Aristocrat Technologies Australia Pty Ltd v Global Gaming Supplies Pty Ltd [2009] FCA 1495

FEDERAL COURT OF AUSTRALIA

COPYRIGHT – copyright infringement in gaming machines parts and components – infringement inferred from circumstantial evidence – burden of proof – authorisation of copyright infringement – joint liability – claim in conversion for resale of components acquired from scrap dealer fails – scrap dealer not a bailee of the goods – infringement of copyright established – damages and additional damages ordered.

Copyright Act 1968 (Cth), ss 36, 38, 115

Evidence Act 1995 (Cth), ss 135, 136, 140

Sale of Goods Act 1923 (NSW), s 23

Trade Practices Act 1974 (Cth)

Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd (2007) 157 FCR 564 referred to

Associated Midland Corporation Ltd v Bank of New South Wales [1983] 1 NSWLR 533 referred to

Australasian Performing Right Association Limited v Jain (1990) 26 FCR 53 referred to

Beck v Montana Constructions Pty Ltd (1963) 5 FLR 298 distinguished

Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1 referred to

Briginshaw v Briginshaw [1938] 60 CLR 336 referred to

CBS Inc v Ames Records & Tapes Ltd [1982] Ch 91 referred to

CBS Songs Ltd v Amstrad Consumer Electronics PLC [1988] AC 1013 distinguished

Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission (2007) 162 FCR 466 referred to

Concrete Pty Limited v Parramatta Design & Developments Pty Ltd (2006) 229 CLR 577 distinguished

Cooper v Universal Music Australia Pty Ltd (2006) 156 FCR 380 referred to

Designers Guild Ltd v Russell Williams (Textiles) Ltd [2001] All ER 700 referred to

Foxtel Management Pty Ltd v The Mod Shop Pty Ltd (2008) 165 FCR 149 referred to

Gauci v Commissioner of Taxation of the Commonwealth of Australia(1975) 135 CLR 81 referred to

Harding v Commissioner of Inland Revenue [1977] 1 NZLR 337 referred to

Jones v Dunkel (1959) 101 CLR 298 referred to

The Koursk [1924] P 140 referred to

Luxton v Vines (1952) 85 CLR 352 referred to

Morris v C. W. Martin & Sons Ltd [1966] 1 QB 716 referred to

Motor Mart Limited v Webb [1958] NZLR 773 referred to

Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449 referred to

Nguyen v Cosmopolitan Homes [2008] NSWCA 246 referred to

Palmer v Dolman [2005] NSWCA 361 referred to

Papakosmas v the Queen (1999) 196 CLR 297 referred to

Penfolds Wines Proprietary Limited v Elliott (1946) 74 CLR 204 referred to

Qantas Airways Ltd v Gama (2008) 167 FCR 537 referred to

Raben Footwear Pty Ltd v Polygram Records Inc (1997) 75 FCR 88 referred to

Rejfek v McElroy (1965) 112 CLR 517 referred to

Root Quality Pty Ltd v Root Control Technologies Pty Ltd (2000) 177 ALR 231 referred to

Schellenberg v Tunnel Holdings Pty Limited (2000) 200 CLR 121 applied

Seltsam Pty Ltd v McGuiness (2000) 49 NSWLR 262 referred to

Sony Computer Entertainment Australia Pty Ltd v Stirling [2001] FCA 1852 referred to

S.W. Hart & Co Proprietary Limited v Edwards Hot Water Systems (1985) 159 CLR 466 applied

Thompson v Australian Capital Television Pty Limited (1996) 186 CLR 574 referred to

The Trustees of the Property of Cummins v Cummins (2006) 227 CLR 278 referred to

Universal Music Australia Pty Ltd v Cooper (2005) 150 FCR 1 referred to

Universal Music Australia Pty Ltd v Sharman License Holdings Ltd (2005) 220 ALR 1 referred to

University of New South Wales v Moorhouse (1975) 133 CLR 1 referred to

WEA International Inc v Hanimex Corporation Limited (1987) 17 FCR 274 referred to

J.D. Heydon, Cross on Evidence (7^th Aust ed, 2004)

S. Odgers, Uniform Evidence Law (8^th ed, 2009)

N. Palmer, Bailment (2^nd ed, 1991)

F.A. Trindade, P. Cane & M. Lunney, The Law of Torts in Australia (4^th ed, 2007)

ARISTOCRAT TECHNOLOGIES AUSTRALIA PTY LIMITED (ACN 001 660 715), ARISTOCRAT INTERNATIONAL PTY LIMITED (ACN 000 148 158) and ARISTOCRAT TECHNOLOGIES INC v GLOBAL GAMING SUPPLIES PTY LTD (ACN 008 548 589), ANTHONY EDWARD ANDREWS, IMPACT GAMING PTY LTD (ACN 109 299 461), TONITA ENTERPRISE PTY LTD (ACN 120 737 402), FRANCIS GEORGE BERNARD CRAGEN and RIAD ALLAM

NSD 1271 of 2006

JACOBSON J

15 DECEMBER 2009

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 1271 of 2006

BETWEEN:

ARISTOCRAT TECHNOLOGIES AUSTRALIA PTY LIMITED (ACN 001 660 715)

First Applicant

ARISTOCRAT INTERNATIONAL PTY LIMITED (ACN 000 148 158)

Second Applicant

ARISTOCRAT TECHNOLOGIES INC

Third Applicant

AND:

GLOBAL GAMING SUPPLIES PTY LTD (ACN 008 548 589)

First Respondent

ANTHONY EDWARD ANDREWS

Second Respondent

IMPACT GAMING PTY LTD (ACN 109 299 461)

Third Respondent

TONITA ENTERPRISE PTY LTD (ACN 120 737 402)

Fourth Respondent

FRANCIS GEORGE BERNARD CRAGEN

Fifth Respondent

RIAD ALLAM

Sixth Respondent

JUDGE:	JACOBSON J
DATE OF ORDER:	15 DECEMBER 2009
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The first and second respondents pay the applicants damages under s 115(2) of the Copyright Act in the amount of $US12,800, converted to $AU13,963.

2. The first, second, third, fifth and sixth respondents pay the applicants, jointly and severally, damages under s 115(2) of the Copyright Act in the amount of $US32,000, converted to $AU34,907.

3. The first, second, third, fifth and sixth respondents pay the applicants, jointly and severally, additional damages under s 115(4) of the Copyright Act in the amount of $AU450,000.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using the Federal Law Search on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 1271 of 2006

BETWEEN:

ARISTOCRAT TECHNOLOGIES AUSTRALIA PTY LIMITED (ACN 001 660 715)

First Applicant

ARISTOCRAT INTERNATIONAL PTY LIMITED (ACN 000 148 158)

Second Applicant

ARISTOCRAT TECHNOLOGIES INC

Third Applicant

AND:

GLOBAL GAMING SUPPLIES PTY LTD (ACN 008 548 589)

First Respondent

ANTHONY EDWARD ANDREWS

Second Respondent

IMPACT GAMING PTY LTD (ACN 109 299 461)

Third Respondent

TONITA ENTERPRISE PTY LTD (ACN 120 737 402)

Fourth Respondent

FRANCIS GEORGE BERNARD CRAGEN

Fifth Respondent

RIAD ALLAM

Sixth Respondent

JUDGE:	JACOBSON J
DATE:	15 DECEMBER 2009
PLACE:	SYDNEY

1....... INTRODUCTION............................................................................................................	[1]
2. OVERVIEW.....................................................................................................................	[8]
3. THE CAUSES OF ACTION RELIED UPON..................................................................	[35]
3.1 Copyright...............................................................................................................	[36]
3.2 Trade Marks..........................................................................................................	[45]
3.3 Trade Practices Act................................................................................................	[46]
3.4 Conversion of Behong stock...................................................................................	[48]
3.5 Accessorial liability.................................................................................................	[53]
4. PRELIMINARY OBSERVATIONS AND STRUCTURE OF THE JUDGMENT............	[57]
5. BACKGROUND FACTS.................................................................................................	[66]
5.1 The Parties and their Activities................................................................................	[66]
5.1.1 The applicants..........................................................................................	[66]
5.1.1.1 Aristocrat................................................................................	[69]
5.1.1.2 AI and ATI.............................................................................	[71]
5.1.1.3 Reputation of Aristocrat Gaming Machines ..............................	[77]
5.1.2 The respondents.......................................................................................	[78]
5.1.2.1 Mr Andrews and Global..........................................................	[81]
5.1.2.2 Mr Cragen and Impact............................................................	[89]
5.1.2.3 Mr Allam and Tonita................................................................	[95]
5.2 Gaming Machines...................................................................................................	[101]
5.2.1 Gaming Machines.....................................................................................	[101]
5.2.2 Game software and EPROMs..................................................................	[103]
5.2.3 Artwork...................................................................................................	[111]
5.3 Conversion kits......................................................................................................	[112]
5.4 Aristocrat Gaming Machines...................................................................................	[114]
5.5 Aristocrat Trade Marks..........................................................................................	[117]
5.6 Gaming Machine Markets.......................................................................................	[120]
5.6.1 Markets in Australia and overseas............................................................	[120]
5.6.2 Regulatory background............................................................................	[121]
5.6.2.1 New South Wales...................................................................	[121]
5.6.2.2 Regulations in South American export markets.........................	[132]
5.6.2.3 Respondents’ submissions on regulation...................................	[135]
5.7 Joint Venture..........................................................................................................	[139]
5.7.1 Overview.................................................................................................	[139]
5.7.2 1999/2000 to June 2003 .........................................................................	[145]
5.7.3 June 2003 to April 2004 .........................................................................	[146]
5.7.4 April 2004 to present ..............................................................................	[147]
5.7.5 Mr Allam/Tonita’s association with Joint Venture......................................	[149]
5.8 Nuevestar/Uruguay Transaction..............................................................................	[152]
5.8.1 Purchase by Global/Impact and others......................................................	[158]
5.8.2 Involvement of Mr Allam/Tonita...............................................................	[162]
5.9 Behong..................................................................................................................	[163]
5.9.1 Behong Agreement...................................................................................	[163]
5.9.2 Mr Allam/Tonita’s dealings with Behong...................................................	[167]
5.10 Procedural History.................................................................................................	[172]
5.10.1 Global proceeding....................................................................................	[172]
5.10.2 Impact/Tonita proceeding.........................................................................	[174]
5.10.3 Consolidated proceedings .......................................................................	[176]
6. THE PLAY KING TRANSACTION................................................................................	[177]
6.1 How the transaction occurred.................................................................................	[177]
6.2 The inspection by Mr Coster..................................................................................	[200]
6.3 Whether the Play King machines were counterfeit....................................................	[207]
6.4 Play King machines never in the possession of Global..............................................	[216]
6.5 Spanish Artwork....................................................................................................	[224]
6.6 Four year gap.........................................................................................................	[232]
6.7 The pattern of trade and the evidentiary onus...........................................................	[242]
6.8 Jones v Dunkel.......................................................................................................	[250]
6.9 Other matters in relation to Play King......................................................................	[260]
7. BUSINESS COMMUNICATIONS OF THE RESPONDENTS......................................	[264]
7.1 Communications going to infringement.....................................................................	[269]
7.2 Findings in relation to the email communications.......................................................	[321]
8. MR CHANNA’S EVIDENCE..........................................................................................	[341]
8.1 Overview of Mr Channa’s evidence........................................................................	[341]
8.2 Preliminary observations at to Mr Channa’s credit...................................................	[361]
9. THE SEIZED MATERIALS..............................................................................................	[375]
9.1 The Florey and Mascot Premises............................................................................	[380]
9.1.1 Artwork at Florey and Mascot.................................................................	[382]
9.1.2 Game sheets at Florey/Mascot.................................................................	[395]
9.1.3 EPROMs and EPROM labels at Florey and Mascot.................................	[398]
9.1.4 Game Software at Florey and Mascot......................................................	[409]
9.2 The Botany Premises..............................................................................................	[419]
9.2.1 EPROMs at Botany.................................................................................	[419]
9.2.2 EPROM label files at Botany....................................................................	[432]
9.2.3 Compliance plates at Botany....................................................................	[438]
9.3 The Bankstown Premises........................................................................................	[441]
9.3.1 Compliance plates at Bankstown..............................................................	[441]
9.3.2 EPROMs at Bankstown...........................................................................	[443]
9.4 Compliance plates at the Botany and Bankstown Premises......................................	[447]
9.5 The Georges Hall Premises.....................................................................................	[459]
9.5.1 EPROM Labels at Georges Hall...............................................................	[459]
9.5.2 Blank EPROMs at Georges Hall..............................................................	[464]
9.5.3 Compliance Plates at Georges Hall...........................................................	[468]
9.5.4 Aristocrat game software at Georges Hall.................................................	[475]
9.5.5 Computers at Georges Hall......................................................................	[477]
9.5.5.1 The voir dire............................................................................	[481]
9.5.5.1.1 Submissions of the respondents.............................	[485]
9.5.5.1.2 Submissions of the Aristocrat companies...............	[488]
9.5.5.1.3 Admissibility of Mr McKemmish’s evidence..........	[493]
9.5.5.2 The Loose HDD......................................................................	[496]
9.5.5.3 Georges Hall Desktop 1..........................................................	[520]
9.5.5.4 Georges Hall Desktop 2..........................................................	[522]
10. CCC-14............................................................................................................................	[530]
11. THE DATA MATCHING EXERCISE..............................................................................	[536]
11.1 Overview...............................................................................................................	[536]
11.2 The OLGR Matching Exercise................................................................................	[551]
11.3 The “fake” invoice exercise.....................................................................................	[563]
12. THE BURDEN OF PROOF.............................................................................................	[590]
13. AUTHORISATION/JOINT VENTURE: LEGAL PRINCIPLES......................................	[606]
13.1 Background...........................................................................................................	[606]
13.2 Authorisation..........................................................................................................	[610]
13.3 Joint tortfeasors......................................................................................................	[620]
13.4 Liability of officers..................................................................................................	[625]
14. CREDIT OF WITNESSES...............................................................................................	[631]
14.1 The Aristocrat companies’ witnesses.......................................................................	[631]
14.2 The respondents’ witnesses....................................................................................	[635]
14.2.1 Mr Andrews............................................................................................	[635]
14.2.2 Mr Cragen...............................................................................................	[656]
14.2.3 Mr Allam.................................................................................................	[667]
14.2.3.1 Compliance plates at Bankstown and Georges Hall..................	[677]
14.2.3.2 False denials of use of CCC-14 and the Loose HDD...............	[707]
15. PRELIMINARY FINDINGS ON COPYRIGHT INFRINGEMENT...............................	[713]
15.1 Subject matter of claims..........................................................................................	[713]
15.2 What flows from the credit findings.........................................................................	[716]
15.2.1 The Tonita respondents burned Aristocrat game software onto blank EPROMs.................................................................................................	[724]
15.2.2 The Tonita respondents manufactured fake Aristocrat compliance plates....	[737]
15.2.3 Mr Andrews and Mr Cragen were aware that Mr Allam was burning Aristocrat game software .........................................................................	[751]
15.2.4 Mr Andrews and Mr Cragen were aware that Mr Allam was manufacturing counterfeit compliance plates..............................................	[753]
15.2.5 Sending artwork to be copied...................................................................	[757]
16. FINDINGS IN RELATION TO THE JOINT VENTURE AND AUTHORISATION OF COPYRIGHT INFRINGEMENT	[763]
17. THE CONVERSION CLAIM..........................................................................................	[769]
17.1 Background...........................................................................................................	[769]
17.2 Dealings between Behong and the Tonita respondents.............................................	[777]
17.3 The Behong Agreement..........................................................................................	[787]
17.4 Conversion.............................................................................................................	[797]
18. THE 54 TRANSACTIONS..............................................................................................	[821]
18.1 Introduction............................................................................................................	[821]
18.2 Machines at Clubs (MC)........................................................................................	[838]
18.3 Duplicate Numbers (DN).......................................................................................	[850]
18.4 Infringing Indicia (II)...............................................................................................	[873]
18.5 Conclusion in relation to the 54 transactions............................................................	[879]
19. DAMAGES.......................................................................................................................	[881]
19.1 Damages under s 115(2) .......................................................................................	[881]
19.2 Allocation of s 115(2) damages..............................................................................	[902]
19.3 Additional damages under s 115(4).........................................................................	[906]
19.4 Trade marks and other causes of action..................................................................	[916]
20. MISCELLANEOUS MATTERS......................................................................................	[919]
21. ORDERS	[935]

REASONS FOR JUDGMENT

1. INTRODUCTION

1 The modern poker machine bears only passing resemblance to the original machines which first appeared in the United States in the latter part of the 19^th century. Today, poker machines are referred to in the industry as gaming machines. They are computer operated and viewed on video screens which simulate the spinning reels that were a feature of poker machines until the advent of the electronic era.

2 In 1974, the Report of the Western Australian Royal Commission into Gambling described the playing of poker machines as a “mindless, repetitive and insidious form of gambling which has many undesirable features”.

3 More recently, Jagot J referred to the concerns raised by a Local Council about the vulnerability of persons to the misuse and abuse of gaming machines and the extent to which these concerns are addressed in the provisions of the Gaming Machines Act 2001 (NSW): see Waugh Hotel Management v Marrickville Council (2007) 156 LGERA 414 at [91].

4 Notwithstanding these remarks, the manufacturers of those machines are nevertheless entitled to have their intellectual property protected against counterfeiting.

5 The essence of the applicants’ case is that the respondents were participants in a joint venture to counterfeit and sell, principally in South America, second hand gaming machines assembled in Australia using pirated copies of materials in which the applicants hold the copyright.

6 The allegations of copyright piracy were vigorously denied by the respondents in proceedings which occupied more than four weeks of court time.

7 The principal question which arises is whether I can infer copyright infringement in the absence of direct evidence of the gaming machines which are said to have been counterfeited.

2. OVERVIEW

8 The applicants (collectively “the Aristocrat companies”) are engaged in various ways in the manufacture, distribution and sale of gaming machines and gaming machine components in Australia and internationally.

9 The respondents participate in various ways in the business of refurbishing and supplying used gaming machines to overseas markets.

10 There are three groups of respondents. The first group is Global Gaming Supplies Pty Ltd (“Global”) and its principal, Mr Anthony Edward Andrews (collectively “the Global respondents”). The second is Impact Gaming Pty Ltd (“Impact”) and its principal, Mr Francis George Bernard Cragen (collectively “the Impact respondents”). The third is Tonita Enterprises Pty Ltd (“Tonita”) and its principal, Mr Riad Allam (collectively “the Tonita respondents”).

11 There was no real question that there was a joint venture for the supply of refurbished gaming machines to overseas markets between the Global/Impact respondents from about April 2005.

12 Nor can there be any real dispute that from about the same time, the Tonita respondents, or Mr Allam personally, carried out significant technical work and business functions for the Global/Impact Joint Venture.

13 The Aristocrat companies obtained Anton Piller orders which were executed at the premises of each group of respondents. Large numbers of components of Aristocrat gaming machines were seized at each of the premises. The Aristocrat companies claim that the seized materials include counterfeit copies of materials in which they held the copyright.

14 Much of the seized materials consisted of computer hard drives, but the materials included certain items of hardware and software which were an important part of the Aristocrat companies’ case.

15 The first was game software stored on sets of removable memory chips called Erasable Programme Read Only Memory chips which are known in the industry by the acronym EPROMs. The software stored on the EPROM storage devices enable electronic games to be played on the modern form of poker machines.

16 All EPROMs produced by the Aristocrat companies contain labels which identify, amongst other things, the particular Aristocrat game contained on the EPROM. The Aristocrat companies claim that their EPROM labels have certain specific recognisable formats and characters and that they are printed using specific printing methods.

17 The Aristocrat companies claim that the seized EPROMs were counterfeit because a number of their witnesses gave evidence that the labels on the EPROMs were not in the format used by the Aristocrat companies. In addition, a number of electronic EPROM label files and templates were amongst the material seized from the respondents, a fact which the Aristocrat companies say is evidence of the fabrication of EPROM labels and the EPROMs to which they were attached.

18 The second important item seized on the Anton Piller raids was compliance plates. It is a regulatory requirement in NSW that a gaming machine must have an approved compliance plate affixed to it before it leaves the premises of a licensed dealer. The compliance plate affixed to such a gaming machine has a unique serial number which enables the regulatory authority in NSW to access information about that machine.

19 There are similar regulatory requirements in Queensland and the ACT (but much of the South American market appears to be unregulated).

20 The seized materials included nearly 100 compliance plates which resemble genuine Aristocrat compliance plates but which the Aristocrat companies claim to be counterfeit.

21 Various features of the seized compliance plates are relied upon to support the Aristocrat companies’ contention that the seized items are not genuine. One such feature is that some of the seized compliance plates were blank, and it is said that blank compliance plates would not normally be available in the market place for legitimate purposes. However, a complication arises in relation to this issue because in a transaction referred to as the “Uruguay” or “Nuevestar” transaction, the Aristocrat companies put into circulation certain blank compliance plates originally destined for South America.

22 I will describe the transaction in more detail below but it appears that some of the blank compliance plates associated with it re-entered NSW when the Global/Impact respondents obtained an interest in the gaming machines that were the subject of that transaction.

23 The allegations of counterfeiting were hotly contested by all of the respondents. One of the most bitter contests related to the materials seized on the raid at the premises of the Tonita respondents.

24 Four imaged copies of computer hard drives were seized at those premises. I will describe the seized materials in more detail later but they included an imaged copy of a loose hard disk drive known as the “Loose HDD” which Mr Allam claims to have been planted at his premises to incriminate him.

25 The Loose HDD contained software of a kind used to burn EPROMs (the “Dataman software”) and folders that were connected to an EPROM programming device. The folders contained files that indicated that the Dataman software had been used in connection with game software that was found on the Loose HDD.

26 There was no suggestion that another computer seized at the premises of the Tonita respondents (the “Georges Hall Desktop 2”) had been deliberately planted for an ulterior purpose. That computer showed that the Dataman software had been used in the same way on it as the use which was detected on the Loose HDD. However, the Tonita respondents submit that the Georges Hall Desktop 2 computer was located in an area at the Tonita respondents’ premises which was easily accessible by all employees at the premises.

27 The Anton Piller orders were obtained upon the basis of evidence given by Mr Christos Channa, a disaffected former employee of the Tonita respondents. Mr Channa provided the Aristocrat companies with a disk described as CCC-14, which he said he had obtained from Mr Allam. The disk contained binary game files and there was evidence that it had been viewed on the Loose HDD.

28 Mr Allam claimed that the disk, CCC-14, was fabricated either by Mr Channa or another person. The Tonita respondents made a substantial attack on Mr Channa’s credit. At the heart of the attack was the fact that Mr Channa received payments from the Aristocrat companies for providing evidence in support of these proceedings.

29 The essence of the defence of the Global/Impact respondents is that for many years, they have been engaged in refurbishing and supplying used gaming machines with genuine Aristocrat artwork and software.

30 The essence of the Tonita respondents’ defence is that Mr Allam operates his own business which is, and was at all times, distinct from that of the Global/Impact business. As I have said, the allegations of counterfeiting are strenuously denied.

31 The respondents also complained that the “snowstorm of paper” tendered against them by the Aristocrat companies was insufficient to establish the necessary elements of the serious claim made against them. In particular, they submitted that, notwithstanding the substantial resources of the Aristocrat companies, there was no physical evidence of infringing material.

32 In my view, the often repeated refrain of the respondents as to the absence of physical evidence is an overstatement. It ignores the force of the evidence obtained on the execution of the Anton Piller orders.

33 Ultimately, the Aristocrat companies identified 54 transactions of the respondents in relation to 618 Aristocrat gaming machines which they claimed that the respondents sold with infringing copies of Aristocrat games and artwork. The total value of the 618 machines, according to the respondents’ invoices was $1,096,690.

34 At the heart of the case is the question of whether the mass of material tendered by the Aristocrat companies is sufficient to satisfy their evidentiary onus and whether the denials of Mr Andrews, Mr Cragen and Mr Allam ought to be accepted.

3. THE CAUSES OF ACTION RELIED UPON

35 The Aristocrat companies pleaded and particularised a large number of causes of action. After the evidence closed, they provided a document setting out the claims which they maintained.

3.1 Copyright

36 The Aristocrat companies claim that the respondents have, in the course of carrying out their business or businesses, reproduced, manufactured, supplied, offered to sell or distributed:

· imitation Aristocrat game software, copied on to blank EPROMs;

· imitation Aristocrat EPROM labels;

· imitation Aristocrat artwork; and

· imitation Aristocrat compliance plates.

37 These acts are said to have been carried out either separately or as part of the manufacture and sale of machines that were sold as Aristocrat gaming machines.

38 The Aristocrat companies claim that Aristocrat game software is a literary work within the meaning of s 10(1) of the Copyright Act 1968 (Cth). They claim that Aristocrat compliance plates and their layout are artistic works within the meaning of that sub-section of the Copyright Act. They also claim that Aristocrat artwork constitutes artistic work within the meaning of s 10(1).

39 The respondents did not challenge the subsistence of copyright or the Aristocrat companies’ claim of ownership in the literary or artistic works in those items.

40 The Aristocrat companies claim that the respondents, by doing the acts which I have set out in [36] above, have infringed their copyright in those works under s 36 of the Copyright Act.

41 In addition to the claims of primary infringement under s 36, the Aristocrat companies also allege that by dealing with infringing copies of the works with knowledge or constructive knowledge of the infringements, the respondents are guilty of secondary infringement of copyright under s 38 of the Copyright Act.

42 The Aristocrat companies claim compensatory damages under s 115(2) of the Copyright Act in an amount in excess of $1.5 million. They also claim additional damages under s 115(4).

43 Although the Aristocrat companies also claim damages for conversion under s 116 of the Copyright Act, that claim is made in the alternative, if the damages awarded under
s 115(2) are not an adequate remedy.

44 In respect of each type of primary infringement by any respondent, the Aristocrat companies maintain a claim of authorisation infringement under s 36(1) and s 36(1A) against all of the respondents, but only from 24 May 2004 which was the date of incorporation of Impact. A number of infringements are alleged to have occurred before that date. Authorisation infringements in respect of those transactions are maintained only against Global and Mr Andrews.

3.2 Trade Marks

45 The Aristocrat companies claim that by engaging in the acts referred to in [36] above, the respondents have infringed their registered trade marks. The relevant marks include ARISTOCRAT and the names of various games. They accept that if damages are awarded under s 115(2) of the Copyright Act, no further damages for trade mark infringement would be appropriate.

3.3 Trade Practices Act

46 The Aristocrat companies allege that by “rebirthing” gaming machines with counterfeit Aristocrat works, the respondents have represented in trade or commerce that the rebirthed machines emanate from the Aristocrat companies and have their approval.

47 They claim that the representations were false because the rebirthed machines have important components that are not authentic. Nevertheless, as with the claims of trade mark infringement, the Aristocrat companies accept that if they are awarded damages under
s 115(2) of the Copyright Act, no further claim for damages under the Trade Practices Act 1974 (Cth)would be appropriate.

3.4 Conversion of Behong stock

48 The Aristocrat companies make a claim against the Tonita respondents for conversion of a large number of items of stock and equipment acquired by those respondents from Behong Import & Export (Australia) Pty Ltd (“Behong”), a scrap merchant located in Sydney.

49 Behong was appointed by one of the Aristocrat companies as its authorised scrap collector.

50 I will refer in more detail below to the basis upon which the claim of conversion is made. It is sufficient to say by way of introduction that the Aristocrat companies claim that the effect of their contractual arrangements with Behong was that Behong was prevented from on-selling for reuse as gaming machine equipment the stock obtained by Behong under the scrapping contract.

51 The Aristocrat companies claim that the Tonita respondents acquired from Behong second hand gaming machines and equipment, the property in which remained with the Aristocrat companies, and that by using the components in the assembly of other machines, the Tonita respondents converted the components to their own use, or to the use of the Global/Impact respondents.

52 The Aristocrat companies also allege that the Global/Impact respondents are joint tortfeasors with the Tonita respondents in the tort of conversion.

3.5 Accessorial liability

53 The Aristocrat companies claim that each of the respondents is liable as a joint tortfeasor with the other respondents for copyright infringement, trade mark infringement and conversion, as explained briefly below.

54 The claim against the Global/Impact respondents is that:

· from the date of incorporation of Impact on 24 May 2004, Global and Impact were participants in a joint venture with respect to 21 of the 54 transactions identified by the Aristocrat companies (the “Joint Venture”); and

· Mr Andrews and Mr Cragen are personally liable for the acts of their companies.

55 The claim against the Tonita respondents is that they were engaged by the Global/Impact Joint Venture for reward, to supply services and to procure parts and equipment for the purposes of the joint venture and that they are “so personally involved in the commission of the unlawful act[s], that it is just that [they] should be rendered liable”: Universal Music Australia Pty Ltd v Sharman License Holdings Ltd (2005) 220 ALR 1 at [434]; cf Cooper v Universal Music Australia Pty Ltd (2006) 156 FCR 380 at [1], [74], [161].

56 Alternatively, the Aristocrat companies claim that, in any event, the Tonita respondents were acting with the full countenance and approval of the Global/Impact respondents who are therefore vicariously liable for the unlawful acts of the Tonita respondents.

4. PRELIMINARY OBSERVATIONS AND STRUCTURE OF THE JUDGMENT

57 The 54 transactions identified by the Aristocrat companies cover the period from September 2001 to February 2006.

58 Since the Global/Impact Joint Venture commenced at the earliest on 24 May 2004, the transactions which took place before that date were alleged only against the Global respondents. The transactions before that date cover those which were numbered 1 to 33 in the Aristocrat companies’ schedule of infringing transactions.

59 One of the transactions falling into this category was known as the “Play King Transaction” because it involved the sale by Global to a company in Peru known as Play King SA (“Play King”).

60 The Play King Transaction is of some importance in these proceedings, in particular because there was direct evidence that a number of the machines which were the subject of the transaction were inspected in Peru and found to be counterfeit.

61 I will therefore deal separately with the Play King transaction before turning to the balance of the Aristocrat companies’ case.

62 All of the claims in respect of the remaining transactions depend upon whether I am prepared to draw the inferences of infringement sought by the Aristocrat companies.

63 The inferences of infringement are said to flow from a vast quantity of material that was adduced in evidence. This included:

· the materials seized on the Anton Piller raids;

· the evidence of Mr Channa;

· business records generated by the respondents in the course of conducting their business operations, in particular email correspondence relating to the supply of gaming machines to the South American market; and

· a very large volume of invoices generated by the Global/Impact respondents. These invoices were analysed in a computerised data matching exercise which was said to demonstrate that the serial numbers of gaming machines shown on the invoices were not genuine.

64 I will deal separately with each of these evidentiary bases for the claim of infringement.

65 Before doing so, I will set out certain background facts which are not controversial. They are drawn from a document entitled “Factual Findings Contended for by the Applicants”. In stating these facts, I have taken into account the submissions of the respondents, in particular the comments of the Tonita respondents who resisted some of the findings sought by the Aristocrat companies.

5. BACKGROUND FACTS

5.1 The Parties and their Activities

5.1.1 The applicants

66 The Aristocrat corporate group is engaged in the business of supplying gaming technologies and services to the international gaming industry, including the manufacture and sale of electronic gaming machines and game software.

67 The applicants are members of the Aristocrat corporate group. The Aristocrat corporate group is based in Sydney, Australia; is listed on the Australian Stock Exchange through the holding company Aristocrat Leisure Limited; and has offices throughout the world.

5.1.1.1 Aristocrat

68 The first applicant (“Aristocrat”) is the main operating company responsible for conducting Aristocrat Leisure Limited’s business operations. Aristocrat employs all of the Aristocrat corporate group’s Australian employees.

69 Aristocrat designs and manufactures gaming machines, gaming machine components and conversion kits for Aristocrat gaming machines. It also sells Aristocrat gaming machines and conversion kits in Australia.

5.1.1.2 AI and ATI

70 The second applicant (“AI”) and third applicant (“ATI”) exploit Aristocrat’s products (and associated intellectual property rights), including Aristocrat gaming machines, outside Australia. AI is a wholly owned subsidiary of Aristocrat Leisure Limited. AI primarily sells products to its subsidiary companies in various markets for on-sale to customers.

71 AI is responsible for the export, distribution and sale of Aristocrat’s products to third parties outside Australia.

72 ATI is a wholly-owned subsidiary of AI, and is based in the state of Nevada in the United States. It is engaged in the manufacture and supply of Aristocrat gaming machines in North and South America.

73 The Aristocrat companies led evidence that under the Aristocrat corporate group’s internal organisational arrangements, Aristocrat is the designated holder of all of their intellectual property. They summarised the relevant licence arrangements in the table below.

