Aristocrat Technologies Australia Pty Ltd & Ors v Global Gaming Supplies Pty Ltd & Ors ; Aristocrat Technologies Australia Pt Ltd & Ors v Allam & Ors
[2013] HCATrans 94
[2013] HCATrans 94
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Sydney No S168 of 2012
B e t w e e n -
ARISTOCRAT TECHNOLOGIES AUSTRALIA PTY LTD
First Applicant
ARISTOCRAT INTERNATIONAL
PTY LTDSecond Applicant
ARISTOCRAT TECHNOLOGIES INC
Third Applicant
and
GLOBAL GAMING SUPPLIES PTY LTD
First Respondent
ANTHONY EDWARD ANDREWS
Second Respondent
IMPACT GAMING PTY LTD
Third Respondent
FRANCIS GEORGE BERNARD CRAGEN
Fourth Respondent
Office of the Registry
Sydney No S169 of 2012
B e t w e e n -
ARISTOCRAT TECHNOLOGIES AUSTRALIA PTY LTD
First Applicant
ARISTOCRAT INTERNATIONAL
PTY LTDSecond Applicant
ARISTOCRAT TECHNOLOGIES INC
Third Applicant
and
RIAD ALLAM
First Respondent
GLOBAL GAMING SUPPLIES
PTY LTDSecond Respondent
ANTHONY EDWARDS ANDREWS
Third Respondent
IMPACT GAMING PTY LTD
Fourth Respondent
FRANCIS GEORGE BERNARD CRAGEN
Fifth Respondent
TONITA ENTERPRISE PTY LTD
Sixth Respondent
FRENCH CJ
CRENNAN J
KIEFEL J
GAGELER J
KEANE J
TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON THURSDAY, 2 MAY 2013, AT 10.15 AM
Copyright in the High Court of Australia
____________________
MR A.J.L. BANNON, SC: If it please the Court, I appear with my learned friend, MR J.M. HENNESSY, SC, for Aristocrat, the applicant in both matters. (instructed by Gilbert + Tobin Lawyers)
MR M.L.D. EINFELD, QC: May it please the Court, I appear with my learned friend, MR A.C. HARDING, for the Aristocrat interests, so the respondents to the first appeal, and the second, third, fourth and fifth respondents to the second application. (instructed by Paul Bard Lawyers)
MR M. GREEN: If the Court pleases, I appear for the first and sixth respondents in the second application. (instructed by Bruce & Stewart Lawyers)
FRENCH CJ: Thank you. Mr Bannon, we would like to hear argument on the application for special leave first and, of course, as part of that addressing the question of which the parties were notified in the letter from the Court.
MR BANNON: Yes.
FRENCH CJ: I might just draw – I am sure you are already familiar with it – draw attention in particular to paragraphs 37 to 45 of the second judgment of the Court of Appeal, which I think raises away those issues.
MR BANNON: Yes. The applicant position is that we do not seek – just looking at our outline of oral argument – to run an argument which was not run before the primary judge and was not run on appeal. The supplementary judgment of the Court of Appeal does advert to an argument which we sought to run independently of any reliance on the emails – that was in the circumstances of that case. That application really had two purposes.
We contended that the section 97 issue had not been squarely raised in a way which we had an opportunity to meet it. Rather than come to this Court and be told you should have asked the Full Court to consider it, that was your view, we asked the Full Court and we also ran an argument to the effect that inexorably you must come to the same conclusion in any event. But for the purposes of this application we do not say that this Court should, if it grants leave, decide the matter independently of the emails or findings in relation to the emails. What we do say is that the critical conclusion of the Full Court – namely, that the findings in relation to the emails involved findings which were used as tendency evidence – are simply wrong.
CRENNAN J: May I ask you something about the facts because it might be important and I am not sure I understand it properly. I notice the expression “infringing machines” is used in your argument.
MR BANNON: Yes.
CRENNAN J: Are the machines the subject of the impugned transactions Aristocrat machines – that is to say, were they manufactured originally by your clients?
MR BANNON: No. There is a possibility that the box may have been, but even that is not clear. There is no evidence one way or other to ‑ ‑ ‑
CRENNAN J: Does your client have any design or patent or any monopoly in relation to the box or are we in Puxu territory with the boxes?
MR BANNON: No. There was an argument in relation to copyright in artwork. Each machine has two pieces of artwork, an intermediate panel and a larger panel which usually has a name on it. It might have some descriptions in relation to the games and rewards and that sort of thing. There was an argument in relation to artwork and your Honours will see references to artwork, but that was not persisted in.
CRENNAN J: What is the infringing article in terms of section 38? It has to be a physical or tangible article?
MR BANNON: Yes.
CRENNAN J: No monopoly rights in the box?
MR BANNON: Yes.
CRENNAN J: Is the article for the purposes of section 38 in truth the software?
MR BANNON: Yes.
CRENNAN J: So that is the article, for the purposes of section 38, in which you are seeking to prove constructive knowledge of infringement?
MR BANNON: Yes, but there is an argument. There would be a subsequent argument, which has never been raised, as to whether or not you can disentangle the EPROMs, which form part and parcel of the machine, from the box itself.
CRENNAN J: Well, if you are refurbishing these machines, and I notice the evidence talked about refurbishment ‑ ‑ ‑
MR BANNON: Yes.
CRENNAN J: Again, I must confess to feeling very unclear about who was refurbishing and what they were refurbishing.
MR BANNON: Yes.
CRENNAN J: But if, for argument’s sake, it was an Aristocrat box and it had some software in it, is it possible to move that software from that particular Aristocrat box – by which I mean originally manufactured by Aristocrat – across to another box originally manufactured by Aristocrat?
MR BANNON: That would be a theoretical possibility, but you could not use a different serial number.
CRENNAN J: Well, I understand – now, you say you could not use it. You have a second‑hand box originally manufactured by Aristocrat. It has lost its compliance plate. You have a compliance plate from another Aristocrat box originally emanating from Aristocrat. Would you be complaining if that compliance plate was put on the box that had lost it?
MR BANNON: As part of copyright infringement as found it probably would not be a complaint, but there would be no logical reason for doing that.
CRENNAN J: Do you have a design registration, in relation to the compliance plate?
MR BANNON: There was copyright in relation to the compliance plate.
CRENNAN J: There is no corresponding design defence been raised?
MR BANNON: No, but we only succeeded in limited instances.
CRENNAN J: In relation to one plate, was it?
MR BANNON: No actually, we succeeded - yes, in one plate which was located on certain premises, or two plates.
CRENNAN J: Are they artistic works or literary works?
MR BANNON: They are artistic works, but there was no design overlap issue raised. But perhaps coming back to your Honour’s question, as your Honour knows there are cases in damages where if a part of an article, which is a physical article is sold, which includes a copyright infringing element as to whether or not as a damages issue you get damages referable to the whole of the article, and there are issues as to whether or not you can disentangle them or the ease of disentangling them, or whether the profit, in relation to it is related solely to the relevant software or the copyright infringing part of it, or some other attracted features in this case of the box, but none of those issues arise here.
CRENNAN J: Well, would it be possible to tell, in some way that I perhaps do not appreciate, whether the software in a machine was originally licensed software, that is to say, it was originally in a machine manufactured by Aristocrat which has come on to a second‑hand market somehow?
MR BANNON: I am not sure there is any evidence as to the – if you are looking at the software itself. I think there is evidence relating to whether it is the same EPROMs, for example, the physical EPROMs which Aristocrat used; there is certainly evidence in relation to compliance plates.
CRENNAN J: Yes, it is the link between the two that is not easy to understand I must say.
MR BANNON: But we say in that issue there are findings of fact by the primary judge which are not interfered with by the Full Court, namely that there is a representation, in effect, conveyed by a New South Wales, relevantly here, serial number which appears on the outside of a machine.
