Avel Pty Limited v Intercontinental Grain Exports Pty Ltd

[1996] HCATrans 292

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S82 of 1996

B e t w e e n -

AVEL PTY LIMITED

Applicant

and

INTERCONTINENTAL GRAIN EXPORTS PTY LTD

Respondent

Application for special leave to appeal

BRENNAN CJ

DAWSON J
TOOHEY J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON MONDAY, 30 SEPTEMBER 1996, AT 11.39 AM

Copyright in the High Court of Australia

MR T.K. TOBIN, QC:   May it please your Honour, I appear with MR R.J. WEBB, for the applicant.  (instructed by Kemp Strang & Chippindall)

MR P.T. TAYLOR:   May it please the Court, I appear for the respondent.  (instructed by Rockliffs)

BRENNAN CJ:   Yes, Mr Tobin?

MR TOBIN: Your Honours, in this case the applicant made unjustifiable threats of commencing legal proceedings against the respondent and others. It was mulcted in damages. The judge at first instance and the Full Court on the appeal considered principles that would guide the court for the award of damages in unjustifiable or groundless threat cases under section 202 of the Copyright Act.  Your Honours would recollect ‑ ‑ ‑

BRENNAN CJ:   Mr Tobin, is there anything in this other than the question of causation?

MR TOBIN: Your Honour, there is a question basically of construction of the section itself, section 202. That is to say, your Honours, at the heart of the Full Court’s decision and his Honour’s decision below was a view as to what the words “damages sustained by the threat” - I do not give you the precise words of the section - what width were to be given to those words and, as it were, how were they to be imprinted upon the circumstances in this case where there was parallel related, but not the same litigation which was called the Multicoin litigation, which came before your Honours in 1990. 

So, what we say is this, your Honours, that section 202 with its parallel sections in the Trade Marks Act, the Patents Act and the Circuit Layouts Act has its origin in the 1883 English legislation and strangely enough there is no authoritative decision of the courts in this country laying down the principles and the range, as it were, of damage that is attracted by section 202 and its parallels. That is our primary point on the special leave ground, your Honours. There is no authoritative decision which would guide the courts as to how the groundless threat provisions and the use of the term “damage sustained” in general use in those statutes is to be applied.

The second aspect is this, your Honours.  When the Full Court came to deal with the question, it faced up to the causation problem that your Honour the Chief Justice has put to me at the outset and in the analysis provided by the Full Court of how causation is to be understood, in our respectful view, their Honours strayed, as it were, from the language of the Copyright Act itself and have impressed upon it a concept which they have called a calculated course of conduct and if I could explain to your Honours how this seems to us to be both relevant in the immediate case but bears very heavily upon the way these sections will be interpreted by the courts ‑ ‑ ‑

BRENNAN CJ:   What page are we speaking about?

MR TOBIN: Your Honours, I was going to go first of all, if I might, to the section itself and there is one factual matter which I would like to explain, your Honours, because it makes the case, as it were, idiosyncratic in its own terms but paradoxically it has a big impact, we would submit, on the way, as I have said, these sections might be interpreted. Now, what is idiosyncratic about the judgment, your Honours, is this. In the pleading by the other side as plaintiff under section 202 alleging a groundless threat, there were not solely those two letters of threat for which damages were awarded that were pleaded.

Importantly and relevantly, a third letter was also pleaded.  It was a letter not sent to the respondents, not sent to the respondent’s customers.  They were the two letters.  They were sent to the respondent’s customers.  The third letter was sent to an importer called Multicoin in Queensland, an importer of pinball machines, for which my client claimed an exclusive licence.  This is a matter that came before your Honours in a different form in the Multicoin litigation at the end of 1990 but relevantly, your Honours, both to the two customers of my opponent’s client, the respondent, and to the Multicoin people who were separately importing in a different State, my client sent letters of threat.

When the matter was litigated in Queensland at first instance, the applicant here was successful.  The applicant was unsuccessful in the Full Court and was unsuccessful before this honourable Court.  What is idiosyncratic about the way in which the courts below have approached my client’s case is this.  The first letter which was sent to the Queensland people, Multicoin, was in 1987.  Shortly thereafter, at the very beginning of 1988, two further letters were sent, if I may put it this way, locally to the respondent’s customers.  The respondent itself learned of the Multicoin litigation, that is, another proceeding for an unjustifiable threat taken in Queensland.

