Federal Court of Australia

Microsoft Corporation v CPL Notting Hill Pty Ltd [2024] FCAFC 20

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be allowed.

2.    The judgment of the primary judge made on 6 December 2022 be set aside, and in lieu thereof, order that there be a new trial before a judge of the Federal Court of Australia on all issues except for those on which the appellants were successful at trial before the primary judge.

3.    The costs of the trial before the primary judge be reserved for determination by the judge before whom the proceeding is retried.

4.    The respondents pay the appellants’ costs of the appeal.

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

REASONS FOR JUDGMENT

NICHOLAS J:

Background

Introduction

1    This is an appeal from a judgment by the Federal Circuit and Family Court of Australia (Division 2) comprising declarations and orders made on 6 December 2022. Although the primary judge granted the appellants declaratory relief and orders for the payment of damages and costs arising out of infringement of copyright by the first and third respondents, the damages awarded were far less than had been sought by the appellants against all respondents. Further, the primary judge declined to grant the appellants any injunctive relief.

2    The primary judge found that the first and third respondents committed a small number of copyright infringements compared to the number of infringements alleged by the appellants. Such infringements were found to have been committed in circumstances warranting a modest award of compensatory damages, no additional damages and no injunctive relief. The grant of relief reflected the primary judge’s rejection of the appellants’ case at trial that the respondents had committed more wide-spread acts of copyright infringement which they had later sought to conceal by failing to produce relevant records evidencing the true scope of their infringing activities and by relying on false documents, and giving false evidence, in relation to those activities.

3    The appellants now contend, in essence, that they did not receive a fair trial. They rely on a number of related matters in support of that contention. The first concerns rulings made by the primary judge in relation to the cross-examination of the respondents’ witnesses, which the appellants contend were erroneously made and which they say curtailed cross-examination of those witnesses to the point where the appellants were denied procedural fairness. The second matter concerns the lengthy delay between the date of the hearing before the primary judge and the date of delivery of judgment. The appellants contend that the delay contributed to a failure by the primary judge to consider the evidence in its totality and its inherent improbability when considered as a whole. The appellants seek orders setting aside the judgment and for a new (third) trial.

4    For the reasons that follow, I consider that the appeal should be allowed and that there should be a new trial.

5    The parties to the proceeding included, as first appellant, Microsoft Corporation (“Microsoft”) which was at all relevant times the owner of copyright in the computer programs which the respondents were alleged to have infringed. The respondents to the proceeding were the first respondent, CPL Notting Hill Pty Ltd (“CPL Notting Hill”), the second respondent, Ms Wei (Mabel) Li, who was at all relevant times the sole director of CPL Notting Hill, the third respondent, CPL Distribution Pty Ltd (“CPL Distribution”) and the fourth respondent, Mr Jin Wang, who was at all relevant times the sole director of CPL Distribution. The evidence indicates that Mr Wang (who did not give evidence at the trial) owned and controlled both companies through a related entity called LHX Pty Ltd. Except where it is necessary to distinguish between the two companies, I will refer to CPL Notting Hill and CPL Distribution as “the CPL companies”.

6    The primary judge published reasons for judgment on 30 September 2022 (“PJ”), which are lengthy and detailed (Microsoft Corporation v CPL Notting Hill Pty Ltd (No 7) [2022] FedCFamC2G 590). After publication of PJ the primary judge considered the parties’ submissions in relation to the relief which should be granted. Her Honour made final orders on 6 December 2022 and on that date published reasons for judgment as to relief (Microsoft Corporation v CPL Notting Hill Pty Ltd (No 8) [2022] FedCFamC2G 1033). Her Honour made a declaration that CPL Notting Hill, by pre-installing Windows 7 Pro software onto the hard drives of 30 new computers built by it, and to which it affixed loose Certificates of Authenticity (COAs) acquired by CPL Distribution on 9 June 2015, reproduced Windows 7 Pro in a material form without the licence of Microsoft and thereby infringed Microsoft’s copyright in Windows 7 Pro under s 36(1) of the Copyright Act 1968 (Cth) (“Copyright Act”). The primary judge also made a declaration that CPL Distribution authorised the infringing acts of CPL Notting Hill by supplying it with Windows 7 Pro software and loose COAs acquired on 9 June 2015, and thereby infringed Microsoft’s copyright in Windows 7 Pro under s 36(1) of the Copyright Act.

7    In respect of the infringements the subject of declarations, the primary judge awarded compensatory damages to Microsoft in the amount of $5,911.75 (excluding interest) against CPL Notting Hill and a mere $121.50 (excluding interest) against CPL Distribution. Her Honour declined to make any award of additional damages against any respondent and, apart from costs orders also made by the primary judge, the proceeding was otherwise dismissed.

8    The proceeding was commenced by the appellants against CPL Notting Hill and Ms Li on 13 May 2016 some months after Microsoft’s lawyers issued a letter of demand dated 8 January 2016 (“the letter of demand”). Various causes of action were relied on including, most relevantly, infringement of Microsoft’s copyright in the Windows 7 operating system (“Windows 7”). This is an operating system that is no longer supplied or supported by Microsoft that came in four different versions – Windows 7 Professional (“Windows 7 Pro”) and Windows 7 Home Premium (“Windows 7 Home”), with each available in either a 32bit or 64bit version. Except where it is necessary to distinguish between the different versions in these reasons, I will refer to them as Windows 7.

9    Microsoft relied on a sale of a computer by CPL Notting Hill to Ms Simone Lanyon on 11 November 2015. The sale to Ms Lanyon, who was an investigator engaged by the appellants, is referred to in PJ as the “test purchase”. This sale was relied on by Microsoft in support of what is referred to in the parties’ submissions and PJ as the “retail case” which related to “at least” 39 installations of Windows 7 Pro on new computer systems built and supplied by CPL Notting Hill in the period 28 February 2014 to 16 December 2015.

10    Although the respondents denied that they infringed Microsoft’s copyright, they admitted that CPL Notting Hill installed 30 copies of Windows 7 Pro on new computers which it supplied to end-users and to which it had affixed loose COAs. The respondents contended that those COAs were acquired by CPL Notting Hill on 9 June 2015, as evidenced by an invoice of that date issued by LDS International Pty Ltd (“LDS”) to CPL Distribution. Mr Felix Chen, an employee of LDS, was alleged by the respondents to have supplied 50 COAs and a number of installation disks (specifically, compact disks or CDs) for Windows 7 for a total cash price of $3,850.

11    A witness called by the respondents, Mr Pan, gave evidence that he was contacted by Mr Chen by telephone on 5 June 2015 and that he negotiated with Mr Chen for the purchase of the 50 COAs (with installation disks) which were delivered by Mr Chen to CPL Notting Hill’s premises on 9 June 2015. It is not in dispute that (as found by the primary judge) the COAs supplied by Mr Chen to Mr Pan were genuine certificates authorised for use in connection with what was referred to as the Microsoft refurbisher program, which permitted them to be used by participants in that program to install Windows 7 on refurbished computers, but not new computers. Neither of the CPL companies was a participant in Microsoft’s refurbisher program. They were (or at least CPL Notting Hill was) what Microsoft’s licensing structures and arrangements refer to as low volume original equipment manufacturers (“OEMs”) engaged in the production of new computer systems on which a Windows operating system would be installed. Low volume OEMs were also referred to as “commercial OEMs” or “system builders”. Commercial OEMs were entitled to acquire copies of Windows 7 in the form of “system builder packs”. A system builder pack comprised a COA label on which a unique 25 digit alphanumeric product key was printed, and an authorised recovery DVD or other medium including a copy of Windows 7. Commercial OEM software licence terms (known as the “system builder licence”) were printed on the packaging of the system builder packs.

12    The appellants were granted leave to join CPL Distribution and Mr Wang to the proceeding on 4 August 2017. By amendments made at the time of their joinder, the appellants alleged that CPL Distribution supplied CPL Notting Hill with at least 1,467 loose COAs which permitted CPL Notting Hill to activate, install, and operate Windows 7 on new computer systems even though such loose COAs had been created by Microsoft solely for use by entities which were licenced to do so under the refurbisher program. The pleaded case based on the supply of these 1,467 COAs were referred to in the parties’ submissions and the primary judge’s reasons as the “supply case”. Microsoft ultimately contended at trial that a total of 1,617 loose COAs were acquired by CPL Distribution and supplied by it to CPL Notting Hill.

13    There is an issue raised by the respondents in the appeal as to the scope of the supply case as pleaded by the appellants and whether it touched CPL Notting Hill and Ms Li. The primary judge was of the view that it was not part of the appellants’ pleaded case that any of the at least 1,467 COAs alleged to have been supplied by CPL Distribution were used to install Windows 7 on new computers by CPL Notting Hill, which it then supplied to its customers. The appellants accepted that their pleading did not include this express allegation.

14    The proceeding was heard by the primary judge on 19 - 23 August 2019 (when the evidence was taken) and 16 December 2019 (when oral closing submissions were heard) on remittal from a judge of this Court (O’Callaghan J) exercising appellate jurisdiction. O’Callaghan J set aside orders made on 29 August 2018 by a different judge of what was then the Federal Circuit Court of Australia, in favour of the CPL Companies, Ms Li and Mr Wang: see CPL Notting Hill Pty Ltd v Microsoft Corporation (No 2) [2019] FCA 223. His Honour also ordered that there be a new trial. The present appeal arises out of the re-trial that occurred pursuant to his Honour’s orders.

15    The supply case pleaded by the appellants referred to what became known in the parties’ submissions and PJ as the Chen invoices. Most of the Chen invoices referred to in the appellants’ particulars were identified by date and invoice number. In each case the purchaser was identified as CPL Distribution. Nineteen of those invoices nominate LDS as the supplier. The dates appearing on them fall within the range of 17 July 2014 to 17 August 2015. The Chen invoices referred to in the appellants’ particulars also include others in which the supplying party is a company called Ever Success Pty Ltd (“Ever Success”). Evidence called at the trial established that Ever Success was a company operated by Mr Chen’s parents-in-law that Mr Chen used as a vehicle to sell computer products that he stole from LDS. This conduct was, in part, the subject of a police investigation and subsequent criminal proceeding, which I discuss in more detail below.

16    The Chen invoices were, as will be seen, critical to the appellants’ infringement case. On their face, they purported to show that LDS and Ever Success supplied a total of 1,617 COAs to CPL Distribution in the period between 17 July 2014 and 17 August 2015. The appellants’ case was complicated by the existence of different versions of the Chen invoices (at least those purportedly issued by LDS) and an evidentiary contest concerning their admissibility which raised questions concerning their authenticity and how it happened that many of those invoices came to be supplied by Ms Li to Victoria Police. Before returning to that topic, it is necessary to say something more about Mr Chen.

17    Mr Chen was the main point of contact between LDS and CPL Distribution. According to the primary judge’s findings, he was the LDS sales representative who principally dealt with the CPL companies on LDS’ behalf. Mr Pan was the CPL companies’ staff member who primarily dealt with Mr Chen and, according to Mr Pan’s evidence, he saw Mr Chen at the CPL companies’ business premises once or twice a month.

18    Mr Chen was the subject of a police investigation that commenced in about April 2015. The investigation was conducted by Sergeant O’Sullivan of Victoria Police who was called to give evidence by the appellants. She investigated allegations made by LDS that Mr Chen had stolen stock and fraudulently manipulated accounting records to cover his tracks. She gave evidence that he would raise orders which he would use to obtain stock from the LDS warehouse. He would later delete the order and corresponding invoice and then supply the stock taken from the warehouse to customers of LDS, presenting them with fraudulent invoices which he prepared. According to Sergeant Megan O’Sullivan’s evidence (her evidence is recited in detail by the primary judge in PJ [218] and [224] – [225]), the false invoices created by Mr Chen on his computers (of which there were several including a laptop) were not recorded in any of LDS’ records. They bore dates and invoice numbers corresponding to invoices issued to different customers of LDS. As a result of Mr Chen’s theft of stock and false accounting, LDS suffered serious cash flow problems and went into voluntary liquidation in March 2016.

19    Mr Chen was arrested on 3 September 2015 and found in possession of cash in envelopes and plastic bags totalling $451,904 which he obtained through sales of computer hardware and software that he stole from LDS. Following his arrest Mr Chen was released on bail. The evidence is not clear as to when bail was granted, but Ms Li’s evidence was consistent with this having occurred prior to 4 November 2015. Mr Chen defended the charges against him for a year or more before pleading guilty to four charges of theft, four charges of false accounting and one charge of knowingly dealing with the proceeds of crime. He was sentenced by Judge Gaynor on 1 June 2017 to three years imprisonment with a non-parole period of 20 months. There was no allowance made for time already served which also suggests that Mr Chen was granted bail soon after his arrest. According to her Honour’s sentencing remarks, Mr Chen stole computer hardware and software from his employer to the value of $557,018.58. It was never suggested by Sergeant O’Sullivan, or the appellants for that matter, that either of the CPL companies was a target of the police investigation or that they may have been implicated in Mr Chen’s criminal activities.

The Chen invoices

20    Various invoices purportedly issued by LDS and Ever Success were obtained by the appellants by subpoena for production served on Victoria Police, produced in the period 10 April 2017 to 11 July 2017. These included nineteen invoices issued in the name of LDS and five issued in the name of Ever Success. It is apparent that there was more than one copy of some of these invoices. Some were described by her Honour as “clean” in the sense that there was no handwriting on them whereas others included some handwriting. Sergeant O’Sullivan gave evidence as to the source of the invoices.

21    The nineteen clean Chen invoices purporting to have been issued by LDS came from Mr Chen’s laptop computer. There were multiple copies of some of these invoices which appeared to be extracted from Mr Chen’s laptop computer, some of which were different (e.g. marked as drafts) in ways identified by the primary judge at PJ [445]. Her Honour ruled that these invoices, sourced from Mr Chen’s laptop, were not admissible as business records.

22    Other versions of the Chen invoices purporting to have been issued by LDS were provided by Ms Li to Victoria Police and admitted into evidence on the basis that they were (or at least may have been) represented by Ms Li to be business records of CPL Distribution. However, the primary judge concluded that those invoices were not authentic and she gave them no weight. That conclusion was based on a close examination of the Chen invoices, the existence of what are referred to in PJ as the CPL/LDS invoices (which I discuss below), evidence of Mr Desmond Lu and Mr Yuanfeng (Kevin) Xu (both of whom worked in the CPL companies’ warehouse) and, importantly, evidence given by Ms Li explaining how those invoices came into the possession of the CPL companies. I will say more about Ms Li’s evidence on that topic shortly.

23    The five Ever Success invoices were, according to Microsoft, attached to an email which Ms Li sent to Mr Chen on 4 November 2015 (“4 November email”). I discuss the relevant email, including the question whether these invoices were attached to it, below. Two other copies of invoices purportedly issued by Ever Success to CPL Distribution were exhibited to an affidavit of one of the solicitors for the appellants (Mr Alvin Ng) and were said to have been extracted from the documents produced by Victoria Police. One of these invoices, which bore the same invoice number as one of the invoices the appellants alleged to be attached to the 4 November email, was admitted into evidence by her Honour, but found to be a forgery at PJ [538] – [541]. As to the other invoice, her Honour observed at PJ [542] that she could not be satisfied of its provenance due to discrepancies between the invoice number identified as between the solicitor and Sergeant O’Sullivan.

The CPL/LDS invoices

24    With regard to the invoices referred to by the primary judge as the CPL/LDS invoices, these were invoices issued in the name of LDS and produced by the CPL companies on discovery. There were nineteen such invoices with the same invoice numbers and amounts as the Chen (LDS) invoices, but which record the purchase of hardware, not Windows 7 software. There was also a stock receive form of CPL Distribution corresponding to each such invoice. These documents were relied on by the CPL companies as evidence that, with the exception of the 9 June 2015 purchase, none of the sales evidenced by the Chen invoices were authentic, and were said to corroborate Ms Li’s and Mr Pan’s evidence that CPL Distribution only ever acquired 50 loose COAs by way of the 9 June 2015 purchase. The primary judge made an express finding at PJ [525] that the CPL/LDS invoices were genuine. In reaching this conclusion, her Honour had regard to the stock receive forms, the CPL/LDS payables list (which was emailed by Ms Li to Victoria Police), and the evidence of Mr Lu and Mr Xu. Until September 2015, Mr Xu was the person primarily responsible for receiving goods at the CPL companies’ warehouse. In that role he reported to Mr Lu, the warehouse manager. Mr Lu’s duties included receiving and dispatching goods and supervising warehouse operations.

25    Most of the CPL/LDS invoices are annotated with handwriting acknowledging payment. For example, invoice 300026866 dated 17 July 2014 for $2,211 is for six units of a HP product. The handwriting on the invoice states “2,211-received. Felix. 18.07.2014” and is initialled. The bottom of the invoice refers in handwriting to the name “Kevin” and a signature (or initial). Mr Xu gave evidence that the signature was his and that it recorded receipt by him of the goods specified in the invoice at the warehouse on or about the date of the invoice.

26    Mr Xu gave evidence to the same effect in relation to eleven other invoices with numbers and dates corresponding to Chen (LDS) invoices relied on by the appellants in support of their case. It was not put to Mr Xu in cross-examination that he had not signed the invoices or had not received the stock referred to in them. The primary judge found at PJ [431] that each of the CPL/LDS invoices had been initialled by either Mr Xu or Mr Lu at the time the goods the subject of the invoices were received.

The manila folder

27    Commencing in late 2015, Sergeant O’Sullivan and her colleagues requested at various times that Ms Li provide Victoria Police with documentary information relating to an investigation then underway, including invoices issued by LDS to CPL. In response to these requests, Ms Li did not provide the CPL/LDS invoices to Victoria Police. The invoices she provided to Victoria Police were copies of invoices she claimed had been provided to her by Mr Chen in a yellow manila folder on or about 14 or 15 January 2016.

28    The primary judge summarised Ms Li’s evidence concerning her production to Victoria Police of the Chen (LDS) invoices at PJ [450] as follows:

[450]    …

(a)    on about 16 December 2015, Sgt O’Sullivan and PO Smith attended CPL Notting Hill, and asked for a payables list of purchases from LDS. Police mentioned that they may need some copies of invoices in the future, but not then;

(b)    on Christmas Eve, 24 December 2015, Ms Li provided the CPL/LDS Payables List to Sgt O’Sullivan;

(c)    upon receiving the letter of demand on 8 January 2016, CPL investigated, identified the supplier of the impugned Windows 7 Pro licence as LDS, as part of the June 2015 purchase, and contacted Mr Chen of LDS to return remaining licences of the June 2015 purchase and get a refund;

(d)    Mr Chen attended CPL Notting Hill on 13 January 2016, and CPL returned 15 licences and obtained a refund. Ms Li had a conversation with Mr Chen. She asked about LDS. Ms Li told him the police had visited and mentioned that they might need copies of delivery invoices. About 2 minutes later, Mr Chen told her he had all these invoices, and that he would prepare the copies of them for CPL, so that she would not have to spend time digging them out from CPL’s accounting records;

(e)    a few days later, Mr Chen again visited CPL Notting Hill, told Ms Li he had copies of the LDS invoices for her as per above. Mr Chen handed her a bundle of loose invoices in a yellow manila folder;

(f)    on 18 January 2016, Sgt O’Sullivan emailed Ms Li stating “I am hoping that you may be able to provide us with the following invoices;” and listed 15 items corresponding to items in the CPL/LDS Payables List;

(g)    on about 25 January 2016, Ms Li looked through the invoices in the manila folder, located 15 requested invoices, and emailed them to Sgt O’Sullivan;

(h)    on 2 March 2016, Gerard Curtin of Victoria Police sent an email to CPL requesting copies of 11 invoices. That email was overlooked. Then in early May 2016, PO Smith telephoned and asked if Ms Li could produce 11 invoices previously requested, and said if the invoices are ready, he could arrange someone to pick up. She said Ok. Again she looked at the invoices in the manila folder provided to her by Mr Chen. She found copies of the 11 invoices sought by police. On or about mid May 2016, a police officer attended CPL premises and picked up the 11 invoices police had requested; and

(i)    it was only in 2018 when the Microsoft parties put on their evidence in chief that she realised she had been misled and they were false documents.

29    The primary judge referred to the relevant invoices as the Chen (LDS/manila) invoices in light of Ms Li’s evidence that they were handed by Mr Chen to Ms Li in a yellow manila folder. This yellow manila folder also included other LDS invoices, which are not part of the Chen (LDS/manila) invoices. As to the CPL/LDS Payables List referred to by her Honour, this was a list of purchases (comprising two documents) produced by CPL Distribution to Victoria Police listing purchases from LDS for the period 2 July 2014 to 5 October 2015. The list of purchases specifies the stock received number, the date of supply, the name of the supplier (in each case this is LDS), the invoice total and amount paid, and the invoice number. However, the product supplied is not identified. Total purchases recorded amount to around $277,000. In total the list includes entries for 130 separate transactions including a purchase on 9 June 2015 for $3,850.

30    Ms Li’s evidence was, in effect, that it did not occur to her that Mr Chen might provide her with copies of invoices different from those provided to the CPL companies and retained by them. The primary judge referred to cross-examination of Ms Li on this topic which included the following exchange at transcript p 528 lines 6-36:

MR COBDEN: Now, Mr Chen at this meeting or discussion on 13 January 2016 – you said to him, did you not, that the police had mentioned that they may need copies of delivery invoices from LDS; correct? --- Yes.

MR COBDEN: Yes. And Mr Chen said to you, on your account, after he had been given the cash refund for the product that CPL did not want to deal with anymore, “I have all these invoices. I will prepare copies for you. You don’t have to spend time digging them out from your accounting records.” That’s what you say he said? --- Yes.

MR COBDEN: Thank you. And you said okay? --- Yes.

MR COBDEN: So, instead of doing as the police asked you – or said they might ask you, which is to provide invoices from the records of CPL, you, instead, accepted Mr Chen’s suggestion that he give you copies of the invoices so you had them handy; that’s correct, is it? --- All the invoices were from Mr Chen, and he – to me he’s LDSs sales rep. And I’ve never thought about he could forge those invoices. And the invoices he gave me in the manila folder, to me the same as in our accounting records.

MR COBDEN: You had an obligation, did you not, if the police asked you for invoices, to do your very best to give you the precise invoices that the police wanted; correct? --- Yes. Correct.

MR COBDEN: And the only way to do that with any certainty was to go to your own records and extract those invoices and give them to police from your own original records. That’s correct, isn’t it? --- The invoices – I did check the invoice amount according to places in the email, the amount, the invoice number. To me, one invoice number, how could this possible to have two different invoices with different - - -

MR COBDEN: Yes? - - - accountants? To me that’s impossible. And I’m accounting background. For me, for the invoices, I checked the invoice number and amount according to our payable list. Payable list is from our system, so must be right.

31    Ms Li’s evidence was that she did not look at the product descriptions, and that she focused on the number and amount of each invoice. Each invoice provided to Victoria Police by Ms Li is no more than one page long. Some are for computer hardware only, and others for either Windows 7 Pro or Windows 7 Home with the licence described as “For System Build Only”. However, there are others which are for Windows 7 Pro or Windows 7 Home that do not use the words “System Build Only” in the product description, but merely refer to the products as either “Microsoft Windows 7 Pro License” or “Microsoft Windows 7 Home License”. These invoices include the 9 June 2015 invoice for $3,850 for 50 units of what is referred to as “Microsoft Windows 7 Pro License”. There are other invoices that predate that invoice that use the same product description. For example, one, dated 14 May 2015, is for 100 units of Windows 7 Pro License for a total price of $7,700. Handwritten notations on that invoice purport to record the receipt of $3,000 by “Felix” on 14 May 2015 and another $4,700 the next day.

32    Her Honour considered that Ms Li’s evidence as to her focus on the invoice number and amount received was “plausible and consistent with her experience as having an accounting background, and her role in CPL Notting Hill”. She said that Ms Li’s evidence was not shaken in cross-examination and that she accepted Ms Li’s evidence as truthful. She went on to conclude at PJ [528] that while the Chen (LDS/manila) invoices were in Ms Li’s possession, she accepted Ms Li’s account that they were given to her by Mr Chen for the specific purpose of responding to the police request. Her Honour also observed at PJ [528] that she was not satisfied on the evidence that the Chen (LDS/manila) invoices were authentic or that they were what the appellants claimed them to be. Although her Honour admitted the Chen (LDS/manila) invoices into evidence, she did not give them any weight.

33    Mr Fox SC (who appeared for the appellants on appeal and as junior counsel at trial) emphasised in his submissions that the Chen invoices, or at least those provided by Ms Li to Victoria Police, were (on the appellants’ case) genuine records of transactions entered into by CPL Distribution whereby it acquired in exchange for cash the products referred to in those invoices. However, his submission left open the possibility that the Chen invoices were issued by Mr Chen in the course of his criminal activities, rather than in the ordinary course of LDS’ business.

The 4 November email

34    The documents produced by Victoria Police also included a copy of the email purportedly sent by Ms Li to Mr Chen on 4 November 2015, (i.e., the 4 November email) confirming that $23,485 in cash had been paid to Mr Chen in respect of Ever Success invoices. The 4 November email, as reproduced by the primary judge at PJ [309], stated:

Hi Felix,

We have paid cash to Felix of Ever success for the following invoices:

Regards,

Mabel

35    There was no dispute that the 4 November email was sent from Ms Li’s email account on that date. However, Ms Li denied that she sent the email. Her evidence at trial was the CPL companies never had any business dealings with Ever Success.

36    While there is no explicit finding as to the source of Victoria Police’s copy of the 4 November email, it seems likely that it was obtained from one of Mr Chen’s computers or Mr Chen’s lawyer, Mr Chen Yang, who on 25 November 2015 made written representations (in what is referred to by the primary judge as the Yang 25 November email) on Mr Chen’s behalf for the return of a large part of the cash seized from Mr Chen’s house.

37    There was an issue as to whether copies of the Ever Success invoices were attached to the 4 November email. The primary judge found at PJ [465] that they were not attached to the email. Although Mr Fox SC asserted that the appellants challenged this finding, their submissions on this topic did not engage with the primary judge’s finding that the email does not contain any indication that there were any attachments to it. Sergeant O’Sullivan did not give any evidence indicating that the invoices were attached to the email or that this explains why the documents produced by Victoria Police were numbered sequentially (i.e., email followed by invoices).

38    The primary judge provided a detailed account of the circumstances in which Ms Li said the 4 November email came into existence. According to Ms Li, Ms Jenny Zhang (who also worked for the CPL companies) forwarded Ms Li an email received from Mr Chen (“the Chen/Zhang email”) requesting that he be provided with a letter declaring that between June 2015 and August 2015 he had been paid cash for invoices from Ever Success. The draft letter included in the email to Ms Zhang provided for the inclusion of an approximate amount of cash paid to Mr Chen which was left blank.

39    According to Ms Li, Mr Chen came to CPL Notting Hill’s premises in early November 2015 and asked about the email to Ms Zhang. Ms Li said he asked her to turn up the email, which she then found and read. In relation to the discussion that then occurred between Ms Li and Mr Chen, the primary judge provided the following summary of Ms Li’s evidence at PJ [314]-[317]:

[314]    Mr Chen then said to Ms Li to the effect “can you help me out by putting a big number like $100,000 to $200,000 in the form attached to the email”. Ms Li says she told him that “we can only provide you with information that relates to actual sales” and that she “cannot sign any false documents”. He then asked if she could “at least acknowledge a few sales for me”, and that he had drafted an email for her. Ms Li attests that Mr Chen then produced from his pocket a USB stick drive, plugged it into a computer in the sales office, opened a draft email, and she looked at it. Ms Li recollects it was similar to the 4 November email. She recalls looking at the table, the amounts.

[315]    Ms Li attests that she was unaware whether CPL Distribution or CPL Notting Hill had any transactions with a supplier called ‘Ever Success’. She said to Mr Chen she needed to check with the accounting department. She then left Mr Chen alone in the sales office, and went down the corridor to check with the accounting department. Ms Li was informed by one of the accounting staff that there had been no dealings ever with Ever Success. She returned to the sales office, told Mr Chen this, he responded “Never mind” and left. Ms Li attests that the purported Chen (Ever Success) invoices (which I refer to as the Chen (ES/print) invoices) were never received by CPL companies, she never sent the 4 November email, and at no time did CPL Notting Hill or CPL Distribution have any business dealings with Ever Success.

[316]    Tested in cross-examination, Ms Li confirmed her evidence. Ms Li said she did not suspect anything. She looked at the draft email, she noted the table and she told Mr Chen “If we paid you this, then I can confirm that. If we haven’t then I cannot.” She went and checked with the accounting department, and they had a look, and gave her the answer above. When she came back to the sales office, [Mr Chen] was already at the doorway about 2 metres away from the computer, and told her never mind. Under cross-examination, Ms Li reiterated that she then did not pay any attention to the matter. Ms Li said that the form of expression is not what she would say. She reiterated that she did not send the 4 November email.

[317]    Ms Li’s evidence is corroborated by the evidence of Mr Pan, and each of the warehouse staff Mr Lu, Mr Xu and Mr Godby, each of whom received goods into the warehouse in the relevant period, and attested that they had never received goods from Ever Success or seen an invoice from it, or heard of it until the proceeding.

(Footnotes omitted)

40    The primary judge accepted Ms Li’s account of her meeting with Mr Chen on 4 November 2015, that Ms Li never sent the 4 November email, and that at no time did either of the CPL companies have any business dealings with Ever Success. As for Mr Chen’s motivation around this time, her Honour found that there was an available inference that Mr Chen was at that time fabricating material for presentation to Victoria Police and the Office of Public Prosecutions (“OPP”) for the purpose of securing the release of seized funds. Her Honour said at PJ [534]:

I consider that the timing of the Yang 25 November email and the representations made by Mr Yang to the OPP and Sgt O’Sullivan on instructions, whilst I am not persuaded that they can be relied upon as true (given Sgt O’Sullivan’s evidence, and the remarks of the sentencing judge), give credence to, and are supportive of Ms Li’s evidence … that Mr Chen visited CPL on 4 November 2015, that he sent the Chen/Zhang email to CPL earlier that day, and to her account of the events of, and surrounding that visit, and her disavowal of the 4 November email. The sequence of these events and the documents give rise to an available inference that Mr Chen was engaged in fabricating material to cover up his thefts from LDS of goods and his sales of those goods, and sought to present to the OPP and police an alternative explanation for having obtained the money seized, which money he then petitioned (through his solicitor) to be returned …

41    There are two other points to make in relation to the Ever Success invoices which Microsoft contends were attached to the 4 November email. Two of the invoices referred to in the 4 November email have the same invoice number and date but different invoice amounts. Further, none of Ever Success invoices said to have been attached to the email bear any handwritten note or other indications to acknowledge or record the receipt of the goods or any cash payment, notwithstanding that all of the sales are described as cash sales.

The 2017 data loss

42    Ms Li gave an account of an incident referred to in PJ as the 2017 data loss in an affidavit made on 21 December 2017 in response to an order for discovery made against the CPL companies. The information she provided in that affidavit was supplemented by a further affidavit made on 30 January 2018. In short, Ms Li claimed that electronic records required to be produced pursuant to the discovery order were no longer accessible following a mains electricity supply outage that occurred at around 6.15pm on 21 November 2017. Her Honour considered the evidence given by Ms Li and Mr Pan in relation to this incident in PJ [407]-[420]. There was no criticism by the appellants of the accuracy of her Honour’s summary of Ms Li’s and Mr Pan’s evidence. The following account is largely drawn from those paragraphs of her Honour’s reasons.