Agreement title	Parties	Date of execution	Term	Summary of relevant IP provisions
Head Distribution & Intellectual Property Licence Agreement	Aristocrat AI	19/07/2006	Commenced 1 Jan 2005. 1 year term with automatic 1 year renewal periods.	Aristocrat gives AI exclusive licence to intellectual property in respect of products worldwide other than Australia, but including products made for export outside of Australia.
Distribution Agreement	AI ATI	03/05/2006	Commenced 1 Jan 2006. 1 year term with automatic 1 year renewal periods.	AI gives exclusive licence to ATI to grant sublicences, lease, and reproduce products embodying intellectual property rights held by AI within the territory comprising North America (except British Columbia), South America, the Caribbean and Latin America (except Argentina and Puerto Rico in relation to Recurring Revenue transactions).
Deed of Variation	Aristocrat ATI	28/12/2006		Varies Distribution Agreement (above) to exclude Peru from the territory. Confirms that licensee may sue for and recover damages for infringement of intellectual property rights.
Intellectual Property Development Agreement	Aristocrat ATI	04/01/2002		ATI agrees to develop intellectual property and assign all rights in that intellectual property back to Aristocrat.

74 The Aristocrat companies then submitted that none of the respondents were licensed by Aristocrat, AI or ATI to use or otherwise exploit Aristocrat’s intellectual property.

75 The Tonita respondents challenged the summary of licence arrangements put forward by the Aristocrat companies. In essence, they argued that the evidence that had been produced did not support the findings for which the Aristocrat companies contend, and in particular, the agreements had not been proven to be relevant and important. The records which had been produced, they argued, were in a “poor state”, thereby calling into question the accuracy and reliability of any records held by the Aristocrat companies in relation to licensing and the absence of any license held by the respondents.

76 The Global/Impact respondents also challenged the purported terms and effectiveness of the license agreements relied upon by the Aristocrat companies. In particular, they denied that none of the respondents were licensed by the Aristocrat companies, and submitted that the respondents, as recipients of second-hand Aristocrat gaming machines, have an implied license to use the intellectual property contained in those gaming machines.

5.1.1.3 Reputation of Aristocrat Gaming Machines

77 In the course of carrying out their business, the Aristocrat companies submitted that they have acquired valuable goodwill and reputation, including in Aristocrat gaming machines in Australia and the world.

5.1.2 The respondents

78 The respondents participate in the refurbishing and supplying of used gaming machines, including Aristocrat gaming machines and conversion kits, to markets overseas.

79 Mr Cragen and Mr Andrews began jointly supplying gaming machines to markets overseas in about 1999 or 2000; they had known each other for some years prior to that through business connections in the gaming industry.

80 Tonita and Mr Allam provide technical and customer services and raw materials for the Joint Venture.

5.1.2.1 Mr Andrews and Global

81 Mr Andrews commenced carrying on the business of selling second hand gaming machines to markets overseas in late 1999 under the name Catkem Pty Ltd, which was the name of Global at that time (the company, having been incorporated on 24 August 1979, changed its name to Global on 28 June 2000).

82 Mr Andrews has at all relevant times conducted his activities through Global.

83 Mr Andrews is:

· the sole director, secretary and shareholder of Global; and

· is and was at all relevant times involved in the day to day management and operations of Global.

84 Global’s business is geographically located in Australia. Its main office is located in Edman Close, Florey ACT (the “Florey Premises”).

85 For a time, Global also used an office at Ricketty Street, Mascot, NSW (the “Mascot Premises”).

86 From 2000 to 2005, Global’s general business model consisted of:

· trading in second-hand gaming machines;

· advertising via a website located in Australia at the URL www.allgamingshop.com, thereby attracting overseas customers;

· prospective overseas customers contacting Global in Australia;

· sourcing gaming machines from suppliers in Australia; and

· shipping gaming machines from Australia to the overseas customers.

87 Mr Andrews is also a director and shareholder of Huricane Pty Ltd (“Huricane”). Huricane was, at all relevant times, involved in the development of computer platforms and software relating to gaming.

88 Since 2000, Global has also owned and operated a business through Starburst Games that hires and sells home gaming equipment.

5.1.2.2 Mr Cragen and Impact

89 Mr Cragen has been involved in the gaming industry for about 35 years. He worked for the Aristocrat corporate group from 1972 to 1983. He also held the position of General Manager of a company manufacturing gaming machines in competition with the Aristocrat companies, and held senior sales positions within, and consulted to, the gaming company known as IGT (Australia) Pty Ltd, trading as International Game Technology (“IGT”).

90 In 1997, Mr Cragen commenced supplying second hand gaming machines to overseas customers, initially through a company he acquired known as Bondtren Pty Limited (“Bondtren”).

91 Mr Cragen has at all relevant times conducted his activities through corporate vehicles, initially Bondtren, and then Impact. Impact was incorporated on 26 May 2004.

92 Mr Cragen is:

· the sole director, secretary and shareholder of Impact; and

· involved in the day to day management and operations of Impact.

93 Impact carries on business from an office and warehouse at 5/10 Morgan Street, Botany (the “Botany Premises”). Prior to December 2006, Impact’s business was conducted at 3/10 Morgan Street, Botany. Mr Cragen visited the Botany Premises on a daily basis.

94 Mr Cragen is also a director and shareholder of Huricane.

5.1.2.3 Mr Allam and Tonita

95 Mr Allam is a gaming machine technician. From 1990, he worked as a workshop technician and managed the workshop for Olympic Video Games, and later worked in the research and development department at IGT. From January 2000, he worked as a gaming machine technician for Ay-Jay Electronics. From 2002, he subcontracted to Goldstar Gaming (“Goldstar”) as a field technician.

96 Mr Allam’s association with Mr Andrews/Global and Mr Cragen/Impact began in about January 2003 while he was subcontracting to Goldstar. He was performing significantly more work for Mr Cragen/Impact by January 2004 and thereafter for the Joint Venture, such that by 2005, Mr Allam was being referred to by Mr Andrews as the Joint Venturers’ “technical guy”.

97 Tonita was incorporated on 14 July 2006. Thereafter, Mr Allam provided his services to the Joint Venture through Tonita and conducted his activities under the business name Tonita Enterprises.

98 Mr Allam:

· is a director, secretary and shareholder of Tonita; and

· is involved in the day to day management and operations of Tonita.

99 Tonita and, before its incorporation, Mr Allam carried on business at Impact’s warehouse (ie the Botany Premises) and at Mr Allam’s residence in Georges Hall, NSW (the “Georges Hall Premises”).

100 Tonita was also carrying on business at a warehouse in Bankstown at the time search orders were made in this proceeding (the “Bankstown Premises”). Mr Allam leased the Bankstown Premises from May 2006 to February 2008 in order to store materials obtained from Behong.

5.2 Gaming Machines

5.2.1 Gaming Machines

101 A gaming machine consists of computers which play a game of chance based on odds of winning according to computer programs, and it simulates the spinning reels of mechanical gaming machines on a video monitor.

102 A gaming machine comprises, inter alia, the following hardware and software:

· a cabinet;

· artwork panels affixed to the cabinet (identifying the particular game housed in the cabinet);

· pay scale artwork (listing the pay scale for the particular game housed in the cabinet);

· a monitor;

· game software (stored on EPROMs) that permits electronic games to be played on the machine;

· system software (software which is more generally required for a gaming machine to function without being specific to a particular game);

· a logic board (electronic circuit board) into which EPROMs are plugged;

· a logic cage (a metal box with hinged door that sits within a cabinet and that securely holds gaming systems such as the logic board and EPROMs);

· a currency validator; and

· mechanic meters.

5.2.2 Game software and EPROMs

103 Software, including game software, can be reproduced onto an EPROM or a number of EPROMs.

104 The process for reproducing, or burning, software onto EPROMs requires a personal computer, EPROM burning software and an EPROM burning device connected to a computer.

105 In addition to being copied onto EPROMs, Aristocrat game software can be copied in other ways onto other media.

106 In the case of those Aristocrat gaming machines that use EPROMs in order to operate, the data must be “printed” to a complete set of EPROMs before it can be used. Each Aristocrat gaming machine uses multiple EPROMs.

107 It is not in dispute that one of the manufacturers of devices used to burn EPROMs is known as “Dataman”. Dataman supplies portable EPROM burning devices, which allow files contained on EPROMs to be easily uploaded to a computer hard drive and then burned onto blank EPROMs. Those burning devices also enable the software contained on an EPROM to be copied and stored on a computer.

108 It is also not in dispute that Dataman software may be downloaded over the internet, however the relevance of this fact is challenged by the respondents.

109 The Aristocrat companies led evidence that game software is divided into a number of separate files, which are contained on individual EPROMs. In addition, EPROMs contain a number of pins or “legs” which enable them to be plugged into motherboards. The EPROMs must be plugged into specific locations within the motherboard of a gaming machine in order to function properly. EPROM locations are typically identified by reference to the letter “U” and a number.

110 The respondents did not challenge this evidence. However, they argue that the Aristocrat companies have provided no explanation of how the game software is divided into separate files, such that if less than a full set of such files is located, the Court might be in a position to assess the substantiality of an alleged taking.

5.2.3 Artwork

111 Artwork includes the visual themes, words, symbols and images which are physically printed and appear on the bottom (“belly panel”) and top (“top panel”) sections of a gaming machine.

5.3 Conversion kits

112 It is possible to make changes to gaming machines (ie to change the relevant game), by way of, for instance, conversion kits, or by using components such as EPROMs and corresponding artwork.

113 Conversion kits comprise game software on EPROMs and artwork panels that correspond to the game on the EPROMs. Conversion kits sold by the Global respondents also provided components to enable an upgrade of gaming machines.

5.4 Aristocrat Gaming Machines

114 There are different versions of gaming machines, which are referred to as “Mark IV”, “Mark V”, and “Mark VI”. It is possible to upgrade a Mark IV series to a Mark V series 1, and series 2 Mark V to a Mark VI.

115 Aristocrat gaming machines are comprised of the following components:

· Aristocrat games, which are electronic games of chance comprised of a combination sheet and a game specification, documents created by Aristocrat’s game designers. Combination sheets are basic technical design documents which describe the structure and mathematics of a particular game, including the number of reels and the prize tables. Game specifications are like a story board, and contain information about how the game is intended to play, including a general description of the game, the pay structure, any special features, and information about the artwork, video and sound.

· Aristocrat game software, which is comprised of computer programs and data and is created by software engineers by incorporating elements of the combination sheet and game specification, and embodying key elements of the game into source code and software binaries. The game software includes reel strips, simulated images of reels which are depicted on the monitor of a gaming machine when activated, and pay tables, which set out the number of credits that a player will be awarded for each combination of winning symbols.

· Cabinets for Aristocrat gaming machines.

· Aristocrat artwork, which is designed for each particular Aristocrat game by Aristocrat’s employees. Prior to 2001, Aristocrat artwork was printed using a screen printing method, which involves applying ink to a stencil. Since that time, Aristocrat artwork has been printed using digital printing technology.

· Aristocrat compliance plates, which are manufactured in accordance with a written design specification which sets out precise layout and design information. Aristocrat compliance plates are fabricated from aluminium with a matt-anodised finish. Through a technique known as anodising, the surface of the compliance plates is converted so as to form a coating, to which dye is added. Each Aristocrat compliance plate has information engraved on it, including the relevant serial number.

· Aristocrat EPROM labels, which are produced with every Aristocrat EPROM. The EPROM label records a unique program number associated with the software program on the EPROM; the name of the relevant Aristocrat game; the position in the motherboard where the EPROM is to be inserted; the memory capacity of the EPROM; a combination number, which is a unique number assigned to each combination sheet; the number of the EPROM in the set; and the copyright symbol (©), year and the name “Aristocrat”. Templates for Aristocrat EPROM labels were tendered into evidence.

116 The respondents do not dispute that copyright subsists in the component parts of an Aristocrat gaming machine listed above. Copyright is specifically claimed by the Aristocrat companies in Aristocrat games, game software, artwork and compliance plates.

5.5 Aristocrat Trade Marks

117 At all relevant times, Aristocrat claims to have been the registered owner in Australia of approximately 80 registered trade marks upon or in relation to Aristocrat gaming machines and Aristocrat conversion kits. The Tonita respondents concede the accuracy of the list of trade marks provided by the Aristocrat companies, with the exception of seven trade marks which they say are either not held by Aristocrat or have lapsed, expired or been withdrawn. The Global/Impact respondents do not accept that Aristocrat owns the registered trade marks as claimed, but have not given reasons for this.

118 By reference to distribution and license agreements which are in evidence, the Aristocrat companies claim that at all relevant times, AI and ATI have been authorised users of Aristocrat trade marks.

119 They also claim that each of the respondents has used one or more of the Aristocrat trade marks in the course of undertaking their activities. The respondents do not concede this, and the Tonita respondents in particular argue that it is unsafe for the Court to assume the accuracy of those assertions.

5.6 Gaming Machine Markets

5.6.1 Markets in Australia and overseas

120 Markets exist for gaming machines and conversion kits throughout the world, including in Australia, Asia Pacific, Europe, North America and South America.

5.6.2 Regulatory background

5.6.2.1 New South Wales

121 The market for gaming machines in NSW is heavily regulated. In order to undertake gaming machine-related activities, such as servicing gaming machines, selling spare parts, and dealing with compliance plates, it is necessary to hold the relevant licence.

122 The regulatory authority in NSW used to be known as the Liquor Administration Board or “LAB”, until it became the Office of Liquor, Gaming and Racing (the “OLGR”).

123 The OLGR is responsible for administering various pieces of legislation including the Gaming Machines Act 2001 (NSW).

124 The manufacture, use and servicing of gaming machines is controlled by the Australian and New Zealand Gaming Machine National Standards. These Standards regulate the configuration of a gaming machine, and together with the NSW Gaming Machine Communications Protocol, ensure that data regarding the machine’s operation is sent to the OLGR.

125 It is a regulatory requirement in NSW that a gaming machine must have an approved compliance plate affixed to it before it leaves the premises of a licensed dealer.

126 Each gaming machine contains a unique serial number on its compliance plate which enables the machine to be identified and tracked.

127 In NSW, Aristocrat serial numbers start with the prefix XAW. After the prefix there is a 6 digit number.

128 For every gaming machine or conversion kit purchased in NSW, the purchaser must request an approval form from the OLGR to authorise the venue for its purchase and installation. Approval forms must include details such as the serial number, game being operated and venue of the machine.

129 The OLGR maintains records on all gaming machines in operation in registered clubs and hotels, based on the information supplied by venues and sellers.

130 Aristocrat receives periodic reports from the OLGR on all Aristocrat gaming machines in circulation. The reports display the number of Aristocrat gaming machines in circulation in NSW, identified by serial number, as well as the games installed in those machines and the venue where those machines are located.

131 In addition to the records held by the OLGR, the Aristocrat companies maintain their own database records of serial numbers which they have given to Aristocrat gaming machines that have been sold. This database was known as “Manfact” up until 2000 when it changed to “PeopleSoft”.

5.6.2.2 Regulations in South American export markets

132 The regulation of gaming machines differs in each country in South America. The first South American country to pass national laws regulating gaming machines was Argentina in 2000.

133 Certain Latin American countries, such as Peru, require games to be specifically approved and adapted to local conditions (known as “homologated machines”) and may require Spanish language games and artwork. They also require demonstration that a machine has a unique serial number and has been genuinely manufactured.

134 In Peru, gaming machine sales consist predominantly of refurbished machines due to a combination of high import duties (45%) and relatively low average daily revenue generated by machines. In the past six years, the gaming industry has been largely unregulated and it has only recently become a more strongly regulated industry.

5.6.2.3 Respondents’ submissions on regulation

135 The respondents do not deny the existence of the regulatory regime set out above, except that they challenge any attempt by the Aristocrat companies to relate regulatory activities that take place in NSW to any other state in Australia or any other jurisdiction.

136 The respondents do challenge certain aspects of the factual background relied upon by the Aristocrat companies. First, they deny that the “periodic reports” received by Aristocrat from the OLGR can provide assistance to the Court, as the OLGR only has jurisdiction in NSW and gaming machines are at times moved outside of NSW.

137 The respondents also contest the extent of information received by the Aristocrat companies from the OLGR. They say that the only witness who attested to the receipt of periodic reports from the OLGR acknowledged that he did not have any involvement in their actual receipt, was not familiar with how the original files arrived, and was not employed in the research department which received the reports. I will discuss this in further detail below: see section 11 on the data matching exercise.

138 In addition, the respondents challenge the reliability of the Manfact and PeopleSoft database records. They argue that the records from those databases become inaccurate as soon as a gaming machine leaves Aristocrat’s premises. They say that two of the witnesses for the applicants conceded that the records of gaming machines located outside NSW may have been inaccurate in certain cases.

5.7 Joint Venture

5.7.1 Overview

139 The arrangements between Mr Andrews/Global and Mr Cragen/Impact for the sale of refurbished gaming machines to markets overseas constituted a joint venture. The Global/Impact respondents admit that the Joint Venture was in place, but only from April 2005. The Aristocrat companies allege that the Joint Venture was in place since May 2004.

140 The Joint Venture’s operation included the following features:

· Impact provided the capital to buy gaming machines;

· Global provided back office services, including making all the freight arrangements;

· Global managed the refurbishment of gaming machines by Tonita; and

· Impact and Global both sourced gaming machines and sales (although the arrangement developed so that Impact did most of the sourcing of the gaming machines).

141 Impact held any licences required for the Joint Venture.

142 The activities of the Joint Venture, including obtaining supplies for second hand gaming machines and storing them, and refurbishing gaming machines and packing them for delivery, took place at Impact’s premises, the Botany Premises.

143 Global had no staff permanently located at Botany. Mr Andrews went to Botany from time-to-time to ensure the activities were being conducted properly.

144 Mr Andrews kept records relating to the Joint Venture at the Florey Premises.

5.7.2 1999/2000 to June 2003

145 From 1999 or 2000, Mr Cragen and Mr Andrews jointly supplied second hand gaming machines to customers and then issued invoices in the name of whichever of their companies (ie Global or Bondtren/Impact) had had dealings with the customer.

5.7.3 June 2003 to April 2004

146 Mr Andrews and Mr Cragen dealt with each other in relation to the supply of gaming machines to markets overseas from (at least) late 2003.

5.7.4 April 2004 to present

147 The Aristocrat companies allege that since about April 2004, Mr Andrews, Global, Mr Cragen and Impact have operated on the basis of a “joint venture arrangement” between them. The Global/Impact respondents accept that from about April 2004, Impact started to become a major supplier to Global for selected transactions, and that in those selected transactions, surplus revenue may have been shared on a joint venture basis. However, as stated above, they deny that the Joint Venture was in place until April 2005.

148 In about April 2005, the manner in which the Joint Venture was conducted changed at Mr Cragen’s behest; thereafter, all receipts were banked into Impact’s account only.

5.7.5 Mr Allam/Tonita’s association with Joint Venture

149 Mr Allam’s association with the Joint Venture included the carrying out of the following work:

· undertaking the refurbishment work on behalf of the Joint Venture at the Botany Premises;

· sourcing spare parts; and

· acting as a contact point for the receipt of materials into the Botany Premises.

150 Mr Allam was described and regarded by Mr Andrews as the Joint Venture’s “technical guy” and “main guy”.

151 Invoices were issued by Tonita to Impact which listed items including EPROM model numbers and conversion kits.

5.8 Nuevestar/Uruguay Transaction

152 In 2002, ATI entered into an agreement with a Uruguayan company called Nuevestar S.A. for the supply of 1300 “upright” Mark V Aristocrat gaming machines, and 1000 Mark V “slant top” Aristocrat gaming machines into the Brazil market (the “Nuevastar transaction”but also referred to during the course of the hearing as the Brazilian machines and the Uruguay project).

153 The Aristocrat gaming machines were supplied by ATI into a bonded area in Montevideo for alteration and were then shipped to Brazil. At that time, gaming machines sold in Brazil were required to be approved by the Brazilian regulatory authorities as having a particular type of cabinet which was unique to Brazil.

154 As a result of Brazilian gaming regulations, all of the components were removed from the Aristocrat steel cabinets and installed in Brazilian approved gaming machines.

155 The Aristocrat gaming machine cabinets and spare parts were removed and stored in a warehouse in the Uruguay bonded area. They did not have any games in them. In order for the gaming machines to be put back into the market, the gaming machines would have had to have EPROMs and artwork installed onto them.

156 After the gaming machines were placed in the Uruguay bonded area, Aristocrat was approached by Nuevastar about repurchasing the unused cabinets. Aristocrat declined the offer.

157 Evidence from the respondents’ witnesses indicated that the gaming machines which formed part of the Nuevastar transaction were disassembled when shipped to Uruguay. Evidence from those witnesses also suggested that as part of the component parts of the gaming machines, loose blank compliance plates were shipped to South America.

5.8.1 Purchase by Global/Impact and others

158 In 2004, Impact acquired a one-third interest in the unused Aristocrat gaming machine cabinets from the owners of the warehouse in which they were stored. Mr Vladimir Trajkovski and Mr Andreas Kan were business associates of Impact and Global in a venture to utilise the new cabinets for the sale of refurbished Aristocrat gaming machines.

159 Meetings were held during the course of 2005 to set down groundwork for the arrangement between Mr Andrews, Mr Cragen, Mr Trajkovski and Mr Kan in relation to the refurbishment of Aristocrat gaming machines and placement of them into the South American market. One such meeting was held in Sydney in August 2005.

160 Mr Andrews accompanied Mr Allam on a visit to South America on behalf of the Joint Venture in early 2005, during which a meeting took place with Mr Trajkovksi in Peru.

161 Approximately 100 of the gaming machines were brought back into Australia and dealt with at the Botany Premises, and then re-exported.

5.8.2 Involvement of Mr Allam/Tonita

162 Mr Allam/Tonita participated in activities associated with the refurbishment and supply of the machines in the Nuevestar transaction. Mr Allam dealt with technical issues for customers in South America via Mr Andrews, and he would sometimes be in direct contact with customers. The Aristocrat companies also claim that Mr Allam was responsible for supplying a stock of EPROMs and artwork which would allow the gaming machines to be refurbished and sold and that he manufactured counterfeit compliance plates.

5.9 Behong

5.9.1 Behong Agreement

163 Behong was a scrap merchant located in Sydney.

164 From 1 July 2005 until 30 November 2006, Aristocrat had a contractual agreement with Behong pursuant to which Behong was the appointed scrap collector for Aristocrat (“Behong Agreement”).Under the Behong Agreement, Behong would pick up scrap inventory, comprising unusable or obsolete inventory of gaming machines and components designated for disposal, from Aristocrat’s Rosebery plant, including second hand gaming machines and artwork.

165 The services provided to Aristocrat by Behong under the Behong Agreement, were described as “scrap metal containment, removal, disposal and purchasing services”.

166 The Behong Agreement included a term prohibiting Behong from on-selling for reuse material supplied to it under the Behong Agreement. Clause 3.5.2(b) states that Behong must “only use such rubbish and waste for scrap reclamation and must not be sold for reuse”. In closing addresses, the Aristocrat companies abandoned reliance on this clause but they pointed to other provisions of the Behong agreement to support the claim of conversion.

5.9.2 Mr Allam/Tonita’s dealings with Behong

167 Mr Allam was first introduced to Behong and its principal, Mr Hong, through Mr David Fisher. Mr Fisher is an electronics and gaming machine technician who has known Mr Allam for about 17 years and has provided technical services to him over a number of years.

168 With Mr Fisher’s initial assistance, Mr Allam and Tonita purchased certain items, including Aristocrat gaming machine parts and components, from Behong in the period 1 February 2006 to 30 November 2006. The quantity included the following:

· in or around February 2006, Mr Allam’s first purchase, which was arranged by Mr Fisher, comprised between 300 and 350 gaming machine monitors;

· in the course of the next 10 to 12 weeks (that is, from about February 2006 to April 2006) Mr Fisher made about a dozen trips to Behong to collect scrap parts and components for Mr Allam;

· from the end of May 2006 to the end of June 2006, Mr Allam obtained several truckloads of materials;

· in late June and early July 2006, Mr Allam obtained approximately 100 boxes containing Aristocrat artwork and conversion kits from Behong with new Aristocrat EPROMs and artwork panels. Mr Allam also obtained over 100 boxes of used artwork panels;

· from around the beginning of July 2006 until early November 2006, Mr Allam went to the Behong scrap yard several times per week. On many occasions, Mr Allam took away whole bins and whole pallets, selected what he wanted and returned the rest; and

· from August to September 2006, Mr Allam collected about 10 or 12 bins of artwork panels, of which he retained only a small quantity.

169 The Aristocrat companies allege that as Behong was prohibited under the terms of the Behong Agreement from selling the waste obtained from Aristocrat for reuse, Behong remained the bailee of the waste until it completed its obligation to destroy it. Consequently, the Tonita respondents’ acts in dealing with the waste constituted acts of conversion.

170 The Tonita respondents do not deny that they obtained significant quantities of material from Behong. Indeed they rely upon the fact of having obtained second-hand material from Behong to explain the presence of some of the items seized from their premises in Anton Piller raids (discussed below).

171 However, the respondents dispute that a relationship of bailment existed at the relevant time between Aristocrat and Behong. They submit that the terms of the Behong Agreement do not prohibit the re-sale of the waste and that the Aristocrat companies ceased to have title or any right of possession in the waste after delivery. They say that no claim in conversion can therefore be made against any of the respondents.

5.10 Procedural History

5.10.1 Global proceeding

172 Part of the current proceeding was initially brought against Global and Mr Andrews, and commenced by way of an application for search orders.

173 The first Anton Piller orders were made by Allsop J on 30 June 2006 against the Global respondents. The search orders were executed on 3 July 2006 at:

· the Florey Premises; and

· the Mascot Premises.

5.10.2 Impact/Tonita proceeding

174 A separate proceeding against Impact, Mr Cragen, Tonita and Mr Allam (NSD 133 of 2007) was commenced by way of application for search orders. Those orders were made by Branson J on 31 January 2007 and searches took place at the following premises on 1 February 2007:

· the Botany Premises;

· the Georges Hall Premises; and

· the Bankstown Premises.

175 Search orders were also made in relation to Mr Cragen’s residence in Killarney Heights, NSW. However, those search orders were unable to be executed. Mr Cragen gave evidence that at the time of the search orders he was in Argentina.

5.10.3 Consolidated proceedings

176 On 22 June 2007, I ordered that the Global proceeding and the Impact/Tonita proceeding be consolidated.

6. THE PLAY KING TRANSACTION

6.1 How the transaction occurred

177 On 12 July 2002, Mr Andrews received an email from one of his overseas customers, Mr Sergio Ortega Barrie about the possible supply of ten Aristocrat Mark IV gaming machines at $US650 per machine to Mr Barrie’s client, Play King, in Peru.

178 There was further communication between Mr Andrews and Mr Barrie about the price and number of the gaming machines to be supplied. It was Mr Andrews’ usual practice to send pro forma invoices to his clients before sending the final commercial invoice. Mr Andrews’ evidence is that around 14 July 2002, he sent to Mr Barrie a pro forma invoice number 352 for the supply of 20 Aristocrat Mark IV gaming machines.

179 Pro forma invoice number 352 does not contain details of the games that were to be supplied but it does state a total price of $13,000 for the gaming machines.

180 At or about the same time, Mr Andrews contacted Mr Lawrence (Laurie) Birks, the principal of a Queensland based company known as Gaming Machine Consulting Services Pty Ltd. Mr Andrews’ evidence was that he dealt with Mr Birks’ company on about seven occasions and that the Play King transaction was one of the earliest of them.

181 There is no written record of Mr Andrews’s first communication with Mr Birks, which was by way of a telephone conversation. Mr Andrews gave evidence of the conversation in very brief terms. He said that he asked Mr Birks whether Mr Birks could supply 20 Aristocrat gaming machines and that Mr Birks said he could.

182 No details of the machines or their serial numbers or the games, or even the price, are mentioned in Mr Andrews’ evidence of the conversation with Mr Birks. However, he says that after the conversation, Mr Birks sent him a list of 20 Aristocrat Mark IV gaming machines that Mr Birks could supply and that Mr Andrews prepared a new pro forma invoice number 360 from that list. Mr Andrews was unable to find the list, but the pro forma invoice was in evidence.

183 Pro forma invoice number 360 was dated 14 July 2002. It was for the supply of 20 Mark IV machines. Details of the serial numbers and the games were included on the invoice. The price stated on the pro forma invoice was US$650 per machine, with a total price of US$13,000.

184 Following the dispatch of pro forma invoice number 360, Mr Andrews apparently had email correspondence with Mr Barrie in which Mr Barrie requested that the number of machines be increased to 32. Mr Andrews was unable to locate those emails.

185 Mr Andrews’ evidence is that he then telephoned Mr Birks who told him that he (Mr Birks) could supply the increased number that had been requested.

186 Mr Andrews says he then raised commercial invoice number 360 dated 14 July 2002 but, curiously, there are a number of differences between the details on this invoice and the details recorded on pro forma invoice number 360.

187 First, the price per machine on the commercial invoice is lower than on the pro forma. The price on the pro forma was US$650 per machine whereas on the commercial invoice it was US$500 per machine. This discrepancy does not seem to be explained in the evidence.

188 Second, the details of the games which were recorded on the pro forma invoice do not appear on the commercial invoice, which lists the machines only by reference to their serial numbers. The explanation for this appears to be that, nearly a month later, on 7 August 2002, Mr Andrews received an email from Mr Barrie requesting Mr Andrews to remove the names of the games from the invoice as it was said not to be a requirement of Peruvian Customs that the name be stated.

189 Mr Andrews is unable to locate the email correspondence with Mr Barrie about this alteration. But assuming the explanation to be correct, it must follow that the commercial invoice number 360 which was in evidence as the final invoice was not raised on 14 July 2002. The evidence referred to later indicated that this commercial evidence was not raised until August 2002.

190 The evidence given by Mr Andrews as to the terms of the sale by Mr Birks’ company for onsale by Global to Play King was set out in Mr Andrews’ affidavit. The evidence discloses that the agreed price was A$525 plus GST per machine, making a total of A$18,400.

191 There was documentary evidence of the payment of this sum by Global to Mr Birks’ company.

192 The 32 machines that were the subject of the Play King transaction were shipped to Peru in August 2002. Global’s Shippers Letter of Instruction addressed to JAS International (Aust) Pty Ltd of Alexandria, NSW (“JAS”) was in evidence.

193 Importantly, whilst Global was shown on the Instruction as the shipper, the pick up address was recorded as being Mr Birks’ company, with the address described as Unit 3, 35 Tradelink Road, Hillcrest, Queensland. Mr Birks’ name was shown next to the company’s name as the contact person.

194 The consignee was recorded on the instruction as Play King and its address in Peru was set out.

195 Mr Andrews gave evidence that on or about 7 August 2002, he arranged for an inspection report on the 32 gaming machines. There was a copy of the inspection report in evidence which described the goods as 32 used/refurbished Aristocrat Mark IV “slot machines, as per the attached invoice”.

196 It appears that Play King paid an initial deposit on the 32 machines and Mr Andrews’ evidence was that Play King paid the balance on 7 August 2002. A copy of the payment advice was in evidence.

197 Mr Andrews’ evidence is that on or about 8 August 2002, he forwarded an “amended” commercial invoice number 360 to JAS, who was apparently the freight forwarder. Mr Andrews says that the copy of the invoice which was in evidence was the final version of the document. He says that it was in the same form as the document to which I referred at [186] above.

198 On or about 18 September 2002, Mr Andrews received an email from Mr Barrie informing him that one of the serial numbers on commercial invoice number 360 did not match any of the machines that had been shipped and that the Peruvian Customs Department was threatening not to release the machine.

199 Mr Andrews does not have a copy of the email from Mr Barrie but he produced in evidence a copy of a letter (not on letterhead) dated 25 September 2002. The letter was addressed “to whom it may concern” and advised of an error in commercial invoice number 360 because of a last minute substitution of one of the machines forming part of the shipment.

6.2 The inspection by Mr Coster

200 In April 2006, that is to say nearly four years after the Play King transaction took place, Mr Garry Coster carried out an inspection of the gaming machines at the offices of Mincetur, which is the Peruvian Ministry of Foreign Trade and Tourism.

201 At the time of the inspection, Mr Coster held the position of Special Projects Manager of Aristocrat and, in that capacity, he was engaged in the conduct of an investigation into counterfeit Aristocrat gaming machines in Peru.

202 Mr Coster carried out his inspection on 13 April 2006 at a warehouse occupied by Mincetur in Lima. A lawyer acting for Play King was present during the inspection. The lawyer showed Mr Coster a copy of an invoice that appeared to record that the seized machines had been purchased by Play King from Global.

203 Mr Coster initially formed the view that each of the seized machines was counterfeit. He formed that view on the basis that the artwork and the EPROMs incorporated into the gaming machines were non-genuine, and the hand engraving of the serial numbers on the compliance plates was of poor quality.

204 Mr Coster’s affidavit evidence continued as follows:

44. The factors which indicated to me that the artwork was non-genuine included that it was of an inferior quality to genuine Aristocrat artwork (for example, the artwork appeared faded and some figures were distorted), and most of the artwork panels did not bear the Aristocrat Copyright Information. The factors that indicated to me that the EPROMs were non-genuine included that the EPROM labels were coloured either red or yellow (whereas genuine Aristocrat EPROM labels are white), the labels were handwritten (whereas genuine Aristocrat EPROM labels are typed), the labels did not bear the full names of the Aristocrat games, and the labels did not bear Aristocrat Copyright Information.