CRENNAN J: That is to do with gaming regulations, is it?
MR BANNON: It is to do with gaming regulations.
CRENNAN J: A sort of auditing technique.
MR BANNON: That is right. You cannot have in New South Wales – and there are different regulations but there are similarities in other States – you cannot have a gaming machine which is not registered with the old LAB, the Office of Liquor and Gaming now, you cannot sell it and you cannot have it in a club without it being registered. If you change the software, that has to be recorded on the records under regulation. So, the point of having a serial number on the outside is it distinguishes what is inside as a genuine machine.
CRENNAN J: What if someone wanted to add to the software on that machine, or, you know, have more games than they presently have?
MR BANNON: Well, they should in New South Wales register that with the licensing board.
CRENNAN J: I see. Is the software sold separately from the machines, can a machine owner phone up, give the credit card number and get some software?
MR BANNON: There is evidence about conversion kits which you can convert up your machine and that can be authorised but, again, that is the subject of registration procedures as well.
FRENCH CJ: Mr Bannon, looking at your outline of oral argument, your primary line of attack seems to be that the Full Court got it wrong in characterisation of the emails as tendency evidence for the purposes of section 97?
MR BANNON: Absolutely. I will try to develop that briefly but, we say, it is just that – if I may say so, in my respectful submission, an obvious error.
KIEFEL J: Before you get to the discussion about its use as tendency evidence the Full Court also had something to say about the reversal by the primary judge of his earlier ruling under section 136. Now, that, at the very least, covers the emails, does it not?
MR BANNON: Not relevantly, because the relevant emails which established the propositions – at least enough of them to establish the propositions were initially admitted against the Global and Impact respondents because they were parties to the emails.
KIEFEL J: So it was the Allam parties that they were not admitted against?
MR BANNON: There were some emails admitted against them as well but that issue does not affect Global and we say for reasons I have explained, it does not affect the Global or Impact outcome. We say, relevantly, it does not affect Allam either because ‑ ‑ ‑
KIEFEL J: But the fact that they were parties to them does not make them admissible for all purposes, does it? Were they not initially admitted on limited basis under section 136?
MR BANNON: Not against the parties against whom they were initially tendered. Their Honours record the fact that they were admitted without comment when they were admitted against the parties against whom they were tendered.
KIEFEL J: But were they tendered, at the time that they were tendered, in relation to issues to credit?
MR BANNON: They were just tendered generally without limitation. Their Honours record that.
KIEFEL J: Will you not have to deal with that part of the Full Court’s findings on this before we can discuss the use of the emails?
MR BANNON: No, because that part of their findings, to the extent they dealt with it, did not suggest that that was a reason why these particular emails resulted in the overturning of the decision.
KIEFEL J: I might be mistaken; I thought the Full Court said that section 136 was one basis but went on to say that in any event the emails could only have been logically used as tendency evidence.
MR BANNON: We submit that is, with respect, not what they said. We say they did not actually finally decide the 136 issue. What they did not do was analyse what bits of evidence would have made a difference in relation to the outcome.
KIEFEL J: That is perhaps true, but they did flag the section 136 reversal as a difficulty that would have to be overcome.
MR BANNON: As a potential difficulty but, as I will endeavour to demonstrate, it did not affect the particular issue in respect of which we seek to succeed. Perhaps, harking back to your Honour Justice Crennan’s questions, if I endeavour to develop the argument by reference to the findings and the facts it may answer the questions.
The particular matters, I have to confess, in relation to which your Honour was raising perhaps appear at the back end of our outline which pick up findings referred to in paragraphs 24 and 25 – namely there is a concurrent finding that a compliance plate, with its unique serial number, affixed to a gaming machine, represents that the machine and its components are authentic. That is of significance, for example, in selling machines to overseas countries. There is a concurrent finding that there is little point in using fake serial numbers if you have a genuine machine because you are depriving yourself of the advantage.
CRENNAN J: It is just that expression “genuine machine”. What does it cover?
MR BANNON: Relevantly, one ‑ ‑ ‑
CRENNAN J: One would normally think of a machine as being the body of the machine.
MR BANNON: Relevantly, for these purposes, one which has software reproduced with the authority of Aristocrat. Perhaps jumping to the fourth point on this outline, section 38 is referred to at the back of our submissions. I do not think I need to take your Honours to it specifically, but I should add there is a new section 38(3) in the current version of the Act. That is an amendment which post‑dated it. It relates to “article” and does not affect these proceedings. But, relevantly, to be a relevant dealing:
the copyright –
in this case a literary work –
. . . is infringed –
because it is a computer program –
by a person who, in Australia, and without the licence of the owner of the copyright:
(a) sells . . . an article . . .
if the person knew, or ought reasonably to have known, that the making of the article constituted an infringement of the copyright –
Now, the making of a machine with software copied from Aristocrat without our authority is the making of an article which infringes copyright. That proposition was not contested, if that was established. But the elements of knew or ought reasonably to have known must be proved. Then, in 5 of our outline – and I will come back to the detail of this – what we submit and what we submit was found by both the primary judge, and indeed affirmed by the Appeal Court, was that the transactions which were found to be infringing transactions fell into two categories, the so‑called duplicate number transactions.
They involved transactions where, by reference to the Global and Impact’s own records, we were able to identify the sales of Aristocrat identified machines by reference to specific serial numbers. So an invoice would read XAW four numbers, and we could identify prior sales of the same machines. Because of the regulatory requirement, you cannot have a sale of the same machine twice.
The answer put forward by the respondents, in particular their positive evidence from Mr Andrews and others, was to say there was no duplicate sale. You have got it wrong. The second sale did not go ahead, or the first sale did not go ahead. They did not attempt to say – to take your Honour Justice Crennan’s example – we just put some numbers on without thinking that they were genuine software inside. They did not attempt to say, we deliberately put fake numbers on. They did not run that argument. They simply said there were no duplicate transactions because there was no sale of the non‑genuine machine because there was no duplicate transaction. It was a positive case that they put forward.
The other area of success in which we achieved was that we demonstrated they sold machines, again with serial numbers which were apparent Aristocrat serial numbers, in circumstances that were identified by independent evidence, that those same machines were located at, or about the time of the sale, in clubs, and that those machines in clubs were the genuine machines. They could be identified, on the evidence, by reference to examination of compliance plates, on a particular styling and, indeed, cabinetry, and that sort of thing.
So that their records which indicated they had sold those machines, identified by those numbers, had to have been sales of machines which had unauthorised copies of software. Why that was so is because they did not suggest – and the Full Court accepts this – that anyone was selling a machine described as an Aristocrat machine which did not function as an Aristocrat machine.
CRENNAN J: This is, I think, 169 ‑ ‑ ‑
MR BANNON: Yes.
CRENNAN J: ‑ ‑ ‑6239 of the appeal book.
MR BANNON: Exactly. So, no one was suggesting we were selling something which ‑ ‑ ‑
CRENNAN J: So, their case is they were selling genuine Aristocrat machines with fully functioning software?
MR BANNON: That is right.
CRENNAN J: Then they sought to explain the anomalous serial numbers?
MR BANNON: That is right. So, in relation to machines in clubs ‑ ‑ ‑
CRENNAN J: So the real issue is whether the software was licensed or not?
MR BANNON: No, no.
CRENNAN J: What is the real issue?
MR BANNON: The real issue is whether or not the – well, the factual issue on the transactional issue, the issue was whether or not there were duplicate transactions or not. As your Honour says, they never sought to say they ever sold, or ever intended to sell something which was not a genuine machine or something which did not function as an Aristocrat machine. So they never sought to say they ‑ ‑ ‑
CRENNAN J: Well, presumably there might be a market in second‑hand Aristocrat machines.
MR BANNON: There is. There absolutely is, and there is a market which was enhanced by the ability to say this is a genuine machine, albeit in South America, as evidenced by the fact that it has an LAB serial number.