43    In Ms Li’s written evidence the relevant event was first identified as a mains electricity supply outage. Mr Pan, in his evidence, described it as a power surge. Ms Li’s evidence was that the power to CPL Notting Hill’s premises went off and the premises went dark. According to Ms Li, after power was restored, the staff were unable to log onto the data server. The data server hard drive and back up drive were affected, and content was rendered inaccessible. Steps were taken to recover the data but those steps were unsuccessful.

44    Ms Li contacted Mr Charles Chang of Digifield Technology who was the person who had developed and helped install the Business Assistant software used by the CPL companies, and who set up the backup drive of the software system. She became aware that he was overseas, and would not return to Australia until 1 December 2017, so Ms Li called Mr Pan, CPL Notting Hill’s former technical manager for help.

45    Mr Pan gave evidence that he received a call from Ms Li at about 6pm. Ms Li said that “the inventory software was down after a power surge, and they… can’t connect to the database any more”. She asked him if he could “quickly go there and have a look”. He attended the CPL companies’ premises at about 8pm.

46    Mr Pan tried to turn on the computer, which he could, but found that he could not access the database. He advised Ms Li to contact the developer of the software, but that he (Mr Pan) could quickly build another computer, and have it ready for use the next day.

47    Under cross-examination Mr Pan said the only way he could access the data created by the Business Assistant software was through the system, and because he could not log into that system, he could not access the database. Mr Pan installed a new hard drive, installed Windows, and then installed the Business Assistant software from an installation disk.

48    Mr Pan’s oral evidence in chief, and under cross-examination, was that Mr Pan then imported the stock codes by downloading them from CPL’s website. The stock levels were then manually entered by staff using the results of the latest stocktake. Mr Pan and several staff spent until late the next morning manually typing in stock levels. In this way the business was ready to resume on 22 November 2017. Mr Pan said that the only electronic records that existed after the new hard drive was installed with the Business Assistant software were the product codes and the stock levels entered during the course of the night.

49    According to Ms Li’s evidence, on 1 December 2017, the damaged hard drive was sent to Mr Chang of Digifield Technology. Ms Li says she later sent the backup drive to Mr Chang. Correspondence from Mr Chang indicates that he received the main drive on 4 December 2017 and the backup drive on 21 December 2017. On 8 January 2018, Mr Chang informed Ms Li that he was unable to recover and restore any information from either drive. In an email sent on 23 January 2018, Mr Chang told her that he disposed of both drives after he had finished working on them. In the email, Mr Chang stated that his usual practice was to dispose of hard drives once he had finished working on them unless the customer told him to retain them.

50    As her Honour’s reasons record, the appellants submitted to her that the events described by Ms Li and Mr Pan were “unbelievable, self-serving, and seek to minimise and prevent verification of the quantum of infringement, and evidence the lengths the CPL parties have gone to conceal their infringement”. They further submitted that the respondents knew that their attempt to appeal the order for discovery made against them would fail and that the evidence given concerning the 2017 data loss was “… all part of the CPL parties’ web of deceit”. The order for discovery referred to by the appellants was that made by Judge Street on 4 August 2017 as amended on 7 August 2017. Among other things that order required the respondents to give verified discovery of sales invoices relating to the acquisition or supply of Windows 7 or COAs for Windows 7 in the period 1 January 2014 to the date of order. The respondents’ application for leave to appeal that order was heard and dismissed by Robertson J on 24 November 2017, just a few days after the data loss was said by Ms Li and Mr Pan to have occurred: CPL Notting Hill Pty Ltd v Microsoft Corporation [2017] FCA 1385.

51    Various submissions were made by the appellants to the primary judge as to why Ms Li’s and Mr Pan’s evidence concerning the 2017 data loss should not be accepted. It is not suggested that any matter relied upon by the appellants in support of that submission was not considered or dealt with by her Honour. Apart from what was said to have been a failure by the respondents to call evidence from Mr Xu, Mr Lu or Mr Liyao (Leon) Guo in relation to the incident, the appellants relied on differences in the description of the relevant event which referred to it as either a power outage or a power surge. Her Honour did not consider that Ms Li’s description of the incident as a power outage cast doubt on the veracity of her evidence. Her Honour concluded at PJ [425]:

However described, the witnesses’ observations of what happened, of the steps then taken, and as to the consequences are substantially similar. I consider that their descriptions of the event, and the evidence of the reactions, and the actions taken to minimise adverse impact and business damage, and to recover the lost data plausible, reasonable and proportionate. I have regard to the emails exchanged with Mr Chang. I consider Mr Chang’s correspondence independent and corroborative. The documentary and oral evidence gives rise to a clear inference that a chance power surge occurred at the CPL premises, which caused disruption to the database server, and data loss, and that genuine efforts were made to recover the data, which were unsuccessful. I do not ascribe to the 2017 data loss the characterisation urged by the Microsoft parties.

Mr Pan’s merger of stock codes on 9 June 2015

52    Mr Pan gave evidence that on the same date and around the same time he acquired from Mr Chen the 50 COAs the subject of the 9 June 2015 invoice, he merged various stock codes in the Business Assistant software used to identify Windows 7 software in the stock database. Until that date, the following eight stock codes were used for Windows 7 software:

(a)    SOF-MS-W7PCOA with the description of Microsoft Windows 7 Professional COA Label Only (No Media);

(b)    SOF-MS-W7P/64B with the description of Microsoft Windows 7 Professional OEM 64bit;

(c)    SOF-MS-W7PCOA32 with the description of Microsoft Windows 7 Professional 32bits COA Label Only (No Media);

(d)    SOF-MS-W7P/32B with the description of Microsoft Windows 7 Professional OEM 32bit;

(e)    SOF-MS-W7H64COA with the description of Microsoft Windows 7 Home Premium 64bits COA Label Only (No Media);

(f)    SOF-MS-W7H/64B with the description of Microsoft Windows 7 Home Premium OEM 64bit;

(g)    SOF-MS-W7H32COA with the description of Microsoft Windows 7 Home Premium 32bits COA Label Only (No Media);

(h)    SOF-MS-W7H/32B with the description of Microsoft Windows 7 Home Premium OEM 32bit.

53    It can be seen that apart from distinguishing between Windows 7 Pro and Windows 7 Home versions of OEM software, each in either 32bit or 64bit, the codes included four stock codes for Windows 7 versions designated as “COA Label Only (No Media)”. This is the stock code that appears on the invoice for the test purchase and invoices to Mr Anthony Purcell’s business, Alpine, an IT business that purchases pre-assembled computers. There were four such invoices annexed to Mr Purcell’s affidavit, which were dated 28 February 2014, 12 March 2014, 11 April 2014 and 29 June 2015. Each of the invoices to Alpine in 2014 used the stock code “Microsoft Windows 7 Professional COA Label Only (No Media)”. All of the invoices issued to Alpine pre-date the first of the Chen (LDS) invoices, except for the Alpine invoice issued on 29 June 2015. The appellants also relied on five invoices issued by CPL Notting Hill to AV2PC, each of which includes a reference to “Microsoft Windows 7 Home Premium 64bits COA Label Only (No Media)”. These invoices were dated 24 April 2014, 21 July 2014, 30 July 2014, 6 August 2014 and 27 October 2014.

54    In his evidence, Mr Pan described the eight stock codes as comprising two “parallel” codes (being a “COA” code and an “OEM” code) in the stock database for each of the various versions (32bit and 64bit) of Windows 7 for both Windows 7 Pro and Windows 7 Home. According to his written evidence, these two parallel codes both refer to the same product and there was no difference of any significance between the products designated by the COA Label Only (No Media) codes and the products designated by the OEM codes. He said that each of these codes was a stock code for an OEM product, namely, a system builder pack in which the COA and installation disk were packaged.

55    Mr Pan’s evidence was that he noticed there were differences between the versions of Windows 7 with which he was familiar and the Windows 7 COAs supplied by Mr Chen on 9 June 2015. He thought this might cause confusion when warehouse staff carried out stocktakes. What Mr Pan then did, according to his evidence, was merge the four existing COA codes into the corresponding OEM codes, and create a new code for the products supplied to him by Mr Chen.

56    Her Honour referred to Mr Pan’s evidence at PJ [291]-[293]:

[291]    In the stock database Mr Pan merged the above stock codes for Windows 7 products, merging each of the COA codes into the OEM codes. He explained in Pan 3 at [17]-[18] that he did this to clarify the stock coding on the stock database to merge all previous stock code items (the above) to designate those products as ‘OEM’, and the Windows 7 Pro products purchased on 9 June 2015 (that is, the June 2015 purchase) as ‘COA Label Only (No Media)’.

[292]    Mr Pan swore that:

    All sales prior to 9 June 2015 were of legitimate fully licensed Microsoft Windows 7 labels and software. The change of the coding arises solely as a result of the re-coding which I did in the ordinary course of the First Respondent’s business on 9 June 2015. I did this to clarify the stock coding on the stock database. I did this to distinguish the 2 types of non-retail versions of Microsoft Windows professional software, one has been a stock item since late 2009, and new one from LDS. Although the First Respondent only purchased the Professional version of Windows 7 from LDS on 9 June 2015 I also merged the COA and OEM codes for the Home version of Microsoft Windows as at the time it appeared to me that I should make a uniform change to all Microsoft Windows versions including the “Home” versions.

[293]    Mr Pan was cross examined about the potential for confusion before the stock code merger:

    MR COBDEN: Your evidence is that the presence of two codes? --- Yes.

    --- in the past? --- Yes.

    --- had had the capacity to cause confusion in the staff? --- A little bit, but the problem is not really a problem, as the two codes refer to the same product.

    Yes? --- So either if you – say, for example, you sold a product under code A, you will give the same product to the customer. If you sell – sold the item under product B, you will give the exact same product to the customer. It won’t cause any confusion, because there’s packaging difference. I decide to merge the code – I didn’t expect to merge the code until I see the packaging is slightly different. Then, in my mind, if the packaging is slightly different, it will cause confusion for the warehouse people to do stocktake, because, under one code, they are two different packagings. Then there’s another code with one of the packaging also in the code. Then when you do the stocktake, it will cause confusion. So if the two products under both codes, then all they need to do is just how many product A, how many product B; you add up together; if match the stock level on the shelf, that’s it, but if you add another variable, as it’s different packaging, then they may get confused.

57    In his cross-examination, Mr Pan, in answer to the suggestion that the merger had the effect of “wiping out” certain data, explained that this was not correct, and that while the stock codes had changed, the records of pre-existing transactions remained the same. Her Honour considered Mr Pan’s evidence on this topic as follows at PJ [294]-[298]:

[294]    Thus, the import of Mr Pan’s evidence is that on 9 June 2015, whilst Mr Chen was delivering the June 2015 purchase to CPL Distribution for receiving, Mr Pan reduced the pre-existing 4 codes for Windows 7 Professional OEM products to the following two codes:

(a)    SOF-MS-W7P/64B and description Microsoft Windows 7 Professional OEM 64bit;

(b)    SOF-MS-W7P/32B and description Microsoft Windows 7 Professional OEM 32bit;

    and that Mr Pan then added the stock code to designate the June 2015 purchase (the product bought from Mr Chen on 9 June 2015) as follows:

(c)    SOF-MS-W7COA and description Microsoft Windows 7 Professional COA Label Only (No Media).

[295]    Mr Pan corrected Microsoft senior counsel’s proposition that the previous stock records were “wiped out”, stating that as the system only keeps the most recent data, after the merging of the codes, the 5 new codes appeared in the system (the above 3 codes for Windows 7 Pro, and corresponding 2 codes for Windows 7 Home), not the old 8 stock codes. It follows from Mr Pan’s evidence that every document printed from the system thereafter will show the new codes, even where the transaction took place before 9 June 2015. It also follows that the records of pre-existing transactions remain – they are not “wiped out”, but the stock code and product description accorded those transactions thereafter was one of the two codes and descriptions set out in the previous paragraph: (a) or (b). Accordingly, the sales ledger for Windows 7 Pro sales to 7 September 2016, printed in compliance with the first judge’s order of 7 September 2016, and compiled from CPL Notting Hill’s computer sales records, shows the above 3 codes, the code SOF-MS-W7COA corresponding to sales of items from the June 2015 purchase. There was no evidence by any witness that any other details of the pre-existing transactions were affected by the merger of the codes, and there was no cross-examination on the subject. It follows that the Microsoft parties proposition that upon the stock code merger pre-existing transactions were wiped out is rejected.

[296]    Mr Pan’s evidence is that it did not take long for him to do the merger of stock codes in the stock system. He did so while Mr Chen walked around to the warehouse. The view evidences that this journey involved walking out through the retail shop car park to the street frontage, onto and along the street, around the central building, and down from the street to the warehouse receiving area. There is no basis to find that the stock code merger was a time consuming task, or attended by any difficulty. Assuming, as I consider reasonable given the evidence of Mr Chen’s physique, that he did not run, I consider that there was more than sufficient time whilst Mr Chen was walking around to the warehouse for Mr Pan to undertake the merger of the pre-existing codes, and allocation of the “COA Label only (No Media)” code to the June 2015 purchase, as Mr Pan states.

[297]    It is appropriate to state at this point in the chronology of events … that I accept Mr Pan’s evidence of the stock code merger, and its timing, and outcome. I found Mr Pan a highly credible and careful witness, concerned to the best of his recollection to be accurate and to give a truthful account. I am not persuaded that the rationale for the stock code merger Mr Pan gives is implausible, or unreasonable, nor that it must have taken place at some later time, and/or was done to hide transactions involving non-OEM supplies of COA labels for Windows 7.

[298]    The sales ledger produced by Mr Pan on 6 November 2016 disclosed 30 sales of new computers built using product from the June 2015 purchase … This is consistent with the stock merger having occurred at the time of the June 2015 purchase, not later after notice of the letter of demand, or the commencement of the proceeding, or some other time.

58    Although Mr Pan denied that the merger of the stock codes “wiped out” data, it is clear that the effect of his actions resulted in a situation in which Windows 7 products identified in the Business Assistant system before 9 June 2015 as “COA Label Only (No Media)” were given a new name from which those words were deleted and the acronym “OEM” included in their place. The consequence of this change was that sales of stock previously recorded in the accounting system as sales of Windows 7 “COA Label Only (No Media)” were instead recorded as sales of Windows 7 “OEM” product. It follows that, as a result of Mr Pan’s action, it was no longer possible after 9 June 2015 (assuming, as found by the primary judge, that is the date on which the recoding occurred) to determine what sales had been made using the code “COA Label Only (No Media)”. The only product that could be identified by reference to the “COA Label Only (No Media)” code was the stock which was supplied by Mr Chen on 9 June 2015. It may be noted that if, as the appellants contended at trial, the recoding occurred not in June 2015, but some time the following year after the letter of demand was received, the result would be exactly the same; it would not be possible to identify any product sold prior to the date the change was made by reference to the old codes.

59    The primary judge found at PJ [578] that, if the appellants’ contention that the stock code merger was done “some time in 2016 for concealment” was correct, an “elaborate process of merger of codes, and post-merger item by item identification of the 30 [admitted] transactions” would need to be undertaken, or “alternatively, some painstaking transaction by transaction alteration of codes”. Her Honour accepted Mr Pan’s evidence that he merged the stock codes on 9 June 2015. She found at PJ [581] “that Mr Pan made the stock code merger and code changes as and when he states in his evidence – on 9 June 2015, and for the reasons he says, and that Mr Xu received the June 2015 purchase stock into the system after Mr Pan had made the stock code merger and code changes”.

THE GROUNDS OF APPEAL

60    The appellants’ Further Amended Notice of Appeal (“Notice of Appeal”) includes 15 grounds which include lengthy particulars. Each of the grounds 1-5 were relied on in support of a contention that the appellants were denied a fair trial. Grounds 1-5 can be summarised as follows:

61    Ground 6 asserted that the primary judge erred in rejecting the appellants’ “supply case” having regard to grounds 2-5 (described above) and grounds 7-8. Grounds 7 and 8 asserted that the primary judge erred in rulings on evidence including, in particular, in finding at PJ [465] that the 4 November email did not include as attachments various Ever Success invoices.

62    In their Notice of Appeal, the appellants also sought in grounds 9-11, 14, 15, 18 and 19, the reversal by this Court of findings made by the primary judge and substitution of different findings in their favour. Those grounds were only faintly pressed (if not implicitly abandoned) by the appellants, who made it clear in the course of the appeal that their primary position was there should be a new trial on all issues.

63    It is necessary to say something about the way in which grounds 1-5 were developed in the appellants’ submissions. Early on in the appeal Mr Fox SC indicated that grounds 1 and 2 were not relied on as independent grounds, and that delay in delivery of judgment was relied on in support of what was said to be the appellants’ principal grounds 3, 4 and 5. Subsequently, the appellants withdrew from this position and indicated that they did rely on grounds 1 and 2 in support of a submission that the primary judge failed to take into account what was said to be the “glaring improbability” of the respondents’ case. Accordingly, the appellants say that the primary judge should not have accepted the respondents’ witnesses’ evidence because, when considering it in light of the evidence as a whole, it was glaringly improbable and the judgment could not be allowed to stand. The delay in delivery of the judgment was relied on in support of that contention, as providing an explanation for her Honour’s acceptance of a story that the appellants contended was simply unbelievable when considered in light of all of the evidence. However, so far as grounds 1 and 2 are otherwise concerned, there was no submission developed by the appellants in support of the contention that the primary judge failed to refer to what was said to be significant parts of the testimony of the respondents’ witnesses.

64    Mr Fox SC submitted that the appellants’ principal point was that the effect of her Honour’s ruling on the “unpleaded fraud case” was that the appellants were deprived of the opportunity to cross-examine the respondents’ witnesses on matters relevant to the supply case and, in particular, the respondents’ contention that CPL Distribution only ever acquired 50 loose COAs from Mr Chen. As the appellants’ submissions were developed in writing and orally, it became clear that this challenge to her Honour’s judgment was based on what was said to have been rulings on evidence at the trial disallowing questions asked of the respondents’ witnesses and preventing the appellants’ counsel from exploring relevant matters in their cross-examination of the respondents’ witnesses. That aspect of the appeal requires close consideration of rulings said to have been made by the primary judge during cross-examination of the respondents’ witnesses.

65    Ultimately, the focus of the appellants’ submissions on this topic was on the cross-examination of Ms Li, which the appellants say was wrongly curtailed by the primary judge and resulted in them being denied a fair trial. The appellants assert in ground 5(e) of the Notice of Appeal that they were denied a fair trial with respect to the unpleaded case. However, there is no ground of appeal that explicitly refers to the disallowance of any question or line of questions at the trial. Grounds 5(e) and 4 (specifically particular (vi) to that ground) were said by Mr Fox SC to be as close as the Notice of Appeal comes to raising the point. That said, the point was developed in the appellants’ submissions and argued before us, and I will proceed on the basis that it arises under those grounds.

Pleading Issues

66    There are two pleading issues that arose at the trial relevant to the disposition of the appeal. The first concerned the absence of any express allegation against CPL Notting Hill and Ms Li connecting them to the supply case. The second concerned the unpleaded fraud case, which the primary judge found the appellants failed to plead or particularise whether generally or specifically, in relation to their claim for additional damages which relied on (inter alia) the alleged destruction, concealment and fabrication of evidence by the respondents. I will deal with each of these issues in turn.

The pleading of the supply case

67    The appellants’ pleading relevantly alleged the supply by CPL Distribution of at least 1,467 “loose” COAs for Microsoft programs. Paragraph 28A of the Further Amended Statement of Claim (“SOC”) alleged that CPL Distribution supplied CPL Notting Hill with loose COAs on at least 1,467 occasions between 1 January 2008 and 11 November 2015. The appellants did not plead that the supply of at least 1,467 loose COAs by CPL Distribution was itself a primary infringement of copyright. Paragraph 28E of the SOC pleads that, by doing the acts and things referred to in (inter alia) para 28A, CPL Distribution authorised the doing of acts comprised in the copyright in the Microsoft Programs without Microsoft’s licence.

68    The primary judge observed at PJ [58] that “there is no express pleaded allegation of primary infringement of copyright by CPL Notting Hill in respect of the alleged supply of the 1,467 loose COAs as pleaded”. Her Honour further observed at PJ [59] that “[t]here cannot be an act of authorisation done without an act of primary infringement, and a secondary infringement is completed only when the primary infringement has taken place: Roadshow Films Pty Ltd v iiNet Limited [2012] HCA 16; (2012) 248 CLR 42, at [94]; Apotex Pty Ltd v Les Laboratoires Servier (No 2) [2012] FCA 748; (2012) 293 ALR 272, at [27] and [30].” Both observations are correct.

69    The respondents submitted that the appeal is “inutile”, because the primary judge found at PJ [58] that the only primary infringements pleaded were the 39 instances of reproduction of Windows 7 particularised at para 26 of the SOC in support of the retail case, and that CPL Distribution could be not held liable for authorisation based on the supply case. In support of this, the respondents point to her Honour’s conclusion at PJ [59], set out above. The same conclusion was said to follow with regard to the appellants’ case against Mr Wang. In short, the respondents submitted that, given the state of pleadings, Microsoft could not succeed against any of the respondents based on the supply by CPL Distribution of 1,467 loose COAs to CPL Notting Hill.

70    In considering the respondents’ submissions on this point it is essential to have regard to para 28D of the SOC which alleged:

The provision of Loose COAs and a Product Key by the Third Respondent to the First Respondent necessarily resulted in the substantial reproduction of the Microsoft Program associated with the Loose COAs and Product Key by the First Respondent.

71    That allegation only makes sense if the Microsoft program referred to was pre-installed on a computer system built by CPL Notting Hill. The clear implication of the pleading is that the loose COAs supplied by CPL Distribution to CPL Notting Hill were used by CPL Notting Hill to install copies of the relevant programs on such computer systems, thereby rendering CPL Notting Hill liable for reproduction and CPL Distribution liable for authorisation. Moreover, as the appellants submitted in reply, the primary judge recognised at PJ [12] that the appellants’ case was based on “inferential reasoning”, and that the appellants were asking the court to draw an inference that for each loose COA bought by CPL Distribution, a copy of Windows 7 was installed by CPL Notting Hill. The appellants also say that the inclusion of the additional 1,467 instances of primary infringement in their claim, was apparent from the evidence they led in the proceeding. That was a case, they say, the respondents elected to meet through leading their own responsive evidence.

72    The role of pleadings was considered by Issacs and Rich JJ in Gould v Mount Oxide Mines Ltd (In Liq) (1916) 22 CLR 490. Their Honours said in the well-known passage at 517:

Undoubtedly, as a general rule of fair play, and one resting on the fundamental principle that no man ought to be put to loss without having a proper opportunity of meeting the case against him, pleadings should state with sufficient clearness the case of the party whose averments they are. That is their function. Their function is discharged when the case is presented with reasonable clearness. Any want of clearness can be cured by amendment or particulars. But pleadings are only a means to an end, and if the parties in fighting their legal battles choose to restrict them, or to enlarge them, or to disregard them and meet each other on issues fairly fought out, it is impossible for either of them to hark back to the pleadings and treat them as governing the area of contest.

73    The clear implication of paras 28A to 28E of the SOC was that the appellants alleged the supply by CPL Distribution to CPL Notting Hill of loose COAs necessarily resulted in infringement of Microsoft’s copyright, by reason of CPL Notting Hill having reproduced the relevant programs. That case was pleaded with reasonable and sufficient clarity. The submissions made by the respondents on this issue are therefore rejected.

The pleading of the additional damages case

74    The appellants’ sought against the respondents awards of additional damages in substantial amounts under s 115(4) of the Copyright Act. Section 115(4) provides:

(4)    Where, in an action under this section:

(a)    an infringement of copyright is established; and

(b)    the court is satisfied that it is proper to do so, having regard to:

(i)    the flagrancy of the infringement; and

(ia)    the need to deter similar infringements of copyright; and

(ib)    the conduct of the defendant after the act constituting the infringement or, if relevant, after the defendant was informed that the defendant had allegedly infringed the plaintiff’s copyright; and

(ii)    whether the infringement involved the conversion of a work or other subject-matter from hardcopy or analog form into a digital or other electronic machine-readable form; and

(iii)    any benefit shown to have accrued to the defendant by reason of the infringement; and

(iv)    all other relevant matters;

    the court may, in assessing damages for the infringement, award such additional damages as it considers appropriate in the circumstances.

75    In Truong Giang Corporation v Tung Mau Quach (aka John Quach) (2015) 114 IPR 498, Wigney J helpfully summarised the principles relevant to an award of additional damages. Although his Honour was concerned with the application of s 126 of the Trade Marks Act 1995 (Cth), many of the cases referred to by his Honour are concerned with awards of additional damages under s 115(4) of the Copyright Act, the terms of which are not materially different from the provision with which his Honour was concerned. His Honour said at [138]:

… post-infringement conduct within s 126(2)(c) of the TM Act is unlikely to include the respondent’s conduct of the infringement proceedings. Such conduct is more relevant to the appropriate order as to costs: [Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd (No 2) (2008) 76 IPR 763] at [17]; Flags 2000 Pty Ltd v Smith (2003) 59 IPR 191; [2003] FCA 1067 at [31]–[34]. That said, it is difficult to see why some aspects of the conduct, by a respondent, in defence of infringement proceedings, might not be relevant to the award of additional damages: compare [Facton Ltd v Rifai Fashions Pty Ltd (2012) 199 FCR 569] at [44], [69]. Conduct of the proceedings which involved high-handedness, dishonesty, recalcitrance, or flagrant disregard of, or deficiencies in compliance with, discovery orders or notices to produce, might, at the very least, suggest a greater need for an award of additional damages that would deter future infringing conduct by the respondent.

I respectfully agree with his Honour’s statement, which has been cited with approval in a number of other cases including Geneva Laboratories Ltd v Prestige Premium Deals Pty Ltd (No 5) (2017) 122 IPR 279 at [78]-[83] per Bromwich J, Universal Music Publishing Pty Ltd v Palmer (No 2) (2021) 158 IPR 421 at [509]-[510] per Katzmann J. There may be cases in which a respondent’s conduct during the course of an infringement proceeding involving the wilful and deliberate fabrication or destruction of evidence, warrants an award of additional damages. Such conduct may properly be taken into account pursuant to s 115(4)(ib).

76    The appellants alleged at para 32-33 of the SOC:

[32]    Further, the said infringements referred to above were committed flagrantly and deliberately by the First to Fourth Respondents, well knowing the First Applicant's rights, with the intention of appropriating for their own use and benefit the property of the First Applicant and so appropriating the property of the First Applicant.

Particulars

(a)    The Microsoft Programs were at all material times widely known and extensively published in Australia.

(b)    The subsistence of copyright in the Microsoft Programs was readily able to be ascertained from the packaging of the Microsoft Programs.

(c)    The First to Fourth Respondents well know or ought to well know that the unlicensed reproductions of Microsoft Programs was an infringement of the First Applicant's rights.

(d)    In the alternative, the conduct of the First to Fourth Respondents was carried out in reckless disregard of the subsistence of copyright in the Microsoft Programs.

(e)    From their experience in the computer retail industry, the First to Fourth Respondents well knew or ought to have well known that the First Applicant does not permit the sale of Microsoft Programs from the Microsoft Refurbisher Program unless the Respondents are a member of that program and the Microsoft Program is installed on a refurbished computer system;

(f)    The First to Fourth Respondents knew or ought to have known that the COA referred to in paragraph 23 was distributed pursuant to the Refurbisher Program;

(g)    The First to Fourth Respondents knew or ought to have known that First Applicant does not distribute Loose COAs;

(g)[sic]    The Applicants reserve the right to provide further particulars following discovery and any interlocutory steps.

[33]    By the acts and conduct referred to in paragraph 32 above, the First Applicant is entitled to additional damages from the Respondents.

Particulars

(a)    Additional damages pursuant to section 115(4) of the [Copyright] Act.

(b)    Refer to the particulars in paragraph 32 above.

77    At PJ [85] the primary judge noted there was no other pleading or particulars in support of the additional damages claim including any indicating reliance on matters that post-date any of the infringing acts. In particular, there is no pleading that any of the respondents created false invoices or deliberately concealed or destroyed evidence.

The unpleaded fraud case

78    The primary judge dealt with what she characterised as unpleaded allegations of fraud and dishonesty made against the respondents at PJ [99]-[119]. Her Honour said at PJ [113] that she was persuaded that the appellants’ case was not limited to an attack on the credit of Ms Li, and other witnesses called by the respondents, or a submission that their evidence should not be believed. Her Honour said at PJ [113] “[the appellants] prosecute a positive case both of alteration, destruction, and concealment of CPL’s business records – including the sales ledger, of the Business Assistant inventory system and database, purchase and sales records – and also of fabrication of CPL’s business records – the CPL/LDS invoices – and fabrication of the witnesses’ accounts”. Her Honour said at PJ [112]:

I accept that concealment, dishonesty, fabrication and destruction, or fraud are not necessary elements of a cause of action for copyright infringement, or for trade mark infringement. However, fraud need not be a separate cause of action. The Microsoft parties contend those very matters (excepting the use of the word ‘fraud’) as relevant to my determination of their claims on liability, and as foundational to their claims for additional damages. There was no hint of these matters or any reliance on them in their Claim.

79    Her Honour also noted that the appellants in their opening submissions at the trial rejected any suggestion that they were alleging that the respondents had engaged in fraud. She referred to statements made by Mr Cobden SC (who appeared for the appellants at trial) disavowing any fraud case. He submitted that fraud was not an element of a claim of copyright infringement, and the appellants’ allegations of destruction, fabrication and concealment of evidence went merely to the witnesses’ credit.

80    The primary judge was correct to reject any suggestion that the appellants’ case at trial involved nothing more than a challenge to the credit of the respondents’ witnesses and the veracity of their explanation of relevant events including their failure to discover business records. So much is clear from the appellants’ closing submissions to the primary judge in which they asserted at para 257:

… The Respondents have actively concealed, altered and destroyed evidence in these proceedings. That conduct is necessarily flagrant. Further, such conduct involves active dishonesty and it is appropriate that the award of additional damages show the strongest disapproval of the Court … it is submitted the Respondents have actively concealed, altered and destroyed evidence in an attempt to minimise any identified infringement. The conduct by the Respondents justifies a substantial award of additional damages against each of the Respondents of at least 200% compensatory damages.

The written submissions went on to claim very substantial awards of additional damages against the respondents (including awards of $500,000 against each of Ms Li and Mr Wang) for what the appellants submitted was the respondents’ egregious conduct.

81    Mr Fox SC accepted that the appellants’ allegations of document destruction and concealment had a dual role which went beyond an attack on the respondents’ witnesses’ credit and the authenticity of documents tendered by the respondents, but were also directed to the appellants’ claim for additional damages. That concession was properly made. Those allegations were central to the appellants’ case that they were entitled to a substantial award of additional damages against each respondent for what would, if found proven, constitute outrageous behaviour. Given the seriousness of the allegations made by the appellants, the principles considered in Briginshaw v Briginshaw (1938) 60 CLR 336 would necessarily apply.