45. On 20 May 2006 I returned to the Mincetur warehouse to conduct a further inspection of the seized machines. A Mincetur officer provided me with a copy of a document which I recognized to be the invoice shown to me by the lawyer acting for Play King S.A. I checked a sample of the serial numbers recorded on that invoice against the serial numbers recorded on the compliance plates affixed to the seized machines and placed a tick against those serial numbers on the invoice. A copy of that invoice appears at page 81 to 82 of Exhibit GDC-1.

46. I took photographs of the exterior of a sample of the gaming machines, as well as photographs of the EPROMs contained inside the gaming machines and compliance plates with serial numbers which correspond with the serial numbers in the invoice referred to above. Copies of those photographs appear at pages 83 to 96 of Exhibit GDC-1.

205 The invoice to which Mr Coster referred to at [45] of his affidavit was a copy of commercial invoice number 360. He placed ticks against six serial numbers on the invoice, which the Aristocrat companies say represented a sample of the machines originally inspected by Mr Coster.

206 From a comparison of the games and serial numbers recorded on the pro forma invoice with the serial numbers ticked by Mr Coster during his inspection on 20 May 2006, it appears that the following games were loaded on to the “counterfeit” machines identified by Mr Coster in Peru:

· Oscar;

· Enchanted Forest (on two machines);

· Butterfly Delight;

· Heart Throb; and

· Golden Canaries.

6.3 Whether the Play King machines were counterfeit

207 It seems to me that, as was submitted by counsel for Global, Mr Ogborne, there are three reasons why the Aristocrat companies’ claim in relation to the Play King transaction must fail.

208 First, the machines in this transaction did not come into the possession of Global or Mr Andrews. They were shipped directly from Mr Birks’ company in Queensland direct to Play King in Peru.

209 The Aristocrat companies sought to meet this difficulty by relying on s 38 of the Copyright Act, which provides that a person is a “secondary” infringer if he or she knows, or ought reasonably to have known, that the making of the article constitutes an infringement.

210 However, for reasons set out below, I do not consider that Aristocrat has proved the requisite element of knowledge.

211 Second, the machines inspected by Mr Coster had counterfeit Spanish language artwork. However, there is nothing to suggest that the subject machines left Australia with anything but English language artwork.

212 Third, Mr Coster’s inspection took place nearly four years after the machines left Australia and at a time when they had been operating in Peru for some period of time. It seems to me that on the whole of the evidence I should infer that the substitution of the artwork took place in Peru.

213 Senior counsel for the Aristocrat companies, Mr Cobden SC, sought to overcome the second and third difficulties by submitting that an evidentiary onus shifted to Global once it was established that the machines were counterfeit. He relied, in particular, on what he said was a pattern of trade in counterfeit products.

214 Mr Cobden also submitted that an inference ought to be drawn against Global by reason of its failure to call Mr Birks to give evidence.

215 I reject both of those submissions, which I will deal with in more detail below after I turn to the factual questions which I have decided adversely to Aristocrat.

6.4 Play King machines never in the possession of Global

216 Mr Andrews gave evidence as to his method of business operations in the period before the inception of the Global/Impact Joint Venture.

217 Relevantly, Mr Andrews’ evidence was that Global generally did not maintain an inventory of gaming machines at its premises. On receiving a sales enquiry from a customer, Mr Andrews said that he would contact Global’s suppliers and arrange for machines to be located and supplied directly from that supplier to the customer. Mr Andrews’ evidence was that, as a result, he would generally not inspect the gaming machines being supplied for overseas customers.

218 There was no challenge to the proposition that Global followed this practice in supplying gaming machines to Play King. Indeed, the evidence which I set out above as to the way in which the Play King transaction was effected makes it plain that the 32 machines were sourced in or from Queensland by Mr Birks’ company and that they were shipped direct from Mr Birks’ premises to Peru.

219 This was established by the oral evidence of Mr Andrews as to the steps which he took to fill the order and in particular by the contemporaneous documentary evidence to which I have referred.

220 The most telling documentary evidence on this question is the instruction given to JAS, the freight forwarding company, which shows the pick up address as being Mr Birks’ Queensland premises, and the SGS inspection report which shows the place of inspection at the same premises.

221 Mr Andrews was cross-examined on his evidence about the Play King transaction but no challenge was made to his evidence of his dealings with Mr Birks or to his evidence that the machines were sourced by Mr Birks and shipped directly from Queensland to Peru.

222 It follows from this evidence that Global could not have been responsible for producing any infringing components identified on the gaming machines in Peru during Mr Coster’s inspection in May 2006.

223 It also follows in my view that the Aristocrat companies have failed to establish that Global knew or ought to have known of any infringement of its copyright in the components of the machines identified by Mr Coster. I will address the knowledge question in more detail when I deal with the “pattern of trade” and Jones v Dunkel submissions made by Mr Cobden.

6.5 Spanish Artwork

224 Mr Coster’s evidence was that the local regulations in Peru require games and artwork on gaming machines to be in Spanish.

225 He also gave evidence that, in his experience, there is a very significant problem of machines being “rebirthed” in Peru with the insertion of Spanish games and Spanish artwork.

226 Mr Coster accepted in cross-examination that all of the counterfeit artwork on the Play King machines which he inspected was in the Spanish language. He also said that the Play King machines which he inspected with English language artwork on them contained genuine artwork, however the machines with English artwork that he identified as counterfeit contained other indicia of counterfeiting.

227 The quality of the artwork was one of three indicia of counterfeiting to which Mr Coster referred in his affidavit. The other two were the EPROM labels and the poor quality hand engraving of the compliance plates.

228 In cross-examination, Mr Coster retreated from his evidence about the compliance plates. He said that the fact that they were hand engraved did not indicate that the machines were counterfeit. Indeed, he said that there was nothing about the compliance plates which indicated to him that the machines were counterfeit.

229 Mr Coster was not cross-examined about the other indicator of counterfeiting, namely the EPROM labels, but I will return to that question when addressing the significance of the four year gap between shipment and inspection.

230 Before turning to that question, it is sufficient to say that the importance of the evidence that the artwork on the infringing machines was Spanish is that it was not supplied by Global. It was not suggested to Mr Andrews that he had supplied Spanish artwork.

231 Indeed, the evidence demonstrates that the artwork which was shipped from Australia to Peru was in English. This evidence is to be found in the SGS report which describes the machines as “shrink wrapped”. Photographs apparently taken by SGS at the time of its inspection show the machines shrink wrapped and packed in cartons and English language artwork can be seen in the photographs.

6.6 Four year gap

232 The machines which Mr Coster inspected at the Mincetur warehouse in April 2006 were seized by Mincetur from Play King. Mincetur is not the Customs Department; it is the Ministry of Foreign Trade and Tourism and it is important to bear in mind that the machines were seized after they had been in operation in Peru for some period of time.

233 Mr Coster quite fairly said that he could not speculate as to how long the machines had been in operation, but he agreed that they had been in operation for a period of time before they were seized by Mincetur.

234 Mincetur’s functions include monitoring and administering the licences required to operate and import gaming machines into Peru.

235 Whilst carrying out his duties in Peru, Mr Coster received many communications from Mincetur seeking his assistance in the identification of counterfeit Aristocrat gaming machines. Sometimes he attended the premises of gaming machine operators. On other occasions, he was requested by Mincetur to inspect Aristocrat gaming machines held by Peruvian customs officials.

236 Mr Coster’s evidence was that Peruvian customs officials inspect all containers of gaming machines and parts when they enter Peru, including the accompanying documentation, to verify that the serial numbers and other details match the corresponding machines in the shipment. He went on to say that these examinations often result in the impounding of the counterfeit Aristocrat machines, subsequently identified by Mr Coster, while genuine machines are released.

237 It is plain from Mr Coster’s evidence that the six counterfeit machines identified by Mr Coster in April and May 2006 were not seized by Customs when they entered Peru.

238 It seems to me that the inescapable inference from this, and from the fact that the machines were seized after they had been operating in Peru for some period, is that any counterfeit components on the machines identified by Mr Coster were installed on the machines while they were in Peru.

239 This is clearly established in relation to the Spanish artwork. I would also infer that the EPROM labels, on which Mr Coster relied, were placed on the machines in Peru.

240 Having regard to the extent of the “rebirthing” problem in Peru, the period of nearly four years which elapsed between the date of shipment and the date of inspection, and in particular the Spanish artwork, it cannot be inferred that any infringing components on the machines inspected by Mr Coster were part of the machines that were shipped to Play King in about August 2002 by Global.

241 It is true that there are emails to which I will refer later that show Mr Andrews’ willingness to supply original English language Aristocrat artwork to customers in South America, to be copied there as part of the “rebirthing” process. But it was not established that this occurred in relation to the Play King transaction.

6.7 The pattern of trade and the evidentiary onus

242 In determining whether an alleged “infringer” has the requisite knowledge under s 38 of the Copyright Act, regard may be had to the “knowledge, capacity and circumstances of the particular defendant”: Raben Footwear Pty Ltd v Polygram Records Inc (1997) 75 FCR 88 at 91 per Burchett J; see also at 97 per Tamberlin J, at 104 per Lehane J.

243 Raben Footwear was concerned with the construction and effect of ss 102 and 103 of the Copyright Act which contain the same element of knowledge as s 38, namely “knew or ought reasonably to have known”. Accordingly, the same approach may be adopted on this question in the present case.

244 Mr Cobden’s submission that knowledge could be inferred from Global’s “pattern of trade” rested upon the fact that the Play King transaction was the twelfth in the list of 54 transactions identified by the Aristocrat companies.

245 However, in my view, this submission must be rejected for the following reasons.

246 First, it was not established that any of the eleven transactions which preceded the Play King transaction involved the supply of gaming machines sourced by Global through Mr Birks.

247 Mr Andrews’ evidence was that he had about seven dealings with Mr Birks’ company, and that the Play King transaction was more than likely to have been “early on in the run of seven occasions”. But it was not suggested to Mr Andrews that any of the other transactions involved counterfeiting.

248 Second, it was not put to Mr Andrews that he knew or ought to have known from the first eleven transactions, or from his dealings with Mr Birks that Mr Birks was involved in the supply of counterfeit machines.

249 Third, there was no evidence in the present case of the type which resulted in a finding of constructive knowledge in Raben Footwear. In that case, the importer made inquiries from the manufacturer as to whether all copyright conditions had been met but received only a guarded and limited assurance: see Raben Footwear at 92.

6.8 Jones v Dunkel

250 The Aristocrat companies submitted that I was entitled to draw an inference of knowledge from the failure of Global to call Mr Birks to give evidence: Jones v Dunkel (1959) 101 CLR 298.

251 I reject this submission for the following reasons.

252 First, the rule in Jones v Dunkel only applies where a party is required to explain or contradict something: Schellenberg v Tunnel Holdings Pty Limited (2000) 200 CLR 121 at [51]; J.D. Heydon, Cross on Evidence (7^th Aust ed, 2004) at [1215], pp 41-42.

253 Here, there was no challenge to Mr Andrews’ evidence that the Play King machines were shipped directly from the Queensland factory of Mr Birks’ company to Play King in Peru.

254 Nor was it put to Mr Andrews that he knew or ought to have known from his past dealings with Mr Birks that Mr Birks was involved in the supply of infringing materials. Indeed, no such evidence was adduced by the Aristocrat companies.

255 The Aristocrat companies had the burden of proving the elements of secondary infringement. Once it appeared that the machines had been shipped from Mr Birks’ premises, it was for the Aristocrat companies to establish the requisite level of knowledge on the part of Global. But absent any evidence of infringement by Mr Birks, or indeed any suggestion of such to Mr Andrews, the rule in Jones v Dunkel has no application.

256 Second, the rule cannot be employed to fill gaps in the evidence or to convert conjecture and suspicion into inference: Cross on Evidence at [1215], p 41. Yet this is precisely what Aristocrat seeks to do.

257 Third, even if the rule were applicable, the appropriate inference is that Mr Birks’ evidence would not have assisted Global’s case: Jones v Dunkel at 308, 312, 321.

258 The rule could therefore not be elevated to the level at which the Aristocrat companies sought to put it, namely to draw an inference that Mr Birks’ evidence would have been damaging to Global’s case.

259 It is true that Mr Birks swore an affidavit which was filed by Global and that a forensic decision was ultimately taken by Global not to call Mr Birks to give evidence. But the mere filing of an affidavit, and even a decision taken late in the trial not to rely on that evidence, cannot alter the effect of the three propositions which I have set out above as to the inapplicability or inutility of the rule in relation to the Play King transaction.

6.9 Other matters in relation to Play King

260 Mr Cobden’s submission that Global had an evidentiary onus to explain or negative the inference of infringement rested largely on the “pattern of trade” referred to above.

261 To the extent that he relied on other evidence to support the submission that an evidentiary onus fell upon Global, I reject the submission.

262 As I have said, the Aristocrat companies have the onus. Whether the standard is the balance of probabilities or the Briginshaw standard as was submitted by the respondents, there was nothing in the evidence adduced by Mr Coster which imposed any onus of proof on Global. To the extent that Global had any evidentiary onus, that was discharged by Mr Andrews’ oral evidence and the documentary evidence to which I have referred.

263 Although I have reached an adverse view of Mr Andrews’ credit, it does not follow that I would reject all of his evidence as untruthful. It seems to me that Mr Andrews’ evidence of the Play King transaction was consistent with the documentary evidence and I accept it.

7. BUSINESS COMMUNICATIONS OF THE RESPONDENTS

264 During the course of the hearing, the Aristocrat companies placed great weight on a bundle of business communications involving either the Global, Impact or Tonita respondents, or a combination of one or more of the groups of respondents.

265 Initially, each piece of communication tendered into evidence was not tendered against all three sets of respondents – some correspondence was tendered against only the Global respondents, some against the Global and Impact or Global and Tonita respondents, and some against all three sets of respondents.

266 However at the conclusion of the hearing, I made orders, admitting on a provisional basis against all respondents, evidence the use of which was previously limited on the basis that it was only admitted against particular respondents and not against other respondents.

267 The majority of this evidence is found in Exhibit A1. Exhibit A1 was a bundle of documents that were extracted from documents of the Global respondents available to the Aristocrat companies in around late 2006, following the initial disputes between the Aristocrat companies and the Global respondents.

268 A number of other documents were also tendered as separate exhibits.

7.1 Communications going to infringement

269 The Aristocrat companies submit that many of the communications contained in Exhibit A1 constitute “instances of unguarded communications that make plain the true nature of the joint venture’s trade (a counterfeiting operation)”. A large number of email communications were extracted and put to the respondents’ witnesses in cross examination. In this section, I will outline the most relevant of those communications.

270 The first relevant document was an email tendered as a separate exhibit from Mr Andrews to a person described as “Aldo” in the “To” line. This email was dated 9 August 2002 and had been printed from a disk drive that was seized from Mr Andrews’ premises in the execution of the Anton Piller order. The email discussed options for acquiring artwork. The relevant parts are as follows:

There are three options for artwork. The first and most cost effective is to supply good quality second hand art work with game prom chips

Second hand artwork in stock as follows …

Second choice is to provide Digital artwork of the artwork panels – This produces artwork that is the same as the Aristocrat artwork but is not screen printed (Its usually a bit hard to tell except the original screen printed artwork is a bit sharper)

…

Third choice is to provide the proper product that is screen printed but again the cost escalates …

271 In cross-examination, Mr Andrews strongly denied that the “second choice” outlined in this email was a reference to an option of copying Aristocrat artwork by some digital method. He said that as the email was from 2002, he did not recall what the reference to providing the “proper product” meant in the “third choice”.

272 The next relevant document was an undated email from Mr Andrews to the email addresses “lmn48@hotmail.com” (belonging to a Mr Nevada, a business partner of the Joint Venture) and “monica-linda@terra.com” which states in relevant part:

I’m sorry but we cant get the slant tops out this week because of some parts etc but have booked them to be loaded for next Thursday to make the ship cutting off on the 4/3.

This will also give us the opportunity to change some of the games around to try to give you some that you dont have there. If you find any that work OK we could send you a set of art work to match the game and you could just copy the game chips, make some additional new artwork and convert some of your existing machines in your sites to these games.

273 In cross-examination, Mr Andrews accepted that this email appeared to contain a suggestion from him that if Mr Nevada liked some of the games that Mr Andrews sent him, Mr Andrews would be able to send him more artwork and Mr Nevada would be able to copy corresponding game chips. He stated that the fact that Mr Nevada would copy games in South America concerned him now, “but everybody did it in South America – they’re serial counterfeiters over there”.

274 The next relevant document is an email chain contained in the tender bundle between Mr Andrews, Mr Allam and a Mr Richard Foote dated 9 and 10 November 2004 that was originally tendered against the Global and Tonita respondents.

275 The first email in the chain is from Mr Andrews to Mr Foote and states:

Hi Richard

Just testing your email address – Riad will probabl;y [sic] send me the software later on tonight and I’ll forward it to you then.

276 To this email, Mr Allam replied:

hi toni

[t]his is the new version of wcard bet 50 to suit 1c 2c 5c 10c and20c riad

277 In cross-examination, Mr Cobden put it to Mr Andews that the “new version of wcard” to which Mr Allam referred was software that was suitable to run an Olympic game called Wildcard Bet 50. Mr Andrews accepted that “wcard” meant “Wildcard”, however refuted the suggestion that the software that had been sent by Mr Allam and that was referred to in the email was an Olympic game, but “was to do with the bill acceptor that was attached to the machine”.

278 The next relevant document is an email chain dated 12 and 15 November 2004 between Mr Andrews and a Mr Kirill Mendelson, a customer of the Joint Venture who had purchased a large quantity of gaming machines for sale in the Russian market. The subject line of the emails is “Manufacturers Plates”, which Mr Andrews acknowledged in cross-examination referred to compliance plates.

279 The most relevant part of the email chain is a part of an email from Mr Andrews to Mr Mendelson, copied to Mr Cragen, as follows:

Hi Kirill

I can organise the manufacturers plates for you as per your discussions with George.

I need to let me know [sic] the exact information you want on the plates as follows

Mark 6

Date of Manufacture – do you want them all made in the same year or do they have to be a month and year

Serial Numbers – (is there a set serial number you need to use for each machine as per the import you have made or can they be random that we think up or can they be running numbers

…

You can use the XAW5…….series which is normally used by Aristocrat for their conversions of MVPs to Mark 6 or if they are an original Mark 6 then the series of serial numbers will be XAW6…………etc.

Please let me know what you want and we will sort it out for you.

280 This document was originally tendered against the Global and Impact respondents.

281 Mr Cragen accepted that this email resulted from a discussion between himself and Mr Mendelson. Mr Cragen strongly denied in cross-examination that in the discussion, Mr Mendelson had asked him to make up fake Aristocrat compliance plates. He said that Mr Mendelson had indicated that he was willing to purchase the entire Uruguay shipment for sale in Russia, and wanted two sample machines to be sent to him beforehand. Mr Cragen said that he believed that Mr Andrews’ email was a reference to the possibility of sending leftover compliance plates from Sydney on the sample machines, or using the numbers that were on leftover compliance plates that had been removed from stripped machines.

282 The email was also put to Mr Andrews in cross-examination. Mr Andrews did not accept that the email was an offer from him to arrange to have compliance plates made and have serial numbers placed on them. Mr Andrews stated that in the email, he was offering to procure original compliance plates for Mr Mendelson that had been taken off gaming machines. He said that if Mr Mendelson provided him with the information that he required on compliance plates, he (Mr Andrews) would be able to source compliance plates that contained that information from his supply of compliance plates that had come off original machines and that were kept in bins at the Botany Premises. If Mr Andrews was unable to source compliance plates containing the particular information that Mr Mendelson wanted, he said that he would have “gone back and said I can’t supply that”.

283 The next document is an email chain between a Mr Kevin Hirst, who was involved with Huricane, Mr Andrews and Mr Allam. The email chain is dated 18 November 2004 and was initially tendered against the Global and Tonita respondents.

284 In an email to Mr Andrews, Mr Hirst indicated that he was waiting for a “complete set of game Roms [sic]”. He continued:

Riad has sent only 2 color proms and both of them are blank files So he has either mis read the prom or has a defective ones.

With regard to the EPROM size the ones in the games that we have erased are 16 times the size of the files that Riad has sent for the Low res games and will require about 1-2 days to convert the Files there are 42 files involved that will require modification and I am not certain that we have all the ROMs for all the games. [sic]

285 Mr Andrews acknowledged in cross-examination that he understood this email to be a reference to a misread EPROM, that is to say that there was a mistake when copying an EPROM. However, he denied that the email referred to the exercise of copying game EPROMs on to a computer by Huricane.

286 In response to the above email, Mr Allam replied by email in the same email chain as follows:

If Kevin requires the games that I sent to him by mail, I still have the complete set of games on eprom. If he wants then I will send the games to him tomorrow by mail (express post).

Thanks

Riad

287 In cross-examination, Mr Allam denied that he had ready access to games such that he would be able to mail them immediately because he kept a master copy of the games.

288 The next relevant document is an email chain between Mr Andrews and Mr Mendelson (copied to Mr Cragen) with the subject “Atronic”. The emails are dated 17, 18 and 19 February 2005 and were originally tendered against the Global respondents only. There are several relevant parts within the chain of emails.

289 First, in an email to Mr Mendelson, Mr Andrews says:

Hi Kirill

Re the Atronic shipment …

I have been advised that the plates that were to be put on the machines dont have the Atronic logos and I’m trying to get a list of the serial numbers by COB this afternoon so that I can get Riad to make them up by Tuesday next week and I’ll take them to Melbourne with me for fitting on the machines. …

I need some dummy invoices made up for say 80 machines and 50 machines by that date …

[D]id you fix up the last lot of freight … or is this being held pending the recent problems with the incorrect plates / serial numbers for the shipment of 119?

290 When questioned on this part of the email, Mr Andrews conceded that it was possible that the email was a reference to Mr Allam making up or engraving some compliance plates for the “Atronic” machines, a set of gaming machines that had been purchased from Tabcorp. Mr Andrews gave evidence that because of the way the machines were manufactured, and the practice of the Victorian gaming industry, it was necessary to arrange for the manufacture of additional compliance plates for the Atronic machines.

291 The second relevant part of the email chain is in the reply to Mr Andrews’ email from Mr Mendelson as follows:

Please make sure that the tags are attended to and for a change we have the right ones attached.

Mr Andrews indicated that he believed that the reference to “tags” in this email was to compliance plates.

292 Mr Andrews then replied to Mr Mendelson as follows:

Hi Kirill

Is there any particular year of manufacture you want on the plates or do you want me to just go with the series of dates within the numbers of the ones that have passed before (I should be able to get close based on previous lists) or do you want to nominate dates.

293 Mr Andrews acknowledged that this email was a reference to engraving on blank compliance plates the year of manufacture and serial numbers that suited Mr Mendelson, however he denied that this involved using serial numbers that were on existing lists obtained from Tabcorp because those number had been accepted by regulatory authorities in the past. He explained the practice of engraving compliance plates for the Atronic machines by reference to the Victorian gaming system, which involved putting two sets of serial numbers on compliance plates.

294 The next relevant document is an email chain between Mr Andrews, Mr Allam and Mr Dante Rivera, a business acquaintance of the Joint Venture’s located in South America, copied to Mr Cragen, Mr Andes Kan and Mr Vladimir Trajovski. The subject of the emails is “ARISTOCRAT PROGRAMS” and the emails are dated 22 July 2005.

295 The first email in the chain of two emails is from Mr Rivera and is addressed to Mr Allam as follows:

Sr. Ria please send me by e-mail new information about this game programs Star Drifter, King of the Nile, Money Tree because the old ones that you sent me recently they are failure.

296 The second email is an email in response to Mr Rivera from Mr Andrews as follows:

Hi Dante

All the Mark VI games were given to Walter on a CD – Please get him to give you a copy of the games you require.

We are not happy to send this type of information over the email which is why we gave this CD to Walter to take back with him. …

297 In cross-examination, Mr Andrews identified “Walter” as a Mr Walter Di Palma, a gaming machine technician from Argentina who appeared as a witness in the proceeding. Mr Andrews denied that Mr Di Palma was in fact given a CD of games, indicating that he had “made a mistake”. Mr Andrews also stated that he understood from Mr Allam that the problems with the games that Mr Rivera referred to in his email were caused because Mr Rivera “was an incompetent technician and the problem was with the way in which he put them on the board, rather than the games being faulty”.

298 Mr Andrews denied that he had made the reference to not sending information over email because he did not want a record kept of those communications. Another email containing a similar statement from Mr Andrews, dated 5 November 2005, was also in evidence. The relevant part is as follows:

Please don’t ask for software by email – Just call

299 This email was not put to Mr Andrews, although it was put to Mr Cragen and Mr Allam. Mr Cragen also denied that the reason for this comment was that Mr Andrews did not want a record kept of those communications, and said that he believed that Mr Andrews was referring to the fact that he would not send software by email, but could send the relevant chips by post.

300 The email from Mr Andrews to Mr Rivera was also put to Mr Cragen and Mr Allam in cross-examination. Mr Cragen said that he had “made extensive inquiries about that particular email” and was told that the information that was contained on the CD given to Mr Di Palma was game training. He indicated that he had made those inquiries after this proceeding had started, but that he had not seen the email at the time that it was sent in 2005 as “it was an email address that I didn’t really get to all the time”.

301 Mr Allam also denied that the CD referred to in the email contained Aristocrat Mark VI games given to Mr Di Palma by Mr Allam. The effect of Mr Allam’s evidence was that he had given Mr Di Palma instructions on how to assemble Mark VI machines and how to put games and artwork on the machines. He said that Mr Di Palma had taken pictures relating to these instructions and downloaded those pictures onto a blank CD given to him by Mr Allam. Mr Allam said that this CD was the CD referred to in the email by Mr Andrews.

302 Mr Di Palma also gave evidence at the hearing. Exhibited to his affidavit was a CD which he said was the CD given to him by Mr Allam in around June or July 2005.

303 There was some question as to whether the CD exhibited to the affidavit was in fact the same CD that was given to Mr Di Palma by Mr Allam.

304 In his cross-examination of Mr Di Palma, Mr Cobden suggested to Mr Di Palma that the CD that had been exhibited to his affidavit was in fact a CD that was manufactured in Argentina, and words to the effect that it was made in Argentina were marked on the CD. In addition, the manuals that were on the CD exhibited to Mr Di Palma’s affidavit apparently related to American gaming machines which are different to machines from Australia, and were written in English, which Mr Di Palma does not speak.

305 Mr Di Palma stated that the manuals were useful to him despite this as they assisted him to “orient” himself in relation to the machine. Mr Di Palma also denied that he was ever given a CD by Mr Allam which contained Aristocrat games.

306 The next relevant communications are two email chains between Mr Andrews, Mr Vladimir Trajkovski, Mr Andres Kan and Mr Cragen dated 21 and 25 October 2005. The emails relate to machines that formed part of the Uruguay transaction. The first email chain contained an email from Mr Andrews as follows:

Hi Vladimir

What has happened to all the original artwork we sent down to you for projects – I thought you were supposed to keep these and return them to us here?

…

If we cant get the originals back then we will have to charge the group for these sets of artwork which have a value in the local market place here of arouns$1000. [sic]

I cant believe we are sending more of the same gear down there when I was fairly sure that we had made it very plain that we were to have all the originals returned to us.

307 In cross-examination, Mr Andrews denied that the implication to be drawn from this email was that he had sent original artwork to Vladimir with the intention that it would be copied in South America, the copies distributed for sale, and the original returned to him in Australia. He said that the reference to sending artwork back was meant to convey that the surplus that was not used in the project was to be sent back to him in Australia. Mr Cragen also denied any understanding that Mr Trajkovski was borrowing the artworks with an intention of copying them.

308 The second email chain contained another email from Mr Andrews as follows:

Hi Vladimir

…

2/ I have attached a full list of all the original artwork sent – This was given to you / Dante with the instructions that these were to be returned to us here as each one has a value in this market place.

So I need to know

…

c) Original artwork was given to Tony Nuevo and this was again given with instructions for their return to us here …

309 Mr Andrews again denied in cross-examination that this email was a reference to sending artworks to Mr Trajkovski, all of which he expected to be returned to him in Australia.

310 Following this email in the chain was an earlier email that had been sent by Mr Trajkovski to Mr Andrews. The relevant part is as follows:

3. Original artwork, it was sent to us in the last seconds prior to shipping to install them in the machines to Macedonia as we did not have any graphics (what Riad sent was partial) and those where [sic] only 3 or 4 games if I remember well, we did not have time to take copies. But all of this was talked on the phone with you and Riad.

311 In relation to this email, Mr Andrews denied that he understood Mr Trajkovski to mean that he had to use some original artworks, because contrary to the understanding he had with Mr Andrews to make copies of the artwork and send the originals back, he did not make the copies. Mr Cragen also denied that he understood this explanation to be the case at the time that Mr Trajkovski had sent the email, but conceded that when he read the email now, that may be a possible interpretation.

312 The next relevant communication is an email from Mr Antonio Nuevo to Mr Allam, Mr Cragen and Mr Andrews. The relevant part of the email is as follows:

G’Day Riad,

…

I need the software for Flame of Olympus MK6 can you please send it. We also need the blank [c]hips for ten MK6 boards, we only received for 20 boards and we have 30 boards.

313 In cross-examination, Mr Allam denied that he knew that the reason that Mr Nuevo had ordered and had received blank chips for Mark VI boards was for the purpose of copying Aristocrat game software on to those chips in South America. He said that it was possible that Mr Nuevo was using blank chips for legitimate purposes, such as for use on other brands of gaming machines.

314 The next relevant document is an email from Mr Andrews to Mr Trajkovski and Mr Cragen dated 10 April 2005 which states in relevant part:

In future all correspondence regarding the Uruguay project and any other sensitive subject such as parts etc for this project etc is to be sent to the following address

kgbird1947@yahoo.com.au

315 The Aristocrat companies submit that this email, and Mr Andrews’ use of a web-based “and therefore untraceable” Yahoo email address, was evidence of the adoption of protocols to avoid detection of infringing activities. Mr Andrews denied that this was the purpose of adopting a web-based email address, and also denied any connection between the adoption of this email address and the discovery that Anton Piller raids were being carried out in the Vidtech proceedings. The email was also put to Mr Cragen, who said that he did not recall having received it.

316 A further relevant email was tendered as Exhibit X and was dated 20 September 2005. This email was from Mr Nuevo to Mr Allam, Mr Cragen and Mr Andrews, and was copied to a Mr Santiago Sanjur, a business partner of Mr Nuevo. The subject line was “URGENT” and the email stated:

G Day Riad,

The CD Tony Andrews handed me in Vegas only has Indian Dreaming MKVI on it, I was also missing Tiki Torch MKVI as I specified on the mail below ….

317 The earlier “mail” referred to was then reproduced and stated relevantly:

G’Day Riad,

On the CD you gave me with the MKVI games, I am missing MKVI Indian Dreaming & MKVI Tiki Torch, can you please send ASAP via Email …

318 This email was put to Mr Cragen and Mr Allam in cross-examination. Mr Cragen denied having read the email and said that he did not recall having seen the email at the time that it had been sent to him. Similarly, Mr Allam said that although the email was sent to him, he did not remember receiving it and said that “I don’t read every email that is coming, you know, to me”. He also denied ever having given Mr Nuevo a CD.

319 The last email correspondence of note is an email from Mr Andrews to the email address “jesika@iinet.net.au” dated 10 November 2005, which forwards an email sent to Mr Andrews from Mr Sanjur, copied to Mr Nuevo and Mr “Jorge L. Martin C.”. The email from Mr Sanjur which was forwarded by Mr Andrews reads in relevant part:

Hello Tony, …

Tony with regards to the art work for these games, We will translate them into Spanish. If you can get to Us ASAP. The pay tables glass, before the machines arrive to Panama it will greatly appreciated. [sic] If you can get the art in a cd it will be even better. …

I have the Aristocrat Games translated into Spanish and can offer Art for them if you need …

320 This email was put to Mr Andrews in cross-examination. Mr Andrews accepted that in the email, Mr Sanjur requested artwork for translation and copying, however he denied that he in fact ever sent artwork over for this purpose or that he ever sent artwork to Mr Sanjur on a CD. He said that he did not know why Mr Sanjur had made this request of him and that he had not responded to the request.

7.2 Findings in relation to the email communications

321 The emails were not tendered as proof of the facts stated in them, but the contents of the communications are revealing.

322 I reject the explanations given in cross-examination by each of Mr Andrews, Mr Cragen and Mr Allam. The explanations were, in my view, quite unconvincing and were at odds with the terms of the communications which were, themselves, reasonably clear on the face of the documents.

323 Nor do I accept that Mr Andrews, Mr Cragen or Mr Allam did not read the emails. They were significant business communications. Email is an important, if not the prevalent, means of communication between parties in the modern world, especially where business operations are conducted with parties overseas.

324 Of course, business people sometimes fail to read every communication. But no convincing explanation was given as to why this might have occurred in relation to the emails mentioned above. All of them are of sufficient importance to enable me to find that, on the balance of probabilities, the addressees read the emails.

