Campaigntrack Pty Ltd v Real Estate Tool Box Pty Ltd
[2022] FCAFC 112
•6 July 2022
FEDERAL COURT OF AUSTRALIA
Campaigntrack Pty Ltd v Real Estate Tool Box Pty Ltd [2022] FCAFC 112
File number(s): NSD 1015 of 2021 Judgment of: GREENWOOD, CHEESEMAN AND MCELWAINE JJ Date of judgment: 6 July 2022 Catchwords: COPYRIGHT – appeal from decision of the primary judge dismissing claims of copyright infringement, misuse of confidential information, and various breaches of contract – where primary judge upheld the claims in relation to only one of the respondents – where appellant contends that its claims should have been upheld by the primary judge against all respondents
COPYRIGHT – whether the primary judge erred in dismissing the copyright infringement claims against the respondents – whether the primary judge erred in not considering the evidence from 29 September 2016 in deciding what inferences should be drawn on the appellant’s authorisation case – whether the primary judge erred in not concluding that the appellant’s authorisation case was made out against each of the respondents and within the period 29 September 2016 to June 2018 – grounds 1 to 7 allowed
COPYRIGHT – whether the primary judge erred in dismissing the contract claims against the fourth and fifth respondents – where there was no error in the approach of the primary judge – grounds 10, 11, 12, and 13 dismissed
Legislation: Copyright Act 1968 (Cth) ss 13, 22(6), 31(1), 35 36(1), 36(1A), 101(1), 115(4)
Copyright Amendment (Digital Agenda) Act 2000 (Cth) ss 36, 101(1A)
Federal Court of Australia Act 1976 (Cth) ss 24, 37M, 37N
Federal Court Rules 2011 (Cth) r 36.54(c)
Cases cited: ABT17 v Minister for Immigration and Border Protection (2020) 269 CLR 439; [2020] HCA 34
Allesch v Maunz (2000) 203 CLR 172; [2000] HCA 40
Australasian Performing Right Association Limited v Jain (1990) 26 FCR 53
Australasian Performing Right Association Limited v Metro on George Pty Ltd (2004) 210 ALR 244; [2004] FCA 1123
Australian Tape Manufacturers Association Ltd the Commonwealth (1993) 177 CLR 480; [1993] HCA 10
Bahonko v Sterjov (2008) 166 FCR 415; [2008] FCAFC 30
Banque Commerciale SA (En Liqn) v Akhil Holdings Ltd (1990) 169 CLR 279; [1990] HCA 11
Bealev Government Insurance Office of NSW (1997) 48 NSWLR 430
Browne v Dunn (1894) 6 R 67
Campaigntrack Pty Ltd v Real Estate Tool Box Pty Ltd (No 2) [2021] FCA 1053
Campaigntrack Pty Ltd v Real Estate Tool Box Pty Ltd [2021] FCA 809
Cooper v Universal Music Australia Pty Ltd (2006) 156 FCR 380
Coulton v Holcombe (1986) 162 CLR 1; [1986] HCA 33
Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7
Federal Commissioner of Taxation v Glencore Investment Pty Ltd [2019] FCAFC 187; 281 FCR 219
Jadwan Pty Ltd v Rae and Partners and Others (2020) 278 FCR 1; [2020] FCAFC 62
JR Consulting & Drafting Pty Ltd v Cummings (2016) 116 IPR 440; [2016] FCAFC 20
Lee v Lee (2019) 266 CLR 129; [2019] HCA 28
Microsoft Corporation v PC Club Australia Pty Ltd (2005) 148 FCR 310; [2005] FCA 1522
Mifsud v Campbell (1991) 21 NSWLR 725
Minister for Immigration and Border Protection v SZVFW (2018) 264 CLR 541
MWJ v The Queen (2005) 80 ALJR 329; [2005] HCA 74
Performing Right Society Ltd v Ciryl Theatrical Syndicate Ltd [1924] 1 KB 1
Roadshow Films Pty Ltd v iiNet Limited (2012) 248 CLR 42; [2012] HCA 16
Roadshow Films Pty Ltd v iiNet Ltd (2011) 194 FCR 285; [2011] FCAFC 23
Seymour v Australian Broadcasting Commission (1977) 19 NSWLR 219
State Rail Authority of New South Wales v Earthline Contractors Pty Ltd (in liq) (1999) 73 ALJR 306
Streetworx Pty Ltd v Artcraft Urban Group Pty Ltd (2014) 110 IPR 82; [2014] FCA 1366
United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1; [1985] HCA 49
Universal Music Australia Pty Ltd v Cooper (2005) 150 FCR 1; [2005] FCA 972
Universal Music Australia Pty Ltd v Sharman Licence Holdings Ltd (2005) 222 FCR 465; [2005] FCA 1242
University of New South Walesv Moorhouse (1975) 133 CLR 1; [1975] HCA 26
Warren v Coombes (1979) 142 CLR 531
WEA v Hanimex (1987) 17 FCR 274
Winstone v Wurlitzer Automatic Phonograph Company of Australia Pty ltd [1946] VLR 338
Division: General Division Registry: New South Wales National Practice Area: Intellectual Property Sub-area: Copyright and Industrial Designs Number of paragraphs: 359 Date of hearing: 15, 16 February 2022 Counsel for the Appellant: Mr M Green SC and Mr W H Wu Solicitor for the Appellant: McLean & Associates Solicitors Counsel for the First, Second, Fourth, Fifth, Sixth and Seventh Respondents: Mr H P T Bevan SC Solicitor for the First, Second, Fourth, Fifth, Sixth and Seventh Respondents: Mills Oakley Lawyers ORDERS
NSD 1015 of 2021 BETWEEN: CAMPAIGNTRACK PTY LTD ACN 142 537 988
Appellant
AND: REAL ESTATE TOOL BOX PTY LTD ACN 614 827 379
First Respondent
BIGGIN & SCOTT CORPORATE PTY LTD ACN 072 450 689
Second Respondent
DAVID SEMMENS (and others named in the Schedule)
Third Respondent
ORDER MADE BY:
GREENWOOD, CHEESEMAN AND MCELWAINE JJ
DATE OF ORDER:
6 JULY 2022
In these orders:
DreamDesk Source Code Works means the literary works in the source code of the DreamDesk system and includes the three PHP files named “src\Functions\edms.php”, “views.adhoc-edit.php” and “views\adhoc-edit2.php”;
DreamDesk Database and Table Works means the literary works in the DreamDesk database and 18 tables within the database;
PDF Works means the literary or artistic works in the PDF templates in the “client_data” folder in the DreamDesk system;
Toolbox system means the “Real Estate Tool Box” software system.