82    It may be accepted that it is not necessary for a party to plead matters that are merely relied on in support of an attack on a witnesses’ credit. A party is entitled to test the veracity of an opponent’s account of events based on matters that had not been pleaded if those matters are not elements of a cause of action or defence relied on. Allegations of fraud, collusion or other wrongdoing that are relied on merely in support of a finding that a witnesses’ evidence is untrue or unreliable are not usually pleadable. However, as Mahoney JA observed in Ghazal v Government Insurance Office of New South Wales (1992) 29 NSWLR 336 at 347 – 348:

If such a matter is pleadable then ordinarily it may not be raised unless pleaded. There is a distinction between issues which are formally pleadable and those which, though not formally pleadable, may arise as real issues at the trial. If an issue is formally pleadable, for example, if fraud is an element in the claim or in a defence, a party will ordinarily not be allowed to raise it unless it is properly pleaded. Pleas which do not raise fraud are not to be “used as a screen behind which one man is to be at liberty to charge another with fraud or dishonesty without assuming the responsibility of making that charge in plain terms”: Re R, deceased [1951] P 10 at 19; Re Stott, deceased; Klouda v Lloyds Bank Ltd [1980] 1 WLR 246 at 252; [1980] 1 All ER 259 at 264.

If the allegation, for example, of fraud is in this sense not pleadable — the present is such a case – it is necessary that the fact that an allegation is to be made which is of this nature is, in my opinion, to be made clear: it is to be clear that that is, in the sense to which I have referred, a real issue at the trial: see generally Adey v Fisher (1914) 14 SR (NSW) 407 at 409; Middleton v O’Neill (1943) 43 SR (NSW) 178 at 184-186; 60 WN (NSW) 101 at 104- 106.

83    His Honour’s observations were applied by the Court of Appeal in 3WJ Pty Ltd v Kanj [2008] NSWCA 321. In that case Ipp JA (Allsop P, Hodgson JA agreeing) said at [12]:

The dishonesty of a witness, testifying in support of a cause of action or defence in which dishonesty in any form is not an element, is not a material fact that has to be pleaded. In fact, as Mahoney JA observed in Ghazal v GIO of NSW (1992) 29 NSWLR 336 at 347F–G, in a case like the present (a standard motor accident claim), where fraud is neither an element of the claim nor a defence, the fraudulent or otherwise dishonest giving of evidence “is not a pleadable matter”. As is made clear in Ghazal by Kirby P at 344G–346D and Mahoney JA at 347F–348A, the obligation of a party who wishes to contend that a witness has been suborned, or has given fraudulent or otherwise dishonest testimony, is to make clear at an appropriate time that the honesty of the witness’s testimony is a real issue in the trial and the witness should be fairly confronted with the allegations in question.

84    Consistent with those authorities, the appellants were not required to plead that explanations given by the respondents before or at trial concerning their failure to produce records, the provenance of the CPL/LDS invoices, or the Chen invoices provided by Ms Li to Victoria Police were fraudulent or dishonest, at least in so far as those matters were relied upon by the appellants in support of their contention that what they have referred to as the respondents’ “defensive story” should not be accepted. However, the appellants’ reliance on these matters went beyond this. It is clear that the appellants went to trial intending that these matters would be relied on as the foundation for a very substantial award of additional damages. This created a difficulty for the trial judge who was told more than once by Mr Cobden SC that the appellants’ allegations of fraud and dishonesty went merely to the witnesses’ credit, even though they were central to the appellants’ positive case for an award of substantial additional damages.

85    The question whether a party is required to plead material facts on which it relies in support of a claim for additional damages is not addressed in any authority to which we were referred in the appeal. The Federal Court Rules 2011 (Cth) do not include any specific provision requiring that material facts to be relied on in support of a claim for additional damages be pleaded or particularised. However, the rules do require that a pleading state the material facts upon which a party relies that are necessary to give the opposing party fair notice of the case to be made against that party at trial: r 16.02(1)(d). In my experience, claims for additional damages under (inter alia) s 115(4) of the Copyright Act are usually the subject of pleaded allegations of fact to be relied on in support of the claim. Often these are generally expressed, but they do provide some notice of the matters that will be relied on in support of the claim. In the present case the pleading included allegations of facts material to the claim for additional damages which were supplemented by the appended particulars. However, the pleading (including the relevant particulars) provided no indication that the appellants relied on conduct of the respondents occurring after the acts constituting the relevant infringements were committed, or conduct engaged in during the course of the proceeding. This resulted in a situation in which the case for additional damages propounded by the appellants was outside the appellants’ pleaded and particularised case.

86    If an applicant contends that a respondent’s defence of a proceeding has been high-handed or dishonest, or that non-production of documents or deficiencies in compliance with pre-trial orders, should form a basis for an award of additional damages, then these matters should be pleaded or particularised. Not only does that ensure that the respondent knows the case it is being asked to meet, but it also makes clear to the Court what matters are to be relied on by the applicant in support of an award for additional damages.

87    In their Notice of Appeal, the appellants contend that the respondents were aware of the appellants’ allegations of fabrication and destruction of evidence. In support of this proposition, the appellants refer to, inter alia, their own evidence providing copies of some of the Chen invoices, the respondents’ evidence justifying components of the CPL defensive story, and several pieces of correspondence, including two letters from the solicitors for the appellants dated 26 May 2017 and 19 January 2018. None of the documents which the appellants point to give notice to the respondents that the appellants were going to advance a claim for additional damages based on the alleged fabrication or destruction of evidence.

88    Notwithstanding that the primary judge ruled in PJ that the allegations of fraudulent and dishonest conduct made by the appellants against the respondents should have been pleaded, she went on to consider those matters and the evidence relevant to them for the purpose of determining whether or not the evidence of the respondents’ witnesses should be accepted or whether it was, as the appellants’ submitted, dishonest and unreliable.

89    The appellants submitted that her Honour’s ruling that they were required to plead fraud, or something analogous to fraud, resulted in a situation in which her Honour precluded herself from finding in the appellants’ favour in relation to the supply case. This is true in the sense that her Honour, regardless of whether or not she accepted the evidence of the respondents’ witnesses, found that the basis for rejecting their evidence relied on by the appellants was outside the appellants’ pleading. But her Honour also disposed of the case on an alternative basis, which involved accepting the evidence of the respondents’ witnesses, not because of the state of the pleadings, but because she considered that the respondents’ witnesses were honest and truthful. Subject to what I say later in these reasons in relation to questions asked by Mr Cobden SC of the respondents’ witnesses which were said to have been rejected by the primary judge, I do not consider that her Honour’s ruling to the effect that the appellants were impermissibly inviting her to determine a fraud case which had not been pleaded, had any effect on the outcome of the proceeding. This is because the primary judge considered and decided the case that the appellants put, even though she thought it was beyond the pleaded case.

Rejection of questions in Cross-Examination

90    The appellants contended that the primary judge erred in rejecting questions asked of Ms Li in cross-examination and that this had the consequence that they were denied a fair trial. It is necessary to refer in some detail to the relevant parts of the transcript of hearing before the primary judge in which the rejection of these questions occurred. The appellants’ Notice of Appeal and their written submissions give the impression that the cross-examination of the respondents’ witnesses was substantially curtailed. However, an examination of the transcript does not bear that out.

91    Before turning to consider the particular rulings of the primary judge rejecting questions asked of the respondents’ witnesses on which the appellants rely, it is necessary to refer to the principles which inform the Court’s approach to an application for a new trial in such circumstances.

Relevant principles

92    A party may be denied a fair trial if they are denied the opportunity to present evidence or make submissions on matters relevant to their case. A well-known example of such a case is Stead v State Government Insurance Commission (1986) 161 CLR 141 in which the appellant was held by the High Court to have been denied natural justice. In that case, counsel for the appellant chose not to develop a submission that evidence of a particular witness should not be accepted, after the trial judge indicated during the course of final address, that he did not accept that evidence. The trial judge later went on to specifically accept that evidence when deciding the case. The High Court (Mason, Wilson, Brennan, Deane and Dawson JJ) held that the appellant was denied natural justice and ordered that there be a new trial. Their Honours referred at 145 to the general principle which they said was well expressed by the English Court of Appeal in Jones v. National Coal Board [1957] 2 QB 55 (Denning, Romer and Parker LJJ) where Denning LJ (as his Lordship then was) said at 67:

There is one thing to which everyone in this country is entitled, and that is a fair trial at which he can put his case properly before the judge … No cause is lost until the judge has found it so; and he cannot find it without a fair trial, nor can we affirm it.

93    Jones was a case in which the plaintiff appealed against the trial judge’s judgment for the defendants on the ground that she had not received a fair trial owing to the nature and extent of the trial judge’s interruptions during the cross-examination of the defendants’ witnesses, which she contended prevented her from putting her case properly and also properly challenging the case for the defendants. The Court of Appeal upheld the appeal. Denning LJ (giving judgment for the Court) held that the trial judge’s interventions in the cross-examination of the defendants’ witnesses were excessive. His Lordship said at 65-66:

It appears to us that the interventions by the judge while Mr. Mars-Jones was cross-examining went far beyond what was required to enable the judge to follow the witnesses’ evidence and on occasion took the form of initiating discussions with counsel on questions of law; further, and all too frequently, the judge interrupted in the middle of a witness’s answer to a question, or even before the witness had started to answer at all. In our view it is at least possible that the constant interruptions to which Mr. Mars-Jones was subjected from the bench may well have prevented him from eliciting from the defendants’ witnesses answers which would have been helpful to the plaintiff’s case, and correspondingly damaging to that of the defendants.

94    The general principle referred to in Jones and Stead requires that parties be permitted to put their case properly before the judge. But it does not necessarily follow from a judge’s rejection of questions during cross-examination that a party will have been denied the opportunity to put its case properly, even if an appellate court considers that the question asked should not have been disallowed. Much will depend on the circumstances and whether the appellate court is persuaded that the rejection of questions in cross-examination deprived the appellant of the opportunity to put its case.

Cross-examination of Ms Li

95    In the present case the appellants’ submission that they were denied a fair trial was founded on the primary judge’s rejection of questions in Ms Li’s cross-examination on the basis that they were directed to the unpleaded fraud case. It was not submitted by the appellants that any of the primary judge’s interventions during Ms Li’s cross-examination were excessive or otherwise inappropriate: cf. Galea v Galea (1990) 19 NSWLR 263, Jorgensen v Fair Work Ombudsman (2019) 271 FCR 461. Their submission was, in essence, that the primary judge refused to allow Mr Cobden SC to question Ms Li on matters that should have been open to him as relevant to Ms Li’s credit.

96    The appellants’ written submissions focused on what were said to be examples of questions asked by Mr Cobden SC of Ms Li in her cross-examination which were wrongly rejected by the primary judge. The first two examples appear at transcript pp 538-539, but to give the matter context, it is necessary to refer to that part of Ms Li’s cross-examination extending from transcript pp 538, line 20-540, line 24:

MR COBDEN: Yes. Now, what I want to suggest to you, Ms Li, is that over the period from 27 July 2017 when you saw a version of these invoices that had come back from the police records and - - -

MR TRUONG: So I object, your Honour, to this line of questioning. If it’s leading to what I think it is, there is no pleaded case that CPL has engaged in fraud. Mr Cobden made it very clear from the outset that was opened on that basis – if Mr Cobden is going down the line that I think he is, then it’s an unpleaded case. We have not been appraised of any allegation concerning fraud. The High Court has made it very clear in Fortescue and many other cases that you cannot run an unpleaded fraud case.

MR COBDEN: This is not a fraud case, your Honour. It’s a question of credit.

MR TRUONG: No.

MR COBDEN: I’m going to suggest - - -

HER HONOUR: I think it’s a bit beyond credit.

MR TRUONG: This is beyond credit. And I will object every time there is a question about the authenticity of these invoices, because that is a fraud allegation.

MR COBDEN: The correct invoices, I want to put to you, Ms [Li] – please wait before answering this question – the correct invoices that were in the records of CPL that related to the transactions that took place on these dates and for these amounts are the ones that you say you produced from the folder of Mr Chen’s?---No.

I want to suggest to you that this - - -

MR TRUONG: This is the same issue, your Honour, with respect. Mr Cobden cannot around the side, around the back, say on the one hand that Ms Li is producing real records of CPL through the manila folder and, at the same time, consistently say he’s not mounting a fraud case which must depend necessarily on the nonauthenticity of the ones that are starting at 1044. You cannot run that case, with respect. It’s not pleaded.

HER HONOUR: I reject the question.

MR COBDEN: There is no element of any matter that we’re alleging that involves an allegation of fraud. I can ask the witness, in my respectful submission, whether she has fabricated documents.

HER HONOUR: You can ask her whether she is lying.

MR COBDEN: Yes. So - - -

HER HONOUR: But that’s about it, isn’t it?

MR COBDEN: Yes. Well, so - - -

HER HONOUR: I mean, once you go beyond that, that’s – my recollection of your opening was also that you opened – you did not open on, for example, the software not being – originating from Microsoft, in other words, counterfeit software. So there’s a few elements of what you’re saying that you may be going down towards which - - -

MR COBDEN: That doesn’t - - -

HER HONOUR: - - - are going beyond – that doesn’t arise in this instance?

MR COBDEN: That doesn’t arise, no. No, your Honour.

HER HONOUR: Okay. Because there were some questions - - -

MR COBDEN: Because the question of the counterfeit software is quite different.

HER HONOUR: Because there was an earlier question which - - -

MR COBDEN: But what we don’t dispute - - -

HER HONOUR: Not for Ms Li, but for Mr Pan was down that track.

MR COBDEN: I will move on.

HER HONOUR: Yes.

MR COBDEN: Yes. Thank you. What I do want to suggest – I withdraw that.

What I do want to suggest to you – and I will suggest it clearly – is that, over the period 2014 to 2015, CPL bought from LDS in the person of Mr Chen a significant number of Microsoft - - -?---We did not - - -

I don’t think – I haven’t - - -

HER HONOUR: Let the question be – let Mr Cobden finish the question.

MR COBDEN: You’ve just said you didn’t buy a significant number of anything from Mr Chen in the – earlier. So do wait for the question, please. I’m suggesting to you that it was the case that over the period 2014 to 2015 CPL Distribution bought from Mr Chen Microsoft Windows licences that did not come in a Microsoft pack, but came as stickers and possibly some discs on more than the one occasion of 6 June 2015 [sic]?---No.

And I want to suggest to you that the - - -?---No, we did not. Only once.

I want to suggest that the answer you’ve just given to your Honour is false?---No.

Thank you. Could I take you, please, now to the – some events that happened later in time. This will be the last topic, your Honour, so I will press on and finish.

(Emphasis added)

97    The relevant question is rejected by the primary judge at transcript p 539, line 10. The question rejected was, it seems to me, that which appears at transcript p 538, lines 43-46, to which the witness answered “no”, although the appellants’ written submissions first draw attention to Mr Cobden SC’s attempt at asking a similar question at transcript p 538 lines 20-22, which Mr Truong SC objected to. Mr Cobden SC observed at transcript p 538, line 32, that this first (unfinished) question went to credit, to which her Honour responded at line 38 “I think it’s a bit beyond credit”.

98    The question asked of Ms Li at transcript p 538 lines 43-46 was directed to giving her the opportunity to respond to the suggestion that the nineteen CPL/LDS invoices were not authentic, but that the Chen invoices provided by Ms Li to Victoria Police were authentic records of sales made to CPL Distribution. Plainly, the question asked of the witness was relevant to her credit which would be wholly undermined if she was found to have fabricated the CPL/LDS invoices. However, as the trial judge observed, the question went beyond credit, in that it was aimed at impeaching the authenticity of invoices admitted into evidence purporting to record sales of computer hardware on the same dates and for the same amounts appearing in the Chen (LDS/manila) invoices. Her Honour was, in my opinion, correct in suggesting that the question asked involved more than a challenge to Ms Li’s credit.

99    In any event, the question rejected by the primary judge had already been asked and answered. Moreover, the cross-examiner put to Ms Li at transcript p 540 lines 12-17, that in the period from 2014 to 2015 CPL Distribution bought from Mr Chen Microsoft Windows licences in the form of stickers, possibly with some disks, on more than one occasion. Ms Li denied this. Mr Cobden SC also put to Ms Li at transcript p 540 line 21, as he was bound to do, that her denial was false. He then moved onto another topic.

100    It is important to note that the circumstances in which Ms Li testified she came into possession of the Chen (LDS/manila) invoices was the subject of detailed exploration in an earlier part of Ms Li’s cross-examination extending from transcript pp 520-533 in which Ms Li was closely questioned about her dealings with Sergeant O’Sullivan, the requests for copies of invoices, the production of them by Ms Li to Victoria Police, and her encounter with Mr Chen both in relation to the Chen invoices issued in the name of LDS, and the invoices issued in the name of Ever Success. Among other things, Ms Li was asked during her cross-examination to give the primary judge a fresh account of her meeting with Mr Chen on 13 January 2016, and the circumstances in which she came into possession of the invoices she provided to Victoria Police. She was closely questioned on her evidence that she focused on the invoice numbers and amounts when presented with the invoices by Mr Chen, and that she did not pay any attention to the description of the goods. At transcript p 533, lines 3-4, Mr Cobden SC put to Ms Li, and she denied, that she had “made up the entire story about Mr Chen and the yellow folder and the invoices”.

101    The next example of her Honour having rejected a question in cross-examination of Ms Li relied on by the appellants was said to have occurred later in the course of cross-examination concerning the alleged power outage. However, it is apparent that no question asked of Ms Li in relation to that matter was actually rejected. Again, for context, it is necessary to refer at some length to the relevant part of the transcript which commences at transcript pp 548, line 22-550, line 37:

MR COBDEN: I want to suggest to you that there was no power blackout?---No, it was.

No. What I want to suggest to you – and I want to suggest to you that the operating – I withdraw that. That the stock levels and past sales were simply deleted.

MR TRUONG: I object, your Honour.

THE WITNESS: No, no, no.

MR TRUONG: I object.

MR COBDEN: We’ve - - -

MR TRUONG: This is again - - -

MR COBDEN: We’ve raised this squarely at the last trial, your Honour - - -

MR TRUONG: Well, you may - - -

MR COBDEN: - - - and my friends have been on notice - - -

HER HONOUR: Well, you might have raised it at the last trial - - -

MR TRUONG: It’s not pleaded.

HER HONOUR: - - - but the last trial went off in a whole lot of ways.

MR TRUONG: There is - - -

HER HONOUR: This is the question: are you pleading fraud?

MR TRUONG: There is no allegation anywhere in any version of the statement of claim that alleges fraud, deletion – deliberate deletion of any product levels, manipulation of product invoices. There is no such thing, and we are not here to meet that case, even if they are seeking to advance it, and it will - - -

HER HONOUR: Nor are we here on a discovery application.

MR TRUONG: Sorry, your Honour?

HER HONOUR: Nor are we here - - -

MR TRUONG: Nor on any discovery application. It is simply a mischief, with respect to my friend, to seek to advance such a case. Certainly – this is the last day of the trial. This is the first time there is any ..... it is absolutely outrageous, with respect.

HER HONOUR: I think you said your point, Mr Truong.

MR TRUONG: Sorry, your Honour.

MR COBDEN: We have put the case squarely before that the - - -

HER HONOUR: Well, you put and pleaded.

MR COBDEN: We searched the power records, tendered documents, to show there was no power outage as described.

HER HONOUR: There could well have been a power surge. Did you look at that?

No evidence about that.

MR COBDEN: No, no, no.

HER HONOUR: The only evidence that there might have been a power surge is from Mr Pan.

MR TRUONG: Mr Godby - - -

MR COBDEN: With great respect ..... to put this and I will put it: that before the evidence you’ve given today, in no affidavit have you given any evidence about the process of reinputting data to the new system; that’s correct, isn’t it? You’ve not previously given evidence about that; yes?---No.

Yes.

HER HONOUR: You mean – by which you agree you haven’t?---Not in the, yes - - -

MR COBDEN: Yes.

HER HONOUR: Yes?--- - - - affidavit.

Yes?---I agree with that.

MR COBDEN: Yes.

HER HONOUR: And where in the pleadings, Mr Cobden, is there an allegation that that was done?

MR COBDEN: I’m just about – that’s the question I’m asking, your Honour, that there has previously been no evidence about how this data was reinputted.

HER HONOUR: Well, why should there be?

MR COBDEN: Well, there was - - -

HER HONOUR: Where was it put in the statement of claim?

MR COBDEN: It was not in the statement of claim, your Honour.

HER HONOUR: Okay.

MR COBDEN: It was a fight about discovery.

HER HONOUR: Well, why are we worried about a fight about discovery in 2017?

MR COBDEN: Please the court. If your Honour will just pardon me a moment, I

will just - - -

HER HONOUR: I mean, maybe I’m – there’s something that - - -

MR COBDEN: No. I’ve put the questions I need to put, your Honour.

102    However, Mr Cobden SC did continue the cross-examination in relation to the Business Assistant software and the alleged data loss. Although various objections were taken in the balance of Ms Li’s cross-examination, none of the further questions asked by Mr Cobden SC were disallowed by the primary judge and each was answered by the witness. Mr Cobden SC was also not precluded from developing this line of cross-examination prior to that part of the transcript which the appellants have identified in their submissions. For example, the additional questions asked by Mr Cobden SC, and the answers obtained from Ms Li, included the following at transcript pp 543, line 1-546, line 22:

MR COBDEN: Yes. So your Honour is quite correct and I’m going to make that perfectly clear in the question, that on the – the fight about discovery, just so your Honour knows, was on 4 August, but the orders were made on the 7th. So you remember that in August 2017, indeed, just after your affidavit of 2 August was sworn – or third affidavit, remember that, there was a fight – a debate in court and the judge ruled that CPL should give discovery; you remember that?---Yes.

And CPL approached the Federal Court and sought leave to appeal against that discovery order; you remember that?---Yes.

And you remember that that hearing was coming up on 24 November 2017; you recall that?---About that time, yes.

Yes. And what happened was that the Federal Court, Robertson J, refused the leave to appeal; correct?---Yes. Correct.

He later gave his reasons, I think, correct? Yes. But he refused the leave to appeal on 24 November 2017, and the result was that the judge’s order in this court stood and CPL had to give discovery?---Yes. Correct.

And you remember doing the discovery process as a result of that; correct?---Yes, we did.

Yes. And on 21 August 2017, you were aware, were you not, that the – I’m sorry, start that gain – 21 November 2017, you were aware, weren’t you, that the debate about discovery before the Federal Court was coming up on 24 November; correct?---Yes.

And you went back to the office, or you went to the office, at about 6 – a bit after 6pm on that day?---Yes, I remember that.

Why would you be returning to the office at – so late; do you have an answer to that?---Yes. I remember I returning back from my solicitor’s office, and when I arrived to the shop was after 6 pm, 6.10 or – 10 past 6, sometime around that time - - -

Yes?--- - - - and when I drive to the carpark, so all dark in number 7 Howleys Road, and I checked with other staff, there was Steven Ellis, one of our staff - - -

Can I - - -

HER HONOUR: I think we will take it a subject a time.

MR COBDEN: Yes, we will just interrupt. You can turn to your fifth affidavit - - -?---Yes.

- - - which is behind tab 29, and you will see there that you have given a full account – sorry, I withdraw that. You see there that you’ve given an account of what happened - - -?---Yes.

- - - so it’s not necessary for the moment for you to tell her Honour separately - - -?---Okay.

- - - because she has your evidence on this question?---Sure.

Right.

HER HONOUR: And I will read all the evidence.

MR COBDEN: Yes?---Okay. Thanks.

And so on your evidence, you returned to 7 Howleys Road at about 6.15 pm, you’ve just given some answers about that, and you observed no lights on and the interior of the premises were dark, and you spoke to some employees, and at a few minutes later, 6.20 or so pm electricity was restored to the premises to the lights came back on?---Yes.

Yes. And did the lights come back on because somebody went up to the switchboard at the very front of the building of number 7 and flick some sort of switch, as far as you understood?---That’s, yes, what I was told.

Yes. And then, you say, that a server, as you understood it – sorry, no, I will withdraw that. That after the mains – the power was off and came back on, staff tried to logon to the data server and tried to – is this the case – they tried to access the program, Business Assistance ?---Yes. Correct.

Yes. And they were unable to do so, you say?---Yes. Correct. They was - - -

Yes?--- - - - unable to do so.

Yes. And you called, did you, the supplier of Business Assistance, or you tried to call Mr Chang - - -?---Yes.

- - - to come and help?---He was in overseas.

Yes – help you install this – to set – sorry, I withdraw that. You wanted him to come, or send somebody to help, to reinstall the system; is that right?---To – yes.

Yes. But you called – you couldn’t get him, you called Mr Pan to come and help?---Yes, I did.

Thank you. And, then, Mr Pan could not make the Business Assist system work, that’s your evidence, is it?---Yes.

So he set up a new primary hard drive and backup drive and loaded a new operating and inventory system for the first respondent to use; you see that?---Yes.

But it’s your evidence, isn’t it, that – sorry, I withdraw that. So when Mr Pan did that, set up the new computer, new operating system, new inventory system, what happened then? You could log onto the system; correct?---Yes, he - - -

Yes?--- - - - he put a new server system with new hard drives – put the new hard drives - - -

Yes?--- - - - and then we can log onto the system. I remember that night and me and a few other staff have to key in all the – the stocks – stock level – to the new BA server.

Thank you?---To the new software. Yes, we worked very late that night.

And you - - -?---Until next day morning.

Thank you. You don’t give evidence that that’s what happened in your affidavit – your fifth affidavit that we’ve just been looking at, do you?---The fifth - - -

HER HONOUR: Sorry, which affidavit?

MR COBDEN: Sorry?

HER HONOUR: The 13 January 2018 affidavit?

MR COBDEN: Yes.

You don’t describe anywhere sitting and logging in stock levels in this affidavit, do you?---No, I did not put this - - -

Thank you?--- - - - specific words.

And you’ve never described that process before in any of your evidence; correct?---I did not.

You knew at 21 November, didn’t you, that it was very important and you may become – I will start that again. You knew on 21 November that it was possible that the Federal Court would refuse CPL Notting Hill’s application for leave and that you would have to give discovery very soon; correct?---I didn’t – I did not know that.

Thank you. And – so – is – you say that you – does Mr Chang – before that question I will ask another question – Digifield Technology when you tried to find Mr Chang, does it have other employees, do you know, other than Mr Chang?---No, I don’t know.

Does – CPL Notting Hill advertises that it provides data recovery services to customers; correct?---That’s the daily job I wasn’t involved. I believe we do, yes.

Thank you. And we saw a sign offering data recovery services in the premises on Wednesday. Who was – who provides the data recovery services now?---Yes. ..... and Leon provide this. If – yes, he can do the data recovery from the software, I believe.

Thank you?---I don’t know. But we – yes, we do provide this service.

Thank you. And what do you say did staff key in to the Business Assist program, you said, I think, stock levels – after Mr Pan set up the new drive; what is it – what do you say people – you said people keyed in some data, what data was it?---Stock level.

Stock levels. And did – what about stock codes?---Yes, stock code - - -

Thank you?--- - - - with stock level from the – and stocktake form, the physical papers.

You gave evidence before, did you not, that there were about 60,000 different stock codes?---Yes, there are.

103    After that part of the transcript identified by the appellants in their written submissions which I refer to in [101], the cross-examination continued at transcript pp 551, line 39-553, line 16:

MR COBDEN: You have – is it your evidence that there was no other source for the sales data that was lost in the power outage?---You mean now?

As of 22 November. No source other than the hard disc, the backup drive that were damaged?---No. No other source.

Okay. Well, what I want to suggest - - -

HER HONOUR: Well – well – well, except whatever the accountants had of the sales data for the previous years.

MR TRUONG: Hardcopy.

MR COBDEN: I’m sorry. No other available data to - - -?---No, no. No other source for the ..... or the BA data.

Yes. I don’t know what that means ..... well, what I want to suggest to you is that you did, and you still do.

MR TRUONG: I object, your Honour.

HER HONOUR: Well, he might – just - - -

MR TRUONG: Sorry, your Honour.

HER HONOUR: Let Mr Cobden ask the question. Ms Li, just hold - - -

MR COBDEN: Yes.

HER HONOUR: Don’t answer.

MR COBDEN: Yes.

HER HONOUR: And we will see where we go.

MR COBDEN: I - - -

MR TRUONG: Sorry, your Honour. I - - -

HER HONOUR: I think Mr Cobden, in fairness, should have ..... the question.

MR TRUONG: Okay.

MR COBDEN: I want to suggest that you did have, stored on another service somewhere, the data on 22 November and since, and that you would still have it now, but that you have failed to produce it?---I do not.

MR TRUONG: I object, your Honour.

MR COBDEN: That is a perfectly – my learned friend can make his objection.

MR TRUONG: No, it isn’t, because there is no allegation that we have separately stored data anywhere else that is the subject of this case, and that, somehow, we have hidden information and documents somewhere. It’s – they’re not part of this case.

MR COBDEN: If the witness - - -

HER HONOUR: Well, I think, actually, there is – it’s not pleaded as fraud. Mr Cobden has made very clearly he’s not saying fraud. But the question of the loss of the data is – has been in issue in how it was.

MR TRUONG: Loss of data is. Yes. I agree.

HER HONOUR: And what Mr Cobden is really trying to say here is that it wasn’t really lost.

MR COBDEN: Yes?---No.

HER HONOUR: And I think Ms Li can answer it?---It’s lost. Lost. No. Lost data.

That’s okay?---We did lose the data.

104    Finally, Mr Cobden SC again put to Ms Li that the data allegedly lost as a result of the power outage was in fact available to her after that date. The last question and answer in the course of Ms Li’s cross-examination were as follows at transcript p 553, lines 37-43:

MR COBDEN: Yes. Thank you. So I wanted to suggest to you that on and after 22 November, stored somewhere else, you did have the data available to you that related to past sales information by – sales and purchase information by CPL?---I did not have sales information or purchase information anywhere.

Thank you very much?---I did not. That’s the question put. And that’s – there are no further questions from me, your Honour.

It is clear that the last statement recorded (i.e., “That’s the question put … there are no further questions from me, your Honour”) was made by Mr Cobden SC but has been attributed incorrectly in the transcript to the witness.

Consideration of the appellants’ submissions about Ms Li’s cross-examination

105    Leaving aside the primary judge’s rejection of a single question at transcript p 539, line 10, we were not referred to any ruling by her Honour refusing to allow a question of Ms Li. An analysis of the transcript shows that, with that one exception, the primary judge did not disallow any question asked of Ms Li on the basis that it was not open on the pleadings. While her Honour was clearly troubled by the state of the pleadings, she did not make any blanket or prospective ruling that foreclosed cross-examination of Ms Li in relation to the authenticity of the relevant documents or what Ms Li referred to as the power outage.

106    The appellants submitted that the primary judge had effectively foreclosed cross-examination directed to testing the CPL witnesses’ accounts of events, including cross-examination which would allow them to establish that, contrary to Ms Li’s evidence, the nineteen CPL/LDS invoices were not authentic, and the Chen invoices were authentic. However, before an appellate court allows an appeal on the basis that a trial judge wrongly rejected a question, or line of questions, in cross-examination, it is usually necessary for the appellant to show that a specific question was put and rejected or, in the case of a line of questions, that it was rejected by the trial judge on the basis that the cross-examiner would not be required by the court to put the line of questions to the witness.

107    The topic is dealt with by Professor Wigmore in Evidence in Trials at Common Law Volume 1 (Tillers Revision) at pp 757 et seq in connection with what is described by the learned author as “the offer of evidence”. He states at p 766:

A specific offer of evidence is not needed where an entire class of evidence has been in advance formally declared inadmissible by the trial court during preliminary argument or colloquy, for the court’s ruling relates forward to all possible offers of such evidence and renders them needless. More generally speaking, the trial judge has broad discretion to eliminate the necessity for any formal offer of evidence by making an advance ruling on the basis of an informal description by counsel of the offer the proponent plans to make … An adequate offer of evidence has been made if the trial judge makes such a formal advance ruling and expressly or implicitly indicates he wishes to have no further offers with respect to the matter in question.

