FEDERAL COURT OF AUSTRALIA

Chou v Metstech Pty Limited [2023] FCAFC 205

ORDERS

THE COURT ORDERS THAT:

1.    The appeal and cross-appeals be dismissed.

2.    Declaration 1 made by the primary judge be varied as follows:

(a)    the words “As between the plaintiffs and the defendants” be inserted at the beginning of the declaration; and

(b)    the following words be added at the end: “Note that paras (e) to (i) are limited to the documentation created by Mr Chou in the course of designing Metstech’s products in order to arrange their manufacture.”

3.    The parties file and serve written submissions and any affidavit(s) on the question of costs of the appeal by 2 February 2024.

4.    The parties file and serve written submissions and any affidavit(s) in reply on the question of costs of the appeal by 16 February 2024.

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

REASONS FOR JUDGMENT

THE COURT:

INTRODUCTION

1    This appeal concerns the interests of four main groups of parties: (a) Chung-Chieh (Jason) Chou and Welldesign Electronics Pty Limited (Welldesign) (together, the Chou parties); (b) John Geldhart Park; (c) Christopher Scott Martin and CSM Family Investments Pty Ltd (CSM) (together, the Martin parties); and (d) Metstech Pty Limited (Metstech), Auxilia Holding Pty Limited, Chad Jefferson, and Auxilia Investments Pty Ltd (together, the Metstech parties).

2    The proceeding below involved more issues than are raised in this appeal. In essence, the Metstech parties, as plaintiffs, alleged that various defendants (who included Mr Park, the Chou parties, and the Martin parties) were involved in a tortious conspiracy to injure the Metstech parties and the thirteenth defendant, Metstech IP Pty Ltd (Metstech IP), by unlawful means by transferring the business and assets of Metstech and Metstech IP to other entities with the intention that the Metstech parties would hold a lesser or no interest in the Metstech business of designing and distributing telecommunications systems for use in underground mines.

3    Notwithstanding the breadth of that case as it came to be formulated and advanced, the primary judge identified the “central factual dispute” as being whether Metstech’s products were designed by Mr Chou who, at relevant times, was Metstech’s employee. The case proceeded before the primary judge on the basis that the determination of this question also determined the question of copyright subsistence and ownership that the Metstech parties chose to advance within the broader framework of the conspiracy case.

4    The primary judge found that Mr Chou was the designer of Metstech’s products and, on the basis of that finding, made various consequential findings on copyright subsistence and ownership. These findings found expression in Order 1 made by her Honour on 5 December 2022:

The Court Declares that:

1     Copyright subsists in the following works in respect of the Products and the Metstech System, and any revisions thereof, and such copyright is held by Metstech:

(a)     the Metstech PCB Assemblies;

(b)     concept designs;

(c)     printed circuit board schematics and layouts;

(d)     firmware source code (save for the source code relating to the Raspberry Pi Software);

(e)     functional specifications;

(f)     test results;

(g)     bills of materials;

(h)     data sheets; and

(i)     manufacturing files.

5    For the purposes of the orders made by her Honour, the “Metstech System” was defined as the telecommunications system developed and sold by Metstech. “Products” were defined as the products comprising the Metstech System, including: control units (also known as “headend units”); bi-directional amplifiers; splitters; end of line devices; power injectors; and maths boxes (a technical term for a device that causes a single leaky feeder cable to effectively function as two antennas).

6    In closing submissions at trial, the Metstech parties described the Metstech System in these terms (which we do not understand to be contentious):

24    In summary, the Metstech System is a system pursuant to which two-way radio (VHF and UHF) and mobile telephone (LTE) signals can be transmitted and received along underground tunnels. It is a “leaky feeder” system, in that the signals are transmitted and received through leaky coaxial cables, such that the entire length of each cable functions as an antenna. The cables connect to the various devices through “N-Type” connectors. It is a “dual band” system, in that it can transmit and receive radio frequency (RF) signals in two different bands (such as VHF and LTE) simultaneously. It is a “duplex” system in that signals can be sent and received in two directions simultaneously.

(Footnotes omitted.)

7    The primary judge also made an order for delivery up:

Delivery up

6.    By no later than 5pm on 23 December 2022:

(a)     each of the first to fourth and eighth to eleventh defendants are to deliver up to Mesotech all documents or things in that defendant’s possession, power, custody or control which are, or include:

(i)      Metstech Confidential Information;

(ii)    Trade Secrets;

(iii)    Confidential Information;

(iv)    Metstech PCB Assemblies; or

(v)    (in the case of the third and fourth defendants only) Chou Information; or

(b)     to the extent such information cannot be delivered up in accordance with sub-paragraph (a) (for example, because it is stored electronically on a cloud-based storage system), each of the first to fourth and eighth to eleventh defendants are to:

(i)     deliver up to the plaintiffs copies of the information; and

(ii)     delete or otherwise destroy all copies of the information otherwise retained by the defendants,

(c)     but subject to the entitlement of the legal representatives for any of the defendants to retain photographic evidence of any physical items or copies of any documents delivered up in accordance with these orders, with the obligation in Order 6(b) above to delete or otherwise destroy only having effect (insofar as it concerns that photographic evidence and copies of documents retained by those legal representatives):

(i)     7 days following the finalisation of any appeal proceedings; or

(ii)     7 days following the written confirmation by the plaintiffs that all issues concerning the delivery up or destructions of things or documents and all issues concerning the adequacy of any defendant’s compliance with such orders having been finalised,

whichever date occurs first.

8    The appeal brought by the Chou parties, and the respective cross-appeals brought by Mr Park, Mr Martin, and the Metstech parties, raise a large number of grounds. However, by the third day of the appeal hearing, many of these grounds had fallen away, for the reasons explained below.

9    A number of grounds of appeal raised by the Chou parties were supported by grounds in the cross-appeals brought by Mr Park and Mr Martin. For ease of exposition, we will refer to these parties collectively as the appellants, where it is appropriate to do so.

COPYRIGHT AND THE DESIGN OF THE METSTECH PRODUCTS

The development of the copyright case

10    In closing submissions at trial, the plaintiffs described copyright as the most significant form of intellectual property associated with the Metstech System. However, the question of copyright subsistence and ownership was not at the forefront of the proceeding as commenced. It is appropriate to consider how the issue of copyright subsistence and ownership arose and was developed.

11    The proceeding was commenced on 9 October 2020 by the filing of a summons in the Commercial List of the Equity Division of the Supreme Court of New South Wales. On that day, Rein J made a number of restraining orders as well as orders requiring the disclosure, by affidavit, of certain defined assets, by various defendants, including Mr Park, the Chou parties, and the Martin parties.

12    On 15 March 2021, the plaintiffs filed a statement of claim. The statement of claim pleaded a number of causes of action. However, no cause of action framed around allegations of copyright subsistence and ownership was pleaded.

13    On 18 February 2022, the plaintiffs filed an amended summons and a commercial list statement.

14    In the commercial list statement, the plaintiffs pleaded that certain componentry (referred to, collectively, as the “Metstech PCB Assemblies”) of the Metstech System was designed by Mr Chou as an employee of Metstech, pursuant to an employment agreement. They pleaded that, in the course of the design work, certain schematics for the PCBs (referred to as “PCB Schematics”) were created, and that these were artistic, or alternatively literary, works in which copyright subsisted. They pleaded, further, that this copyright was owned by Metstech.

15    The plaintiffs also pleaded that Mr Chou designed certain firmware (referred to, collectively, as the “Metstech Firmware”) as an employee of Metstech pursuant to the employment agreement. They pleaded that the computer programs constituting the Metstech Firmware were literary works in which copyright subsisted and that Metstech was the owner of that copyright.

