FEDERAL COURT OF AUSTRALIA

 

Young v Wyllie [2010] FCA 283

Citation:		Young v Wyllie[2010] FCA 283
Parties:		GARY YOUNG v GREG WYLLIE, VIDEO SPORTS PTY LTD, EX DVD PTY LTD, JIM ZAVOS, PITSTOP BOOKSHOP PTY LTD, BARBARA ELIZABETH LYSTER, ATLANTIC VIDEO, CHAOS ENTERTAINMENT PTY LTD, ROBERT APPEL, STOMP PTY LTD, ANDREW JORGENSEN, SANITY MUSIC STORES PTY LTD, (NO THIRTEENTH RESPONDENT NAMED), GREG MILNE and DARREN ROBINSON TRADING AS MOVIE SEARCH DOT COM
File number:		ACD 41 of 2008
Judge:		MOORE J
Date of judgment:		30 March 2010
Catchwords:		PRACTICE AND PROCEDURE - summary judgment pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth). COPYRIGHT – copyright in a cinematograph film – whether evidence of infringement of those rights. TRADE PRACTICES – whether evidence of misleading and deceptive conduct .
Legislation:		Copyright Act 1968  (Cth) ss 10, 86, 101, 103 Federal Court of Australia Act 1976  (Cth) s 31A Trade Practices Act 1974  (Cth) ss 52, 53
Cases cited:		Coles Supermarkets Australia Pty Ltd v FKP Limited  [2008] FCA 1915 discussed Dandaven v Harbeth Holdings Pty Ltd [2008] FCA 955 followed Houghton v Arms (2006) 225 CLR 553 distinguished Kervan Trading Pty Ltd v Aktas  (1987) 8 IPR 583 applied Universal Music Australia Pty Ltd v Cooper (2005) 65 IPR 409 discussed Universal Music Australia Pty Ltd v Sharman License Holdings Ltd  (2005) 220 ALR 1 cited Wang v Anying Group Pty Ltd  [2009] FCA 1500 followed
Date of hearing:	12 February 2010
Place:	Sydney
Division:	GENERAL DIVISION
Category:	Catchwords
Number of paragraphs:	74
Counsel for the Applicant:	The applicant appeared in person
Counsel for the First and Second Respondents:	C Champion
Solicitor for the First and Second Respondents:	Hazan Hollander Solicitors
Counsel for the Fifth and Sixth Respondents:	P McGowan
Solicitor for the Fifth and Sixth Respondents:	Conal O'Toole
Counsel for the Seventh Respondent:	J McDonald
Solicitor for the Seventh Respondent:	Harris Freidman Hyde Page
Counsel for the Tenth, Eleventh, Twelfth and Fourteenth Respondents:	S Gorry
Solicitor for the Tenth, Eleventh, Twelfth and Fourteenth Respondents:	Henry Davis York

IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY
GENERAL DIVISION	ACD 41 of 2008

 

BETWEEN:

GARY YOUNG Applicant

AND:

GREG WYLLIE First Respondent   VIDEO SPORTS PTY LTD Second Respondent   EX DVD PTY LTD Third Respondent   JIM ZAVOS Fourth Respondent   PITSTOP BOOKSHOP PTY LTD Fifth Respondent   BARBARA ELIZABETH LYSTER Sixth Respondent   ATLANTIC VIDEO Seventh Respondent   CHAOS ENTERTAINMENT PTY LTD Eighth Respondent   ROBERT APPEL Ninth Respondent   STOMP PTY LTD Tenth Respondent   ANDREW JORGENSEN Eleventh Respondent   SANITY MUSIC STORES PTY LTD Twelfth Respondent   (NO THIRTEENTH RESPONDENT NAMED) Thirteenth Respondent   GREG MILNE Fourteenth Respondent   DARREN ROBINSON TRADING AS MOVIE SEARCH DOT COM Fifteenth Respondent

 

JUDGE:	MOORE J
DATE OF ORDER:	30 MARCH 2010
WHERE MADE:	SYDNEY

 

THE COURT ORDERS THAT:

 

1.                  The matter be listed for further directions at 9.30am on Tuesday 18 May 2010.

2.                  Any respondent wishing to make further submissions on the question of costs is to do so within 14 days of the date of this judgment.

3.                  The applicant is to file any further submissions on the question of costs within 28 days of the date of this judgment.

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 Federal Law Search on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY
GENERAL DIVISION	ACD 41 of 2008

 

BETWEEN:

GARY YOUNG Applicant

AND:

GREG WYLLIE First Respondent   VIDEO SPORTS PTY LTD Second Respondent   EX DVD PTY LTD Third Respondent   JIM ZAVOS Fourth Respondent   PITSTOP BOOKSHOP PTY LTD Fifth Respondent   BARBARA ELIZABETH LYSTER Sixth Respondent   ATLANTIC VIDEO Seventh Respondent   CHAOS ENTERTAINMENT PTY LTD Eighth Respondent   ROBERT APPEL Ninth Respondent   STOMP PTY LTD Tenth Respondent   ANDREW JORGENSEN Eleventh Respondent   SANITY MUSIC STORES PTY LTD Twelfth Respondent   (NO THIRTEENTH RESPONDENT NAMED) Thirteenth Respondent   GREG MILNE Fourteenth Respondent   DARREN ROBINSON TRADING AS MOVIE SEARCH DOT COM Fifteenth Respondent

 

JUDGE:	MOORE J
DATE:	30 MARCH 2010
PLACE:	SYDNEY

REASONS FOR JUDGMENT

Introduction

1                                             This judgment concerns an application for summary judgment filed on 26 August 2009 by the applicant, Mr Gary Young.  He is a self represented litigant.  He seeks summary judgment under s 31A of the Federal Court of Australia Act 1976 (Cth) against 14 respondents including declarations referrable to s 103 of the Copyright Act 1968 (Cth) and ss 52 and 53 of the Trade Practices Act 1974 (Cth).

2                                             The applicant was the producer and director of two cinematograph films, "COSY COOL" and "WHEELS ON FIRE", sometimes called "WHEELS ON FIRE 30 years with the Weekend Warriors", produced in the 1970s on 35mm film and recut and modernised for DVD release. The copyright in the films initially vested in Lugen Pty Ltd ("Lugen"). On 26 May 2005 licence agreements between Lugen, "by and through its agent Gary Young", and ostensibly with Duke Video Pty Ltd ("Duke"), were signed by Gregory John Wyllie, the first respondent.  There was a separate agreement for each film.  On 24 July 2008, in consideration of the sum of $1000, the copyright was assigned by Lugen to the applicant.  It is not an issue that the applicant now owns the copyright in the two cinematograph films.

3                                             On 6 November 2008 the applicant filed an application in the ACT Registry of this Court seeking an account of profits and damages under the Copyright Act and damages for breach of contract.  The first respondent by notice of motion filed on 25 November 2008 sought to have the matter transferred to the NSW Registry of this Court under Order 10 rule 1(2)(f) of the Federal Court Rules.  On 1 December 2008 Stone J ordered that the proceeding be transferred.

4                                             A further amended statement of claim was filed by the applicant on 16 April 2009.  Subsequent submissions and affidavits (which are in part argumentative) filed by the applicant include: memorandum of points in support of the Notice of Motion and affidavit of Gary Young (filed 26 August 2009); an affidavit filed on 2 September 2009 (Greg Tingle), three affidavits of the applicant filed 28 October 2009, further points in support (10 February 2010 and 26 February 2010) and an affidavit of the applicant filed in court 12 February 2010.  Before considering the legal issues raised in the applicant's notice of motion, it is convenient to refer to the evidence.  Given that this is an interlocutory application seeking orders under s 31A, I refrain from making findings of fact.  What follows should be treated as an account of some of the evidence which has been admitted for a limited purpose and is untested.

The evidence - the 2005 licence agreements

5                                             In an affidavit sworn on 24 March 2009 and in another filed on 28 October 2009, the applicant annexed a series of emails which reveal the events leading to the signing of the licence agreements of 26 May 2005.  The first respondent, in his affidavit of 3 December 2009, agreed that these emails represent an accurate record of their communication at that time.

6                                             On 14 March 2005 an email from the applicant to the first respondent asked whether he was still interested in selling Wheels on Fire and Cosy Cool.  Two days later the first respondent indicated that he was still interested in both titles and would like to be able to advise the applicant about marketing.  He requested information from the applicant about "the sort of deal" he would accept and the artwork or material available.  By 6 April 2005, the applicant had advised that he would be interested in an advance of "$2500/3000 or so" and royalties on each DVD for a licence of 5 years.  The following day, the first respondent indicated that this "would work fine for us" and that he would contact the applicant to finalise the deal.  On 19 April 2005 the first respondent requested that the applicant provide "what you normally provide as paperwork" and inquired again about artwork.  In an email that same day, the applicant indicated that he was under pressure from investors to finalise the deal and that:

… I dont [sic] need anything too formal..I can just write a simple contract… more like an exchange of letters if you like.