CRENNAN J: Am I right? In your particulars, there are a whole lot of these machines emanating from Global that were Global sales that were Aristocrat machines that had licensed software in them.
MR BANNON: We tried to prove that all of them were not, but we failed because ‑ ‑ ‑
CRENNAN J: But they had compliance plates that were correct and so on.
MR BANNON: They did.
CRENNAN J: Was that not the constellation of a whole lot of facts in relation to a whole lot of them, you know, it was over 400 or something originally in the particulars, was there not?
MR BANNON: Yes. I am sorry, your Honour.
CRENNAN J: And some had genuine compliance plates, they were Aristocrat bodies and had licensed software in them.
MR BANNON: Yes, absolutely, and that is why you could not sell a genuine machine twice.
CRENNAN J: Well, subject to whether or not you can put licensed software into a different box from the one in which it was originally situated.
MR BANNON: But they never suggested they did that. That was not their case. They ran a positive case that they ‑ ‑ ‑
CRENNAN J: Well, one problem might be they were sort of meeting this emails case rather than some other case, they might have sought to meet.
MR BANNON: Well, in effect their procedural argument, some of which they maintained but lost on, both at trial and on appeal, to the extent any of those matters relate to whether it was a procedural fairness issue or they understood the case they were meeting, they are all ‑ ‑ ‑
CRENNAN J: I hope this helps, I feel I should mention it. It is not difficult to understand that some sort of delinquency is involved in a duplicate compliance plate or duplicate serial number. It is easy enough to understand it is a delinquency locally because of the regulations which are meant to have an auditing function in relation to tracking how many gaming machines there are in a State and so forth, and it is possible to understand it might be a delinquency in terms of export regulations or it might be a delinquency at the other end for all I know, but it is just hard to see how that delinquency invariably infers a use of unauthorised software.
MR BANNON: Well, they are the concurrent findings, because there is no – the only reason you would put a serial number on a machine – you have to have a reason to put a serial number on the machine and they actually sell the machines by invoices by reference to serial numbers and the findings are that there is an advantage in doing so because it represents that it is a genuine machine. That is an advantage because in some South American countries they do not want non‑genuine machines.
CRENNAN J: Well, I can understand all that, as I say, I can understand there is some sort of delinquency involved, but it is tying the delinquency to copyright infringement that is not particularly straightforward.
MR BANNON: Well, except that the findings were that there would be no logical reason to put a fake serial number on a genuine machine, so if you are putting a fake serial number on it then there is a reasonable inference ‑ ‑ ‑
CRENNAN J: Well, one reason would be it has lost its original compliance plate, you want to sell it in South America where they are going to be looking to have a compliance plate on an Aristocrat body.
MR BANNON: They never suggested that was what they were doing.
CRENNAN J: I see.
FRENCH CJ: Mr Bannon, just coming back to the question which Justice Kiefel put to you in relation to the reversal of the 136 ruling, looking at paragraph 235 of the first judgment of the Full Court at 6258, am I misconstruing that as implying that the 136 ruling covered the emails in some respect?
MR BANNON: Yes, but the important part of that sentence is:
However, to allow the emails to be introduced as evidence against respondents who had not been required to respond in any way to the email evidence, even if tendered for what their contents revealed against other respondents, was to put the respondents in an unsatisfactory position.
FRENCH CJ: Which respondents are being spoken about there?
MR BANNON: Against whom it was not initially tendered.
FRENCH CJ: So you say they were tendered initially against Global and Impact because they were the parties to the chains?
MR BANNON: Exactly. They are the relevant ones.
FRENCH CJ: Yes.
CRENNAN J: So it was not confined to just proving the joint venture agreement?
MR BANNON: Just to pick up where we refer to this in the oral outline, paragraph 241 of that same judgment of the Full Court at the foot of page 6259, it is the second sentence and what I focus on, I have to deal with the first sentence and I will. The first sentence says:
The primary judge accepted that the emails were not tendered as proof of the facts stated in them.
I will come to the understanding of that because it is plain that his Honour went on to make the findings. Admittedly after making that statement he made factual findings. What we say is what he meant was they are not tendered to prove that the facts ‑ ‑ ‑
FRENCH CJ: The assertions made in them ‑ ‑ ‑
MR BANNON: ‑ ‑ ‑ per se, but even just - sorry, your Honour, I should not interrupt.
FRENCH CJ: As I understood they were being tendered to prove a conduct which they reflected.
MR BANNON: Yes, and knowledge ‑ ‑ ‑
FRENCH CJ: That is the existence of the communications, rather than the ‑ ‑ ‑
MR BANNON: The distinction we draw is everyone accepts and ‑ ‑ ‑
FRENCH CJ: And from that knowledge.
MR BANNON: Yes. Everyone accepts and knew at the time of the tender that these were not the transactions which were subject of the particular emails. Everyone knew that, but what they were relevant to, we say, was the nature of the joint venture, its existence, but also awareness of each – and that is an inherent part of privy to joint venture – awareness of each other’s activities. So one critical email stream, which was tendered against both Global and Impact in the first instance, is the email stream which has them offering false compliance plates to a potential customer and saying things like “How do you want us to number them?”
Now, that is a critical email which their Honours say his Honour used as tendency evidence to prove or to find that the later transactions were infringing. So just pausing there what we say is the later transactions were proved to be infringing, not because of a tendency to engage in infringing transactions. What his Honour went through was exhausting detailed analysis and only where he found, and dealing with the explanations, a duplicate transaction. That is when he concluded or that is likely to be an infringing transaction because the inference is no one would put a false serial number on which is a genuine machine.
He did not use the fact that they had offered compliance plates in relation to other transactions. He did not use that to infer that they were infringing transactions, but the fact that they had done that was relevant to their own awareness of their own activities. See, there is a knowledge requirement to be proved - knowledge or ought to have known. So what you prove is duplicate transactions - therefore, on the face of their own records they are selling a non‑genuine machine. The only reasonable inference is that that is infringing software and I appreciate your Honour has raised an issue about that, but they were the conclusions of the court.
As to knowledge is it likely that Global and Impact knew what they were doing was selling infringing machines? It is relevant in that sort of case to prove that these were people who knew what - in this case, Mr Allam - or knew the fact that they had dodgy compliance - well fake compliance plates - were on top of that issue, were in fact communicating to people. That is not tendency evidence. That is like proving, if I may put this example. So you have to prove that the board of directors or management is aware of particular conduct of, say, an audit clerk or something.
KIEFEL J: It is a platform for credit. It is a platform for cross‑examination on credit, is it not?
MR BANNON: It is certainly that as well.
KIEFEL J: Well, are you saying that they were tendered only to provide that basis for cross‑examination on credit and to show the nature of the joint venture and no more?
MR BANNON: We said they would tender without limitation and the issue was did it have a relevance beyond tendency? That was the ultimate issue in relation to his Honour, the Full Court, it had a plain relevance. If I could just complete my example in relation to a management or board of directors, say there is an issue as to whether a company or upper management or board is aware of perhaps some fraudulent conduct or misdemeanour by a lower employee.
In such a case, you would be entitled to prove the extent to which, for example, the board of directors or management wandered through on a daily basis, the interstices of the company. You would be entitled to prove the extent to which they received reports of what people were doing on a general basis. That is not demonstrating the tendency as to knowledge. That is saying the management or the board has such an intimate knowledge with the activities of the company, even if when you prove that an underling did something and you have not got any direct evidence to say that the board or management were standing over them when that person did it, can you infer that they knew that person was doing it? The basis of an inference is that they were generally familiar with the activities of the company, including lower employees.