16    The plaintiffs made further allegations about the design of a small computer system called “Raspberry Pi” which included software (called the “Raspberry Pi Software”). They pleaded that this software was designed by Mr Chou and Mr Martin jointly as employees of Metstech and pursuant to employment agreements; that copyright subsisted in the computer programs constituting that software; and that Metstech was the owner of that copyright.

17    Despite the pleading of these allegations of copyright subsistence and ownership, the amended summons contained no prayers for relief framed around these allegations.

18    The plaintiffs filed a further amended summons and an amended commercial list statement, each dated 11 May 2022. This occurred on the third day of the trial.

19    The amended commercial list statement introduced further allegations of copyright subsistence and ownership. The plaintiffs pleaded that the Metstech PCB Assemblies themselves, including each “revision” of each such assembly, were artistic works in which copyright subsisted and that Metstech was the owner of that alleged copyright. They also pleaded that, in the course of his employment, Mr Chou created documents described as: functional specifications; test results; bills of materials; data sheets; and manufacturing files. They pleaded that these broadly expressed categories of documents (referred to as the “Product Manufacture Documentation”) were literary works or artistic works in which copyright subsisted and was owned by Metstech.

20    The further amended summons introduced the following claim for relief:

10A    A declaration that copyright subsists in the Metstech PCB Assemblies (as defined at paragraph 63I of the Amended Commercial List Statement), and any revisions thereof, and such copyright is held by Metstech or, alternatively, Metstech IP.

21    The further amended summons also sought, in a related prayer for relief, an order for delivery up of the Metstech PCB Assemblies in the defendants’ possession, power, custody, or control. However, importantly, no claim for relief, framed around the other allegations of copyright subsistence and ownership introduced by the commercial list statement and amended commercial list statement, was made.

22    The response of the Chou parties to these allegations in their amended commercial list response is important because all allegations of copyright subsistence and ownership made in the proceeding (that are relevant to this appeal) were based on Mr Chou’s acts as the alleged “designer”.

23    As to the Metstech PCB Assemblies and PCB Schematics, the Chou parties pleaded that the “final designs” were carried out by the “Metstech Manufacturers”—a reference to the defined term used by the plaintiffs to refer to certain manufacturers domiciled in Taiwan whose identity (the plaintiffs said) was not known to them. One manufacturer whose identity was, in fact, known to the plaintiffs, through the provision of particulars by the Chou parties on 24 June 2021, was an entity described as “Yokao”. The Chou parties did not admit that copyright subsisted in the PCB Assemblies or PCB Schematics, or that Metstech was the owner of such copyright.

24    As to the Metstech Firmware, the Chou parties also alleged that the “final designs” were carried out by the Metstech Manufacturers. They did not admit that copyright subsisted in the Metstech Firmware, or that Metstech was the owner of such copyright.

25    As to the Raspberry Pi Software, the Chou parties pleaded that Mr Martin designed the computer programs comprising this software. Otherwise, the Chou parties did not admit that copyright subsisted in the Raspberry Pi Software, or that Metstech was the owner of such copyright.

26    As to the various categories of documents comprising the Product Manufacture Documentation, the Chou parties admitted that Mr Chou was involved in and contributed to the overall process of designing the Metstech System and some aspects of some parts of that system. They admitted that Mr Chou may have created some documents that contained information that might fall within the description of “functional specifications”. However, they pleaded that, save for these documents (which, they said, had already been provided to the plaintiffs), Mr Chou had not created functional specifications for the Products that were manufactured in Taiwan.

27    The Chou parties expressed uncertainty as to the meaning of “test results”, “bills of materials”, “data sheets”, and “manufacturing files” as pleaded in the amended commercial list statement. They nevertheless pleaded that, if those expressions were given certain meanings, Mr Chou had not created: (a) test results of the testing or analysis of any Products undertaken by any manufacturer in Taiwan; (b) bills of materials in respect of the Products; (c) data sheets in respect of the Products (or components) manufactured in Taiwan; or (d) manufacturing files in respect of the Products (or components) manufactured in Taiwan. They pleaded that, in any event, certain documents relating to these categories had already been supplied to the plaintiffs.

28    Further, the Chou parties did not admit that copyright subsisted in any of the Product Manufacture Documentation, or that Metstech was the owner of such copyright.

29    In their amended commercial list responses, Mr Park and the Martin parties each denied that Mr Chou designed the Metstech PCB Assemblies and PCB Schematics. They denied that copyright subsisted in the Metstech PCB Assemblies and was owned by Metstech. They denied that any copyright in the PCB Schematics was owned by Metstech.

30    They denied that Mr Chou designed the Metstech Firmware and that any copyright in the programs constituting the firmware was owned by Metstech. They denied that Mr Chou designed the Raspberry Pi Software jointly with Mr Martin and that any copyright in that software was owned by Metstech.

31    As to the Product Manufacture Documentation, Mr Park denied that Mr Chou designed the Products. He did not admit that copyright subsisted in that documentation and was owned by Metstech. The Martin parties did not admit that Mr Chou created the Product Manufacture Documentation and, like Mr Park, did not admit that copyright subsisted in that documentation and was owned by Metstech.

32    It can be seen from this summary that, on the pleadings, and speaking in broad terms, the battle lines were drawn between:

(a)    the plaintiffs, alleging that Mr Chou, as an employee of Metstech, was a designer undertaking the design of various aspects of the Metstech System, leading to copyright subsisting in the broad subject matter they had pleaded, with Metstech being the owner of that copyright; and

(b)    Mr Park, the Chou parties, and the Martin parties, denying, or at least putting in issue, that Mr Chou had carried out relevant design work or design work of any substance, that copyright subsisted in the pleaded subject matter, and that Metstech owned the copyright it had alleged.

The parties’ conduct of the proceeding below

33    The copyright alleged in the present case is the copyright in original literary and artistic works within the meaning of the Copyright Act 1968 (Cth) (the Copyright Act).

34    Original works, for copyright purposes, emanate from authors. As Gordon J (when in this Court) put the matter in Telstra Corporation Limited v Phone Directories Co Pty Ltd [2010] FCA 44; 264 ALR 617 at [344]:

Authorship and originality are correlatives. The question of whether copyright subsists is concerned with the particular form of expression of the work. You must identify authors, and those authors must direct their contribution (assessed as either an “independent intellectual effort” of a “sufficient effort of a literary nature”) to the particular form of expression of the work. Start with the work. Find its authors. They must have done something, howsoever defined, that can be considered original. …

35    This passage helpfully brings together a number of important interrelated concepts in copyright law that are pertinent to the present case.

36    The first is that copyright is concerned with particular forms of expression. As Gordon J emphasised, one must start with the particular form of expression in respect of which it is alleged that copyright subsists. This is not pedantry. It is fundamental to the copyright question. Without taking the step of first identifying the particular form of expression, one cannot even begin to assess whether that form of expression is a “work” for the purposes of the Copyright Act in which copyright subsists or, indeed, can subsist.

37    Identifying the copyright work does not mean describing the work in an abstract way by recourse to generalities. It is the fixation in material form of the particular “work” that attains copyright protection. Thus, it is important to identify the precise work in its particular physical manifestation.

38    The second important concept is that copyright is concerned with the creativity of authors measured by reference to the contribution that the author makes to the creation of the identified work. The author’s creativity must be such that the work is original—meaning that the work must be the product of human intellectual endeavour and not merely copied from the work of another: see Dynamic Supplies Pty Ltd v Tonnex International Pty Ltd [2011] FCA 362; 91 IPR 488 at [48] (Yates J), and the cases there cited. However, neither literary merit nor novelty or inventiveness as understood in patent law is required in that regard: IceTV Pty Limited v Nine Network Australia Pty Limited [2009] HCA 14; 239 CLR 458 at [33] and [48] (French CJ, Crennan and Kiefel JJ). As the passage quoted above recognises, authorship and originality are correlatives (the source of that statement in Australian copyright law appears to be the observation of Isaacs J in Sands & McDougall Proprietary Limited v Robinson (1917) 23 CLR 49 at 55 (Isaacs J, with whom Gavan Duffy and Rich JJ agreed)).