7                                             Again on 26 April 2005, the applicant indicated that he would like to finalise the deal and that "[w]e dont [sic] need anything fancy and just a basic deal set out in a letter form".  The applicant also mentioned that he had some original photographs and artwork.  Included in the email was a draft licence agreement in which the applicant required Duke in clause 4 "to produce a minimum of 5000 copies of each film on DVD…".  The following day the first respondent indicated that the only problem he had was with clause 4 because "5k as a minimum would not work for us at all".  There was some discussion of art work and a request for the type of format of the master copy so that the first respondent could make a submission to his distributor "for a Fathers Day Release".  By Thursday 28 April 2005 the first respondent indicated that "[w]e have to do an initial run of 1,000 units and then re-runs of 500 min…" but a run of 3000 would be possible.  Other emails between the parties that day concerned negotiations about royalty payments and a request by the applicant for "some free publicity right around fathers day…and the 2 weeks before…".  The first respondent indicated he agreed as long as he obtained the confirmation of the Father's Day order for mass markets. 

8                                             On 4 May 2005, email correspondence indicated that the first respondent was still waiting to hear from the distributors and that he did not want to give the applicant any false indication of sales figures until he knew he could "get them into mass market".  The first respondent, in his affidavit of 3 December 2009 at para [26(b)], explained that the "mass market distribution" referred to a situation of having the DVDs accepted and sold by large retail outlets such as K-Mart and Big W.  The first respondent also explained to the applicant that the mass market distribution of DVDs would depend on a third party distributor.  He referred the applicant to a contact at MRA Entertainment Group Pty Ltd (MRA), the product manager, Ms Julie Matthews.  On 10 May 2005 the first respondent indicated that the two DVDs had been accepted for Father's Day distribution.  The applicant said in para [11] of his affidavit of 23 March 2009 (amended 30 September and filed on 28 October 2009) that this statement in the first respondent's email "was very critical in inducing myself to sign the agreements" with the first respondent. 

9                                             The first respondent said, in his affidavit of 3 December 2009 at para [26(f)], that at the time of signing the licence agreements on 26 May 2005 he did not notice the reference to Duke Video Pty Limited below his signature because he did not intend to sign agreements on behalf of such a company and he was not an officer or shareholder of the company.  The agreements were drafted by the applicant.  The first respondent did not seek legal advice prior to signing them.  He stated that he thought that the references to Duke Video and Duke throughout the agreements were references to the business names of the second respondent.  The relevance of this error will be apparent shortly.  The terms of the licence agreements are:

Lugen Pty Ltd

ABN 65088386976

PO BOX 561

Goulburn NSW

2580

Phone 612 48225122

To Greg Wiley

Duke Video

15 Little Street

Camden NSW

Dear Greg

Enclosed is the arrangement as I understand it for the DVD release of ["COSY COOL"/"WHEELS ON FIRE"].  If this is your understanding of the deal will you please sign and return the original of this letter and keep the copy for your file.

The Arrangement is:-

Lugen Pty Ltd by and through its agent Gary Young [Lugen] will license the film ["COSY COOL"/"WHEELS ON FIRE"] to Duke video for release on DVD within Australia and New Zealand on the following terms and conditions:-

1.       The term of the license agreement is for a period of 5 years from the date of signatures to this letter.

2.       Both Gary Young as agent and Lugen warrant that Lugen is the sole beneficial owner of the film and that the film is unencumbered in any way and that Lugen by and through its agent Gary Young has the sole authority to license the film within Australia and New Zealand.

3.       Duke will pay to Lugen the sum of $3000.00 as an advance [the "advance"] against a royalty of $2.75 including GST per DVD sold during the license period up to 3000 units sold, thereafter the royalty shall be $2.00 including GST per DVD sold. This advance is to be divided into two payments. One payment of $1500.00 on signature to this letter and a further payment of the same amount at the time the "Glass Master' copy is produced or one month from the date of signature to this letter whichever occurs first.

4.       Duke agrees to produce a minimum of 3000 copies of the film on DVD at the time of first purchase of DVD copies from Duke's DVD manufacturer within one month of signature to this agreement.

5.       Duke agrees to notify Lugen each 3 month period of all copies of DVDs sold of the film and to pay the royalties due to Lugen at those respective times. [provided at all times Duke will first deduct the amount paid to Lugen as the advance]

6.       At all times the "glass master" used to reproduce DVD copies is to remain the property of Lugen Pt Ltd and can be kept by Duke during the period of this license agreement and at the expiration of this license agreement the glass master is to be returned to Lugen in good condition within 14 days.

7.       Should Lugen sell or license the rights to this film to anyone out side of Australia or New Zealand then Lugen will retain the right to order copies of the DVDs through Duke at cost price plus 50cents per DVD

8.       Duke is specifically authorised to attempt to arrange the licensing of the film to "DUKE video on the Isle of Man" for distribution through their respective outlets. Any such license, if issued, must be issued directly by Lugen to "Duke video of the Isle of Man" to be valid and come into force and effect, however all reporting and all advance payments and all royalties made under that licensing agreement are to be paid to Duke who will deduct the sum equal to 20% of the gross payment received and thereafter forward the balance to Lugen within 7 days

9.       This agreement will continue in full force and effect for the full license period set out herein save and except that in the event that Duke becomes insolvent or is liquidated or a receiver is appointed or Duke makes any arrangement to pay creditors then the license agreement will immediately become null and void and of no further effect and the balance of unsold DVDs will immediately become the property of Lugen and the glass  master and the unsold DVDs are to be delivered to Lugen within 14 days in good condition.

10.   The artwork for the DVDs will be made to Duke's specifications and at Duke's cost and shall include the Film Factory logo and the inscription "Sydney Australia" immediately underneath that logo. At all times a warning notice will be displayed on all copies of the DVDs sold wherein the notice assets a claim of copyright as follows:- "Copyright 2005 the Film Factory and Lugen Pty Ltd". The warning notice at the start of the film shall be in substantially the same form as is now on the master copies handed to Duke with the sole exception that where the master copies refer to "videocassette" or "videomovie" then these references shall be replaced with the Letters "DVD"

11.   a Master copy of the film is delivered to Duke on signature to this letter. The master copies must be returned to Lugen within 45 days together will [sic] all artwork supplied at time of signature to this agreement.

Dated_____________

Signed by

Gary Young for and on behalf of Lugen Pty Ltd

___________________

Signed and agreed to by Duke Video Pty Ltd

By________________

10                                          It should be noted that the prefatory words in the agreements indicate that the licence is for "release… within Australia and New Zealand."

The evidence - the sale of the DVDs on the internet by the respondents

11                                          The first respondent is the sole director and secretary of the second respondent, Video Sports Pty Limited (Video Sports), and has been since its incorporation in November 1993.  The second respondent purchased the business Motor Sport Video (MSV) in late 1993 for $115,000.  MSV conducted a video distribution business, consisting of both wholesale and mail order sales to customers in Australia and New Zealand.  From June 2000 the wholesale business was conducted under the name of Duke Video Distribution and the mail order business as MSV.  In January 2005, the second respondent registered the business name Duke DVD Distribution to replace Duke Video Distribution because the primary products being distributed were DVDs not videos.  The second respondent in 2006 also registered the business names Duke Home Entertainment (DHE), to conduct the wholesale business, and Pitlane Direct, to conduct the retail and mail order business.  The subject of the DVDs is predominantly motor sport although a few DVDs concern golf, fitness and aviation.  The second respondent does not undertake the replication process (of making copies of DVDs).  This is outsourced to specialist companies such as Summit Technology Australia Pty Limited (Summit Technology).  The second respondent does not have the equipment to produce digital linear tapes (DLT) or master copies required for the replication process.  Normally producers provide these to the second respondent.  As the applicant did not have a DLT the first respondent supplied the contact details of Mr Anton Strauss of Anton Video Productions Pty Limited and the second respondent paid the invoice for the production of the DLT for the applicant.  The second respondent also paid for the artwork for the cover of the DVDs designed by Icon Visual Marketing Pty Limited, a design studio.

12                                          The wholesale business conducted by DHE entails offering for sale and selling DVDs to retail outlets in Australia and New Zealand, such as motorcycle stores and bookshops, K-Mart, Big W and JB Hi-Fi.  The second respondent has supplied DVDs to the third respondent Ex DVD Pty Limited (formerly Ezy DVD Pty Limited), the fifth respondent Pitstop Bookshop Pty Limited (Pitstop Bookshop), the tenth respondent Stomp Pty Limited (Stomp) and the twelfth respondent, Sanity Music Stores Pty Limited (Sanity Music).

13                                          Toward the end of 2006, the second respondent used third party distributors who had the required expertise and resources to prepare submissions for the large retail outlets.  These third party distributors included MRA and Gryphon Entertainment. 

14                                          The internet is used by Pitlane Direct to offer for sale and sell DVDs directly to end users in Australia and New Zealand on its websites: www.pitlanedirect.com.au, www.dukevideo.com.au and www.motorsport.net.au. The domain names www.pitlanedirect.com.au and www.motorsport.net.au are directed to the second respondent's website at www.dukevideo.com.au.  That website was developed in 2004 by Mr Simon Richardson of WebWorx.  Mr Richardson was unable to maintain this website after 21 June 2005 and it has since been maintained by the first respondent.  The first respondent said in his affidavit of 3 December 2009 at para [21(a)] that there has never been a currency converter on any website of the second respondent and that he does not know how to add or remove a currency converter on a website.