You can prove that by demonstrating that they were on top of the most menial tasks of the company. That is not tendency evidence. That is the sort of evidence which happens on a daily basis, be it negligence cases or otherwise, approval cases, breach of duty cases. This evidence went to a relevant issue. It proved that each of these parties to that email were familiar with the fact of the operations, were familiar with the fact that forced compliance complaints were being made and could be offered. That is not tendency.
FRENCH CJ: So, in the context of a special leave application, your complaint is one of mischaracterisation of this evidence by the Full Court, not misconstruction of section 97?
MR BANNON: It is a flip side.
FRENCH CJ: There is always a flip side of that kind, I suppose.
MR BANNON: Yes. If, to the extent, their judgment inherently involves a conclusion that that is a construction of section 97, then that is a wider issue.
FRENCH CJ: But really this is a characterisation case, is it not, and that makes it a visitation point.
MR BANNON: Yes. Subject to saying that approving this decision or not giving leave suggests a construction of 97, which is completely inappropriate for this Court to – and ultimately, we say, they just got it wrong.
KIEFEL J: Mr Bannon, one of the matters that the Full Court referred to in relation to the findings concerning the emails was his Honour the primary judge’s reference at judgment paragraph 321 which is appeal book 6011 under the heading:
Findings in relation to the email communications
His Honour said:
The emails were not tendered as proof of the facts stated in them, but the contents of the communications are revealing.
I think the Full Court placed some emphasis on the word “revealing”, as for what. His Honour then goes on – he says they speak for themselves, that:
the communications which were, themselves, reasonably clear on the face of the documents.
Then, goes on to make findings as to what they convey in that section. Is there somewhere else in his judgment where his Honour makes findings of the kind that you were referring to in relation to what they convey about knowledge of activities within the business because his Honour does not seem to do so there.
MR BANNON: Well, perhaps the finding of knowledge is explicit in the sense of paragraph 716, starting at 6076, what flows from the credit findings.
KIEFEL J: Has his Honour made any express findings about knowledge of activities of the company by reference to the emails?
MR BANNON: Yes. So the findings are, firstly, 718. This was a factual finding, Tonita burned ‑ the respondents burned – that is not…..by reference to the emails.
FRENCH CJ: Page number?
MR BANNON: Sorry, 6077, and then 719 is the second factual finding but it is the next three which are relevant:
Third, Mr Andrews was aware that Mr Allam was burning Aristocrat game software onto blank EPROMs. So too was Mr Cragen.
Fourth, Mr Andrews and Mr Cragen were aware . . .
Fifth . . . were aware ‑
so he actually made knowledge findings.
KIEFEL J: This is knowledge by reference – this is their knowledge by reference to what was contained in the emails themselves.
MR BANNON: That is right, which is ‑ ‑ ‑
KIEFEL J: Is there a finding as to extrapolating from the emails about their knowledge more generally of business activities that these were examples of some wider knowledge on a day‑to‑day basis?
MR BANNON: Paragraph 766 on page 6083. So at about line 30:
the nature of the Joint Venture was such that it contemplated the very acts which are alleged to have taken place in these proceedings . . .
It seems to me that this is a case where there was a studied and deliberate course ‑ ‑ ‑
KEANE J: Well, that is pretty conclusionary. I am not sure that it is really directed to answering the question that Justice Kiefel asked you. When you look at paragraphs 6 and 7 of your outline of oral argument you characterise what the Full Court did as looking at a tendency to know, or a knowledge tendency.
MR BANNON: Yes.
KEANE J: I do not know that that is a very fair way of characterising what the Full Court did say at paragraphs 240 and 241. They make the point in 240 that these emails did not concern the actual transactions, and in 241 they make the point that:
The primary judge necessarily had to connect the particularised infringing transactions with the joint venture. The only way that he could have made this connection was to draw the inference from the contents of the emails that the respondents had the tendency to act in a particular way, that is, engage in the alleged infringing transactions.
They are not talking about a tendency to know or a knowledge tendency; they are talking about a tendency to use unlicensed software and bogus serial numbers for identification plates from which one can infer knowledge or means of knowledge as part of the undistinguished course of their business, if you like, but it is the tendency to engage in things, engage in conduct, of which one must necessarily know, that is the crucial connection, if you like.
It is not that there is a tendency to know here, it is a tendency to engage in transactions which one can then infer represents the undistinguished course of business, to take up the analogy that you were putting to us before about people knowing what goes on in the course of their business. This is all making an assumption that they are engaging in this course of conduct as an ordinary part of their business and doing so from evidence which shows that in relation to other transactions they have engaged in the course of conduct, but not in relation to these transactions. It seems to me that it is squarely within section 97, and it seems to me that it is also an essential element of your case of knowledge.
MR BANNON: The characterisation of what the Full Court did is attended by the difficulty that they used different language at different times of the judgment and an attempt to understand it requires looking to each of the paragraphs we refer to in paragraph 7. If I may, in an attempt to answer your Honour Justice Keane’s question, address those paragraphs. So, firstly at 6240, in the second sentence their Honours say:
The conclusions reached in respect of that issue bear heavily on the appellant’s challenges to the correctness of the primary judge’s findings represented by the third, fourth and fifth “essential” propositions. The significance of those propositions, and particularly the third and fourth of them, is that they establish the “knowledge” requirement . . . The Aristocrat parties’ case on infringement by dealing could not and cannot succeed without that requirement being established –
So they say that there. Then at 172 they say in the second dot point at the top of 6241, the second bullet point:
whether the primary judge could rely on the contents of the emails to establish the connection between the joint venture and the conduct –
Just pausing there, and there are a number of references to this, the use of words “the connection between the joint venture and the conduct constituting”, the transactions were connected to the joint venture by their own records so whatever they are saying there cannot be you needed these propositions to connect these transactions to the conduct because they were inherently connected. Then the next reference is 181 at page 6242 of the book. At about point 50:
The email correspondence was, however, relevant to establishing the nature and existence of the joint venture and the witnesses’ credit.
So just pausing there, plainly to establish the nature and existence of the joint venture involves findings of fact. I will come back to that point I alluded to, but on the point I am dealing with at the moment:
At the outset, it can be observed that whilst the emails relied upon by the primary judge may have been relevant to the nature . . . they could not be used to prove the particularised infringing transactions unless they were admitted –
Again, to prove the particularised transactions, the transactions were proved by the email comparison. Then the next reference is at 213, in the last sentence:
As such, without the emails being relied upon by the primary judge, he could not have connected the particularised infringing transactions with the joint venture and “tacit agreement” as to the counterfeiting operates that his Honour found existed.
Now, tacit agreement may go to a knowledge requirement, but that is knowledge. Then if one goes to 241, which is the paragraph your Honour mentioned about the top of page 6260 of the book, about line 9:
The primary judge necessarily had to connect the particularised infringing transactions with the joint venture. The only way that he could have made this connection was to draw the inference from the contents of the emails that the respondents had the tendency to act in a particular way, that is, engage in the alleged infringing transactions.
They engaged in the transactions because they sold the things. There is nothing in his Honour’s reasoning which suggests they had a tendency to engage in the transactions that they did.
KIEFEL J: Well, I do not think that is right, is it? All of this resides, and what the Full Court are discussing in all of this are the five propositions put forward by the primary judge which were his process of reasoning through to liability and the first two propositions relate to conduct and it is that conduct which I think the Full Court is identifying as the tendency, the evidence of conduct for which there is a tendency and the following three propositions are knowledge about that conduct and the Full Court is there saying the primary judge has extrapolated from the knowledge about that conduct to a tendency to do it again.
MR BANNON: There is no criticism brought by the Full Court in relation to the findings in relation to the first two propositions or their use.
FRENCH CJ: They both related to Mr Allam, did they not?
MR BANNON: Yes. In fact, the Full Court expressly confirms those two findings, it does not suggest that they were improperly made. That is not tendency evidence, that is relevant evidence of a capacity, you must be able to prove a capacity for someone to provide infringing material. That is the relevant evidence.