(Footnotes omitted)

108    This principle was applied by Lord Chelmsford LC in Penn v Bibby (1866) LR 2 Ch App 127. That was an appeal in a patent case in which the defendant sought a new trial on various grounds, including that the trial judge had wrongly disallowed a question put to the plaintiff’s witnesses in relation to their knowledge of prior art. His Lordship said at pp 137-138:

… there was one ground of application for a new trial which must be shortly noticed. It is said that the Defendants were proceeding to cross-examine some of the Plaintiff’s witnesses as to their knowledge of the use of wood for bearings in paddle-wheels prior to the date of the patent, and that the Vice-Chancellor stopped them upon the ground that this was not within the notice of objections. I apprehend, that it is always competent upon cross-examination, to put a question in this general form. The counsel would not be entitled to inquire of the Plaintiff’s witnesses as to any specific instance of the prior use of the patented invention of which he had not given notice; but he has always a right to test the general knowledge of the witnesses upon the subject.

In order to ground this objection, however, the question proposed to be put should have been formerly tendered to the Judge, and rejected by him as inadmissible. Now, it appears that his Honour was never distinctly requested to admit any specific question, but from some cursory remarks it is assumed that he would not have permitted a particular line of cross-examination.

This, however, is not sufficient. The Judge should have an opportunity of deciding upon some distinct question, and have refused to allow it, before there can be a motion made for a new trial on account of the rejection of evidence. This objection, therefore, has no foundation.

See National Mutual Life Association of Australasia Ltd v Godrich (1909) 10 CLR 1 at p 39 per Higgins J stating “it is not the practice to allow a new trial for rejection of evidence, however adverse the opinion of the Judge, unless a definite question be tendered and rejected” cited by JD Heydon, Cross on Evidence, 14th Ed at p 137 who also, at pp 137-138, cites Penn v Bibby in support of the proposition that “[t]he mere fact that it seems likely, judging by the success of particular objections, that other tenders will fail or questions will be rejected, will not permit complaint on appeal about the rejection of evidence unless it has actually been tendered and rejected”. See also JD Heydon, “Reciprocal duties of Bench and Bar” (2007) 81 ALJ 23 at 28.

109    In my opinion the reasoning in Penn v Bibby is directly applicable to the present case. Aside from the one question disallowed by the primary judge to which I have referred, no other question asked of Ms Li in her cross-examination was rejected and there was no express or implied ruling made by her Honour that any particular line of questioning would be disallowed and therefore need not be asked.

110    Before concluding on this topic, I should note that the appellants’ written submissions (and to a lesser extent their oral submissions) contained some sweeping generalisations concerning the conduct of the trial that are not supported by the transcript. For example, it was submitted in para 69 of the appellants’ written submissions in chief that “Microsoft was limited to putting only the fact that witnesses were lying, and it was not permitted to confront them with the reasons why they should not be believed” (original emphasis). There is nothing in the transcript which supports that assertion. During the course of the appeal Mr Fox SC stated that it was not directly put to Ms Li that there was no power outage on 21 November 2017. He suggested that this was because the appellants were never permitted to explore that matter with her in her cross-examination (see appeal transcript p 44). The transcript of Ms Li’s cross-examination (including that between pp 543-553 extracted above) shows that her evidence-in-chief on the topic was the subject of detailed questioning by Mr Cobden SC in his cross-examination and that he had every opportunity to test the veracity of Ms Li’s account of events. In fact, Mr Cobden SC did put to Ms Li, at transcript p 548 line 22, that there was no power blackout, after questioning her about the reinputting of data in the Business Assistant system. The appellants’ submission that they were prevented by the primary judge from exploring that or any other topic with Ms Li, or any other witness, should be rejected.

111    In the result, I am not persuaded that the rejection of any question or line of questions in the cross-examination of Ms Li or any other witness had the effect of denying the appellants the opportunity to put their case or depriving them of a fair trial. In those circumstances, the question whether there was any possibility of a different outcome had the appellants established that they were denied a fair trial does not arise.

ERRORS IN FACT FINDING

Delay

112    The delay between the trial and the publication of PJ was substantial, extending over a period of approximately three years. A delay of that magnitude allows an appellate court more readily to infer that evidence or submissions not specifically addressed in the primary judge’s reasons were overlooked, or that the advantages that a trial judge ordinarily possesses were lost. Delay in the delivery of judgment must, if it is to justify the setting aside of the judgment on appeal, involve “operative” delay in the sense that the delay must have affected the quality of the decision-making process assessed by reference to the issues, the evidence and the judge’s reasons.

113    In the present case the primary judge explained the delay at PJ [40]. Her Honour noted that she had the benefit of the complete transcript of the evidence and lengthy written submissions together with her own contemporaneous notes. Her Honour observed at PJ [41]:

The time that has passed, however, has conferred the considerable benefit of a detailed review and consideration of the documentary materials and physical exhibits, and the written and oral evidence with the benefit of the complete transcript, my contemporaneous notes and recollection, the parties’ lengthy written submissions, oral submissions, and supporting materials and aides memoire. Because of the passage of time, I have placed somewhat more weight on the written evidence as augmented by the transcript of the hearing. The cross-examination of the various CPL parties’ witnesses did not disturb in any significant way the positions taken by the witnesses in their affidavits.

114    As the authorities make clear, whatever the reasons for the delay, the question is whether it has affected the quality of the trial judge’s judgment to such an extent that it cannot be allowed to stand. In this case the primary judge’s delay requires this Court to undertake a comprehensive review of her Honour’s reasons for the purpose of determining whether she gave full consideration to all of the evidence and the parties’ submissions.

Relevant principles

115    The relevant principles to be applied in determining whether an appellate court should set aside a judgment which was the subject of significant delay were considered by the Full Court in Expectation Pty Ltd v PRD Realty Pty Ltd (2004) 140 FCR 17 (“PRD Realty”). The Full Court said at [68]-[73]:

[68]    Where there are relevant contemporaneous materials, such as file notes and correspondence, and there is significant delay between the hearing of evidence and the giving of reasons for conclusions, being reasons that do not advert to the contemporaneous materials and do not give specific reasoning for accepting or rejecting the evidence of particular witnesses, the conclusions reached should be given careful scrutiny and consideration by an appellate court where the findings are challenged on appeal.

[69]    Delay between the taking of evidence and the making of a decision is not, of itself, a ground of appeal, unless the judge could no longer produce a proper judgment or the parties are unable to obtain from the decision the benefit which they should (cf Boodhoo v Attorney-General of Trinidad and Tobago [2004] 1 WLR 1689 at [11]-[12]). Nor does such delay of itself indicate that a trial has miscarried or that a verdict is in any manner unsafe. However, where there is significant delay in giving judgment, it is incumbent upon an appellate court to look with special care at any finding of fact challenged on appeal. In ordinary circumstances, where there is a conflict of evidence, the trial judge who has seen and heard the witnesses, has an advantage.

[70]    That advantage includes seeing the oral and documentary evidence unfold in a coherent manner, which cannot be replicated on appeal (State Rail Authority (NSW) v Earthline Constructions Pty Ltd (in liq) (1999) 73 ALJR 306 per Kirby J at [90]; Bartlem Pty Ltd v Cox Industries (Australia) Pty Ltd (2002) 55 IPR 449 at [87]). That advantage will ordinarily prove decisive on appeal unless it can be shown that the trial judge failed to use or misused such an advantage. The mere fact of a long delay itself weakens a trial judge’s advantage. Thus, delay must be taken into account when reviewing findings made by a trial judge after a significant delay from the time when the relevant evidence was given.

[71]    In the normal course, statements made by a trial judge of a general assertive character can be accepted as encompassing a detailed consideration of the evidence. However, where there is significant delay, such statements should be treated with some reserve. After a significant delay, a more comprehensive statement of the relevant evidence than would normally be required should be provided by the trial judge in order to make manifest, to the parties and the public, that the delay has not affected the decision.

[72]    In cases not affected by delay, an appellate court is entitled to assume that the mere failure to refer to evidence does not mean that it has been overlooked or that other forms of error have occurred. However, where there is significant delay, no favourable assumptions can be made. In such circumstances, it is up to the trial judge to put beyond question any suggestion that he or she has lost an understanding of the issues. Where there is significant delay, it is incumbent upon a trial judge to inform the parties of the reasons why the evidence of a particular witness has been rejected. It is necessary for the trial judge to say why he or she prefers the evidence of one witness over the evidence of other witnesses (Hadid v Redpath (2001) 35 MVR 152 at [34] and [53]).

[73]    Of course, where the trial judge, notwithstanding significant delay, demonstrates by his or her reasons that full consideration has been given to all of the evidence, the parties and the public may be satisfied that the delay has not affected the decision. More specifically, if the reasons demonstrate that the delay has not weakened the trial judge’s advantage, confidence will be maintained in the decision. For example, it would be open to a trial judge to explain in the course of giving reasons that contemporaneous notes were made of impressions formed as evidence was given by witnesses of importance (see R v Maxwell (unreported, Court of Criminal Appeal, NSW, Spigelman CJ, Sperling and Hidden JJ, No 60282 of 1998, 23 December 1998)) [subsequently reported at 217 ALR 452].

116    The Full Court held that the trial judge’s decision was affected by “operative delay” in circumstances where he had rejected the evidence of a witness on grounds of lack of credit without referring in his reasons to (inter alia) the contemporaneous documents relevant to that rejection. The delay in PRD Realty was also found to have affected the trial judge’s judgment in other respects including through a failure to make findings on a number of key issues: see PRD Realty at [206], [236] and [245].

117    PRD Realty was applied by the Full Court in Tattsbet Ltd v Morrow (2015) 233 FCR 46 (“Tattsbet”). This was a case in which the respondent alleged her employment had been unlawfully terminated by the appellant, and that adverse action had been taken against her contrary to s 340 of the Fair Work Act 2009 (Cth). Jessup J (with whom Allsop CJ and White J agreed) found that the trial judge had failed to make a finding on an issue of fact and to consider whether or not the appellant had discharged its onus of proof. The reasons for the respondent’s termination were the subject of the evidence of Mr Fletton who was the CEO of the appellant. Jessup J said at [134]:

The critical finding with respect to the appellant’s reason or reasons for taking adverse action turned substantially upon the credit which the primary judge assigned to the evidence of Mr Fletton. Notwithstanding the existence of transcript, that finding was inevitably based upon his Honour’s observation of Mr Fletton as a witness, and upon the advantage which a trial judge conventionally has in such a setting. In my view, there is a real risk that his Honour compromised his ability to use that advantage in the determination of Mr Fletton’s reasons for acting when he allowed such an inordinate period to elapse between the giving of the evidence and the making of the determination.

His Honour concluded that when those matters were considered along with the trial judge’s failure to make a relevant finding, the judgment could not stand: see [106]-[109], [129]-[134].

118    In Monie v Commonwealth of Australia (2005) 63 NSWLR 729, the New South Wales Court of Appeal (Giles JA, Bryson JA and Hunt A-JA) considered the extensive delay on the part of the trial judge who dismissed the plaintiffs’ action for negligence on various grounds including that there was no duty of care owed. The Court set aside the judgment, on the basis that the trial judge’s findings which (inter alia) rejected the two principal ways in which the plaintiffs’ put their case on liability were “insubstantially based”, and that the trial judge gave no consideration to documents that were central to the way in which the plaintiffs put their case. Referring to the Full Court’s decision in PRD Realty, Hunt A-JA (with whom Giles JA and Bryson JA agreed) also observed at [44]:

It must, however, be emphasised that delay between taking evidence and the delivery of judgment does not, in itself, justify upholding an appeal against the judgment given. Error must still be established on the part of the trial judge warranting either a reversal of the judgment or the grant of a new trial. Delay may assist an appellant in establishing such error because, as the approach identified by the Full Federal Court demonstrates, the inference will more readily be drawn that a trial judge’s failure to deal in a significantly delayed judgment with particular matters on which the appellant relied in contradiction of the findings made in that judgment resulted from those matters being overlooked by the judge — either because of the time which has passed or because of the pressure on the judge in the end to complete the judgment. In Boodhoo v Attorney General of Trinidad and Tobago [2004] 1 WLR 1689 at 1694 [11], the Privy Council acknowledged that the delay in giving the decision may adversely affect its quality to such an extent that it cannot be allowed to stand. That is what must be shown in order to demonstrate error resulting from delay which warrants either a reversal or a new trial. That is what I understand the judgment in [PRD Realty](at 32 [69] et seq) to be saying.

See also Century Legend Pty Ltd v Ripani [2022] FCAFC 191 (“Ripani”) where a new trial was ordered in circumstances where the primary judge was found to have misunderstood evidence relevant to his assessment of a witness’ credit and to have failed to make necessary findings of fact (at [143]-[157] per McElwaine J, with whom Markovic and McEvoy JJ agreed).

Credibility findings

119    The advantages in fact finding enjoyed by a trial judge were referred to by Kirby J in State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (In Liq) (1999) 73 ALJR 306 (“Earthline”) at [90]. They include seeing and hearing all of the evidence unfold, usually in logical order, with the opportunity for reflection during breaks in proceedings. In the present case, in addition to seeing and hearing the witnesses, the primary judge also had the benefit of a view of the CPL companies’ business premises.

120    The appellate court is required to conduct a “real review” of the evidence given at trial and of the trial judge’s reasons, for the purpose of determining whether the primary judge erred in fact or law. In doing so it must make due allowance for the fact that, unlike the trial judge, it has not seen or heard the witnesses: Fox v Percy (2003) 214 CLR 118 at [25]. As to the influence of witness credibility on the trial judge’s conclusions, Gleeson CJ, Gummow and Kirby JJ observed at [28]-[29]:

[28]    … the mere fact that a trial judge necessarily reached a conclusion favouring the witnesses of one party over those of another does not, and cannot, prevent the performance by a court of appeal of the functions imposed on it by statute. In particular cases incontrovertible facts or uncontested testimony will demonstrate that the trial judge's conclusions are erroneous, even when they appear to be, or are stated to be, based on credibility findings.

[29]    That this is so is demonstrated in several recent decisions of this Court. In some, quite rare, cases, although the facts fall short of being “incontrovertible”, an appellate conclusion may be reached that the decision at trial is “glaringly improbable” or “contrary to compelling inferences” in the case. In such circumstances, the appellate court is not relieved of its statutory functions by the fact that the trial judge has, expressly or implicitly, reached a conclusion influenced by an opinion concerning the credibility of witnesses. In such a case, making all due allowances for the advantages available to the trial judge, the appellate court must “not shrink from giving effect to” its own conclusion …

(Citations omitted)

121    This is not a case in which it was suggested that any finding made by the primary judge was contradicted by incontrovertible facts or uncontested testimony. The appellants challenged the primary judgment on the basis that evidence given by Ms Li and Mr Pan was “glaringly improbable”. In support of that submission, they also contended that the delay in the delivery of the judgment affected the decision-making process by weakening the primary judge’s advantage, and also led her Honour to overlook the inherent improbability of the respondents’ witnesses’ evidence as a whole.

Appellants’ criticisms of primary judge’s reasoning

Excessive attention to documentary evidence

122    One of the appellants’ criticisms of the primary judge’s reasoning was that her Honour focused excessively on documentary evidence.

123    None of the parties adduced expert evidence at trial aimed at demonstrating which invoices (if any) were fabricated and which were genuine. Her Honour was left to decide questions of authenticity based on her evaluation of the evidence as a whole including her own analysis of the relevant documents.

124    The nineteen Chen (LDS/manila) invoices were included in the documents provided by Ms Li to Sergeant O’Sullivan on 25 January 2016 and others provided to her colleague on 19 May 2016. As her Honour observed at PJ [447], those nineteen documents all included blurred or smudged text (in varying amounts and degrees), and eighteen of them had some omitted text, obscured or blanked out entirely. The primary judge also noted that the Chen (LDS/manila) invoices did not appear to have been printed using a dot matrix printer which was, according to Sergeant O’Sullivan’s evidence, the standard method by which LDS printed its invoices. Her evidence also made clear that for each of the Chen (LDS/manila) invoices, there was a genuine invoice with an invoice number issued by LDS for different goods (which the primary judge referred to as the “LDS/Chen (3rd party) invoices”. For example, in the case of invoice number 300026866, there was an LDS invoice to PC Australia but for different goods apparently issued by another sales representative of LDS (i.e. not Mr Chen).

125    As well, there was a corresponding CPL/LDS invoice for each of the Chen (LDS/manila) invoices. Her Honour performed a careful comparison, at PJ [454]-[459], between the CPL/LDS invoices and the Chen (LDS/manila) invoices. She referred, inter alia, to the fact that each of the CPL/LDS invoices were complete without omission of details, and the distinguishing clarity and sharpness of the CPL/LDS invoices. She noted that on each of the CPL/LDS invoices, the sales prices, GST and total prices were complete, and tallied. In contrast, discrepancies in total amounts, or the application of peculiar discounts, appeared on the Chen (LDS/manila) invoices: see PJ [449].

126    In particular, her Honour drew attention to the fact that, on one of the Chen (LDS/manila) invoices, invoice number 300026866, a discount of 30.93% had been applied, so that the total amount was $2,211 (including GST). In the CPL/LDS invoice bearing the same invoice number for the same total amount, no such discount appeared. Her Honour noted at PJ [523] that this discount raised significant doubts in her mind as to the reliability of the Chen (LDS) invoices.

127    At least some of the handwriting on some of the invoices is common to both the CPL/LDS invoices and the Chen (LDS/manila) invoices. For example, some of the handwriting on those two versions of invoice 300026866 appears to be exactly the same, suggesting that one has been prepared from the other. On the other hand, the handwriting on the two versions of invoice 300027368 is very different.

128    Ms Li testified as to the authenticity of the CPL/LDS invoices and the non-authenticity of the Chen (LDS/manila) invoices. She rejected suggestions put to her in cross-examination that the latter documents were genuine or that they recorded the cash transactions that occurred on or about the dates they bore. The clear implication of this line of questioning was that, if the Chen (LDS/manila) invoices were genuine (in the sense that they evidenced genuine transactions entered into by CPL), the CPL/LDS invoices could not also be genuine. That is a logically compelling conclusion because if both sets of invoices were genuine it would necessarily imply that CPL Distribution made two different purchases, one for hardware and the other for Windows 7 software, on each of the relevant dates for precisely the same cash consideration, evidenced by invoices bearing not only the same date, but also the same invoice number.

129    It is difficult to see why her Honour should be open to criticism for having closely examined the documentary evidence in circumstances where both sides contended that key documents had been fabricated, and where a central protagonist in this whole affair, Mr Chen, was a convicted fraudster who engaged in widespread theft and fraud. In circumstances where the appellants contended that the Chen (LDS/manila) invoices recorded genuine transactions entered into by CPL Distribution, and where it was accepted by the appellants that those invoices were a crucial plank in the appellants’ supply case, her Honour’s focus on that material was not unwarranted or inappropriate.

Acceptance of evidence of Mr Xu, Mr Lu and Mr Guo

130    As previously noted, Mr Xu and Mr Lu gave evidence that the goods referred to in the CPL/LDS invoices were received at the warehouse on or about the dates shown and that handwritten notations on those invoices made by Mr Xu and Mr Lu in the ordinary course of business attested to that fact. It was not put to either of them that their evidence on this topic was untrue or mistaken. In light of their evidence, the finding by the primary judge that Mr Xu and Mr Lu initialled the CPL/LDS invoices at the time the goods listed on the invoices were received, was open.

131    Mr Xu’s and Mr Lu’s evidence was of importance in a number of other respects. Mr Xu gave evidence that he recalled receiving 50 Windows 7 COA labels in June 2015 from Mr Chen and 50 pieces of software. He said this was the first time he had seen software packaged in this form from LDS. The transcript of his cross-examination shows that his evidence on this topic was not challenged. He also gave evidence as to the interchangeable use of the various product codes for Windows 7 software before June 2015. He was pressed in relation to the words “no media” in some of those codes and it was suggested to him that they implied that no disk was supplied. He denied this and maintained that disks were always supplied. Her Honour accepted Mr Xu’s evidence.

132    Mr Lu gave evidence that he had only ever seen a small number of loose Windows 7 COA labels at the warehouse. He also said that he did not at any time receive any goods from Ever Success and was not aware of Ever Success having supplied goods to CPL. A review of Mr Lu’s cross-examination shows that his evidence on these topics was not challenged. As to the coding system for Windows 7, Mr Lu gave this evidence in cross-examination at transcript pp 587, line 42-588, line 19:

Yes. And you became aware of that because from the very early days, when you worked for CPL, you would have to look up Windows 7 quite often; correct?---Sorry, can you repeat?

Yes. You started, I think, in 2008, 2009 at CPL; yes?---Yes.

And the reason you became – you can recall now that you became aware, in 2009, of all these extra codes is because you had to look up Windows 7 quite often?---Yes.

And when you looked it up for the 64-bit Windows 7 Professional there were two codes; correct?---Yes. There were – we had double code for Windows 7.

Double code?---Yes.

That’s a very useful expression. Thank you?---But the – but the double code is –referred to the – the same item.

Yes?---Yes.

And did you think, when you first came across the double codes, what is COA label only, no media? The first one, 7A?---The first one?

Yes?---I just said we – this code, and the next one, is Windows 7 Professional OEM. They also refer to the one same.

133    Although it was suggested to Mr Lu that the words “no media” implied that there was no disk supplied with the product, this was rejected by him. In this regard, his evidence was broadly consistent with that given by Mr Xu, and also Mr Pan, in relation to the coding system for Windows 7 which the respondents’ claimed was in use until June 2015.

134    It is also necessary to refer to the evidence of another of the respondents’ witnesses, Mr Guo, who was a full-time technician employed by CPL Notting Hill since 2013 who worked in the assembly room. He was responsible for assembling computers which were built to order and installing software on them. The primary judge found at PJ [603] that Mr Guo was the primary assembler of new computers at CPL Notting Hill, although Mr Pan occasionally built some as well.

135    Mr Guo’s evidence was that, before June 2015, there was only one type of Windows 7 packaging supplied and that it was Windows 7 in OEM sealed packaging. However, he also said that between June 2015 and January 2016 he installed about 20 to 30 copies of Windows 7 in unsealed packages. He gave evidence in cross-examination concerning the use of two parallel codes for each version of Microsoft Windows 7 software. With regard to the codes that referred to “COA label only (No Media)”, he was cross-examined as follows at transcript p 596, lines 31-40:

Now, I want to ask you when you’ve commenced employment and you became aware of these parallel stock codes you noticed that one of them ended OEM and one of them ended COA label only, no media; didn’t you?---The description. Yes.

Yes. The description?---That’s a different name. Yes.

… And you understood COA label only, no media to mean that there was no disc, didn’t you?---No. For me just name – they refer to the same item when I receive it.

136    It was never put to Mr Guo directly that the various Windows 7 codes were used to differentiate between OEM packaged product and loose COAs (whether or not supplied with disks). Although the coding by its terms draws the distinction, the evidence from Mr Guo was to the effect that the Windows 7 software products he installed were all OEM products and not relevantly different, with the exception of products in the unsealed packages which were installed by him between June 2015 and January 2016. His evidence as to the number of unsealed packages used to build computers between June 2015 and January 2016 was not challenged. It is difficult to see how that evidence can stand with the appellants’ contention that at least 1,467 non-OEM copies of Windows 7 were installed on computers built and supplied by CPL Notting Hill over a period of years during which Mr Guo was the main person responsible for the relevant assembly and installation work.

Acceptance of Ms Li’s evidence

137    The case which the appellants pleaded and particularised and sought to establish at trial was dependent on them persuading the Court that the Chen invoices evidenced transactions entered into by CPL Distribution on or about the dates shown on them for the sale of non-OEM Windows 7 software for cash consideration. Critical to the appellants’ case was the alleged fact (i.e. the factum probandum) that those documents evidenced actual transactions that CPL Distribution had entered into for the purchase of non-OEM Windows 7 software. It was common ground that the Chen (LDS/manila) invoices (but not the Ever Success invoices) were supplied by Ms Li to Victoria Police. The issue was whether those invoices were authentic, and knowingly provided by Ms Li to Victoria Police in response to their requests, or whether, as she claimed, she had been tricked by Mr Chen into providing different documents to Victoria Police, which did not record genuine sales of Windows 7 software to CPL Distribution.

138    While the appellants contended that Ms Li’s account of her dealings with Mr Chen was implausible, it is necessary to recognise that Ms Li was at that time dealing with a person who, as found by Judge Gaynor and confirmed by the evidence of Sergeant O’Sullivan, was “a thief and a fraudster who, inter alia, forged documents, who engaged in an elaborate scheme to steal from LDS and to cover up his thefts from LDS”: PJ [531]. Further, at PJ [530] the primary judge found that it was unlikely that the hardware purchased by CPL Distribution, shown in the CPL/LDS invoices, was supplied by LDS knowingly. In context, that appears to amount to a finding that the hardware the subject of the CPL/LDS invoices, or at least the proceeds of its sale, had been stolen by Mr Chen from LDS.

139    By the time Ms Li claimed to have met with Mr Chen on 13 January 2016, he had been under investigation by police for some months, arrested and released on bail, and his lawyer was actively seeking the return of a portion of the large sum of cash that had been seized from Mr Chen at the time of his arrest. In those circumstances, it is entirely plausible that Mr Chen had his own reasons for wanting to conceal the existence of the CPL/LDS invoices from Victoria Police on the basis that they recorded the sale by Mr Chen to CPL Distribution of stolen hardware, and that it would suit his purposes to assert that what was supplied on the relevant dates and for the relevant cash consideration, was computer software which he could claim to have acquired from another source.

140    The evidence given by Ms Li concerning the Ever Success invoices was also considered plausible by the primary judge and accepted by her Honour. The appellants did not explain why, on their case, Mr Chen would want to supply Windows 7 software to CPL Distribution in the name of Ever Success in circumstances where CPL Distribution had sourced its Windows 7 software (or so it believed) from LDS through Mr Chen. In any event, the primary judge was alert to the possibility at PJ [534] that the 4 November email was sent by Mr Chen using Ms Li’s email account at a time when he was fabricating material to cover up his thefts of goods from LDS and his sale of those goods, and seeking to recover money seized by the police on the purported (and untruthful) basis that it was rightfully his. Viewed against that background, and in light of the Yang 25 November email, I do not accept the appellants’ submission that Ms Li’s account of her dealings with Mr Chen in relation to the Chen invoices and the 4 November email was glaringly improbable.

141    I have previously referred to the primary judge’s consideration of the evidence relating to the events of 21 and 22 November 2017 which appears at PJ [407]-[425]. Her Honour’s consideration of the issue also includes reference to the discovery orders that had been made, the pending application for leave to appeal, and the appellants’ submission that Ms Li’s and Mr Pan’s evidence concerning the power outage or power surge was knowingly false.

142    Aside from Ms Li’s and Mr Pan’s evidence, evidence was also given by Mr Godby, who was employed by CPL Notting Hill as the warehouse manager. He gave evidence that on 21 November 2017 he was working in the warehouse and witnessed an electrical mains power supply failure to the adjoining premises (i.e. 7 Howleys Road Notting Hill). He was at the time scanning goods when the computer connected to the business operations software system (i.e. the Business Assistant system) became inoperative. He was not aware of the reason for the power failure. When power was restored approximately 10 minutes later, he attempted to log into the system but could not do so. In his affidavit made on 21 March 2018 he said that as at that date the records of previous transactions and purchase orders on the system had not been restored.

143    Mr Godby’s evidence does not go very far in terms of corroborating the extent of the data loss which Ms Li and Mr Pan claimed to have occurred as a result of what Mr Godby called the “electrical mains power supply failure”. Still, if accepted, it did confirm that there was a power failure of some description that resulted in data loss. The cross-examination of Mr Godby included the following at transcript pp 569 line 6-570, line 11:

Business operation software system is generally known as the Business Assistant software; yes?---Yes. BA, yes.

BA?---Yes.

Thank you very much. Now, you observed that other people were unable to log on?---Yes.

And did you then pack up and go home for the day?---Unfortunately not, no.

Thank you. What happened next?---We had to shelve the rest of the goods that I had scanned during the day.

I see. So – yes. I think I follow, but I won’t ask a question about that. And after doing that – but you didn’t do anything further with the BA system?---No.

No. And after you had done that task, which I detect from your tone might have been a little bit laborious and annoying - - -?---Yes.

- - - then you – you went home then?---Yes, yes.

Finished for the day. And you came back in the next day – paragraph 8?---Yes.

The whole house [sic] was chaotic - - -?---Yes.

- - - and you could not see any previous transactions or purchase orders on the system; yes? And then you say at paragraph 9:

On 22 November two thousand and – the business operations software system was reactivated, however, all previously recorded data was missing.

HER HONOUR: That wasn’t read.

MR COBDEN: I’m sorry. I’m sorry:

...was reactivated –

I will just ask him anyway.

And you noticed at that point yourself that there was data that you had seen there before that wasn’t there now?---Yes.

Yes. But when you – on 22 November, the next day, the stock codes were back in, were they?---Yes.

Yes. And were the suppliers’ names and addresses and details back in?---Yes.

Thank you. And some levels of stock were there?---Yes.

Yes. Thank you very much. Yes. At approximately what time did the chaos subside and you were able to use the system in that way on the 22nd?---The next day?

Yes?---I think in the morning.

144    It was not put to Mr Godby that the power to the premises did not fail as he had testified, or that he and other employees could, in fact, log into Business Assistant at the relevant time. It was certainly not suggested to Mr Godby that he was lying when giving evidence in relation to this, or any other matter. The appellants were therefore left in the position where they had to submit that the power failure was somehow engineered by Ms Li and that the evidence given by Mr Godby related not to a genuine power failure, but something contrived by Ms Li for the purpose of avoiding production of documents the subject of the discovery orders. That was the submission the appellants ultimately put to the primary judge.

145    The primary judge observed at PJ [561]-[562] that, on the key issues, she generally found Ms Li a believable witness. It is apparent from what is said in those paragraphs of her Honour’s reasons that this assessment was based on a consideration of the transcript of Ms Li’s evidence, the evidence of other witnesses, and the impressions her Honour formed of Ms Li at the time she gave her evidence. With regard to the power failure, her Honour found (at PJ [425]) that the data loss was the result of a chance power surge, and that genuine efforts made to recover the data were unsuccessful. Her Honour did not consider that Ms Li’s characterisation of the event as a power outage was inconsistent with a power surge having occurred, or that what occurred was the result of a deliberate act or sham perpetrated by Ms Li or Mr Pan.

146    The evidence of Ms Li and Mr Pan on this topic is recorded in detail by the primary judge at PJ [407]-[420]. Ms Li’s evidence was corroborated by Mr Pan who gave evidence of having been called by Ms Li on the evening of 21 November 2017 seeking his help. Ms Li’s and Mr Pan’s evidence received some measure of corroboration from the unchallenged evidence of Mr Godby to which I have referred. There was also documentary evidence in the form of correspondence from Mr Chang, which was also corroborative of Ms Li’s evidence. It is not apparent whether the appellants objected to the tender of that correspondence but there is, in any event, no challenge in the Notice of Appeal to any ruling admitting it into evidence.