15                                          The software CactuShop is used on the website to enable customers to purchase products.  This software enables business to be conducted through the website by customers selecting items and placing them in a "shopping cart".  When all the items have been selected the customer can then proceed to the "check out" section and pay for the items.  This web page displays the price of the products, inclusive of tax as well as exclusive of tax.  The items sold to New Zealand are exclusive of tax.  The items sold in Australia are subject to the goods and services tax.  In para [2(a)] of his affidavit of 24 February 2010, the first respondent explained that when the CactuShop software was initially installed it was possible to choose the countries that could be selected by a customer as their delivery address and their shipping address, however by early to mid 2005 the countries selected were limited to Australia and New Zealand.  The website may be viewed by persons in countries other than Australia and New Zealand, however, the first respondent has asserted (an assertion challenged by the applicant) "a customer may only purchase a product from the website if they have a delivery address and a billing address in Australia and New Zealand". 

16                                          The website also contains information about "international delivery charges" on the "Help Desk" page of the website.  This feature was added sometime in 2005.  The first respondent believed it might provide a useful indication of potential business in countries other than Australia and New Zealand, however the first respondent's evidence is that no sales of any products via the website have been made to customers in countries other than Australia and New Zealand (at para [21(c)] of the affidavit of the first respondent filed on 3 December 2009).  Pitlane Direct also offers for sale and sells DVDs directly to end users in Australia and New Zealand by way of direct mail order catalogues.  These catalogues are produced three times a year and mailed to approximately 15,000 people in Australia and New Zealand. 

17                                          In his affidavit of 24 March 2009, the applicant attached two photographs of the Pitlane Direct website which showed the Cosy Cool DVD for sale and a statement that it was available "PAL All Regions" with the "Ex Tax" price of $27.23 and "Inc Tax" price of $29.95.  The first respondent in his affidavit filed on 3 December 2009 at para [26(p)] explained that this is a reference to the picture format of the DVD which can be produced in two formats, PAL (Phase Alternating Line, a region restriction system used in most of Asia, Africa, Australia, New Zealand and most of Europe) and NTSC (National Television System Committee, used in North and South America, Japan, South Korea, Taiwan, Burma and some Pacific island nations).  "PAL all regions"" indicates that the DVD can be played in all regions in which DVD players read the PAL format.  If the DVD is to be restricted within the PAL regions, the area is indicated by number, for example PAL region 4 means the format can be played in Australia and New Zealand only.  The first respondent said in his affidavit that he received a phone call from the applicant in or around mid April 2005 to the following effect:

He said: "Can you produce the DVDs for all regions so I can buy DVDs from you and sell them overseas?"

 

I said: "Yes that's fine".

The first respondent referred to clause 7 of the agreements which would allow the applicant to purchase DVDs from the second respondent should Lugen sell or license the rights to anyone in regions other than Australia and New Zealand.  Forty copies of each of the DVDs were sent to the applicant in or around September 2005 and were labelled "O ALL REGIONS".  The applicant raised no objections about this until the commencement of these proceedings.

18                                          The third respondent, Ex DVD Pty Limited and the fourth respondent, Jim Zavos the only director and shareholder of Ex DVD Pty Limited, did not make any submissions in relation to the applicant's notice of motion.  Ex DVD Pty Limited which was founded in 2008 and operated radio, television and electrical stores, is in receivership.  It had a web site www.ezydvd.com.au but there is no evidence relating to sales of the applicant's DVDs on that website.  The second respondent sold some of the DVDs to the third respondent.

19                                          In an affidavit of 24 November 2009, Peter H J Lyster, a director of the fifth respondent, Pitstop Bookshop, said in paras [3] and [4] that there were a total of ten sales made by Pitstop Bookshop, two for Cosy Cool and eight for Wheels on Fire to persons in Australia.  The DVDs had been supplied by the first respondent and the covers show no limitation on the regions in which they may be marketed.  The attachments PHJL 4 and PHJL 5 indicate that Wheels on Fire and Cosy Cool had been made available on the Pitstop website www.pitstop.net.au.  The website has a currency converter and states, "The price includes Australian Goods and Services Tax.  Prices for overseas customers are approximately 9% less. These will be charged automatically." 

20                                          The seventh respondent, AAA Shooting Star Pty Ltd ACN 081 934 198 and T & R Dreamworks Investments ACN 111 550 362 is, in fact, a trading partnership operating under the name of Atlantic Video.  The partnership carries on the business of the sale and rental of VHS and DVD cinematograph works, primarily retail.  In the affidavit of Antonio Curcio (managing director of the partnership) filed on 23 December 2009 at paras [7] to [11] he said that four copies of the DVD Cosy Cool and three copies of Wheels on Fire were purchased by the seventh respondent from MRA and one copy of Cosy Cool was purchased from All Interactive Distribution (AID).  The business maintains a website www.atlanticdvd.com.au where users can search and view DVD titles available for purchase from the partnership and place an order.  The website allows for delivery of products to locations outside Australia and New Zealand.  Two of the Wheels on Fire DVDs were sold at retail outlets in South Australia, however this DVD was not advertised for sale, sold or referred to on the Atlantic website.  Four of the Cosy Cool DVDs were sold via the website to customers in Australia and New Zealand.

21                                          The eighth respondent is Chaos Entertainment Pty Ltd (Chaos) which operates a website www.chaos.com.  The ninth respondent, Robert Appel, is the sole director of Chaos Entertainment.  In Mr Appel's affidavit of 24 November 2009, he said in para [4] that Chaos is the registered owner of the website but does not control or manage its operation (para [5]) nor does Chaos have any business dealings with the applicant or the first and second respondents (para [7]).  Chaos does not purchase products for sale nor does it offer for sale or sell products on the Chaos website (para [8]).  Since about 27 April 2006 the Chaos website has been licensed to Stomp Pty Limited (Stomp), the tenth respondent who has the right to operate an online retail business on the Chaos website and is wholly responsible for its operation, management and content.

22                                          Mr Andrew Jorgensen, the eleventh respondent, is the director of Stomp, the tenth respondent which is in the retail and distribution business for music, movie DVDs, books, games, entertainment news and related merchandise and products.  In his affidavit filed on 24 November 2009, he said at para [4] that one of the methods Stomp uses to conduct its business is through websites.  It has not had any dealings with the applicant.  Stomp acquired a license from Chaos to use the website www.chaos.com on or about 27 April 2006 (para [7]) and is wholly responsible for its operation and management.  Stomp purchases products from a variety of suppliers.  It does not have a written agreement with the second respondent or Duke Video Distribution.  In or about 2005 – 2006, Stomp made the DVDs Cosy Cool and Wheels on Fire available for sale on the Chaos website.  The titles were added to Stomp's product catalogue together with the 1,000,000 other products (para [15]).  Stomp purchased 16 copies of Cosy Cool from Duke Video Distribution.  Another 8 copies of Cosy Cool were purchased from MRA.  In or about 2006, 4 copies of Wheels on Fire were purchased from what was then probably called DHE.  All DVDs purchased were labelled with Region 0.  There were no other markings on the DVDs restricting regions or territories for distribution or sale (para [16]).  The statements "[p]rices displayed are in Australian dollars and, where applicable, GST inclusive" and "what are PAL and NTSC" and an explanation of the systems could also be found on the website (attachment 12 to the applicant's affidavit filed on 26 March 2009).  The tenth respondent sold twenty four copies of Cosy Cool and 4 copies of Wheels on Fire to customers in Australia (paras [19] and [20]).  Stomp ceased offering the two DVDs for sale on the Chaos website in or about November 2008 (para [23]).

23                                          The twelfth respondent, Sanity Music Stores Pty Limited, operates a website www.sanity.com.au for online retail sales and also conducts its business through retail stores located throughout Australia.  The chief executive officer of Sanity is Greg Milne, the fourteenth respondent.  In the affidavit of Gary Mortlock (head of Product and Marketing for Sanity) filed on 24 November 2009, he said at para [10] that Sanity entered into a written agreement with the second respondent on or about 12 February 2007 for the supply of DVD titles and purchased 3 copies of Wheels on Fire (para [18]).  The covers were printed with 0 as the region code for worldwide viewing and there were no other markings on the DVDs restricting regions or territories for distribution or sale. By June 2007, Sanity had advertised the DVDs Cosy Cool and Wheels on Fire on the Sanity website.  Three copies of Wheels on Fire were sold to customers in Australia.  No copies of Cosy Cool were purchased (para [17]).  By November 2008, Sanity ceased advertising the DVDs for sale on the Sanity website (para [22]).

24                                          The fifteenth respondent, Darren Robinson, trades as Movie Search Dot Com and operates the website www.moviesearch.com.au.  In a letter dated 19 November 2008 from Mr Robinson to the applicant and attached to the applicant's affidavit filed on 26 August 2009 at para [2H] the fifteenth respondent claimed that he had not sold any of the DVDs the subject of these proceedings.  The DVDs were titles available on the website that could be purchased on request.  Mr Robinson explained that he is a sole trader and there is no company called Moviesearch Pty Ltd.  He has no association with the second respondent.  It was stated in the letter that he saw the DVD Cosy Cool a couple of years ago and added the title to his "online store".  The fifteenth respondent claimed that he would have removed the DVD from the website if he had been requested to do so by the applicant.  In November 2008 he removed the DVD from his website.