KIEFEL J: It comes down to, they did it on these occasions, the emails prove it, they knew about it, they did nothing to stop it happening again is the other finding made by the primary judge, and they are likely to have done it again. That is tendency evidence.
MR BANNON: The evidence that they did it was that they actually sold the machines, as I say ‑ ‑ ‑
KIEFEL J: That is not what his Honour is finding in propositions 1 and 2, is it? His Honour is referring to the conduct in relation to the burning and the serial numbers.
CRENNAN J: Mr Allam’s conduct.
KIEFEL J: Yes.
MR BANNON: Yes, that is right. The Full Court confirmed that finding and did not say that was being ‑ ‑ ‑
KIEFEL J: Yes, they said it was open, but the question is what is it used for?
MR BANNON: I will have to demonstrate - seek to demonstrate to your Honours, that the trial judge did not use it for tendency purposes because as I say, he said, well, these are the transactions that they sold, what inference can be drawn from that. The real issue is can it be inferred that they knew. Well.
FRENCH CJ: Just putting it neutrally, do you characterise the approach taken by the trial judge as using the emails to infer a course of conduct between the Global and Impact parties consistent with the alleged conduct in respect of the infringing transactions, even though it did not specifically relate to those transactions?
MR BANNON: We would say, at best, he used it to say they must have known that these were infringing transactions, the ones that were specifically identified by duplicates or machines. Why: because they were familiar with the operations and, in particular, they were familiar with counterfeiting operations. They were involved in it.
FRENCH CJ: They were involved in a course of conduct?
MR BANNON: Yes, but that does not prove – we never sought to prove it and his Honour’s reasons say that because they did it once, therefore any transaction they engaged in was an infringing transaction. If that was the course of conduct we would have added a million transactions – not a million, but a very large number. We did not. We did not. We fought tooth and nail and the only ones we were able – when I say only.....substantial number of 54. We were only able to prove those because, as I say, duplicates and machines in clubs.
So the proposition you go from, they have a tendency to do it generally so therefore, any transaction they engaged in was infringing – was not something we ever advanced and certainly not something his Honour found. He insisted on a reason for a finding why there were infringing. It was only in those instances that we still had to prove knowledge. The only thing you get out of the fact that they were aware of these things is a general familiarity of the business which makes it impossible to conclude that these transactions took place without them knowing that they were infringing.
We come back to why they were infringing was because there was no sensible reason to use fake serial numbers unless you had infringing software and the Full Court accepted that finding. That is the critical finding as to why there were underlying infringing transactions, not because of anything they had ever done before. So that left knowledge. Perhaps I will just complete the exercise. At 242 there was just a reference in the provision - does not inform. Then 244, the last sentence:
nothing more than a tendency . . . to engage.
Then 245, the use of the word “connection” which we say, with respect, is not logical and then critically, 248, at 6261:
On the assumption that the primary judge was correct in using the emails in the way he did in making the findings represented by the third, fourth and fifth “essential” propositions (such that the “knowledge” requirement . . . was established) –
We do not consider the other issues. That is completely consistent with what they said way back in 171. The reason we failed was knowledge.
FRENCH CJ: What do you say about the last two sentences in 246 by the way?
MR BANNON: Yes, I should have added that. I am sorry.
FRENCH CJ: Well, what do you say about it?
MR BANNON: Yes. What we say is that that is their interpretation that they were essential, we say, to the knowledge requirement.
FRENCH CJ: Well, it is not just their intention. They are saying it seems to be accepted that.
KEANE J: …..that is what the primary said. The primary judge regarded them as essential propositions.
MR BANNON: Yes.
KEANE J: That seems to suggest that he regarded them as essential propositions.
MR BANNON: Yes, but, as I say, it could only be essential to the knowledge requirement.
KEANE J: Quite, but without the knowledge requirement you do not succeed under section 38 against Global and Impact.
MR BANNON: Yes.
KEANE J: If you do not succeed against them, you do not succeed against Tonita and Mr Allam under section 38.
MR BANNON: That comes back to the characterisation – his evidence that they were familiar with the dealings of the business, including counterfeiting operations – evidence of tendency. You cannot have as a matter of English or legal concept a tendency to have a knowledge.
KEANE J: No, but that is not what the Full Court said. The Full Court said that evidence revealed a tendency to engage in a particular conduct and you say from that you can infer a tendency to engage in conduct beyond the transactions discussed in those emails, such that it represents the ordinary course of their business so that you can infer that in relation to other transactions they also did it.
MR BANNON: With respect, we say if that was the correct analysis then, as I say, we would have had 100,000 transactions, and we did not.
GAGELER J: Just going back to the second last sentence in paragraph 246, is it accurate?
MR BANNON: Yes, well, in the sense that emails were essential to credit issues; they were essential to demonstrating that there was a joint venture and that it started from an earlier date than they were suggesting. Quite frankly – and, as I say, we do not try to suggest that this is the way the Court should approach it because it overly complicates it – there is a way of putting the argument to say you do not need it.
We are happy to proceed on the basis that they are essential, but they can only be essential to the extent of showing that when one sees a transaction where they sell the same machine twice the reasonable inference is that you would not put a fake serial number on it unless it was an infringing article. Is there a reasonable inference that the Andrews and Cragens of this world knew or ought to have known that they were infringing transactions? That is compelled by a finding that they were generally familiar with the business and, in particular, counterfeiting aspects of the business, albeit they are different transactions.
CRENNAN J: But does not the business also involve non‑counterfeiting refurbished machines?
MR BANNON: Yes. But the point at issue is whether or not the use of those knowledge findings was permissible, not whether the connection should have been made. The Full Court was happy with the process of reasoning. They said that at paragraph 122. In relation to reasoning, we do not consider the judged erred in reasoning in this way. The error was using the propositions in what they say was the impermissible way.
CRENNAN J: If the business involved refurbishment of what I will call “genuine” and sale of genuine Aristocrat machines, and then there are these 11 impugned transactions because of the duplicate compliance plates, the question has to ‑ ‑ ‑
MR BANNON: So the question is ‑ ‑ ‑
CRENNAN J: The Full Court is right, is it not, that the emails must be used as tendency evidence in relation to a course of conduct.
MR BANNON: With respect, no. The emails simply confirm ‑ ‑ ‑
CRENNAN J: Because otherwise how would you be able to put together knowledge and these particular transactions?
MR BANNON: We are talking about companies, obviously, and it is their own transactions. They themselves sold the machines by reference to particular serial numbers. So the proposition that the company did not know it was selling those machines is not tenable, and no one has suggested otherwise.
CRENNAN J: No, but it is the link with unauthorised software. It has got to be demonstrated, has it not?
MR BANNON: Yes, but the proposition and your Honour is putting to me they were also selling legitimate machines. Undoubtedly, that is right. In fact, part of their case on the duplicate transactions is they were selling the same machine twice. The first one was legitimate, the second one was not. The proposition is that a sensible conclusion is that the company did not know when it was selling legitimate and illegitimate. On the ordinary course, one would not come to that conclusion.
Sometimes, in these sorts of cases, people come and say we are just passing on what we bought from someone else. Someone is a reliable supplier and we are just passing on, we do not know whether it was a good one or a bad one. In those sorts of cases, you can lead evidence to say that person had a reputation for being a counterfeiter. That would be relevant. That is a relevant fact. That would not be inhibited by section 97. But that is not – their case here was not that. Their case was simply that the dual transactions did not occur or the machines in clubs were not the genuine ones.
But what the email knowledge ‑ findings in relation to emails add and if it was essential as far as his Honour’s proposition, we do not resile from that, what they add is not only is there no reason to think that the company would not know when it is selling legitimate or illegitimate, these very people were familiar with the fact that the company had a capacity, an ability to and were selling counterfeit machines. So, therefore, why would you assume anything other than when they did so, when it can be proved they sold fake machines, why would you come to any other conclusion, other than that they knew what they were doing?
