FEDERAL COURT OF AUSTRALIA

Bell v Steele (No 3) [2012] FCA 246

THE COURT ORDERS THAT:

1.    The respondent pay the applicant damages in the amount of $147,000.

2.    The applicant’s costs be determined otherwise than by taxation.

3.    The respondent pay the applicant’s cost of and incidental to the proceedings, totalling $22,224.

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

REASONS FOR JUDGMENT

1    On 7 February 2012 in Bell v Steele (No 2) [2012] FCA 62 I made the following orders in this proceeding:

1.    The respondent being properly served pursuant to the order of 6 December 2011 and not having filed a defence, the judgment of the Court is that:

a.    The applicant is the owner of the copyright in the Raw Footage for a cinematographic film entitled “The Blackfella’s Guide to New York” as referred to in the Statement of Claim;

b.    The applicant is the owner of the copyright in the Trailer for a cinematographic film entitled “The Blackfella’s Guide to New York” as referred to in the Statement of Claim;

c.    The respondent’s threat of legal proceedings in relation to copyright infringement is unjustifiable pursuant to s  202(1) of the Copyright Act 1968 (Cth).

2.    The respondent pay the applicant’s costs of and incidental to the proceedings.

3.    The applicant file evidence as to quantum of damages pursuant to s 202(1) of the Copyright Act 1968 (Cth), and costs by 16 February 2012.

4.    The matter be set down for hearing as to quantum of damages pursuant to s 202(1) of the Copyright Act 1968 (Cth) and costs for half (½) a day at 10.15 am on 13 March 2012.

2    At a subsequent hearing on 13 March 2012 in the same proceeding I made the following orders:

1.    The respondent pay the applicant damages in the amount of $147,000.

2.    The applicant’s costs be determined otherwise than by taxation.

3.    The respondent pay the applicant’s costs of and incidental to the proceedings, totalling $22,224.

3    At the time of making the orders on 13 March 2012 I stated that I would shortly thereafter deliver my reasons for those orders. These are my reasons.

Background

4    The orders of 7 February 2012 and 13 March 2012 were made in light of findings which I made in Bell v Steele (No 2) [2012] FCA 62, in summary that:

    The applicant is an artist based in Australia who had engaged the respondent to assist him in the United States to make film footage.

    The cost to the applicant of making this footage was claimed at $43,000, in addition to which he paid the respondent $4,000 and gave her a painting for her services.

    A film trailer made by the applicant was distributed to Milani Gallery at Wooloongabba in Brisbane on 10 September 2011.

    The respondent claimed copyright in the footage and demanded the trailer be removed from public exhibition. This was done. The applicant suffered financial loss.

    The applicant has served the respondent in the United States with document relevant to these proceedings, including originating process and affidavit material.

    Notwithstanding this service the respondent failed to file a Defence to these proceedings. No explanation was given for this course of action.

5    In support of his claim for damages and costs, the applicant filed written submissions and the following three affidavits:

    an affidavit of Ramon Milani sworn 16 February 2012;

    an affidavit of the applicant sworn 16 February 2012;

    an affidavit of John Swinson filed 16 February 2012.

6    No material has been filed by the respondent. No appearance has been entered by the respondent at any time in this proceeding.

Material filed by the applicant in support of orders

Submissions of the applicant

7    The applicant provided written submissions in support of his claim to damages and costs and, through his solicitor Mr Swinson, oral submissions.

8    In relation to the claim for damages for unjustifiable threats, the applicant contends, in summary, as follows:

    As a result of the respondent’s unjustifiable threats, actions were taken by the applicant’s agent, Mr Milani, which in turn resulted in the applicant losing the opportunity to promote and sell his artworks at an opportunistic time (namely, in conjunction with a successful exhibition at the Gallery of Modern Art in Brisbane where two of the applicant’s works were headlined).

    The applicant also suffered damage in the US market due to the respondent’s threats, although the applicant is not seeking damages in relation to any losses suffered in the United States.