The legislation

25                                          As noted earlier, the applicant is the owner of the copyright in two cinematograph films.  The term is defined in section 10 of the Copyright Act:

"cinematograph film" means the aggregate of the visual images embodied in an article or thing so as to be capable by the use of that article or thing:

(a)                of being shown as a moving picture; or

(b)                of being embodied in another article or thing by the use of which it can be so shown;

and includes the aggregate of the sounds embodied in a sound-track associated with such visual images.

26                                          Section 86 of Part IV of the Copyright Act details the nature of the copyright in cinematograph films.  It provides as follows:

For the purposes of this Act, unless the contrary intention appears, copyright, in relation to a cinematograph film, is the exclusive right to do all or any of the following acts:

(a)    to make a copy of the film;

(b)    to cause the film, in so far as it consists of visual images, to be seen in public, or, in so far as it consists of sounds, to be heard in public;

(c)    to communicate the film to the public.

27                                          The Copyright Amendment (Digital Agenda) Act 2000 (Cth) inserted a definition of "communicate" in s 10.  The definition was:

…make available online or electronically transmit (whether over a path, or a combination of paths, provided by a material substance or otherwise) a work or other subject-matter.

The Explanatory Memorandum to this Act indicated this definition was central to the new right to communicate to the public and was limited to the availability of material online or through electronic transmissions.  It was not intended to cover the physical distribution of copyright material in a tangible form.

This definition was subsequently amended by the US Free Trade Agreement Implementation Act 2004 (Cth). Sch 9 Pt 3 Item 59, to the form it has since held:

…make available online or electronically transmit (whether over a path, or a combination of paths, provided by a material substance or otherwise) a work or other subject-matter, including a performance or live performance within the meaning of this Act.

28                                          Infringement of the copyright in, relevantly, cinematograph films occurs by doing acts described in s 101.  These include:

(1) Subject to this Act, a copyright subsisting by virtue of this Part is infringed by a person who, not being the owner of the copyright, and without the licence of the owner of the copyright, does in Australia, or authorizes the doing in Australia of, any act comprised in the copyright.

(1A) In determining, for the purposes of subsection (1), whether or not a person has authorised the doing in Australia of any act comprised in a copyright subsisting by virtue of this Part without the licence of the owner of the copyright, the matters that must be taken into account include the following:

(a)    the extent (if any) of the person's power to prevent the doing of the act concerned;

(b)    the nature of any relationship existing between the person and the person who did the act concerned;

(c)    whether the person took any other reasonable steps to prevent or avoid the doing of the act, including whether the person took any other reasonable steps to prevent or avoid the doing of the act, including whether the person complied with any relevant industry codes of practice.

…

29                                          Infringement by sale and other dealings of, relevantly, cinematograph films, is dealt with in s 103 of the Copyright Act:

(1)               Subject to sections 112A, 112C, 112D and 112DA, a copyright subsisting by virtue of this Part is infringed by a person who, in Australia, and without the licence of the owner of the copyright:

(a)    sells, lets for hire, or by way of trade offers or exposes for sale or hire, an article; or

(b)    by way of trade exhibits an article in public;

if the person knew, or ought reasonably to have known, that the making of the article constituted an infringement of the copyright or, in the case of an imported article, would, if the article had been made in Australia by the importer, have constituted an infringement of the copyright.

(2)    For the purposes of the last preceding subsection, the distribution of any articles:

(a)      for the purpose of trade; or

(b)      for any other purpose to an extent that affects prejudicially the owner of the copyright concerned;

shall be taken to be the sale of those articles.

(3)    In this section:

"article" includes a reproduction or copy of a work or other subject-matter, being a reproduction or copy in electronic form.

Sections 112A, 112C, 112D and 112DA refer specifically to the importation and sale of books, the accessories to imported articles, the importation of non-infringing copies of sound recordings and the importation and sale of copies of electronic literary or music items and are not relevant to this application.

30                                          The applicant claims infringement by the respondents of ss 52 and 53 of the Trade Practices Act.  These sections provide as follows:

Section 52

(1)     A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

(2)     Nothing in the succeeding provisions of this Division shall be taken as limiting by implication the generality of subsection (1).

Section 53

A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services in connexion with the promotion by any means of the supply or use of goods or services:

…

(bb) falsely represent that a particular person has agreed to acquire goods or services;

…

(d)  represent that the corporation has a sponsorship, approval or affiliation it does not have;

…

(f)  make a false or misleading representation concerning the need for any goods or services; or

(g) make a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy.

The applicant's case

31                                          The applicant's case is articulated in a number of ways in a number of documents.  Ordinarily it would be appropriate to ascertain the nature of the case by reference to the pleadings.  However, I am prepared to look beyond the pleadings as to do so does not prejudice the respondents.  As articulated by the applicant, his case is to the following effect.    The applicant alleges contravention of ss 52 and 53 of the Trade Practices Act and of s 103 of the Copyright Act and also claims damages under s 115 of Copyright Act.  While the claims of the applicant are many and varied, there are three core complaints.

32                                          The first core complaint is that the licence agreements with the second respondent expressly or impliedly required certain things to be done which were not done.  The agreed number of DVDs of the films was not created.  The DVDs were not marketed competently and, in particular, were not marketed in a way which fostered sales on Father's Day in 2005.  The second respondent did not undertake financial reporting as the agreements required. The second core complaint was that the licence agreements authorised "release" of the films on DVD by the second respondent on the Australian and New Zealand markets only but, in fact, DVDs of the films were sold, or at least were offered for sale, by the second respondent on the internet to customers in regions outside Australia and New Zealand.  The third core complaint is that likewise all the other respondents (or at least the corporate respondents) sold, or at least offered for sale, DVDs of the films on the internet to customers in regions outside Australia and New Zealand.

33                                          Other variants of the applicant's claims are as follows.  The applicant refers to a series of emails between the applicant and the first respondent which the applicant claims contained "misleading and deceptive promises" which led the applicant to believe the first respondent was a "competent distributor" and would market the DVDs for Father's Day 2005, thereby inducing the applicant to sign the licence agreements.  The applicant contends the first respondent engaged in misleading and deceptive conduct by using the name Duke Video Pty Ltd "while knowing full well that there was no such company registered."  Other misleading representations relied on by the applicant included the withholding of sales information, false promises of release dates and false representations of "close connections" with Duke Video on the Isle of Man.  Further, the applicant claims that the DVDs were being sold "from a tent and/or mobile sales platforms at motor sport events" and no accounting was provided by the respondents. 

34                                          The applicant "formed the opinion that all respondents were acting either in concert together, or were simply copying each others business tactics" or "alternatively there is an active conspiracy made evident by a single 'mind'" involving all respondents which was evident from their websites.  Particular matters identified by the applicant concerning sales on the internet were as follows.  The respondents have used the internet to offer the DVDs for sale worldwide "with no disclaimer" explaining that the sale was to be limited to Australia and New Zealand.  Other details that the applicant referred to which indicated copyright infringement included "information about delivery to international buyers by Australia Post", notations that the film is "Pal available all regions", information about price including tax and "ex tax price" and use of currency converters to assist overseas sales.  The website of the seventh respondent contained the words "INTERNATIONAL USERS…All orders sent outside Australia are exempt from paying GST".  The twelfth respondent advertised the DVD Cosy Cool for sale in Australian dollars and US dollars.  The fifteenth respondent's website contained a notation that "[t]his DVD is ALL REGIONS and is Pal Format...will definitely play on all DVD players in Australian [sic] New Zealand UK and Europe."  

35                                          In a further amended application and statement of claim, filed on 16 April 2009, the applicant claimed the first respondent failed to supervise the actions of Video Sports and is personally liable to the applicant.  Similarly the applicant alleged that the fourth, ninth, eleventh and fourteenth respondents failed to supervise the actions of their companies and should be personally liable for the "unlawful acts".  The applicant seeks orders under s 115 of the Copyright Act for damages and for the appointment of a forensic accountant to examine the respondents' books.  The applicant also seeks an order voiding the agreement, an order that the first and second respondent hand over all copies of the DVDs in their possession and master copies, an order that all other respondents be refrained from selling the DVDs in any other place except Australia and New Zealand, an order that all respondents deal directly with the applicant for the supplies of the DVDs, an order that all retail sales of the DVDs be paid in full to the applicant, an order for four million dollars be paid for the destruction of overseas territory rights to the DVDs, an order for exemplary damages for two million dollars for "bad faith breach of contract, the DELIBERATE fraudulent, wilful and vexatious ACTS of selling or offering for sale DVDs in violation of Copyright licence/Trade practices legislation and the destruction of the overseas territory rights of the DVD's" and an order for costs.

Defences of the respondents

36                                          In this discussion of the respondents' defences I will consider not only the pleaded defences, as I have with the applicant's statement of claim, but also the amplification of those defences made in submissions and in the evidence. The first and second respondents filed a defence to the applicant's original application on 23 January 2009 and an amended defence on 18 February 2009.  On 19 March 2009, the first and second respondents filed an outline of submissions in support of their notice of motion (filed on 5 March 2009) to dismiss the application under s 31A of the Federal Court of Australia Act 1976 (Cth).  A defence to the applicant's further amended application and statement of claim was filed by the first and second respondents on 12 June 2009.  Affidavits were filed by the first respondent on 3 December 2009 and 25 February 2010 and submissions of the first and second respondents in response to the applicant's notice of motion on 11 and 24 February 2010.