39    The third important concept is that the test of originality “must be applied to that thing to which the legislation attaches copyright protection” (Desktop Marketing Systems Pty Ltd v Telstra Corporation Ltd [2002] FCAFC 112; 119 FCR 491 at [92] (Lindgren J, with whom Black CJ agreed))—emphasising, once again, the fundamental importance of first identifying the precise work in its particular physical manifestation in which it is said that copyright subsists.

40    Some additional observations should be made. First, the Copyright Act sets out the conditions under which, in Australian law, copyright subsists in original literary and artistic works: see s 32 and the definitions of “literary work” and “artistic work” in s 10(1) of the Copyright Act. Secondly, copyright in Australia is regulated not only by the Copyright Act but also the interaction of that Act with other legislation, such as the Circuit Layouts Act 1989 (Cth), the Designs Act 1906 (Cth), and the Designs Act 2003 (Cth).

41    The plaintiffs’ pleading of copyright in the commercial list statement and in the amended commercial list statement recognised some, but not all, of these cardinal concepts. Further, in closing submissions the plaintiffs took the primary judge to a number of copyright principles which the primary judge noted, with other copyright principles, in her reasons for judgment at J[554]–[566]. However, the case proceeded before the primary judge on a markedly different basis. Rather than identifying and proving the existence of specific literary and artistic works, and addressing Mr Chou’s authorial contribution (if any) to those specific works by reference to the considerations required by the Copyright Act, the plaintiffs called in aid the evidence of a consulting electrical engineer, Dr Georgevits, who, in his report, discussed (amongst other things) the tasks that are typically undertaken as part of electrical design and prototype manufacturing processes; the tools and software that would be required to build the Metstech System; and the role of original equipment manufacturers (OEMs), original component manufacturers (OCMs), and original design manufacturers (ODMs), according to Dr Georgevits’ understanding of the roles performed by these entities. Dr Georgevits’ evidence also included a critique of some of the evidence given in the affidavits of Mr Chou, Ms Chen (Mr Chou’s wife and a director of Welldesign), and Mr Park, and even extended to expressing views about copyright ownership in respect of documents likely to have been produced in the design and manufacturing processes.

42    In closing submissions, the plaintiffs related the evidence of Mr Chou’s activities to this general evidence about the design of electrical products and to the contemporaneous correspondence involving Mr Chou. The plaintiffs contended that, in carrying out his alleged design work, and contrary to his own evidence, Mr Chou must have brought into existence documents or other material (described as functional specifications and other concept design documents; circuit diagrams, PCB layouts, schematics, and PCB designs; source code for the firmware; manufacturing files; bills of materials; PCB assemblies; and test results) for or associated with Metstech’s products. According to the plaintiffs, these were original literary or artistic works in which copyright subsisted and was owned by Metstech. Further, the plaintiffs contended that these descriptions of documents and other materials were documents and materials whose existence and location were required to be disclosed, but had not been disclosed, as required by the orders made on 9 October 2020 (see [11] above).

43    Three immediate comments should be made. First, the existence of these documents and things (to the extent that they do exist) has no necessary connection to whether they are works in which copyright can subsist, whether they are works in which copyright does subsist, or whether, if copyright does subsist, Metstech is the owner of that copyright. Secondly, the ownership of copyright (which, in the case of copyright in literary and artistic works, confers the exclusive rights in s 31(1) of the Copyright Act) should not be confused with the ownership of physical items which are the material form of expression in which copyright can subsist. These are two different and distinct forms of property. Thirdly, the present case is not one about copyright infringement. Therefore, the rights to relief available to a copyright owner in respect of infringing copies of copyright works are not rights that Metstech could assert in the proceeding.

44    As will be apparent from the foregoing, the plaintiffs advanced their copyright case by reference to the paradigm of Mr Chou as the alleged designer of electrical components and products. The defendants acquiesced in the copyright case being proved in this way. This, however, was not the correct paradigm. The correct paradigm was authorship based on Mr Chou’s alleged creation of specific works (not generalised categories of possible works) that were either original literary works or original artistic works within the meaning of the Copyright Act.

45    By conducting the case in the way they did, the parties failed to undertake, and address, the technical analysis that is required to prove the subsistence and ownership of copyright in a literary or artistic work. Notably, no work was even put forward by the plaintiffs for analysis as a copyright work, as the following remarks of the primary judge (at J[591]) make clear:

591    Somewhat unusually, however, the items over which Metstech claims copyright are not before the Court. Notwithstanding Metstech’s efforts, and court orders requiring the defendants to disclose the whereabouts of these items, by and large, nothing has been produced. Rather, the existence of the PCB Assemblies has been deduced from invoices rendered by Welldesign and ChampWin, the photographs attached to contemporaneous emails from Mr Chou and, presumably, the existence of PCBs in the finished products supplied to Metstech and stored at Challenge’s premises. As to the PCB Schematics, the plaintiffs were unable to identify the schematics with any specificity but believed them to be stored on computers of Mr Chou or Welldesign. As to the Product Manufacture Documentation, the plaintiffs were unable to supply particulars but inferred the existence of these documents as documents of this type are required for the manufacture of electronic devices.

46    Nevertheless, the primary judge proceeded to determine the copyright case as it had been formulated, and presented to her, by the parties.

47    We have canvassed the parties’ conduct of the proceeding before the primary judge in some detail because it puts in context and explains a number of the issues that arise in this appeal. Notwithstanding the criticism we have made of the parties in this regard, we have concluded that the appeal (and cross-appeals) should be considered and determined on the basis of the case that the parties chose to put before the primary judge: cf Australian Meat Group Pty Ltd v JBS Australia Pty Ltd [2018] FCAFC 207; 268 FCR 623 at [45] (Allsop CJ, Besanko and Yates JJ). As we will explain, that case, in essence, concerned the rights of the parties to the proceeding, as between themselves.

The primary judge’s findings

48    At the commencement of her reasons for judgment, the primary judge made a number of general findings on credit.

49    The primary judge said that she approached Mr Chou’s evidence with caution. It appeared to her Honour that he had not complied with the orders for disclosure that had been made. Amongst other remarks, her Honour said (at J[29]):

29    Mr Chou’s evidence was given in most emphatic and fervent terms; he was keen to speak at length. Mr Chou was, on occasion, fiery and argumentative and made a few speeches although, on other occasions, was non-responsive or evasive: see, for example, at [241]. Mr Chou’s evidence that he did not know the fee, and had never discussed a fee, with an ODM (an Original Design Manufacturer) was unlikely. On occasion, Mr Chou’s version of events was clearly at odds with contemporaneous documents and, when pressed as to the difference between his evidence and the document, Mr Chou’s answer was usually preceded with “Not really”, which, over the course of his cross examination, was generally an indication that what followed was going to be difficult to accept.

50    The primary judge said that she had not accepted Mr Park’s evidence unless corroborated by contemporaneous documents or the evidence of another reliable witness, or where his evidence was against interest. At J[25] – [26], her Honour said:

25    Mr Park gave evidence and was cross-examined at great length. He was keen to give his version of events and volunteered self-serving remarks. He was, on occasion, non-responsive and, on other occasions, evasive and argumentative. Mr Park was prone to speeches. Some of Mr Park’s evidence seemed unlikely, for example, that he did not care who Mr Chou was getting to design Metstech’s products, where intellectual property rights was clearly a subject dear to Mr Park’s heart. On occasion, Mr Park referred to conversations not in his three affidavits. Mr Park maintained a position at odds with contemporaneous documents. The disconformity between Mr Park’s evidence and contemporaneous documents is endemic.