147    Her Honour concluded at PJ [423]:

Viewed objectively, and with restraint, I am not persuaded by the Microsoft parties’ submissions. I am not persuaded that any of the timing of the event, or employing different words in describing what occurred – as a mains electricity supply outage, an electrical mains power supply failure to the premises, or a power surge, or the steps that were taken to minimise damage to the business, and recover from the data loss, or who did or did not give evidence on the event demonstrate that the loss of power and the effect on the data server and back up was a deliberate act done to destroy or render inaccessible the CPL companies’ electronic records, and thus evidence of their infringing and contravening conduct, or was a sham, or that the witnesses were lying, or concealing evidence that must have or should have existed, or colluding to fabricate their accounts, and that it follows I should not believe the CPL parties version of events.

148    There is no doubt that the appellants were submitting to the primary judge that the respondents had engaged in the deliberate destruction or concealment of relevant evidence and they sought a positive finding to that effect. A finding that a witness has engaged in the deliberate destruction or concealment of evidence is a grave matter. Such conduct would very likely constitute a contempt of court and, in Victoria, where the relevant events were alleged to have occurred, an indictable offence under s 254 of the Crimes Act 1958 (Vic). In those circumstances, her Honour’s cautious approach to the appellants’ submission was appropriate.

149    A finding that Ms Li or Mr Pan had engaged in wilful destruction or concealment of evidence would have had significant implications for the respondents’ case by giving rise to a presumption (or at least an inference) that the relevant documents would have told against the respondents: see The Ophelia (No 2) [1916] 2 AC 206 (PC) at 229-230 and Allen v Tobias (1958) 98 CLR 367 at 375 per Dixon CJ, McTiernan and Williams JJ.

Failure to consider whole of evidence or the improbability of respondents’ case

150    I come now to what I consider to be the critical issue of whether the primary judge, in rejecting the appellants’ supply case, failed to consider the inherent improbability of the respondents’ evidence as a whole. In support of this submission the appellants relied on what they characterised as the inherent improbability of Mr Pan’s evidence as to the stock code merger in June 2015, Ms Li’s evidence as to the supply by Mr Chen of fabricated invoices in the yellow manilla folder, the sending of the 4 November email from Ms Li’s email account, and Ms Li’s and Mr Pan’s evidence concerning the data loss in November 2017.

Mr Pan’s evidence regarding the stock code merger

151    I have previously explained why I consider Ms Li’s evidence concerning the invoices provided to Victoria Police and the 4 November email plausible, given what is now known about Mr Chen’s criminal behaviour. I do not consider Ms Li’s evidence on those particular matters to be glaringly improbable.

152    However, in my opinion, there are serious weaknesses in the primary judge’s assessment of Mr Pan’s evidence concerning the merger of the stock codes, and her treatment of the evidence relied on by the appellants to show that CPL Notting Hill was selling Windows 7 software prior to June 2015 described in invoices to its customers (including Alpine and AV2PC) as “COA Label Only (No Media)”.

153    There can be no doubt that the description “COA Label Only (No Media)” did not accurately describe any OEM product. OEM product included more than just a COA. It was distinctively packaged and included a DVD or other media on which the relevant software was reproduced. Yet, on the respondents’ case, and according to their witnesses’ evidence, every version of Windows 7 sold by CPL Notting Hill before June 2015 under “COA Label Only (No Media)” was an OEM product. In his affidavit sworn 21 June 2017 Mr Pan gave this evidence:

In or about late 2009 I became aware that there were 2 parallel codes in the stock database relating to each of the various versions of Microsoft Windows 7 Software for both Windows 7 professional and Windows 7 Home. These were specified in the stock database as OEM and COA labels Only (No Media). They both refer to the same product and there was no significance of any difference in substance between the terms “OEM” and “COA”.

154    Mr Pan did not explain in his affidavit evidence how these codes, which he claimed to refer to the same product, came to be used by the CPL companies. At trial, his evidence was that typically such codes and descriptions were imported from suppliers. However, he also said that the codes were already in use when he commenced working for the CPL companies in late 2009. Mr Pan was cross-examined as to his understanding of the different codes. He gave this evidence at transcript p 386, lines 30-46:

So what do you say you thought when so frequently the description came up in front of you on the screen that said:

Windows 7 Professional COA label only, no media.

What did you think when you read those words?---I didn’t think too much, because it exists when I joined the CPL.

Yes. And so you didn’t wonder to yourself - - -?---No.

- - - what sort of product would be a Windows 7 Professional COA label only, no media?---I was – when I joined the CPL, I was told they refer to the same product, but just in a different code.

It must have been fairly annoying that you always go four descriptions when you just searched Windows 7 Professional instead of the two descriptions you should have got. No?---Not really. If you start with something, then you get used to it.

The evidence does not show who told Mr Pan that the codes refer to the same product. He was asked some more questions concerning the codes and, in particular, the four that included the description “COA Label Only (No Media)” at p 388, lines 35-42:

Is it your evidence that up until 9 June 2015 in your time there no products were sold that matched those descriptions?---No.

It’s not your evidence that that’s not the case? Sorry, I will - - -?---They refer to the same product.

I see. It is your evidence, is it, that the two codes referred to the OEM product at all times?---Yes.

155    It can be accepted that staff used the appropriate code to distinguish between the four different OEM versions of Windows 7. For example, if staff wanted to make an entry recording a movement in stock levels for Windows 7 Professional OEM 32bit then they would (leaving aside the possibility of a coding error) use that code. But the respondents’ case is that they also used the corresponding “COA Label Only (No Media)” code for the exact same product. That would involve choosing between the four codes that used the “COA Label Only (No Media)” description, distinguishing between Windows Pro and Windows Home in either the 64bit or 32bit version, but not distinguishing the OEM product from the “COA Label Only (No Media)” product on the basis that, according to Mr Pan’s evidence, there was no difference between those products.

156    There is correspondence in evidence in which the CPL companies purport to explain why they used the “COA Label Only (No Media)” codes. In a letter dated 6 June 2017 from the respondents’ solicitors to the appellants’ solicitors it was asserted (at para 10):

… All sales occur with the provision of media by our client to their customers but as a result of customers complaints the notation “no media” is put on invoices so the customer cannot ask for another copy of media if they lose/misplace or deliberately want to obtain a second copy of the media disk which our client originally supplied.

According to this letter, the notation “no media” was used to deter customers from asking for a second copy of the relevant media. The letter does not explain the use of the notation “COA Label Only”. In any event, if the “no media” notation was used for the reason stated in the letter, the question that then arises is why was the code incorporating that notation used for some sales, and not others? This explanation for using the “no media” notation makes no sense.

157    In my view Mr Pan’s evidence concerning his reasons for merging the stock codes is inherently improbable. There are four reasons why I have come to this view.

158    First, for the reasons I have stated, the explanation given by the respondents in their letter of 6 June 2017 for using what the witnesses described as “double” or “parallel” codes, is inconsistent with the respondents’ witnesses’ evidence that the “COA Label Only (No Media)” codes and the “OEM” codes were used interchangeably.

159    Secondly, on the respondents’ case, every invoice issued by CPL Notting Hill before 9 June 2015 (and I infer there were many) that referred to a Windows 7 product as “COA Label Only (No Media)” misdescribed the OEM product supplied to the customer. In this regard, the respondents’ witnesses’ evidence was that the customers were always (or almost always) supplied with a disk. The only explanation proffered for the misdescription of the OEM products (as explained above) is nonsensical.

160    Thirdly, Mr Pan says that when he acquired 50 loose COAs (and some disks) from Mr Chen on 9 June 2015, he observed that they were different from the OEM product previously supplied to customers under (inter alia) the description “COA Label Only (No Media)”. However, on Mr Pan’s version of events, he then proceeded to assign to these different products exactly the same product description that he says had been used until then to describe the OEM products.

161    Fourthly, the coding changes made by Mr Pan made it impossible to identify from the sales ledger what Windows 7 product had been sold under the description “COA Label Only (No Media)” before the changes were made. His evidence that data was not “wiped out” (transcript p 390 lines 25-32) is demonstrably wrong.

162    I do not agree with the primary judge’s finding at PJ [578] that if the merger of the stock codes occurred sometime in 2016, some elaborate or painstaking process would have had to be undertaken to identify the 30 admitted transactions. There was no evidence to support that finding. I therefore do not consider that it provides a reason for accepting Mr Pan’s evidence that he merged the codes on 9 June 2015.

163    I have previously referred to the evidence of Mr Lu and Mr Xu which was relied on by the respondents to corroborate Mr Pan’s evidence that the relevant codes referred to the same product. A court is not bound to accept evidence that has not been the subject of cross-examination if that evidence is inherently improbable: Ellis v Wallsend District Hospital (1989) 17 NSWLR 553 at 587-589, Vivo International Corporation Pty Ltd v Tivo Inc (2012) 294 ALR 661 at [139]. If Mr Pan’s evidence that the stock described by the relevant stock codes was all OEM product is inherently improbable, then the same may be said of Mr Lu’s and Mr Xu’s evidence to the same effect.

164    Even if the primary judge had not accepted Mr Pan’s evidence on the ground that it was inherently improbable, it does not necessarily follow that the appellants should have succeeded at trial. This is because it does not necessarily follow that if Mr Pan merged the codes sometime after the letter of demand was received, then CPL Distribution must have acquired some 1600 unauthorised copies of Windows 7 from Mr Chen. That said, a rejection of Mr Pan’s evidence on this topic would have significant implications for his credit and the respondents’ case more generally, including in relation to matters on which he purported to corroborate Ms Li’s evidence. This is particularly true of Ms Li’s evidence concerning the data loss.

Respondents’ evidence concerning the power outage or power surge

165    The respondents’ evidence concerning the power outage or power surge was remarkable, to say the least.

166    First, there is the timing of the relevant event, which was said to have occurred just a few days before the scheduled hearing of the respondents’ application for leave to appeal the discovery orders made on 4 August 2017 as amended on 7 August 2017 by Judge Street. That application was heard and refused by Robertson J on 24 November 2017. Second, only after the hearing before Robertson J did the respondents assert in an affidavit made by Ms Li on 21 December 2017 that they were unable to produce any sales ledgers or invoices pursuant to the discovery orders due to a “mains electricity supply outage” which damaged the hard drive and back-up drive which stored that data. Third, Mr Chang of Digifield Technology (who apparently declined to make an affidavit because he was “too busy”) was said to have been unable to retrieve any data from either drive and to have permanently disposed of them without Ms Li’s knowledge or consent. Fourth, there was documentary evidence sourced by the appellants from the electricity supplier for the CPL companies’ premises that indicated that there was no power outage on 21 November 2017. Fifth, Mr Pan said nothing about any power outage or power surge in his affidavit of 25 May 2018. His evidence on the topic was first foreshadowed in a supplementary outline of evidence served the week before the trial. That document suggested that Ms Li spoke to him about a power surge, which is how he described the event in his evidence in chief, rather than a power outage. Sixth, while the power outage or power surge did not prevent the CPL companies from resuming trading as usual the next day, it had the consequence, according to Ms Li’s and Mr Pan’s evidence, that they were unable to give discovery of any document evidencing the acquisition by the CPL companies of what, according to the sales ledger, would have amounted to more than 2,000 copies of Windows 7 supplied by them, other than the (admitted) 9 June 2015 invoice for 50 COAs, or any customer invoice evidencing the supply of any such copy other than those first identified by the appellants in their solicitors’ correspondence (i.e. for the test purchase, and the Alpine and AV2PC purchases).

167    I have previously referred to the primary judge’s conclusion at PJ [425] that the documentary and oral evidence gave rise to the clear inference that a chance power surge occurred that caused the data loss. Each of the matters which I have just mentioned was referred to in her Honour’s reasons and not overlooked by her. Nevertheless, in my opinion, her Honour’s acceptance of the respondents’ witnesses’ account of the data loss, which was substantially based on the evidence of Ms Li and Mr Pan and heavily dependent on her Honour’s assessment of their demeanour, reflected what I regard as an uncritical acceptance of an account of events that appears to me to be glaringly improbable.

168    In their submissions the respondents emphasised the methodical and comprehensive treatment of the evidence and submissions by the primary judge. Broadly speaking, I agree with that assessment of her Honour’s reasons. In that respect, this case is different from PRD Realty, Tattsbet, Monie and Ripani. The respondents also emphasised the role played by demeanour in her Honour’s assessment of the respondents’ witnesses’ evidence. It is apparent from her Honour’s reasons, and I accept, that demeanour played a very significant role in her Honour’s assessment of that evidence. But the weight that can be given to findings made by the primary judge that were substantially based on the witnesses’ demeanour is greatly diminished due to the time that elapsed between the trial and the delivery of judgment.

169    I am also mindful that her Honour’s lengthy and detailed reasons must be read as a whole. However, even when this is done, my very strong impression is that her Honour has failed to give adequate consideration to the question whether Mr Pan’s evidence of the stock code merger and Ms Li’s and Mr Pan’s evidence of the data loss was, as the appellants submitted to her, inherently improbable when the respondents’ evidence is considered as a whole. Even if Ms Li’s account of her dealings with Mr Chen is put aside as plausible, her Honour’s judgment still reflects her acceptance of evidence regarding two key events of importance to the resolution of the issues in the case, that are in my opinion inherently improbable.

DISPOSITION

170    In the circumstances, I consider that the appeal should be allowed and the judgment of the primary judge set aside. Subject to what follows, the parties agreed that if the appeal is allowed and the judgment is set aside, there should be a new trial. I consider there should be a new trial on all issues except those on which the appellants were successful against the respondents at the trial before the primary judge. The latter qualification is appropriate in circumstances where there was no cross-appeal, notice of contention or submission from the respondents contesting any of the primary judge’s findings. The order for a retrial in Earthline was the subject of a similar qualification.

171    The respondents submitted that the appeal as against Ms Li and Mr Wang should be dismissed and that the re-trial should be limited to the case as pleaded against the CPL companies. The submission was that the authorisation case as pleaded against Ms Li and Mr Wang was weak and could not succeed. I do not accept that submission. It would be open on the pleadings for the court to find that each of Ms Li and Mr Wang infringed copyright by authorisation of the CPL companies’ acts of infringement.

172    The respondents should pay the appellants’ costs of the appeal. The costs of the trial before the primary judge should be reserved for determination by a different judge before whom the proceeding will be re-tried. I agree that the new trial should take place before a judge of the Federal Court of Australia.

Associate:

Dated:    4 March 2024

REASONS FOR JUDGMENT

ROFE J:

173    I have read the reasons for decision of Nicholas J and respectfully agree with the reasoning set out therein, and the conclusion that the matter should be remitted to a judge of the Federal Court of Australia for re-hearing.

174    I agree with the orders proposed by Nicholas J.

Associate:

Dated:    4 March 2024

REASONS FOR JUDGMENT

JACKMAN J:

175    This is an appeal from the decision of the primary judge in the Federal Circuit and Family Court of Australia (Division 2) in Microsoft Corporation v CPL Notting Hill Pty Ltd (No 7) [2022] FedCFamC2G 590. The hearing at first instance took place on 19-23 August 2019 and 16 December 2019, and judgment was given on 15 August 2022. The judgment of the primary judge is very lengthy, comprising 782 paragraphs, and what follows by way of summary of the primary judge’s reasoning is confined to the salient aspects of that judgment for the purposes of the appeal.

The Reasons of the Primary Judge

176    The primary judge introduced the judgment with a helpful overview of the matter. The proceeding concerned claims of copyright infringement under ss 36 and 38 of the Copyright Act 1968 (Cth) (Copyright Act), of misleading or deceptive conduct in contravention of s 18(1) of the Australian Consumer Law, being Sch 2 to the Competition and Consumer Act 2010 (Cth) (ACL), and of trade mark infringement under s 120(1) of the Trade Marks Act 1995 (Cth) (TM Act), arising from certain dealings alleged in relation to the computer software known as Windows 7, copyright in which is owned by Microsoft Corporation (Microsoft). The applicants (the Microsoft Parties) alleged that the third respondent, CPL Distribution Pty Ltd (CPL Distribution), supplied to the first respondent, CPL Notting Hill Pty Ltd (CPL Notting Hill), “loose” certificates of authenticity (COAs) for Windows 7, those COAs being intended by Microsoft for use in connection with refurbished computers pre-installed with Windows 7, but which CPL Notting Hill allegedly affixed to new computers on which it pre-installed copies of Windows 7 without authority, and then supplied those computers to end users: [2]. The Microsoft Parties alleged that the respondents (the CPL Parties) variously did, and authorised the doing of, the resultant acts which they alleged constituted copyright and trade mark infringements, and misleading or deceptive conduct: [2]. The alleged acts comprised: first, conduct alleged in relation to some 30 or up to 44 occasions, of which 30 occasions were largely admitted; and second, conduct alleged in relation to some 1,617 (the pleaded case being “on at least 1,467”) alleged occasions, which was denied and vigorously contested, central to which were the documents defined below as the Chen Invoices, and evidence concerning or relating to that material (defined below as the Chen Related Material): [3].

177    The first of the copyright infringement cases arose from the admitted conduct of CPL Notting Hill in the period July 2015 to 16 December 2015 of custom building and supplying to order to end users 30 new computers pre-installed with Windows 7 Pro and on each of which a loose COA (that is, a COA not packaged in the same packaging with media containing a copy of Windows 7 for installation) was affixed, which COAs were intended by Microsoft for use with refurbished computers (the Retail Case). The CPL Parties acknowledged that the 30 COAs affixed to those new computers were part of a purchase of 50 COAs and Windows 7 Pro installation disks made by CPL Distribution on 9 June 2015 (the June 2015 Purchase). The CPL Parties’ evidence was that 15 COA labels and some installation disks were returned to the supplier on 13 January 2016, and that five were lost or stolen. The Microsoft Parties, however, did not accept as complete the CPL Parties’ concession of 30 installations arising from the June 2015 Purchase, and relied on a purchase on 13 November 2015 of a new computer pre-installed with Windows 7 Pro and to which a loose COA was affixed (the Affixed COA Label), built to order and supplied by CPL Notting Hill (the Test Purchase Computer): [6]. The Microsoft Parties contended that by that conduct, CPL Notting Hill infringed copyright in Windows 7 (making unauthorised reproductions and supplying infringing articles), and that it also authorised infringement by end users of the new computers supplied with Windows 7 pre-installed and on which COAs were affixed (that is, the end users’ use of the software): [7]. The Microsoft Parties further contended that the second respondent, Ms Li, authorised CPL Notting Hill’s reproduction of Windows 7 in infringement of copyright: [7]. The Retail Case thus concerned admitted conduct in relation to 30 new computers, and also encompassed claims concerning sales alleged to have been made to two businesses trading respectively as Alpine Tech Computing (Alpine) and AV2PC.

178    The Microsoft Parties also ran a second and larger case in which they alleged that the Chen Invoices showed that CPL Distribution acquired and supplied some 1,467 loose COAs to CPL Notting Hill in the period 1 August 2014 to 8 January 2016, that CPL Distribution was not licensed to supply the loose COAs, and that it must be inferred from the Chen Invoices that CPL Notting Hill then dealt with those COAs in the same manner as the admitted conduct in the Retail Case by affixing those loose COAs allegedly acquired to new computers pre-installed with Windows 7 which it built to order and supplied to end users (the Supply Case): [9]. The Microsoft Parties alleged that the provision of loose COAs to CPL Notting Hill necessarily resulted in the substantial reproduction of Windows 7, and CPL Distribution authorised CPL Notting Hill’s reproduction of Windows 7 in infringement of copyright: [9]-[10]. The Microsoft Parties further alleged that having regard to the acts of CPL Distribution as shown in the Chen Invoices, the fourth respondent, Mr Wang, authorised the doing of acts in infringement of the copyright in Windows 7: [10]. The primary judge noted that the pleaded allegation against CPL Distribution that it supplied 1,467 loose COAs to CPL Notting Hill encompassed the 50 COAs comprised in the June 2015 Purchase, in respect of which the CPL Parties admitted 30 subsequent pre-installations of Windows 7 on new computers and their supply to end users. To that extent, the primary judge noted that the Supply Case intersected with the Retail Case against CPL Notting Hill and Ms Li but said that there was otherwise no allegation pleaded against CPL Notting Hill of pre-installation or supply of the alleged 1,467 unlicensed copies of Windows 7, or authorisation of that conduct by Ms Li: [11]. The primary judge referred to the submission by the Microsoft Parties that it was asking the Court to infer that for each loose COA bought by CPL Distribution there was a copy of Windows 7 installed, and Microsoft accepted that it was conceivable that there was a small amount of loss or wastage, so to fix on an exact number at or between 1,467 and 1,617 would be to strive for unnecessary exactitude: [12].

179    The primary judge noted that the conduct alleged under each of the Retail Case and the Supply Case gave rise to each of the copyright case, the ACL case, and the trade mark case: [13]. The Microsoft Parties sought declarations, permanent injunctions, and compensatory and additional damages in the order of $2.5 million plus interest and costs: [14].

180    By way of overview of the CPL Parties’ response, the primary judge noted that they denied any infringement of copyright, trade marks or contravention of the ACL, and all claims of authorisation: [15]. In relation to the Retail Case, the CPL Parties admitted 30 pre-installations following the June 2015 purchase, defensively called in aid the terms of the Microsoft system builder licence then applying to CPL, and its End User Licence Terms (EULA), and relied on Microsoft’s activation of the copies of Windows 7 thereby permitting use by end users, which use had not been de-activated. They also pleaded reliance on the temporary reproduction and incidental use provisions under ss 43B and 47B of the Copyright Act, and if infringement were established, raised a positive defence under s 115(3) of the Copyright Act of innocent infringement. In relation to the trade mark claims, the CPL Parties raised a defence under s 123 of the TM Act. The primary judge referred to the argument by the CPL Parties that the Supply Case was not maintainable, in that it relied on inadmissible and unreliable evidence having no probative value, namely the Chen Invoices and the Chen Related Material, and could not succeed: [17]. The primary judge referred also to the submission by the CPL Parties that the Supply Case necessarily depended on the Court rejecting other business records of CPL which were not the subject of any fraud allegation, and were supported by the evidence of the CPL Parties’ witnesses: [17]-[18]. The primary judge said that central to the Microsoft Parties’ case was their contention that the CPL Parties had engaged in dishonest conduct in flagrant disregard of the Microsoft Parties’ intellectual property rights, and in particular mounted a vigorous and sustained attack on Ms Li’s credibility: [19]. The primary judge referred to the allegations by the Microsoft Parties that the CPL Parties’ witnesses had crafted a “web of deceit”, and that the CPL Parties had actively concealed, altered and destroyed evidence in the proceeding in an attempt to minimise any identified infringement: [19]. The primary judge referred to the absence of any allegation along those lines in the pleading by the Microsoft Parties, and referred also to the submission by the CPL Parties that such serious allegations should have been pleaded: [20]-[21]. I will return to that issue later in dealing with the principal grounds of appeal.

181    Having provided that overview, the primary judge identified the parties to the proceedings. The first applicant, Microsoft, being a company incorporated under the laws of the state of Washington, United States of America, was the owner of the copyright in various versions of computer programs comprising the Windows operating system: [22]. It was also the registered owner of six Australian registered trade marks: [24]. The second applicant, Microsoft Pty Ltd, was a wholly owned subsidiary of Microsoft which supplied Microsoft products and services in Australia, and was an authorised user of the trade marks: [25]. The third applicant, Microsoft Regional Sales Corporation (Microsoft Sales) was a corporation incorporated under the laws of the state of Nevada, United States of America, and was a wholly owned subsidiary of Microsoft, which operated an online retail store in Australia for the distribution of Microsoft products through the retail channel: [26]. The primary judge said that the Microsoft Parties alleged that Microsoft Sales had an exclusive licence from Microsoft to resell Microsoft computer programs in Australia through the retail channel, but excluding programs distributed and licensed by Microsoft through the original equipment manufacturer (OEM) channel.

182    The first respondent, CPL Notting Hill was a retailer of computers and parts and built and sold new computers in response to customers’ orders, sometimes pre-installed with a Microsoft Windows operating system, including at the relevant time Windows 7. It was an OEM “system builder”, carrying on business online and from retail premises in Notting Hill, Melbourne: [28].The second respondent, Ms Li, was at all material times the sole director of CPL Notting Hill. The third respondent, CPL Distribution, was a computer parts wholesaler which bought computer parts and software from third party suppliers, and despatched those goods to CPL Notting Hill and others: [30]. CPL Distribution’s warehouse was located next to CPL Notting Hill’s retail premises in Melbourne: [30]. The primary judge said that the evidence established that the warehouse distribution and retail businesses of CPL Distribution and CPL Notting Hill respectively employed people having distinct roles and responsibilities, although the two companies shared some staff, and CPL Notting Hill employed sales, technical and accounting staff: [31]. The fourth respondent, Mr Wang, was at all material times the sole director of CPL Distribution, and a company associated with Mr Wang was the sole shareholder of CPL Notting Hill: [32]. The primary judge referred to CPL Notting Hill and CPL Distribution together as CPL or the CPL companies.

183    The primary judge then outlined some of the procedural history of the matter. The proceedings were commenced on 13 May 2016 against CPL Notting Hill and Ms Li by reference to the invoice of 11 November 2015 for the Test Purchase Computer (which was collected on 13 November 2015). On 7 September 2017, CPL Distribution and Mr Wang were joined, the Retail Case was expanded and the Supply Case was introduced: [35]. A hearing had taken place before what was then the Federal Circuit Court of Australia on 27 to 29 August 2018 and judgment was given ex tempore on 29 August 2018. On 5 February 2019, O’Callaghan J sitting as the Full Court of the Federal Court allowed an appeal, set aside the orders which had been made on 29 August 2018 and remitted the matter for re-hearing: CPL Notting Hill Pty Ltd v Microsoft Corporation (No 2) [2019] FCA 223. The matter was then heard by the primary judge in August and December 2019 and judgment was given on 30 September 2022. The primary judge said the following at [40]-[41] on the subject of delay:

It is obvious that I have taken considerable time to deliver these reasons. My reasons have been delayed through the lockdowns of the Covid-19 pandemic, and into 2022 by the reality and consequences of those lockdowns and the events in the period since the conclusion of the hearing, by the complexity of the proceeding, and the manner and content of the presentation of the parties’ evidence and arguments, and by other unavoidable and other unrelated matters.

The time that has passed, however, has conferred the considerable benefit of a detailed review and consideration of the documentary materials and physical exhibits, and the written and oral evidence with the benefit of the complete transcript, my contemporaneous notes and recollection, the parties’ lengthy written submissions, oral submissions, and supporting materials and aides memoire. Because of the passage of time, I have placed somewhat more weight on the written evidence as augmented by the transcript of the hearing. The cross-examination of the various CPL parties’ witnesses did not disturb in any significant way the positions taken by the witnesses in their affidavits.

The primary judge then added at [43]:

My conclusions on all the witnesses’ evidence and their credit (in the case of CPL witnesses) arises from careful attention to their written evidence, and their oral evidence in chief and under cross-examination, augmented by the transcript, and aided by my contemporaneous notes, my distinct recollections of witnesses in the witness box, specifically, the CPL parties’ witnesses.

184    For completeness, I note that legislation restricting movement and gathering due to the Covid-19 pandemic in New South Wales operated from 31 March 2020 until 29 August 2021, to varying degrees of restriction, but throughout that period the relevant orders permitted people to leave their place of residence if the person could not work from their place of residence or was undertaking a legal obligation, and excluded gatherings at a court or tribunal: see, for example, the Public Health (COVID-19 Restrictions on Gathering and Movement) Order 2020 (NSW), cll 5 and 6, Items 2 and 11 of Sch 1 and Item 7 of Sch 2. However, the important question (which I deal with below in relation to Grounds 1 and 2) is not the reason or reasons for the delay in delivering judgment, but the effect of that delay on the decision-making process.

185    The primary judge conducted a detailed review of the pleadings and submissions at [44]-[119]. In the course of that review, the primary judge said that there was no express pleaded allegation of primary infringement of copyright by CPL Notting Hill in respect of the alleged supply of the 1,467 loose COAs pleaded in relation to the Supply Case: [58]. The primary judge said that the Supply Case pleaded against CPL Distribution necessarily depended on establishing primary acts of infringement by CPL Notting Hill, in that there cannot be an act of authorisation done without an act of primary infringement, and a secondary infringement is completed only when the primary infringement has taken place, referring to Roadshow Films Pty Ltd v iiNet Ltd [2012] HCA 16; (2012) 248 CLR 42 at [94] (Gummow and Hayne JJ) and Apotex Pty Ltd v Les Laboratoires Servier (No 2) [2012] FCA 748; (2012) 293 ALR 272 at [27] and [30] (Bennett J): [59]. That pleading point was also made in the introductory overview at [11]. I will return to that question later.

186    As a separate matter, the primary judge referred to the assertion by the CPL Parties that the Supply Case (and the claim for additional damages) made by the Microsoft Parties was an unpleaded fraud case (the Unpleaded Fraud Case), which could not be entertained in the absence of it having been pleaded: [99]-[100]. The primary judge referred to the Microsoft Parties’ response that they did not have to plead and particularise fraud as part of a copyright infringement claim, as it was not an element of any cause of action on which they relied: [102]. Reference was made to the submission by the Microsoft Parties that it was open for Microsoft to assert that the CPL Parties, and persons on their behalf, had engaged in the destruction or concealment of documents for the purposes of avoiding discovery obligations, and the fabrication of documents for the purposes of the proceeding, and that they had complied with the rule in Browne v Dunn (1894) 6 R 67: [103]-[104]. The primary judge rejected the Microsoft Parties’ submissions on this point: [105]-[119]. Her Honour accepted that concealment, dishonesty, fabrication and destruction, or fraud were not necessary elements of a cause of action for copyright infringement, or for trade mark infringement, but expressed the view that fraud need not be a separate cause of action and that it was the contention of the Microsoft Parties that those matters were relevant to her Honour’s determination of their claims on liability and were foundational to their claims for additional damages: [112]. The primary judge said that the Microsoft Parties prosecuted a positive case of alteration, destruction and concealment of CPL’s business records, and of fabrication of CPL’s business records, as well as fabrication of the witnesses’ accounts: [113]. The primary judge took the view that they were allegations which had to be pleaded. The primary judge said at [114] that the Microsoft Parties’ case required the Court not merely to disbelieve the CPL Parties’ evidence about certain documents and events, but to affirmatively find that:

(a)    the Chen Invoices were authentic, accurate, and able to be relied upon as to the truth of their contents;

(b)    the CPL/LDS Invoices (being invoices purportedly given by LDS International Pty Ltd (LDS) to CPL Distribution) and associated stock receive forms were false records created by witnesses for the CPL Parties;

(c)    data that would have corroborated the Chen Invoices was deliberately concealed during discovery by fabricating a computer system crash, and that the third party data recovery efforts were either not done or were part of the CPL Parties’ fabrication; and

(d)    each of the CPL Parties’ witnesses was part of a collusive effort to fabricate, tamper with and conceal records.