37                                          The first and second respondents deny that they breached the contract with the applicant and deny that they infringed copyright by selling copies of the DVS via their website to persons resident outside Australia or New Zealand.  The website www.dukevideo.com.au since late 2004/early 2005 has only allowed for the sale and delivery of products to addresses in Australia and New Zealand.  The second respondent's websites www.duke.com.au and www.dukevideo.com.au have never featured currency converters and it was asserted in the defence filed on 12 June 2009 (para [6 ff)]) that it was the applicant who insisted that the notice "PAL All Regions" appear on the second respondent's website www.dukevideo.com.au to allow the applicant to sell the DVDs outside Australia and New Zealand.  The first respondent said that Video Sports' website www.duke.com.au did not have an e-commerce capability.

38                                          The first respondent stated in his affidavit filed 3 December 2009 at para [26(u)] that the following amounts were paid by the second respondent to Lugen: $3000 upon signing the agreements on 26 May 2005 and $3000 on 6 July 2005.  The second respondent estimated that $8250 was owed for 3000 copies of Cosy Cool at the royalty of $2.75 per DVD and $8250 for 3000 copies of Wheels on Fire at the royalty of $2.75 per DVD.  Therefore an additional $10,500 was paid on 1 August 2008, a total payment of $16,500.  The first respondent claimed that this represented a payment of $8,129 in excess royalties (para [27]).  The total amount received by the first respondent from the sale of the DVDs was $36,083.70.  In addition the second respondent spent $16,295.40 preparing the DVDs for sale for a profit on sales to date of $3,949.93 (para [28]). 

39                                          An affidavit of Bruce Kitson, forensic accountant, was filed on behalf of the first and second respondents on 3 December 2009.  The expert accounting report attached to the affidavit included an analysis of stock and royalties, sales reports and MRA quarterly distribution statements.  The report in figure 4.11.4 indicated that 2517 copies of Cosy Cool and 2495 copies of Wheels on Fire had been purchased by the second respondent.  These copies were produced by Summit Technology.  In his affidavit filed on 11 December 2009, Francis Sek, the chief executive officer of Summit Technology confirmed the number of DVDs produced at para [4] and said that the exact number of copies ordered (2500 of each DVD) was not supplied.  This is because it is usual for damage to occur during the replication process, and more DVDs are produced than the number ordered.  Sometimes there are shortfalls or excess numbers. 

40                                          The expert accounting report stated that the total sales for the second respondent were 2041 copies of Cosy Cool and 1003 copies of Wheels of Fire.  Allowing for 52 additional copies of Cosy Cool and 1208 copies of Wheels on Fire either sold or provided to Lugen, the report concluded that there were still 424 copies of Cosy Cool and 284 copies of Wheels on Fire (708 copies in total) unaccounted for in the stock analysis.  If a royalty is payable on these copies at $2.74 per copy, then an additional $1947 would be payable, bringing the maximum royalty payable to $10,318.

41                                          Figure 4.12.6 of the report summarises the minimum and maximum royalties payable as follows.  

	Minimum Royalty Payable	Maximum Royalty Payable
Royalty Paid	$16,500.00	$16,500.00
Less Royalty Payable	$8,371.00	$10,318.00
Overpayment by Video Sports	$8,129.00	$6,182.00

 

As noted earlier, the second respondent has paid the applicant $16,500.  The report estimated that the maximum royalty payable by Video Sports for the DVDs is $10,318 if all the unaccounted for stock is included which leaves an overpayment of $6182.  If the royalties are calculated without considering this stock, the minimum royalty payable would be $8371 which leaves an overpayment of $8129.

42                                          The first respondent in his affidavit of 3 December 2009 at para [33] provided a possible explanation for the unallocated stock of the second respondent.  He said that this could represent stock given away as samples for promotional reasons and/or stock sold at motor shows as cash sales which are not entered into the second respondent's accounting system.

43                                          The first respondent denied having received constant requests to send quarterly statements of sales to the applicant.  MRA did not make any sales until February 2006 and the sales by the second respondent were low.  As an advance of royalties had been paid and no additional royalties were owing to the applicant, the first respondent did not send regular sales reports.  A detailed explanation of the sales report sent to the applicant on 27 October 2008 is provided in para [26(i)] of the first respondent's affidavit of 3 December 2009.  The total number of DVDs sold by the second respondent was 3044 as detailed in exhibit GJW-49 to the first respondent's affidavit of 3 December 2009.  The first respondent at para [26(o)] denied having offered for sale or sold the DVDs at the Phillip Island race track or at Bathurst. 

44                                          In attachment GJW-46 to the first respondent's affidavit of 3 December 2009 was a letter from DHE to the applicant written shortly after his email to the applicant dated 27 October 2009.  This explained that there had only been one replication run for each title and the invoices from Summit Technology were attached showing 2517 units of Cosy Cool and 2495 units of Wheels on Fire had been produced.  The letter also contained the following explanation: "we have only produced 2,500 of each title so far not 3,000 as per the agreement".  There is no evidence that the first and second respondent had decided not to replicate the additional number of DVDs.  The letter merely stated that 2,500 was the number produced "so far".  It is possible that the smaller number was chosen as adequate for the first run because of advice from MRA.  In an email exchange between the first respondent and Julie Matthews at MRA dated 16 May 2005, the first respondent stated, "I need to give one of the producers an indication as to quantities that will go to mass market for this Fathers Day release, will it be around the usual +3,000 units mark?"  The response from Julie Matthews was, "My guess is that sales will be lower than what they've previously been – I would estimate around 2,000 units" but Julie said that she would confirm the sales expectations when another staff member returned from overseas (exhibit GJW-17).  Clause 4 of the agreements is far from clear about the date when the 3000 copies should be made and whether this was to be from the "time of first purchase of DVD copies from Duke's DVD manufacturer".

4. Duke agrees to produce a minimum of 3000 copies of the film on DVD at the time of first purchase of DVD copies from Duke's DVD manufacturer within one month of signature to this agreement.

It would not have been possible for the 3000 copies to have been made within one month of signature to the agreements (by 26 June 2005).  The applicant did not then have a DLT prepared and, on the recommendation of the first respondent, requested that Antons perform this task.  There is no evidence of the date of this request.  The invoice for the preparation of the DLTs was 25 July 2005 (exhibit GJW – 9).  No explanation for the two months' delay has been provided by the applicant or the first respondent, although Anton Strauss in his email to the first respondent suggested that he "may have to ask Gary to help pay for this, considering all the fixing I had to do."  The invoice for $3520 was paid by the second respondent. 

45                                          The letter of 27 October 2009 also explained that as of 15 October 2008 there were 368 units of Cosy Cool and 1450 of Wheels on Fire in stock.  The stock was sub-distributed by MRA and "Duke" supplied stock directly to them from Summit Technology, however MRA did not produce any stock for their own purposes.  The limited success in the distribution of the DVDs to the major retail chain buyers by MRA was referred to and it was noted in the letter that no major retailer accepted the titles.  As MRA had been acquired by a larger company, merged with another distributor and no longer existed, in early 2007 DHE presented the two titles to all their existing retailers again with limited success.  The first respondent, however, still expressed hope there would be "opportunities for these two titles in the future", despite the results being disappointing so far.

46                                          In the supplementary outline of submissions of the first and second respondents, emailed on 11 February 2010, at para [10 e)], the claims of the applicant in [74] – [90] of his affidavit dated 23 March 2009, amended 20 September 2009 and filed 28 October 2009, were denied.  These are claims that the first and second respondents were in breach of the agreements in failing to correctly account for the sales and number of DVDs.  The applicant questioned the "actual production runs" of the DVDs and found there were "extremely troubling odd numbers, production runs of 680 units or 880 units".  In the applicant's affidavit of 24 March 2009, filed on 26 March 2009 (email attachment 11- dated 28 April 2005), the first respondent explains the replication process:

Hi Gary

We have to do an initial run of 1,000 units and then re-runs of 500 min.  To do 5,000 in one hit just isn't viable due to the cost and storage factor.  However it looks like we may have these two into mass market for Fathers Day, I'll just need to get this confirmed, and we would probably do a run of 3,000 for this." (emphasis added)

The reference to the cost and storage issues may explain why the initial run consisted of 2500 and indicates that this was an explanation to the applicant about how the process works rather than a misrepresentation that more copies would be reproduced than was actually made.  The applicant concludes (paras [80] and [81] in his affidavit dated 23 March 2009 and amended 20 September 2009) that as there was no legal requirement to pay for 6000 copies there must have been some misrepresentation for the $10,500 cheque to be paid.