CRENNAN J: When you say “fake machines”, do you actually mean machines containing counterfeit software?
MR BANNON: Yes.
CRENNAN J: In one sense, they are not necessarily fake machines, are they? They might have been manufactured originally by Aristocrat. Is that not right?
MR BANNON: I am not at – it is conceivable. It is conceivable.
FRENCH CJ: Looking at your amended draft notices of appeal, everything hangs off this tendency point.
MR BANNON: Yes. So, then looking at – perhaps I should just complete the exercise which is referred to in point 7 of our outline.
CRENNAN J: Is that right, your answer to the Chief Justice? Is not your visitation point that the concurrent findings on dealing are enough for knowledge and you do not need the emails? Is that not part of what you are saying?
MR BANNON: We do not pursue it without emails.
FRENCH CJ: I am looking at your amended draft notice. Everything is in the premises after the tendency issue is raised.
MR BANNON: Yes, that is right. There may be a way of putting the case otherwise but we do not seek to do that. Our friends say that is a new argument. We do not want to get into that debate. We have to take it front on ‑ ‑ ‑
CRENNAN J: The tendency point.
MR BANNON: ‑ ‑ ‑ and say the characterisation is just tendency evidence where impermissible use is simply wrong. No‑one ever suggested it at trial. You have an experienced trial judge. It was not a ground of appeal. It is a thought which has come arguendo and we do not say we did not have procedural fairness. We are not bringing that up here. We say, it having been raised ‑ ‑ ‑
FRENCH CJ: You were able to deal with it at the Full Court because ‑ ‑ ‑
CRENNAN J: Because of the timing.
MR BANNON: Ultimately. We say it is a rough hole but a pretty decent litmus test. Nobody thought it was a good point at trial and nobody thought it was a good point on appeal. It raises – well, what is really going on here?
FRENCH CJ: Is there not some old saying that the judge’s point is the best point?
MR BANNON: Not if you get special leave. So just completing the exercise identified in paragraph 7 of our outline, if you go to the supplementary reasons for judgment ‑ ‑ ‑
KEANE J: Is it not fair to say the section 97 point arose because when one scrutinises the process of reasoning one needs to confront the way in which the connection was made. When one looks at the way in which the connection was made and analyses it the connection is made in the way the Full Court says; for the purposes of knowledge, of knowledge of these bogus transactions.
MR BANNON: I am happy to deal with it on that basis, but you cannot have tendency as to knowledge.
KEANE J: We are ad idem on that I think, Mr Bannon.
MR BANNON: I was seeking to suggest your Honour was suggesting otherwise, but ‑ ‑ ‑
KIEFEL J: But the Full Court did not suggest that you could. They said that that was the problem.
MR BANNON: We say, analysing the Full Court’s reasons, they said knowledge was the problem. That is demonstrated by their findings in relation to the infringing transactions.
KIEFEL J: They said that the primary judge used the email evidence as a basis for tendency evidence and then extrapolated from that in relation to knowledge, and that was wrong.
FRENCH CJ: Tendency as to a particular line of conduct from which knowledge could be inferred. That is the logic, is it not? It is not a tendency as to knowledge. It is obviously a logical conundrum.
MR BANNON: Putting it the way we have put it, there is not a word, we respectfully submit, in the primary judge’s reasoning to say – he has not used the “tendency” word ever to say ‑ ‑ ‑
FRENCH CJ: It is an exercise in characterisation as to his reasoning by the Full Court, is it not?
MR BANNON: I accept that we do not succeed simply because the words are not there, but what we say is the absence of the words is the first point. Secondly, when one sees the words his Honour did use they do not admit of it and, thirdly, the process which as the Full Court suggests, if that is the correct analysis, we respectfully submit, does not sound in logic. In other words, the mere fact to say that you have done it before and you were aware of doing it before, the words in the section “tendency” just cannot inform knowledge when they did something later, when something did happen later. I cannot frame the proposition and it is not framed by our learned friends, and the Full Court has not framed it.
KIEFEL J: But your argument in a way throws up another possibility which is not expressed in the primary judge’s reasons and that is that the evidence was used to infer something about the knowledge of activities in a business sense.
MR BANNON: Yes.
KIEFEL J: But what the Full Court was able to fasten onto is the more likely scenario - I do not know that the business proposition was ever put to them. What their Honours were able to fasten onto was the five essential propositions which indicated the direction in which the primary judge was heading, that that was to identify previous conduct, knowledge about that conduct and then their Honours were able to say, well, in that background tendency evidence is really the only likely use on that approach.
MR BANNON: But we would say, with respect, that the fact that the finding expressly uses the word “knowledge” tells you you are immediately outside of tendency.
FRENCH CJ: The tendency rule, either way, does cover, does it not, a tendency to have a particular state of mind?
MR BANNON: That is right, but that is not something which, with respect, can be applied here because it is know or ought to have known as the test and you cannot have a tendency to know something about your own business. You either do or you do not and there are facts which could be proved and findings which were made…..made from which one can draw the inference that these are the sorts of people who were sufficiently familiar with their business that when they did engage in a duplicate transaction they knew it was infringing. So I was just going to complete the reference in the supplementary judgment, so it is at 34 of the supplementary judgment which is in the book at 6326, I should have added, the last sentence of that, after putting what I have just put orally here:
However, other than by reason of this tendency, to support by inference the necessary findings of fact, Aristocrat failed to provide a link –
So we put “submits that it is not susceptible of being described as ‘a tendency”. Their Honours say, “other than by reason of this tendency”. That is a tendency of knowledge. They do not seem to be saying they were not doing tendency of knowledge. There may be another analysis of that sentence, but I cannot think of it as I speak, to support that. They go on to:
failed to provide a link between the content of the emails and the particularised infringing transactions.
Then 35:
the steps to be taken from the emails to the ultimate conclusion was that the emails demonstrated a tendency on the part of the Global/Impact parties to participate in infringing transactions, leading to the inference that they did engage in particularised transactions.
That is contrary to what they said in their primary reasons, where they said “We failed because of the knowledge requirement”. It is contrary to their findings where they say the duplicate transactions were established and the machines in clubs transactions were established. If I could then attempt to move to his Honour’s – this is point 8 now I am on to on our outline, where his Honour records what we alleged, and it is part of paragraph 5. This is on page 5959 of the appeal book:
The essence of the appliants’ case is that the respondents were participants in a joint venture to counterfeit and sell, principally in South America, second hand gaming machines assembled in Australia using pirated copies of materials in which the applicants hold the copyright.
CRENNAN J: Are you now going beyond the application for special leave?
MR BANNON: I do not want to afford to myself my own time limit, but there are some underlying matters in the primary judge’s reasons which I wanted to refer to.
FRENCH CJ: What you have identified is, you say, a mischaracterisation by the Full Court of the primary judge’s reasoning so that section 97 applied and that evidence should not have been received.
MR BANNON: Yes.
FRENCH CJ: Is there anything more in the special leave point than that? I am not trying to trivialise it; but I am just trying to look at the content of it.
MR BANNON: Only to attempt to satisfy your Honours that the characterisation of his Honour’s reasoning process as using tendency is not demonstrated by an analysis of his reasons.
FRENCH CJ: In other words that they got it wrong, all right.
MR BANNON: I will try to be as brief as I can and it generally follows his outline.
GAGELER J: To the end?
MR BANNON: I may jump to the end, but there are ‑ ‑ ‑
CRENNAN J: Or bounce?
MR BANNON: Bounce forensically rather than physically.
FRENCH CJ: Or be bounced.