187    Turning to the Chen Invoices and Chen Related Material, the primary judge said that the Chen Invoices were among documents produced by the Commissioner of Victoria Police in the period 10 April 2017 to 11 July 2017 pursuant to a subpoena issued at the request of the Microsoft Parties on 20 February 2017 (the Microsoft Subpoena). The Chen Invoices comprised: (a) 19 invoices (and versions of those 19 invoices) purportedly created by a convicted fraudster, Mr Chen, whilst in his role as the sales representative of the computer product supplier LDS (the Chen (LDS) Invoices); and (b) five other invoices (and versions of those invoices) purportedly created by Mr Chen in the name of the company Ever Success Pty Ltd (Ever Success), a company owned by his partner’s parents: [125] (the Chen (Ever Success) Invoices). In relation to the 19 Chen (LDS) Invoices, there was a version of them that contained printed text but was otherwise clean, and a corresponding version with the same invoice number as the clean version but on most of which there was some handwriting. The primary judge also referred to the Chen (LDS) invoices as comprising the Chen (LDS/laptop) invoices and the Chen (LDS/manila) invoices, being references to the sources identified by Sgt O’Sullivan in her 3 April 2018 statement: [127]. The five Chen (Ever Success) Invoices comprised one version of five invoices that contained printed text but were otherwise clean, and another version of one (or possibly two) of those five invoices, one of which had handwritten markings on it: [128]. The primary judge referred to the Chen (Ever Success) Invoices as comprising the Chen (ES/print) invoices and the Chen (ES/search) invoices: [128]. Sgt O’Sullivan was the officer investigating Mr Chen’s wrongful activities, culminating in the sentencing of Mr Chen on 1 June 2017: [143]. The primary judge recorded that Sgt O’Sullivan confirmed the factual account given by the sentencing judge in the reasons on sentencing Mr Chen in Director of Public Prosecutions v Chen [2017] VCC 735, a copy of which was admitted in evidence without restriction: [145].

188    The primary judge referred to the witnesses who gave evidence at the hearing at [139]-[167].

189    The primary judge then dealt with Microsoft’s supply and licensing system for Windows 7. In the relevant period, Microsoft had two main sales and distribution channels for Windows 7 in Australia:

(a)    OEM channels, through which computer manufacturers and computer assemblers pre-installed Windows 7 on new computers they manufactured or built, or had manufactured for them, including under their own brand, or pre-installed Windows 7 on second-hand computers refurbished by or for them, each of which OEM computers were then sold to resellers or end users; and

(b)    retail channels, comprising the physical store operated by Microsoft Pty Ltd, the Microsoft online store, and independent resellers and retailers which offered for sale a copy of Windows 7 either on an installation disk or other medium, or via download online, for the end user to then install on their own computer: [169].

190    In relation to the OEM channel, Microsoft supplied and licensed Windows 7:

(a)    under “direct” OEM licences to multi-national OEMs which have a global distribution, sales and marketing presence and corresponding sales volumes, which pre-installed Windows 7 on new computers using a master copy of Windows 7 code supplied by Microsoft, and affixed a separately supplied Windows 7 COA onto each of those computers, and sold the new computers with Windows 7 pre-installed and with a COA sticker;

(b)    to “commercial” OEMs under “system builder licences” which pre-installed Windows 7 using a copy of Windows 7 copied from a recovery DVD or other medium such as a disk, and affixed to the computer a Windows 7 COA, which media and COA were supplied to these OEM entities together in a “system builder pack”, and like the direct OEMs, the commercial OEMs sold new computers with Windows 7 pre-installed and stickered with a COA; and

(c)    to “refurbishers” under either a direct Microsoft Authorised Refurbisher or a Registered Refurbisher licence, depending upon volumes, and like the OEMs under direct OEM licences, the refurbishers used master copies of Windows 7 code to install the software, and affixed a separately supplied COA to each refurbished computer. The COAs supplied to refurbishers were identified for refurbished computers only.

In relation to the retail channel, Microsoft supplied and licensed Windows 7 to end users under an end user licence agreement (EULA). Those end users acquired a copy of Windows 7 on physical media, such as a USB storage device, or could download it from the Microsoft online store, and then installed and activated the copy on their computer. Retail copies of Windows 7 were supplied in plastic “shrink wrap” packaging.

191    A COA is a physical label or sticker with Microsoft anti-counterfeiting features: [176]. It has depicted on its face a unique 25-digit alphanumeric sequence known as a product key, which is used in the process of validating and activating a copy of Windows 7 that has been pre-installed on a computer: [176]. The COA labels in issue in the proceeding were approximately 7 cm by 2.3 cm in size: [176]. In the relevant period, Microsoft and its Authorised Replicators (which manufactured the COAs) distributed COAs both with and without an accompanying OEM copy of Windows 7: [177]. Microsoft distributed COAs separate from an OEM copy of Windows 7, being what were referred to as “loose” COAs, to direct OEM licensees and their authorised third party installers, and to refurbishers licensed as described above, under Microsoft’s refurbisher program. The primary judge referred to the evidence of Mr Noble, who was responsible for Microsoft’s intellectual property enforcement in Australia, that “loose” COA labels may have been stolen or leaked from an Authorised Replicator, direct OEM or Microsoft Authorised Refurbisher, or may have been forged and printed with a product key leaked by persons with access to them (for example, by an employee of a licensee that was in possession of product keys through a volume licensing licence): [177]. A COA itself was not a licence or permission to use Microsoft software such as Windows 7: [178]. In the relevant period, a product key was used to “activate” the copy of Windows 7 installed on the hard drive of the computer, but it was not mandatory to activate the copy of Windows 7 installed on the computer in order to use it: [178]. The product key and the activation process were used by Microsoft to verify that each copy of Windows was installed by an end user on no more than the limited number of computers that were permitted under an EULA: [179]. In respect of Windows obtained through a system builder pack, the product key associated with that copy of Windows permitted a limited number of activations of Windows: [179].

192    For a computer to operate, it must be installed with an operating system, which is necessary to control and manage the computer hardware and software resources such as word-processing, media player, accounting software, and web browsers. In the relevant period, Windows 7 was one such operating system: [180]. Once Windows 7 was installed onto the hard drive or solid state drive of the computer, the steps of set-up and activation would be undertaken, and it was at the activation stage that the product key would need to be used: [183]-[184].

193    The primary judge referred to the CPL companies having had a long history of purchasing system builder packs from Microsoft’s authorised distributors in Australia: [201]. Since 2004, CPL Notting Hill’s predecessor business, and since 2007, CPL Distribution, had been members of Microsoft’s system builder program. It was not in dispute that CPL Notting Hill was a “commercial” OEM business or system builder, and that for many years, including throughout 2014 and 2015, in the ordinary course of its business it purchased from CPL Distribution several thousand Windows 7 system builder packs which it installed on new computers it built and supplied to order: [202]. It was also not in dispute that CPL Distribution purchased from Microsoft’s appointed resellers and distributors and supplied to CPL Notting Hill those Windows 7 system builder packs: [202]. The primary judge found that the CPL companies did not deal with copies of Windows 7 Microsoft supplied through the retail channel: [202].

194    The primary judge found that the Windows 7 system builder packs used by CPL Notting Hill comprised a white cardboard envelope printed in black and white and sealed with a red sticker, inside which was a white envelope with a clear window containing the Windows 7 disk, and on which was a COA label, and the Microsoft Parties made no complaint about the CPL Parties’ acquisition and use of Windows 7 system builder packs: [203]. The primary judge found that the CPL Notting Hill sales ledger, and the CPL Distribution copy purchase invoices from OEM suppliers for Windows 7 Pro (OEM Supplier Invoices) established that from January 2014 to September 2016, CPL Distribution purchased 2,236 Windows 7 Pro system builder packs about which the Microsoft Parties made no complaint, and that CPL Notting Hill acquired from CPL Distribution 2,180 such packs which it pre-installed on new computers which it supplied to order or which it supplied as system builder packs to customers to install themselves: [204]. The primary judge found that the CPL Parties consistently replenished their stock of Windows 7 Pro system builder packs in the relevant period to meet ongoing demand: [204]. The primary judge also found that in the period 1 January 2014 to 31 December 2016, Microsoft paid CPL Distribution rebates under its rebate program in respect of 2,345 Microsoft Windows system builder packs that had been purchased by CPL Distribution from three of its authorised OEM distributors in Australia: [205]. The primary judge said that while it was reasonable to assume that payment of rebates lagged purchases, the rebate evidence was consistent with the CPL companies’ evidence of the purchases and sales: [205].

195    The primary judge said that it was not in dispute that the copies of Windows 7 pre-installed on the admitted 30 new computers built by CPL Notting Hill (that is, the admitted copies the subject of the Retail Case) were not packaged in system builder packs together with a Windows 7 Pro COA label: [206]. The primary judge said that it was not genuinely in dispute that the copies of Windows 7 pre-installed on new computers by CPL Notting Hill and in issue in the proceeding were genuine Microsoft products: [207]. The primary judge said that CPL Notting Hill did not dispute that the evidence of the “test purchase” of the Test Purchase Computer tended to establish that the 30 COAs it had used in relation to the 30 new computers it admitted it supplied (that is, within the Retail Case) were originally issued under a Microsoft refurbisher program, but said that the CPL Parties denied that they had any knowledge of that program or any knowledge that the COAs were issued under that program: [213].

196    The primary judge then turned to the subject of supplies by LDS and the wrongful activities of Mr Chen. LDS was a supplier of computer parts, hardware and software to CPL Distribution, relevantly in 2014 and 2015, and Mr Chen was LDS’s sales representative (also described as a business development manager and responsible for sales of products) who principally dealt with the CPL companies: [216]. Mr Pan was the CPL Notting Hill staff member who primarily dealt with Mr Chen, and did so once or twice a month: [216]. None of the CPL Parties’ witnesses said they had any suspicion about Mr Chen or his conduct: [216].

197    In April 2015, Sgt O’Sullivan commenced Operation Astucia, an investigation she conducted into alleged deception and theft committed by Mr Chen: [217]. Sgt O’Sullivan referred to a report by LDS that Mr Chen was generating false invoices of the LDS system to take stock from the warehouse and then selling those items under the guise of being from LDS to customers of LDS and presenting them with fraudulent or falsified invoices: [218]. In 2017, Mr Chen pleaded guilty to four charges of theft, four charges of false accounting and one charge of knowingly dealing with the proceeds of crime, and was sentenced to three years imprisonment with a minimum (non-parole) term of 20 months: [220]. Sgt O’Sullivan verified the facts set out in the reasons of the sentencing judge in Director of Public Prosecutions v Chen [2017] VCC 735 to the effect that Mr Chen’s modus operandi was to remotely access LDS’s accounting system, concealing his thefts by making unauthorised alterations to its records by reducing the individual items of stock in the inventory stock records and creating false credit notes for products purportedly returned by customers. One of the avenues through which he on-sold the products he stole was via an eBay account through Ever Success, which was owned by his partner’s parents and used for his own purposes. He also introduced Ever Success to LDS as a customer: [221]. The falsified invoices created by Mr Chen from his computers and addressed to CPL were not found on LDS’s computers or records, and were duplicates of invoices on the LDS system addressed to other customers of LDS: [224]. The primary judge said that there was no pleading that any of the CPL Parties were involved in Mr Chen’s criminal conduct, and that there was no evidence that CPL had any involvement in Mr Chen’s criminal conduct: [227]. On 29 March 2016, a liquidator was appointed to LDS pursuant to a creditors’ voluntary winding up: [229].

198    The primary judge then dealt in detail with CPL’s premises, employees and businesses in the relevant period: [230]-[260]. As indicated above, Ms Li was the director of CPL Notting Hill and Mr Wang was the director of CPL Distribution: [246]-[247]. The primary judge accepted Ms Li’s evidence that Mr Wang was not involved with CPL Notting Hill’s sales operation, and did not give her instructions about CPL Notting Hill in the relevant period, but he did give instructions to CPL Notting Hill staff which related to CPL Distribution in the relevant period, as CPL Notting Hill’s staff sometimes did purchasing on behalf of CPL Distribution: [248]-[249]. The primary judge found that Mr Wang was not involved with the daily operation of CPL Distribution, which only had warehouse staff for whom Mr Lu was the supervisor, and it was only if something very abnormal happened that they would check with Mr Wang: [249]. From about 2009 until late 2016, Mr Pan was employed by CPL Notting Hill as a senior manager in charge of daily operations, in charge of the technical area and sales areas: [250]. Mr Pan was responsible for purchasing hardware and software on behalf of CPL Distribution, which was then sold to CPL Notting Hill for use in its retail business: [251]. Since 2013, Mr Guo had been employed by CPL Notting Hill full-time as a computer technician, and was the main person who assembled computers to order and who repaired computers for CPL Notting Hill, and reported to Mr Pan: [252]. Since 2008, Mr Lu had been the senior warehouse manager and supervisor, and was responsible for receiving and despatching stock on behalf of CPL Distribution, and for undertaking stocktakes: [253]. Until September 2015, Mr Lu was assisted by Mr Xu, and since then had been assisted by Mr Godby: [254].

199    The primary judge found that the usual procedure for receiving goods, dispatch, building computer systems and invoicing was as follows:

(a)    the supplier delivered the goods to the warehouse receiving area, usually accompanied by the supplier’s invoice or delivery document;

(b)    the goods received were checked by a warehouse staff member against an internal purchasing order opened and viewed electronically in the system;

(c)    the goods were checked against the supplier’s invoice/delivery documents as to item, unit and total prices, and quantities;

(d)    when they had been physically checked, the goods were input into the system by keying the goods, like the product codes, into the system, or as from September 2015 by scanning the barcodes and serial number;

(e)    during his employment, Mr Xu’s practice when he saw the supplier’s invoice in the course of receiving goods was to copy it, check the goods were right, then return the original invoice back to the supplier or delivery person, and keep a copy for the company. He generally signed both invoices, the original and copy. If everything was fine, then the receiving staff member issued a receipt; and

(f)    the warehouse’s receipt of goods did not involve payment, and the warehouse staff did not have any role in payments or paying suppliers, which was done by the sales office. Similarly, the warehouse staff’s role in dispatch was to bring the product to the specific area (the retail and sales side). Warehouse staff did not know what customer sales was doing: [256].

200    The primary judge found that on occasion Mr Chen attended the warehouse and asked Mr Xu to re-sign invoices for deliveries made a few days earlier, which Mr Xu did, saying that this was not the usual practice: [257]. The primary judge said that on occasions Mr Xu omitted to sign the supplier’s invoices/delivery documents, and also found that when asked to sign an invoice for previously delivered goods, Mr Xu believed he was able to remember what goods he had received a day or so earlier: [257].

201    The primary judge said that throughout the relevant period the sales staff were not permitted to go into the warehouse area without permission, except for Mr Pan, but warehouse staff were able to go into the sales area: [258]. Mr Guo, the technician who primarily assembled the computer systems ordered by customers, was not allowed to go into the warehouse area: [259].

202    CPL Notting Hill generated an invoice for a customer’s purchase, and that invoice served as the picking list for the warehouse: [260]. The warehouse staff picked the parts and software out of the stock held in the warehouse and delivered the picked stock to the technical area for assembly or to the sales area, that is, to CPL Notting Hill: [260]. The invoice was the sales invoice that the customer then received and paid: [260].

203    The primary judge then dealt with the June 2015 Purchase, comprising 50 loose COAs and disks. On 9 June 2015, CPL Distribution purchased 50 COA labels and disks for Windows 7 from LDS for a total cash price of $3,850.00, as evidenced by a tax invoice dated 9 June 2015: [261]. Mr Pan made the purchase for CPL Distribution, and Mr Chen represented the seller of the goods to be LDS, and the invoice was signed by Mr Chen: [261]. The June 2015 Purchase was of loose COA labels and disks, not system builder packs. The CPL Parties said that it was the only purchase of Windows 7 loose COA labels and disks by a CPL company: [262]. The primary judge accepted the evidence of Mr Pan to the effect that Mr Chen had said several days earlier that LDS was in financial difficulty and was running a sale and said that he had a limited quantity of genuine Microsoft Windows 7 Pro licences to sell under cost for cash on delivery: [263] and [283]. When Mr Chen came to Mr Pan’s office at CPL Notting Hill on 9 June 2015, he produced a bundle of 50 separate COA labels as well as a box or bag with Windows 7 disks, which was different from the usual packaging of the Microsoft Software in a white cardboard envelope inside which there was another envelope that contained the disk and on that envelope there was a licensed sticker: [265]. Mr Chen assured Mr Pan the COA labels were genuine and that this was just one of the ways that Microsoft distributed its product keys: [265]. The disks seemed to Mr Pan to be genuine, and the same as those in the OEM system builder packs: [265]. After Mr Pan saw that the June 2015 Purchase was different (not being OEM system builder packs), and while Mr Chen delivered the goods to the warehouse to be received into stock, Mr Pan changed the stock codes for Windows 7 electronically in the manner referred to below, to distinguish between OEM stock received (that is, in a system builder pack), and the stock now received from LDS: [267].

204    The primary judge accepted the evidence of each of CPL’s witnesses (Messrs Pan, Godby, Xu, Lu and Guo) that they had never seen refurbisher COA labels in CPL’s stock; that is, COA labels expressly marked with the words “for refurbished PCs only” or an abbreviation of those words: [282]. The primary judge said that there was no evidence that CPL’s witnesses were aware of Microsoft’s refurbisher channel before CPL Notting Hill received Microsoft’s letter of demand of 8 January 2016, and there was no evidence from any of the CPL witnesses that they had specific knowledge of any of Microsoft’s licence terms for Windows 7: [282].

205    The primary judge then dealt with the merger of stock codes by Mr Pan on 9 June 2015. The primary judge referred to Mr Pan’s evidence to the effect that commonly CPL imported the stock descriptions and stock codes from suppliers by downloading file contents or the descriptions and product codes from the supplier, with the result that more than one product code could represent the same product: [285]. Mr Pan’s evidence (referred to at [286]) was that since 2009 (when he commenced employment) and prior to 9 June 2015, there were the following eight stock codes for Windows 7 software in the stock database:

(a)    SOF-MS-W7PCOA with the description of Microsoft Windows 7 Professional COA Label Only (No Media);

(b)    SOF-MS-W7P/64B with the description of Microsoft Windows 7 Professional OEM 64bit;

(c)    SOF-MS-W7PCOA32 with the description of Microsoft Windows 7 Professional 32bits COA Label Only (No Media);

(d)    SOF-MS-W7P/32B with the description of Microsoft Windows 7 Professional OEM 32bit;

(e)    SOF-MS-W7H64COA with the description of Microsoft Windows 7 Home Premium 64bits COA Label Only (No Media);

(f)    SOF-MS-W7H/64B with the description of Microsoft Windows 7 Home Premium OEM 64bit;

(g)    SOF-MS-W7H32COA with the description of Microsoft Windows 7 Home Premium 32bits COA Label Only (No Media);

(h)    SOF-MS-W7H/32B with the description of Microsoft Windows 7 Home Premium OEM 32bit.

206    As Mr Pan said, there were thus two parallel codes in the stock database for each of the various versions (32bit and 64bit) of Microsoft Windows 7 software for both Windows 7 Pro and Windows 7 Home: [287]. Mr Pan’s evidence was that they both referred to the same product and that there was no difference in substance between the terms “OEM” and “COA”: [287]. Mr Pan’s evidence was that each of those stock codes was for an OEM product, being a system builder pack in which the COA label and the software disk were packaged together: [288].

207    Mr Pan’s evidence was that on 9 June 2015, when he saw that the packaging of the stock which Mr Chen brought in to CPL Notting Hill was “slightly different”, in order to remove confusion in the future he decided to merge the codes for the Windows 7 OEM products and put the new packaging under one code: [290]. The primary judge at [294] referred to the effect of Mr Pan’s evidence being that on 9 June 2015, whilst Mr Chen was delivering the June 2015 Purchase to CPL Distribution for receiving, Mr Pan reduced the pre-existing four codes for Windows 7 Professional OEM products to the following two codes:

(a)    SOF-MS-W7P/64B and description Microsoft Windows 7 Professional OEM 64bit; and

(b)    SOF-MS-W7P/32B and description Microsoft Windows 7 Professional OEM 32bit;

(d)    SOF-MS-W7COA and description Microsoft Windows 7 Professional COA Label Only (No Media).

208    In response to the proposition put by senior counsel for Microsoft that the previous stock records were “wiped out”, Mr Pan said that the system only keeps the most recent data, so that after the merging of the codes, five new codes appeared in the system (being the three codes referred to above for Windows 7 Pro and the corresponding two codes for Windows 7 Home), not the eight old stock codes. However, every document printed from the system thereafter showed the new codes, even where the transaction took place before 9 June 2015 and to that extent the records of pre-existing transactions remained and were not “wiped out”, but the stock code and product description accorded those transactions thereafter was one of the two codes and descriptions set out in subparagraph (a) or (b) in the previous paragraph: [295]. Accordingly, the primary judge rejected the Microsoft Parties’ proposition that upon the stock code merger pre-existing transactions were wiped out: [295]. I will return to this topic later, but I observe at this point that there is a gap in the primary judge’s reasoning, in that the effect of the stock code merger was that one could not tell afterwards what product had been sold before 9 June 2015 because one could not see what had been classified as “COA Label Only (No Media)”. The primary judge found that the stock code merger was not a time consuming task, or one attended by any difficulty: [296]. The primary judge accepted Mr Pan’s evidence of the stock code merger and its timing and outcome: [297]. The primary judge said that her Honour was not persuaded that the rationale for the stock code merger given by Mr Pan was implausible or unreasonable, nor that it must have taken place at some later time, or was done to hide transactions involving non-OEM supplies of COA labels for Windows 7: [297]. The primary judge noted that the sales ledger produced by Mr Pan on 6 November 2016 disclosed 30 sales of new computers built using product from the June 2015 Purchase, which was consistent with the stock merger having occurred at the time of the June 2015 Purchase rather than later, after the letter of demand of 8 January 2016 or the commencement of the proceeding on 13 May 2016: [298].

209    The primary judge found that in the period from the June 2015 Purchase until 31 December 2015, CPL Notting Hill assembled and sold 30 new computers pre-installed with Windows 7 Pro and to which it affixed a loose COA label from the June 2015 Purchase: [299]. One of those new computers was the Test Purchase Computer ordered on 11 November 2015, to which was affixed the Affixed COA Label: [300].

210    The primary judge then dealt with events in the period from September 2015 to the commencement of the proceedings, and dealt with the submission by the Microsoft Parties that the chronology of the filing of the parties’ evidence and making of certain orders made by the first judge in their favour supported a submission that the CPL Parties sought to avoid challenges to the veracity of their assertion that the infringing conduct was limited to the acquisition of 50 “licences” only: [303]. The primary judge said that the chronology did not make good that contention, and that the evidence of both parties revealed that the Microsoft Parties’ disclosure of the evidence on which they proposed to rely was made in a partial and piecemeal fashion over the period November 2016 to May 2018, and that it was unsurprising that such a piecemeal disclosure over time contributed to the iterative disclosure of the events and explanations by the CPL witnesses in response: [304]. The primary judge said that her Honour was not persuaded that the CPL Parties’ defence was untoward, defiant and obstructionist, or unwarranted, as the Microsoft Parties contended: [304].

211    The primary judge referred to the documents annexed to Mr Ng’s affidavit made on 27 July 2017 in support of Microsoft’s case, Mr Ng being one of the solicitors acting for the Microsoft Parties. The source of those documents was the production made by Victoria Police in answer to the Microsoft Subpoena: [306]. The first of the documents was a purchase payable list produced by CPL Distribution pursuant to a request by Sgt O’Sullivan of goods purchased from LDS for the period 2 July 2014 to 5 October 2015 (the CPL/LDS Payables List), comprising a list of 114 entries for the period 2 July 2014 to 30 June 2015 (including the June 2015 Purchase) and a list of 16 entries for the period from 2 July 2015 to 5 October 2015: [307]. Sgt O’Sullivan made the request for that list during her visit to CPL Notting Hill’s premises on 16 December 2015. The second document was an email dated 4 November 2015 purporting to be from Ms Li to Mr Chen, saying “We have paid cash to Felix [Chen] of Ever success for the following invoices”, and then set out the invoice numbers and amounts for five Chen (ES/print) invoices, and the primary judge found that there were no attachments to the email: [310]. The third set of documents were copies of 22 invoices comprised within the Chen Invoices, being 17 Chen (LDS/laptop) invoices (dated in the period 17 July 2014 to 15 June 2015), and five Chen (ES/print) invoices (dated in the period 30 June 2015 to 17 August 2015). The proposition in Mr Ng’s affidavit was that those 22 Chen Invoices evidenced that CPL Notting Hill had purchased Microsoft 7 Pro and Microsoft 7 Home licences in the period 17 July 2014 to 17 August 2015, totalling 1,467 licences (comprising 1,417 licences in addition to the 50 licences of the June 2015 Purchase): [311].

212    Responding to Mr Ng’s affidavit of 27 July 2017, Ms Li said that in early November 2015, around 2.30 pm or 3.00 pm, Mr Chen came to CPL Notting Hill’s retail shop without warning, and asked for Ms Li, who met him. Mr Chen referred to an email that he had sent to a CPL staff member, Jenny Zhang, who had forwarded it to Ms Li. That email asked Jenny Zhang to confirm by filling in various blanks in a draft letter that from June 2015 to August 2015 a CPL company had paid Mr Chen cash for invoices from Ever Success in an amount left blank. Mr Chen asked Ms Li to insert a large number, such as $100,000 to $200,000, in the draft, to which Ms Li responded that she could only provide information relating to actual sales, and could not sign false documents: [314]. Mr Chen then showed Ms Li a draft email on his computer, similar to the 4 November 2015 email, and she looked at the table and the amounts stated: [314]. The primary judge then referred to Ms Li’s evidence that she was unaware whether CPL Distribution or CPL Notting Hill had any transactions with a supplier called Ever Success, and left Mr Chen alone in the sales office and went down the corridor to the accounting department to check, and was told by the accounting staff that there had been no dealings ever with Ever Success and returned to the sales office, told Mr Chen and he responded “Never mind” and left: [315]. Ms Li gave evidence that the purported Chen (Ever Success) invoices (the Chen (ES/print) invoices) were never received by the CPL companies, she never sent the 4 November email, and at no time did CPL Notting Hill or CPL Distribution have any business dealings with Ever Success: [315]. Mr Pan, Mr Lu, Mr Xu and Mr Godby gave evidence to similar effect: [317].

213    As to Sgt O’Sullivan’s visit to CPL’s premises and the production of the CPL/LDS Payables List, on 16 December 2015 on her visit to CPL Notting Hill’s premises, Sgt O’Sullivan asked for Ms Li’s help with the payables for LDS, Ever Success and FTEV International. Ms Li’s evidence was that she responded: “We do have a payable list for LDS, but I have never heard of Ever Success and FTEV International”, to which Sgt O’Sullivan responded: “Then, can you please provide me the payable list for LDS?”: [320]. Ms Li was not told the reason for the police investigation, and did not ask: [325]. On 24 December 2015, Ms Li sent an email to Sgt O’Sullivan enclosing the CPL/LDS Payables List: [327].

214    On 8 January 2016, the Microsoft Parties’ lawyers sent a letter of demand to CPL Notting Hill, alleging that CPL Notting Hill’s actions in installing and selling the Microsoft Windows 7 Pro program installed on the Test Purchase Computer infringed Microsoft’s copyright, and foreshadowing the relief available should court action be initiated: [328].

215    The primary judge said that by the letter of demand, CPL Notting Hill was put on notice that Microsoft identified the COA label affixed to the Test Purchase Computer (that is, the Affixed COA Label) as a label issued under Microsoft’s refurbisher program, but not the visual appearance of a COA label so issued under that program: [330]. Upon receipt of the letter of demand, CPL identified that Affixed COA Label as stock forming part of the June 2015 Purchase: [330].

216    CPL Notting Hill responded to the letter of demand by email on 22 January 2016 from Ms Li. Mr Pan said that after receiving the letter of demand, he was instructed by Mr Wang to send the June 2015 Purchase back to LDS and seek a refund, and at that time CPL had 15 licences remaining which were unsold and in its possession: [332]. Mr Chen collected those 15 remaining licence labels and the several installer CDs of Windows 7 Pro, and gave a cash refund in the amount of $1,155: [334]. There was no evidence of any other loose COA labels or disks in CPL’s warehouse: [336]. Ms Li gave evidence to similar effect: [338]-[340]. Ms Li also said that she discussed with Mr Chen the LDS situation and Mr Chen said that the police needed copies of invoices and that to save Ms Li time, Mr Chen said that he would give her all of the hard copy invoices, and then provided a yellow manila folder of copy LDS invoices: [344]-[345]. On 18 January 2016, Ms Li received an email from Sgt O’Sullivan thanking her for the CPL/LDS Payables List sent on 24 December 2015, and requested copies of 15 invoices referred to in that list: [346]. Ms Li said that on about 25 January 2016, she looked through the invoices in the yellow manila folder and scanned the 15 requested invoices and emailed them to Sgt O’Sullivan that day: [347]. Those invoices included some of the Chen (LDS/manila) invoices and the LDS June 2015 Invoice: [347]. Ms Li said at the time she did not contemplate that the invoices Mr Chen had provided to her in the yellow manila folder were different from the actual copy invoices that CPL had retained and thought that the invoices provided were for the actual goods purchased from LDS as part of its usual business records: [348]. The primary judge accepted Ms Li’s evidence that she focused on the dates and invoice numbers sought by Sgt O’Sullivan, and not on the product descriptions: [350]. Ms Li handed copies of further Chen (LDS/manila) invoices to the police in May 2016: [351]-[352]. Ms Li gave evidence that it was only after reading Sgt O’Sullivan’s statement dated 16 April 2018 that Ms Li realised that the invoices that Mr Chen had provided in hard copy were not the correct invoices that truly identified the goods that CPL purchased and received from LDS, and said that she was shocked to see that she had honestly and in good faith supplied Sgt O’Sullivan with what now appeared to be false invoices that had been provided to her by Mr Chen: [353]. Ms Li gave evidence that at the time she provided Sgt O’Sullivan the 15 invoices, and the further 11 invoices in May 2016, she was not aware that Mr Chen was under investigation for criminal activity and did not suspect that he could have given her a bundle of false invoices in the yellow manila folder: [354]. The Microsoft Parties issued a notice to produce in June 2018 for production of the yellow manila folder, but no such folder was produced: [355]. The primary judge then said that: “Beyond a general puttage [sic] that Ms Li was lying, there was no cross-examination about the folder and its contents or their number”: [355]. I note at this point that the primary judge did not refer to the limits which her Honour placed on Ms Li’s cross-examination, which I refer to below in relation to Grounds 3, 4 and 5.

217    The proceedings were commenced in May 2016, and until about September 2017, the Microsoft Parties alleged a single incidence of copyright infringement, relying upon the Test Purchase Computer, pre-installed with a copy of Windows 7 Pro and to which was affixed the Affixed COA Label: [373]. Consistently with the CPL companies’ response to the letter of demand on about 22 January 2016 and their defence thereafter, Mr Pan swore that CPL Notting Hill had supplied 30 “licences” installed with new computers from the June 2015 Purchase (that is, the admitted 30 instances of the Retail Case), and said that CPL Notting Hill had never before engaged in any kind of copyright or trade mark infringement: [374]. In response to the first judge’s orders for production of a schedule quantifying the number and price of sales by CPL Notting Hill of Windows 7 Pro up until 7 September 2016, Mr Pan made an affidavit on 7 November 2016 annexing the sales ledger: [375]. The Microsoft Parties contended that the sales ledger misdescribed at least nine “No Media” software sales as sales of a PC with OEM software and media, relying on CPL Notting Hill sales invoices to Alpine and AV2PC of sales made in 2014 and 2015. The primary judge said that those invoices were first disclosed in Mr Ng’s affidavit made in June 2017: [376]. In respect of sales to Alpine, the Microsoft Parties subsequently filed an affidavit of Mr Purcell dated 28 March 2018. Mr Purcell’s business, Alpine, was an IT services business that bought pre-assembled computers, and typically sold about 20 computers a year. One of the companies from which Alpine bought computers was CPL Notting Hill: [377]. The Microsoft Parties relied on four invoices annexed to Mr Purcell’s affidavit (dated 28 February 2014, 12 March 2014, 11 April 2014, and 29 June 2015) of sales made by CPL Notting Hill to Alpine of new computer systems pre-installed with Windows 7 Pro, noting that the 2014 Alpine invoices pre-dated the first of the Chen Invoices. Each of the four Alpine invoices listed the Windows 7 software with the stock code “SOF-MS-W7PCOA” and the product description “Microsoft Windows 7 Professional COA Label Only (No Media)”: [379]. Mr Purcell took photographs of COA labels affixed to two computers at an unidentified third party site, one of them referring to Windows 7 Pro “for Refurb PCs”: [381].