47                                          No authorisation to make copies of the DVDs was ever given by the first respondent to any of the other respondents.  The first respondent did not make any promises to the applicant before or after signing the agreements that the second respondent would undertake any promotional activities.  Nevertheless, the second respondent paid for advertisements in a promotional flyer sent to Autobarn and Auto1 stores in 2005; an advertisement in approximately 900,000 copies of the 2005 Sydney Motor Show magazine in 2005 and in magazines such as "Heavy Duty", "Motorsport News", "Auto Action", "Drag Action" and "Cruzin'" (para [26(g)] first respondent's affidavit filed 3 December 2009).  The DVDs were featured in the second respondent's Father's Day 2005 catalogue which was mailed to approximately 45,000 customers within Australia and New Zealand.  Viewing copies of the DVDs were forwarded to Duke UK by Video Sports Pty Limited in or around August 2005, however Duke UK indicated that it was not interested in distributing the DVDs. 

48                                          In the outline of submissions resisting this notice of motion, the first and second respondents said at [9] that the two agreements did not impose an obligation to restrain third party buyers of the DVDs from offering them for sale and selling them to persons outside Australia and New Zealand, nor an obligation on "Duke Video" or any third party buyers to sell the DVDs only shrink-wrapped.

49                                          Earlier in the proceedings, on 5 March 2009, the first and second respondents filed a notice of motion seeking summary judgment under s 31A(2) of the Federal Court Act and alternatively that the amended statement of claim should be struck out under Order 11 rule 16 of the Federal Court Rules.  This application has not, to this point, been pressed. 

50                                          The third and fourth respondents did not file any submissions in relation to the applicant's notice of motion.  A defence was filed on 3 February 2009 in response to the statement of claim filed by the applicant on 6 November 2008.  The third respondent admitted that copies of the DVDs were purchased from the first respondent for retail sale in the course of its business and offered them for sale.  The third respondent denied that there was a "pact whether actual or implied with the first respondent" as alleged by the applicant in [19] of the statement of claim to "sell, openly and brazenly, the DVDs into territories not licenced by Applicant".  The third respondent denied all the allegations of infringement in the applicant's statement of claim.  On 7 May 2009 the applicant filed an application under Order 73 rule 3 of the Federal Court Rules and sought leave to continue the proceedings against the third respondent pursuant to s 471B of the Corporations Act 2001 (Cth).  On 21 May 2009 the applicant withdrew this application.  The proceedings against the third respondent were stayed pursuant to section 471B of the Corporations Act.

51                                          In their defence to the further amended statement of claim filed on 9 June 2009, the fifth and sixth respondents admit that the purchase of the DVDs by the fifth respondent was for retail sale in the fifth respondent's business.  These DVDs were offered for sale on the fifth respondent's website, www.pitstop.net.au.  The fifth and sixth respondents deny that the currency converter on that website is applicable to the applicant's DVDs.  The fifth and sixth respondents in their submissions filed on 10 February 2010 assert there was no infringement of the applicant's copyright or alternatively there was no evidence that they had the requisite knowledge to found a claim under s 103 of the Copyright Act.  In para [9] of his affidavit of 23 November 2009 Mr Lyster stated that "[p]rior to being served with the Writ in this matter I had never heard of the Applicant or Lugen Pty Ltd. If either had raised the issue of limited availability of the DVDs for sale and if there was a legitimate basis for the limitation, appropriate action would have been taken as regards the Pitstop web site."   The DVDs were supplied by the first respondent and the scanned covers of Cosy Cool and Wheels on Fire show that there was no limitation on the regions in which they could be marketed.  Mr Lyster was informed by the first respondent that the artwork for both DVDs was approved by the applicant before production.

52                                          The seventh respondent, in the defence filed on 22 June 2009 and in the amended defence filed on 23 December 2009 at para [6], asserts that (see para [20] of this judgment) there was no licence agreement between the applicant, the first respondent or any other party and the partnership trading under the name Atlantic Video and the seventh respondent did not require a licence to sell the supplied DVDs or offer them for sale.  In the amended defence filed on 23 December 2009 the seventh respondent denies that inclusion of the Cosy Cool DVD on the Atlantic website contains any representation, either express or implied, that the partnership had any licence or approval from the applicant and did not breach s 53 of the Trade Practices Act nor infringe the applicant's copyright.  The seventh respondent contends that the DVDs supplied to Atlantic Video were licensed DVDs and non-infringing copies of the films and therefore the applicant is not entitled to the relief claimed, nor is the partnership under any obligation to provide any figures to the applicant in respect of the DVDs.  It is submitted by the seventh respondent that the listing of the DVD Cosy Cool on the website did not reduce the economic potential of the films nor place any improper or undue limitation on the capacity of the applicant to enter into licensing arrangements for territories outside Australia.  The partnership was not engaged in any conspiracy with the other respondents and had no direct knowledge of the licensing, production or distribution arrangements in relation to the films.  It was asserted by the seventh respondent that the DVD format allows for voluntary region based encoding measures and these have no fundamental connection with the territories within which a DVD may be viewed or sold (para [23]).

53                                          The eighth respondent in the defence filed on 19 June 2009, denied any business dealings with the first and second respondents.  Chaos is in the business of intellectual property rights, including URLs, web designs and logos and not content related to product or ordering, managing or selling product.  The business is managed by the ninth respondent.  The website is licensed to the tenth respondent to operate and manage.  The tenth respondent, Stomp, owns the contents, including advertisements for sale of DVDs, pricing and shipping information.  The director of the eighth respondent, Mr Robert Appel, in his affidavit of 24 November 2009 denies making the applicant's DVDs available on the Chaos website.  He explained that this website is controlled and managed by the tenth respondent and Chaos does not have any business dealings with the applicant.

54                                          The tenth respondent, in a defence filed 19 June 2009, agreed that the eighth respondent licensed to the tenth respondent from 27 April 2006 the right to operate and manage the website www.chaos.com.  The tenth respondent owns the contents of the eighth respondent's website.  The eleventh respondent, Mr Jorgensen, in his affidavit of 24 November 2009, admits to making the DVDs available for sale on the Chaos website and that they were printed with region 0 for worldwide viewing.  The tenth and eleventh respondents deny any business dealings with the applicant prior to the commencement of these proceedings and contend that there is no evidence to found a claim for conspiracy.  In para [6] of the outline of submissions of the tenth and eleventh respondents, dated 11 February 2010, they deny that their acts constituted any infringement of the applicant's copyright or alternatively that there is no evidence that they had the requisite knowledge to found a claim under s 103 of the Copyright Act.  They assert that they did not mislead potential buyers about the ownership of copyright in the DVDs.  Further, they assert that as the applicant approved the covers on the DVDs there can be no claim under ss 52 and 53 of the Trade Practices Act. 

55                                          In their outline of submission, the twelfth and fourteenth respondents adopt the first and second respondents' submissions dated 12 October 2009.  They deny any business dealings with the applicant prior to the commencement of the proceedings and did not have any contact or dealings with the other respondents apart from the purchase of the three Wheels of Fire DVDs from the first respondent.  The twelfth and fourteenth respondents deny that there is any evidence to found a claim for conspiracy.  They submit that the applicant does not have any maintainable cause of action (para [9]).  There is no evidence that they had the requisite knowledge to found a claim under s 103 of the Copyright Act nor a claim under ss 52 or 53 of the Trade Practice Act because the applicant approved of the covers on the DVDs.  The twelfth respondent's defence filed on 15 June 2009 stated that the DVDs were included in the Sanity catalogue and in June 2007 it published the details of the DVDs on Sanity's new website including the price in Australian dollars with the words "APPROX US $13.16 and GBP $7.62" (para [22(a)]).  The website does not contain information on overseas shipping.  The twelfth respondent did not mislead potential buyer into believing that the copyright holder had licensed the DVDs for sale.  The twelfth respondent did not ever "release" the DVDs.  There were three requests for Wheels on Fire and no orders for Cosy Cool.  The fourteenth respondent, the director of Sanity also filed a defence on 15 June making similar submissions in relation to the DVDs as the twelfth respondent. 

56                                          There is no named thirteenth respondent. 

57                                          In a letter dated 26 May 2009 from the fifteenth respondent to the Court, he said that the applicant had never asked him to take down his web page and he removed it voluntarily.  He denied a conspiracy in the "DVD industry".  There was no submission filed by the fifteenth respondent in response to the applicant's notice of motion.

The applicant's case on the summary judgment application

58                                          The essential points raised by the applicant in support of his notice of motion for summary judgment are the following (this involves some repetition of an earlier description of the applicant's case):

(1)                     The respondents have no reasonable prospect of successfully defending the claims and their defence is hopeless and bound to fail.  Mere denial of the facts is insufficient to prevent the granting of summary judgment.

(2)                     There is infringement of s 103 of the Copyright Act because the DVDs are "articles" and the copyright is owned by the applicant.  The infringing act has been done in Australia without the licence of the owner of the copyright and published on the internet.

(3)                     There is a mandatory duty of care imposed by s 103 of the Copyright Act on the resellers to have a valid licence or sublicence.

(4)                     Section 86 of the Copyright Act grants exclusive rights to the applicant only.  The first and second respondents are only licensed to offer the DVDs for sale to the public within Australia and New Zealand.  The respondents are making the DVD copies available online on websites that can be seen all around the world and are in breach of s 86 because only the applicant has the right to "communicate" and make available online or electronically transmit the DVDs.

(5)                     The respondents have not complied with the industry code of practice of not selling unlicensed copyright products from within Australia without a licence from the copyright holder.

(6)                     The first respondent was fraudulent in signing the agreements on behalf of Duke Video Pty Ltd.