THE COURT ORDERS THAT:
1.The appeal be allowed.
2.Set aside orders 6 and 8 made on 31 August 2021 in proceeding NSD 772 of 2017.
3.In lieu thereof:
(a)Declare that the first, second, sixth and seventh respondents have between 29 September 2016 and June 2018 infringed:
(i)the copyright in the DreamDesk Source Code Works, by:
A.authorising the third respondent to reproduce the whole or a substantial part of the DreamDesk Source Code Works in material form in developing the Toolbox system;
B.authorising other developers of the Toolbox system to reproduce a substantial part of the DreamDesk Source Code Works in material form in developing the Toolbox system;
C.authorising users of the Toolbox system to reproduce a substantial part of the DreamDesk Source Code Works in material form in using the Toolbox system; and
(ii)the copyright in the DreamDesk Database and Table Works, by:
A.authorising the third respondent to reproduce a substantial part of the DreamDesk Database and Table Works;
B.authorising users of the Toolbox system to reproduce a substantial part of the DreamDesk Database and Table Works.
(b)Declare that the first respondent has infringed the copyright in the DreamDesk Source Code Works, by authorising between 29 September 2016 and June 2018 the third respondent to communicate a substantial part of the DreamDesk Source Code Works to the public, in developing the Toolbox system.
(c)Declare that the fourth and fifth respondents have infringed between 29 September 2016 and June 2018:
(i)the copyright in the DreamDesk Database and Table Works, by authorising the third respondent to reproduce a substantial part of the DreamDesk Database and Table Works;
(ii)the copyright in the PDF Works, by authorising the third respondent to reproduce the whole of the PDF Works in material form.
(d)The first, second, sixth and seventh respondents be permanently restrained from reproducing or authorising the reproduction of the whole or a substantial part of:
(i)the DreamDesk Source Code Works;
(ii)the DreamDesk Database and Table Works,
in material form, without the licence of the copyright owner.
(e)The first respondent be permanently restrained from communicating or authorising the communication of the whole or a substantial part of the DreamDesk Source Code Works to the public, without the licence of the copyright owner.
(f)The fourth and fifth respondents be permanently restrained from reproducing or authorising the reproduction of the whole or a substantial part of:
(i)the DreamDesk Database and Table Works;
(ii)the PDF Works
in material form, without the licence of the copyright owner.
(g)Within 28 days of the date of these orders, each of the first, second, fourth, fifth, sixth and seventh respondents permanently destroy or erase, on oath or affirmation, all reproductions of the DreamDesk Source Code Works, the DreamDesk Database and Table Works and the PDF Works in their possession, custody, power or control, such verification to set out steps undertaken to give effect to the destruction or erasure.
(h)The matter be remitted to the primary judge for an inquiry as to damages or profits in respect of copyright infringement.
4.The Parties file and exchange any submissions as to costs or other consequential orders not to exceed 3 pages within 7 days.
5.The question of costs, and any consequential orders, be determined on the papers.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
GREENWOOD J:
Part I: Background and matters of principle
I have had the benefit of reading the final draft reasons for judgment of his Honour Justice McElwaine and the final draft reasons of her Honour Justice Cheeseman. I agree with the orders proposed by his Honour McElwaine J and his Honour’s reasoning explanatory of the basis upon which the orders are to be made.
I respectfully disagree with the conclusion of her Honour Cheeseman J that the appeal ought to be dismissed, and although there are a number of contextual matters of principle identified by her Honour with which I agree, there are a number of significant and material considerations that, in my view, ought to have been examined by the primary judge and made the subject of exposed findings in quelling the controversy at trial on the question of whether parties described as the “represented respondents” (and I will return to these designations shortly), engaged in conduct properly characterised as authorisation of the primary infringements (as found by the primary judge) of the appellant’s copyright subsisting in particular source code (called the “DreamDesk source code”), the “DreamDesk Database Work”, “Table Works” and “PDF Works” (the “DreamDesk system”), by Mr Semmens and software developers acting under his direction (Mr Gallagher and Mr Zhang), and by users, in the period on and from 29 September 2019 (and ultimately until June 2018).
I agree with both McElwaine J and Cheeseman J that the question of whether the represented respondents engaged in conduct of authorising infringements of the appellant’s copyright in the DreamDesk system by the developers, and users, of a software program or system called the “Toolbox system” in the period from 29 September 2016 to June 2018 by reason of the “indifference” of the represented respondents to the gravity of the matters of fact and law put to them (and to their lawyers) by the appellant (and by its lawyers), was part of the controversy before the primary judge. The grounds of appeal contend for error on the part of the primary judge in failing to determine this aspect of the case on authorisation based upon the conduct of the represented respondents in the period on and from 29 September 2016. The text of the particular grounds of appeal going to this aspect of the case are discussed in the reasons for judgment of McElwaine J and it is not necessary to recite them in these reasons.
Moreover, this aspect of the case was an important part of the controversy not a matter at the periphery of the controversy to be quelled by a trial of the action.
Thus, in my view, it was necessary for the primary judge in deciding the authorisation case in the period on and after 29 September 2016 to address the matters of fact reflected in the chronology of events that emerged between the parties on and after 29 September 2016 material to the authorisation case in that period in the context of the primary judge’s findings made on the whole of the evidence. The reason that is so, put analogically, is that there is a geological fault line running through the evidence at 29 September 2019 that meant that the seam of evidential strata did not just continue, but came to be seen in a different setting. That which went before can be seen but altered by the evidence of the events on and after 29 September 2019. The point is not that evidence of the later events was overlooked by the primary judge in addressing the general narrative of events and exchanges, but rather, in reasoning to a conclusion on the authorisation case on and after 29 September 2019, evidence of material matters were simply not weighed in the balance or, put another way, taken into account in reasoning to a conclusion answering the statutory questions arising under s 36(1) and s 36(1A) of the Copyright Act 1968 (Cth) (the “Act”), in that period. It was a fact‑intensive question, and the material findings in the period prior to 29 September 2016, and facts material to the question arising on and after 29 September 2016, had to be weighed in the reasoning on the authorisation question in the period on and from 29 September 2016.