325 Having regard to the volume of material tendered in this case, I do not consider it necessary to analyse and explain each of the emails set out above. To a large extent, they speak for themselves. I make the following findings.

326 First, Mr Andrews offered to provide a customer with artwork that was digitally copied from Aristocrat artwork. This is plain from the email to “Aldo” from 2002.

327 Second, Mr Andrews offered to another customer in South America to send him artwork which could be matched to games that could be copied in South America. Mr Andrews accepted that this was the effect of the undated email referred to in [272] above.

328 The offers contained in the emails were not offers to do an act which would have constituted an infringement of the Aristocrat companies’ copyright under ss 36 or 38 of the Copyright Act. But they do indicate Mr Andrews’ willingness to assist the “serial counterfeiters” in South America in carrying out their actions.

329 There were other offers to the same effect, including the email chain dated 21 and 25 October 2005, and a request from South America for artwork to be translated into Spanish: see email of 10 November 2005.

330 The email chain of 21 and 25 October 2005 is an example of Mr Cragen’s tacit acceptance of the Joint Venture’s role in the South American counterfeiting operations.

331 Third, Mr Andrews offered to arrange for Aristocrat compliance plates with fake serial numbers to be made for a customer of the Global/Impact Joint Venture. He did so following a conversation between Mr Cragen and the customer about the supply of gaming machines.

332 This is quite clear from the email chain of 12 and 15 November 2004 and, in particular, from the extract set out at [279]. Mr Cragen accepted that the email resulted from a discussion between himself and the customer. I am inclined to accept Mr Cragen’s denial that the customer, Mr Mendelson, asked him to make up fake Aristocrat compliance plates, but I do not consider that he gave me a truthful account of the conversation which took place.

333 The inference I would draw from the email communication, and from Mr Cragen’s concession that a discussion took place, is that he discussed the topic of the compliance plates with Mr Mendelson and that he would leave it to Mr Andrews to contact Mr Mendelson about it.

334 Implicit in this is, at very least, the acceptance by Mr Cragen that the Global/Impact Joint Venture was prepared to supply gaming machines with false Aristocrat compliance plates.

335 Fourth, Mr Allam gave Mr Walter Di Palma a CD containing Aristocrat Mark VI games which he (Mr Allam) had burned onto the CD. That is the effect of what Mr Andrews said in his email of 22 July 2005 to Mr Rivera and of his evidence of his conversation with Mr Allam about this topic.

336 I reject Mr Allam’s denial that the CD referred to in the email contained Aristocrat Mark VI games. I also reject Mr Di Palma’s evidence. The CD he produced in his evidence was not given to him by Mr Allam.

337 The email to Mr Allam and others of 20 September 2005 also dealt with the topic of the delivery of an unauthorised CD. I am satisfied that Mr Allam gave such a CD to Mr Nuevo and that Mr Andrews and Mr Cragen were aware of this.

338 Fifth, Mr Allam was requested by a South American customer, Mr Nuevo, to provide blank EPROMs for Aristocrat Mark VI gaming machines. I think it is plain that he knew the purpose of this request was to enable Mr Nuevo to copy Aristocrat game software onto EPROMs in South America.

339 Sixth, I accept that Mr Andrews adopted protocols to avoid detection of the Global/Impact Joint Venture’s involvement in copyright infringement, in particular the adoption of a web-based, Yahoo email address.

340 Although there are other innocent explanations which could have been given for the adoption of this course, Mr Andrews’ email of 10 April 2005 was written shortly after an Anton Piller raid on a business associate of his, Mr David Parry: see Aristocrat Technologies Australia Pty Ltd v Vidtech Gaming Services Pty Ltd (2006) 68 IPR 229. I cannot accept that it was mere coincidence that the adoption of the Yahoo email address and the sending of the email set out in [314] by Mr Andrews corresponded with the raids on Mr Parry’s premises.

8. MR CHANNA’S EVIDENCE

8.1 Overview of Mr Channa’s evidence

341 Mr Channa’s evidence is of importance to the case for two reasons. First, Mr Channa provided evidence to the Aristocrat companies which formed the basis on which they obtained the Anton Piller orders against the Impact and Tonita respondents.

342 Second, Mr Channa’s evidence, if I accept it, includes direct evidence of copyright infringement by the Tonita respondents. It also includes evidence of material contained on a computer disk which Mr Channa claims to have received from Mr Allam (CCC-14). The content of the disk includes material which establishes copyright infringement, although Mr Allam denied that the disk belonged to him.

343 Mr Channa gave oral evidence in the proceeding before me. The affidavit evidence which he gave in support of the Anton Piller orders was not relied upon, but the respondents put to Mr Channa in cross-examination some inconsistencies between his earlier evidence and the evidence adduced before me.

344 Mr Channa now lives in England where he works as a maintenance person in a cheese factory. He speaks very little English, his first languages being Arabic and Greek. He gave his evidence in Arabic through an interpreter.

345 During the period from about February to December 2006, Mr Channa was employed by Tonita or Mr Allam as an assistant at Impact’s Botany Premises. As I said earlier, Mr Allam used those premises to carry on a part of his business activities.

346 Mr Channa’s evidence in chief was that Mr Allam used to pick Mr Channa up by car every morning and take him to the Botany factory. He proceeded to give evidence of his observations at those premises.

347 This evidence commenced with a statement by Mr Channa that he saw “chips” being fitted into a machine or device at the Botany Premises. He said he was told by Mr Allam that the device was used to load and unload programs. He said he witnessed Mr Allam using the device in this way approximately five times a month.

348 I took the effect of this evidence by Mr Channa to be that he saw Mr Allam burning or copying EPROMs using an EPROM burning device.

349 Mr Channa went on to say that there were “chips” without a sticker and that Mr Allam used to get the sticker and put it on. Mr Allam would give Mr Channa stickers with numbers on them and Mr Channa would match the numbers on the stickers to a number in a book.

350 I took the effect of this evidence to be that Mr Channa saw Mr Allam placing EPROM labels on EPROMs using numbers that Mr Channa matched with numbers in a book, apparently kept by Mr Allam.

351 Mr Channa gave evidence that he was told to hide compliance plates at the Botany Premises by Mr Allam. He testified that Mr Allam said to him “don’t let anyone see them because they are illegal, prohibited”. Mr Channa also testified that Mr Allam told him to “hide them, get somewhere and hide them in case they come to check the place”.

352 Mr Channa testified that on Mr Allam’s instruction, he hid the plates in various locations, including by burying them in a plastic bag in the backyard of the workshop, or hiding them in the ceiling or drawers.

353 Mr Channa also testified that some plates that he had hidden had printing on them and others were blank, and he observed Mr Allam printing on them. When the blank plates were delivered to the Botany Premises, Mladen (an employee of Mr Allam) would print on them and then give them to Mr Channa, who would hide them.

354 Mr Channa also said in his evidence in chief that there were the same devices and equipment at Tonita’s Bankstown Premises as at Impact’s Botany factory.

355 He also gave some evidence of Mr Allam’s acquisition of stock from Behong’s scrap yard. He said that Mr Allam had told him that the items in the scrap yard were not allowed to be sold and that he had gone to those premises up to 100 times over a period of six months. Mr Channa said that he had never attended the scrap yard alone.

356 In his evidence in chief, Mr Channa also addressed the topic of visits that he made to Mr Allam’s home. This topic was relevant because it was part of Mr Allam’s case that Mr Channa had planted important items of evidence at Mr Allam’s home in an attempt to “incriminate” him.

357 Mr Channa’s evidence on this topic was that he had attended one of Mr Allam’s homes to cut a tree and that he had attended another to paint it and clean the carpet. He said he had visited the first house on four or five occasions.

358 I referred in the introduction at [27] to the disk which was described as CCC-14. Mr Channa’s evidence was that the disk was given to Mr Allam by a man at the Botany factory. He said:

The man came and gave it to Riad and Riad took it and left it in my in the … and left it with me. He forgot to take it.

359 The cover of the disk CCC-14 has the word “Riad” written in handwriting on it. Mr Channa denied in cross-examination that he had written Mr Allam’s name on the disk.

360 The final topic of importance in Mr Channa’s evidence in chief was a bundle of photos taken by Mr Channa about one and a half months before he left Mr Allam’s employment. The photos record Mr Channa’s observations of the factory floor at the Botany factory.

8.2 Preliminary observations at to Mr Channa’s credit

361 It will be necessary to return to the topic of Mr Channa’s credibility when I deal with Mr Allam’s evidence. However, it is appropriate that I make some general observations at this point in my reasons.

362 Mr Channa was cross-examined closely as to payments he received from the Aristocrat companies and about financial dealings he had with Mr Allam. Mr Channa claimed that Mr Allam owed him a substantial sum of money, and the thrust of the cross-examination was that Mr Channa sought to secure a financial benefit for himself by providing false evidence to the Aristocrat companies, as well as to extract revenge against Mr Allam.

363 I am satisfied that the respondents were on sufficient notice of the payments by the Aristocrat companies to Mr Channa. Moreover, I am satisfied that the payments were not so large as to irrevocably taint his evidence. He was brought to Australia to give evidence because of the respondents’ objections to video link. Some payment to compensate him for the dislocation and involvement was not objectionable.

364 Nevertheless, in my opinion, Mr Channa saw the payments as, to some extent, placing him in the Aristocrat companies’ debt. The consequence of this was that, in my view, he did not wish to say anything which might be seen as adverse to the Aristocrat companies’ case.

365 To what extent he was motivated by revenge against Mr Allam is impossible to say. But plainly, there was no love lost between them. At one point during Mr Channa’s evidence, Mr Allam called out from the well of the Court words in Arabic which amounted to a threat against Mr Channa.

366 Two things seem to me to be important aspects of Mr Channa’s evidence. First, some of it was consistent with other evidence in the case.

367 An example of this may be found in the email conversations to which I have referred above. The email referred to at [279] contains an offer by Mr Andrews to make compliance plates with false numbers. Mr Allam was the “technical guy” for the Joint Venture and it is therefore likely that he would have carried out that work. Other emails, such as those at [284] and [312], suggest that Mr Allam burned Aristocrat games onto blank EPROMs.

368 The second aspect is that there was a degree of exaggeration in Mr Channa’s evidence on some important matters of detail, as well as a reluctance to make concessions which he thought might be against the Aristocrat companies’ interests.

369 The most notable example of this is seen in a comparison of Mr Channa’s transcript of an interview given to the Aristocrat companies’ then solicitor, Mr Arnold, prior to seeking the Anton Piller orders, and his evidence before me.

370 In the transcript of his original interview, Mr Channa gave evidence of planting compliance plates at the Botany workshop as follows:

Q You said you buried some compliance plates.

…

A … but I didn’t actually put it into the ground I just put it over the ceiling …

Q Sorry, the hole in the ceiling. This is in Bankstown, right? How if I went there how would I find it.

…

A Ok there is a light there. You can push up the tiles.

Q How do you know which tile it is?

…

371 There can be no doubt that the transcript of the interview is accurate as Mr Arnold subsequently attended on the Anton Piller raid of the Botany workshop and was able to go straight to a tile in the roof of the office and locate compliance plates which had been hidden in the roof. Yet, in cross-examination, Mr Channa flatly denied that he had said these words in the interview and denied that he had planted the compliance plates.

372 Also, in his evidence in chief at the trial, Mr Channa said that he had “dug in the backyard” and buried compliance plates before taking them out the next day. He repeated that evidence in cross-examination. Yet in his interview with Mr Arnold he said he did not actually put the compliance plates into the ground, he just put them “over the ceiling”.

373 Another troubling aspect of Mr Channa’s evidence was in his account of the interview before the Anton Piller application. Mr Arnold said that Mr Channa had told him that he hoped the Aristocrat companies would assist him by giving him some of the money he had lost in his dealings with Mr Allam. But when this was put to Mr Channa, he denied having had the conversation with Mr Arnold.

374 There were other inconsistencies in Mr Channa’s evidence including his evidence as to the amount owing to him by Mr Allam. This also adversely affects the reliability of his evidence.

9. THE SEIZED MATERIALS

375 In this section I will deal with materials seized during the Anton Piller raids which are said to give rise to an inference of counterfeiting. I will exclude from this section a consideration of email correspondence and invoices, which are dealt with in separate sections of the judgment.

376 Thus, this section is confined to a consideration of seized gaming machine components and software which are said to be indicative of copying of Aristocrat copyright materials. Of particular importance are EPROM labels, game software, artwork and compliance plates.

377 The evidence of what was seized at Florey, Mascot and Botany was admitted against the Global and Impact respondents but, subsequently, I admitted it provisionally against all respondents. I took the same course in relation to the material seized at the premises of the Tonita respondents. That is to say, it was admitted initially only against the Tonita respondents but later, I admitted it provisionally against all respondents.

378 The question of whether the materials seized at each set of premises is admissible against all respondents depends upon two factors. The first is the date on which the Global/Impact Joint Venture commenced. The second is whether it is relevant to the Aristocrat companies’ claim that the Tonita respondents were jointly liable for any copyright infringements committed by the Global/Impact respondents.

379 It seems to me that the appropriate way to approach the seized material is to consider it separately, by reference to the premises at which the material was seized.

9.1 The Florey and Mascot Premises

380 The electronic materials seized at the Florey and Mascot Premises of the Global respondents were imaged and placed onto CD-ROMs which were identified in the evidence of Mr Michael Cooley, a solicitor employed by the solicitors for the Aristocrat companies.

381 The CD-ROMs were provided by Mr Cooley to Mr Marc Mayo, a studio manager employed by Aristocrat and to Mr Dieter Polaczek, who is the manager of Aristocrat’s Compliance Verification Laboratory.

9.1.1 Artwork at Florey and Mascot

382 Mr Mayo’s evidence was that the CD-ROM contained a copy of 478 computer files and that the names of the files were either based on an Aristocrat game name, eg “Dolphin Treasure.jpg”, an abbreviation of such a name, or contained the word “Aristo”, which seems to be an abbreviation of the name “Aristocrat”.

383 Mr Mayo observed that the images of the files found on the Global respondents’ computers were identical to Aristocrat artwork, although for the most part those images were of lower resolution than that of the original Aristocrat artwork, and therefore not suitable for reproduction.

384 Nevertheless, Mr Mayo’s evidence in chief was that there were 19 files that were of sufficiently high resolution to produce hard copy artwork that would be:

of an acceptable quality level although not to Aristocrat quality standards, depending on the markets in question.

385 The force of this evidence was somewhat diminished in cross-examination. First, Mr Mayo conceded that sophisticated software was needed to enhance the resolution of the artwork, and there was no suggestion of the presence of the software on the files examined by Mr Mayo.

386 Second, while it was suggested that the resolution of the files could have been enhanced by using a program known as Photoshop, no such software was found on the Global computers.

387 Third, at least one of the images was conceded not to be absolutely identical to Aristocrat’s artwork in the following passage of cross-examination:

Q: So that if one was trying to use the seized file on the left to create the panel on the right, one couldn’t do it, could one?

A: No.

388 Fourth, none of the artwork files on the Global computers were Spanish language artwork, although the only counterfeit artwork sighted by a witness for the Aristocrat companies was Spanish language artwork: see discussion of Spanish language artwork in the context of the Play King transaction at section 6.5 above.

389 Fifth, Mr Mayo conceded that if a person wanted to create a copy of the artwork, he or she would simply take the physical item to a printer and have it copied. He agreed that this would be an infinitely better way to obtain a good resolution copy of the artwork, which would be far superior to that which could be obtained from the files on the Global computers, which in any event was in a different file format to that used by Aristocrat.

390 Mr Andrews’ explanation for the presence of the artwork on his computers was that he scanned the images from Aristocrat brochures and that he used them on his website. He said that from time to time he forwarded some of the images to prospective clients in response to enquiries for details of the games installed on the machines that were available for purchase from Global.

391 In cross-examination, he said that he scanned the images before 2005 and had forwarded them to customers for information purposes in the period up to 2005.

392 Mr Mayo agreed that the resolution of the images on Mr Andrews’ computer was consistent with them having been produced by a scanner for use on the internet.

393 It seems to me that, considered in isolation, the concessions made by Mr Mayo support the explanation given by Mr Andrews for the existence of the scanned images on his computers. However, this evidence is only one part of a large maze of evidentiary material put forward by the Aristocrat companies and I will return to it once I have considered the other material.

394 On any view, the copying of Aristocrat artwork for the purpose of using it on the Global respondents’ website was, of itself, an infringement of copyright under s 36(1) of the Copyright Act, at least when the artwork was displayed on the website and when images were forwarded to prospective customers. Those infringements were not of the magnitude or seriousness of the claims of counterfeiting, but they give rise to a claim for damages under
s 115(2).

9.1.2 Game sheets at Florey/Mascot

395 Mr Mayo’s evidence in chief was that the materials seized from Global’s Florey and Mascot Premises included 148 images of game sheets that could be used to produce hard copy artwork that would be of “an acceptable quality level although not to Aristocrat quality standards, depending on the markets in question”.

396 In cross-examination, Mr Mayo conceded that the artwork involved in game sheets could not be used to replicate artwork to fit on an Aristocrat panel.

397 This is yet another part of the evidentiary maze to be considered in light of the evidence as a whole.

9.1.3 EPROMs and EPROM labels at Florey and Mascot

398 Mr Polaczek’s evidence was that a motherboard containing EPROMs was seized at the Mascot Premises.

399 Photographs of the motherboard show that the EPROM labels described the games as “Treasure”.

400 Mr Polaczek said in his evidence in chief that the labels on the game EPROMs contained on the motherboard were not genuine Aristocrat labels. He identified a number of features of the labels which indicated to him that the labels were not genuine. These included the absence of copyright information and the absence of standard label information, as described in his affidavit.

401 Mr Polaczek also said that the labels on the “Treasure” EPROMs appeared to be much newer than the other EPROMs within the motherboard. He said that this indicated to him that they were likely to have been installed more recently than the other EPROMs and that they were therefore likely to be non-genuine Aristocrat EPROMs.

402 The proposition that the EPROM labels were not genuine was not the subject of direct attack in cross-examination. Some attack was made on Mr Polaczek’s experience in relation to label finishes but I accept his evidence on this topic.

403 Mr Andrews’ evidence was that the gaming machine with the motherboard identified by Mr Polaczek came from South Australia and was in storage at Global’s Mascot Premises awaiting delivery to Botany for refurbishment.

404 A further answer to this part of the case was that, in Global’s submission, the evidence of the Aristocrat companies’ computer expert, Mr McKemmish, established that the labels on the Global computer had been printed only once.

405 I do not think this accurately encapsulates Mr McKemmish’s evidence which was that the printing date shown on Mr Andrews’ computer was the last date on which the relevant instance of the file had been printed.

406 As with each piece of evidence in this case, it will be necessary to return to it once I have considered the totality of the material presented by the Aristocrat companies.

407 Whilst I accept that the EPROM labels identified by Mr Polaczek were not genuine Aristocrat labels, I am not satisfied that this evidence, viewed in isolation, establishes that the EPROMs were not genuine. It seems to me that this question turns on whether there was other evidence to support that inference, in particular whether there was evidence that EPROMs had been copied and/or whether there was software at the premises that was used in the process of burning counterfeit EPROMs.

408 The Aristocrat companies pointed to other evidence of the existence of a large number of EPROM labels at Global’s premises and on Mr Andrews’ computer. However, the Aristocrat companies conceded that the EPROM labels identified as counterfeit on the motherboard seized from the Mascot Premises were different from those on Mr Andrews’ computer. I am therefore not prepared to find that those labels on the motherboard constituted false EPROM labels.

9.1.4 Game Software at Florey and Mascot

409 Mr Polaczek’s evidence establishes that there were 40 files which contained software that corresponded to Aristocrat game software amongst the files seized from the Global respondents.

410 However, these files included only three Aristocrat games: “Pengin Pays”, “Queen of the Nile” and “Dolphin Treasure”.

411 Mr Andrews accepted that these games were stored on the computers, but said that he had forgotten about the existence of them. He said that he believed that the files were sent to him as an attachment to an email dated 9 November 2001 requesting confirmation of specific versions of those games which were to be supplied by the Global respondents. The email was in evidence and it supports Mr Andrews’ explanation for why the games were sent to him.

412 Mr Andrews went on to say that he did not make any other use of the files exhibited to Mr Polaczek’s affidavit.

413 I do not consider that the Aristocrat companies have established that Mr Andrews’ explanation is false. The Aristocrat companies made a strong attack on Mr Andrews’ credit, but I have been unable to find any evidence which establishes that the Global respondents made use of the game software identified by Mr Polaczek.

414 Indeed, in my view, the evidence supports Mr Andrews’ claim that he did not use it. First, in respect of one of the games, “Penguin Pays”, Mr Polaczek was unable to successfully cause the software to run on a gaming machine. Whilst he recognised symbols that correspond to Aristocrat’s game “Penguin Pays”, he tested the seized software for that game and was unable to make it work.

415 Second, Mr McKemmish filed an expert report in reply to, inter alia, the evidence of Mr Andrews, but he did not take issue with Mr Andrews’ assertion that the files had not been used.

416 Mr McKemmish’s evidence appears at section 8 of his report in reply. That section of the report is headed “Comments in respect of matters raised in the affidavit of Mr Riad Allam … and Mr Anthony Andrews …”. Notably, Mr McKemmish took issue with Mr Allam’s claim that he did not operate certain relevant software but the report contains no such evidence in relation to Mr Andrews.

417 I am entitled to infer that Mr McKemmish’s evidence would not have assisted the Aristocrat companies on the issue of whether the Global respondents used the game software for the three Aristocrat games found on Mr Andrews’ computers: Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418-419.

418 Finally, I do not consider that the evidence of the existence of an external hard disk drive on the Florey computer gives rise to an inference of copying, as was submitted by the Aristocrat companies. I accept Mr Ogborne’s submission that the evidence of the USB disk does not suggest that it was being transported from place to place for the purpose of being used in a counterfeiting operation.

9.2 The Botany Premises

9.2.1 EPROMs at Botany

419 Mr Polaczek’s evidence in chief was that he examined a number of EPROMs that were seized from the Botany Premises. He gave evidence that three polystyrene foam boards were seized from the Botany Premises, attached to which were 355 EPROMs. Photographs of these foam boards were in evidence.

420 Mr Polaczek further indicated that another 56 EPROMs were also seized from the Botany Premises. Those EPROMs were located in plastic tubes, with labels attached that corresponded to various Aristocrat games. A photograph of a sample of these EPROMs was also in evidence.

421 Mr Polaczek gave evidence that the EPROM labels attached to the seized EPROMs were not genuine. He pointed to the type of typeface on the labels, the colour and dimensions of the labels, the fact that some were handwritten, and the lack of standard label information or copyright information that appears on genuine Aristocrat EPROM labels as indicia that these labels were counterfeit.

422 As well as the physical EPROMs that were examined, Mr Polaczek was given a
CD-ROM which contained copies of software that were taken from a sample of the EPROMs seized at the Botany Premises. Mr Polaczek conducted a series of tests on the software to determine whether the seized software was Aristocrat software, namely:

· identification of embedded program numbers within the binary code of the software;

· CRC signature check, which involved comparing the “CRC signature” on the seized software to genuine Aristocrat software to determine whether the program data was the same; and

· transferring files onto EPROMs and loading into gaming machines.

423 Of the 81 files tested by Mr Polaczek, his evidence was that he obtained a correct CRC match for 67 files, indicating a high probability that the software on those seized EPROMs was the same as corresponding Aristocrat software. In addition, a further eight files contained only a very small number of variations with the corresponding Aristocrat software, however the significance of a small discrepancy was not explained.

424 The Aristocrat companies relied on the presence of the seized EPROMs as evidence of the copying of Aristocrat game software, and also as evidence of a larger counterfeiting operation.

425 However, whether Aristocrat sought to rely on the fact that a large number of EPROMs was found at the Botany Premises as evidence in itself of copyright infringement was never stated plainly. The proposition that the possession of a large number of EPROMs containing Aristocrat software could in itself be viewed as an indication that the software was counterfeit was never put to Mr Cragen.

426 Instead, Aristocrat relied on the fact that the EPROMs seized from the Botany Premises were found “lying around in open buckets and boxes”, contrary to the terms of Mr Allam’s licence which they say required EPROMs to be kept “under lock and key”. From the casual manner in which EPROMs were treated at the Botany Premises, the Aristocrat companies sought to draw an inference that the EPROMs or the software on them must have been obtained illegitimately.

427 Against the allegation that the seized EPROMs were counterfeit, the Impact respondents made three main submissions.

428 First, Mr Cragen did not deny that a large number of EPROMs were kept at Impact’s premises in Botany. However, he said that the seized EPROMs were EPROMs that had been stripped from second-hand machines obtained from Behong with the intention of matching them with artwork and re-using them.

429 Second, the Impact respondents submitted that all that was established by Mr Polaczek’s testing was that the software on the EPROMs was Aristocrat software. They argued that the same results would have been established if genuine Aristocrat software was tested in the same way in which Mr Polaczek had tested the software from the seized EPROMs.

430 Third, Mr Ogborne pointed to the fact that the majority of the seized EPROMs were found on polystyrene foam boards at the Botany Premises. It was said that Mr Cragen had placed EPROMs on the foam boards for the purpose of assisting Mr Andrews with the legal proceeding that was first brought against him. Mr Ogborne said that, in order to demonstrate that genuine EPROMs in Mr Cragen’s and Mr Allam’s possession had different coloured EPROM labels, Mr Cragen and Mr Allam had placed a range of EPROMs onto the foam boards and taken photographs.

431 These actions were said to indicate, first, that the Impact and Tonita respondents were not seeking to hide anything, and second, that the EPROMs found on the boards were not considered to be “live” or “active” EPROMs that were being used in business, as EPROMs would be damaged by static charge by placing them on material such as polystyrene foam.

9.2.2 EPROM label files at Botany

432 Mr Polaczek also examined a PDF document which was seized from a computer at the Botany Premises during the execution of the search orders. Mr Polaczek said that the PDF document contained imitations of EPROM labels for a number of Aristocrat games. The labels included information such as Aristocrat game names, program numbers, standard label information and copyright information.

433 The Aristocrat companies relied upon Mr Polaczek’s evidence of imitation EPROM labels to infer that the copying of Aristocrat software onto EPROMs was commonplace amongst the respondents. It was said that the conclusion that I should draw from the presence of imitation EPROM labels on the Impact respondents’ computer was that the respondents affixed imitation labels onto counterfeit EPROMs.

434 Similar files were found on computers at the Tonita respondents’ premises, which I will discuss in more detail later on. In essence, Mr Allam’s explanation for those files was that he occasionally produced EPROM labels where labels were missing from EPROMs that he had in his possession. He said that it had become very common to see EPROMs on logic boards within Aristocrat gaming machines that were missing labels or that had labels that were about to fall off because the glue had dried out. On those occasions, it was necessary for him to replace EPROM labels.

435 This evidence was corroborated by Mr David Fisher, a gaming machine technician and long-time acquaintance of Mr Allam. Mr Fisher said that in his experience as a field technician, it was quite common for EPROMs in Aristocrat Mark VI machines to be missing labels or to have the labels fall off while working with the logic board.

436 Mr Cragen denied knowledge of the PDF file containing the imitation EPROM labels that was found on the computer at his premises. The Impact respondents submit that as Mr Allam had access to the computer from which the file had been seized, a logical explanation was that Mr Allam used the computer to produce labels that were missing from EPROMs. I am inclined to accept this explanation for the presence of EPROM labels on the computer at Botany.

437 Moreover, the print out of the PDF file that was in evidence reveals that the file contained only one page of eight labels. Even if Mr Allam’s and Mr Cragen’s explanations for the labels were to be rejected, the presence of these labels alone cannot constitute evidence of the widespread copyright infringement for which the Aristocrat companies contend. Rather, as with the evidence found on the raids at the Florey and Mascot Premises, the evidence must be considered in light of the totality of the material presented by the Aristocrat companies.

9.2.3 Compliance plates at Botany

438 The evidence of Mr Brett Parsons, the manager of Aristocrat’s Mechanical Platform Development, establishes that a number of compliance plates were seized from the Botany Premises in the course of executing the search orders. On the basis of his knowledge and experience with Aristocrat compliance plates, Mr Parsons was asked to determine whether the seized compliance plates were genuine compliance plates.

439 Mr Parsons’ evidence was that a number of the compliance plates seized from the Botany Premises were not genuine Aristocrat compliance plates. He identified 22 compliance plates that were said to be counterfeit. His reasons for concluding that those plates were not genuine were that the plates had one or several of a number of features, including:

· the finish of the plates had a blue tinge, as opposed to the black matt anodised finish on Aristocrat compliance plates;

· the lettering of the Aristocrat logo was too thick;

· there were no holes to allow for riveting on to gaming machines, whereas all genuine Aristocrat plates contain holes;

· the plates appeared to have been screen printed and had glossy finishes, as opposed to the matt finishes that results from the anodised process used on authentic Aristocrat plates;

· engraving of the model number of the machine (eg MK6) did not comply with Aristocrat’s specification;

· information on the plates was hand engraved and not machine engraved; and

· the serial number format did not comply with the National Standard.

440 Compliance plates were also seized from the Bankstown Premises. There is overlap in the arguments relating to the genuineness of the compliance plates found at the Botany and Bankstown Premises. These will be discussed in detail below.

9.3 The Bankstown Premises

9.3.1 Compliance plates at Bankstown

441 Mr Parsons identified 67 Aristocrat compliance plates which were said to not be genuine and which were seized during the raids on the Bankstown Premises.

442 As with the compliance plates seized from the Botany Premises, Mr Parsons concluded that the Bankstown compliance plates were not genuine because they had one or more of the following features:

· plates were screen-printed with a glossy finish;

· thick Aristocrat logo lettering;

· no holes for riveting;

· engraving that did not comply with the specification; and

· blue tinge.

9.3.2 EPROMs at Bankstown

443 Mr Polaczek gave evidence about a large number of Aristocrat EPROMs that were seized at the Bankstown Premises. Of the seized EPROMs, 710 EPROMs had a label attached that referred to the game “Golden Pyramids”. Mr Polaczek’s evidence was that many of the Golden Pyramids EPROMs were in plastic tubes containing the set of EPROMs required for installation in an individual gaming machine. Based on a number of factors, Mr Polaczek concluded that the seized Golden Pyramids EPROMs were not genuine Aristocrat EPROMs.

444 Mr Polaczek said that a key factor that led him to believe that the Golden Pyramid EPROMs were not genuine was that it is very unusual to possess a large number of EPROMs for the same game. This is because genuine Aristocrat EPROMs are either installed, and remain, with a gaming machine when it is released into the market, or are provided with corresponding artwork as part of a conversion kit. Mr Polaczek said that there was no reason of which he was aware why hundreds of EPROMs for a single game would be available in the marketplace separate from the gaming machines for which they were supplied.

445 Mr Polaczek also identified 677 Golden Pyramid EPROMs and many other seized EPROMs with different games that had labels that he said were not genuine Aristocrat labels. Based on this conclusion, Mr Polaczek was of the opinion that the seized EPROMs were not genuine Aristocrat EPROMs.

446 In response to Mr Polaczek’s conclusion that the EPROMs were not genuine, Mr Allam said that the EPROMs were obtained from Behong. He said that where the EPROMs were contained in plastic tubes, they were obtained like that from Behong, and where the EPROMs were loose, they were also obtained from Behong in that fashion. Mr Allam said that he had obtained a large number of EPROMs from Behong, which were in all kinds of conditions, new and second-hand, some of which had labels and some of which did not. Mr Allam denied having created any labels for those EPROMs, and said that all of the EPROMs seized from the Bankstown Premises were in the state in which he obtained them from Behong.

9.4 Compliance plates at the Botany and Bankstown Premises

447 The Aristocrat companies rely on Mr Parsons’ evidence that the compliance plates seized from the Botany and Bankstown Premises were imitations on two levels. First, they say that copyright subsists in Aristocrat compliance plates as original artistic works. Subsistence of copyright is not disputed by the respondents. The Aristocrat companies therefore claim that by taking possession of counterfeit compliance plates for the purpose of distributing them, the respondents have infringed Aristocrat’s copyright in the compliance plates.

448 Second, the Aristocrat companies point to the possession of counterfeit compliance plates by the respondents as evidence of their involvement in a large-scale counterfeiting operation in order to facilitate their supply of Aristocrat gaming machines.

449 The respondents challenged Mr Parsons’ findings on several bases. First, there was some attack on Mr Parsons’ qualifications and expertise to reach the conclusions that he did. Mr Parsons admitted in cross-examination that his involvement with compliance plates was limited to the stages in which the design specification is prepared. He therefore did not see issues or faults that arose in the manufacturing process, unless they were deemed to be issues that needed to be addressed by his department. Mr Parsons also said that he was not familiar with the characteristics of genuine Aristocrat compliance plates that were manufactured overseas.

450 Mr Parsons also admitted in cross-examination that the characteristics of Aristocrat compliance plates that were produced before his time at Aristocrat were outside his expertise or range of knowledge.