(7)                     The respondents have infringed ss 52 and 53 of the Trade Practices Act.  They all admit they are involved in "trade and commerce" and have engaged in conduct that is misleading and deceptive by advertising the DVDs for sale on their websites which can be seen world wide.  The websites have currency converters, offer overseas delivery, advise on which countries can play PAL formatted DVDs and how to set up NTSC DVD players to play PAL formatted DVDs, advertised payments with and without tax payments, and advertised the DVDs for sale in US and British currency.  The first and second respondents also engaged in misleading and deceptive conduct by failing to promote the DVDs as promised.

(8)                     The applicant has suffered major loss because 700 DVDs are missing and the applicant is owed between $10,000 and $20,000.  Also, because the respondents have been offering the DVDs for sale overseas on the internet, the applicant has failed to secure an agreement for international licensing with a US satellite television company worth $1.425 million.  The applicant filed an affidavit on 2 September 2009 of Greg Tingle, his agent and promoter of his films through a business, Media Man.  Mr Tingle said at para [14], "the satellite Television transaction fell apart when it was discovered that Australian distributors who were only licensed to sell in Australia and New Zealand were in fact selling internationally without any license to do so."

(9)                     The applicant contends  he approved the "actual MAJOR picture layout of the artwork but not the final artwork".

(10)                 The contracts signed by the first respondent requires the first and second respondents to advise resellers of their obligations to have a licence.

(11)                 The number of websites offering the DVDs for sale world wide indicates there was a conspiracy between the respondents.

(12)                 In para [5B] of the applicant's affidavit of 26 August 2009, he claimed to be "SEVERELY Prejudicially affected" because he has been derided by his peers in the Australian Film Industry for having licensed the DVDs for sale in Australia and New Zealand and they are, instead, being offered for sale in every country.  This has belittled him and made it difficult for him to obtain investment funds for his current projects.

Consideration

59                                          Before considering the particular issues in this matter, it is convenient to mention how the exercise of the power conferred by s 31A should be approached.  In the present case, the question is whether any of the respondents have no reasonable prospect of defending the proceedings or any part of the proceedings.  How this question should be answered was recently discussed by Foster J in Wang v Anying Group Pty Ltd [2009] FCA 1500 at [43]:

The critical words of s 31A(1), when applied to the present case, require me to be satisfied that the respondents have “… no reasonable prospect of successfully defending the proceeding …”.  The following principles may be extracted from the authorities:

(a)                The moving party does not have to demonstrate that the defence is hopeless or unarguable;

(b)               The Court must consider the pleadings and the evidence with a “critical eye” in order to see whether the respondent party has evidence of sufficient quality and weight to be able to succeed at trial (Jefferson Ford Pty Ltd v Ford Motor Company of Australia Ltd (2008) 167 FCR 372 at [23] (p 382) (per Finkelstein J));

(c)                The respondent party is not obliged to present its whole case in order to defeat the summary judgment applicant but must at least present a sufficient outline of the evidence in order to enable the Court to come to a preliminary view about the merits for the purpose of considering the statutory test in s 31A(1)(b) (Jefferson Ford Pty Ltd 167 FCR 372 at [22] (p 382) (per Finkelstein J)); and

 

(d)               The test may require greater scrutiny of the pleadings and evidence in some cases than in others.  In my judgment, the words of s 31A(1) compel a flexible approach.  The real question in every case is not so much whether there is any issue that could arguably go to trial but rather whether there is any issue that should be permitted to go to trial.  This seems to be the approach of Finkelstein J in Jefferson Ford Pty Ltd 167 FCR 372 and of Gordon J in the same case (as to which see [123]–[134] (pp 406–409)), although Rares J in that case at [73]–[74] (p 394) and in Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd (2006) 236 ALR 720 esp at [45] (p 731) favoured a test which is much closer to the older test articulated in authorities decided under Rules of Court expressed in terms different from the language of s 31A(1)).

60                                          I am content to adopt broadly the same approach.  Foster J went on to indicate that he agreed with the summary of the relevant principles given by Gilmour J in Dandaven v Harbeth Holdings Pty Ltd [2008] FCA 955. Generally, I also agree.  However it was submitted in this matter that before a point was reached where the prospects of a respondent successfully defending the proceedings was considered, it was necessary to consider whether there was a case of substance advanced by the applicant to which a sustainable (in the sense of having reasonable prospects of success) defence would have to be raised.  I think, in this particular case, there is much to commend such an approach though in most cases where the prospects of a respondent successfully defending the proceeding was raised, the assumed starting point would be that the applicant did have a case of substance though that, in turn, may depend on the extent to which the applicant's asserted case was admitted or denied in the defence.

61                                          The first claim for which the applicant seeks summary judgment against the first and second respondents is one based on s 52 of the Trade Practices Act.  It is said that the first respondent in signing the licence agreement on behalf of "Duke Video Pty Ltd" engaged in misleading and deceptive conduct.  Somehow this conduct is also attributable to the second respondent.  It is said that the signing of the agreement involved misleading and deceptive conduct because the licensee was, in truth, another company, namely Video Sports Pty Ltd, a fact now accepted by the applicant.  This aspect of the claim, as against the first respondent, is misconceived.  Section 52 concerns the conduct of corporations and not individuals.  The case relied upon by the applicant, Houghton v Arms (2006) 225 CLR 553, is of no assistance.  That case concerned the liability of individuals under the Fair Trading Act 1999 (Vic) and not the Trade Practices Act.  In addition, the document containing the company name "Duke Video Pty Ltd" which the first respondent signed was prepared by the applicant.  It is difficult to see how the signing of the agreement involved misleading or deceptive conduct at all let alone involved such conduct on the part of the second respondent.  There should be no summary judgment in favour of the applicant on this aspect of his case.

62                                          The second claim for which the applicant seeks summary judgment against the first and second respondents is, again, based on s 52 though, at some points in his written material, the applicant appears to suggest this is also a contractual claim.  It concerns the terms of clause 4 of the licence agreements whereby the licensee agreed to produce a minimum of 3000 copies within one month of signing the agreement.  It is common ground that, as a matter of fact, only approximately 2500 copies of each film were produced.  It is convenient, at this point, to deal with another claim of a similar type concerning clause 5 of the agreements, namely the agreement to notify every three months the amounts of sales and royalties and a claim that the first respondent represented that the second respondent would market the DVDs competently.  In so far as these are claims under the Trade Practices Act and are maintainable under that Act, they are of a character that would ordinarily attract s 51A, that is, they are representations about future matters (that a particular number of DVDs would be produced, notification would be made about sales and royalties and the DVDs would be marketed in a particular way).  That section would raise, in turn, whether there were reasonable grounds for making the representation.  That would involve a factual investigation and, accordingly, summary judgment on this aspect of the applicant's claim would be inappropriate. 

63                                          Indeed there is a more fundamental legal issue that would have to be resolved at any trial concerning the interaction between the Trade Practices Act and the contractual promises relied upon by the applicant.  The issue was adverted to recently in a judgment of Gordon J in Coles Supermarkets Australia Pty Ltd v FKP Limited [2008] FCA 1915 at [67] – [69]:

[67]      The interaction between the TPA and the law of contract is interesting and has been the subject of previous consideration:  see by way of example Concrete Constructions Group v Litevale Pty Ltd (2002) 170 FLR 290; Futuretronics International Pty Ltd v  Gadzhis [1992] 2 VR 217; Mander Forklift Pty Ltd v Dairy Farmers Co-operative (1990) ATPR (Digest) 46-061.

[68]      In Futuretronics at 239, Ormiston J “expressed [his] doubts whether a contractual promise of itself carries with it any representation as to fact or conduct” actionable by reason of s 51A.  His Honour explained the issue (at 238-39) in the following terms:

It is hard to believe that normally any promisee with ordinary contractual rights would … describe himself as having been deceived or misled [based on the mere acceptance of a promise]. It is only when it becomes apparent that the promise cannot be enforced, because, for example, it is either unenforceable or the promisee's rights are valueless or diminished, that one may return to the original promise to inquire whether that promise was of so little substance that it can be concluded that the promisee was indeed misled or deceived in the first place, at the time of his acceptance of the promise.  Thus it may then be seen that the promisor originally had no intention to perform his promise or that he originally had no capacity or ability to perform it.

…

 

It would seem on the authorities that, at the least, a contractual promise would amount to an implied representation that the promisor then had an intention to carry out that promise.  If it can be shown that he had no such intention, he would be guilty of misleading or deceptive conduct.  Likewise it would seem that such a representation connotes a present ability to fulfil that promise which, if shown to be untrue at the time of making, would likewise characterise the implied representation as misleading or deceptive.

[69]           As this passage reveals, an express contractual promise or representation will constitute an actionable implied representation under s 52 of the TPA only if the party making the promise or representation had no intention or capability of carrying it out at the time it was made (ie the promisor had no reasonable grounds for making the promise). 

64                                          In so far as these claims are contractual, it would be inappropriate to give summary judgment.  Ultimately, if there has been a breach of the licence agreements in one or a number of ways, the appropriate remedy will be damages if the applicant suffered loss.  Making a declaration of breach, even if breach was now established, would be a barren exercise.