218    The Microsoft Parties submitted that the Alpine invoices showed that the Windows 7 Pro pre-installed on the new computers supplied to Alpine had the same description as appeared on the invoice for the Test Purchase Computer of “COA Label Only (No Media)” and that CPL Notting Hill supplied Alpine with four new computers affixed with loose Windows 7 Pro COAs (that is, non-OEM versions of Windows 7 Pro) on dates prior to the June 2015 Purchase, and by reference to the Alpine invoice of 29 June 2015, on six new computers affixed with loose Windows 7 Pro COAs on 29 June 2015, after the June 2015 Purchase: [389]. The Microsoft Parties submitted that that showed that the sales to Alpine in the Alpine invoices in 2014 and 2015 were all of non-OEM copies of Windows 7 Pro; that is, from the refurbisher channel, and not system builder packs: [389].

219    The Microsoft Parties submitted that Mr Pan’s account that the pre-stock merger codes (COA or OEM) were for the same product, namely OEM products, was implausible, pointing to a difference in pricing between the products which were differently described, and the only plausible explanation for Mr Pan merging the stock codes was to conceal all sales and purchases of COA label only Windows 7 products, that is, non-OEM versions of Window 7 Pro prior to the merger: [390]-[391]. The primary judge also noted here that “This was not the subject of cross-examination”, but in my view that must be taken to be a reference to the lack of cross-examination about the price differential between differently described products. Mr Pan was cross-examined extensively about the stock code merger (T386.16-430.34), including the proposition that his evidence was absurd (T415.4-13).

220    The primary judge was not satisfied on the evidence that the Alpine invoice of 29 June 2015 was what the Microsoft Parties claimed it to be, namely for the pre-installation of copies of Windows 7 Pro and six loose COAs for Windows 7 Pro (intended by Microsoft for its refurbisher channel) on six new computers, and the sale to Alpine of those six new computers so pre-installed: [396]. Further, the primary judge was not satisfied that the Alpine invoice of 29 June 2015 related to Windows 7 Pro products pre-installed by CPL Notting Hill from the June 2015 Purchase: [397]. The primary judge said that her Honour was not able reasonably to infer from Mr Purcell’s evidence that CPL Notting Hill installed non-OEM versions of Windows 7 Pro (that is, copies of Windows 7 Pro and loose COAs not bundled in a system builder pack) on any of the computer systems referred to in the four invoices issued to Alpine: [398].

221    In addition, the Microsoft Parties relied on five CPL Notting Hill invoices to AV2PC for new computers installed with Windows 7 Home dated in the period 24 April to 27 October 2014. The primary judge noted that the Microsoft Parties did not adduce evidence from the purchaser, or any customer or end user: [400]. The primary judge accepted the evidence of Mr Pan that the sales to AV2PC were of OEM products despite the Windows 7 code or description on the invoices appearing as “COA”: [401]-[402]. Accordingly, the primary judge was not persuaded that CPL supplied to AV2PC anything other than Windows 7 OEM products: [402].

222    The primary judge then dealt with an incident in 2017 causing the loss of data: [407]-[425]. The primary judge set out the evidence given by the CPL Parties to the following effect. On 21 November 2017, at approximately 6.07 pm the CPL Notting Hill premises suffered a mains electricity power outage or power surge, and staff were unable to log onto the data server at the premises. Staff called Ms Li, who arrived at the premises at approximately 6.15 pm, and observed that the premises were dark. Once the power supply electrical surge trip switch was re-set, electricity was restored at about 6.20 pm, but staff were unable to log on to the data server operated by CPL Notting Hill at the premises, and sales staff had to use a physical invoice book and manually write out invoices: [407]. In her discovery affidavit of 21 December 2017, Ms Li attested that the electronic documents enumerated in Schedule 2 were no longer accessible, following a mains electricity supply outage, but expressed optimism that the electronically stored records would be recovered, and the hard drive and back up drive had been delivered to a third party supplier of the accounting system for recovery. The primary judge noted that Ms Li’s written evidence referred initially to the causative event being a mains electricity supply outage, but subsequently it was described as a power surge: [409]. The steps taken to recover the data were unsuccessful. Mr Pan installed a new hard drive and imported the stock codes by downloading them from CPL’s website and staff manually input the stock levels taken from the latest stocktake: [413]-[414]. Mr Pan and several staff spent until quite late the next morning manually typing in stock levels, and the business was ready to resume on 22 November 2017: [416]. Mr Pan said that the only things that existed after the fix were the product codes and the stock levels, nothing else: [418]. On 1 December 2017, the damaged hard drive was sent to Mr Chang of Digifield Technology, and the backup drive was also sent to Mr Chang on 21 December 2017. On 8 January 2018, Mr Chang informed Ms Li that he was unable to recover and restore any information: [419]. On 22 January 2018, Ms Li emailed Mr Chang asking him to provide an affidavit for the data recovery result, and to return the hard disks, but on 23 January 2018 Mr Chang said that he had already disposed of the hard disks, as he normally did directly when the process was completed, whether or not the data was recovered “unless the customer tells us they need to keep their device before we start the work”: [420].

223    The primary judge referred to the submission by the Microsoft Parties that the CPL Parties’ version of events was false, and was designed to minimise and prevent verification of the quantum of infringement, against the background that the CPL Parties knew that they were going to lose their appeal from the first judge’s interlocutory orders relating to discovery: [421]. The primary judge noted that the application for leave to appeal had been on foot for several months but the hearing was yet to occur (although her Honour did not observe that the hearing was scheduled for only three days later on 24 November 2017), and was not limited to appealing discovery orders: [421]. The primary judge was not persuaded by the Microsoft Parties’ submissions that any of the timing of the event, or employing different words in describing what happened (as a mains electricity supply outage, an electrical mains power supply failure to the premises, or a power surge), or the steps that were taken to minimise damage to the business and recover from the data loss, or who did or did not give evidence on the event, demonstrated that the loss of power and the effect on the data server and back up was a deliberate act done to destroy or render inaccessible the CPL companies’ electronic records: [423]. The primary judge found that a chance power surge occurred at the CPL premises, which caused disruption to the database server and data loss, and that genuine efforts were made to recover the data which were unsuccessful: [425].

224    The primary judge then referred to the CPL/LDS Invoices, being 19 invoices that the CPL Parties had discovered that CPL Distribution received from LDS, with the same invoice numbers and amounts as the Chen (LDS) Invoices, which were for hardware, not Windows 7, and for each of which there was a corresponding stock receive form: [426]. The CPL Parties submitted that those invoices and the stock receive forms were irreconcilable with the Chen (LDS) Invoices, and that they completely destroyed the Microsoft Parties’ pleaded Supply Case: [426]. Ms Li located from CPL Distribution’s financial records ten of the CPL/LDS Invoices, with numbers corresponding to the Chen (LDS/laptop) invoices, none of those ten invoices being for Microsoft products: [427]. In a later affidavit, Ms Li exhibited a further nine CPL/LDS Invoices, also evidencing purchases of hardware products, and having invoice numbers corresponding to the numbers of the Chen (LDS) Invoices: [428]. Each of the CPL/LDS Invoices was signed with the name Felix (Mr Chen’s first name) or an initial squiggle attributed to Mr Chen, each records a handwritten amount received, and 16 of the 19 invoices also had a date handwritten on the invoice: [429]. There were no stock receive numbers recorded on the CPL/LDS Invoices, but the goods description and the details on those invoices corresponded to the CPL stock receive forms which were in evidence: [430]. Each of the CPL/LDS Invoices was initialled or signed by either Mr Lu or Mr Xu, both of whom attested that they signed the documents at the time the goods the subject of the invoices were received: [431].

225    The primary judge then dealt with the Chen Invoices and the Chen Related Material, noting that the Chen Invoices were sourced from documents produced by Victoria Police in answer to the Microsoft Subpoena: [434]. The Chen Invoices comprised documents under 24 invoices numbers, being 19 Chen (LDS) Invoices, and five Chen (Ever Success) Invoices: [436]. The Chen (LDS) Invoices comprised two versions of the 19 numbered invoice documents referred to above as the Chen (LDS/laptop) invoices and the Chen (LDS/manila) invoices: [441]. The Chen (LDS/laptop) invoices were 19 “clean” documents which Sgt O’Sullivan said were extracted from Mr Chen’s MSI Laptop seized from his house on 3 September 2015 on execution by Victoria Police of a search warrant (the reference to “clean” meaning that they were unmarked by any handwriting). The 19 Chen (LDS/manila) invoices were selected from the 26 documents which Sgt O’Sullivan stated were requested by police from CPL and provided by Ms Li to them in response to those requests, being documents selected from the 15 documents emailed by Ms Li to Sgt O’Sullivan on 25 January 2016, and the 11 documents Sgt O’Sullivan stated were obtained in May 2016: [446].

226    The primary judge then referred to two more groups of invoices with the same invoice numbers as those of the Chen (LDS) Invoices, being the CPL/LDS Invoices and LDS Invoices to third party customers as recorded in LDS’s accounting records (the LDS/Chen (3rd Party) Invoices): [452]-[462]. In addition, the primary judge referred to the Chen (Ever Success) Invoices, comprising five documents in the name of Ever Success and addressed to CPL Distribution for Windows 7 Pro or both Windows 7 Pro and Windows 7 Home “Licenses”, being:

(a)    five Chen (ES/print) invoices, being 5 “clean” documents with printed text and unmarked; and

(b)    two Chen (ES/search) invoices, one of which has the same invoice number as one of the Chen (ES/print) invoices: [463].

227    The primary judge then summarised the parties’ submissions on the Chen Invoices, and said the following at [482]-[483]:

Relevantly to the Microsoft parties’ pleading, the cornerstone of their supply case is the authenticity and reliability of the Chen invoices. Admitting and accepting as authentic and probative the Chen invoices necessarily depends on the Court rejecting other business records of CPL, not the subject of any fraud allegations, and the consistent, compelling, evidence of the CPL’ witnesses, which evidence should be accepted.

The Microsoft parties cannot succeed in their supply case unless the Court finds that CPL staff conspired to create false documents. The Court would need to find that the CPL/LDS invoices for the supply of hardware to CPL Distribution – unchallenged – with the handwritten details I have summarised, and bearing the same invoice numbers and same total prices as the Chen (LDS/laptop) invoices, were fraudulently generated and produced (not pleaded), and that the Chen (LDS) invoices, and the Chen (Ever Success) invoices were hidden.

228    The primary judge concluded that Ms Li’s evidence about Mr Chen’s visit, the Chen (LDS/manila) invoices, the 4 November 2015 email, and the Chen (Ever Success) Invoices, should be accepted: [484]. The primary judge said that even if the Court were to receive the Chen Invoices as admissible evidence, little or no weight should be attached to them: [485]. As to the admissibility of the Chen (LDS) Invoices, which had been extracted by the police from Mr Chen’s MSI laptop seized from his home, the primary judge inferred that they were not business records of LDS and they were drafted by Mr Chen on his laptop in the course of his criminal activities to cover his tracks: [506]-[508]. The primary judge found that the third party invoices which Sgt O’Sullivan identified as recorded in LDS’s accounting system (and comprised within the LDS/Chen (3rd party) invoices) were the true LDS Invoices: [506]. Further, the primary judge concluded that no reasonable inference was open that the Chen (LDS/laptop) invoices were received by CPL Distribution, or stored in a record system belonging to or kept by or for CPL: [510]. Accordingly, the primary judge held that the Chen (LDS/laptop) invoices were not business records of LDS or CPL, and were not admissible: [511]. The primary judge held further that those invoices were not evidence that the CPL companies acquired loose Windows 7 COAs on 19 occasions in the numbers appearing on the documents: [512].

229    Turning to the Chen (LDS/manila) invoices, the primary judge said that for the reasons set out in relation to the Chen (LDS/laptop) invoices, her Honour considered that no reasonable inference was open that the documents were made, issued or kept by or on behalf of LDS for the purposes of its business, or that of CPL Distribution as its customer: [515]. However, the primary judge admitted those documents into evidence on the basis that when Ms Li provided them to Victoria Police, she arguably represented that the documents were business records of CPL: [517]. The primary judge then said that her Honour was not satisfied that the Chen (LDS/manila) invoices were authentic, and said that they were so unreliable that they had no testimonial value and accorded them no weight: [519].

230    The primary judge accepted the CPL Parties’ argument on the case pleaded that both sets of invoices could not stand as authentic, genuine invoices, and concluded that the CPL/LDS Invoices were genuine: [525]. The primary judge said that given that CPL Notting Hill had required Mr Chen on behalf of LDS to take back the balance of the June 2015 Purchase following Microsoft’s letter of demand and to give a refund, it was reasonable that when delivering the manila folder a few days later, a copy of the LDS invoice for the June 2015 Purchase would be intermingled with other documents included in the manila folder documents: [527]. The primary judge accepted Ms Li’s evidence that the documents were given to her by Mr Chen for the specific purpose of responding to police requests for the purpose of their investigation, and were provided to the police in response to those specific requests: [528]. The primary judge concluded that, even apart from her Honour’s finding that the CPL/LDS Invoices were genuine, her Honour was not satisfied that the Chen (LDS/manila) invoices were authentic, or that they were what the Microsoft Parties claimed them to be: [528]. The primary judge found that those invoices were not evidence that the CPL companies acquired loose Windows 7 COAs on 19 occasions in the numbers appearing on the documents: [529].

231    Turning to the Chen (Ever Success) Invoices, and dealing first with the Chen (ES/print) invoices, the primary judge found that no reasonable inference was available from the content of those invoices that they were business records of Ever Success or CPL Distribution: [532]. Further, the primary judge accepted Ms Li’s explanation of the communication of the 4 November 2015 email from her email address, and her disclaimer that the email was from her or was her form of expression: [533]. The primary judge concluded that those emails were not authentic and were inherently unreliable and held that they were not admissible: [535].

232    Dealing with the Chen (ES/search) invoices, the primary judge admitted one of those two documents but held that it was a forgery, and rejected the other document as inadmissible: [536]-[542].

233    The primary judge concluded that the Microsoft Parties could not make out any case based on the Chen Invoices, there being insufficient evidence from which her Honour could reasonably be satisfied on the civil standard that the CPL companies, or either of them, acquired loose Windows 7 COAs in the numbers claimed by the Microsoft Parties under the Supply Case: [544]. The primary judge then said the following at [545]:

In reaching my conclusions on the Chen invoices, I have not limited my consideration to the pleaded case. For the purposes of weighing up and reaching my findings on the evidence I have assumed the counterfactual that the Microsoft parties’ allegations fall within the ambit of the case pleaded in the Claim. As I have found that the Chen (LDS/manila) invoices have no testimonial value and can be accorded no weight, and I have not admitted the other purported invoices sought to be relied on by the Microsoft parties, which in whole are encompassed by the term Chen invoices, I have not assessed the Chen invoices, or any of them, on the ground whether or not their claimed relevance falls to be considered within or falls outside the pleaded case. The issue of the relevance of the Chen invoices to the pleaded case does not arise given the conclusions I have reached on the Chen invoices and each version of those documents. The supply case fails at the evidentiary stage, and apart from the limitations of the pleaded case.

I note that that passage did not refer to the limitations placed by the primary judge on the cross-examination of the CPL Parties’ witnesses, being a limitation imposed by reason of the primary judge’s approach to the pleaded issues (as I discuss below in relation to Grounds 3, 4 and 5).

234    The primary judge dealt with the balance of the Chen Related Material, saying that it followed from her Honour’s conclusions on the Chen Invoices that the Chen Related Material was irrelevant and should be rejected: [551]-[552].

235    The primary judge then dealt with the credit of the CPL Parties’ witnesses and said that her Honour had formed “a clear impression of each of the witnesses’ demeanour and manner in giving evidence and under cross-examination, and aided by the transcript, and my notes, recall that impression”: [554]. The primary judge concluded that each of the CPL Parties’ witnesses gave clear, consistent and credible evidence, which was corroborated by the documentary evidence: [555]. Her Honour was not persuaded that the witnesses (or any two or more of them) colluded to fabricate their accounts, or documents, or to conceal purchases of loose Windows 7 COAs and installation disks, or sales of such Windows 7 products pre-installed on new computers supplied by CPL Notting Hill in the relevant period, or supplied as loose COAs: [556]. As I discuss in relation to Grounds 3, 4 and 5, they were matters on which the primary judge did not permit the Microsoft Parties to cross-examine fairly and effectively.

236    As to Ms Li, the primary judge found Ms Li to be a believable witness and accepted her evidence: [562]. The primary judge said the following at [561]:

A successful attack on Ms Li’s credit is central to the Microsoft parties’ case (see for example, above at [19]). Ms Li to subject to fierce and sustained cross-examination. On the key issues on which she was cross-examined my impressions of Ms Li at the time she was giving her oral evidence was that she was telling the truth. I found her explanations of her interactions with the police, with Mr Chen, and with Mr Liu, and her dealings in the documents plausible and credible, and consistent with her accountancy background and her role and duties at CPL Notting Hill and the chronology of events. I am not persuaded that she was lying, or was dishonest or deceitful. I am not persuaded that Ms Li fabricated key parts of her evidence or documents or hid or destroyed documents.

However, as I note in relation to Grounds 3, 4 and 5, they were matters on which Ms Li’s cross-examination was curtailed by the primary judge’s rulings.

237    The primary judge returned to the stock code merger at [570]-[581], recording the Microsoft Parties’ submission that Mr Pan was lying, and that the stock code merger did not take place on 9 June 2015 but took place later, after the CPL Parties were on notice of Microsoft’s allegation that the Test Purchase Computer had been pre-installed with an unauthorised copy of Windows 7 Pro, after the proceeding commenced or later, in order to avoid properly complying with the first judge’s 7 September 2016 order, and that the stock code merger was done deliberately to hide evidence that would show a year later than the June 2015 Purchase that the CPL companies dealt in the numbers posited in the Supply Case: [570]. The primary judge said that if the stock code merger was done sometime in 2016 for concealment, then an elaborate process of merger of codes and post-merger item by item identification of the 30 transactions using the stock from the June 2015 Purchase, overwriting of the merged codes and reallocation of the code SOF-MS-W7COA and stock description to those transactions had to be done in order to produce the sales ledger, or alternatively some painstaking transaction by transaction alteration of codes, over a thousand times, but excepting the 30 admitted supplies: [578]. The primary judge said that those scenarios were fanciful in the extreme, had not been pleaded and were not put to any witness, and attributed a deceit, degree of connivance and level of sophistication not apparent in the evidence or demeanour of any of the CPL witnesses: [578]. The primary judge repeated her Honour’s finding that Mr Pan made the stock code merger and code changes as and when he stated in his evidence, namely on 9 June 2015, and for the reasons he said, and that Mr Xu received the June 2015 Purchase stock into the system after Mr Pan had made the stock code merger and code changes as he attested: [581].

238    The primary judge then dealt with findings as to the number of loose Windows 7 COA labels in the CPL warehouse in the relevant period. Her Honour said that apart from the 15 loose COA labels and disks returned to Mr Chen, purporting to represent LDS, there was no evidence of any other loose Windows 7 COA labels or disks in CPL’s warehouse in 2014 or 2015 or thereafter: [596]. The primary judge referred to the evidence of each of Messrs Lu, Xu, and Godby (the warehouse staff), and Messrs Pan and Guo (sales and technical staff) that the June 2015 Purchase was the only instance of loose COA labels they ever saw at the CPL premises: [596]. The primary judge said that no relevant “on the ground” employee witness of CPL was omitted, and that if in the relevant period the CPL companies dealt in the order of 1,467 loose Windows 7 COA labels, with or without Windows 7 installation disks, the employee witnesses would have noticed: [600] and [604]. The primary judge said that in light of the fact that the Court had accepted the evidence of the CPL employee witnesses and not made adverse credit findings about them, the Court could not then find that the CPL Parties engaged in the infringing conduct alleged in the Supply Case: [605]. The primary judge concluded that the Microsoft Parties had failed to make out the supplies of loose Windows 7 COA labels they claimed in the Supply Case, and it followed that the Microsoft Parties’ allegation that it must be inferred that CPL Notting Hill dealt with each of those additional loose COA labels by affixing them to new computers on which it pre-installed a copy of Windows 7, and then sold those new computers to end users, or that it sold the loose COA labels for third parties to affix, cannot succeed: [620]. Accordingly, the primary judge said that the Microsoft Parties’ submissions that CPL Notting Hill infringed Microsoft’s copyright in Windows 7 by any conduct, or on any occasion other than the conduct or occasion arising from the 30 pre-installations, need not be further considered: [621].

239    The Microsoft Parties’ allegations against CPL Notting Hill in respect of copyright infringement that remained for determination were allegations of unauthorised reproduction by the 30 instances of pre-installation (infringement under s 36(1) of the Copyright Act), the sale of those 30 new computers (infringement under s 38 of the Copyright Act), and the authorisation of the reproduction of Windows 7 Pro from data storage to RAM on those 30 new computers by the purchasers (infringement under s 36(1) of the Copyright Act) (the 30 relevant instances): [622]. Those allegations were within the Retail Case. The primary judge noted that in relation to the acts of primary infringement of copyright by CPL Notting Hill for the 30 relevant instances, and thence authorisation liability of CPL Distribution, the elements for establishing copyright infringement of the doing in Australia of an act comprised in the copyright in respect of the copyright work or a substantial part of the work, were not in issue in the proceeding, and the dispute turned on whether the conduct was without Microsoft’s licence: [626]. The primary judge concluded that the reproduction by CPL Notting Hill of Windows 7 Pro onto the hard disks of the 30 new computers CPL Notting Hill built and to which it affixed loose COAs acquired by CPL Distribution in the June 2015 Purchase, was done without the licence of Microsoft: [629]-[649]. As to the allegation of infringement by the sale of articles pursuant to s 38(1) of the Copyright Act, the primary judge concluded that the Microsoft Parties failed to make out that case, in that they had not established that CPL Notting Hill knew or ought to have known that the process of pre-installation of Windows 7 Pro on the new computers in the 30 relevant instances and then sale of the computers amounted to an infringement of copyright: [660]-[666].

240    The primary judge then dealt with the allegation by Microsoft that CPL Notting Hill authorised the reproduction of Windows 7 Pro onto the data storage and the subsequent reproduction from data storage to RAM on their new computers by the end users in each of the 30 relevant instances, further infringing the Microsoft’s copyright in Windows 7 Pro under s 36(1) of the Copyright Act: [667]. The primary judge rejected that submission on the basis that Microsoft had sole control over activation, and in the 30 relevant instances had activated the end user’s copy of Windows 7 Pro and affirmatively granted permission to the end user to reproduce Windows 7 Pro into and from RAM on their computer in the course of their use of the computer: [670]. Accordingly, the end user’s conduct was authorised by Microsoft upon activation, and it followed that CPL Notting Hill did not infringe copyright by authorising the authorised reproductions of Windows 7 Pro: [670].

241    The primary judge then dealt with Microsoft’s authorisation cases to the effect that if there were primary infringements of copyright established by:

(a)    CPL Notting Hill, then Ms Li was liable for copyright infringement because she authorised CPL Notting Hill’s conduct;

(b)    CPL Notting Hill, then CPL Distribution was liable for copyright infringement because it authorised CPL Notting Hill’s conduct; and

(c)    CPL Distribution, then Mr Wang was liable for copyright infringement because he authorised CPL Distribution’s conduct: [672].

As the primary judge noted at [625] it was not in contest that to the extent that primary infringement was established against CPL Notting Hill, CPL Distribution was liable for authorising that conduct: [673]. The primary judge rejected the authorisation cases against Ms Li and Mr Wang on the basis of insufficient proof of knowledge and involvement by either of them in the conduct constituting copyright infringement: [674]-[691].

242    The primary judge then considered the CPL Parties’ reliance on the defence of innocent infringement under s 115(3) of the Copyright Act: [692]-[701]. The primary judge held that such a defence was not made out, in that in the circumstances of the June 2015 Purchase, CPL Notting Hill (and Mr Pan on behalf of CPL Distribution) could have and reasonably should have made further inquiries of the OEM suppliers who had supplied Windows 7 system builder packs to CPL Distribution prior to the June 2015 Purchase by reference to the OEM supplier invoices: [701].

243    As to compensatory damages pursuant to s 115(2) of the Copyright Act, the primary judge assessed damages on the basis of a lost licence fee, that is, the opportunity to charge a fee in respect of the supply of the equivalent number of system builder packs as they established had been infringed, namely the 30 relevant instances. The primary judge said that the lost licence fee should be determined net of rebates, being an amount of US$85.45 per relevant instance: [711]. The primary judge was not satisfied that it was appropriate to award additional damages pursuant to s 115(4) of the Copyright Act or s 126(2) of the TM Act: [737].

244    As to the allegation by the Microsoft Parties of a contravention of section 18(1) of the ACL, the primary judge found that none of the pleaded alleged representations arose, and thus the ACL claim failed: [755]. As to the trade mark claims, the primary judge found that the CPL Parties had made out their defence under s 123(1) of the TM Act by reason of the trade mark having been applied to, or in relation to, the goods with the consent of the registered owner of the trade mark: [771]-[777].

245    By a separate judgment given on 6 December 2022, the primary judge declined to award injunctive relief, quantified the amount of compensatory damages pursuant to s 115(2) of the Copyright Act as AU$121.50, awarded pre-judgment interest from commencement of the proceeding on 13 May 2016, and made orders as to costs: Microsoft Corporation v CPL Notting Hill Pty Ltd (No 8) [2022] FedCFamC2G 1033.

The Pleading Point as to Primary Acts of Infringement by CPL Notting Hill

246    I have referred above to the primary judge’s statement in her Honour’s reasons at [58] (and also [11]) to the effect that there was no express pleaded allegation of primary infringement of copyright by CPL Notting Hill in respect of the alleged supply of the 1,467 loose COAs, and that the pleaded allegations against CPL Notting Hill of reproduction in infringement of copyright were confined to the 39 occasions pleaded and particularised at [20] of the Further Amended Statement of Claim (FASC). In my view, that was an overly literal reading of the FASC. The FASC contained the following allegations:

28A     On at least one thousand four hundred and sixty-seven (1,467) occasions in the period… from at least 1 January 2008 to 11 November 2015, in the course of carrying out business, [CPL Distribution] supplied [CPL Notting Hill] with Loose COAs for Microsoft Programs printed with Product Keys.

…

28B     The Loose COAs and Product Key supplied by [CPL Distribution] to [CPL Notting Hill] permitted [CPL Notting Hill] to activate, install and operate the Microsoft Programs on new computer systems.

28C     [CPL Distribution] was not licensed by [Microsoft] to supply the Loose COAs and Product Key to [CPL Notting Hill].

Particulars

…

(c) [CPL Distribution and CPL Notting Hill] were not licensed by [Microsoft] to install and operate the Microsoft Programs relating to the Loose COAs and Product Keys.

    …

28D     The provision of Loose COAs and a Product Key by [CPL Distribution] to [CPL Notting Hill] necessarily resulted in the substantial reproduction of the Microsoft Program associated with the Loose COAs and Product Key by [CPL Notting Hill].

247    Senior counsel for the Microsoft Parties submitted that, while he accepted that “the pleading is inelegant” (T9.13), those paragraphs, and particularly [28D], did allege acts of primary infringement against CPL Notting Hill. However, senior counsel for the Microsoft Parties submitted that the primary judge dealt with that broader Supply Case and, more importantly, the respondents conducted the case on that basis (T9.32-33). In the Further Amended Notice of Appeal, Ground 9 was amended to make clear that the Microsoft Parties contended that to the extent that the primary judge did not implicitly accept that Microsoft was entitled to advance a case of primary infringement against CPL Notting Hill in relation to at least 1,467 occasions of reproduction of Windows 7 software and applying loose COAs to computers, the primary judge erred by failing to find that the parties had agreed to conduct the litigation on the basis that the alleged 1,467 infringements formed part of the case against CPL Notting Hill, to the extent that such a case was not expressly pleaded by Microsoft.

248    In my view, it is clear that the parties did agree to conduct the case on the basis that there was an allegation of primary infringement against CPL Notting Hill in relation to 1,467 COAs constituting the reproduction of Windows 7 software in infringement of Microsoft’s copyright on 1,467 occasions. In the written outline of opening submissions by the CPL Parties at [10], the statement was made that: “CPL Distribution is alleged to have supplied 1,467 COAs to CPL Notting Hill thereby authorising primary infringements of copyright by CPL Notting Hill”. Further, the CPL Parties said in their opening submissions at [62]:

Microsoft alleges that CPL Distribution supplied 1,467 “loose” COAs printed with Product Keys to CPL Notting Hill and, in doing so, authorised primary infringements of copyright by CPL Notting Hill. This allegation is based on the following factual premises:

(a)    that CPL Distribution acquired 1,467 “loose” COAs from LDS and supplied them to CPL Notting Hill;

(b)    which necessarily resulted in an infringement of copyright by “the subsequent reproduction of the Microsoft Program associated with the Loose COAs and Product Key”.

That paragraph gave footnote references to the pleading by the Microsoft Parties at paragraphs 28A, 28B and 28D.

249    In contrast to the stance taken by the CPL Parties in relation to the Unpleaded Fraud Case (which I deal with below), the CPL Parties at no stage submitted that there was a lack of pleading of acts of primary infringement against CPL Notting Hill in relation to the Supply Case involving the 1,467 alleged occasions of infringement. In their submissions on the appeal, the CPL Parties did rely in their written submissions on the primary judge’s finding that there was a lack of pleading of primary infringements against CPL Notting Hill in relation to the Supply Case, but did not put any submission either in writing or orally to the effect that the parties had not agreed to conduct the trial on the basis that there was such an allegation. It is well established that if a party allows the other to raise material facts and issues for determination of the court beyond those expressed in the pleadings, then the court should proceed to determine the matter on those further material facts and issues, being the real controversy between the parties: Banque Commerciale SA (in liq) v Akhil Holdings Limited (1990) 169 CLR 279 at 296-297 (Dawson J); Castel Electronics Pty Ltd v Toshiba Singapore Pte Ltd [2011] FCAFC 55; (2011) 192 FCR 445 at [305] (Keane CJ, Lander and Besanko JJ). In my view, whether or not the point was sufficiently pleaded in the FASC, there is no doubt that the trial was conducted by both parties on the basis that the Microsoft Parties were alleging that CPL Notting Hill had engaged in 1,467 acts of primary infringement.

Grounds 3, 4 and 5: Denial of Procedural Fairness through Rulings on Cross-examination

250    Grounds 3, 4 and 5 of the Further Amended Notice of Appeal are based on the central proposition that the Microsoft Parties were denied procedural fairness by reason of rulings by the primary judge which restricted the cross-examination of the CPL witnesses as to whether they had engaged in deliberate concealment, fabrication or destruction of evidence, and which limited the cross-examination in a way which permitted the cross-examiner only to put to a witness that he or she was not telling the truth. As I have indicated in my summary of the primary judge’s reasons above, the primary judge took the view at [99]-[119], that, although concealment, dishonesty, fabrication and destruction, or fraud are not necessary elements of a cause of action for copyright infringement or for trade mark infringement, in the present case the Microsoft Parties had to plead such a case if they wished to pursue it, and had not done so. The Microsoft Parties contend that, while the primary judge did consider the case on the hypothesis that those allegations fell within the ambit of the case which had been pleaded by the Microsoft Parties (at [545]), the primary judge’s consideration of the Unpleaded Fraud Case was infected by the rulings which the primary judge had made in the course of cross-examination. Before dealing with those grounds of appeal on their merits, it is important to identify the principal aspects of the evidence which gave rise to the Unpleaded Fraud Case.