The appellant contends that the primary judge failed to address these matters.
The appellant also contends that a consideration of the material matters in evidence before the primary judge concerning the period on and after 29 September 2016 taken in conjunction with facts as found by the primary judge concerning conduct in the earlier period, but nevertheless material to the authorisation case in the subsequent period, properly gave rise to an inference of authorisation by the represented parties which ought to have been drawn by the primary judge but, in contended error, was not drawn.
Before examining the contentions of the appellant on these questions, the following matters of principle concerning appellate review ought to be noted:
(1)An appeal by way of re‑hearing, such as the appeal in this case, is a procedure for the correction of error. The identification of error, within the limits of the grounds of appeal, whether of law or fact, on the part of the primary judge, is an indispensable condition of a successful appeal: Minister for Immigration and Border Protection v SZVFW (2018) 264 CLR 541 (“SZVFW”), Gageler J at [30]. To the extent necessary to address the grounds on which the primary judge is respectfully said to have erred, the Full Court is “obliged” to conduct a “real review” of the trial and the primary judge’s reasons for, in this case, dismissing the authorisation case in the period on and after 29 September 2016: SZVFW, Gageler J at [32].
(2)In conducting a real review of the primary judge’s reasons, the judges exercising the appellate jurisdiction of this Court cannot excuse themselves from the “task”, central to the exercise of the appellate jurisdiction (in an appeal such as this), of weighing conflicting evidence and deciding whether inferences ought to be drawn or not, and reaching their own conclusions: SZVFW, Gageler J at [32].
(3)In applying the general standard of “correctness” to appellate review, the majority in Warren v Coombes (1979) 142 CLR 531, Gibbs ACJ, Jacobs and Murphy JJ, said this at 551 about the position of an appellate court in determining proper inferences to be drawn from facts found or undisputed facts (see also, SZVFW, Gageler J at [41]):
Shortly expressed, the established principles are, we think, that in general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge. In deciding what is the proper inference to be drawn, the appellate court will give respect and weight to the conclusion of the trial judge, but, once having reached its own conclusion, will not shrink from giving effect to it.
(4)In undertaking a real review of the primary judge’s reasons within the limits of, and the extent necessary to address the grounds of appeal, the Full Court in applying the correctness standard must observe the “natural limitations” that arise concerning the resolution of challenges to the credibility of witnesses based on factors such as the demeanour of the individuals in giving evidence (or impressions the primary judge may have found about them). It may be that considerations alive in the case before the primary judge are not necessarily fully reflected in the transcript and, of course, the primary judge is the trier of fact (and the application of the facts as found according to law), weighing all of the evidence “viewed as a whole”: SZVFW, Gageler J at [33].
(5)Keeping the scope of these natural limitations in mind (otherwise described by the majority in Warren v Coombes at 552 as the “advantages enjoyed by the judge who conducted the trial”), the majority also said this at 552:
[I]f the judges of appeal consider that in the circumstances the trial judge was in no better position to decide the particular question than they are themselves, or if, after giving full weight to his [or her] decision, they consider that it was wrong, they must discharge their duty and give effect to their own judgment.
[emphasis added]
In this appeal, the central matter, put simply, is that in deciding whether the represented respondents authorised infringements of the appellant’s copyright by users of the “Toolbox system” on and after 29 September 2016, the primary judge failed to have regard to, weigh and make findings about, important evidence of events on and after 29 September 2016 central to that question, and failed to have regard to material facts as found in the period anterior to 29 September 2016 that inform the extent to which an inference may be drawn concerning the contended indifference of the represented respondents to things put to them on and from 29 September 2016.
In the context of that aspect of the controversy before the primary judge to be quelled by the primary judge’s decision, the appeal court is in a position to consider the facts as found, the evidence of the events on and from 29 September 2016 said not to have been considered, and determine whether an inference is to be drawn which establishes the contended case on authorisation in that period and whether failure to draw the contended inference reflects error to be corrected in undertaking the necessary “real review” according to the “correctness” standard of appellate review.
I respectfully disagree with her Honour Cheeseman J’s observation at [147] of her Honour’s reasons that: “in the absence of error by the primary judge, it is not necessary to embark upon a real review of all of the material that was before the primary judge in order to revisit the primary judge’s rejection of the authorisation claims”. I do so because that approach respectfully seems to me to invert the essential task of the Full Court which is, within the limits of the grounds of appeal, and to the extent necessary to address them, the appellate court must conduct a real review of the primary judge’s judgment, the reasons explanatory of the findings, and the evidence said not to have been addressed in the reasoning, all going to the authorisation case in the post‑29 September 2016 period in order to decide whether the primary judgment reflects error in failing to draw the contended inference and whether inferences are to be drawn.
As to other matters of principle, I accept that the extent of the primary judge’s duty to “record the evidence given and the findings made depend, as the duty to give reasons does, upon the circumstances of the particular case” and where “certain evidence” is “important or critical” to a “proper determination” of claims made in the controversy to be quelled by a decision of the primary judge, evidence of that character cannot be “overlooked” and nor can the primary judge fail to “give consideration” to it. If such evidence is “not referred to” in reasoning to a conclusion, certain inferences arise. All “material” or “ultimate” findings of fact should be set out in the reasons. The application of the law to the facts found in determining the claims ought to be set out in the reasons. As to these matters, see Bealev Government Insurance Office of NSW (1997) 48 NSWLR 430 at 442‑444, emphasised by Cheeseman J. I also accept that the reasons of the primary judge may properly “omit attention to peripheral issues” (State Rail Authority of New South Wales v Earthline Contractors Pty Ltd (in liq) (1999) 73 ALJR 306, Kirby J at [90]), but that is not true of evidence characterised as “important or critical” or “material” to a “proper determination” (that is, a proper quelling) of the claims of a plaintiff or applicant at trial.