    The applicant’s artistic credibility and integrity is very important in maintaining his reputation and the marketability of his art works.

    The facts of this case are egregious in that:

    threats of legal action were made in a calculated fashion by the respondent through her New York law form;

    threats were made to both the applicant and Mr Milani;

    the threats took no account of Australian legal principles;

    notwithstanding the threats no legal action was commenced by the respondent, nor an appearance entered by the respondent.

9    In relation to the costs claimed, the applicant relies on r 40.02(c) of the Federal Court Rules 2011 and the affidavit of Mr Swinson detailing costs incurred.

Mr Milani’s affidavit

10    In his affidavit Mr Milani deposes in summary that:

    he is the owner and operator of the Milani Gallery.

    he has a stable of artists he represents as an agent, one of whom is the applicant.

    Mr Milani has represented the applicant since 2003, including in relation to the applicant’s film The Blackfella’s Guide to New York.

    He published the trailer for the applicant’s film The Blackfella’s Guide to New York on his gallery’s website and set up a link to the trailer on the Gallery’s Facebook page.

    On or about 14 October 2011 the respondent, through her New York attorney, sent letters to the applicant and himself, claiming that she owned the copyright in 18 hours of raw footage and the trailer to the film. As a result the applicant and Mr Milani obtained legal advice, and subsequently removed the trailer from the gallery website.

    The applicant is one of Australia’s most significant artists, has taken part in a number of group exhibitions, and his work is held in major public galleries in Australia.

    The applicant’s work is represented in major collections in Australia, New Zealand, Canada and Germany, and is currently the subject of travelling exhibition in the United States of America.

    The applicant was working on the film The Blackfella’s Guide to New York as part of a prestigious fellowship in New York.

    Art videos which the applicant has produced before were very successful in generating interest in him and his paintings, have achieved international acclaim, and have been shown in art galleries in Australia and the United States.

    At the time of the affidavit there was an exhibition at the Gallery of Modern Art in Brisbane, including a number of the applicant’s paintings. Mr Milani often takes clients to the exhibition, and then takes such collectors back to his gallery with the intention of making a sale. Mr Milani had intended to show the trailer of the film to those clients, but has been unable to do so because of threats made by the respondent. Mr Milani deposed that he strongly believed that this had resulted in fewer sales of the applicant’s works as a result.

    The applicant sells his painting for prices ranging from $1,000 to $100,000.

    Mr Milani generally sells paintings by the applicant with values upwards of $20,000. Annexed to Mr Milani’s affidavit were copies of three invoices in relation to recent sales of paintings for $66,000, $45,000 and $38,500 respectively.

    Currently there is an exhibition of the applicant’s paintings and art films travelling the United States, sponsored by the American Federation of Arts (“AFA”). A catalogue was produced for this travelling exhibition. The respondent’s US attorney wrote to the AFA and the art gallery first on the travel itinerary demanding that the catalogue be removed from sale due to a photograph being a still from the applicant’s film trailer.

    As a result of the threats by the respondent Mr Milani took the following action:

    he removed the film trailer from the Milani Gallery website, Vimeo (a video sharing website) and the Milani Gallery’s Facebook page;

    he postponed a showing of the applicant’s works at Artspace, a gallery in New South Wales; and

    he delayed the sale of a catalogue of the applicant’s works which featured a still shot from the applicant’s film trailer.

11    Mr Milani also deposed that he considers he would have sold between an additional six to eight of the applicant’s paintings because of interest generated through publicising the film trailer on the internet and showing the film trailer at Artspace, and approximately 100 catalogues. In conclusion, Mr Milani deposed:

22. In light of the above, I believe that my reduced ability to publicise and exhibit Mr Bell’s work as a result of Ms Steele’s threats has resulted in lost sales totalling approximately $243,000. This can be broken down as follows:

(a)    Likely additional sales of four paintings (at $30,000 each): $120,000

(b)    likely additional sales of two paintings (at $60,000 each): $120,000

(c)    likely sales of 100 catalogues in Australia (at $30 each): $3,000

23. From these sales, Mr Bell would receive $147,000.

The applicant’s affidavit

12    In his affidavit, the applicant summarised the background events to the commencement of these proceedings.

13    In relation to his reputation and the cost of his paintings the applicant deposed, inter alia:

10. I believe that both the general public and the artistic community take a great interest in my works. I have won a number of prestigious awards, such as the Telstra National Aboriginal and Torres Strait Islander Art Award for 2003. I was a finalist for the Archibald Prize in 2004. Recently, there has been publicity surrounding my unconventional judging of the Sulman Art Prize for 2011.