MR BANNON: They may not necessarily be mutually exclusive. So paragraph 5, and then 269 is his Honour recording the proposed use – this is on page 6001 – of the emails. Then, as I say, at 321 at 6011 is where his Honour makes the statement, “were not tendered as proof of the facts” but that is in the context of, we say, what he has indicated they attempted to prove, so they are proving facts, but it is a recognition that these particular facts were not the infringing transactions. He immediately goes on to make particular findings which were obviously significant.
FRENCH CJ: The findings start – I think you have already taken us to them, have you not, at 326 and following?
MR BANNON: Yes. I think the key, I suppose, for the purposes of the special leave application really goes to the use his Honour made of these findings. So, firstly, if one goes to page 6081 - there is the finding at 751:
It is clear, in my view, from the email correspondence that Mr Andrews and Mr Cragen were aware of the fact that Mr Allam was burning Aristocrat game software –
And there were a number of emails referred to and I can indicate, for example, that the emails referred to in [312] and [316] were admitted in the first instance against both Global and Impact. Some of the others vary, but those emails were sufficient to support the finding. Then, at paragraph 753 was the awareness of the manufacturing compliance plates. Then, one comes to 766 which I have taken your Honours to, but then one comes to the dealing with the 54 transactions and it is at 821 that commences.
Then, at 6094 his Honour addresses “Machines at Clubs”. I will not go through it but the ultimate finding is – he goes through and compares whether or not the evidence as to the machines that were in club were genuine is good. He rejects explanations otherwise given in some instances by their witnesses.
CRENNAN J: At 846 it is clear that his Honour is proceeding on an inferential basis.
MR BANNON: That is right, and he comes back to that.
FRENCH CJ: I am sorry, did you take us to 768, by the way?
MR BANNON: No.
FRENCH CJ: That is a fairly important part of his reasons, is it not?
MR BANNON: Yes, and particularly the last part:
The evidence more than sufficiently establishes “tacit agreement” between the parties –
CRENNAN J: That sort of makes you think of a section 36 case rather than a section 38 case?
MR BANNON: Both elements were being run.
CRENNAN J: Against everybody?
MR BANNON: Yes.
CRENNAN J: I see.
MR BANNON: There was authorisation of direct infringements as well as section 38 ‑ ‑ ‑
CRENNAN J: That is part of the remitter in relation to Mr Allam, a direct infringement case?
MR BANNON: Yes. So 766, 767 and 768, the Full Court implicitly says that these findings had a wider impact in relation to knowledge; at least they were not limited just to the authorisation and the concerted contact, they were relevant to section 38. Again, that knowledge, tacit agreement, implicitly goes to a knowledge element. So then the duplicate number section starts at 6096, but – and, again, his Honour goes through the process of comparison of invoices, rejecting explanations. Then at paragraph 868 his Honour says:
Just as importantly perhaps in the context of an application for special leave is the fact that this submission that is now sought to be made to this Court was not made to the Full Court, as your Honours know, during the course of the lengthy appeal, punctuated by a very lengthy adjournment. As their Honours in the second judgment pointed out, there was ample opportunity for the applicants to put the submissions, which they now seek to adumbrate, the question of section 97 and the tendency requirements and the need to comply with the requirements for notice under section 97 were debated.
We have provided to your Honours an extract from the transcript in our extraneous materials where at page 121 of the transcript of the hearing of the appeal Mr Bannon himself characterised the emails as establishing a tendency on the part of the Global and Impact parties to undertake transactions of the kind embodied in the impugned transaction. Now, that produces the following result, your Honours. That is in the extract at page 121. It is at line 7. In the discussion which commences at the bottom of the previous page, you go:
through these emails, which were admitted without limitation –
and then Mr Bannon submits at line 7 ‑
But we’ve got these, and these show their preparedness and tendency to do exactly what we say they did in relation to machine numbers –
that is, in the impugned transactions place fake serial plates on the machines in order to mask infringing components, so it is said. Now, the result of that exercise is as follows, your Honours. At the hearing at first instance the present applicants identified with precision the basis upon which they sought to use the emails – that was credit purposes – and to establish the joint venture, and his Honour proceeded on that basis – expressed himself to be proceeding on that basis.
We had the conundrum by which his Honour said, well, they are not tendered for use as evidence of the fact, nevertheless, they are interesting and he went on, it would seem, to use the fact of what was contained in them extensively; put that to one side. In the Full Court, however, the proposition was made that they were being used for tendency purposes – see the transcript – and the Full Court approached the matter on that basis and said, well, if they are being used – that they could have no other function in the circumstances than tendency basis.
Yet the applicants come to this Court and say, having abandoned apparently now the first ground of their two ground primary ground appeal, the other being that you could establish infringement absent the emails altogether, now proceed on the basis that the emails do not evince a tendency purpose. So this Court now has an application where at first instance they took one stance, second instance on appeal to the Full Federal Court took a different one and now they seek to depart from that.
Particularly, ought that not attract a grant of special leave where that course was not adopted during the course of the hearing, an eight‑day appeal, over a long period of time, but undertaken in circumstances as we know of what apparently was an attempt to reopen their case without the leave of the Full Court by making submissions after judgment was delivered and, in our submission, obvious principles of finality would dictate powerfully on an application such as this that applicants should not be allowed to, as it were, have their cake and eat it, if I could slip into the colloquial, or be able to adopt a stance according to the outcome of one proceeding or the other.
The characterisation was accurate. The ground not having been adopted at first instance or taken on appeal is now sought to be taken here for the first time other than the belated application to the Full Court after it delivered judgment, which the Full Court declined to permit. Importantly, in this context, no challenge is made to this Court to the Full Court’s discretionary determination not to permit the applicants to reopen the appeal to argue this very matter which they now seek to argue. In the absence of that application, your Honours, in our submission, special leave ought be declined.
Your Honours, the other matters we would seek to address largely go to the question of the absence of prospects of success and that takes me into the factual considerations to some greater degree. I am happy to undertake that exercise if your Honours would consider it meritorious or helpful for me to do so at this juncture.
FRENCH CJ: I think at this stage we have seen your written submissions in relation to that aspect. Perhaps we can hear from Mr Green also and just focus on the primary special leave question.
MR EINFELD: May it please your Honour. Can I just conclude before I resume my seat? We do make the submission that no question of law is raised by the application. Nor is there a question of general importance, legal or otherwise. The question raised is squarely one for the application of the section, there being no serious question of construction to be determined on the basis of the application if leave were granted.
Lastly, the twofold assumption that seems to underlie our friends’ submissions that would require this Court’s consideration of the factual matters which overlook two very significant considerations - the first is the one to which I adverted a little earlier, namely, that the Full Court determined that the evidence admitted against us in relation to the counterfeiting materials and the like was impermissibly admitted by the primary judge at the end of the case – provisionally during final submissions – finally only when he gave judgment so that we did not have a chance to address the ramifications of it.
That decision too is not the subject of challenge in this Court. That means that any appeal that would go forward would have to proceed upon the basis of the correctness of that decision which undermines the whole of the credit findings in relation to the directors of Global and Impact.
The last matter is that the underlying foundation of all of our friends’ submissions that there were the current findings which they have identified in their submissions is also flawed because there were no concurrent findings as to the transactions. The Full Court proceeded upon the basis
that the section 136 rulings were made by the way - the extent of the 136 rulings to the counterfeiting materials is at paragraphs 174 and 175 of the Full Court’s judgment. At paragraph 238 is the place in the Full Court judgment where their Honours said that the section 136 rulings ought not to have been reversed.
In the light of that, the decisions that they proceeded to make on the original transactions were expressed in paragraph 248 to be conditional -, that is, on the basis that the primary judge had erred. The position was the appeal to that court had to be upheld but against the contingency that their decisions were incorrect they would proceed to make findings so that the findings were expressly conditional and cannot be described as concurrent in the ordinary sense. May it please the Court, that is what we have to say about special leave.
FRENCH CJ: Thank you, Mr Einfeld. Mr Green. Again, Mr Green I think it would be of assistance if you focused on the characterisation point which is raised by Mr Bannon.