Where, as here, the contention is of the latter kind, the obligation of the appellate court is to conduct a “real review” of the primary judge’s decision as explained by the primary judge’s reasons, according to the “correctness” standard of appellate review: no more, no less.
It is now necessary to consider the findings of the primary judge in relation to the relevant events giving rise to the controversy, and the particular findings and reasoning concerning the events on and after 29 September 2016 material to the authorisation case in that period.
Part II: The relevant events and findings made by the primary judge about them
The so‑called “represented respondents” (all represented by the same legal team) are Biggin & Scott Corporate Pty Ltd (“Biggin & Scott” or “B&S”), Real Estate Tool Box Pty Ltd (“RETB”), Dream Desk Pty Ltd (“DDPL”), Mr Meissner, Mr Stoner and Ms Bartels. In these observations, I am concerned with findings made by the primary judge relevant, ultimately, to the question of whether B&S, Mr Stoner, Ms Bartels and RETB authorised, in the later period, by their conduct, infringements of the copyright subsisting in the appellant’s “DreamDesk” software (and related works) by users of the “Toolbox system” and conduct of Mr Semmens (and the software developers under his direction), of infringing the appellant’s copyright in developing the Toolbox system. So far as any other aspect of the appeal is concerned in relation to the fifth respondent, Mr Meissner, and the sixth respondent, DDPL, I agree with the observations of McElwaine J. I also agree generally with the observations of McElwaine J in relation to B&S, RETB, Mr Stoner and Ms Bartels, but I also wish to make the observations reflected in these reasons in relation to those respondents.
Biggin & Scott in the entire period relevant to these proceedings was the franchisor of a group of real estate agencies operating in Victoria. The group of agencies had been using an online software system called “Campaigntrack” from 2006 to 2009 and then again in 2013. Through that software system, the appellant, Campaigntrack Pty Ltd (“CPL”), provided online marketing and sales services to the real estate industry.
The Campaigntrack software system had a range of functionalities. It is not necessary to describe them here.
In November 2014, Mr Meissner operated (and continued to operate throughout the relevant events) an advertising agency called “JGM Advertising Pty Ltd” (“JGM”). In November 2014, Mr Meissner met with Mr Semmens and his business partner, Mr Ewart. In the meeting, Mr Semmens and Mr Ewart proposed creating a new internet online real estate marketing system and sought investment from Mr Meissner for the venture called the “DreamDesk venture”. On 11 March 2015, Mr Meissner, Mr Semmens and Mr Ewart agreed to incorporate DDPL to pursue that venture. They agreed the proportionate distribution of the shares to be issued in DDPL once Mr Meissner (and JGM) had recouped the investment. That allocation did not occur due to events relating to the conduct of Mr Semmens. DDPL was incorporated ultimately on 12 March 2015. Mr Meissner was its sole director and shareholder. Mr Semmens became an independent contractor to DDPL for the venture and worked on the “technical and software development” of the DreamDesk system.
The DreamDesk system developed by Mr Semmens had two principal components. The first was a “web application” comprising a software program provided to users over the internet, executed on a remote server to deliver particular functionality. It enabled a real estate agent to quote, manage, invoice and market real estate campaigns and create artwork and enable email marketing. The second was a “relational database” arranged in a particular way for associating (or relating) particular records (data) one to the other within the database.
Mr Stoner was a director of B&S. Between March and May 2015, Mr Stoner was approached by Mr Ewart who suggested that B&S consider moving from the Campaigntrack system to the DreamDesk system. Ultimately, agreement was reached and Mr Stoner for the Biggin & Scott franchisor entity (and the group of agencies), on the one hand, and Mr Meissner for DDPL, on the other hand, entered into a written agreement by which B&S became a client of DDPL. The B&S group went “live” on the DreamDesk platform on 17 August 2015.
On 26 May 2016, Mr Semmens signed two important documents both of which contained an acceptance (admission) that whilst an officer of DDPL, he had “deliberately used confidential information and trade secrets and other intellectual property (including but not limited to the ‘Process 55” system) being the property of TDG and Campaign Track so as to develop the business of Dream Desk”. He also acknowledged (or at least asserted) that “Mr Martin Ewart, a person associated with [DDPL] is and was at all material times aware of the conduct I have engaged in as described above”. Mr Semmens also acknowledged that he had “deliberately gained access to the private email accounts of [Mr Farrugia] the CEO of The Digital Group and [Mr Stewart] Exec Chairman of The Digital Group”. Both documents contained the statements and the full text is set out by the primary judge at [22].
The primary judge described these signed statements of Mr Semmens as a statement that he had copied an earlier system called “Process 55” (a web‑based real estate marketing system), when he developed the DreamDesk system.
The primary judge explained the context in which Mr Semmens came to make these statements. The primary judge explained that by September 2013, The Digital Group Pty Ltd (“DGPL”), a company founded by Mr Semmens and his brother‑in‑law, Mr Farrugia, owned the intellectual property (copyright) in Process 55. Mr Stewart (mentioned above in the statement and who had joined the DGPL venture), and Mr Farrugia, held the view that Mr Semmens “had stolen the intellectual property of [DGPL] in the development of the DreamDesk system”: PJ, [21].
On 28 May 2016, Mr Semmens and Mr Ewart told Mr Meissner of these matters. On 30 May 2016, Mr Stewart and Mr Farrugia told Mr Meissner of their concern that Mr Semmens had used DGPL’s intellectual property in developing the DreamDesk functionality (in particular, the “PDF Distiller” functionality enabling images to be used in real estate marketing campaigns), without authority.
As a result, Mr Meissner decided to either buy the title to Process 55 to solve the problem created by Mr Semmens or sell the DreamDesk system.