26    Mr Park appeared to laugh at various questions or when giving an answer, in an apparent effort to make the question appear to have been ridiculous. Mr Park did not take responsibility for anything but blamed others; he sought to ‘verbal’ Mr Jefferson whenever he could. He destroyed documents. He appears to have breached restraining orders made in the early days of these proceedings. Ultimately, I have not accepted Mr Park’s evidence unless corroborated by contemporaneous documents, the evidence of another reliable witness, or where his evidence was against interest.

51    Further, her Honour said (at J[320]):

320         ... At trial, Mr Park would say whatever that he thought would damage the plaintiffs’ case, whether true or not, and so he was of no assistance in corroborating what his contemporaneous emails suggested.

52    The primary judge had a better view of Mr Martin’s evidence. Her Honour observed that Mr Martin appeared to have “a good and actual recall of events” and was “generally fair in the answers he gave”. Her Honour also remarked that “he appeared honest and credible”. Nevertheless, her Honour deferred to the contemporaneous documents, saying (at J[34]):

Sadly, those documents depart significantly from Mr Martin’s version of events in several material respects.

53    The primary judge carried out a detailed analysis of the evidence at J[74] – [548], which comprised the extensive documentary record before her Honour as well as the affidavit and oral evidence of the witnesses. Her Honour made a number of findings along the way. Much of this analysis concerned the evidence about Mr Chou’s activities in relation to the design and development of the components and products of the Metstech System. Consistently with her remarks concerning the evidence of Mr Chou, Mr Park and Mr Martin, the primary judge placed considerable reliance on the documentary record. When considering the copyright case, her Honour summarised pertinent aspects of this evidence, giving references to her earlier discussion and findings.

54    As the primary judge noted at J[566], the substantive issue before her in respect of the copyright case was the discrete factual issue whether the design work was carried out by Mr Chou (as the plaintiffs were contending) or whether that work was carried out by “Yokao” (as the defendants were contending). It is important to understand that the defendants’ case was put in the way it was to rebut the plaintiffs’ case about Mr Chou’s activities, not to advance the interests of any third party, let alone “Yokao”. In other words, the defendants’ case was advanced as a denial of the alleged fact that Mr Chou carried out design work, in any material way, in respect of the components and products of the Metstech System.

55    Having reviewed the evidence, the primary judge found (at J[581]) that Mr Chou “undertook the design work to create Metstech’s products”. This led her Honour to make the following further finding (at J[587]):

587     As such, the principle of first authorship has the consequence that Mr Chou holds, to the extent the components of the system are capable of having copyright subsist in them, copyright over Metstech’s products. There is no dispute that Mr Chou was an employee of Metstech when he created these products. The next question is whether the products were designed in pursuance of Mr Chou’s terms of employment with Metstech. I have no doubt that Mr Chou was employed by Metstech for the purpose of designing new products.

56    It will be observed that whilst this finding invokes the notion of first authorship, it speaks of copyright subsistence in “components” and copyright “over … products”. These references to copyright are, with respect, inapposite. However, later, at J[590], the primary judge noted:

590    … The specific items in which the plaintiffs claim copyright subsists are PCB assemblies, source code, concept designs, PCB schematics and PCB layouts, firmware source code, manufacturing files, bills of materials and test results. …

57    Importantly, the primary judge recorded that the defendants did not dispute that copyright is capable of subsisting in each of these items. There is no challenge to that finding.

58    In considering whether the products were designed in pursuance of Mr Chou’s terms of employment with Metstech, the primary judge found (at J[599]):

599    Based on the unfolding design process as described in the contemporaneous documents, I find that Mr Chou completed the design and prototyping stages before providing the manufacturer with the documentation in order to produce Metstech’s products. Mr Chou supplied the associated documentation, which he prepared: at [94], [97], [104], [111], [112], [124], [126], [130], [136], [152]­[153], [158], [176], [206]. To the extent that Mr Chou called upon an ODM to assist in these tasks, there is no documentary trail as to the portion of the design done by an ODM. I conclude that any such task was relatively minor compared to the tasks undertaken by Mr Chou. That is, I am not satisfied that an ODM or “Yokao” expended sufficient effort to be considered an author, or joint author, of the work within the meaning of the Copyright Act: IceTV at [97].

59    At J[603], the primary judge found:

603     Rather, Mr Chou designed Metstech’s products and prepared the associated documentation to enable the products to proceed to manufacture. The disputed works must have been created and insofar as they are original literary or artistic works (or both) and that to the extent that they still exist, the employer owns them. Mr Chou created such works in the course of his employment, with the consequence that copyright in them vests in the employer. Whilst his family companies - Welldesign and ChampWin - earned further income by ‘marking up’ the manufacturing costs charged by “Yokao”, this does not detract from the fact that Mr Chou’s employer has copyright in the designs and associated documentation.

60    Grounds 3 to 10 of the notice of appeal challenge, either directly or indirectly, this finding and a number of the primary judge’s other findings along the way, including findings on credit and certain inferences which the primary judge made or (in the Chou parties’ contention) failed to make.

The form of the declaration as made

61    On publishing her reasons for judgment, the primary judge made a direction that the parties propose orders reflecting her reasons. The plaintiffs proposed orders that included the declaration quoted at [4] above. Mr Park, the Chou parties, and the Martin parties each responded to the plaintiffs’ proposal by providing written submissions. Those submissions did not address the proposed declaration.

62    It can be taken, therefore, that the parties to this appeal considered that, at the time it was being proposed, the declaration was appropriate, given the primary judge’s findings, and that there was no legal impediment to it being made. It can also be taken that the parties regarded the proposed declaration as being in proper form and as conforming to the findings that had been made.

63    Notwithstanding this, the Chou parties contend in Grounds 1 and 2 of the appeal that the primary judge erred in making the declaration:

Failure to join a necessary party

1.    The learned Trial Judge (Rees J) erred in making declarations (and delivery up orders) in favour of the First to Fourth Respondents (as Plaintiffs in the Court below) (hereinafter, Plaintiffs) in relation to the ownership by Metstech Pty Ltd (Metstech) of copyright, in respect of the Products (as defined in the orders made by her Honour on 5 December 2022 (Orders)) and the Metstech System (as defined in the Orders), in the following works:

(a)     printed circuit board (PCB) schematics and layouts;

(b)     firmware source code (save for the source code relating to the Raspberry Pi Software);

(c)     functional specifications;

(d)     test results;

(e)     bills of materials;

(f)     data sheets; and

(g)     manufacturing files,

in circumstances where the Taiwanese company referred to as “Yokao” (also Yo Kao Technology Co Ltd) (J[147]) (Yokao) was neither given notice of the proceedings nor joined to the proceedings by the Plaintiffs, notwithstanding that it was a necessary party to the proceedings, including in circumstances where:

(i)     the Plaintiffs and the learned Trial Judge were on notice of the 3rd/4th Defendants’ contention that Yokao had created and was relevantly the author of the works referred to in sub-paragraphs (a) to (g) above;

(ii)     her Honour found (at J[151], J[574]) that Yokao had been engaged to manufacture the PCBs;

(iii)     the expert evidence of the expert witness called by the Plaintiffs, Dr Georgevits, whose evidence was accepted by her Honour (J[23], J[62], J[581]), was, as her Honour recorded (J[598]), that an original design manufacturer (ODM) or “Yokao” could have been involved in generating the electrical schematics and the PCB layouts, writing firmware code, manufacturing and testing prototypes;

(iv)     her Honour found (at J[599]) that, to such extent as Yokao assisted with the design and prototyping stages associated with the Metstech products, such tasks were relatively minor compared to the tasks undertaken by the Third Defendant, such that Yokao was neither an author or a joint author of the work within the meaning of the Copyright Act 1968 (Cth); and

(v)     the unchallenged evidence of Dr Georgevits (as recorded at J[72]) was that, when design work is completed by an ODM, the question of ownership of the design is ultimately subject to the contractual arrangements between the client and the design house.