11. My paintings are exhibited in a number of galleries including the Queensland Art Gallery, the National Gallery of Australia and the NSW Art Gallery.

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14. I sell my paintings for prices ranging from $1,000 to $100,000. Typically, may paintings are sold to art galleries and serious collectors.

15. My reputation and integrity are extremely important. Galleries and collectors, who are my typical customers, would not purchase my work if they believed I infringed the copyright of others.

16. Based on statements made to me by those in the art world and who are aware of the threats and claims made by Ms Steele, I consider that there was a cloud over me and my reputation from the time when the threats were first made by Ms Steele until the Federal Court of Australia gave judgment in my favour on 7 February 2012.

14    The applicant also gave evidence supporting Mr Milani’s evidence in respect of actions taken by Mr Milani and Mr Milani’s expectations of losses the applicant has experienced as a result of the threats.

Mr Swinson’s affidavit

15    Mr Swinson is the solicitor with carriage of the matter for the applicant. In summary, Mr Swinson deposes that:

    documents in the proceedings were properly served upon the respondent in accordance with my orders of 6 December 2011;

    the Court fees paid by the applicant to date are $3.008;

    professional fees for legal services provided to the applicant amount to more than $30,000 for over 70 hours work including settlement discussions with the respondent’s New York counsel. The applicant claims its legal professional fees in the amount of $17,430, and makes no claim for costs associated with settlement discussions or dealings with the respondent’s law suit apparently filed in New York.

Consideration

Damages

16    The applicant has been successful in obtaining an order pursuant to s 202(1) of the Copyright Act 1968 (Cth) which provides:

Groundless threats of legal proceedings in relation to copyright infringement

(1) Where a person, by means of circulars, advertisements or otherwise, threatens a person with an action or proceeding in respect of an infringement of copyright, then, whether the person making the threats is or is not the owner of the copyright or an exclusive licensee, a person aggrieved may bring an action against the first-mentioned person and may obtain a declaration to the effect that the threats are unjustifiable, and an injunction against the continuance of the threats, and may recover such damages (if any) as he or she has sustained, unless the first-mentioned person satisfies the court that the acts in respect of which the action or proceeding was threatened constituted, or, if done, would constitute, an infringement of copyright.

17    In Ricketson S and Creswell C, The Law of Intellectual Property: Copyright, Designs & Confidential Information (2nd ed, Lawbook Co) paragraph 2.195 the learned authors summarise damages a copyright owner may claim in respect of groundless threats in the following terms:

Where a person, by means of circulars, advertisement or otherwise, threatens a person with an action or proceeding for infringement of a patent, copyright, circuit layout or design, a person aggrieved may bring an action against the person making the threats for a declaration to the effect that the threats are unjustified, as well as an injunction against the continuance of the threats. Such an action may be brought, even if the threats were made in good faith, albeit ultimately found to be unjustified. It is also possible to obtain relief by way of damages to compensate for any damage that the person threatened has sustained as a result of these threats but such damage must flow from the making of the threats, not from any legal proceedings that may be subsequently commenced by the copyright owner.

(Footnotes omitted.) (Emphasis added.)