251    The starting point is that the transaction involving the Test Purchase Computer on 13 November 2015 showed a purchase from CPL Notting Hill of a loose COA, described in CPL Notting Hill’s invoice as “Microsoft Windows 7 Professional COA Label Only (No Media)”, the reference to “No Media” indicating that no disk was supplied with the COA label. The Microsoft Parties submitted that that COA label was referable to Microsoft licensing arrangements outside the system builder packs, and referable instead to the refurbisher system. Microsoft’s letter of demand of 8 January 2016 asserted that CPL was not entitled to sell refurbished computers on which Microsoft software had been loaded. In response, Ms Li on behalf of CPL Notting Hill sent an email on 22 January 2016 acknowledging a purchase of about 50 pieces from LDS, being a reference to the June 2015 Purchase, and the subject matter of the Retail Case.

252    The proceedings were commenced on 16 May 2016, and discovery orders were made by the first judge on 7 September 2016. In response to those orders, on 7 September 2016 CPL served an affidavit of Mr Pan, annexing a schedule of the sales of various versions of Microsoft Windows 7 Professional sold during the period 1 January 2014 to 7 September 2016. Senior counsel for the Microsoft Parties drew attention to the fact that before 9 June 2015, being the date of the June 2015 Purchase, there were no entries in the schedule which bore the code SOF-MS-W7PCOA, whereas after 9 June 2015 there were such references (including the Test Purchase Computer of 13 November 2015). The significance of that code is in the concluding letters “COA”. On 26 May 2017, the solicitors for the Microsoft Parties wrote to the solicitors for the CPL Parties, raising a series of invoices which Microsoft had obtained from Alpine and AV2PC. The four Alpine invoices identified sales by CPL Notting Hill described as “SOF-MS-W7PCOA Microsoft Windows 7 Professional COA Label Only (No Media)”, three of them being in 2014. The five AV2PC invoices bore similar descriptions, and all of them were in 2014. The invoice to Alpine dated 12 March 2014 also had a column headed “Stock”, and a number, being 495, which corresponded to the description “Microsoft Windows 7 Professional COA Label Only (No Media)”, which raised questions as to whether there were more of that stock item (in the total amount of 495 at the time) held by CPL Notting Hill. Microsoft had thus obtained from two different sources invoices that preceded the June 2015 Purchase, which bore the code relating to “COA Label Only”. After those matters were drawn to the CPL Parties’ attention, Mr Pan gave a further affidavit of 21 June 2017 as to having taken steps on 9 June 2015, being the very day of the June 2015 Purchase, to merge some stock codes in the stock database for CPL Notting Hill. That had the effect of deleting from the system all previous COA references, and changing them to a different code. Mr Pan gave evidence that he had been aware since late 2009 that there were two parallel codes in the stock database relating to each of the various versions of Microsoft Windows 7 software for both Windows 7 Professional and Windows 7 Home but said that there was no significant difference between the terms “OEM” and “COA”, and they referred to the same product. That evidence was given in explanation of the fact that the schedule which Mr Pan had previously provided did not show the code for “COA Label Only” before 9 June 2015. The Microsoft Parties pointed out that there was no evidence of confusion caused by the two parallel codes during the six years since Mr Pan became aware of the issue, and alleged that CPL was simply endeavouring to cover its tracks.

253    The next aspect of the matter which Microsoft wished to test fully at the trial concerned the Chen Invoices, and the subsequent invoices which were produced by Ms Li. On 20 February 2017, a subpoena was issued at the request of the Microsoft Parties to Victoria Police, as records of LDS and of Mr Chen were then being held by Victoria Police in light of the charges made against Mr Chen for fraudulent conduct with respect to his employer, LDS. The subpoenaed documents included the Chen Invoices and the Ever Success Invoices. Those documents were summarised in a schedule prepared by Mr Ng, one of the solicitors acting for the Microsoft Parties, which showed a total of 1,467 Windows 7 licences sold by Mr Chen to CPL. The Ever Success Invoices were referred to in the email of 4 November 2015, which, on its face, purported to have been sent by Ms Li to Mr Chen. In response to Mr Ng’s affidavit of 27 July 2017, Ms Li served an affidavit on 2 August 2017 which referred to an alternate set of invoices to the Chen Invoices. In that affidavit, Ms Li annexed ten different invoices on LDS headings, which corresponded with the numbers of the invoices included among the Chen Invoices attached to Mr Ng’s affidavit, saying that those ten alternate invoices came from the storage records of CPL. It was in that affidavit that Ms Li gave evidence of her meeting with Mr Chen on 4 November 2015, to which the primary judge referred at [314]-[315], and denied that the email of 4 November 2015 was sent by her to confirm those particular invoices. On the following day, 3 August 2017, Mr Ng made a further affidavit, identifying four LDS invoices from the documents produced by Victoria Police, which appeared to be the same invoices disclosed by Ms Li as attachments to her affidavit, with the same dollar figures and the same handwriting (on three of the four documents) but with different product descriptions. There was thus a clear issue at the trial about which set of invoices was to be accepted as true.

254    On 17 April 2018, CPL was provided with a copy of the statement of Sgt O’Sullivan dated 3 April 2018, which attached an email Ms Li had sent to Victoria Police, attaching 15 invoices which Sgt O’Sullivan had requested a week earlier. Four of those fifteen invoices were exactly the same as the ones in Mr Ng’s affidavit of 3 August 2018 which attached four invoices. Also attached to Sgt O’Sullivan’s statement was an internal police email of 21 May 2016, which attached 11 invoices that the police received from Ms Li on 19 May 2016, which described the product as Microsoft “License”. Ms Li then made a further affidavit on 18 May 2018, referring to the invoices which she gave to Victoria Police on 25 January 2015 and 19 May 2016 and said that they did not come from the genuine records of CPL, but came from a yellow manila folder that Mr Chen had provided to her. Ms Li gave evidence of Sgt O’Sullivan visiting CPL Notting Hill’s premises in December 2015 and asking for a payables list with LDS, Ever Success and FTEV International, to which Ms Li responded that she had a payables list for LDS but had never heard of Ever Success or FTEV International. Ms Li gave evidence that on 13 January 2016, when Mr Chen attended CPL Notting Hill’s premises to pick up the 15 unsold Windows 7 Pro labels and accompanying disks, and in return refunded money to CPL, Ms Li said to Mr Chen that the police had asked her for CPL’s payables to LDS to reconcile the LDS accounts, and may need copies of delivery invoices. Ms Li’s evidence was that a day or two later, Mr Chen returned and said that he had copies of the LDS invoices, which would save her time to go through all CPL’s records, and handed to Ms Li a bundle of loose copy invoices in a manila yellow folder. When Ms Li received the email of 18 January 2016 from Sgt O’Sullivan requesting copies of 15 invoices, Ms Li said that she looked through the invoices provided to her by Mr Chen in the yellow manila folder and scanned the fifteen requested invoices and emailed them to Sgt O’Sullivan, and did not contemplate that the invoices which Mr Chen had provided to her in the yellow manila folder were different from the actual copy invoices that CPL had retained and were for the actual goods purchased from LDS as part of its usual business records. Ms Li said that she could now see that the invoices which she sent to Sgt O’Sullivan were not the correct invoices that truly identified the goods that CPL purchased and received from LDS. Similarly, the 11 invoices which Ms Li sent to the police on 19 May 2016 came from the yellow manila folder, which Ms Li said she did not realise were not the true invoices that correctly identified the goods that CPL had received from LDS. On 24 May 2018, the Microsoft Parties issued a notice to produce seeking production of the yellow manila folder, but nothing was produced.

255    Senior counsel for the Microsoft Parties referred also to the findings made in the sentencing judgment, Director of Public Prosecutions v Chen [2017] VCC 735, concerning Mr Chen’s modus operandi, namely that he would take LDS stock, manipulate the LDS computer records to hide what he had done, would physically sell it to third parties and raise money by doing so. The Microsoft Parties submitted that Mr Chen’s mode of operation was consistent with their case theory, because as a matter of fact, Mr Chen had been selling the loose COAs for some time, thereby defrauding LDS, but said that they were genuine transactions as between him (purporting to be LDS) and CPL. Accordingly, the Microsoft Parties submitted that the Chen Invoices did faithfully record transactions, albeit transactions which defrauded LDS.

256    The final aspect of the defensive case of the CPL Parties, which Microsoft challenged, concerned the claimed power outage or power surge on 21 November 2017. The Microsoft Parties sought to verify the alternative set of invoices that Ms Li had provided by way of her affidavit of 2 August 2017, and sought and obtained an order for discovery from the first judge on 7 August 2017. CPL Notting Hill and Ms Li sought leave to appeal against those discovery orders, and the application was heard by the Federal Court on 24 November 2017 and leave to appeal was refused that day. On 21 December 2017, Ms Li made an affidavit of discovery, saying that the documents listed in schedule 2 were last accessible on 21 November 2017, having been contained in two separate hard drives, being a system and a back-up drive, but those hard-drives were damaged because of a mains electricity supply outage at CPL Notting Hill’s business premises on 21 November 2017 (only three days before the hearing of the leave application), and the data was now inaccessible. The Microsoft Parties contended that those two hard drives were only a very small part of the bank of servers that were at the premises. Ms Li made a further affidavit on 30 January 2018, giving more detail about what she said happened on 21 November 2017, and annexed the email from Mr Chang of Digifield Technology to the effect that he was unable to recover anything from the hard drives and had disposed of the hard disks already. Microsoft issued a subpoena to United Energy for records regarding whether there was any power outage on 21 November 2017, but United Energy’s response indicated that there had not been, although there had been a supply outage on 24 November 2017. I note that that left open the possibility that what had occurred on 21 November 2017 was a power surge, rather than a power outage, to which the primary judge referred at [409], [423] and [425].

257    Turning then to the way in which the issue concerning the Unpleaded Fraud Case emerged at the trial, Mr Pan was the first witness called by the CPL Parties, and he was cross-examined on the fourth day of the trial. On the fifth day, Ms Li was called as a witness and was cross-examined on a number of matters including her affidavit of 2 August 2017, which referred to Ms Li having located ten LDS invoices with numbers corresponding to the invoices which Mr Ng had referred to in his affidavit of 27 July 2017. Ms Li claimed that those ten invoices exhibited to her affidavit of 2 August 2017 were true and correct, and she had noticed that all of them were marked “COD”; that is, cash on delivery (T537.17-21). It was put to her that it was very unusual to have so many supplier invoices over such a long period of time in 2014 and 2015 paid with cash, which Ms Li denied (T538.8-10). It was then put to Ms Li that she had never seen suppliers being paid cash in the retail or sales area, to which she replied that she did not see the physical transactions (T538.12-18). The following exchange then took place, noting that Mr Cobden SC appeared for the Microsoft Parties and Mr Truong QC appeared for the CPL Parties, at T538.20-540.21:

258    A few pages later, Ms Li was cross-examined on the topic of the power outage or power surge and the following exchange occurred at T548.22-553.43.

259    Those last two sentences should have been attributed to Mr Cobden SC. The CPL Parties relied on Mr Cobden SC’s statement in that passage at T550.37, that he had put the questions he needed to put, but that statement in its ordinary and natural meaning did not amount to an acceptance of the correctness of the primary judge’s ruling, and Mr Cobden plainly wanted to ask more questions than the primary judge permitted. Ms Li then withdrew. Mr Godby, Mr Xu, Mr Lu and Mr Guo were then cross-examined.

260    The Microsoft Parties submitted, and I accept, that in the first of those passages the primary judge expressed a clear ruling that the Microsoft Parties were precluded from challenging the CPL Parties’ defensive case (as they plainly intended to do) on the basis that it involved the fabrication of documents, or other unpleaded fraudulent conduct relating to documents such as concealment or destruction of documents, or that witnesses called by the CPL Parties had colluded in engaging in such conduct. The primary judge permitted the Microsoft Parties only to put whether a witness was lying, and drew the line clearly at that point. That reasoning is reflected also in the second of those passages. While some counsel may have chosen to persist with their proposed line of cross-examination and thereby elicit a series of rulings to the same effect, there is no obligation on a barrister to engage in stubborn and indignant repetition. On the contrary, the obligation imposed by s 37N(2) of the Federal Court of Australia Act 1976 (Cth) is to the opposite effect, in that a party’s lawyer must assist the party to comply with the duty to conduct the proceeding consistently with the overarching purpose of facilitating the just resolution of disputes according to law, and as quickly, inexpensively and efficiently as possible. The Microsoft Parties drew attention to the primary judge acknowledging at [112] that concealment, dishonesty, fabrication and destruction, or fraud were not necessary elements of a cause of action for copyright infringement or for trade mark infringement, but also saying that the parties were to be held to the cases that they had pleaded, which did not include any allegation of dishonest or fraudulent conduct on the part of the CPL Parties: at [99]-[119].

261    The Microsoft Parties submitted, and I accept, that in making that ruling and in reaching that conclusion the primary judge incorrectly conflated two distinct legal principles: first, the principle that a party must clearly put to a witness the basis upon which it will be submitted that his or her evidence should not be believed; and second, the principle that a cause of action based on fraud must be pleaded clearly, distinctly and with sufficient particulars of the alleged fraud. It is well established that if a matter is “pleadable” then ordinarily it may not be raised unless pleaded, using “pleadable” in the sense that it is an element in the cause of action relied upon in the claim, or an element in a defence. However, if the allegation of fraud is not pleadable, then it is necessary only to make clear that an allegation of that nature is to be made and is a real issue at the trial: Ghazal v Government Insurance Office of New South Wales (1992) 29 NSWLR 336 at 347-348 (Mahoney JA, with whom Clarke JA agreed); 3WJ Pty Ltd v Kanj [2008] NSWCA 321 at [12] (Ipp JA, with whom Allsop P and Hodgson JA agreed); Royds v Norcross Press Pty Ltd [2000] 1 Qd R 681 at [39]-[41] (Shepherdson J, with whom McMurdo P and McPherson JA agreed). In Ghazal, the allegation was that the plaintiff had brought a false or fraudulent case, in that he had sought compensation on the basis that he had been a passenger in a car which was in a collision, whereas it was asserted at the trial that he had not been present in the car at all, that being an allegation which was not pleadable but something which needed to be raised as a real issue at the trial. In my view, the present case falls into the same category, in that allegations of fabrication, concealment or destruction of documents, or collusion between witnesses in engaging in those acts, were not elements in any cause of action on which the Microsoft Parties brought the proceedings, but were real issues in the sense that, if established, then they would have undermined the defence raised by the CPL Parties to the effect that the Chen Invoices were false and the invoices upon which the CPL Parties relied were true. During oral argument before us, senior counsel for the CPL Parties conceded that the primary judge’s ruling in relation to the Unpleaded Fraud Case was not consistent with authority (T107.38-47). No complaint was made by the CPL Parties that the Microsoft Parties had not raised clearly as a real issue their allegations as to the falsification of documentary evidence in compliance with the rule in Browne v Dunn, nor would such a submission have been tenable in view of the detailed written opening submissions by the Microsoft Parties.

262    The effect of the primary judge’s ruling was to prevent the Microsoft Parties from being able to advance the full force of their contentions that CPL’s witnesses should not be believed and that findings should be made about concealment, destruction and fabrication of evidence. The Microsoft Parties were confined to the typically ineffective line of merely putting to the opposing witnesses that they were lying, without having a fair and effective opportunity to test those witnesses’ accounts in cross-examination by confronting them with the reasons why they should not be believed, in an attempt to extract admissions or, failing that, to obtain answers that may have appeared implausible. Where the rules of natural justice (or procedural fairness) are applicable, a party is entitled to a fair opportunity to correct or contradict any relevant material prejudicial to it: Kioa v West (1985) 159 CLR 550 at 569 (Gibbs CJ). Although the court has a discretion to control cross-examination so as to ensure relevance and to guard against repetition and prolixity, the right to cross-examine means the right to cross-examine effectively, and if a court or tribunal fetters cross-examination in such a way that a witness’s evidence cannot properly be tested, then procedural fairness has been denied: Australian Postal Commission v Hayes (1989) 87 ALR 283 at 289-90 (Wilcox J); Australian Postal Commission v Bessey [2001] FCA 266 at [16] (Gyles J). As I have indicated above, the primary judge took the view at [483] that the Microsoft Parties could not succeed in their Supply Case unless the Court found that CPL staff conspired to create false documents, but denied the Microsoft Parties a fair opportunity of making good that allegation. The findings which the primary judge made about the credibility of witnesses and the authenticity of documents were reached without the primary judge having had the benefit of fair and effective cross-examination on those matters. As I have indicated above in my summary of the primary judge’s reasoning, the dispositive conclusions expressed by the primary judge, such as those at [545], [556] and [561], on central credit-based findings did not contain any acknowledgement of the limitations imposed by the primary judge on the cross-examination conducted by the Microsoft Parties. In my view, the primary judge’s ruling was a clear denial of procedural fairness to the Microsoft Parties in relation to the central factual issues in the case.

263    The question then arises as to whether that procedural unfairness is sufficient to justify the setting aside of the primary judge’s orders and the making of an order for a new trial. All that the Microsoft Parties need to show is that the denial of procedural fairness deprived them of the possibility of a successful outcome, rather than the probability of a different result, and in order to negate that possibility it would be necessary for this Court to find that a properly conducted trial could not possibly have produced a different result: Stead v State Government Insurance Commission (1986) 161 CLR 141 at 147 (Mason CJ, Wilson, Brennan, Deane and Dawson JJ); Nobarani v Mariconte [2018] HCA 36; (2018) 265 CLR 236 at [38]-[39] (Kiefel CJ, Gageler, Nettle, Gordon, Edelman JJ). That is to be treated as a question of “realistic possibility”: Nathanson v Minister for Home Affairs [2022] HCA 26; (2022) 403 ALR 398 at [32]-[33] (Kiefel CJ, Keane and Gleeson JJ); [45] and [59] (Gageler J). While Nathanson concerned the judicial review of administrative decision-making, there does not appear from the majority’s reasoning that there is a difference in the test of materiality applicable to procedural fairness in that context and procedural fairness in the context of conventional litigation. Indeed, the plurality in Nathanson referred to Stead (being a case involving conventional litigation) as an analogous case which involved the question of whether there was a realistic possibility of a different outcome: [34]. Similarly, Gageler J referred to Stead at [47] in relation to the threshold of materiality not being onerous, and said at [50] that the approach to the assessment of the reasonableness of a conjecture that a decision could have been different if a fair opportunity to be heard had been afforded, as exemplified by the holding in Stead, has been informed by the cumulation of curial experience.

264    As Kiefel CJ, Keane and Gleeson JJ said at [33], with the agreement of Gageler J at [59], there will generally be a realistic possibility that a decision-making process could have resulted in a different outcome if a party was denied an opportunity to present evidence on an issue that required consideration. In Nathanson, the applicant was not given an opportunity to give or adduce evidence at all on the relevant matter, whereas in the present case the Microsoft Parties were denied the opportunity to cross-examine fairly and effectively on the relevant matter. I do not regard that as a point of distinction. Cross-examination is one of a number of different ways of presenting or adducing evidence, and in the setting of conventional litigation, denial of an opportunity to cross-examine fairly and effectively on a central issue in the proceedings is a denial of an opportunity to present or adduce evidence on that matter. The cross-examination which was prevented in the present case concerned a central issue in the proceedings and, in my view, could realistically have led to a different result.

265    The CPL Parties relied on the primary judge’s finding at [600] and the evidence of CPL’s witnesses to the effect that, if the CPL companies had dealt in about 1,467 loose COAs in the relevant period then those witnesses would have noticed, but I do not regard that finding or evidence as determinative in the light of the primary judge refusing to permit the Microsoft Parties to put their Unpleaded Fraud Cause in cross-examination. When Mr Cobden SC said in final address that he did not need to challenge that evidence (T746.12-20), he appears to have been merely making a virtue of necessity given the primary judge’s ruling.

266    The majority in Nathanson held that where a tribunal errs by denying a party a reasonable opportunity to present their case, “reasonable conjecture” does not require demonstration of how that party might have taken advantage of that lost opportunity, and does not require the articulation of a specific course of action which could realistically have changed the result: [2], [33], [34] and [39] (Kiefel CJ, Keane and Gleeson JJ); [48] and [59] (Gageler J). Accordingly, I reject the submission made by the CPL Parties that “it behoves a party in the position of the appellant to properly articulate what it is they were precluded from asking”: T118.24-26.

267    Accordingly, in my view, Grounds 3, 4 and 5 are made out. The orders of the primary judge should be set aside and there should be a new trial. I consider further below the appropriate nature of that new trial.

Grounds 7 and 8: Rulings on Evidence

268    Ground 7 contends that the primary judge erred by finding that no weight should be given to the Chen (LDS/manila) invoices. Ground 8 contends that the primary judge erred with respect to other rulings on evidence led by the Microsoft Parties, namely: (a) the finding that the 4 November 2015 email did not include as attachments the invoices to which it referred; (b) the finding that invoice ES 2015730C was a forgery; (c) refusing to admit invoice ES 20150817A into evidence; and (d) the findings with respect to the Alpine and AV2PC invoices.

269    The primary judge’s reasoning in relation to the lack of weight to be given to the Chen (LDS/manila) invoices was heavily dependent on the primary judge’s overall finding that the Chen Invoices were not true and correct, which in turn was inevitably infected by the denial of procedural fairness which is the subject of Grounds 3, 4 and 5. It follows that the primary judge’s conclusions on this matter are also the product of the same denial of procedural fairness in wrongly precluding the Microsoft Parties from pursuing in cross-examination the Unpleaded Fraud Cause. The same difficulty applies to the other rulings on evidence which are the subject of Ground 8.

Grounds 1 and 2: The Effect of Delay in the Delivery of Judgment

270    Grounds 1 and 2 focus on the delay of almost three years from the trial in 2019 to the delivery of reasons for judgment on 30 September 2022. The evidence had been given from 19 to 23 August 2019, and final oral addresses had been made on 16 December 2019. The Microsoft Parties contend that the primary judge’s ability to consider properly Microsoft’s case, especially as to the inherent improbabilities in CPL’s defensive case, would have been affected by the significant delay, together with the real risk that the primary judge’s advantage of having seen and heard the witnesses was compromised. While the Microsoft Parties accept that the primary judge attempted to deal with the consequences of delay by focusing on written materials, and by reciting evidence and submissions systematically, the Microsoft Parties submit that that approach, coupled with the delay, affected the primary judge’s ability to consider the evidence as a whole, and the broader submission Microsoft was advancing that the CPL Parties’ version of events was inherently improbable and should not be believed. The Microsoft Parties submitted that, considered as a whole, the evidence put forward by the CPL Parties in support of the sets of invoices upon which they relied was too reliant on cumulative coincidence and implausibility to be accepted, pointing to such matters as the merger of the stock codes occurring purportedly to resolve a very longstanding issue on the very day of the June 2015 Purchase, the provision by Ms Li of invoices to Victoria Police which she had taken from the Chen Invoices purporting that they were true, and the claimed power outage or power surge on 21 November 2017 (only three days before the hearing of the leave to appeal application from the orders requiring discovery of the lost records) which had purportedly damaged the only hard drives on which the relevant electronic records were located.

271    The relevant principles regarding the significance of delay in giving judgment are as follows:

(a)    mere delay is not enough to uphold an appeal, and error must be shown: Monie v Commonwealth [2005] NSWCA 25; (2005) 63 NSWLR 729 at [44] (Hunt AJA, with whom Bryson JA agreed);

(b)    a delay of 12 months is generally “substantial” and “excessive”: Beaman v Bond [2017] FCAFC 142; (2017) 254 FCR 480 at [65(b)] (McKerracher J, with whom Gilmour and Charlesworth JJ agreed); and a delay of almost 17 months was described as “grossly inordinate” in Expectation Pty Ltd v PRD Realty Pty Ltd [2004] FCAFC 189; (2004) 140 FCR 17 at [75] (Carr, Emmett and Gyles JJ);

(c)    an operative delay alters the normal approach an appellate court takes: Expectation Pty Ltd v PRD Realty Pty Ltd at [75]-[76];

(d)    the appellate court should be more disposed to find error where there has been “operative delay”, and such delay permits an appellate court more readily to infer that the judicial function has miscarried: Beaman v Bond at [65(c)];

(e)    whatever the cause of any particular delay, its consequences must be examined with an eye to the fair administration of justice: Tattsbet Ltd v Morrow [2015] FCAFC 62; (2015) 233 FCR 46 at [2] (Allsop CJ, with whom White J agreed);

(f)    significant delay creates the need to look with special care at any finding of fact challenged on appeal, and the mere fact of a long delay itself weakens a trial judge’s advantage: Expectation Pty Ltd v PRD Realty Pty Ltd at [69]-[70]; Beaman v Bond at [65(e)];

(g)    where there has been a delay, the trial judge is obliged to give specific reasons for accepting or rejecting the evidence of those witnesses whose evidence plays an important part in the factual finding made, and where there has been significant delay, there can be no assumptions that statements of a general assertive character made by the trial judge are based on a sufficient consideration of the evidence, or that evidence relevant to a particular finding not considered in the judgment has not been overlooked: Monie v Commonwealth at [43](5) and (6); Beaman v Bond at [65(e)];

(h)    the problems are not limited to fading memory, but include pressure which a judge may feel to complete a long-delayed judgment, and a losing litigant’s perception that the judge may not have grappled with the issues raised by them: Expectation Pty Ltd v PRD Realty Pty Ltd at [74]; Monie v Commonwealth at [43](7), (8) and (9).

272    In the present case, the delay of almost three years between the end of the trial and the delivery of reasons was certainly an operative delay. While the primary judge’s reasons were detailed and systematic, I accept the criticism made by the Microsoft Parties that the primary judge did not make an overall assessment of the reasonableness and plausibility of the CPL defensive narrative of events as a whole and failed to consider the question whether, taken as a whole, that version of events strained credulity to the point where the balance of probabilities may have been against it. An appellate court may intervene where the trial judge has failed to consider and reflect on the entirety of the evidence viewed as a whole: J.D. Heydon, Cross on Evidence (14th ed.) at [11150], citing Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 at [23] (Gleeson CJ, Gummow and Kirby JJ) and Guirguis Pty Ltd v Michel’s Patisserie System Pty Ltd [2017] QCA 83; [2018] 1 Qd R 132 at [49] (Fraser JA, with whom McMurdo JA and Boddice J agreed). In the circumstances of this case, that principle is to be applied in conjunction with the principle that the inherent improbability of an event having occurred will, as a matter of common sense, be a relevant factor when deciding whether it did in fact occur, and accordingly proof of an improbable event may require more cogent evidence than might otherwise be required: Jones v Birmingham City Council [2023] UKSC 27; [2023] 3 WLR 343 at [51] and [60] (Lord Lloyd-Jones, with whom Lord Reid, Lord Hodge, Lord Sales, Lord Stephens, Lady Rose and Lord Richards agreed). As Lord Hoffmann observed in Secretary of State for the Home Department v Rehman [2003] 1 AC 153 at [55]: “It would need more cogent evidence to satisfy one that the creature seen walking in Regent’s Park was more likely than not to have been a lioness than to be satisfied to the same standard of probability that it was an Alsatian.” That reasoning applies even more forcefully where, as in the present case, the court must consider whether the cumulative effect of a series of allegedly unlikely events renders them improbable and implausible. I note that the reasoning in Jones v Birmingham City Council in a different respect must be treated cautiously in Australia, in that the reasoning of their Lordships also included the proposition that the seriousness of an allegation, or of the consequences which would follow for a defendant if an allegation is proved, does not necessarily affect the likelihood of it being true, and thus there is no general rule that the seriousness of an allegation or the consequences of upholding it justifies a requirement of more cogent evidence where the civil standard is applied, without reference to the contrary reasoning routinely applied in Australia following Briginshaw v Briginshaw (1938) 60 CLR 336 at 350 (Rich J) and 362-363 (Dixon J). However, that qualification does not affect the common sense proposition that the inherent improbability whether an event has occurred will be relevant to the degree of cogency required in the evidence led in support of that event. In the present case, the primary judge’s detailed reasoning did not demonstrate that her Honour gave proper consideration to whether the evidence of the CPL Parties, viewed as a whole, should be accepted in light of the relative unlikelihood allegedly involved in the overall combination of the various elements of that defensive narrative.

273    Accordingly, I would also uphold Grounds 1 and 2.

The Order for a New Trial

274    Section 28 of the Federal Court of Australia Act 1976 (Cth) confers on the Court a wide range of forms of judgment in the exercise of its appellate jurisdiction, including power to:

(b)    give such judgment, or make such order, as, in all the circumstances, it thinks     fit, or refuse to make an order;

(c)    set aside the judgment appealed from, in whole or in part, and remit the     proceeding to the court from which the appeal was brought for further hearing     and determination, subject to such directions as the Court thinks fit;

…

(f)    grant a new trial in any case in which there has been a trial, either with or     without a jury, on any ground upon which it is appropriate to grant a new trial ….

275    In the present case, in my view, it is appropriate to set aside the judgment of the primary judge (except for the declarations of copyright infringement and authorisation of infringement by CPL Notting Hill and Ms Li respectively in relation to the 30 instances established in the Retail Case) and to grant a new trial. This is unfortunately the second occasion when a judgment of the Court below has been set aside, and the judgment presently appealed from was on a remitter from the first such occasion. Even if a new trial were to be regarded as a deplorable result, that is to be regarded as a necessity of justice to be deplored but not refused: Balenzuela v De Gail (1959) 101 CLR 226 at 243 (Windeyer J). In my view, it would be contrary to the proper administration of justice to remit the matter again to the Federal Circuit and Family Court of Australia (Division 2), and thereby run the risk of yet another miscarriage of justice. As the Federal Court has jurisdiction to hear and decide the issues raised in these proceedings, the appropriate order is for there to be a new trial in this Court. The Microsoft Parties expressed that to be their preference (T91.36-42), and the CPL Parties did not address this particular point as to which Court should hear the new trial.

276    As a separate matter, the CPL Parties submitted that there was no basis, if the matter were to be retried, for the matter to continue against Ms Li and Mr Wang, as there was no submission put by Microsoft on the appeal specifically addressing the position of Mr Wang or Ms Li, and further it was submitted that the way in which the matter was pleaded against them did not encapsulate any basis for proving authorisation. I do not think that the new trial should be so limited. It will be necessary for the trial judge to consider the authorisation allegations made against Ms Li and Mr Wang in the full context of the case concerning primary infringement, including what may emerge from a fair and effective opportunity to cross-examine the CPL Parties’ witnesses.

277    Accordingly, in my view, the following orders should be made:

(1)    The appeal be allowed.

(2)    Orders 3 to 6 of the orders made by the primary judge on 6 December 2022 be set aside.

(3)    A new trial be granted of the proceeding before a single judge of the Federal Court of Australia.

(4)    The respondents pay the appellants’ costs of this appeal.

(5)    The question of costs with respect to the first trial and the trial below be reserved for determination in the new trial.

Associate:

Dated:    4 March 2024