2.    In the absence of the joinder of Yokao as a party to the proceedings, the learned Trial Judge ought to have dismissed, at least as against the Appellants (the Third and Fourth Defendants in the Court below) (hereinafter, 3ʳᵈ/4ᵗʰ Defendants), the entirety of the claims brought by the Plaintiffs for declaratory relief and other orders in respect of the ownership of intellectual property rights associated with the Products and the Metstech System.

(Emphasis original.)

64    The fundamental submission of the Chou parties is that, as made, the declaration is an order in rem that directly affects “Yokao’s” rights. In their submission, “Yokao” was, therefore, a necessary party to the proceeding and, because it was not joined, the declaration (and, as it also happens, the order for delivery up) should be set aside: News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 at 524 (Lockhart, von Doussa and Sackville JJ).

65    These grounds of appeal are supported by Mr Park and by Mr Martin in their respective cross-appeals (Ground 1 in each cross-appeal). They contend that if Grounds 1 and 2 of the appeal succeed then, correspondingly, the entirety of the claims for declaratory relief and other orders in respect of the ownership of intellectual property rights in the “works” identified in Ground 1 of the appeal should be dismissed.

66    These grounds raise an objection that was not raised before the primary judge at the time that orders were proposed. The question arises whether the appellants should be permitted to raise the objection now.

67    The most that can be said on that score is that, during the course of the trial, when the plaintiffs were seeking leave to file their further amended summons which introduced the claim for declaratory relief in prayer 10A, Senior Counsel for the Chou parties said:

But, can I identify for your Honour that part of my client’s case is that these items were designed in part, in significant part, by an original design manufacturer, an ODM in Taiwan, and if your Honour made declarations as to copyright they would operate at large against the whole world, and there is no evidence that the ODM in Taiwan has been given any notice of that claim. I’m neutral as to that matter, but I raise that as a practical issue if your Honour was to be asked to and give declaratory relief.

68    The significance, if any, of those observations depends on the actual terms of the declaration to be made—that is, whether any such declaration “would operate at large against the whole world”. It is important to note in that regard that, in the face of the Metstech parties’ copyright claims, and particularly in relation to the question of declaratory relief, the Chou parties informed the primary judge that they “did not ‘seek to be heard’ on this subject”, except to contend that “Mr Chou did not create or design these products nor prepare the documentation”: J[553]. Like the Chou parties, Mr Park and the Martin parties raised no objection to the further amended summons being filed to claim the relief in prayer 10A and said nothing about the need for any joinder of additional parties to the proceeding.

69    We do not think that the appellants should be permitted to raise this objection now. If it was a matter of substance, it should have been advanced, and pressed home, no later than the time at which the proposed orders were before the primary judge for consideration. In coming to this conclusion we are also influenced by two matters. The first matter is that we are not persuaded that these grounds of appeal are soundly based in any event, for the reasons given below. The second matter is that, even if these grounds are soundly based, there is no reason why the declaration cannot be varied to bind the appellants, who took no objection to it at the appropriate time.

70    The case before the primary judge was not so much about the work that “Yokao” carried out or might have carried out, but about the work that Mr Chou in fact carried out, remembering that Mr Chou was an employee of Metstech, not an employee of “Yokao”. The contest before the primary judge was whether Mr Chou, as an employee of Metstech, and pursuant to the terms of his employment with Metstech, carried out the particular design work that the plaintiffs alleged he had carried out. In this regard, it was never contended, for example, that Mr Chou was carrying out work for “Yokao” or that the work he carried out as an employee of Metstech was work that resulted, or even could result, in “Yokao” owning copyright.

71    The defensive case advanced by the appellants was a factual case, nothing more. That case was that Mr Chou had not himself carried out any relevant design work, or at least any work of significance. The primary judge rejected that factual case, as is abundantly clear from the findings made by her Honour at J[587], [599], and [603], as well as in other paragraphs of the reasons. Her Honour was satisfied that, as a matter of fact, Mr Chou, in pursuance of his employment with Metstech, had carried out the work covered by the subject matter identified at J[590]. This finding is reflected in the declaration that was made.

72    It is convenient at this point to deal with a particular aspect of the Chou parties’ submissions on appeal. They submitted that the Metstech parties were “yielded an unfair forensic advantage” because the Metstech parties had not joined “Yokao” and the Chou parties were therefore left with the burden of proving the design work. This submission rings hollow. As the primary judge correctly recognised at J[39], although the plaintiffs bore the ultimate onus of proof, it was peculiarly within Mr Chou’s means to adduce evidence about the very activities he was alleged to have engaged in with respect to the design of the products. After all, it was Mr Chou who, allegedly, had direct and personal dealings with “Yokao”, not the plaintiffs. If the evidence of “Yokao” could possibly have informed the primary judge of the activities that Mr Chou, himself, had undertaken, then it was within Mr Chou’s power to call that evidence. The joinder of “Yokao” as a party to the proceeding was not necessary for that purpose, and the appellants raised no matter in the course of submissions before us that would indicate that there was any impediment to them calling such evidence. We can only conclude that the appellants exercised a forensic judgment not to do so.

73    Because the plaintiffs’ case was directed to the work that Mr Chou had carried out as an employee of Metstech, no rights of “Yokao” were in play. Therefore, there was no obligation on the plaintiffs to join “Yokao” to the proceeding, and no apparent reason why they should have joined it. We conclude, therefore, that the case brought by the plaintiffs involved no arguable possibility of any right of “Yokao” being affected: Victoria v Sutton [1998] HCA 56; 195 CLR 291 at [77] (McHugh J); Ross v Lane Cove Council [2014] NSWCA 50; 86 NSWLR 34 at [57] – [58] (Leeming JA).

74    Once these matters are understood, it is clear that, in making the declaration referred to at [4] above, the primary judge was doing no more than declaring rights as between the parties to the proceeding. This is the proper construction of the order that her Honour made, considered in the context of the reasons for judgment supporting that order: Athens v Randwick City Council [2005] NSWCA 317; 64 NSWLR 58 at [28] (Hodgson JA, with whom Santow and Tobias JJA agreed).

75    Therefore, we are not persuaded that the declaration that the primary judge made was an order in rem. Properly construed, it was an order affecting only the interests of the immediate parties to the proceeding. This is the position of the Metstech parties.

76    A declaration of this kind (i.e., affecting the interests of the immediate parties to the proceeding) was justified, particularly given the defendants’ denials that Metstech was the copyright owner, and the contention made at one stage that Welldesign, in fact, held the relevant intellectual property rights: J[580]. The primary judge noted (at J[430]) that the contention that Welldesign held the relevant intellectual property rights was part of a plan to divert Metstech’s business, customers, potential investors, and products away from Metstech and Metstech IP.

77    We note that the Metstech parties accept that even if, contrary to their submissions, “Yokao’s” interests were affected by the declaration that was made, and that “Yokao” should have been joined as a party, the declaration that was made would not be binding on it: Australasian Oil Exploration Ltd v Lachberg (1958) 101 CLR 119 at 133–134 (Dixon CJ, McTiernan and Taylor JJ). In other words, if, hypothetically, “Yokao” (or, for that matter, any other person except for the defendants) were to advance a claim to copyright ownership inconsistent with Metstech’s declared rights, “Yokao” (or such other person) would not be precluded by the declaration from seeking to advance its asserted rights in legal proceedings.

78    As to the form of the declaration itself, a question arose about the ownership of the copyright in “manufacturing files” (sub-para (i) of the declaration): Ground 5 of the appeal. These files are part of the suite of documents described by the plaintiffs as the “Product Manufacture Documentation”. The Chou parties argued that, properly construed, the declaration extended to the copyright (if any) in the manufacturing files created by “Yokao” (assuming there to be such files).