65                                          The next claim for which the applicant seeks summary judgment concerns the alleged contravention of s 103(1) of the Copyright Act by all respondents.  The first way in which the applicant alleges contravention involves a construction of the sub-section which is, as I presently view things, untenable.  At the very least, it is not a construction so obvious as to warrant summary judgment against respondents based on it.  The applicant argues that if the circumstances identified in (a) or (b) of subs (1) of that section arise then there is infringement.  That is, if (for present purposes) there is a sale or offering for sale of an article without the licence of the owner then that is an infringement by operation of s 103.  However this construction of the subsection ignores the five lines of text following (a) and (b) which plainly enough, in my present view, completes the description of the circumstances which give rise to infringement.  The circumstances are that an article is made which constitutes an infringement of the copyright, that article is then sold or offered for sale and the person selling or offering for sale the article either knew or ought reasonably to have known that the making of the article constituted an infringement.  The construction advanced by the applicant misconceives, it presently appears to me, the effect of the "or" between (a) and (b).  The applicant treats that word as separating from (a) not only, as an alternative, the circumstances identified in (b) but also the text which follows (b).  The word "or" does not have that effect, as I presently read the subsection.  It simply indicates that the circumstances in (a) and (b) are alternatives and that in either circumstance, if the remainder of the subsection is satisfied, there is an infringement. 

66                                          The applicant also suggests, as I understood his oral submissions, that even accepting that his construction of the section was wrong, there was nonetheless infringement by all respondents.  That was because the making of the DVDs which were sold or offered for sale by the respondents constituted an infringement.  It is extremely difficult to see why this is so.  The making of copies on behalf of the second respondent was authorised by the licence agreements.  On the evidence adduced at this point, their making did not constitute an infringement.  However, it is conceivable that one of the elements necessary to engage the section is satisfied if a licensee makes copies under a licence agreement but did so for a purpose not authorised by the agreement and, indeed, for a purpose contrary to the terms of the agreement.  On this approach, the making of the copies for an unauthorised purpose might constitute an infringement and any person who knew or ought reasonably to have known this and sold or offered for sale the article infringed copyright because of s 103.

67                                          In so far as the first and second respondents are concerned, there is no evidence of substance to suggest that copies of the two films were made other than to enable the second respondent as licensee to sell copies in accordance with the licence.  At the very best for the applicant there is an unresolved factual question (apart from the legal question about the scope of s 103) about whether circumstances existed in which the copies made were infringing copies for the purposes of s 103.  For this reason alone it would be entirely inappropriate to give summary judgment in favour of the applicant against those two respondents.  This reasoning applies equally to the other respondents.  In addition, on the evidence as it presently stands in relation to respondents other than the first and second respondent, it is highly improbable that the applicant could establish the relevant knowledge or imputed knowledge to establish contravention of s 103.  This provides an additional reason why summary judgment should not be given in favour of the applicant against those respondents.

68                                          I should, at this point, mention one other argument advanced by the applicant.  It was to the effect that in selling the DVDs online, the respondents were communicating the film to the public in derogation of the rights of the owner of the copyright: see s 86(c).  A DVD version of a film lawfully created (that is, the chattel comprising the disk on which the film has been lawfully reproduced, any plastic covering and any printed artwork etc) can, fundamentally, be treated the same as any other chattel.  What a purchaser of an article to which copyright relates, including a DVD of a film, cannot do is use it in a way that contravenes the rights of the owner of copyright.  As noted earlier in relation to a cinematograph film, those rights are those embodied in s 86. Speaking generally (and subject to qualifications which need not be explored now), the purchaser of such a DVD cannot make a copy of the film, cause it to be seen in public or communicate it to the public.  In the present case, respondents other than the second respondent have not, it appears on the evidence, done any of these things.  My present view is that it is almost certainly not the case that the expression in s 86 "to communicate the film to the public" encompasses, as the applicant contends, selling or offering for sale a DVD version (that is, the chattel comprising the disk, any plastic covering and any printed artwork etc) of the film on the internet. 

69                                          As Bryson J said in Kervan Trading Pty Ltd v Aktas (1987) 8 IPR 583 (a matter related to an alleged breach of copyright of a number of films produced in Turkey) at 589:

The Copyright Act does not protect the right of sale alone; once copyright articles have gone into the flow of trade they may be resold, whether new or secondhand, in the course of trade within Australia…

The right under s 86(c) is to "communicate the film to the public".   The term "communicate" is defined in s 10 of the Copyright Act (see para [27] of this judgment) and refers to when the film is made available "online or electronically" transmitted.  This latter expression encompasses the film itself being viewed online, not simply an image of the DVD or chattel.  The terms "communicate" and "to the public" have been judicially considered in relation to s 85 of the Copyright Act: cf. Universal Music Australia Pty Ltd v Cooper (2005) 65 IPR 409 and Universal Music Australia Pty Ltd v Sharman License Holdings Ltd (2005) 220 ALR 1.  Justice Tamberlin in Cooper held in relation to the communication of sound recordings to the public that the respondent did not "make available" or "electronically transmit" the sound recordings within the meaning of the expression because no sound recordings were actually stored on the website and the sound recordings were made available for downloading by the remote websites linked to via the website. The presence of the hyperlinks alone was insufficient.  In this matter, the evidence indicates the films reproduced on DVDs have not been electronically transmitted. 

70                                          The next and final claim of the applicant for which summary judgment is sought is based on s 53 of the Trade Practices Act and, in particular, paragraphs (bb), (d), (f) and (g).  As to all respondents, the applicant contends that they engaged in misleading and deceptive conduct by falsely representing they had the approval of the applicant (as owner of the copyright) to offer the DVDs for sale: s 53(d).  Similarly, it is alleged, they falsely represented they had a right to sell them: s 53(g).  Both arguments depend, as I understood the submission, on the applicant's seemingly erroneous construction of s 103 discussed earlier at [65]–[67].  As I presently view things, unless s 103 operates in the way the applicant contends (and as I have earlier indicated, I do not presently consider that it does) then the various respondents were entitled to sell the DVDs they purchased to any person anywhere.  The only qualification to this general observation concerns the first and second respondents who were bound by the licence agreement and apparently bound to offer for sale and sell only in Australia and New Zealand.  But whether, simply as a matter of fact, either representation was made (as to purchases by consumers in other countries) would need to be investigated at a trial having regard to the first respondent's evidence about what the second respondent's sites did or did not say and what the site did or did not permit from time to time (by way of purchase from locations in Australia and New Zealand).  There should be no summary judgment in favour of the applicant in relation to these matters

71                                          The applicant alleges, additionally, contravention of paragraphs (bb), (d) and (f) of s 53 by the first and second respondent based on statements made by the first respondent in email correspondence before the licence agreements were signed.  Those statements concerned entry into a mass market, use of a distributor, numbers of DVDs to be created and marketing and sales for or on Father's Day 2005.  Again these allegations almost certainly concern future matters and the observations I made earlier (at [62]) apply to these allegation is as well.  There should be no summary judgment in favour of the applicant in relation to these matters.

72                                          I have not, in these reasons, sought to deal with the applicant's allegations broadly made against both corporations and individuals associated with them.  At a trial, these undifferentiated allegations would need to be examined carefully to determine whether, in relation to any given individual, any case made out against a corporation could be treated as made out against the individual as well.

Conclusion

73                                          The applicant has failed to establish any basis for summary judgment against any respondent on any of the claims he makes.  He persisted in pursuing this application for summary judgment notwithstanding observations I made at directions hearings cautioning him against following this course.  Several of the applicants have engaged legal representation to defend the matter generally and to oppose this application for summary judgment in particular.  Costs have been sought by several respondents.  It is highly likely respondents who have incurred legal costs in defending this application for summary judgment will be awarded them.  In some instances an order has been sought that the costs be payable immediately and in some instances indemnity costs are sought.  Given the likely serious financial consequences to the applicant if an order is made that he pay the costs of the various respondents and that they are payable forthwith, and all the more so if an indemnity costs order is made, I propose to allow the parties an opportunity to file written submissions, if they so wish, on the question of costs.  Any respondent wanting to make additional submissions on the question of costs is to file and serve any written submission within 14 days of the date of this judgment.  The applicant should reply to the submissions within 28 days of the day of this judgment.  Ultimately I will make an order dismissing the application for summary judgment.  However the appropriate order to make at this time is to stand the matter over for approximately one and a half months so that all necessary orders can be made then disposing of the application for summary judgment.

74                                          I have, in these reasons, probably descended into more detail than is usually necessary in an application for summary judgment under s 31A.  Necessarily my views are only tentative.  However the comparatively detailed account of the evidence and discussion of at least some of the legal issues is intended to provide the applicant with a yardstick for measuring the likelihood of him succeeding in the proceedings in any respect or failing in all or most respects.  It is for the applicant to weigh the likely cost of persisting in these proceedings generally with the benefits, if any, he will gain from doing so.  Even if there was, in relation to the first or second respondent, some minor and probably technical breach of contract or some representation made which could not be justified -Where does that lead?  What damage has the applicant suffered?  I appreciate that the applicant contends he lost the opportunity to market the two films in overseas markets other than New Zealand and he asserts this is a significant loss.  Whether, at trial, this could be established is entirely another question.

 

 

I certify that the preceding seventy-four (74) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore.

Associate:

Dated:         30 March 2010