451 Second, the Global and Impact respondents sought to challenge Mr Parsons’ findings by reference to Aristocrat’s scrapping procedures. In essence, they said that the evidence established that there were some instances when compliance plates were produced by Aristocrat which did not match their specification, for example because the printing was unsatisfactory. On these occasions, Aristocrat had a process of removing the compliance plates from production and distribution, and sending them to Behong to be destroyed or scrapped.

452 The respondents submit that Aristocrat did not have in place a system which guaranteed the destruction of those compliance plates, and the evidence established that relevant procedures were not always followed. The respondents therefore questioned the basis on which Mr Parsons found that compliance plates that did not match Aristocrat’s specification were necessarily counterfeit.

453 Third, the respondents challenge Mr Parsons’ finding that the presence of hand-engraving on compliance plates was an indicia of counterfeiting. The respondents submit that it is commonplace for genuine Aristocrat gaming machines to come with hand-engraved compliance plates. Mr Allam and Mr Fisher gave evidence to this effect, indicating that in their dealings over the past eight or more years with Aristocrat gaming machines, they had both observed Aristocrat compliance plates that are engraved by hand attached to genuine gaming machines.

454 Indeed the Aristocrat companies conceded that there was some hand engraving done by Aristocrat for a period of time. The Aristocrat companies led reply evidence to the effect that Aristocrat uses hand engraving on compliance plates only on limited occasions, for example if the computer controlled engraving machine breaks down or on a small number of times over the weekend.

455 It was said that only a small team of employees are permitted by the Aristocrat companies to work the hand engraver, in order to meet Aristocrat’s quality standards. Mr Sachin Reddy, an employee of Aristocrat who works in the section responsible for compliance plate engraving, gave evidence that he was the primary person responsible for operating the hand engraver, and the seized compliance plates that contained hand engraving did not match the style of hand engraving produced by his section at Aristocrat.

456 The respondents also allege that Mr Channa planted some of the compliance plates seized from the Bankstown Premises for the purpose of incriminating the respondents. This attack on Mr Channa’s credibility arose in part from an interview that Mr Channa had with Aristocrat in January 2007, the transcript of which was in evidence. The respondents relied upon the following passage, which is set out in part at [370] above:

Q You said you buried some compliance plates

A ... but I didn’t actually put it into the ground I just put it over the ceiling …

Q Sorry, the hole in the ceiling. This is Bankstown, right? How, if I went there how would I find it?

A Ok there is a light there. You can push them up the tiles.

Q How do you know which tile it is?

A Oh because it has black marks from my fingers because I … it also has a hole in the corner. But what I did before I left I just scattered around a few blank plates because as evidence because I didn’t know what would happen when I leave so I just wanted them to be there. And also in Bankstown we put some of those blank plates on top of the cupboard and I also put 2 or 3 of those blanks [sic] plates behind the cupboard so if you move the cupboard you will see them.

457 In cross-examination, Mr Channa denied having said this in the interview, and denied having planted any compliance plates.

458 The Global and Impact respondents also say that those compliance plates seized from Bankstown that were not planted by Mr Channa were legitimately procured from Behong.

9.5 The Georges Hall Premises

9.5.1 EPROM Labels at Georges Hall

459 Mr Polaczek gave evidence that loose EPROM labels (labels that were not attached to EPROMs) were found at the raid at the Georges Hall Premises in a container with a blue lid. Mr Polaczek said that the labels were a mixture of genuine and non-genuine Aristocrat labels.

460 His reasons for concluding that the labels were not genuine EPROM labels was that they were printed onto either sheets of labels or paper sheets which would have required the label to be cut out with scissors or some other implement, whereas genuine Aristocrat EPROM labels are never printed onto paper sheets of that type. Mr Polaczek’s evidence also established that the typeface on the labels was not the same as that which appears on genuine Aristocrat labels. In addition, Mr Polaczek said that Aristocrat does not supply adhesive labels separately to EPROMs.

461 Mr Polaczek also gave evidence that six packets of blank, self-adhesive labels, of similar dimensions to EPROM labels, were seized from the Georges Hall Premises. This was relied upon by the Aristocrat companies as evidence of the copying of EPROM labels by the Tonita respondents.

462 Mr Polaczek also examined a PDF document which was seized from a computer at the Georges Hall Premises, containing imitations of EPROM labels for a number of Aristocrat games. Mr Polaczek concluded that the labels were not genuine Aristocrat labels for a number of reasons, including that the labels contained incorrect program numbers and game names.

463 As referred to above, the Tonita respondents dispute that the discovery of EPROM labels at the Georges Hall Premises is evidence of counterfeiting of gaming machines. They say that the EPROM labels that Mr Allam created were for the purpose of replacing missing labels and do not evidence a broader counterfeiting operation.

9.5.2 Blank EPROMs at Georges Hall

464 Mr Polaczek’s evidence indicated that certain documents were seized from a computer and in hard copy at the Georges Hall Premises. Amongst those documents was an invoice in the name of Tonita Enterprise and a document marked “Escrow-Order Form” which refers to Tonita Enterprise and another company named Hong King Inventory Ltd. Those documents appeared to relate to the purchase of certain components including 500 parts described as “M27V322-100F1” and another 500 parts described as “M27C1001-10F”. Mr Polaczek’s evidence was that from his knowledge of Aristocrat EPROMs, the descriptions “M27V322-100F1” and “M27C1001-10F” refer to a type of EPROM which can be used to store Aristocrat software.

465 In addition, a box titled “New Tubes” with a number of tubes containing EPROMs was seized from the Georges Hall Premises. Mr Polaczek gave evidence that there were no labels on any of the EPROMs contained within the tubes. Some tubes contained new, unused EPROMs, while others contained used EPROMs, and some contained a mixture of new and used EPROMs. In total, there were 7 tubes of new EPROMs, 5 tubes of used EPROMs, and 4 tubes of a mixture of new and used EPROMs.

466 The Aristocrat companies submit that blank EPROMs, like blank DVDs in film piracy cases or blank CDs or tapes in music piracy cases, are suggestive of copying.

467 In response to the Aristocrat companies’ allegation of counterfeiting, Mr Allam said that many of the materials that he obtained from Behong were new and unused EPROMs. He says that all of the EPROMs that were seized from the Georges Hall Premises were obtained from Behong in the condition in which they were found at the time of the raids.

9.5.3 Compliance Plates at Georges Hall

468 Mr Parsons examined a PDF document containing images which were found on a computer at the Georges Hall Premises. His evidence was that the PDF document contained two images which resembled compliance plate artwork for Aristocrat compliance plates. In particular, the first image contained the words “Aristocrat”, “Aristocrat Leisure Industries Pty Limited” and “Mk 6 series II”. The second image contained a close approximation of the Aristocrat logo (although it was not accurate), the words “Aristocrat Leisure Industries Pty Limited” and “Mk 5 series II”. Both images contained representations of panels for engraving details of the manufacture date, machine type and serial number.

469 An invoice which referred to “70x90 LAB Plate” was also seized from the Georges Hall Premises and examined by Mr Parsons. Mr Parsons’ evidence was that the invoice appeared to relate to the purchase by Impact Gaming of 150 compliance plates from a company named Azortech.

470 Mr Parsons’ evidence also established that six compliance plates were seized from the Georges Hall Premises. His evidence was that those compliance plates were not genuine Aristocrat compliance plates because of two features of the plates: first, because they appeared to have been screen printed, with a glossy instead of a matt finish; and second, because there were no holes to allow for riveting on to machines.

471 Mr Allam gave an explanation for the presence of those compliance plates at his home in his affidavit. He said that he believed that the seized compliance plates had been placed in his car by Mr Channa at the end of 2006, and that Mr Allam had removed those items together with everything else in his car and placed them in his house before going away in January 2007. He said that prior to the search, he was not aware of the presence of the seized compliance plates in his house.

472 Mr Allam also gave evidence that Mr Channa had approached him in around August 2006 at the Botany Premises and showed him a bundle of blank Aristocrat compliance plates that he had procured from Behong. Mr Allam said that he was “concerned about the existence and appearance of such blank compliance plates”, and had a conversation with Mr Channa as follows:

[Mr Allam]: These plates should not be used by anyone except Aristocrat. I do not want these anywhere they must be destroyed.

Mr Channa: Should I through [sic] them in the bin or take them back to Behong

[Mr Allam]: No, these plates must be destroyed as they should not be in anyone’s property. Do not put any of these plates in the truck, or anywhere. You must destroy the plates now because they are illegal.

473 Six blank compliance plates were also seized from the Georges Hall Premises. These compliance plates contained no engraved information in the “manufacture date”, “machine type” or “serial number” panels.

474 Mr Allam said that the blank compliance plates that were found at the Georges Hall Premises came from installation kits that accompanied the South American machines that formed part of the Uruguay transaction, and were therefore legitimately obtained. The respondents submitted that blank Aristocrat compliance plates came into the market from the machines that formed part of the Uruguay/Nuevestar transaction: see [152]ff above.

9.5.4 Aristocrat game software at Georges Hall

475 Mr Polaczek also examined a CD-ROM containing 167 files which were seized from a hard drive found at the Georges Hall Premises. As with the software found on EPROMs at the Botany Premises, Mr Polaczek conducted a number of tests on the files found at the Georges Hall Premises, including identifying the embedded program number, conducting a CRC check, and transferring the files onto EPROMs and loading them onto gaming machines.

476 However although Mr Polaczek’s evidence sets out in length the steps that he took in conducting tests on the files seized at Georges Hall, the Aristocrat companies did not read those paragraphs of his affidavit that set out the results of those tests, nor did they tender the exhibits to Mr Polaczek’s affidavit in which he had summarised the results in table form. Therefore, no conclusion can be drawn about the presence of those files on the Tonita respondents’ computer.

9.5.5 Computers at Georges Hall

477 Three imaged copies of hard drives were seized from the Georges Hall Premises. The first was an imaged copy of a loose computer hard disk drive, or the “Loose HDD”. The two other imaged copies were extracted from desktop computers at the Georges Hall Premises, known as “Georges Hall Desktop 1” and “Georges Hall Desktop 2”.

478 The imaged copies were examined by two computer forensic specialists. Mr Nigel Carson is a computer forensic specialist who was retained by the Tonita respondents as an expert. He was given a copy of the CCC-14 CD-ROM (see section 10 below) and imaged copies of the Loose HDD and the Georges Hall Desktop 2 and prepared a report on the contents of those items for this proceeding.

479 Ultimately, the Tonita respondents did not rely on Mr Carson’s report. The Aristocrat companies tendered Mr Carson’s report and rely upon some of its content.

480 Mr McKemmish is also a computer forensic specialist who examined the Loose HDD and the two Georges Hall Desktop computers. Mr McKemmish was originally engaged by the Aristocrat companies as the independent computer expert at the Anton Piller raids. In the course of the hearing, the Global and Impact respondents challenged the admissibility of certain parts of the evidence of Mr McKemmish. This challenge was heard on the voir dire.

9.5.5.1 The voir dire

481 In June 2006, Mr McKemmish was engaged by Aristocrat’s former solicitors as an independent expert in this matter. As part of his duties as independent computer expert, Mr McKemmish undertook various tasks pursuant to several court orders, including:

· attending the execution of search orders at the Mascot, Botany and Bankstown Premises;

· extracting files in accordance with court orders from several computers seized at the Mascot, Florey, Botany and Georges Hall Premises; and

· making a copy of the exhibit CCC-14 in accordance with court orders.

482 Mr McKemmish also made certain confidentiality undertakings to the Court in regards to the material obtained or sighted in his role as independent computer expert.

483 In November 2007, Mr McKemmish was asked by the current solicitors for the Aristocrat companies to extract electronic files from a number of EPROM chips seized from the respondents’ premises. At the Aristocrat companies’ request, Mr McKemmish also performed a review of documents and original data found on computers at the respondents’ premises and made certain observations on the basis of those documents and data, contained in an affidavit sworn 21 December 2007.

484 The Aristocrat companies also tendered an expert report prepared by Mr McKemmish in which he details the forensic analysis that was carried out by him on the computers found at the Georges Hall Premises, as well as the Loose HDD.

9.5.5.1.1 SUBMISSIONS OF THE RESPONDENTS

485 On the voir dire, the Global and Impact respondents submitted that Mr McKemmish’s role as an independent computer expert appointed for the purposes of assisting in the supervision and carrying out of the Anton Piller orders was inconsistent with him then becoming an expert witness for the Aristocrat companies. They argued that parts of his evidence should therefore be excluded on two grounds: either as, first, an abuse of process, or second, under s 135 of the Evidence Act 1995 (Cth) as there was a real danger of unfair prejudice to the respondents.

486 Underlying both grounds was the argument that once Mr McKemmish had seen certain confidential material seized during the Anton Piller raids, his evidence as an expert witness was “infected” as he would be unable to keep the confidential material from his mind in preparing his expert’s report and giving evidence. Citing Australian Securities and Investments Commission v Rich (2005) 190 FLR242, Mr Ogborne argued that even if Mr McKemmish had not actually used the confidential material in forming his opinions, the prejudice to the respondents would be too great to allow the material to be admitted as Mr McKemmish had had access to the material and may therefore have used it as a factual basis in an improper way.

487 Mr Ogborne also argued that a person who assumed the role of independent computer expert was required to maintain his or her independent position until the end of the trial. Mr Ogborne drew an analogy between the roles of the independent computer expert and the independent solicitor in the execution of Anton Piller orders, and emphasised the importance of there being an independent and neutral court-appointed officer placed in charge of seized computer files. On this basis, he argued, it would be inappropriate for a person charged of this neutral role to take on a new role as a witness for one party.

9.5.5.1.2 SUBMISSIONS OF THE ARISTOCRAT COMPANIES

488 In response, Mr Cobden raised five main points. First, Mr Cobden submitted that the respondents had failed to identify those parts of Mr McKemmish’s expert report which were said to be tainted by reason of his previous role as independent computer expert. In particular, Mr Cobden emphasised that the computers analysed in Mr McKemmish’s report and evidence were all computers found at the Georges Hall (Tonita) Premises. On this basis, he argued, it was up to Mr Ogborne to identify which parts of Mr McKemmish’s evidence had involved him looking at the confidential Impact and Global material and therefore tainted his evidence.

489 In regards to the abuse of process argument, Mr Cobden had two submissions. First, he submitted that the argument must be rejected due to the delay by the respondents in raising their objection to the evidence of Mr McKemmish. Although the Global and Impact respondents had made some reference to their objection in a letter of December 2006, he argued that the point had not been raised substantively until the hearing in October 2008.

490 Second, Mr Cobden argued that the respondents had not clearly articulated the allegation of abuse of process. In particular, they had not set out clearly by whom the abuse of process had allegedly been committed. This was important, he submitted, because there had been no allegation of abuse of process by the Aristocrat companies’ solicitors, and there was no authority to which he could refer the Court in which it had been said that a witness could commit an abuse of process.

491 Mr Cobden’s fourth and fifth points related to the respondents’ argument under s 135 of the Evidence Act. In his fourth submission, Mr Cobden drew the Court’s attention to the test of unfair prejudice under s 135, as defined by Papakosmas v the Queen (1999) 196 CLR 297 at 325, which envisaged a danger that the fact finder may use the evidence on an improper, perhaps emotional, basis; that is on a basis logically unconnected with the issues in the case. Mr Cobden argued that the respondents had failed to clearly articulate the basis upon which s 135 had been invoked, and in any case, the evidence objected to did not meet the test set out in Papakosmas.

492 Finally, Mr Cobden rejected the analogy drawn by the respondents between the role of the independent computer expert and that of the independent solicitor in the carrying out of Anton Piller orders. He argued that the independent computer expert is not an officer of the Court and is therefore not under the same obligations as the independent solicitor. He also referred to several Federal Court practice directions and practice notes in which the role of the independent solicitor is significantly more regulated than that of the independent computer expert.

9.5.5.1.3 ADMISSIBILITY OF MR MCKEMMISH’S EVIDENCE

493 The view that I came to after hearing the submissions of the parties was that, whilst it is undesirable for a person who has occupied the role of an independent expert for the purpose of an Anton Piller order to then give evidence as an expert witness, I did not consider that the submissions that had been put before me demonstrated that it was an abuse of process. Moreover, the undesirability of Mr McKemmish giving evidence could have been pointed to at any time after 20 December 2007 but was not, either in correspondence between the parties or in directions hearings.

494 Having carefully considered the contents of the affidavits and reports which were proposed to be read and tendered, in particular the initial report of Mr McKemmish, and having also looked closely at the evidence tendered on the voir dire, I was not satisfied that it was unfairly prejudicial to the Impact and Global respondents to admit the evidence of Mr McKemmish, subject to any proper objection that may be taken to individual paragraphs.

495 I was not satisfied that the material to which references were made was unfairly prejudicial to the respondents within s 135(a) of the Evidence Act or misleading or confusing within s 135(b), so as to enliven the exercise or possible exercise of the discretion under that section. On this basis, the application by the respondents was dismissed.

9.5.5.2 The Loose HDD

496 In his report, Mr McKemmish set out the following relevant features of the Loose HDD that was seized at the Georges Hall Premises:

· the registered name was “TONITA-3CG89Y5G”;

· the registered owner was “Riad Allam”;

· the registered organisation was “Tonita Enterprise”; and

· the Windows registry recorded a number of user account names, one of which was “Riad”. An examination of the use profile folders suggested that the “Riad” user account was active.

497 Mr Carson also examined a version of Windows that was once installed on the Loose HDD but had since been deleted. He said that there was evidence of file activity as early as 19 August 2003, under other user profiles which are no longer present, including “roro” and “nana”, who are members of Mr Allam’s family.

498 Mr McKemmish also made a number of observations relating to what he described as “DATAMAN & EPROM related activity” on the Loose HDD. The Loose HDD contained Dataman software, the program that is used to burn EPROMs. Mr McKemmish noted that his examination of the files located on the Loose HDD, its Windows registry and the associated Windows Event logs revealed evidence of the operation of Dataman software.

499 After carrying out an examination of the unused data areas of the Loose HDD, Mr McKemmish recovered certain file path information which he then analysed. After scanning the unused data areas, he identified a number of references to the Dataman directory containing file paths that included the word “Aristocrat” and the name of some Aristocrat games. Examples of the file paths identified were:

· “C:\Program Files\Dataman\Aristocrat\Helen of Troy U85 72 in100 u7”;

· “C:\Program Files\Dataman\Aristocrat\Silver and Gold U 85”;

· “C:\Program Files\Dataman\Aristocrat\Money Tree U86”;

· “C:\Program Files\Dataman\Aristocrat\High Noon U85”; and

· C:\Program Files\Dataman\Aristocrat\Q of Nile Eu u11”.

500 From his analysis of the Loose HDD, Mr McKemmish concluded that the Loose HDD had been used to burn and/or read binary data to and from EPROM chips.

501 Mr Carson’s report also addressed the contents of the Loose HDD. He said that overall, the Loose HDD contained around 40,000 files and 5 Gigabytes of data. Many of those files were documents and pictures and relate to university assignments and family snapshots.

502 Mr Carson also said that the Loose HDD contained a number of what appeared to be game binaries that had been created in various folders, including under the “Riad” profile. In addition, the Dataman folders identified by Mr McKemmish contained files indicating the use of the application in relation to the game binaries.

503 The inference that was sought to be drawn from the files on the Loose HDD and the activity related to the Dataman software was that the Tonita respondents had utilised the Dataman program in order to copy Aristocrat software on to EPROMs.

504 Also in evidence were screen shots taken from the data on the Loose HDD. In particular, one screen shot showed a folder called “540games” which contained a series of files with names that resembled the names of Aristocrat games, such as “blakrinou20”, “enchantedu20”, “g canariesu20” and “kgbirdu20”.

505 The Loose HDD also contained 11 game sheet files that were found in a file under the description “Riad/MyDocuments/AristocratCatalogue”. Mr Mayo’s evidence in chief was that these 11 images of game sheets could be used to produce hard copy artwork that would be of “an acceptable quality level although not to Aristocrat quality standards, depending on the markets in question”.

506 Mr Allam admitted that he had scanned several images from an Aristocrat catalogue which were consistent with those found on the Loose HDD in order to allow him to email a picture of games that he was supplying as a description of stock. Mr Mayo’s evidence in chief was consistent with Mr Allam’s concession that a brochure had been scanned. However, Mr Green, counsel for the Tonita respondents, submitted in his closing submissions that Mr Mayo’s evidence in cross-examination acknowledged that none of the images found on the Loose HDD could have been used to create artwork to fit onto a machine.

507 I reject this submission. The proposition was never put to Mr Mayo and the only concessions that Mr Mayo made in cross-examination relate to the material seized at the Global and Impact premises, as outlined in [385]ff above. Therefore, the presence of these images on the Loose HDD must be considered in line with the other material found on the Loose HDD.

508 The Loose HDD also contained a large number of files that appeared to belong to the Tonita respondents. Mr Allam identified a document on the Loose HDD containing a table with the names of Aristocrat games as a document which he had prepared when packing gaming machines for export. He also identified another document found on the Loose HDD containing images which he had scanned from an Aristocrat catalogue and an invoice from Tonita Enterprise to Global Gaming dated 22 October 2004, as well as other files relating to the Tonita respondents.

509 Mr Carson’s report also indicated that there was strong evidence that the CCC-14 CD-ROM had been viewed on the Loose HDD. I will return to the material found on CCC-14 at a later stage.

510 Mr Allam’s evidence regarding the Loose HDD was that prior to the execution of the search orders at his home, he was not aware that he had the device in his house or his car at any time. He did not recall at any time having used the Loose HDD, and could not explain why the Loose HDD contained a large number of files that appeared to belong to either himself or his family.

511 Mr Allam suggested in cross-examination that someone else had put the Loose HDD in his car. He then said that in January 2007 when he was going on a holiday, he emptied a large amount of material from his car to clear some space. Mr Allam said that it was possible at that time that he could have taken the Loose HDD out of his car unknowingly, and placed it in his house along with the other material emptied from his car. In the course of cross-examination, Mr Allam went on to suggest that Mr Channa had planted the Loose HDD.

512 In the course of cross-examination, Mr Cobden drew to Mr Allam’s attention the fact that there were documents on the Loose HDD which appeared to belong to him, his family and Tonita, including university pharmacy exams and essays for his children’s pharmaceutical studies, Tonita invoices, and other documents that had been prepared by Mr Allam. Mr Allam could not explain why these files were on the Loose HDD. He suggested that the person who had planted the Loose HDD in his home must have also planted documents on the hard drive in order to incriminate Mr Allam, by linking the hard drive to him and his family.

513 In closing submissions, the Aristocrat companies submitted that certain information about the Loose HDD that was uncovered by the computer experts made it unlikely that the material on the Loose HDD could have been created by anyone other than Mr Allam and his family. They pointed to the former user profiles that included names of members of Mr Allam’s family, as well as the personal files that were stored on the Loose HDD including family photos and university assignments that corresponded to the pharmaceutical courses studied by Mr Allam’s children.

514 In Mr Cobden’s submission, had the Loose HDD been planted by Mr Channa to incriminate Mr Allam, as was suggested by Mr Allam in his evidence, the operation would have required considerable computer expertise and prior planning.

515 Because of a combination of factors that were identified by Mr Carson and Mr McKemmish, Mr Channa would have had to have sufficient knowledge to install a previous version of Windows onto the Loose HDD which included the user profiles “roro” and “nana”; and would have required access to over 40,000 files to load onto the Loose HDD, many of which belonged to Mr Allam, his family or Tonita, such as the photos and assignments mentioned above, or the invoices and files that Mr Allam admitted having created.

516 The evidence also indicated that there was file activity on the Loose HDD as far back as 2004, although Mr Channa only started working for Mr Allam in 2006. Therefore in planting the Loose HDD, Mr Channa would have had to have the computer expertise to be able to change the dates on the Loose HDD to simulate use over two years earlier.

517 There was also debate as to whether Mr Channa would have in fact had access to Mr Allam’s garage in order to plant the Loose HDD. The Tonita respondents say that Mr Channa had access to Mr Allam’s house and garage, and had the “motive and means” to plant the Loose HDD. However, Mr Channa’s evidence was that he had never gone to Mr Allam’s house or garage alone.

518 I accept the Aristocrat companies’ submissions that Mr Channa was unlikely to have the necessary computer expertise to arrange the data in the way in which it was found on the Loose HDD. To draw the inference suggested by the Tonita respondents that Mr Channa deliberately manufactured the evidence found on the Loose HDD and then planted the device in Mr Allam’s home would require me to accept a most unlikely combination of circumstances.

519 Indeed, the combination of circumstances that would be required to make good the submission of the Tonita respondents is so extraordinary that I regard the submissions as untenable.

9.5.5.3 Georges Hall Desktop 1

520 Mr McKemmish examined the Georges Hall Desktop 1 and gave evidence that the computer contained link files (or shortcuts) which indicated that a person using the computer had accessed files with the names “dream+pompei.doc”, “inDIAN DREAMING edited.doc” and “geisha ce.doc”. The link file information also revealed that those files were located within a directory called “LABEL” which is resident on an external removable storage device.

521 The external removable storage device was not seized from any of the premises during the Anton Piller raids and the files referred to above were therefore not able to be extracted. It follows that little more is known about those files than their names. This information was not relied upon in any detail in the Aristocrat companies’ closing submissions and therefore little, if any, weight can be given to it.

9.5.5.4 Georges Hall Desktop 2

522 The Georges Hall Desktop 2 was Mr Allam’s computer which was located in the garage of the Georges Hall Premises. The computer’s registered name was “TONITA-4D3B76GS”, the registered owner was “riad allam” and the registered organisation was “tonita enterprise pty ltd”. The Windows registry records recorded a user account named “riad”.

523 Under the heading “DATAMAN & EPROM related activity”, Mr McKemmish made a number of observations about the Georges Hall Desktop 2 computer. Mr McKemmish identified Dataman software on the Georges Hall Desktop 2 computer and indicated in his report that a number of binary files appeared to have been read and their contents written to an EPROM, including files with the names “G:\geisha jcl 0007311 602\u72” and “G:\ Indian jack car 10007611 628 6\u72”. “Geisha” and “Indian jack” are names of Aristocrat games.

524 Mr McKemmish concluded in his report that the Georges Hall Desktop 2 computer had been used to write binary file data to EPROM chips in the period between August 2006 and January 2007.

525 In addition to the Dataman and EPROM related activity, files were found on the Georges Hall Desktop 2 computer with names that resembled names of Aristocrat games. Mr McKemmish’s evidence indicates that the files including “geisha label.doc” and “geisha label2.doc” were accessed by a person using the Georges Hall Desktop 2, and there was file or folder activity associated with the following entities (which may have been either a file or folder): “Gamblin Jack”, “Calypso king”, “reel rockin”, “Olympic Games”, “Aristocrat”, “were the gold86.zip”, “Queen of the Nile.zip”, “Queen of the Nile Special Edition” and “King of the Nile”. Mr McKemmish also identified a number of directories that were accessed on the computer, including “geisha jc10007311 602”, “Indian jack car 10007611 628”, “Gamblin Jack\20197211\”, “Queen_of_nile_JC_hypl 4 Eproms” and “Spring_carn_500c_jacpotc 4 Eproms”, and a number of folders with names including “Top Banana”, “Indian dreaming”, “were the gold”, “golden Incas”, “black rhino” and “King of the nile”.

526 Mr McKemmish’s evidence does not establish the content of these files, and is therefore of little weight. What is of significance is Mr McKemmish’s conclusion that the Georges Hall Desktop 2 computer had been used to write binary file data to EPROM chips.

527 This finding is contrary to Mr Allam’s claims that he had not used any Dataman programming device or any other EPROM programmer since leaving his previous employment in 2002.

528 However Mr Allam also gave evidence that the Georges Hall Desktop 2 computer was accessible by all of the workers at the Botany factory, including Mr Channa.

529 The Tonita respondents also pointed to several technical issues that they identified in Mr McKemmish’s evidence which they say renders his findings unsafe. Mr Green submitted that the last modification date of one of the binary files examined by Mr McKemmish was after the date of the forensic examination, and as no other dates were identified, it would be unsafe for the Court to draw any inference as to the use by any person of a Dataman device on the Georges Hall Desktop 2. Mr Green submitted that the Court should infer that the errors identified by Mr McKemmish in the running of the system indicate the system neverworked.

10. CCC-14

530 The exhibit numbered CCC-14 was a CD-ROM that was provided to the Aristocrat companies by Mr Channa. Mr Channa’s evidence was that an unidentified man had visited the Botany Premises and gave the CD to Mr Allam. Mr Channa said he had taken the CD from Mr Allam’s car, where Mr Allam had left it. Marked on the CD was the word “RIAD”.

531 The Aristocrat companies submitted that the content of CCC-14 is significant to the proceedings. Mr Carson examined CCC-14 and made findings about its content in his expert report, which was ultimately tendered by the Aristocrat companies. In particular, Mr Carson’s report stated that “[t]he content on the CD appears to comprise binary game files and several documents that appear to be labels and invoices for ‘Tonita Enterprise’”.

532 Although it was not referred to in the Aristocrat companies’ written closing submissions or closing address, Mr Polaczek’s second affidavit indicates that he examined CCC-14 for the purpose of this proceeding. As with the EPROMs seized at the Botany Premises and the software found at the Georges Hall Premises, Mr Polaczek ran a number of tests on the game files found on CCC-14. On the basis of those tests, Mr Polaczek concluded that CCC-14 contained files which included Aristocrat game software, including software which related to Aristocrat’s Dolphin Treasure, Queen of the Nile, Indian Dreaming, Boot Scootin’, Chicken, Orchid Mist, Wild Thing and Wild Ways games.

533 The Aristocrat companies emphasised the presence of the game files on CCC-14 as evidence of copyright infringement by the Tonita respondents. In cross-examination, Mr Allam accepted that CCC-14 contained Aristocrat game software. However, the Tonita respondents submitted that it had been planted by Mr Channa and had never been used or accessed by Mr Allam. The Tonita respondents sought to attack Mr Channa’s credit on the basis that he was a “paid disgruntled witness” who should not be believed.

534 Mr Carson’s report also indicated that there was strong evidence that CCC-14 had been viewed on the Loose HDD which was found at the Georges Hall Premises. This was because link files on the Loose HDD indicated that the CD had been inserted into the drive on the computer to which the Loose HDD was attached and the files on the CD had been opened. The Tonita respondents accept that CCC-14 was used in conjunction with the Loose HDD, however, as outlined in [511]ff above, they submit that the Loose HDD was also planted by Mr Channa and its contents fabricated so as to incriminate Mr Allam.

535 In cross-examination, Mr Allam denied that he had created CCC-14 by copying its contents from the Loose HDD. The Tonita respondents seek to infer that Mr Channa planted the Loose HDD and used it to prepare CCC-14. They say that he had the motive and means to achieve this, and that he incorporated suspicious material onto the CD and the Loose HDD which he thought would incriminate Mr Allam and would be valuable to the Aristocrat companies.

11. THE DATA MATCHING EXERCISE

11.1 Overview

536 In opening its case against the respondents, the Aristocrat companies relied upon an analysis of a large number of serial numbers recorded on invoices seized in the Anton Piller raids.

537 The Aristocrat companies explained in their opening that they explored the serial numbers and identified some 3,500 which “prima facie, were attended by very real questions”.

538 This aspect of the Aristocrat companies’ claim was pleaded with extensive particulars. The gravamen of the claim is stated in [35] of the Amended Consolidated Statement of Claim but the enormity of the allegation is only revealed by reference to the particulars.

539 The particulars include “additional transactions involving infringements identified in Annexure A and Annexure B”. Those annexures consist of tables in the form of spreadsheets which purport to contain details of commercial invoices and packing lists that record shipments of counterfeit Aristocrat gaming machines identified by serial number.

540 The serial numbers of the machines alleged to be counterfeit were colour-coded in the tables. They were explained in opening submissions and in [67A] of the Particulars as follows:

· red were said to be fake serial numbers invented by the respondents. They were said to be fake because the serial numbers did not correspond to the Aristocrat companies’ database of serial numbers affixed to genuine Aristocrat gaming machines;

· orange was used to identify machines which, according to the records of the OLGR, were still present in NSW after having purportedly been sold overseas by the respondents; and

· yellow was used to allege that the game on the machine was different from the game last recorded for that machine in the OLGR records.

541 These allegations were sought to be proved by the evidence of Ms Gardner, an employee of the solicitors for the Aristocrat companies. It is apparent that the voluminous particulars were drawn from Ms Gardner’s affidavit evidence.

542 Ms Gardner is (or was at the relevant time) a paralegal with a degree in Design Computing. She conducted an exercise which involved comparing serial numbers and game name data extracted from the respondents’ invoices with:

· the Aristocrat companies’ own database of serial numbers ascribed to Aristocrat gaming machines; and

· data received from the OLGR recording the location of particular machines and the names of games recorded by the OLGR as installed on particular gaming machines.

543 In conducting this exercise, Ms Gardner wrote a computer program which performed a comparison of the data. Two aspects of the comparison exercise involved comparisons with information from the OLGR. These were the serial numbers coded orange and yellow.