79    We do not think that this is what the primary judge had in mind when making the declaration. The Metstech parties accept, however, that, given that the question has been raised, it would be appropriate to make clear that the “Product Manufacture Documentation” (comprising sub-paras (e)–(i) of the declaration) is the documentation “created by Mr Chou in the course of designing Metstech’s products and in order to arrange their manufacture”: Transcript p 120 lines 1–14. To do so would be consistent with the case they had pleaded and pursued in respect of that documentation: see J[552] and para 67A of the amended commercial list statement. There is no reason why, for the avoidance of doubt, the declaration, as granted, cannot and should not be varied to state this expressly.

80    Perhaps more fundamentally, the Metstech parties accept that, in recognition of its true construction, the declaration could be prefaced by the words: “As between the plaintiffs and the defendants …”: Transcript p 130 line 23 – p 131 line 20; Transcript p 148 lines 1–13. Once again, for the avoidance of doubt, there is no reason why the declaration, as granted, cannot and should not be varied in this way.

The consequences of amending the form of the declaration

81    Our findings at [66] – [75] mean that Grounds 1 and 2 of the appeal (and Ground 1 of the cross-appeals brought by Mr Park and Mr Martin) do not succeed.

82    Even so, in the course of oral submissions the Court raised the consequences of varying the declaration in the way contemplated in [80] above. The appellants accepted that if the declaration were to be varied in this way, any matter of contention raised by Grounds 1 and 2 of the appeal would be removed.

83    There is a further matter to which we should refer. The appellants contended that, just as the declaration was invalid because of the non-joinder of “Yokao”, so too was the order for delivery up: see [7] above. There are a number of things to be said about this contention.

84    First, this is also a new issue raised for the first time on appeal. It is not an issue that should be entertained on appeal. In their written submissions to the primary judge on the form of the proposed orders, none of the appellants raised any impediment, or made any objection, to the order for delivery up being made. The only comment by the Chou parties was a request to have their solicitors retain copies of documents (and, in the case of “things”, a photograph) to “facilitate the efficient conduct of any appeal proceedings” and to allow them to respond to any complaints or concerns about the “nature, extent and/or adequacy” of their compliance with the order. In their written submissions, Mr Park and the Martin parties made a similar comment.

85    Secondly, the field covered by the order for delivery up is broader (it would seem significantly broader) than the identified “works” in Ground 1 of the appeal.

86    Thirdly, to the extent that there is an overlap between the physical form of the identified “works” in Ground 1 of the appeal and the “documents or things” the subject of the order for delivery up, there is no connection between the copyright ownership declared in respect of those “works” and the property rights with which the order for delivery up is concerned: see [43] above. In other words, the order for delivery up does not depend on, and is not tethered to, copyright ownership.

87    Fourth, and in any event, the appellants are not the owners of the copyright (if any) in the “works” referred to in Ground 1 of the appeal. They do not contend otherwise.

88    On the premise that any matter of contention raised by Grounds 1 and 2 of the appeal is removed, the Court raised the question of the utility of Grounds 3 to 10 of the appeal. This was because, notwithstanding the fact that the required copyright analysis had not been undertaken, the appellants had accepted before the primary judge that copyright subsists in the subject matter identified in the declaration. Grounds 3 to 10 were directed to the ownership of that copyright, and yet none of the appellants was claiming to be the owner. Indeed, the Chou parties disavowed copyright ownership and did not want to be heard on that question. Beyond the contention that “Yokao”—as an ODM in Taiwan—had not been heard on the question of copyright ownership, none of the appellants advanced a positive case that “Yokao”, or any other person, owned the copyright. They were simply agnostic on that question.

89    On the final day of the hearing of the appeal, the Chou parties accepted that if the declaration was varied in the way contemplated above at [80], then Grounds 3 to 10 fall away and do not need to be decided: Transcript p 150 lines 14–35. Mr Park and the Martin parties also accepted that position: Transcript p 150 line 40 – p 151 line 45.

90    When discussing the fate of Grounds 3 to 10 in light of the suggested variation to the declaration, the Chou parties adverted to the order for delivery up. They appeared to suggest that, somehow, the order for delivery up (and, more particularly, their compliance with that order) was dependent on the fate of the declaration. For the reasons given above, we do not accept that to be the case. The delivery up order has effect according to its own terms.

91    The Chou parties also raised the utility of the declaration if it is understood as doing no more than declaring the rights of the parties to the proceeding. We have already expressed our view at [76] that the declaration has utility. Further, at the time the declaration was proposed, the Chou parties did not contend that it lacked utility.

92    Mr Park and the Martin parties suggested, as no more than a theoretical possibility, that the delivery up order might affect “Yokao”. In this regard, they hypothesised that they might have been given “something” by “Yokao” and that “Yokao” could be in contempt if it stopped them from complying with the order.

93    It is not clear to us how this state of affairs would arise, particularly as to how “Yokao” would or could “stop” Mr Park and the Martin parties from complying with the order. We do not propose to speculate on that matter except to state, once again, that the delivery up order has effect according to its own terms. We wish to stress that the appellants are bound by that order. It is not for them to choose how they are bound or in what circumstances they are bound. But in any event, the determination of Grounds 3 to 10 could have no bearing on that question.

94    For these reasons, it is not necessary for us to consider Grounds 3 to 10 of the appeal. There is no utility in doing so.

THE INQUIRY AS TO DAMAGES

95    Ground 11 of the appeal, Ground 6 of the cross-appeal filed by Mr Park and Ground 4 of the cross-appeal filed by Mr Martin challenge the orders made by the primary judge as to an inquiry as to damages, being Order 13 in the orders made on 5 December 2022, which is in the following terms:

An inquiry be conducted into the damages sustained by Metstech by reason of the breaches of the Metstech SDA and the equitable duty of confidence found to have occurred in the Court’s judgment dated 17 November 2022.

While the relevant grounds of appeal and cross-appeal also challenge the primary judge’s statements at J[19] and J[644] to the effect that there was also a proper basis for an account of profits, no order was made by the primary judge as to an account of profits.

96    The primary basis on which the inquiry as to damages is challenged is the contention that there was no evidentiary basis to justify the order for the inquiry into damages. The relevant principle has been variously expressed in the Supreme Court of New South Wales to the effect that the plaintiff in seeking an inquiry as to damages must establish that:

(a)    it seems reasonably probable from the nature of the breach that substantial damages would reasonably and naturally result from it, even though it may be difficult to show specifically what the damage was, or to define the particular loss which has been sustained, and the inquiry would serve a useful purpose: ICT Pty Ltd v Sea Containers Ltd (1995) 39 NSWLR 640 at 660E–F (Clarke, Handley and Sheller JJA); National Engineering Pty Ltd v Chilco Enterprises Pty Ltd [2001] NSWCA 291 at [5] (Hodgson JA, with whom Heydon JA agreed);

(b)    there is some evidence of damage or some circumstances suggesting that damage was likely to have occurred: Enkelmann v Glissan (1982) 2 BPR 9640 at 9643 (Rath J); OzEcom Ltd (in liq) v Hudson Investment Group Ltd [2007] NSWSC 1441 at [48] (McDougall J); and

(c)    there is a prima facie case of some damage: Frank Davies Pty Ltd v Container Haulage Group Pty Ltd (No 2) (1989) 98 FLR 324 at 325 (Hodgson J); OzEcom at [49].

Similarly, in relation to an order for an account of profits, there is a threshold requirement that the plaintiff must establish that the order is “appropriate”: Mid-City Skin Cancer & Laser Centre Pty Ltd v Zahedi-Anarak [2006] NSWSC 844; 67 NSWLR 569 at [273] (Campbell J).