However, in May/June 2016, CPL and another company called “New Litho Pty Ltd” (“NLPL”) agreed in principle with DGPL to purchase the Process 55 system. They ultimately did so by an agreement with DGPL in August 2016. CPL and NLPL also wanted to purchase the DreamDesk system. In July 2016, DDPL (Mr Meissner) agreed to sell DreamDesk to CPL and NLPL for $50,000. DDPL sought a licence‑back of a particular feature called “Dashboard” which displayed on a homepage or intranet page key information for a user at the “front‑end” of the DreamDesk system, and other functionality. The agreement for the sale of the intellectual property in the DreamDesk system was signed on 18 July 2016 between DDPL, CPL and NLPL. It expressly excluded any intellectual property that DreamDesk may have derived from Process 55 or functionality of DreamDesk used necessarily in conjunction with Process 55 to enable operation of the DreamDesk system.
The agreement also provided for an exclusive Australia‑wide licence‑back to DDPL to use the DreamDesk intellectual property for the purpose of operating the “DreamDesk Business” until 3 October 2016.
On 30 July 2016, Mr Semmens made enquiries of a company called “Aleyant Systems LLC” (“Aleyant”) which owned a web‑based online design system called “eDocBuilder” (otherwise called the “EDB Tool” or the “Tool”). On 2 August 2016, Mr Semmens had discussions with Aleyant and was given an online demonstration of the EDB Tool used for designing data publishing systems.
The primary judge drew an inference that the point of the enquiry was to determine whether the Tool could be used to deliver a new system with the same eventual functionality as DreamDesk. At [37], the primary judge first notes his conclusion (derived from the analysis later appearing in his Honour’s reasons) that the new system, to be called “Toolbox” was developed “by first copying substantial parts, probably the whole, of the source code of DreamDesk” [emphasis added] by Mr Semmens and developers acting under his instructions.
On 3 August 2016, Mr Semmens met with Mr Stoner (who, apart from being a director, was also the CEO of Biggin & Scott), at B&S’s Head Office. Mr Semmens told Mr Stoner that he “could create a system with similar functionality to DreamDesk and Campaigntrack” and asked Mr Stoner whether he (meaning B&S) would be interested in “developing the [new] system”: PJ, [38].
At that meeting, Mr Stoner showed Mr Semmens a letter he had written and had already signed. The text of the letter is set out at [38] of the primary judge’s reasons. Mr Stoner said in the letter that he was happy for the EDB Tool to be used as a “PDF delivery system”, and as to the arrangement with Mr Semmens he said this: “You are instructed to build a web to print delivery system that does not breach any other [company’s] IP or ownership, in particular DreamDesk or Campaign Track” [emphasis added]. To make that point even clearer, Mr Stoner also said this in the letter: “In simple terms we do not want [anything] used that can be claimed as owned by the 2 companies above” [emphasis added].
Although Mr Stoner had handwritten both his own name (above which he had signed the letter) and the name of Mr Semmens at the foot of the letter in order for him to also sign, Mr Semmens did not sign the letter.
At [40], the primary judge inferred, from the terms of the letter, that the development of the new Toolbox system was already underway on 3 August 2016. Having reviewed aspects of Mr Stoner’s oral evidence, the primary judge reached four findings at [43] of the reasons.
First, Mr Stoner knew that Mr Semmens had admitted to “using Process 55 in developing DreamDesk”.
Second, it was “hardly surprising” that Mr Stoner wanted an assurance from Mr Semmens that he would not infringe (again) the intellectual property rights of others in building the new web to print delivery system).
Third, Mr Stoner “trusted” Mr Semmens not to infringe the rights of DDPL or CPL (and NLPL) in developing the new system.
Fourth, Mr Stoner did not want Mr Semmens to misuse the intellectual property of others in developing the new system.
Ms Bartels (a director of B&S and later, company secretary of RETB) was told by Mr Stoner of the substance of the letter. Mr Bartels left it to Mr Stoner to determine the specifications of the new system. The primary judge made two findings at [45] concerning Ms Bartels.
First, Ms Bartels was likely to have known that Mr Semmens had admitted to using Process 55 to develop DreamDesk and that this “had caused problems”.
Second, Ms Bartels did not want Mr Semmens to misuse the intellectual property of others in developing the new system.
Because the licence‑back to DDPL would end on 3 October 2016, the new system had to be developed by Mr Semmens and made functional and available online to the B&S group of agencies by 3 October 2016, a period of merely two months from the date of the meeting with Mr Stoner on 3 August 2016. The licence‑back to DDPL in effect facilitated a sub‑licence to DDPL’s client, B&S and the B&S agencies. The primary judge observes that Mr Semmens most likely started to develop the Toolbox system on or about 9 August 2016: PJ, [54].
As to the EDB Tool, the primary judge observes that Mr Stoner gave evidence about changes that had been made to the “username” and “password” for the EDB template. The detail of it does not presently matter. The primary judge concluded that the events did “reflect adversely on Mr Stoner’s credibility”, but the primary judge observes that the explanation was that Mr Stoner wanted his own login details to be created in order to provide those details to the appellant’s solicitor “so as not to provide them with a document which indicated the involvement of Mr Semmens” in the relevant events (that is, the use of the EDB Tool by Mr Semmens to develop a new system).
From 16 August 2016 to 19 September 2016, Mr Semmens ran a number of “migration scripts” concerning the DreamDesk system. The detail of it is set out at PJ, [56] and PJ, [57]. Mr Semmens accepted that he had done so: PJ, [58]. Mr Semmens gave evidence that Ms Bartels told him to keep the client data up to date: PJ, [59]. Doing so did not copy any of CPL’s intellectual property: PJ, [64].
During the period of the development of Toolbox, Ms Bartels, in discussions with Ms Keys of CPL on 18 August 2016, sought to convey the impression that B&S were considering moving to the Campaigntrack system, whilst at the same time B&S was actually seeking to develop the new Toolbox system (PJ, [71]), and Mr Stoner’s position in the period 18 August 2016 to 6 September 2016 was that the Campaigntrack system was his “least preferred option” for use by the group: PJ, [72]. The primary judge accepted that in this period, B&S conveyed to CPL that it was actually considering using Campaigntrack’s system for the group when, in fact, the Campaigntrack system was B&S’s “least preferred option”: PJ, [73].
At [75], the primary judge commences a description of the early development of the Toolbox system from 26 August 2016. The primary judge concludes that it was likely that Mr Meissner was aware of these developments and the involvement of DDPL people and his own (JGM) staff: PJ, [78]. The primary judge accepted that one of the DDPL actors, Ms Neal, was using an email address for her engagement in work on Toolbox that was not her DDPL email.