544 However, no officer of the OLGR was called to prove that data. Instead, it was put into evidence through an employee of Aristocrat, Mr Brown, the Market Development Manager, Server-Based Gaming.

545 The respondents sought to meet this evidence by producing a large schedule of material said to have been drawn from relevant invoices issued by Global and Impact. The schedule was put into evidence by Mr Andrews in an exhibit marked GGS4.

546 It is true, as was submitted on behalf of the Aristocrat companies, that some of the explanations given by Mr Andrews were revealed under cross-examination to be unacceptable. This reflects upon Mr Andrews’ credit but it does not make good the propositions for which the Aristocrat companies contend. Disbelief of a witness on his or her credit does not amount to positive evidence of the opposite of what is disbelieved: Gauci v Commissioner of Taxation of the Commonwealth of Australia (1975) 135 CLR 81 at 87; J. D. Heydon, Cross on Evidence (7^th Aust ed) at [17,600].

547 The data matching exercise must be considered on the basis of the quality of the evidence adduced by the Aristocrat companies, as the foundation upon which the exercise was conducted.

548 The question of the quality or sufficiency of the evidence raises two separate sub-issues. The first is the evidence pertaining to the OLGR records which formed the basis for the production of the “orange” and “yellow” serial numbers.

549 The second is the evidence which was said to have supported the matching exercise in respect of the “fake” serial numbers that were coded red in Ms Gardner’s tabulation.

550 I will deal separately with each of those evidentiary questions.

11.2 The OLGR Matching Exercise

551 As I have said above, the “orange” or “yellow” serial numbers were identified by a comparison of the serial numbers listed on the respondents’ invoices with data from the OLGR. Plainly, the validity of the results of the matching exercise in respect of these serial numbers depends upon whether Ms Gardner’s program used unimpeachable data from the OLGR records.

552 However, I am not satisfied that Mr Brown’s evidence established the provenance of the OLGR data. There are two principal reasons for this.

553 First, the spreadsheets which were said to have been provided by the OLGR to Aristocrat covered the period from August 2000 to February 2007, but Mr Brown was not the person within Aristocrat who was responsible for reviewing that information for almost the entirety of that period.

554 Mr Brown accepted in cross-examination that prior to June 2006, he was not the person in Aristocrat who had the responsibility for receiving the relevant spreadsheets from the OLGR.

555 It follows that Mr Brown was not the person who held the relevant responsibility in respect of all but one of the 18 OLGR data files which were used by Ms Gardner in her matching exercise. Mr Brown effectively conceded this in cross-examination.

556 This was of particular significance in the evidentiary underpinnings upon which the matching exercise depended. In particular, it left Mr Brown in the invidious position of being quite unable to explain the substantial number of modifications which were made on the OLGR spreadsheets by other Aristocrat employees.

557 Second, Mr Brown did not say in his evidence that the spreadsheets were the documents that were actually received from the OLGR. Rather, Mr Brown conducted a review which was shown in cross-examination to have been a somewhat cursory exercise.

558 It is true that Mr Brown said in chief that, based on his review, the files were “the same files that were provided by the OLGR to Aristocrat”. But in cross-examination he conceded that the review process consisted of opening up each of the spreadsheets, looking at them and confirming in his own mind “that they were consistent with the form of the spreadsheets which the OLGR had sent to Aristocrat”.

559 Needless to say, what was required was not evidence of apparent consistency of the form of the spreadsheets, but proof of the actual OLGR data, together with an explanation for any modification made by the relevant Aristocrat employees.

560 The significance of this lacuna was revealed in the cross-examination of Ms Gardner. I accept the analysis of the Global/Impact respondents that the workbook which Ms Gardner used in her matching exercise contained data in respect of many thousands of gaming machines that were not recorded in Mr Brown’s OLGR worksheets. Ms Gardner conceded in cross-examination that if the worksheets which she relied upon to carry out the matching exercise were not contained in the OLGR records, “all of the orange and yellow results could be false results”.

561 It follows, in my opinion, that the matching exercise which Ms Gardner carried out against the “OLGR data” was flawed because the Aristocrat companies failed to prove the essential premise upon which the exercise depended. Accordingly, the evidence given by Ms Gardner and Mr Brown does not provide any basis for drawing an inference that the machines which were coded “orange” or “yellow” were machines which infringed the Aristocrat companies’ copyright.

562 Notably, in closing submissions the Aristocrat companies did not rely upon Ms Gardner’s evidence, but sought to make good their claim upon the basis of the evidence given by Mr Brown. However, for the reasons set out above, Mr Brown’s evidence provides an insufficient evidentiary foundation for the claim.

11.3 The “fake” invoice exercise

563 The data matching exercise which produced the allegedly fake serial numbers, colour-coded red, was carried out by a process of interrogating the Aristocrat companies’ databases with a list of serial numbers taken from Global/Impact invoices seized in the Anton Piller raids.

564 The databases are known as Manfact and PeopleSoft. These systems recorded the unique serial numbers that were attached to each individual gaming machine to enable it to be identified or tracked.

565 The Manfact system was in operation until 2001 or 2002 when it was replaced by PeopleSoft.

566 The process that was undertaken was, no doubt, a detailed and painstaking exercise. It commenced with the preparation of a spreadsheet created by Mr Michael Cooley, a solicitor employed by Gilbert + Tobin, and another lawyer from that firm. In order to prepare the spreadsheet, they separated, selected and printed the seized invoices and entered them in electronic folders.

567 Mr Cooley created two separate spreadsheets, one for Manfact, the other for PeopleSoft. He provided the Manfact spreadsheet to Mr Kevin Batch, a database administrator employed by Aristocrat. Mr Cooley provided the PeopleSoft spreadsheet to Ms Rebecca Estepa, a data analyst employed by Aristocrat.

568 The Manfact spreadsheet contained approximately 2,500 serial numbers. The PeopleSoft spreadsheets contained approximately 1,000 serial numbers.

569 Mr Batch interrogated the Manfact system to determine whether the serial numbers contained on the spreadsheet appeared on the records contained in the Manfact database. Ms Estepa performed the same exercise for the PeopleSoft spreadsheet on the PeopleSoft database.

570 Mr Batch and Mrs Estepa then produced spreadsheets of those serial numbers which did not appear on the Manfact and PeopleSoft databases.

571 Mr Cooley then caused, no doubt with some assistance, the unmatched serial numbers located by Mr Batch and Ms Estepa to be copied into a worksheet from which a further spreadsheet was created and provided to Ms Gardner for entry into her workbook

572 Plainly, the potential for human error in carrying out the various steps involved in the total exercise was great. The tedium is obvious. It is an atmosphere in which human error thrives, as was exposed in cross-examination of Mr Batch and Ms Estepa.

573 Ultimately, there are two reasons why I give little or no weight to the results of the data matching exercise which produced the “red” or “fake” invoices.

574 The first is the errors to which I have referred. These resulted, at least in some instances, from the literal and uncritical approach which was adopted in the matching exercise. Thus, for example, the number “1” was misread as the letter “I” and incorrectly transcribed so that the incorrect prefix on serial numbers shown as DVI were assumed to be invoices which did not match the Aristocrat companies’ databases.

575 Other errors included a number shown as ending with a “?” instead of a “1” and the addition of a space between numbers which should have been inserted as consecutive numbers.

576 The Global/Impact respondents submitted that the computer matching exercise was cynically designed to produce as many false matches as possible. I reject this submission. There was no proper basis for such a bold assertion. It is an example of the highly charged atmosphere in which the case was fought. A submission that the Aristocrat companies had deliberately over-reached in their claims was itself an example of over-reaching on the part of the Global/Impact respondents.

577 Nevertheless, I accept the proposition that the exercise was tainted by human error. That proposition is, as I have said, clear enough from the nature of the exercise and the mind-numbing steps involved in it. Doubtless, the accuracy of the tasks was not assisted by the involvement of lawyers in the process. It is hardly an exercise for which a law degree was an essential prerequisite.

578 Second, the Manfact and PeopleSoft databases did not necessarily record serial numbers for those machines that were destined for foreign markets, or apparently for markets outside of NSW.

579 This was the effect of the concessions made in cross-examination by Mr Neil Hogg, the General Manager, Business Process Development, of Aristocrat, who was the person with overall responsibility for maintenance of the databases. Mr Hogg indicated that the regulatory requirements only obliged the Aristocrat companies to record the serial numbers of those gaming machines that were destined for NSW. His evidence was that in practice, most serial numbers were recorded regardless of the destination. However he conceded that there may have been instances when Aristocrat machines were shipped, for example, to the United States and the serial numbers were not recorded on the system.

580 It follows that the matching exercise which produced “red” serial numbers cannot be accepted as proof of the assertion that the serial numbers were fake in respect of those gaming machines obtained by the Global/Impact markets from regions outside NSW.

581 Although this does not dispose of all of the “red” serial numbers, I consider that the exercise that was carried out with respect to the “red” serial numbers cannot be relied upon for the first reason explained above. That is, the exercise carried out by the Aristocrat companies has plainly resulted in numerous errors which call into question the reliability of the results.

582 For present purposes, it is convenient to refer to one example of a transaction undertaken by Global which was claimed by Aristocrat to involve fake serial numbers. This is transaction number 22 in the Aristocrat companies’ list of infringing transactions, which was recorded on invoice number 531 as a sale to New Star Internacional SRL, Argentina, dated 20 June 2003.

583 Mr Andrews’ evidence was that the machines which were the subject of this transaction were obtained by Global from the MGM Grand Casino in Darwin.

584 This explanation was given by Mr Andrews in his schedule which became Exhibit GGS4. Mr Andrews said that the machines the subject of the transaction were shipped to Goldstar Gaming, located in St Peters, NSW, and then to the customer, “without coming into the direct possession of GGS”.

585 Although the explanations given in Exhibit GGS4 must be treated with caution, it seems to me that the documentary evidence supports Mr Andrews’ explanation in relation to this shipment.

586 The documents included an email from Mr Ian Dowling of MGM Grand Casino to Mr Andrews dated 31 March 2003 which stated that MGM Grand Darwin had 65 gaming machines for which it had no further use. Machine and game details were attached. These included a large number of the machines that were comprised in transaction number 22.

587 I reject the submission of the Aristocrat companies that the documentary evidence bears no relationship to the machines referred to in Mr Dowling’s email.

588 It is true that the list which was apparently attached to Mr Dowling’s email includes machines that were not the subject of transaction number 22. But an examination of the list shows that the 33 machines identified by the Aristocrat companies in their closing submissions as contained within the transaction were all included in Mr Dowling’s list.

589 The documents referred to in GGS4 also included a Forwarding Instruction from JAS Forwarding Worldwide. The document listed Goldstar Gaming’s address in St Peters NSW as the pick up address, and New Star Internacional SRL as the consignee. On this basis of this evidence, as with the Play King transaction, I am satisfied that the machines in question were never in the possession of the respondents.

12. THE BURDEN OF PROOF

590 The Tonita respondents submitted that the Aristocrat companies have failed to prove their claims in accordance with the standard of proof required by s 140 of the Evidence Act.

591 Section 140(1) provides that in a civil proceeding, the Court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities.

592 Section 140(2) sets out a non-exhaustive list of the matters that the Court is to take into account in deciding whether it is satisfied that the case has been proved. These are, relevantly: (a) the nature of the cause of action, (b) the nature of the subject matter and (c) the gravity of the matters alleged.

593 The proper approach to the construction and application of s 140 has been considered in a number of authorities of the Full Court of the Federal Court and by the Court of Appeal of NSW. The following propositions are to be gleaned from those authorities.

594 First, the standard of proof which is required in a civil case is the balance of probabilities, but the Court should not determine whether it is so satisfied until the final stage of the reasoning process, taking into account the matters referred to in s 140(2): Qantas Airways Ltd v Gama (2008) 167 FCR 537 at [110] and [139]; Palmer v Dolman [2005] NSWCA 361 at [40]-[41].

595 Second, although there is some difference in the authorities as to whether it is appropriate to describe the standard of proof under s 140 as the Briginshaw standard, the cases all recognise that the strength of the evidence necessary to establish a fact in issue on the balance of probabilities will vary according to the nature of what is sought to be proved: Qantas v Gama at [110] and [139]; Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission (2007) 162 FCR 466 at [30]-[36].

596 The authorities which were analysed by the Full Courts in arriving at the conclusion stated in the second proposition included, in particular, the decisions of the High Court in Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449 and Rejfek v McElroy (1965) 112 CLR 517.

597 Third, the Court of Appeal of NSW has accepted that the balance of probabilities test stated in s 140 requires the Court to reach a level of actual persuasion: Nguyen v Cosmopolitan Homes [2008] NSWCA 246 at [55]; Seltsam Pty Ltd v McGuiness (2000) 49 NSWLR 262 at [136]. However, the learned editor of Odgers, Uniform Evidence Law (8^th ed, 2009) observes at [1.4.100] that:

It is difficult to see how the proposition that “actual persuasion” is required can stand under [s 140 of] the Act […].

598 Fourth, the position stated by the Full Court of the Federal Court exposes a difference of views on the question of whether the trier of fact must feel “an actual persuasion.” Weinberg, Bennett and Rares JJ accepted that the Court must be so persuaded in Communications and Allied Services Union v ACCC at [31]. But that observation was based upon the statement of Dixon J in Briginshaw v Briginshaw [1938] 60 CLR 336 at 361-362. In Qantas v Gama at [123] and [139], Branson J (with whom French and Jacobson JJ expressed general agreement) considered that the Briginshaw test has been replaced by the provisions of s 140, and should be avoided due to its tendency to mislead.

599 Fifth, where an allegation is to be proved from circumstantial evidence, it is sufficient if the circumstances raise a more probable inference in favour of the allegation. Where the allegation is a serious one, the inquiry is to take account of the requirements of s 140(2)(c), and what was said by the High Court in Neat Holdings about the need for caution in making such a finding: Palmer v Dolman at [39], [47].

600 Sixth, it is sufficient if the circumstances give rise to a reasonable and definite inference; but if they produce conflicting inferences of equal degrees of probability so that the choice between them is a matter of conjecture, the allegation is not proved: Palmer v Dolman at [35], [36], [41]; Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1 at 5; Luxton v Vines (1952) 85 CLR 352 at 358 and other High Court authorities cited in Palmer v Dolman at [36]; see also The Trustees of the Property of Cummins v Cummins (2006) 227 CLR 278 at [34].

601 Here, the causes of action are copyright infringement, trade mark infringement and damages for misleading and deceptive conduct under the Trade Practices Act. There is also a claim for conversion.

602 Although it was submitted by the respondents that the claims were analogous to a claim of conspiracy, that allegation does not form part of the causes of action pressed by the Aristocrat companies.

603 Nevertheless, the subject matter of the proceeding may be seen as a claim of copyright piracy in which all of the respondents were knowingly involved. The matters which are alleged are of some gravity. These factors must be taken into account under s 140(2).

604 The allegations are sought to be proved by circumstantial evidence, together with some direct evidence, in particular that of Mr Channa.

605 To the extent that the claims are based upon circumstantial evidence, they will not be made out unless I am satisfied that they have been proved on the balance of probabilities, taking due account of what was said in Neat Holdings.

13. AUTHORISATION/JOINT VENTURE: LEGAL PRINCIPLES

13.1 Background

606 The Aristocrat companies claim that the respondents are liable for copyright infringement, either as joint tortfeasors or on the ground that one or other of them has authorised the copyright infringement carried out by the others.

607 The legal principles applicable to each of these separate heads of liability have been considered in some detail by the authorities. I do not consider that there is any real dispute between the parties as to those principles, but I will refer to them briefly below.

608 The Statement of Claim also pleads that one or other of the Global, Impact or Tonita respondents induced, directed or procured the other parties to infringe the copyright of the Aristocrat companies.

609 This may raise for consideration the question of the liability of directors or other “officers” for corporate wrongdoing. That is a question as to which there are competing lines of authority to which I will refer briefly.

13.2 Authorisation

610 Section 36(1) of the Copyright Act provides that the copyright in a work is infringed where a person, without the licence of the owner, does or “authorises” the doing of an act comprised in the copyright. Section 36(1A) contains a non-exhaustive list of mandatory considerations that the Court must take into account in determining whether a person has authorised an infringement. They are:

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

· the nature of any relationship between the persons; and

· whether the person took any reasonable steps to prevent or avoid the doing of the act.

611 In Cooper v Universal Music Australia Pty Ltd (2006) 156 FCR 380, Kenny J and Branson J each endorsed a wide approach to the concept of “authorisation”. French J agreed with the reasons given by each of them.

612 In Cooper at [136], Kenny J observed that s 101(1A) of the Copyright Act (which corresponds to the current s 36(1A)) is premised on the concept of “authorisation” developed by the High Court in University of New South Wales v Moorhouse (1975) 133 CLR 1.

613 Moorehouse is authority for the proposition that “authorisation” means “sanction, approve, countenance”; express or formal permission is not required: per Gibbs J at 12-13; per Jacobs J at 20-21.

614 Gibbs J said at 13:

… a person who has under his control the means by which an infringement of copyright may be committed – such as a photocopying machine – and who makes it available to other persons, knowing, or having reason to suspect, that it is likely to be used for the purpose of committing an infringement, and omitting to take reasonable steps to limit its use to legitimate purposes, would authorize any infringement that resulted from its use.

615 Kenny J also referred in Cooper to the observations of Gummow J in WEA International Inc v Hanimex Corporation Limited (1987) 17 FCR 274 at 285-286.
Gummow J there pointed to the broad concept of “authorisation” accepted by the High Court in Moorhouse.

616 Branson J’s approach to the proper construction of s 101(1A) at [34]ff was to similar effect to that of Kenny J.

617 Both Branson J, at [38], and Kenny J, at [145], referred to the decision of a Full Court in Australasian Performing Right Association Limited v Jain (1990) 26 FCR 53. There, Sheppard, Foster and Hill JJ held at 61 that a “studied and deliberate course of action” in which a respondent had decided to ignore the applicant’s rights and to allow a situation to develop which he must have known would be likely to result in an infringement, amounted to an authorisation.

618 Jain was an authority on the question of the degree of control that was required to give rise to an authorisation prior to the enactment of s 36(1A) and s 101(1A). But as Kenny J observed at [140] and [146], that case emphasises the breadth of the concept of authorisation and that a failure to take reasonable steps to prevent an infringing act is a relevant consideration to a finding of authorisation.

619 The degree of control, the nature of the relationship between the parties and the question of “reasonable steps” are now enshrined in s 36(1A)(a), (b) and (c), which I am required to take into account in determining whether the claims of “authorisation” are made out.

13.3 Joint tortfeasors

620 As Gummow J explained in WEA International at 283, infringement of copyright statutes are considered tortious, so as to make applicable the common law principles of liability of joint tortfeasors.

621 It is not sufficient to establish a claim of joint liability that two or more persons assisted or concurred in or contributed to a tortious act; what is required is that there be “some common design”: WEA at 283.

622 In Universal Music Australia Pty Ltd v Cooper (2005) 150 FCR 1 at [135], Tamberlin J pointed out that it follows from the remarks of Gummow J in WEA International that:

… there must be something in the nature of concerted action or agreed common action. It is not necessary that there must be an explicitly mapped out plan with the primary offenders. Tacit agreement between the parties is sufficient … .

623 Tamberlin J referred to Australian and English authority which support the abovementioned statement of principle including the decision of the High Court in Thompson v Australian Capital Television Pty Limited (1996) 186 CLR 574 and the seminal English case, The Koursk [1924] P 140.

624 Siopis J cited the relevant passage from the decision of Tamberlin J with apparent approval in Foxtel Management Pty Ltd v The Mod Shop Pty Ltd (2008) 165 FCR 149 at [133].

13.4 Liability of officers

625 In WEA International at 283, Gummow J pointed out that where the infringer is a corporation, questions often arise as to the degree of involvement on the part of directors necessary for them to be rendered personally liable. He observed that this question is not answered by the principles which govern “authorisation” and joint tortfeasance. Rather, recourse is to be had to the authorities which explain the circumstances in which a director or officer will be personally liable for the torts of the corporation.

626 It is those authorities which prompted Kenny J to say in Cooper at [160] that the law concerning the liability of directors and officers for corporate wrongdoing is unclear.

627 Three separate tests have been stated. The first is the “Performing Right Society test”, namely whether the director “directed or procured” the company’s infringement. The second is the “Mentmore test”, that is whether the director or officer “makes the tortious act his own” by deliberate, wilful and knowing pursuit of a course of conduct that was likely to constitute infringement: see the discussion of Finkelstein J in Root Quality Pty Ltd v Root Control Technologies Pty Ltd (2000) 177 ALR 231 at [123]ff.

628 The third test was formulated by Finkelstein J in Root Quality at [146]. The test is that the director’s conduct is such that:

… he was so personally involved in the commission of the unlawful act that it is just that he should be rendered liable.

629 Kenny J said in Cooper at [161] that she agreed with the test stated by Finkelstein J. So did Wilcox J in Universal Music Australia Pty Ltd v Sharman License Holdings Ltd (2005) 220 ALR 1 at [434]. He went on to add a qualification, that the person need not be a director of the company.

630 As Kenny J said in Cooper at [161], no Full Court has settled which of the tests is correct. However, I do not need to consider the question because, in my view, it is essential to recognise that the debate in the authorities as to the test to be applied to the liability of directors or officers for the wrongs of the corporation is a different question from that which applies to the question of liability for “authorisation” or joint tortfeasance. This was what Gummow J pointed out in WEA International at 283.

14. CREDIT OF WITNESSES

14.1 The Aristocrat companies’ witnesses

631 Subject to the observations I have made about Mr Channa, it seemed to me that the witnesses called by the Aristocrat companies were, generally speaking, truthful. They made concessions where appropriate and, apart from specific matters to which I have referred in the course of these reasons, I accept their evidence.

632 The respondents suggested that Mr Juan Pablo Irarrazaval, the General Business Manager of Latin America for ATI, was not a witness of truth. Mr Irarrazaval’s evidence dealt principally with the market for gaming machines, including second hand machines, in South America.

633 It will be necessary to return to his evidence when dealing with the question of quantum, but I should observe here that he seemed to be a witness of truth. Mr Ogborne submitted that he was an advocate for the Aristocrat companies, and there was some force in that submission. However, when considering his evidence as a whole, I do not think that his “advocacy” was so great as to impair the credibility of his detailed evidence of the South American market.

634 I was in no doubt that Mr Irarrazaval is highly intelligent, experienced and capable. He seemed to me to have a sound knowledge of the South American market.

14.2 The respondents’ witnesses

14.2.1 Mr Andrews

635 I was not impressed with Mr Andrews. His evidence seemed to me to be lacking in candour and answers had to be extracted from him with some difficulty.

636 In his affidavit evidence, Mr Andrews denied that any EPROM or artwork was ever copied by or on behalf of the Global or Impact respondents or otherwise and installed into a gaming machine in the course of supplying machines to customers.

637 He went further in his oral evidence when asked whether he or anyone on behalf of the Global/Impact Joint Venture had suggested to anyone that they make copies of Aristocrat artwork in South America. Mr Andrews’ answer to that question was “[n]ot to my knowledge”.

638 He was then asked whether he had supplied artwork to anybody in South America, having in mind the possibility that they may make copies of the artwork in South America. His answer was “not necessarily, no”. I thought this answer was quite evasive and his later answers showed it to be untrue.

639 Mr Andrews was also asked whether he had sent artwork to South America with the suggestion that they copy gaming chips to match the artwork. His answer was “[n]ot to my knowledge”.

640 These answers were in the teeth of the suggestions made quite expressly by Mr Andrews in the undated email which I have set out at [272].

641 But when taken to the email in cross-examination, Mr Andrews sought to avoid the implications that flowed from his own suggestion by saying:

… everybody did it in South America. [They’re] serial counterfeiters over there.

642 There were other examples of prevarication by Mr Andrews. One was his refusal to accept that the email which I have set out at [279] was an offer to have compliance plates made up with fake serial numbers placed on them.

643 The email went to the lengths of asking whether the serial numbers on the gaming machines could be “random that we think up or can they be running numbers”. Mr Andrews said in cross-examination that if Mr Mendelson requested a set serial number that was not available from the Global/Impact stock at Botany, Mr Andrews would not have supplied the compliance plates, however this answer is not consistent with what was said in the email.

644 A further example was the answers he gave when cross-examined about the options for supplying artwork to South America as set out in the email at [270].

645 The following exchange is revealing:

Q: And a second choice is to create a copy of the artwork by some digital means but not by screen-printing?

A: That's possible.

Q: And the quality would not be as good as screen-printing?

A: I don’t know.

Q: Do you know whether it would be hard to tell the difference between digital artwork of Aristocrat artwork and screen printed artwork of Aristocrat artwork?

A: I don’t really know.

646 Mr Andrews’ statement that he did not know whether it would be hard to tell the difference between digital artwork and screen printed artwork is totally at odds with the unequivocal view he expressed in parenthesis in his email.

647 Indeed, the answers given by Mr Andrews to questions he was asked about the emails which I have set out at [275], [284], [292], [296], [306], [308], [310] and [319] contain further examples of his untruthfulness.

648 Moreover, I reject his denial that the use of the Yahoo email address referred to in the email at [314] was adopted to avoid detection of sensitive information, in particular information that was suggestive of copyright infringement.

649 The new email address was adopted less than three weeks after an Anton Piller raid on Mr Parry, a business colleague of Mr Andrews. I think it is highly unlikely that Mr Andrews would not have known of the raid. I thought his answers when pressed about the connection with the raid and the “sensitive subjects” were evasive.

650 Finally, I should refer to Mr Andrews’ evidence regarding the documents he put forward to try to explain the “fake” serial numbers referred to by Ms Gardner.

651 I have no doubt that the exercise of answering Ms Gardner’s evidence was a time consuming and tedious one. An element of frustration on Mr Andrews’ part in dealing with the documents would be hard to quibble with.

652 But in my view Mr Andrews gave answers which were not credible when seeking to answer some of the data in the matching exercise.

653 The most notable was his evidence at pages 1207 to 1209 of the transcript in which he was asked about the identification of invoice number 1155 which was contained in Exhibit GGS2.

654 According to Mr Andrews, invoice number 1155, which was also referred to on pages 311 to 312 of Exhibit GGS4, was the final invoice for a shipment of gaming machines to South America. But an examination of what was said to be the original invoice, appearing at page 247 of Exhibit GGS2, showed the consignee as Cathay Entretenimientos S.A.C. of Lima, Peru, whereas a DHL Forwarding Instruction from Global bearing the same number, at Exhibit GGS1 page 846, showed the consignee as Assembling Accessories S.A. of Uruguay.

655 Mr Andrews’ attempt to explain the discrepancy as “a transfer of ownership on the water” was not credible.

14.2.2 Mr Cragen

656 Mr Cragen’s evidence was at odds with contemporaneous documents in a number of material aspects. In particular, his efforts to explain away and distance himself from emails which suggested knowledge of, or participation in, copyright infringement were quite unconvincing. This can be seen in the following examples.

657 The first is his attempt to explain the email from Mr Andrews to Mr Mendelson set out at [279]. When he was asked whether the statement in the email “do you want them all made up in the same year” was a reference to compliance plates that Mr Mendelson wanted Mr Andrews to make up, Mr Cragen replied that it was not.

658 The following exchange then took place:

Q: That is a reference, is it not, to some compliance plates that Mr Mendelson, wanted Mr Andrews to make up for him?

A: No, in actual fact, as I recall that situation, Mr Mendelson had been to Uruguay and he had indicated that he could probably dispose of the whole of that Uruguay shipment to Russia, if it could be completed, and he wanted two sample machines made up and think that the correspondence that Mr Andrews is referring to there, we were going to possibly send a couple of compliance plates over from Sydney, or use the numbers that were on the compliance plates that we had left over [that] had been removed from stripped machines, but it never happed. He wanted two machines for fitting cash code bill acceptors for Russia, but the whole Russian market fell apart.

659 It was then put to Mr Cragen that his explanation was false. Mr Cragen gave a series of quite unconvincing answers including:

Q: You know perfectly well it is not a reference to two, it is a reference to a series of compliance plates that Mr Mendelson wants made up using fake Aristocrat numbers?

A: I don’t believe so.

Q: And being counterfeit compliance plates?

A: I beg your pardon?

Q: And being counterfeit compliance plates and that you knew that this was a request to create Aristocrat compliance plates with a series of numbers using the XAW5 dot, dot, dot series?

A: If that was what it was it didn’t happen, but it wasn’t.

Q: I want to suggest to you that answer is quite false, Mr Cragen?

A: I beg your pardon?

Q: I want to suggest to you that answer is quite false?

A: No.

660 The second example is Mr Cragen’s attempt to explain the email set out at [306]. This was an email from Mr Andrews to Mr Trajkovski about the failure to return original artwork.

661 Mr Cobden put to Mr Cragen that the intention at the time was to send the original artwork to South America for the purpose of having it copied and then returned. Mr Cragen said initially that he did not know; he then said he did not believe that was the intention. Next he tried to explain the difficulty away by saying “but [Mr Trajkovski] kept them” and “didn’t pay for them”.

662 Eventually Mr Cragen conceded that his intention and understanding of the plan was that Mr Trajkovski would borrow the artwork and return it. He went so far as conceding that Mr Trajkovski may have had the intention to copy the artwork, but Mr Cragen refused to concede that he knew the plan to be for Mr Trajkovski to do so.

663 Third, it was put to Mr Cragen that he knew that games were copied onto CDs by people associated with the Joint Venture in Australia and taken to South America. Mr Cragen said he did not know, but he conceded that he had seen correspondence dated 2005 to 2006 to that effect.

664 Mr Cobden then put to Mr Cragen that he did not, at the time, raise any protest to the copying of games, to which Mr Cragen answered:

It’s my evidence that it didn’t happen.

665 Fourth, Mr Cragen sought to deny the obvious implication of the email from Mr Nuevo set out at [312]. When Mr Cragen was asked about the meaning of the email, the following exchange took place:

Q: … What this email means, does it not, is that Mr Nuevo wanted the software sent to him so that he could duplicate it on to blank chips?

A: I believe Mr Nuevo wanted an EPROM, which I suppose he was sent, I don’t know, and he wanted some blank chips. What he wanted to do with the blank chips, I don t know.

666 The evidence to which I have referred above reflects badly on Mr Cragen’s credit. I do not accept him as a reliable witness.

14.2.3 Mr Allam

667 Mr Allam’s evidence in chief was contained in his affidavit sworn on 30 July 2008, as supplemented by some short oral evidence. The affidavit occupied 76 pages and contained 433 paragraphs. It was written in plain English and was, for the most part, clearly expressed.

668 The affidavit was, clearly enough, Mr Allam’s evidence in answer to the large and somewhat complex case brought against him by the Aristocrat companies. I would have assumed, when reading it, that the affidavit was intended to give a full account of all of the critical aspects of the case.

669 In the witness box, under cross-examination, Mr Allam presented as an excitable witness, prone to dramatic outbursts.

670 Mr Green submitted that the form of Mr Cobden’s cross-examination was designed to insult and inflame Mr Allam and that it was framed in a way that was apt to mislead a non-English speaker.

671 I reject this submission. There was nothing unfair in the cross-examination nor were Mr Cobden’s questions in any way improper having regard to Mr Allam’s language, background or skills.

672 Mr Allam immigrated to Australia from Lebanon in 1990. He has a university degree in electronics from the University of Technology in Beirut. He holds a technician’s licence from the OLGR. He has worked for very large electronics corporations in Beirut, Damascus and Sydney, and has conducted his own business in Sydney since about 2002.

673 Although Mr Allam speaks English with an accent and with some measure of idiomatic expression, he appeared to me to be quite fluent and to have no difficulty in giving his evidence in English. I do not consider that he was disadvantaged by linguistic difficulties in understanding Mr Cobden’s questions or in giving his evidence.

674 Rather, the explanation for Mr Allam’s emotional state in the witness box seems to me to have come about from his own attitude to the litigation, not from any provocation on the part of the cross-examiner. This was revealed before Mr Allam entered the witness box when, in the course of Mr Channa’s evidence, Mr Allam called out a threat in Arabic:

By Almighty God, I will ruin your house.

675 When considering Mr Allam’s credit, there are a number of aspects of his evidence in chief which need to be recorded. They are:

· first, his evidence in answer to Mr Parsons’ evidence dealing with compliance plates seized at Bankstown and Georges Hall;

· second, his denial that CCC-14 was his disk and his claim that Mr Channa had planted it; and

· third, his denial that he had used the Loose HDD and the claim that it too had been planted.

676 I will deal with each of these below.

14.2.3.1 Compliance plates at Bankstown and Georges Hall

677 Mr Parsons gave evidence that 12 compliance plates seized at Georges Hall and 67 seized at Bankstown were counterfeit. Photographs of the plates were contained in Exhibit BHP-2. He identified the features of the compliance plates which indicated that they were not genuine Aristocrat compliance plates.

678 Mr Parsons’ evidence and a sample photograph of the compliance plates seized from Georges Hall shows that six of the compliance plates were blank. That is to say, the manufacture date, the serial number and the machine type are blank but the Aristocrat logo and other standard information appear on the compliance plate.