97    The relatively undemanding nature of that principle may be contrasted with the position where damage is the gist of the cause of action in tort. Relevantly to the present case, the tort of conspiracy requires proof of actual damage: Fatimi Pty Ltd v Bryant [2004] NSWCA 140; 59 NSWLR 678 at [34] and [42] (Handley JA, with whom McColl JA agreed); and at [44] (Giles JA, who said that the tort of conspiracy requires proof of “pecuniary loss”).

98    Under the sub-heading “Conspiracy to injure by unlawful means”, the primary judge referred at J[657] to the plaintiffs not having adduced any evidence of damage. At J[658], the primary judge referred to some submissions made by the plaintiffs and then said the following:

658    … Nonetheless, Metstech was deprived of the benefit of its intellectual property where control of that intellectual property was retained by the conspirators, either by Mr Chou alone or together with other defendants. The plaintiffs had clearly suffered loss and damage, being the opportunity to commercialise Metstech’s products and further develop its intellectual property. The plaintiffs sought an order for an inquiry to occur into the quantification of such damage or alternatively for an account of any profits, such election to occur upon the granting of final relief in these proceedings.

It is not clear whether the primary judge intended in those sentences merely to record submissions by the plaintiffs, or whether the primary judge was making findings to that effect.

99    However, at J[659], the primary judge said the following by way of stating her Honour’s own views:

659    Whilst it is permissible to elect between an account and damages in respect of the claims for equitable relief, the same cannot be said for a tortious claim in the absence of orders for separate determination of liability and damages. More importantly, no evidence was adduced of any damage. Nor can I readily infer that damage was suffered where, according to the administrator, Metstech and Metstech IP were insolvent, at least absent the continuing financial support of Mr Jefferson or Challenge. There was no evidence of the value of the intellectual property rights which the defendant sought to exploit outside of Metstech and Metstech IP, although the rights appear to have been valuable given the interest expressed in Metstech’s products and the lengths to which the defendants went to continue to exploit those rights. I accept that, by reason of the defendants’ actions and as a consequence of these proceedings, Metstech’s ability to develop and exploit its intellectual property rights and build its business has been interrupted and potentially harmed, but whether this has caused pecuniary loss is conjecture on my part and not based on evidence. As a consequence, the plaintiffs’ conspiracy claim fails.

100    The primary judge had already expressed numerous findings to the effect that Metstech had been placed into administration by the defendants in order to “phoenix” its business by avoiding paying its liabilities while transferring its business and assets to a new entity. The primary judge had also found in various paragraphs that, to that end, the defendants had deleted Metstech’s data, sought to “warehouse” the Metstech logo and domain name (with the intention of transferring them to a new entity) and sought to take commercial opportunities belonging to Metstech for themselves, including by depriving it of its intellectual property and by soliciting custom and investment from its existing customers (namely US Co, SA Distributor, and Telco). Accordingly, the finding at J[659] that Metstech’s ability to develop and exploit its intellectual property rights and build its business had been interrupted and potentially harmed indicates that the primary judge did find (in the language of J[658]) that Metstech had lost the opportunity to commercialise its products and further develop its intellectual property. Her Honour was clearly satisfied that there was a prima facie case of the reasonable probability of damage, as her Honour ultimately ordered that there be an inquiry as to damages. In effect, the primary judge found that there were potentially valuable commercial opportunities of trading with and obtaining investment from entities such as US Co, SA Distributor and Telco, of which Metstech was deprived (or in respect of which it was delayed) as a result of the breaches of the Metstech Shareholders Deeds of Agreement (Metstech SDAs) and the breaches of the equitable duty of confidence which the primary judge had found. Accordingly, in our view, there was a sufficient basis in the primary judge’s reasoning for ordering an inquiry as to damages, even if it did not amount to proof that actual pecuniary loss had been incurred so as to satisfy the tort of conspiracy to injure by unlawful means.

101    Mr Bruckner on behalf of Mr Martin made three further submissions as to why there was no proper basis for an inquiry as to damages. These additional submissions focus on the aspect of Order 13 dealing with damages sustained by reason of the breaches of the equitable duty of confidence, as Mr Martin was not a party to either of the Metstech SDAs.

102    First, it is submitted on behalf of Mr Martin (and also on behalf of Mr Park) that the remedy of an inquiry as to damages or account of profits went beyond the remedies sought by the Metstech Parties against Mr Martin and other defendants. We reject that submission. The further amended summons sought in para 12 that, at the election of the plaintiffs, an inquiry be conducted into the damages sustained by the plaintiffs or an account be taken of “any revenue” received by any of the defendants in relation to “the Metstech Confidential Information, the Trade Secrets, or the Confidential Information”. It was then claimed in para 13 that, at the election of the plaintiffs, there be an order that each of the defendants give an account of profits or damages or equitable compensation. The reference to an account of “any revenue” in para 12 was infelicitous and was plainly intended to refer to an account of profits (as para 13 expressly indicated). There cannot be any doubt that the plaintiffs sought an inquiry as to damages or equitable compensation. While Mr Bruckner sought to contend that paras 12 and 13 were confined to the claim in conspiracy, that is inconsistent with the fact that they follow paragraphs which claim declarations relating to confidential information, and are not expressed to be limited to any particular cause of action. Further, contrary to Mr Bruckner’s submission, nothing said in opening or closing submissions by the plaintiffs can sensibly be read as limiting the claims in paras 12 and 13 only to the situation where the plaintiffs failed to obtain the declarations and injunctions which they sought.

103    Secondly, it is submitted that “damages” are not an available remedy for the breach of the equitable obligation of confidentiality which Mr Martin was held to owe. However, Mr Bruckner accepts that equitable compensation is an available remedy. While we accept the technical correctness of the submission, the inquiry as to damages claimed in the further amended summons, and upheld by the primary judge, was plainly intended to include an inquiry as to the amount of equitable compensation, as para 13 of the further amended summons made expressly clear. As a matter of substance, the inquiry concerns the amount of monetary compensation arising by reason of the breaches of contract and equitable duty referred to in Order 13 as made by the primary judge.

104    Thirdly, it is submitted that no allegation was made that Mr Martin breached an equitable duty of confidence owed to Metstech, in that it is submitted that the references to “breach of confidence” in the amended commercial list statement formed part of the plaintiffs’ failed tortious conspiracy claim, with reference to the allegations made in paras 188 to 194. This submission is based on a misreading of the allegations as a whole. At para 60, the plaintiffs alleged that Mr Martin and others had an obligation (inter alia) under the general law not to improperly use information obtained by them, referred to as the “Use of Information Duty”. Further, at para 171, it was alleged that by reason of their positions as employees or directors of Metstech (as applicable) it would be against conscience for any of Mr Martin or others to use or disclose Metstech Confidential Information otherwise than in good faith and in the interests of Metstech, and each thus owed and continues to owe a duty to Metstech not to do so, referred to as the “Duty of Confidence”. In para 202B, it is alleged that by doing various things, Mr Martin (inter alia) breached the Use of Information Duty, and improperly used information obtained by him because he was an employee of Metstech or Metstech IP to gain an advantage for himself or someone else and cause detriment to Metstech and Metstech IP. Those allegations sufficiently allege a breach by Mr Martin of an equitable duty of confidence owed to Metstech. There is a separate allegation in para 194 as to the use by Mr Martin of Metstech Confidential Information “to effect the Conspiracy”, but the plaintiffs do not need to rely on that paragraph in order to establish that they did in fact allege that Mr Martin breached an equitable duty of confidence.

COSTS OF THE PROCEEDINGS AT FIRST INSTANCE

105    Grounds 12 and 13 of the appeal, and Grounds 7 and 8 of the cross-appeals filed by Mr Park and Mr Martin respectively, challenge the orders as to costs made by the primary judge.