From [84], the primary judge describes the ongoing development of Toolbox from 8 September 2016. For example, on 8 September 2016, Ms Neal and Ms Bartels exchanged emails copied to Mr Semmens and Mr Stoner regarding aspects of the functionality of the Toolbox system and the integration of data with the real estate agency’s customer relationship management system.
In mid‑August 2016, Mr Stoner decided that the Toolbox venture ought to be undertaken through a separate entity: PJ, [70]. Mr Stoner, in proposing a “structure”, was speaking for B&S. B&S (and its partners in the venture) were to have a controlling interest of 70%, with Mr Semmens (and his partners) a 30% interest. The “objective” was to have each B&S agency on the new Toolbox system by 3 October 2016. Further, Mr Stoner, Ms Bartels and B&S were taking an active role to ensure the success of the new venture by bringing in production revenue from the agencies, sharing information about use of Toolbox and by Mr Stoner and Ms Bartels persuading customers to move to the Toolbox system. As to these matters, see PJ, [86].
On 14 September 2016, Ms Keys (and Mr Dean) of CPL, met with Ms Bartels. The primary judge notes that Ms Bartels gave evidence that she demonstrated features of the DreamDesk system which were not part of the Campaigntrack system to them. Ms Bartels gave evidence that she did so “in the hope that [CPL] would keep DreamDesk alive for B&S so we did not ultimately have to go down the track of launching a new system”. Ms Keys, however, gave evidence that Ms Bartels had said that everything is “pretty much set for B&S to come back to Campaigntrack”; the “only issue” was whether Campaigntrack could accommodate an intranet feature; and “at this point, it is just a matter of going through the contract and finalising the pricing”: PJ, [89]. The primary judge preferred the version of the facts given in evidence by Ms Keys: PJ, [90].
RETB was incorporated on 15 September 2016 with Mr Stoner as the sole director and a 95% shareholder. Ms Bartels was appointed as company secretary and a 5% shareholder. RETB became the trustee of a unit trust on 1 October 2016 to conduct the new Toolbox venture.
On 6 or 7 September 2016, CPL and NLPL paid the purchase price for DreamDesk to DDPL and by email asked Mr Meissner for the passwords which were to be provided as part of the settlement. By 16 September 2016, the passwords had not been provided. On 16 September 2016, Ms Neal (DDPL) sent an email to Ms Keys advising that Mr Meissner was on a cruise ship and not contactable until 18/19 September 2016. Having considered Mr Meissner’s evidence and an email he caused to be sent on 16 September 2016, the primary judge formed the view that Mr Meissner could have been contacted.
On 21 September 2016, Mr Stoner sent an email to Ms Keys copied to Mr Meissner and Ms Bartels expressing concern that DreamDesk would be “shut off” on and from 3 October 2016. The primary judge accepted (at [100](1)) that Mr Stoner, by the email, sought to convey the impression that CPL was putting B&S in a difficult position commercially, and that if CPL turned off DreamDesk on 3 October 2016, B&S would have “little option but to “go manual”, whereas the true position was that “Mr Stoner considered that he would likely have available a competing system which even if not fully functional, would be sufficiently operational to avoid ‘going manual’”.
At [100](3), the primary judge accepted that Mr Stoner’s “communication did not convey that he was, together with others, developing a competing system and his comments to [CPL, Ms Keys] were intended to convey that his interests were more confined than they really were” [emphasis added]. At [102], the primary judge observes that “despite Mr Stoner’s evidence”, it was probable that at least one of Mr Stoner’s purposes of the email was to “buy time” in order to “further develop or complete the development of the Toolbox system”: PJ, [102].
Thus, it seems that the primary judge had accepted, at least in the context of this email, that Mr Stoner was willing to convey an impression that he knew to be incorrect in order to suit the particular circumstances of the day.
On 22 September 2016, Mr Semmens provided Ms Keys with some degree of access to the server on which DreamDesk was stored. However, at some time between 19 and 22 September 2016, Mr Semmens deleted migration scripts from the “virtual server” and from the DreamDesk system: PJ, [104].
Mr Watts is the CEO of NLPL. On 22 September 2016, he discovered that RETB had been incorporated; that the Toolbox domain name had been registered to RETB; and that when the Toolbox internet protocol address was entered into a browser, it resolved to a login page for the DreamDesk system. On 23 September 2016, CPL and NLPL began investigating whether the Toolbox system had been copied from the DreamDesk system. The primary judge at [106] concluded that both systems were running on the computer of Mr Semmens having regard to the IP address for his computer.
On 26 September 2016, Mr Stoner sent an email to Ms Keys saying that Biggin & Scott would not be entering into a contract with CPL.
Mr Stoner sought an extension from 3 October 2016 for four weeks to continue using DreamDesk.
On 26 September 2016, Ms Keys spoke to Mr Meissner asking why CPL had not yet received access to the DreamDesk system and particularly the Amazon web server. After speaking to Ms Neal and Mr Semmens, Mr Meissner sent an email to Ms Keys saying that access would be fixed that morning.
On 27 September 2016, Mr Stoner again requested a four week extension of access to DreamDesk until 24 October 2016.
In the course of CPL attempting to establish whether the Toolbox system had been copied from the DreamDesk system, enquiries were made of Mr Semmens for access to a facility called the “DreamDesk Git repository” which through access in the repository to features and interactions called “commits and branches” would establish when “things occurred”. At [113], [115] and [116], the primary judge concluded that Mr Semmens had deleted these features of the repository for versions of the DreamDesk system and the Toolbox system and found that his doing so “made it ‘virtually impossible’ for [CPL] to prove when certain things occurred, in particular various development pathways of the DreamDesk system”.
Part III: Aspects of the primary judge’s other findings
Before turning to the events on and from 29 September 2016, the following findings of the primary judge ought to be noted:
(1)At [263], the primary judge accepted the conclusions of Mr Taylor (a Court appointed IT expert), set out in his report that substantial parts of the corresponding code in the Toolbox system had been copied from DreamDesk.