It regarded the same assertion of copyright with regard to the same material to the same rights but it related, as it were, to a different letter of threat.  In fact what happened, your Honours, was that the respondents here waited for the outcome of the Multicoin litigation in Queensland.  That meant that it went to the High Court which delivered judgment in December 1990 and it was only after that, in the beginning of 1991, that the respondents commenced proceedings in the Federal Court in the Sydney Registry with regard to those unjustifiable threats.

TOOHEY J:   When you say “those”, do you mean the two which you describe as being made locally, Mr Tobin?

MR TOBIN: Plus the third one, your Honour, which was the Queensland threat and what they were entitled to do was to say “Well, we are a person aggrieved under section 202. The fact of the threat being made to Multicoin in Queensland could cause us sustainable damage, as it were, under section 202 for which a claim is being made”. Now, as I have indicated to your Honours, the idiosyncratic aspect of the case is that notwithstanding the pleading of the two local letters and the Multicoin letters as a basis for damages, the respondent failed to prove the Multicoin letter in these proceedings and as a result of that, his Honour Mr Justice Wilcox held that no damage could flow to the respondent from the Multicoin letter.

Now, one may have thought that that would have tied the damages to the two local letters but what has happened, your Honours, is this: that the Full Court has said it is very difficult to work out on the one hand, the damage sustained as a result of the unjustifiable local letters and on the other hand, the damage which may be attended by what I might call the chilling effect on the market place of knowledge of other proceedings in another jurisdiction, that is in Queensland. So, their Honours were faced, in the Full Court, with how, under a section 202 or an unjustifiable threat claim for damages, a statutory claim for damages, one is to allocate between these two potentially contending factors appropriate damages.

That may appear to be, as it were, the sort of case that could readily be resolved by the principles at common law of common sense.  However, your Honours, what has happened is in the reasoning of the Full Court, the court has embraced, we would submit incorrectly, a concept which they have called “a calculated course of conduct” and they have said, “Look, the applicant Avel, the party responsible for the unjustifiable threats has, in fact, embarked upon a course of conduct designed to chill out of the marketplace anyone else dealing with these imported pinball machines and because they said that this was part of an entire course of conduct, one whole category of conduct, they were not prepared, as it were, to divide out the damage occasioned by the Multicoin litigation on the one hand and the damage occasioned by the letters of threat on the other.

Now, the result of that, your Honours, appears, in our respectful view to be this, that for the first time we have a section 202 case where the principles, as it were, of the award of damage are going to be found in some way, either implicitly or directly. One principle which appears from the Full Court judgment is that it is appropriate to take into account for the attraction of damages whether the unjustifiable threatener has embarked upon legal proceedings defensively under section 202 of the Copyright Act or, if I can put it perhaps more simply, what the court has done is to introduce into section 202 and thus into its fellow sections in other intellectual property statutes, a concept not based upon a statutory cause of action in damages for the making of an unjustifiable threat and then the simple factual question, what are the damages occasioned by that threat?

Rather, they have imported into the equation the concept that you can have a course of conduct including an exercise of the statutory right under section 202 to counter-claim, that is that the threatener counter‑claims asserting either the copyright or the exclusive license and that conduct itself can be taken into account as attracting damages and it seems, in our submission, your Honours, that once these ‑ ‑ ‑

DAWSON J:   Well that is not really so.  It just means that the threat continues, does it not?  I mean, your client can remove the threat at any time it likes.  Instead of removing the threat it embarked on a course of conduct which left the threat of which complaint is made on foot.

MR TOBIN:   But, your Honours, we would submit that it is not intended once the parties commenced proceedings - once the threatener in the counter‑claims asserts for curial determination its property right, once that happens we say the threat merges in the proceeding.

DAWSON J:   I do not understand that.  The threat is still there and it has not been removed.  Indeed, it is being asserted elsewhere.

MR TOBIN:   But, your Honour, it does not become a threat in that circumstance, it becomes the ‑ ‑ ‑

DAWSON J:   No, the original threat remains surely in those circumstances.

MR TOBIN:   Your Honours, we would say that if one goes to 202 and looks at the wording of it ‑ ‑ ‑

DAWSON J:   I have just been doing that.

MR TOBIN:    ‑ ‑ ‑ one may not necessarily agree with your Honour because it is possible that ‑ ‑ ‑

BRENNAN CJ:   It is rather like a case of defamation in which the defendant persists in the false allegation in cross‑examination and inflames the damages.