106    The reasons of the primary judge in relation to costs were expressed at J[673] – [674] in the following terms:

673    The plaintiffs have largely succeeded, albeit not in respect of the tortious claim of conspiracy. Mr Martin has enjoyed partial success in respect of copyright in the software and the existence of an exclusive licence, albeit not to the company he suggested and subject to an obligation to deliver up the source code, which he opposed. I note that Mr Poisson was amenable to some of the plaintiffs’ demands shortly after the commencement of these proceedings.

674    Having regard to these matters, I consider it appropriate to order that the plaintiffs’ costs be paid by Mr Park, Mr Chou and their companies, by Mr Martin and his company but limited to 40% of the plaintiffs’ costs, and by Mr Poisson and his company but limited to 20% of the plaintiffs’ costs.

107    After delivering reasons, written submissions were sent to the primary judge in relation to final orders, including orders as to costs, which the primary judge read, but ultimately adhered to the views expressed in her Honour’s reasons.

108    The Chou parties submit that the reasons given by the primary judge were inadequate and that it was factually incorrect to say that the plaintiffs had “largely succeeded”. They submit that the tortious claim of conspiracy comprised a significant portion of the trial, but the primary judge gave no consideration to the failure of the conspiracy claim, nor to the fact that the appellants were only two of multiple defendants, against whom some non-overlapping claims had been brought. The Chou parties submit that the order that they pay 100% of the costs at first instance was manifestly unreasonable and unfair, and there was no reasonable justification for a costs order against them exceeding about 20% of the plaintiffs’ costs. Mr Park in his cross-appeal similarly submits that the tortious conspiracy claim was such a clearly dominant issue in the proceedings that it was manifestly unreasonable and plainly unjust not to depart from the usual rule and apply a substantial discount to the costs awarded to the plaintiffs or to set off the costs order to which Mr Park and his company would otherwise have been entitled in relation to the costs of the failed conspiracy claim. Further, Mr Park and his company submit that no relief was sought against them in relation to the copyright claims or in relation to the allegation that Mr Chou had failed to provide information, and there was no basis to allege that Mr Park’s company had failed to comply with the deed of company arrangement. Likewise, Mr Martin in his cross-appeal submits that the plaintiffs had lost on “the two most critical and dominant claims” made against him and his company, namely the tortious conspiracy claim and the copyright claim, and submits that any reasonable person would have concluded that the Martin parties had been the successful parties, thereby giving them a prima facie entitlement to have the plaintiffs pay their costs of the proceedings. Further, Mr Martin submits that the plaintiffs had not made claims for the ownership of copyright against him, and the plaintiffs’ success in relation to the Metstech SDAs and the related claims involving obligations owed by the directors of Metstech or Metstech IP were unrelated to the Martin parties.

109    The Metstech parties submit that there is no need for elaborate reasons to be given in relation to costs, and it was reasonably open to the primary judge to exercise the discretion in the way that her Honour did, and the costs orders reflected what the primary judge considered the parties’ respective successes and failures to have been. The Metstech parties also submit that the conspiracy claims included claims for breach of duties of directors, officers and employees, breach of confidence, breach of the restraint clauses in the Metstech SDAs, and the oppressive conduct of Metstech IP’s affairs. To the extent the plaintiffs alleged a conspiracy to injure by unlawful means, those other claims were necessary elements of the tortious conspiracy because they comprised the unlawful means through which the conspiracy was allegedly effected. The Metstech parties submit that they succeeded on the breach of confidence and Metstech SDA claims, which were based on the same facts as the tortious conspiracy claims. They submit that there was no evidence that went only to the tortious conspiracy claims and not to the claims on which the plaintiffs succeeded.

110    In our view, the Metstech parties are justified in drawing attention to the very substantial overlap between the tortious conspiracy claim, the claims based on the Metstech SDAs and on breach of confidence, and the claim of oppression. By reason of the very substantial overlap in those claims, which all involved collusive conduct by various of the defendants, it is not appropriate to differentiate between the issues on which the Metstech parties were successful and those on which they failed. In our view, the conspiracy claim was not clearly dominant or separable so as to require an apportionment of costs: see Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 at [6] – [7] (Beazley, McColl and Basten JJA); Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38] (Beazley, Ipp and Basten JJA); City of Canada Bay Council v Bonaccorso Pty Ltd (No 3) [2008] NSWCA 57 at [22] and [35] (Mason P, Tobias JA and Young CJ in Eq); Turkmani v Visvalingam (No 2) [2009] NSWCA 279 at [15] (Hodgson JA, with whom Beazley and McColl JJA agreed); and see generally Hockey v Fairfax Media Publications Pty Ltd (No 2) [2015] FCA 750; 237 FCR 127 at [84] – [91] (White J). The mere fact that a court does not accept all of a successful party’s arguments does not make it appropriate to apportion costs on an issue by issue basis: Mawhinney v Australian Securities and Investments Commission (No 2) [2022] FCAFC 205 at [66] (O’Bryan and Cheeseman JJ).

111    The primary judge enjoyed the advantage of observing at first hand how the trial was conducted and the interrelationship between the causes of action and issues on which the various parties had succeeded or failed at the trial. The discount in the costs order which the primary judge extended to the Martin parties, and also to Rorque Poisson and his company (the ninth and tenth respondents to the appeal), reflected a careful consideration of those matters, and did not require any further exposition by way of reasons. In light of the central role played by Mr Park in the events which gave rise to the Metstech parties’ claims, we do not regard it as manifestly unreasonable or unfair that he be treated in the same way as Mr Chou in relation to costs. In our view, no appellable error (so as to engage the principle of review of discretionary decisions set out in House v The King (1936) 55 CLR 499 at 505 (Dixon, Evatt and McTiernan JJ)) has been established in relation to the primary judge’s decision as to the costs at first instance.

112    In relation to the costs of the appeal, the parties have expressed a preference to deal with those costs by way of further submissions subsequently to the delivery of these reasons, and accordingly we will set a timetable for those submissions to be filed and served.

CROSS-APPEAL BY THE METSTECH PARTIES

113    The Metstech parties claimed in their amended notice of cross-appeal that the primary judge had failed to deal with two aspects of their claims. The first was that they had sought relief in relation to breaches by the defendants of their duties to Metstech as its directors, officers and employees, which the primary judge had not fully dealt with. The second was that, while the claim for tortious conspiracy failed because the Metstech parties had not proved damage, the primary judge had not dealt with their claim for a quia timet injunction to prevent the defendants from giving effect to the alleged conspiracy.

114    However, in the course of oral submissions, Senior Counsel for the Metstech parties accepted that if the primary judge’s orders for delivery up, injunctions and an inquiry as to damages were not disturbed on appeal, then these grounds of appeal were academic, as they arose only in the event that the appellants were successful in seeking to set aside those orders: Transcript p 133 lines 15–35. As we have reached the view that those orders should not be disturbed, there is no need to deal with these grounds of cross-appeal.

CROSS-APPEAL BY MR MARTIN AS TO EQUITABLE RELIEF

115    In relation to the balance of Mr Martin’s cross-appeal, Ground 3 (concerning equitable relief against Mr Martin) and Grounds 5 and 6 (concerning equitable relief against CSM) were withdrawn in the course of oral addresses: Transcript p 45 lines 21–24.

DISPOSITION

116    Accordingly, the appeal and cross-appeals should be dismissed, although the declaration made by the primary judge in Order 1 should be varied in the interests of clarity to state expressly that the Product Manufacture Documentation referred to in sub-paras (e) to (i) of that declaration is the documentation created by Mr Chou in the course of designing Metstech’s products in order to arrange their manufacture, and that the declaration is as between the plaintiffs and the defendants. In the orders which we have made today, we have set a timetable for written submissions and any affidavit(s) on the question of costs of the appeal. We anticipate that we will decide the question of costs of the appeal on the papers.

Associate:

Dated:    22 December 2023

SCHEDULE OF PARTIES