MR GREEN: Yes, of course. Your Honours, the first and sixth respondents adopt what Mr Einfeld put to your Honours and I will not repeat that. The fundamental reason why the Full Court correctly characterised the trial judge’s application of the emails as an example of the use of tendency evidence is the way in which the trial - the course of the trial which was as his Honour the trial judge observed on a number of occasions but, relevantly, in relation to Mr Allam transactions 48 and 51. In relation to transaction 48 at judgment paragraph 849, page 6095, his Honour correctly said that it was not possible – this is lines 58 to 60:
to identify which particular infringing components were located within the machines.
This goes back to something that Justice Crennan observed at the outset. We are dealing here with a section 38 case and we are dealing with infringing components but it was utterly impossible in the way in which the applicants, Aristocrat, ran its case to determine which particular components were used in the transactions.
So there was a parallel case that took place. There was a case in relation to primary infringements, section 36, and there was a case in relation to secondary infringements, section 38. The way in which his Honour at first instance tied the evidence of the transactions together and knowledge was to use the tendency point. He does so in numerous places, paragraph 849. He does so again by recourse to the emails at paragraphs 871 to 872. I do not need to take your Honours to that. That is
in relation to transaction 51 and the Full Court goes so far as to accept that counterfeiting is not equivalent in all cases to copyright infringement.
So there were instances where there was no copyright infringement involved. Therefore, arguably, of course, essentially there would be no engagement of section 38 in relation to dealings in relation to those goods. So there is a discontinuity in the present proceedings between primary and secondary infringements. Once one focuses on the dealing which is section 38 and once one recognises, as the trial judge clearly recognised and the Full Court recognised that fact as well, when what the applicants for special leave here are attempting to do is to remerge both limbs of the case and to argue it is natural that knowledge gained in one limb of the case is available to the other limb which, on the reasoning process taken by the Full Court, is not available.
The answer to your Honour the Chief Justice’s question is that what is here is correctly characterised in the most fundamental sense as tendency. It is not a tendency of knowledge. It is a tendency to actually conduct in a certain way or, as Justice Keane put, to dispose to do something in a particular way and that is what has occurred here. That is the only way in which the Full Court could consider the findings that the primary judge made in relation to the dealings.
The strength of the case and the consequence of the case, of course, was something which your Honour the Chief Justice has requested not to hear from at this point, but one point is important and that is that in relation to Tonita there is no claim maintained and the special leave application should be dismissed or should be refused in relation to Tonita.
In relation to Mr Allam, we are here dealing with two transactions in circumstances where the pleading - if your Honours went to the pleading and saw the voluminous allegations, the various articles and the like, what the case reduced to when it came to final submission was a case based upon inference from transactions and not a case based upon proving specific pieces of software being used or specific licence - compliance plates being used. When tested before the Full Court the evidence further was reduced in relation to compliance plates. May it please the Court.
FRENCH CJ: Thank you. Yes, Mr Bannon.
MR BANNON: Thank you, a very brief matter. Firstly, the proposition that there is a lack of identification of what is the infringing component, the case proceeded on the basis as recorded in paragraph 29 of the primary judge’s reasons, 5963:
The essence of the defence of the Global/Impact respondents is that for many years, they have been engaged in refurbishing and supplying used gaming machines with genuine Aristocrat artwork and software.
So that was their case. There was no alternative different case and that was their general response – a genuine, general business they had never done it, part of which the emails went to and credit tax. That is the first point. The second point, the proposition that this is a new argument not raised in front of the Full Court is not accepted, but we accept a new argument was raised, namely on the supplementary submissions that you can decide this without reference to the emails. We do not advance that here.
CRENNAN J: Do you want to say anything about the transcript to which Mr Einfeld directed our attention?
MR BANNON: Yes. Whatever may have been said then in passing the correct characterisation of what our case was is recorded at 243 of the Full Court’s judgment. This is at 6260 of the book, the last sentence:
it was confirmed that the parties did not seek to rely on Pt 3.6 -
That was also the position at 181 at page 6242 but, to the extent I used the word – it was not used scientifically, and I cannot remember now, but it may well have been before someone said well, it cannot be tendency, and that was buried in a number of other statements but their Honours encapsulated the position we maintained.
FRENCH CJ: It should be read “E & OE”.
MR BANNON: My recollection is it came up several times, the particular question of the Bench: this was not admitted as tendency? No. Do you say it is tendency? No - when the issue came up and that was consistently maintained. Next, the proposition of my learned friend, Mr Einfeld, to the effect that the 136 point would somehow affect the credit issues, paragraph 248 of the Full Court judgment contradicts that – and they go on to say and deal with the balance of the transactions. The only qualification they put on it is in relation to use of:
the third, fourth and fifth “essential” propositions” –
This is at 6261 – and the credit findings – one can go through them – they all relate to inconsistencies with the emails. On any view, there was no question that the emails could go in to deal with credit.
Lastly, and related to that - well, I suppose penultimately, if one goes back to 869 of his Honour the primary judge’s reasons, and 872 to which my learned friend says - 869 is in the context of a credit finding where his Honour is perfectly entitled to use the emails to address a credit finding as to whether he believes his explanations and 869 and 872 is not tendency use, it is identification that there is a known commercial object advantage in selecting - that there is a fact particular and that appears from invoice numbers and that appears from the judgment itself, the part of the email which picks it up which is in the primary judge’s judgment at 279 that the email is set out:
is there a set serial number you need to use for each machine as per the import you have made –
Related to that is a Full Court finding in paragraph 38 of their judgment, and this is at page 6209 where their Honours record that:
it was a requirement of certain Latin American countries, such as Peru, that it be demonstrated that a gaming machine has a unique serial number and has been genuinely manufactured. This finding was not challenged –
That is part of the advantage in having a serial number. There is a commercial interest in that and that commercial interest could be proved and that was an interest to which the emails could be used to prove. At 305 their Honours confirm the logic of the finding in 869 and 872. This is at 6274 where their Honours say, in answer to:
the absence of an explanation by the Aristocrat parties as to why the appellants would replicate compliance plates is in fact provided by the primary judge’s finding . . . Mr Andrews selected the serial numbers to go on compliance plates because he knew that they would pass an inspection.
So you come back to – it is their business record, they selected the numbers, they did it deliberately, there is a duplicate transaction. Do you believe the explanation? No. What is the logical reason for choosing fake numbers? One, you need some numbers because there is a commercial advantage in that, let us choose some numbers which might be likely to pass inspection. The emails can be legitimately used to identify that as a business advantage which was known to the business and, in particular, Mr Andrews and does not involve tendency.
CRENNAN J: What do you say about the Full Court and the section 136 ruling reversal? Nothing or ‑ ‑ ‑
MR BANNON: As I have endeavoured to demonsrate, the emails on which the propositions were relied upon were all relevantly tendered against Global and Impact.
CRENNAN J: That is the reason you do not in fact challenge that aspect of the Full Court’s decision?
MR BANNON: Correct, we do not need to and 248 of the judgment demonstrates - they do not say this is a qualification based on the use of the propositions and also based on the 136. The other matter my learned friend says, well the other matters go to credit findings. My friend did not take your Honour to any part of the judgment. They did not go to credit findings. The emails went to credit findings and they were always allowed to use that. If the Court pleases.
FRENCH CJ: Thank you, Mr Bannon. The Court will consider what course it should take. We will adjourn until 2.15.
AT 12.14 PM LUNCHEON ADJOURNMENT
UPON RESUMING AT 2.14 PM:
FRENCH CJ: The Court is of the view that the applications for special leave should be refused with costs in each case. There will be orders accordingly for reasons to be published later. The Court adjourns until 10.15 on Tuesday, 7 May.
AT 2.14 PM THE MATTER WAS ADJOURNED
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