MR TOBIN: Your Honour, that seems to us to be, if I may say with respect, an apt manner of assessing damages to bear in mind in this case because section 202 derived from a cause of action in injurious falsehood. Special damage was an essential element of the cause of action. It was not damage at large. It was not damage of the kind in, for example, a defamation proceeding, which allows subsequent conduct including the conduct of the litigation to be taken into account.

BRENNAN CJ:   But the requirement of special damage did not exclude consideration in the assessment of an award of all that followed from the wrongful conduct.  It was only an element in the tort.

MR TOBIN:   But, your Honour, the purpose of the statute in 1883 in Britain was to remove malice as an essential element in what had been the tort.  So, it gave a statutory remedy and this is the remedy we have here.  Now what troubles us, frankly, your Honours, is that if you import into a statutory remedy in all these intellectual property statutes a concept of malice, in effect, because that is the basis of ‑ ‑ ‑

BRENNAN CJ:   Can you show us the passage where this is supposedly introduced.

MR TOBIN:   Yes, if your Honours would go to page 40 of the appeal book at line 25 their Honours deal with the background in the Full Court.  Another factor which we think should be given weight is that the Multicoin proceedings were commenced by Multicoin and not by the appellant, that is by my client.  Then at line 40 your Honours see:

It is true that it sought to maintain that position in the counter‑claim -

that is the exclusive licensee assertion -

which it brought and which failed.  But throughout it acted defensively allowing a situation to develop in which Multicoin -

took the initiative and then importantly, your Honours, on page 41 of the book from line 11 and following is really, we submit, the heart of the construction of the statute with which we contend.  Their Honours agreed with counsel for the respondent:

that the proceedings were but an aspect of a course of conduct -

In line 20 they say:

It stands to reason that threats against others would tend to increase the effect of threats against particular parties.

TOOHEY J:   That is simply drawing in the other conduct simply to reflect the seriousness of the threats that were being made.  You have told us earlier, Mr Tobin, that the respondent did not tender the third letter and I take it that the respondent did not seek to prove any particular damage arising from the conduct in relation to Multicoin?

MR TOBIN:   That would have to be so on the pleading, your Honour, but on the actual findings of the court the Multicoin litigation itself was said by one and more of the witnesses called by the respondent here to have had an effect on it not continuing to import the product.  That is to say, your Honours, as a factual matter there was a concession, we would submit, in the course of the hearing that the Multicoin proceedings did have a chilling effect in the marketplace and their Honours took the view that in practical terms it would not be realistic for the clients of the respondent to continue to try to sell the product while the Multicoin proceedings were on foot.

Our answer to that is simple, your Honour, we say this. Where section 202 allows a person aggrieved a wide scope to bring proceedings such as the respondent did with regard to the Multicoin litigation, the Full Court was in error and it is an error which will be compounded, we would submit, because of its interpretative force if it is accepted that a party may fail to prove it is an aggrieved person with regard to an identifiable threat which has not been proved to be justifiable, eg the Multicoin litigation, fails to prove that point as a matter of fact but then can have recourse to what I might call the chilling effect in the marketplace of the proceedings, as it were, by a back door to avail itself of the damages provision under section 202.

DAWSON J:   You are not suggesting that is this case?

MR TOBIN:   In this case, it is, your Honour, yes.  It is by a back door that the respondents get damages for the chilling effect of Multicoin which they failed to litigate.

TOOHEY J:   I must say that seems to me to be reading quite a lot into the judgment, Mr Tobin.  If you go to page 42, that middle paragraph, and I do not propose to read it, but you can see there that what the court is saying is that the conduct in relation to Multicoin simply adds to the seriousness of the threatened conduct which falls within the operation of the section 202.

MR TOBIN:   It is really, your Honours, the device, a device of construction of the section employed by their Honours to resolve that difficulty, which we submit creates a special leave ground.  That is, they have introduced in line 40, your Honour, of that page, the concept of the calculated course of conduct which included the defendant proceeding by way of cross‑claim in the Queensland litigation for infringement of exclusive licence.

BRENNAN CJ:   Thank you, Mr Tobin.  We need not trouble you, Mr Taylor.

This application raises no question of general principle but rather the application to the particular facts of the case of the general principle that damages under section 202 of the Copyright Act 1968 (Cth) extend to whatever naturally flows from the conduct of a defendant in making the groundless threats on which the plaintiff sues For that reason, special leave will be refused.

MR TAYLOR:   I ask for costs.

BRENNAN CJ:   You have nothing to say about that.  Special leave will be refused with costs.

AT 12.01 PM THE MATTER WAS CONCLUDED