679 Mr Parsons said that the compliance plate was not genuine because it appears, inter alia, to have been screen printed.

680 The indicia of counterfeiting to which Mr Parsons pointed on the compliance plates seized at Bankstown included the appearance of screen printing and engraving of the compliance plates with lettering that did not comply with Aristocrat specifications.

681 Mr Parsons also identified seven compliance plates at Botany which he said were counterfeit because they had a number of features including hand engraving.

682 Mr Allam said that he had “only ever seen 2 of those seized compliance plates”, referring to compliance plates which were similar to those shown in Mr Parsons’ photographs on pages 4, 5 and 6 of Exhibit BHP-2. Those pages contained photographs of compliance plates seized at Botany, Georges Hall and Bankstown.

683 As to the compliance plates seized at his home at Georges Hall, Mr Allam said he believed that they were placed in his car by Mr Channa at the end of 2006 and that he removed them from his car and placed them in his house before going away on holidays in January 2007.

684 Mr Allam went on to say that prior to their seizure from his home on 1 February 2007, he was not aware that there were compliance plates of any sort at his home.

685 Mr Allam’s answer to the seizure of the remaining compliance plates, which included blank compliance plates seized at Botany, Georges Hall and Bankstown, was that he had told Mr Channa to destroy them.

686 Mr Allam set out the conversation he claimed to have had with Mr Channa about that topic:

I had a discussion with Mr Channa about these blank compliance plates during which we said words to the following effect:

Mr Channa: Riad look what I got from Behong [he showed to me a bundle of blank Aristocrat compliance plates]

Me: These plates should not be used by anyone except Aristocrat. I do not want these anywhere they must be destroyed.

Mr Channa: Should I through [sic] them in the bin or take them back to Behong

Me: No, these plates must be destroyed as they should not be in anyone’s property. Do not put any of these plates in the truck, or anywhere. You must destroy the plates now because they are illegal.

Mr Channa: Who would know?

Me: You don’t know who knows. You know about the trouble Tony has with Aristocrat. We cannot take any risk. This plate cannot be used. You must get rid of it now but don’t put it in my bin or in my car.

687 According to Mr Allam, Mr Channa then left with the compliance plates and “we did not discuss the issue again”.

688 However, Mr Allam went on to say that in October or November 2006 he saw his workers with compliance plates that were “similar or identical” to those which Mr Channa had shown him and which he had asked Mr Channa to destroy.

689 Mr Allam then said:

Upon discovering the use of the Aristocrat MK6 series style plates, which I had already asked Mr Channa to destroy or dispose of, I had a conversation with one of my workers, either Mladen or Pete to the effect of the following:

Me: We cannot use this plate. Where did you get this from

Mladen or Pete: Chris gave them to me.

Me: We cannot use these. You must collect all of these plates you have and from the boys and throw them out. We cannot use it.

690 He went on to say that he observed Mladen or Pete collect “a small number” of the compliance plates and that he did not see them again until after the Anton Piller raid on the Botany workshop on 1 February 2007.

691 Notwithstanding the instructions he claimed to have given to Mr Channa and to his employees to destroy or throw out the compliance plates, Mr Allam claimed that the compliance plates which were seized at the Bankstown warehouse and at the Botany workshop were “planted” by Mr Channa.

692 Mr Cobden cross-examined Mr Allam on the conversations which I have set out above. He put it to Mr Allam that the conversations were fabricated. I am satisfied that they were fabricated for the purpose of falsely denying the serious claims made against him. This finding is based not merely upon my observations of Mr Allam in the witness box, but upon the inherent improbabilities of the conversation takings place, as was revealed in the cross-examination appearing at transcript pages 1567 to 1578.

693 First, it seems to me to be unlikely in the extreme that if Mr Channa presented Mr Allam with a set of illegal compliance plates, Mr Allam would have entrusted the task of destroying them to Mr Channa.

694 Mr Channa was an employee who was inexperienced in the gaming industry, whose duties Mr Allam described as driving trucks and sorting materials at the Bankstown warehouse. Yet according to Mr Allam, he left it to Mr Channa to destroy the plates (without any supervision or follow-up), notwithstanding the fact that Mr Allam was concerned that proceedings had already been commenced by the Aristocrat companies against the Global respondents.

695 Second, I do not think it is likely that Mr Allam would have instructed Mr Channa not to “put it in my bin or in my car”.

696 This is because the situation about which Mr Allam professed to be concerned was the presence on his premises of illegal compliance plates which would constitute incriminating evidence in the event that Mr Allam was subject to an Anton Piller order. He said he wanted those plates to be destroyed. If that were said, it was a very plain instruction which was inconsistent with any suggestion of putting the plates in a bin or in Mr Allam’s car.

697 Even if Mr Allam instructed Mr Channa to destroy the plates (which I do not accept), an instruction not to put them in Mr Allam’s car was, at very least, an embellishment which was unlikely to have been made. It bore no natural connection with the situation confronting Mr Allam.

698 In my opinion, the instruction not to put the compliance plates in Mr Allam’s car was concocted with a view to lending support for the suggestion that, contrary to his express instructions, Mr Channa planted the evidence in the manner stated in [325] of Mr Allam’s affidavit.

699 Third, in the course of cross-examination on the conversations, Mr Allam added details which painted an entirely different picture of the events than those depicted in his affidavit.

700 In particular, he said he told Mladen or Pete not to use the compliance plates they had been given by Mr Channa, but to use the blank compliance plates which had been obtained from the Uruguay transaction. Moreover, he said Mladen or Pete engraved those compliance plates.

701 Not only was there no reference in Mr Allam’s affidavit to engraving the Uruguay plates, in his oral evidence, he disclosed for the first time that he had a hand engraver. He went on to assert that he had never engraved any other compliance plates, other than those acquired in relation to the Uruguay transaction.

702 The fact that Mr Allam had an engraver, and the assertion that he had used it only in the limited circumstances stated in cross-examination, were highly material to answering the evidence of Mr Parsons. Yet he made no reference to it in his affidavit.

703 What emerged in cross-examination points to the falsity of Mr Allam’s account of the conversation with Mladen or Pete. It also points to the existence of a piece of equipment which was capable of producing the counterfeit compliance plates found on the Anton Piller raids and suggests that Mr Allam’s evidence that he had only ever engraved the Uruguay plates was also false.

704 Fourth, the instruction which Mr Allam said he gave to Mladen or Pete to “throw out” the blank compliance plates would have been, on his evidence, the second occasion on which his express instructions were ignored. The first instruction was purportedly given to Mr Channa and the second to Mladen or Pete.

705 The proposition that very important instructions to destroy materials were ignored twice, thereby enabling incriminating material to remain in existence, and indeed be deliberately planted in Mr Allam’s car and on his premises, is one that I cannot accept.

706 Nor can I accept one of the basic premises which is said to underlie the conversation. According to Mr Allam, Mr Channa told him that he got the blank compliance plates from Behong. Yet Mr Channa vehemently denied that he had ever visited Behong without Mr Allam or to collect materials by himself. I accept Mr Channa’s evidence on this topic.

14.2.3.2 False denials of use of CCC-14 and the Loose HDD

707 I set out at sections 9.5.5.2 and 10 the evidence relating to the Loose HDD and
CCC-14.

708 It is plain from the evidence of Mr McKemmish and Mr Carson that the Loose HDD had been used to burn or read binary data and that CCC-14 had been viewed on the Loose HDD.

709 Notwithstanding this, Mr Allam maintained that he had never used or accessed CCC-14 and that it had been planted by Mr Channa. He made the same claim with respect to the Loose HDD.

710 I have already stated that I cannot accept Mr Allam’s evidence that Mr Channa manufactured false evidence and placed it on the Loose HDD. The same finding applies to CCC-14.

711 In my opinion, Mr Allam’s denials of the evidence against him on CCC-14 and the Loose HDD were false. His assertions that the evidence was manufactured and planted upon him are so unlikely to be true that I regard his evidence as entirely without credit.

712 Indeed, when considered together with his fabricated evidence of the conversations about the compliance plates, I am satisfied that Mr Allam was an untruthful witness.

15. PRELIMINARY FINDINGS ON COPYRIGHT INFRINGEMENT

15.1 Subject matter of claims

713 At the conclusion of oral argument, Mr Cobden withdrew a claim that had been relied upon by the Aristocrat companies throughout the hearing for copyright infringement in EPROM labels, both as literary works and artistic works.

714 In doing so, Mr Cobden observed that the withdrawal of that aspect of the case was not a concession with respect to the significance of “imitation” EPROM labels in determining whether EPROMs had been copied.

715 However, the withdrawal of the claim for copyright infringement in relation to the labels confined the copyright case to one of direct or indirect infringement in relation to imitation game software, imitation artwork and imitation compliance plates.

15.2 What flows from the credit findings

716 It is, of course, for the Aristocrat companies to prove their case on the balance of probabilities. But the claims are based largely on circumstantial evidence and my assessment of the credit of the principal witnesses for the respondents enables me to make a number of preliminary factual findings, against which the 54 transactions in issue will fall for determination.

717 Stripped down to their bare essentials, it is possible to identify five essential propositions which I will explain in more detail below.

718 First, the Tonita respondents burned Aristocrat game software onto blank EPROMs using the Dataman software to carry out this exercise.

719 Second, the Tonita respondents manufactured fake Aristocrat compliance plates, some of which were found at Botany, Bankstown and Georges Hall.

720 Third, Mr Andrews was aware that Mr Allam was burning Aristocrat game software onto blank EPROMs. So too was Mr Cragen.

721 Fourth, Mr Andrews and Mr Cragen were aware that Mr Allam was manufacturing false compliance plates for export to foreign markets.

722 Fifth, Mr Andrews and Mr Cragen sent, or were aware that the Global/Impact Joint Venture had sent, digital artwork to South America for the purpose of having it copied there. They also sent original artwork, or were aware that original artwork had been sent, to South America for copying.

723 I will deal with each of these propositions below.

15.2.1 The Tonita respondents burned Aristocrat game software onto blank EPROMs

724 As I said earlier, it is plain that the Loose HDD was used to burn primary data onto EPROM chips and that CCC-14 was viewed on the Loose HDD. In making that finding, I accept the evidence of Mr McKemmish and Mr Carson: see [500] and [509].

725 The Loose HDD was seized on the raid at Mr Allam’s premises and CCC-14 was provided to the Aristocrat companies by Mr Channa. There can be no question that both of these items of evidence were the property of the Tonita respondents and that the Loose HDD was used by them to burn Aristocrat game software onto blank EPROMs.

726 The inference to be drawn from the relevant email correspondence referred to above is that the Tonita respondents sent the pirated Aristocrat software to South America for use in the South American market: see [275], [276], [284], [286], [295], [296], [312], [316].

727 A large number of EPROMs were seized at the Tonita respondents’ Bankstown Premises. In light of Mr Polaczek’s evidence, which I accept, and having regard also to Mr Allam’s false denials of the source of the Loose HDD and CCC-14, I find that the EPROMs seized at the Bankstown Premises were counterfeit: see [443] – [445].

728 I reject Mr Allam’s denial that the EPROMs that were seized from the Bankstown Premises were obtained from Behong: see [446].

729 I accept Mr Polaczek’s evidence that the blank EPROMs seized at Georges Hall were capable of being used to store Aristocrat software: see [465].

730 I also accept the submission of the Aristocrat companies that the blank EPROMs were suggestive of copying: see [466]. I reject the submission of the Tonita respondents that the materials were obtained from Behong.

731 The position here is quite different from that which existed in CBS Songs Ltd v Amstrad Consumer Electronics PLC [1988] AC 1013. There, the House of Lords held that the sale of a high speed twin-tape recorder capable of reproducing music cassettes onto blank tapes was not an authorisation of copyright infringement.

732 The reason for the House of Lords’ decision appears to be the absence of control over the actions of the purchasers and the possibility of legitimate use rather than the inevitability of infringement: see 1053-1055; see also CBS Inc v Ames Records & Tapes Ltd [1982] Ch 91 at 106 (per Whitford J).

733 This is to be contrasted with the facts of the present case as is well illustrated by the email set out at [312]. Mr Allam was requested to provide game software and blank chips. I reject his denial that he knew the purpose to be the copying of the game software onto the chips in South America.

734 It is true that Mr Allam had no real ability to control what took place in South America, but there was no possibility that the blank EPROMs were to be used for a legitimate purpose. It was inevitable that the EPROMs were to be used for the purpose of infringement.

735 Moreover, there was other evidence which was indicative of unauthorised copying by the Tonita respondents. This was the existence of the Dataman software on the Loose HDD. Mr McKemmish’s evidence that the Dataman software was operated on the Loose HDD gives rise to a very strong inference that the Tonita respondents used it to burn Aristocrat game software onto blank EPROMs: see [498].

736 When this evidence is taken into account, it makes more credible the evidence of Mr Channa that he saw Mr Allam burning EPROMs from an EPROM burning device: see [348].

15.2.2 The Tonita respondents manufactured fake Aristocrat compliance plates

737 In my opinion, the evidence establishes that Mr Allam manufactured counterfeit compliance plates. This is to be inferred in particular from the seizure of blank compliance plates at Botany, Georges Hall and Bankstown.

738 Even if I were to disregard Mr Channa’s evidence as to the compliance plates seized at Botany, there is no escape from the inferences which arise from the seizures at Bankstown and Georges Hall.

739 The clearest example of the presence of counterfeit Aristocrat compliance plates at the premises of the Tonita respondents is the 67 compliance plates that were seized at Bankstown and the twelve compliance plates that were seized at Georges Hall: see [441], [470] and [473].

740 I accept Mr Parson’s evidence that those compliance plates were not genuine. As I said earlier, I reject Mr Allam’s evidence that Mr Channa planted the compliance plates and that the only compliance plates that Mr Allam engraved were for the Uruguay transaction.

741 The inescapable inference from this and from Mr Allam’s belated revelation that he had a hand engraver is that he engraved, or authorised the engraving of, at very least the six counterfeit compliance plates seized at Georges Hall.

742 But in my view, the inferences to be drawn are not limited to the compliance plates seized at the Georges Hall Premises.

743 Once it is accepted that Mr Allam (or the Tonita respondents) had the necessary engraving equipment, it is my view that a strong inference arises that the counterfeit compliance plates seized at Bankstown and, indeed, at Botany, were produced with the authority of the Tonita respondents.

744 This is supported by the evidence contained in the emails and the inferences to be drawn from them. The clearest example is the email from Mr Andrews to Mr Mendelson and Mr Cragen set out at [279].

745 In that email Mr Andrews said he could organise the “manufacturers plates” for Mr Mendelson. It is plain that this was an offer to manufacture counterfeit compliance plates.

746 In my view, the inference from this statement is that Mr Andrews was offering to have Mr Allam manufacture the plates. Mr Andrews was not a technician. Mr Allam was, as Mr Andrews described him elsewhere, his “technical guy”.

747 Also, there was other evidence from which it is to be inferred that Mr Andrews was to make up a set of compliance plates, albeit for machines manufactured by a different gaming machine manufacturer: see [289].

748 The emails at [279] and [289] were initially admitted only against the Global/Impact respondents but I subsequently admitted them provisionally against all the respondents. In my view, the emails were probative evidence against the Tonita respondents when considered in the light of the counterfeit compliance plates seized from the Bankstown, Georges Hall and Botany Premises and from the revelation that Mr Allam had a hand engraver.

749 Also, there was evidence adduced by the Aristocrat companies that the seized compliance plates did not match the style of hand engraving sometimes used by Aristocrat on its gaming machines: see [455].

750 All of this evidence makes more credible the testimony of Mr Channa that he saw Mr Allam or his employees, printing the blank compliance plates at the Botany Premises: see [353].

15.2.3 Mr Andrews and Mr Cragen were aware that Mr Allam was burning Aristocrat game software

751 It is clear, in my view, from the email correspondence that Mr Andrews and Mr Cragen were aware of the fact that Mr Allam was burning Aristocrat game software onto blank EPROMs. I reject their explanations of the emails.

752 The relevant emails are those set out at [275], [284], [286], [295], [296], [312] and [316].

15.2.4 Mr Andrews and Mr Cragen were aware that Mr Allam was manufacturing counterfeit compliance plates

753 In my opinion, Mr Andrews and Mr Cragen were aware that Mr Allam was manufacturing counterfeit compliance plates for export to foreign markets.

754 That is precisely what Mr Andrews told Mr Mendelson that he could organise in the email set out at [279]. The email was copied to Mr Cragen.

755 Whilst I am prepared to accept Mr Cragen’s denial that Mr Mendelson asked him to make up fake Aristocrat compliance plates, I reject his explanation of the email: see [281].

756 In my opinion, the email was sufficiently clear on its face to reveal what Mr Andrews had in mind. Mr Cragen’s suggestion that the email referred to the use of leftover compliance plates from sample or stripped machines is not consistent with Mr Andrews’ statements, in particular “can they be random that we think up”.

15.2.5 Sending artwork to be copied

757 Even before the advent of the Global/Impact Joint Venture, Mr Andrews engaged in discussion about the supply of digital artwork panels: see the email at [270]. I reject his denial that the “second choice” referred to in that email was a reference to the copying of Aristocrat artwork.

758 It is not clear whether the undated email at [272] pre-dated the Global/Impact Joint Venture, but Mr Andrews made the unequivocal statement that he could send a set of artwork to South America. He went on to say that Mr Nevada could then “just copy the game chips” and make some new artwork.

759 In my view, it is plain from this, and from his answers in cross-examination that he knew that the artwork would be copied in South America: see [273].

760 Other emails sent after the establishment of the Global/Impact Joint Venture show that both Mr Andrews and Mr Cragen were aware that Aristocrat artwork was sent by them to South America for the purpose of copying.

761 This can be seen in the email set out at [306] from Mr Andrews in which he asked Mr Trajkovski what had happened to the original artwork “we sent”. I reject the denials given in evidence by Mr Andrews and Mr Cragen that the implication from the email was that the artwork had been sent to Mr Trajkovski to be copied and returned: see [307].

762 Other emails which reveal the knowledge of Mr Andrews and Mr Cragen are set out at [310] and [319]. I reject their denials that they were aware that the artwork was sent to South America to be copied: see [311] and [320].

16. FINDINGS IN RELATION TO THE JOINT VENTURE AND AUTHORISATION OF COPYRIGHT INFRINGEMENT

763 It is clear from the extensive email correspondence which was the subject of Exhibit A1 that the Global/Impact Joint Venture commenced at a date earlier than that for which the Global/Impact respondents contended.

764 The email chain dated 12 and 15 November 2004 referred to in [279] shows that the Joint Venture was in operation at the time of those emails. I would infer from the email at [279] that the Global/Impact Joint Venture had commenced some time prior to the discussion evidenced in the email to Mr Mendelson.

765 Whilst the commencement date cannot be identified with precision, I will infer that it commenced at least six weeks before the date of those emails, that is to say on 1 October 2004.

766 It follows from the finding that the Joint Venture commenced in October 2004 that the parties to the Joint Venture authorised any copyright infringements committed by the Joint Venture in the carrying out of its activities from that date forward. It is plain that the matters to be taken into account under s 36(1A) are satisfied in the present case because Mr Andrews and Mr Cragen each had power to prevent the other from doing the acts concerned and the nature of the Joint Venture was such that it contemplated the very acts which are alleged to have taken place in these proceedings. In addition, neither Mr Andrews nor Mr Cragen took any reasonable steps to prevent the infringements which I find to have been committed in the present case.

767 It seems to me that this is a case where there was a studied and deliberate course of action in which each of the Global and Impact respondents had decided to ignore the rights of the Aristocrat companies with knowledge that there was likely to be an infringement of copyright: see APRA v Jain at 61.

768 Moreover, the email correspondence to which I have referred at some length makes it plain that the Global and Impact respondents sanctioned, approved or countenanced the infringements of copyright carried out by the Tonita respondents: see [284]ff. Indeed, whilst there was no joint venture between the Tonita respondents and the other respondents to the proceedings, there was, in my view, something in the nature of concerted action or agreed common action; it was not necessary for the Aristocrat companies to prove an express plan mapped out by the primary offenders. The evidence more than sufficiently establishes “tacit agreement” between the parties: see Universal Music v Cooper at [135].

17. THE CONVERSION CLAIM

17.1 Background

769 The conversion claim turns solely upon the terms of the contract between the Aristocrat companies and Behong. Before dealing with the relevant provisions, it is necessary to say something about the background which was described in the evidence of Mr R. C. Harrison, the Australian Integration Centre Manager for Aristocrat.

770 Mr Harrison’s evidence indicated that, as part of the Aristocrat companies’ normal business procedures, the Aristocrat companies identify gaming machines and component parts which are unusable or obsolete inventory and which require disposal.

771 The reasons why the Aristocrat companies identify machines or component parts as requiring disposal include:

· they have been superseded by new stock;

· they are trade-ins which are considered not to be suitable for re-sale because of their physical condition or configuration; or

· they have been damaged in the manufacturing process or otherwise do not meet the Aristocrat companies’ quality control standards.

772 Mr Harrison also indicated that the Aristocrat companies have in place certain procedures which are intended to ensure that their inventory of machines or component parts that are to be scrapped are not reintroduced into the gaming machine market.

773 Some of the Aristocrat internal scrapping procedure instructions were in evidence, but it is not clear whether they were in force at the time when the contract with Behong was current. For example, a “work instruction” at Exhibit RCH1, page 1, which had the “effective date” of “TBA”, contained no instructions for scrapping.

774 Also, the Scrapping Procedure document at page 1 of confidential Exhibit RCH2 was dated December 2006, but the contract with Behong terminated on 30 November 2006.

775 The effect of Mr Harrison’s evidence, which I accept, is that the Aristocrat companies had in place from at least 2002 procedures which included placing machines and parts intended for scrapping in a secure area at the Rosebery plant, where they were monitored by security systems. The machines and parts were then collected by the Aristocrat companies’ contracted scrap collector.

776 Behong was appointed as the Aristocrat companies’ scrap collector under a contract which commenced on 1 July 2005 and ended on 30 November 2006.

17.2 Dealings between Behong and the Tonita respondents

777 The Tonita respondents commenced their purchase of used gaming machines or parts from Behong in around February 2006.

778 The first purchases were made on Mr Allam’s behalf by Mr Fisher: see [167]ff above. The purchase comprised between 300 and 350 gaming machine monitors.

779 Mr Fisher made a number of other purchases on Mr Allam’s behalf between February 2006 and April 2006.

780 Mr Allam first met the principal of Behong, Mr Jacky Hong, in around May 2006. In the period from May 2006 to November 2006, Mr Allam purchased a large quantity of machines and components from Behong. The purchases included conversion kits and artwork panels. He was accompanied on some of his visits by Mr Channa, who drove the truck in which the materials were transported from Behong’s scrap yard.

781 Mr Allam agreed that in his experience in the gaming machine industry he had not previously been able to acquire such a large quantity of Aristocrat spare parts for his business.

782 Mr Fisher was “amazed” to see such a large quantity of materials, particularly whole gaming machines, available for sale in a scrap yard.

783 Between February 2006 and December 2006, Mr Fisher saw large quantities of stock acquired from Behong at Impact’s Botany Premises.

784 I accept the submission of the Aristocrat companies that it is to be inferred from the course of dealing I have described and from Mr Fisher’s observations at the Botany Premises, that the items purchased by the Tonita respondents from Behong were embodied in Aristocrat gaming machines that were refurbished by the Tonita respondents for the Global/Impact Joint Venture.

785 Mr Fisher accepted that he knew from his earliest contact with Mr Hong that it was important that the Aristocrat companies not find out “what he was doing”.

786 Mr Fisher claimed to have no recollection of whether he told Mr Allam of this fact. However, I think it is more probable than not that he would have communicated such an important piece of information to his principal.

17.3 The Behong Agreement

787 The Behong Agreement was signed by the parties in August 2005 but it took effect on 1 July 2005.

788 Recital B of the Agreement stated that Behong had agreed to provide scrap metal containment, removal, disposal and purchasing services in respect of “the Property” to Aristocrat on the terms set out in the Agreement.

789 The “Property” was described as property located at the Aristocrat companies’ business premises at Dunning Avenue, Rosebery, NSW.

790 Part 1 of the Agreement was headed “Services”. Clause 1.1 set out the services which Behong agreed to provide as follows:

The Contractor must provide the Services in respect of the Property set out in Schedule 1 (Services) (“the Services”) to Aristocrat.

791 Parts 2 and 3 of the Agreement set out the standard of care and services to be provided by Behong and the obligations imposed on Behong in the performance of the Services.

792 Clause 3.5 provides:

Cleaning and Removal of Waste

3.5.1 The Contractor must keep its workplace neat and tidy including removing its rubbish and waste from the Property as required by Aristocrat. […]

3.5.2 The Contractor must:

(a) comply with all relevant legislation when disposing of rubbish and waste and must on request from Aristocrat provide a certificate evidencing such compliance; and

(b) only use such rubbish and waste for scrap reclamation and must not be sold for reuse.

793 The Services were defined by Schedule 1 which was as follows:

The Contractor must provide metal containment, removal, disposal and purchasing services of scrap metal at property located at 85-113 Dunning Avenue, Rosebery, New South Wales, Australia.

794 The scope of the Services in respect of the “Second Hand Machines Approved for Authorised Disposal” was further spelled out in a “Note” to the Agreement as follows:

The Scrap Process / Viewing of destruction / and Destruction Certificates, will be put in place in order to meet all of Aristocrats [sic] requirements.

795 The prices payable by Behong to the Aristocrat companies for the materials are confidential. It is sufficient to say that a specified price per tonne was payable by Behong to the Aristocrat companies for “Second Hand & Obsolete Machines”.

796 The practice which was adopted by the parties, apparently in pursuance of the Agreement, was for Behong to deliver to the Aristocrat companies certificates of destruction of the materials. A large number of the certificates were in evidence. They contained a declaration by Behong that:

… all the material collected from Aristocrat’s warehouse on [date], has been damaged and or destroyed, and no part thereof has been retained for re-sale or re-use.

17.4 Conversion

797 The claim in conversion, as ultimately argued by Senior Counsel for the Aristocrat companies, rested solely upon the terms of Recital B, cl 1.1 and the scope of the Services set out in the Schedule, when read with the Note set out above.

798 Mr Cobden also sought to derive some support from the terms of the certificate of destruction, which he submitted were further terms of the Agreement.

799 Reliance upon cl 3.5.2, which formed the original basis upon which the argument was presented, was abandoned in closing submissions.

800 The effect of Mr Cobden’s closing argument was that Behong held possession of the materials collected from the Aristocrat companies, which remained the property of the Aristocrat companies until the materials were destroyed by scrapping them in accordance with the Agreement. He also submitted, though perhaps faintly, that Behong was a bailee of the goods. It was not, in his submission, a purchaser of the goods, but a service provider under a contract for the provision of services.

801 It is a fundamental principle of the law of torts that to maintain an action for conversion, the plaintiff must have either actual possession of the goods or the immediate right to possession at the time of the conversion: Penfolds Wines Proprietary Limited v Elliott (1946) 74 CLR 204 at 226-227; Associated Midland Corporation Ltd v Bank of New South Wales [1983] 1 NSWLR 533 at 549; F.A. Trindade, P. Cane & M. Lunney, The Law of Torts in Australia (4^th ed, 2007) at 209-210.

802 The essence of the tort of conversion is the commission of an intentional act by the defendant which constitutes a dealing with goods, without lawful justification, in a manner repugnant to the plaintiff’s possession or immediate right to possession.

803 In my view, it is plain that under the terms of the Behong Agreement, the Aristocrat companies had no right to possession of the goods and, accordingly, the failure on the part of Behong to destroy the goods did not amount to a wrong to the Aristocrat companies’ possessory rights.

804 Whether or not the Agreement was a contract for the sale of goods or a contract for the provision of services, the effect of it was that upon the collection of the materials from the Aristocrat companies’ premises, the Aristocrat companies parted with possession as well as any right to recall possession from Behong.

805 Behong was a purchaser of the materials who was contractually bound to dispose of the materials or to scrap them. Failure to scrap the materials, or to pay the stipulated purchase price, amounted to a breach of contract, but there was nothing in the terms of the Agreement which permitted the Aristocrat companies to reclaim possession in the event of breach.

806 Indeed, the entire commercial purpose of the Agreement was for Behong to take possession of the materials and destroy them, an act which would otherwise have been inconsistent with the Aristocrat companies’ property in the goods. The Agreement therefore lawfully authorised and required Behong to do what would have otherwise amounted to a conversion of the Aristocrat companies’ property.

807 The delivery by Behong of false certificates of destruction amounted, at very least, to a breach of contract. It may also have given rise to serious claims by the Aristocrat companies against Behong. But it was not a denial of any right of possession on the part of the Aristocrat companies.

808 I do not consider that anything turns upon whether the Agreement amounted to a contract for services or a contract for the sale of goods. The short answer to the Aristocrat companies’ claim in conversion is, as I have said, that the failure to destroy the materials did not constitute a wrong to the Aristocrat companies’ right of possession.

809 In any event, it seems to me that the Agreement was a contract for services which included an agreement for the sale of unascertained or future goods by description. This is because cl 1.1 and Schedule 1 required Behong to provide services which included scrapping and “purchasing services”.

810 When those terms are read with Schedule 2 and the “Note”, Behong was bound to purchase the materials from time to time specified by the Aristocrat companies at the price stated in the contract.

811 The claim for conversion does not rest upon the rules relating to the passing of property under the Sale of Goods Act 1923 (NSW), but it may be noted that the property passed to Behong when the goods were appropriated to the contract, that is, upon collection from the Aristocrat companies’ premises, or alternatively, when they were weighed and measured: see Sale of Goods Act s 23, rules 3 and 5.

812 The suggestion that Behong was a bailee cannot be sustained. It is true, as the discussion by the learned author of Palmer, Bailment (2^nd ed, 1991) reveals, that the concept of bailment is difficult to define: see Palmer at 3 ff.

813 Moreover, as Turner J observed in Motor Mart Limited v Webb [1958] NZLR 773 at 784-785, it would be a mistake to conclude that the transaction of bailment is not capable of adaptation to modern commercial circumstances. Indeed, his Honour said:

I decline to assume that, under the pressures and stresses of modern legal necessity, some new mutation may not burst into flower, of a quality to startle the author of the Institutes were he privileged to behold it.

814 Nevertheless, the Behong Agreement cannot be such a mutation. This is evident from the nature of the obligations entailed by the relationship of bailment.

815 One of the obligations of a bailee is to redeliver the goods to the bailor. The nature of the duty varies according to the circumstances in which and the purpose for which the goods are delivered to the bailee: Morris v C. W. Martin & Sons Ltd [1966] 1 QB 716 at 731.

816 The authorities go so far as to establish that a bailment does not necessarily impose upon a bailee the obligation of redelivering the identical object that was bailed: Motor Mart v Webb at 781; Harding v Commissioner of Inland Revenue [1977] 1 NZLR 337 at 340.

817 But here, not only was there no obligation to return the goods, whether in their original or scrapped form, Behong’s obligation was to scrap or destroy the goods. The certificates of destruction, though not terms of the Behong Agreement, indicate that what was contemplated was that Behong would certify that it had scrapped the materials. The scrap was not to be redelivered to the Aristocrat companies.

818 In Morris v C. W. Martin, Diplock LJ at 732, and Salmon LJ at 738 observed that one of the common law duties imposed upon a bailee is not to intentionally convert the goods to his or her own use. Yet this is precisely what the Behong Agreement required Behong to do.

819 It may be true that Behong was contractually bound not to resell the materials in their unscrapped form, but that does not undermine the proposition that the fundamental commercial purpose of the Behong Agreement, as exemplified in the terms to which I have referred, was for Behong to collect and scrap or destroy the materials. Nothing could be further from the concept of bailment.

820 The evidence of the dealings between Behong and Messrs Fisher and Allam indicate knowledge on the part of the Tonita respondents that their purchases of the unscrapped materials may have amounted to a breach of contract. However, that is irrelevant to the claim for conversion. No claim of inducement of breach of contract was made.

18. THE 54 TRANSACTIONS

18.1 Introduction

821 The Aristocrat companies sought to establish their claim for damages under the Copyright Act by reference to 54 transactions in which some or all of the respondents were said to have exported counterfeit gaming machines to South America. The 54 transactions involved dealings with 618 gaming machines.

822 With the exception of two transactions (transactions 12 and 38), no gaming machines involved in the transactions were inspected by the Aristocrat companies for counterfeit parts. The result of this was that the Aristocrat companies did not identify which components of the gaming machines in the impugned transactions were alleged to infringe copyright.

823 Instead, the case was built upon discrepancies in the serial numbers affixed to the gaming machines sold by the respondents, as identified in their business records and invoices. A large number of the transactions relied upon the data matching exercise set out in section 11 above.

824 The respondents, and in particular the Global/Impact respondents, sought to meet the case against them on a number of levels. First, they made general submissions in answer to the impugned transactions, including their attack on the OLGR data and the data matching exercise. Second, the respondents made specific submissions about particular transactions, including submissions in regard to the documents relied upon by the Aristocrat companies.