(2)At [275], the primary judge found that knowledge of the development of the Toolbox system lay principally with Mr Semmens (and developers under his direction, Mr Gallagher and Mr Zhang), and Ms Neal. The primary judge concluded at [275] that the appellant’s evidence demonstrated that Toolbox was developed by reproducing DreamDesk.
(3)At [278](2), the primary judge found that Mr Semmens made the deletions from the DreamDesk Git repository to prevent CPL from having access to evidence probative of copying of the DreamDesk system or parts of it.
(4)At [278](1) and (3), the primary judge found that Mr Semmens deleted migration scripts and “RSYNC commands” because he did not want CPL to know that he had copied data, although neither act constituted infringement. He did not take those steps on instructions from Ms Bartels or B&S.
(5)At [278](4), the primary judge found that Mr Semmens altered a particular Git commit log to prevent CPL obtaining probative evidence of copying from the DreamDesk system. He did not do so on the instructions of Mr Stoner, B&S or RETB.
(6)At [278](6), the primary judge found that Mr Semmens took the steps there described in order to make it more difficult for CPL to establish its case.
(7)At [278](7), (8), (10) and (11), the primary judge found that Mr Semmens took the steps there described which had the effect of removing information relevant to whether an infringement had occurred.
(8)At [280], the primary judge found that Mr Semmens was the “main developer” of the Toolbox system and that he reproduced a substantial part of the source code works and the whole of three “PHP Files” in the DreamDesk system.
(9)At [281], the primary judge found that Mr Semmens copied the whole or substantial parts of the DreamDesk source code (and system) and then proceeded to modify it or caused Mr Gallagher and Mr Zhang to modify it under his supervision.
(10)At [282] to [284], the primary judge found that Mr Semmens reproduced the DreamDesk source code as a whole at least as early as early August 2016. The primary judge also found that reproductions occurred when the DreamDesk system was used, loaded, edited or modified by Mr Semmens. The primary judge found at [284] and [285] that Mr Semmens reproduced a substantial part of each of the “Database Work”, the “Table Works” and the “PDF works” (see the primary judge’s definitions of those works at [193] and [194]).
Part IV: The steps taken by CPL and NLPL and events occurring on and from 29 September 2016
As earlier mentioned at [55] of these reasons, on 22 September 2016, CPL and NLPL discovered particular events in relation to RETB and the Toolbox domain registration. As also mentioned earlier, investigations then began immediately to determine whether DreamDesk had been copied (as was ultimately found) in developing the Toolbox system. Other aspects of those investigations were mentioned earlier including difficulties CPL had on 28 September 2016 in securing access to the Git repository and the requests made by Mr Stoner on 26 September and 27 September 2016 for a four week extension from CPL of the licence‑back of the DreamDesk system until 24 October 2016.
On 29 September 2016, McLean & Associates (Ms McLean), the solicitors for CPL, sent an email to Mr Meissner (DDPL) attaching a letter of that date referring to the request (of Mr Stoner) to extend the licence‑back to DDPL to enable B&S to enjoy continuing use of DreamDesk. The letter noted DDPL’s failure to perform its obligations under the Sale Agreement which seems to be a reference to the delays in providing CPL with all of the necessary login details, passwords, server access (and the various matters concerning access set out in an email of 28 September 2016 from Mr Ryan Allen of CPL). Mr Allen had been retained by CPL on 23 September 2016 to investigate possible copying of DreamDesk in developing the Toolbox system. At [122] to [124], the primary judge describes the following things revealed by Mr Allen’s forensic searches between 3 October 2016 and 10 October 2016:
122On 3 October 2016, Mr Allen found evidence of RSYNC commands being run on the production server of the DreamDesk system. An RSYNC command is a command to copy files from one location to another. The production server is the service used to provide the DreamDesk system to customers.
123On 4 October 2016, Mr Allen installed a software named “sudoreplay” on the production server of the DreamDesk system, to record and allow playback of a user’s activity on the server. The videos logged by the sudoreplay software showed:
(1)on 5 October 2016, the running of an RSYNC command for files in a sub‑folder “images”, found in a sub‑folder for Whitford Property. Whitford Property was a real estate agency operating in Victoria;
(2)on 5 October 2016, the running of an RSYNC command for files in a sub‑folder for Biggin & Scott;
(3)on 6 October 2016, the running of an RSYNC command for files in a sub‑folder “images”, found in a Biggin & Scott sub‑folder; and
(4)on 10 October 2016, the running of an RSYNC command for files in a sub‑folder “approved”, found in a Biggin & Scott sub‑folder.
124All of the above RSYNC commands copied files to an identified target folder, which included the word “toolbox”, at an identical IP address. In cross‑examination, Mr Semmens stated that he ran the RSYNC commands.
Returning to the letter of 29 September 2016, Ms McLean also notes the direct request by B&S (Mr Stoner’s requests) to extend the licence. The letter also notes two other matters in these terms:
•Our clients have become aware of improper access and duplication of code which is intellectual property now owned by our clients;
•Our clients are also aware of the incorporation and involvement of Real Estate Tool Box Pty Ltd.
[emphasis added]
The letter advised that CPL (and NLPL) would extend the licence to DDPL (and thus to B&S) for one week from 3 October 2016 subject to four matters.
First, DDPL not permit use of the DreamDesk platform otherwise than in the ordinary course of business.
Second, B&S not use the platform otherwise than in the ordinary course of business.
Third, all relevant parties involved provide an undertaking to CPL that the intellectual property already obtained or duplicated will not be used for any purpose.
Fourth, all relevant parties involved provide an undertaking to CPL that the intellectual property already obtained or duplicated will be destroyed immediately.
The letter observes that absent the undertaking from all relevant parties in those terms, the extension would not be granted. The letter called for a response by 3.30pm the following day.
Mr Meissner responded by email the next day at 1.23pm saying that, in principle, he agreed to the “terms” subject to a number of comments.
First, one copy of the DreamDesk platform would need to be kept, in his view, until DDPL had been paid by its customers (including B&S). Mr Meissner contended that DDPL would need access to data to deal with those customers and also suppliers.
Second, DDPL believed that everything required to be done under the Sale Agreement had been “supplied this week”.