18    In my view this comment accurately states the law. That the applicant can only make a claim in respect of damages arising from the threats was clearly explained by Lord Esher MR in Ungar v Sugg (1892) 9 RPC 113 at 118, cf von Doussa J in Townsend Controls Pty Ltd v Gilead, G & Ors [1990] FCA 250 at [16]. (I note that, although both cases concerned threats in respect of infringement of a patent, identical principles in respect of damages apply as in the case before me.) So, for example:

    impacts upon the readiness of third parties to do business with the applicant (World of Technologies (Aust) Pty Ltd v Tempo (Aust) Pty Ltd [2007] FCA 114 at [124]);

    losses arising from threats to the applicant’s customers (Avel Pty Ltd v Intercontinental Grain Exports Pty Ltd (1996) 143 ALR 533 at 542);

    lost sales or lost potential sales (Cowan, B S & Anor v Avel Pty Ltd [1995] FCA 546 [1995] FCA 546 at [25]); and

    the cost to the applicant of instituting relief – such as a declaration – following receipt of the threat (Nine Network Australia Pty Ltd v IceTV Pty Ltd [2007] FCA 1172 at [234]).

may all be compensable in damages. Conversely, losses arising from such events as rumours which may spring up but are not attributable to the party making the threat, or damage to the threatened party flowing from the actual commencement of legal action by the party who made the threats, are not compensable as damages sustained from groundless threats.

19    Losses in respect of which damages may be sought will always, of course, depend on the facts of the particular case.

20    In this case the respondent never commenced proceedings against the applicant, and the only damages claimed by the applicant are those the applicant contends arose from the unjustifiable threats made by the respondent. It is clear that the respondent made groundless threats against both the applicant and his agent, Mr Milani. The evidence of both the applicant and Mr Milani as to the losses consequent upon the threats of the respondent, including the potential loss of sales of paintings and the amount of potential losses, are not disputed. I have no reason to do other than accept the evidence filed on behalf of the applicant. Further, I note Mr Swinson’s submissions at the hearing on 13 March 2011 that the damages sought were conservative in that:

    no damages were sought in respect of matters arising outside of Australia; and

    estimated losses in respect of lost opportunities to sell paintings related to the lower end/middle of the scale of sales the applicant could have been expected to make.

21    I am not persuaded on the material before me that the applicant is entitled to damages because of apparent rumours to which the applicant adverts in paragraph 16 of his affidavit. However this does not affect the damages to which the applicant is otherwise entitled.

22    In my view it is appropriate to make orders for damages in the amount sought by the applicant.

Costs

23    Rule 40.02 of the Federal Court Rules provides:

40.02 Other order for costs

A party or a person who is entitled to costs may apply to the Court for an order that costs:

(a) awarded in their favour be paid other than as between party and party; or

(b) be awarded in a lump sum, instead of, or in addition to, any taxed costs; or

(c) be determined otherwise than by taxation.

24    As I noted earlier, the applicant relies on r 40.02(c) in seeking an order for costs fixed in the sum of $22,224. This amount represents:

    $3,008 in Court fees;

    $17,340 in professional fees; and

    $1,786, being a hearing fee paid to the Federal Court for the hearing of 13 March 2012 which was paid following the filing of Mr Swinson’s affidavit.

25    In my view the order sought by the applicant in respect of costs should be made. I take this view because:

    In light of the failure of the respondent to appear in these proceedings or file any material, it is possible that costs of any taxation would fall entirely on the applicant who would then need to commence proceedings against the respondent in respect of the costs of that taxation. In my view the failure of the respondent to appear in this proceeding or file any material is a relevant factor to take into account in ordering that costs be determined otherwise than by taxation.

    Ample sworn evidence has been produced as to costs which have been incurred in this proceeding.

    It is clear from the affidavit of Mr Swinson that the estimate of professional fees in this matter was conservative, including by reference only to costs incurred in respect of this proceeding and the time of only one lawyer at the firm where more than one lawyer had undertaken a similar task, and excluding the scaled fees for care and consideration which would otherwise be claimable.

    I am satisfied that the costs and fees incurred by the applicant and which are the subject of this claim were incurred in respect of the unjustifiable threats made by the respondent to the applicant and Mr Milani.

Associate:

Dated:    16 March 2012