825 Mr Cobden helpfully attempted to reduce the burden of dealing with each of the 54 impugned transactions by producing a table grouping the transactions in separate categories. The result of this exercise was to produce five categories of transactions which were relied upon by the Aristocrat companies.

826 The table is as follows:

Code	[Transaction number]
DN	13, 20, 28, 29, 32, 36, 41, 42, 46, 51
GC	1, 2, 5, 6, 8, 9, 10, 11, 14, 15, 16, 17, 19, 21, 23, 24, 25, 26, 27, 42, 49, 50, 54
II	12, 38
MC	3, 4, 7, 16, 17, 18, 34, 35, 36, 42, 45, 47, 48, 52
NG	17, 22, 24, 25, 27, 30, 31, 33, 34, 36, 39, 40, 42, 43, 44, 52, 53

DN: Duplicate Numbers

GC: Game Changes

II: Infringing Indicia

MC: Machines at Clubs

NG: Non-Genuine Numbers

827 I will explain briefly the basis upon which these categories have been selected. I will also deal with them en globo before returning to particular transactions numbers within some of the impugned categories.

828 Ultimately, only a very small number of the categories of transactions relied upon by Mr Cobden have been proved. Principally, this is because a large number of the claims depend upon acceptance of the data matching exercise which I referred to above. My rejection of the evidentiary basis for the data matching exercise results in the rejection of all of the transactions falling into the “GC” and “NG” categories, as well as a number of other transactions falling into the “MC” category.

829 It is necessary to explain briefly the abbreviations used in Mr Cobden’s schedule. “DN” or “Duplicate Numbers” describes those transactions where the Global/Impact respondents issued invoices for machines, the serial numbers of which were a duplicate of serial numbers on machines which had already been shipped by them in earlier transactions.

830 “GC” or “Game Changes” refers to transactions where the games in the machines the subject of the transaction were not consistent with the OLGR’s record of the game on the machine with that serial number. This information was arrived at by comparing the OLGR data (which was said to record the current game on every machine in NSW) with the games recorded on the Global/Impact respondents’ invoices. The Aristocrat companies alleged that in these transactions, the games were changed by Global or Impact to a game that was found on the respondents’ computers or on other infringing material (such as counterfeit EPROMs) found at their premises.

831 “II” or “Infringing Indicia” refers to transactions where inspections of the machines in South America by Mr Coster or Mr Irarrazaval resulted in them identifying certain infringing components of the machines.

832 “MC” or “Machines at Clubs” referred to machines which were currently in clubs in NSW but which had been listed as being shipped overseas in the Global/Impact respondents’ invoices. The Aristocrat companies identified the gaming machines in this category by two methods: first, by reference to the OLGR data which was said to record the current location of each machine; and second, by a visual inspection by Ms Lynne Oldfield, a Games IP Administrator employed by the Aristocrat companies.

833 “NG” or “Non-Genuine Numbers” referred to transactions which were coded red in Ms Gardner’s matching exercise: see [563]ff above. That is to say, this category refers to those transactions where the evidence is said to show that the serial numbers were not genuine serial numbers created by the Aristocrat companies.

834 I have come to the view that the Aristocrat companies have proved infringements in relation to a small number of transactions in the DN category. I will explain this in more detail below.

835 As I have already said, Aristocrat fails in relation to all of the transactions in relation to the GC and NG categories, because they rely entirely upon the flawed data matching exercise set out in section 11 above.

836 There are only two transactions listed in the II category. I have come to the view that the Aristocrat companies have failed to establish infringement of those transactions for reasons which I will set out in more detail below.

837 Many of the transactions in the MC category rely solely upon the data matching exercise and it follows that the Aristocrat companies cannot succeed on those transactions. However there are machines within four of the transactions in the MC category, namely transactions 34, 36, 48 and 54, where there was corroborative evidence from Ms Oldfield which is, in my view, sufficient to establish infringement in relation to those transactions. I will deal with that in more detail below.

18.2 Machines at Clubs (MC)

838 The clearest instance of proven infringements is to be found in the MC category and I will therefore deal with it first. The relevant transactions which do not rely solely upon OLGR data are transactions 34, 36, 48 and 54.

839 Transaction 34 is the first of the impugned transactions alleged to have taken place after the date on which I have found the Global/Impact Joint Venture to have commenced. It is also the first transaction alleged against all three groups of respondents.

840 The transaction is documented in an invoice on the letterhead of Global dated 5 October 2004, invoice number 1045. The invoice was for a total of 84 Aristocrat gaming machines to Mr Luis Miguel Naveda Cruzado of Lima, Peru.

841 The Aristocrat companies claimed that nine of the machines listed on the invoice contained infringing components. Those machines bore the following serial numbers:

“XAW600752”, “XAW602324”, “XAW603563”, “XAW603570”, “XAW603572”, “XAW603575”, “XAW603980”, “XAW605055”, and “XAW605058”.

842 OLGR data relied upon by the Aristocrat companies indicated that on 1 December 2004, machines bearing those serial numbers were located in hotels and clubs throughout NSW.

843 On 23 October 2007, Ms Oldfield attended several clubs and hotels in NSW for the purpose of confirming the evidence sourced from the OLGR data. Of the machines indicated above, Ms Oldfield confirmed that five of the machines were operating in hotels and clubs in NSW by carrying out a visual inspection of the serial numbers of the gaming machines in the hotels and clubs that she attended.

844 These were the machines bearing the serial number “XAW603570”, “XAW603572”, and “XAW603575”, which were operating at the Guildford Bowling and Recreation Club, NSW; the machine bearing the serial number “XAW603980”, operating at the Miranda Hotel; and the machine with the serial number “XAW605058”, operating at the Rockdale RSL Club.

845 In my opinion, this evidence establishes that the five machines identified by Ms Oldfield were operating in NSW after the date on which machines bearing those serial numbers were purportedly sold to Snr Cruzado in Peru. I infer from this that those five gaming machines contained infringing components of Aristocrat gaming machines, and in particular, false Aristocrat compliance plates.

846 However, aside from the compliance plates (and the inference which I draw as to Aristocrat software: see [897], it is not possible to identify which particular components of the machines were in fact counterfeit. This has consequences for the claim in damages, which I will refer to in more detail below.

847 It is unnecessary to set out all of the detail of transactions 36, 48 and 54, the other transactions within which machines were said to have serial numbers matching those on machines identified by Ms Oldfield in NSW (although transaction 54 was not listed in this category in Mr Cobden’s table above).

848 Transaction number 36 was the subject of an invoice issued by Global dated 4 January 2005 to Cathay Entretenimientos SAC of Lima, Peru, invoice number 1153. Transaction number 48 was covered by an invoice issued by Impact on 12 July 2005 to Princess Entertainment of Belize, invoice number 54. Transaction 54 was recorded on a Global invoice dated 20 February 2005 to Reel Games of Florida, USA, invoice number 1201.

849 It is sufficient to say that Ms Oldfield identified two machines within transaction 36, five machines within transaction 48 and four machines within transaction 54 operating at clubs in NSW. I draw the same inference in relation to those machines in transactions 36, 48 and 54 as I did for the machines inspected by Ms Oldfield within transaction 34. Once again, it is not possible to identify which particular infringing components were located within the machines.

18.3 Duplicate Numbers (DN)

850 As I have said above, I am of the view that the Aristocrat companies have proved infringements in relation to a small number of transactions in the DN category. In this category, it will be necessary to examine each of the transactions in turn.

851 Turning first to transactions 36 and 42, these transactions appear to have been miscategorised by the Aristocrat companies. The machines in those transactions fall either within the category MC (Machines in Clubs), NG (Non-Genuine Numbers) or GC (Game Changes). All of those categories rely upon the integrity of the data matching exercise, and as I have already said, the Aristocrat companies cannot succeed in relation to those categories. I therefore reject findings of counterfeiting in relation to transactions 36 and 42 (other than the machines in transaction 36 identified by Ms Oldfield).

852 The next transaction that falls within the DN category that I will consider is transaction number 32. Transaction number 32 is alleged against the Global and Impact respondents, however as it is dated 6 May 2004, it is before the date on which I have found that the Joint Venture commenced. I will therefore only admit this transaction against the Global respondents.

853 In this transaction, the Global respondents deny the allegation of counterfeiting as they say that the gaming machines never came into their possession. This is the same defence that was used in relation to the Play King transaction: see above at section 6.4.

854 Transaction number 32 is recorded on Global invoice number 893 and is addressed to “El Muro SA” of Buenos Aires, Argentina. It contains the following serial numbers which are also recorded on Global’s invoice number 936:

“0051994”, “0051954”, “0051980”, “0052093”, “0052146”, “0052175”, “0052310”, “0052528”, “0052561”, “0052584”, “0052686”, “0052690”, and “0052743”.

855 The Global respondents refer to several documents to make good their claim that their practice was to ship games from independent suppliers directly to the customer, without ever taking possession of the machines. In particular, they refer to a document known as the “Bondtren Purchase Order”.

856 The Bondtren Purchase Order is a document dated 15 May 2004 for the purchase of 130 Aristocrat Mark V gaming machines. The supplier is recorded as “Bytecraft Systems Pty Ltd”. Relevantly, in the “Ship To” box, “Bondtren” is listed as the receiver and Mr Cragen’s Killarney Heights address is recorded.

857 As with the Play King transaction, I cannot accept that the machines the subject of transaction number 32 ever entered into the possession of the Global respondents. The Bondtren Purchase Order supports Mr Andrews’ evidence that the relevant machines were shipped directly to Global’s supplier, and there is no evidence that the machines were ever forwarded to the Global respondents. In this case, the supplier happens to be Mr Cragen and his company Bondtren, however as the transaction took place before the Joint Venture commenced, this does not alter my conclusion in relation to this transaction.

858 The Global respondents also say that invoice number 936, on which the serial numbers are duplicated, was not a final invoice and should be discounted. They point to a second invoice numbered 936 on which the relevant serial numbers are not recorded, which they say was the final invoice for this transaction.

859 This explanation is also given in relation to all but one of the remaining transactions in the DN category, transactions 13, 20, 28, 29, 41 and 46. I do not propose to set out those transactions in great detail, however I will say the following.

860 Transactions 13, 20, 28, 29, 41 and 46 are all set out on Global invoices that are titled “Proforma invoice”, “Commercial Invoice” or “Commercial Invoice & Packing List”. All of the invoices are addressed to different customers in different countries, including Peru, Cyprus and Mexico.

861 In answer to the claim that those invoices included serial numbers which duplicated the serial numbers on machines that had already been shipped, the Global respondents say that the Aristocrat companies relied upon invoices that had been superseded. They say that the invoices listed above were interim invoices relating to transactions which did not proceed, and which do not represent the machines that were ultimately shipped.

862 Exhibited to Mr Andrews’ affidavit was a lengthy document of over 500 pages which sought to provide an explanation in relation to each invoice which came under criticism by the Aristocrat companies, including by providing references to the final invoices which superseded the “interim” invoices listed above.

863 For several reasons that I will set out, I do not accept Mr Andrews’ explanation of the presence of duplicate serial numbers on the invoices referred to in [860].

864 First, in relation to several of the transactions, the date on the invoice which Mr Andrews described as the “final” invoice was earlier than the date on the “interim” invoice. For example, in transaction number 13, the invoice the subject of the transaction, Global proforma invoice number 363 addressed to Altagracia S R L, was dated 17 July 2002. This was said by Mr Andrews to be an interim invoice which was replaced by a proforma invoice addressed to Play King. However, not only was the number of the final invoice earlier in sequence than the interim invoice (the interim invoice being proforma invoice number 360), the final invoice was also dated 14 July 2002, three days earlier than the interim invoice.

865 Discrepancies in the date also occurred in transaction 41, where the final invoice was dated 4 November 2003 and the interim invoice was dated one and a half years later, 7 April 2005; and transaction 46, where the interim invoice was dated 14 June 2005 and the final invoice was dated 6 June 2005.

866 Second, in transaction 46, recorded on invoice number 5, the document said to be the “final” invoice was not only earlier in date than the final invoice, but also did not resemble an invoice. Whilst all of the other final invoices were recorded on documents titled “Proforma Invoice” or “Commercial Invoice”, the document said to be the “final” invoice in this transaction was titled “Packing List – Original”. Unlike an invoice, it did not contain details of price or tax payable, but instead contained an “equipment description” under the heading “Shipment from Sydney to Callao Peru”. I therefore do not accept that this document was in fact a final invoice which superseded invoice number 5.

867 Third, the customers on the invoices said to be “final” bore no resemblance to the customers recorded on the “interim” invoice. The invoices in transactions 20, 28 and 41 were addressed to Alexis Opthalmic of Cyprus, Faberio S de R.L. de C.V. of Mexico and Privada Labastida of Mexico. In each case, the Global respondents say that these transactions did not proceed, and the relevant final invoice is invoice 770, addressed to Servicios Internacionales of Mexico.

868 It is possible that these transactions were superseded by a later transaction, recorded on invoice number 770, which ultimately shipped the gaming machines that were intended to be shipped in transactions 20, 28 and 41. However, my findings as to Mr Andrews’ credit affect the weight that I give to his explanations. In particular, in the absence of any corroborating evidence, such as emails or other records indicating that the “interim” transactions were in fact cancelled, I find it difficult to accept his explanation.

869 The more probable explanation, in line with the business communications of the respondents recorded above and in particular the email set out at [279], is that Mr Andrews selected serial numbers to go on compliance plates that he knew would pass an inspection. It is for this reason that various serial numbers were duplicated on one or more invoice issued by the respondents.

870 I therefore accept the Aristocrat companies’ submission that these transactions (transactions 13, 20, 28, 29, 41 and 46) contained infringing components. However, as with the MC or Machines in Clubs category, it is not possible to conclude on the evidence which components were counterfeit.

871 The final transaction included in the DN category was transaction number 51. This transaction, recorded on invoice 050830, duplicated serial numbers recorded on invoice 050505. In response to this transaction, the respondents submit that some of the gaming machines on this invoice may have been substituted at the last minute.

872 As with Mr Andrews’ explanation regarding duplication above, I reject this submission. In the light of the business communications recorded in the emails extracted in these reasons and my findings above, in my view, the more plausible explanation for this duplication of serial numbers is that Mr Andrews created or obtained fake compliance plates which included false or invented numbers.

18.4 Infringing Indicia (II)

873 There are two transactions listed in the “Infringing Indicia” or “II” category in Mr Cobden’s table, transactions 12 and 38. Transaction number 12 is the Play King transaction, which I have dealt with in section 6 above. For the reasons stated above, I do not accept the Aristocrat companies’ submissions in regard to the Play King transaction as it has not been established that the machines ever entered into the possession of the Global respondents.

874 Transaction number 38 is recorded on Global invoice number 1156 and dated 4 January 2005. It is addressed to Cathay Entretenimientos S.A.C. of Lima, Peru and is for the sale of 81 “Video Gaming Machines”. Two machines listed on the invoice have serial numbers “DY0352V” and “AV17325V”.

875 The Aristocrat companies relied upon several documents entitled “Certificado de Fabricacion”, which were issued in South America following upon a raid at Cathay Entretenimientos conducted by Mr Coster. The raid was carried out in April 2006 and the certificates were issued in August 2007. The effect of the certificates were that the relevant Aristocrat company notified the Peruvian government of the sale of a new genuine Aristocrat game or a game kit to a customer in Peru.

876 The substance of Mr Coster’s evidence was that the certificates were issued because the raid identified a large number of counterfeit gaming machines in operation at various locations in Peru. As a result of the identification of counterfeit machines, the purchasers agreed to purchase genuine Aristocrat games or gaming kits from the local Aristocrat distributor to replace the counterfeit components. Two of these games identified as counterfeit by Mr Coster were Dolphin Treasure, which were found on the machines bearing the serial numbers referred to in [874] above.

877 Whilst at first sight this may suggest that the games had emanated from the Global/Impact respondents who supplied those machines, it seems to me that I cannot make that finding. This is because, as Mr Coster conceded in cross-examination, most of the machines identified by him had Spanish artwork and games. He also conceded that there was a big problem in Peru where casino operators changed genuine games and artwork installed in gaming machines in Peru to Spanish artwork and games.

878 It seems to me to follow that I cannot be satisfied that the two identified machines were shipped by the Global/Impact respondents to Peru with the counterfeit games or artwork identified by Mr Coster in the raid.

18.5 Conclusion in relation to the 54 transactions

879 I am satisfied that 11 of the 54 impugned transactions comprised gaming machines which contained infringing components of the Aristocrat companies’ gaming machines. Four of these transactions fell into the “MC” category, namely transactions 34, 36, 48 and 54. Seven of the transactions fell into the “DN” category, namely transactions 13, 20, 28, 29, 41, 46 and 51.

880 However, as I have said a number of times, it is not possible to conclude on the evidence precisely which components in the machines were counterfeit.

19. DAMAGES

19.1 Damages under s 115(2)

881 The principles applicable to the assessment of damages under s 115(2) of the Copyright Act were set out by Black CJ and Jacobson J in Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd (2007) 157 FCR 564 at [23]ff. It is unnecessary to repeat what was said in that case, save for two relevant observations.

882 First, in DAP Services, the Aristocrat companies claimed damages only upon one basis, namely, the value of lost sales calculated by reference to the report of a chartered accountant who attempted to calculate the loss of profits for each lost sale: see DAP Services at [30].

883 However, the claim for compensatory damages failed in DAP Services because the evidence did not establish that each sale by the respondents was at the expense of a new Aristocrat machine: see DAP Services at [31].

884 Second, it was suggested in DAP Services at [34]ff that there may have been other bases upon which damages could have been assessed. These included the possibility of finding that Aristocrat had lost some proportion of the sales made by the infringing respondents: see Sony Computer Entertainment Australia Pty Ltd v Stirling [2001] FCA 1852 at [8] per Emmett J.

885 However, these alternatives were not open in DAP Services because there was no evidence to support the assessment of damages on those bases.

886 In the present case, the Aristocrat companies contend that the appropriate measure of compensatory damages is the loss of profit that would have been made from the sale of second-hand or refurbished Aristocrat gaming machines by the Aristocrat companies, or the loss of profits on the sale of conversion kits. The evidence in support of that assessment was contained in the affidavits of Mr Irarrazaval and Mr Graham Ward, the Group Financial Controller of Aristocrat.

887 Mr Irarrazaval’s evidence dealt in some detail with the market for the sale of Aristocrat new and refurbished gaming machines to countries in South America. Evidence was given as to the volume of second-hand or refurbished gaming machines supplied by the Aristocrat companies to companies in South America during 2002 to 2007, and the prices at which Aristocrat second-hand or refurbished gaming machines were supplied in the South American market.

888 Mr Irarrazaval gave evidence in relation to the market in a number of South American countries. In relation to Peru, Mr Irarrazaval said that notwithstanding the significant size of the gaming machine market, and the large number of Aristocrat gaming machines installed and operating across the various venues in Peru, the relevant member of the Aristocrat group of companies had difficulties selling Aristocrat gaming machines to customers between 2002 and 2006. Mr Irarrazaval attributed that difficulty to the high number of counterfeit gaming machines being sold in Peru at prices significantly below the prices at which the Aristocrat companies were able to offer genuine refurbished gaming machines.

889 Mr Irarrazaval gave evidence as to the prices that were obtained by the respondents for sales in South America covering the period from 2002 to 2004 in respect of gaming machines recorded on “seized invoice spreadsheets”. Whilst it is true that the Aristocrat companies have not established that all of those gaming machines were counterfeit, it is relevant to record that, as Mr Irarrazaval says, the amount obtained for those machines was around $US1000 to $US1500 per machine. He observed that this is lower than the price at which the Aristocrat companies sold their refurbished gaming machines into South America at that time, which was put at between $US3500 and $US4500 per unit.

890 Mr Ogborne submitted that Mr Irarrazaval’s evidence established that the Aristocrat companies were operating in a different price band of the market to Global and Impact. He also submitted that Mr Irarrazaval’s evidence was to the effect that the Aristocrat companies could not and did not compete with the cheap end suppliers like Global and Impact.

891 Mr Ogborne also sought to attack one part of Mr Irarrazaval’s evidence in which he identified a number of Global/Impact customers to which sales may have been made by the Aristocrat companies. Mr Ogborne went on to submit that in these circumstances, the Aristocrat companies have failed to prove that they had lost any infringing sales made by the Global or Impact.

892 I reject Mr Ogborne’s submissions which, in my view, are contrary to the proper and fair reading of the whole of Mr Irarrazaval’s evidence. It is true that the Aristocrat companies had difficulty in competing with “cheap end suppliers”, but this was because, as Mr Irarrazaval said, the counterfeiters were selling at much lower prices than the Aristocrat companies.

893 It seems to me that the overall effect of the evidence was that the Aristocrat companies have made sales of second-hand or refurbished machines in South America, albeit at prices higher than those obtained by the Global/Impact respondents, and they have also sold conversion kits. Indeed, there was evidence in Mr Coster’s certificate of the sale of two conversion kits to replace counterfeit components in Aristocrat gaming machines. Whilst it is true that those two counterfeit gaming machines are not shown to have been supplied by the respondents, Mr Coster’s evidence indicates that there are at least some buyers who will purchase genuine conversion kits at the higher price.

894 In view of Mr Irarrazaval’s evidence, I am entitled to infer that the Aristocrat companies would have sold at least a proportion of the machines that are the subject of the 11 infringing transactions. In the present case I find that the Aristocrat companies would have been able to sell 50 percent of those machines in the South American market.

895 It is then necessary to consider the quantum of the lost profit on each of those sales. I accept Mr Ward’s evidence that the lost profit was approximately $US1545 per machine, or approximately $US1770 per conversion kit. The steps in the reasoning process by which Mr Ward arrived at these figures contain some inconsistencies, but I have come to the view that I should accept his conclusions.

896 The Global/Impact respondents submitted that Mr Ward’s evidence was based on intra-company pricing. Whilst there seems to be some force in that submission, I think that on a fair reading of both Mr Irarrazaval and Mr Ward, I am nevertheless entitled to accept the figures that Mr Ward puts forward in support of the claim.

897 However a difficulty arises because, as I said earlier, it is impossible to tell precisely which infringing components were contained in the machines that were the subject of the 11 infringing transactions. Nevertheless, it seems to me to be more likely than not that the infringing components included counterfeit Aristocrat game software. There would have been little point in having fake serial numbers for gaming machines containing genuine Aristocrat software. Accordingly, I am entitled to proceed upon the basis that 50 percent of the gaming machines sold in the infringing transactions represented lost sales to Aristocrat.

898 There were 16 machines in the four infringing transactions in the “MC” category that were identified by Ms Oldfield, and 56 machines in the seven infringing “DN” transactions, totalling 72 infringing machines. However, 16 of these machines were supplied outside of the South American market, namely four to the USA and 12 to Cyprus. There was no evidence as to the markets for second-hand gaming machines in those countries and accordingly, the Aristocrat companies have failed to prove that those sales were made at the expense of the Aristocrat companies.

899 It follows that the total number of infringing machines sold in South America was 56. Proceeding upon the basis that the Aristocrat companies would have been able to sell 50 percent of those machines, they are entitled to recover damages under s 115(2) of the Copyright Act for 28 machines.

900 Applying Mr Ward’s analysis, and averaging the figures so as to allow for the different profits attributable to the sale of gaming machines or conversion kits, I will adopt a figure of $US1600 per machine. The Aristocrat companies are therefore entitled to damages under s 115(2) for $US44,800, converted at the exchange rate prevailing on the day before judgment.

901 On the basis of the exchange rate quoted in The Australian Financial Review on 14 December 2009, namely the average of the buy/sell rate which was 1.09085, the Aristocrat companies are entitled to damages under s 115(2) for $AU48,870.

19.2 Allocation of s 115(2) damages

902 As I have said on several occasions, I find that the Global/Impact Joint Venture did not commence until 1 October 2004. It follows that any infringing transactions prior to transaction number 34 can be supported only against the Global respondents. Any of the transactions numbered 34 to 54 which were proved to be infringing transactions can be maintained against the Global/Impact respondents.

903 They can also, in my view, be maintained against Mr Allam because it is plain on the evidence that Mr Allam authorised each of the infringing transactions in the sense that he sanctioned, approved or countenanced them. He was the person who was supplying the technical know-how to the Global/Impact Joint Venture and his involvement in that way must have made it clear to him that he was at the very least approving the sale of infringing components to the South American market.

904 As I have said earlier, Tonita was incorporated on 14 July 2006. All of the 54 transactions alleged against the respondents took place before that date; the latest in date (transaction number 54) was dated 20 February 2006. On this basis, none of the 54 transactions can be maintained against Tonita.

905 There were 16 machines that were the subjects of transactions 13, 28 and 29 that have been proved against the Global respondents. Compensatory damages for transaction number 20 have not been proved because those machines were supplied to Cyprus. It follows that the Global respondents are liable for $US12,800 or $AU13,963 and that Global, Impact, Mr Andrews, Mr Cragen and Mr Allam, jointly and severally, are liable for the balance, $US32,000 or $AU34,907.

19.3 Additional damages under s 115(4)

906 Where it is established that a defendant has infringed copyright, the Court may, in assessing damages, award additional damages if it is satisfied that it is proper to do so, having regard to the flagrancy of the infringement, and the other matters referred to in s 115(4)(b) of the Copyright Act.

907 The principles upon which additional damages are awarded were discussed in DAP Services at [40]ff. It is not necessary to set out the principles in any detail. It is sufficient to say that the objectives include deterrence, and that an element of penalty is an accepted factor in the remedy. Also, the assessment of the amount to be rewarded is a somewhat imprecise exercise and the Court is to have regard, amongst other things, to the flagrancy of the infringement and the need to mark the Court’s disapproval of the conduct.

908 In the present case, as in DAP Services, the actions of the respondents demonstrate a cynical and flagrant exploitation of the Aristocrat companies’ copyright. Although the number of infringing transactions was ultimately proved to be far less than the number claimed by the Aristocrat companies, it is plain that the respondents were engaged in a commercial exercise. Their actions were plainly flagrant and undertaken for commercial gain.

909 The Aristocrat companies claimed that the true nature of the respondents’ business was a large scale counterfeiting operation. They failed to make this good. But the statements made in the emails when considered with much of the materials seized on the Anton Piller raids show the willingness of the respondents to engage in counterfeiting when it suits their commercial purposes.

910 There is no need for any proportionality between the amount of compensatory damages under s 115(2) and the amount of additional damages under s 115(4): DAP Services at [45].

911 I am also entitled to take into account the conduct of the respondents after the acts constituting the infringement. Accordingly, I am entitled to include in my calculation of additional damages the attitude of the respondents to this litigation, in which they vehemently denied any involvement in counterfeiting.

912 For the reasons mentioned above, additional damages cannot be maintained against Tonita as it has not been established that Tonita was involved in any of the 54 impugned transactions.

913 The amount of additional damages awarded in DAP Services was $200,000 against Vidtech and Mr Parry: see DAP Services at [53] and [116].

914 Here, the activities were on a scale which seems to me to be larger than that which existed in DAP Services. In addition, there are three groups of respondents. I have come to the view that I ought to award an amount of $450,000 for additional damages under s 115(4) against the Global respondents, the Impact respondents and Mr Allam, jointly and severally.

915 Although Mr Allam was an independent contractor, he was intimately involved in the venture and there is no basis for awarding a lesser sum of additional damages against him.

19.4 Trade marks and other causes of action

916 Damages were also sought for infringement of trade marks, breach of the provisions of the Trade Practices Act and passing off. However, these claims were pressed only to the extent that damages awarded for copyright infringement were inadequate.

917 In view of the orders I propose to make for damages under s 115(2) and (4) of the Copyright Act, I do not need to address the other claims.

918 Damages for copyright infringement for dealings in blank EPROMs are sufficiently covered by awarding nominal damages (to the extent necessary) and are otherwise covered by the award of additional damages.

20. MISCELLANEOUS MATTERS

919 The respondents submitted that the Aristocrat companies’ internal documentary records were shown to be haphazard and unreliable. There was some force in this. But the conclusion which the respondents sought to draw from that cannot be maintained.

920 The conclusion which the respondents suggested was that I could not be confident that the Aristocrat companies had failed to grant a licence to the respondents to deal in the used gaming machine components in South America or other overseas markets.

921 That submission is without substance. No suggestion was ever made by any of the respondents’ witnesses that such a licence had been granted.

922 Nor is there any substance in the submission that the respondents had an implied licence to exploit the copyright in those components. The position here is quite different from that which occurred in the well established authorities that have considered the question of implied licence to use copyright materials; see Beck v Montana Constructions Pty Ltd (1963) 5 FLR 298; Concrete Pty Limited v Parramatta Design & Developments Pty Ltd (2006) 229 CLR 577.

923 Another submission pressed strongly by the respondents was the need for the Aristocrat companies to prove their claims to the requisite standard. I am satisfied that the Aristocrat companies have proved their claims in respect of the 11 transactions set out above in accordance with the principles stated in section 12 of my reasons.

924 If it is necessary for me to reach a level of actual persuasion in relation to those claims (see [597]), I have reached that state of satisfaction. So too I am satisfied that additional damages ought to be ordered under s 115(4) in a substantial sum.

925 The respondents also submitted that in the absence of the production of the counterfeit gaming machines, I could not be satisfied as to the substantiality of the components which were comprised in the copyright infringement.

926 I reject this submission. Whilst I cannot be certain as to the actual infringing components, I consider it is more likely than not that they consisted of fake Aristocrat game software and fake compliance plates. That is sufficient to meet any test of substantiality.

927 Whilst I have not been able to conduct a visual comparison of the infringing compliance plates with the Aristocrat companies’ originals, the evidence is sufficient for me to infer that the test stated by the High Court in S.W. Hart & Co Proprietary Limited v Edwards Hot Water Systems (1985) 159 CLR 466 at 472, 478 and 479 is satisfied. The Tonita respondents had prior access to the copyright works. From the material before me going to infringement of compliance plates, in particular the evidence of Mr Parsons, I infer the elements of resemblance, actual use and causal connection. The onus then passed to the Tonita respondents to rebut the inference of copying but they failed to discharge that onus: Designers Guild Ltd v Russell Williams (Textiles) Ltd [2001] All ER 700 at 708-9.

928 Moreover, I am entitled to take into account the unauthorised use made by the respondents of the Aristocrat companies’ artwork. Even if there was no infringing artwork in the 11 proved transactions, it is clear that on other occasions, artwork was supplied to South American customers to facilitate counterfeiting. That is a matter which is relevant to additional damages under s 115(4).

929 Mr Ogborne made much of the fact that photos were taken by Mr Channa at the Botany warehouse yet they disclosed no evidence of counterfeiting. That is a matter which goes against the Aristocrat companies’ claim that the respondents’ real business was one of counterfeiting. But is does not answer the claim in relation to 11 proved transactions. Nor is it an answer to the claim for additional damages.

930 The respondents also stressed the need to confine the Aristocrat companies’ claim to the pleaded case. I am satisfied that the proved transactions were within the pleaded claims or sufficiently within the case conducted by the Aristocrat companies.

931 I accept that the Aristocrat companies unleashed a “snowstorm” of paper, some of it insufficiently distilled to meet the requirements of modern commercial litigation. But ultimately the claims were sufficiently clear to enable the respondents to address them.

932 Nor did I consider it was appropriate to exercise my discretion under s 136 to limit the evidence as was sought by the respondents.

933 I was satisfied that evidence which was admitted provisionally was admissible against all the respondents. The case of joint liability was made good for the reasons referred to above.

934 Finally, I reject the Tonita respondents’ submission that only nine of the transactions were pressed against them. If that were correct, then some of the transactions which I have found to be made out would not be able to be maintained against them. However, Mr Cobden made it plain that all transactions from number 34 onwards were pressed against all of the respondents. This is sufficient to dispose of the Tonita respondents’ submission.

21. ORDERS

935 The orders that I will make are as follows:

4. The first and second respondents pay the applicants damages under s 115(2) of the Copyright Act in the amount of $US12,800, converted to $AU13,963.

5. The first, second, third, fifth and sixth respondents pay the applicants, jointly and severally, damages under s 115(2) of the Copyright Act in the amount of $US32,000, converted to $AU34,907.

6. The first, second, third, fifth and sixth respondents pay the applicants, jointly and severally, additional damages under s 115(4) of the Copyright Act in the amount of $AU450,000.

936 I will hear the parties as to costs.

I certify that the preceding nine hundred and thirty-six (936) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.

Associate:

Dated: 15 December 2009

Counsel for the Applicants:	Mr R. Cobden SC with Mr J.M. Hennessy

Solicitor for the Applicants:	Gilbert + Tobin

Counsel for the First, Second, Third and Fifth Respondents:	Mr A. Ogborne

Solicitor for the First, Second, Third and Fifth Respondents:	Paul Bard Lawyers

Counsel for the Fourth and Sixth Respondents:	Mr M. Green with Ms E.M. Peden

Solicitor for the Respondents:	Bruce Stewart Dimarco Lawyers

Date of Hearing:	29 September -10 October 2008; 20 - 24 October 2008; 9 - 13 March 2009; 30 April - 6 May 2009

Date of Judgment:	15 December 2009

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