Third, Mr Meissner said this: “I understand what is required under the contract, and it will be enforced by myself in terms of end date; non use of [the] platform; inappropriate use by current clients in anything apart from its present usage, and my participation in any area other than as a print broker”.
Fourth, Mr Meissner said that he did not understand the reference to “another company” (which was Mr Meissner’s reference to RETB).
Fifth, Mr Meissner observed that if the licence‑back was to be extended, B&S would be told that “as of midnight October 10 2016 [DDPL] will no longer support the platform and web to print [the licence from CPL having come to an end]”.
Sixth, as to complaints made by CPL about improper duplication of code, Mr Meissner said this: “The IP purchased by your client is being used solely by [DDPL] contractors (no one else) for its original function only, and [Biggin & Scott] only has login to enter campaign related material” [emphasis added].
On 3 October 2016, Mr Maletic of Mills Oakley, the solicitors representing all relevant parties except Mr Semmens, sent an email to Ms McLean requesting, on behalf of B&S, an extension of the licence until 17 October 2016. Mr Maletic observed that B&S is a large franchisor with over 40 franchisees. He observed that more time would be required to enable the franchisees to transfer their requirements “off the platform” while the licence was on foot. Mr Maletic observed that a date of 24 October 2016 had been sought (by Mr Stoner) but, as a matter of compromise, a date of 17 October 2016 was now sought by B&S “in good faith”. The letter confirmed that B&S would provide the undertakings as sought.
On 5 October 2016, McLean & Associates sent an email to Mr Meissner attaching a letter of that date and an undertaking addressed to Mr Meissner, DDPL and Mr Semmens. The proposed extension would be on terms of the provision of the undertaking and payment of a fee of $5,000. The undertaking was framed in terms of addressing the conduct complaint of improper access and duplication of the DreamDesk code and apprehension about the existence and role of RETB. The elements of the undertaking to be given by DDPL, Mr Meissner and Mr Semmens were these:
[DDPL], Meissner and [Semmens] undertake and agree that they individually or jointly with any other person or entity will not use, market, sell, copy, duplicate or in any way enable or facilitate the development of any system by making use of any of the intellectual property which comprises and/or relates to the system of [DreamDesk], which is now owned by [CPL] to the extent that they will not permit, now or at any time in the future, access by any third party to the system known as [DreamDesk] for any use other than its ordinary permissible use.
[DDPL], Meissner and [Semmens] also undertake and agree that they will immediately cause to be returned to [CPL], or if unable to be returned then destroyed so as to render useless, any of [DreamDesk’s] intellectual property or code which has already been copied, duplicated or otherwise provided to any third party or entity of any description whatsoever.
Mr Meissner responded by email on 5 October 2016 at 9.29pm agreeing to all “Re Meissner”. As to Mr Semmens, Mr Meissner said that he could not speak for him and that Mr Semmens had never used DreamDesk “unless under DDPL authority”. As to the concern about use, Mr Meissner said that “no part [of DreamDesk] can, or ever was used, by others”.
On 5 October 2016 at 9.09am, Ms Neal of DDPL sent an email to “all” (which seems to be Mr Semmens, Mr Adams and Ms Davies of DDPL, Mr Stoner of B&S and Mr Meissner) offering to “come in” after 1.00pm to provide help. On 5 October 2016, Ms Neal responded, suggesting certain steps and Mr Semmens responded suggesting that help in relation to templates and a simple guide on using the new system would be helpful.
On 6 October 2016, Ms Neal sent an email to Mr Semmens, Ms Page (B&S), Mr Stoner, Mr Meissner and Mr Adams and Ms Davies at DDPL addressing aspects of the domain, the sub‑domain and “endpoint” issues and other matters. On 6 October 2016, Ms Page sent an email to all the above people advising that B&S would be ready by 7 October 2016.
On 6 October 2016 at 12.03pm, Ms McLean pressed Mr Meissner to secure the execution of the undertaking by Mr Semmens. At 3.57pm that day, Mr Maletic sent an email to Ms McLean attaching the undertaking duly executed by B&S (by Mr Stoner and Ms Bartels), RETB (by Mr Stoner and Ms Bartels) and by Mr Stoner and Ms Bartels on their own behalf. Mr Maletic also sought confirmation of the extension of the licence until 17 October 2016.
On 6 October 2016 at 9.43am, Mr Stoner sent the undertaking that B&S, RETB and he and Ms Bartels were being called upon to sign (which was in the same terms as the undertaking sent to Mr Meissner, DDPL and Mr Semmens to sign) to Mr Semmens. Mr Semmens gave evidence that he and Mr Stoner, “possibly we discussed it”, but said that he would not have signed it because he believed it “restricted me from working in the industry”. That, of course, was not the textual terms of the undertaking. Mr Semmens also said that he would not sign the undertaking in any event due to his intense dislike of CPL. At 3.57pm that day (about six hours later), the undertaking signed by Mr Stoner and Ms Bartels on their own behalf and on behalf of B&S and RETB was sent to Ms McLean.
On 7 October 2016 at 2.32pm, Ms McLean responded to Mr Maletic’s email noting that Mr Meissner had not procured the signature of one party (Mr Semmens) to the undertaking and the fee of $5,000 had not been paid. Ms McLean then asked the following question of Mr Maletic in the light of the difficulty CPL had experienced in securing the signature of Mr Semmens to the undertaking: “In the meantime, we have been asked by our client to enquire what system your client is moving over to. The purpose of that request is in order for our client to gauge whether there would be any possible reasons for the resistance to the provision of the undertaking requested”.
On 7 October 2016 at 5.44pm, Ms McLean sent an email to Mr Maletic advising that DreamDesk would not be extended beyond 10 October 2016 as no undertaking had been provided by Mr Semmens; the licence fee had not been paid; and Mr Meissner had not yet made clear that he would cease operating DreamDesk on 10 October 2016.
On 7 October 2016, Ms Page (5.06pm) sent an email to Mr Semmens (copied to Mr Stoner), re “tool box” asking about the allocation of templates, brochures, templates onto Drop Box, mail cards, B&B, MUI and other matters concerned with implementation issues for the Toolbox system.
On 9 October 2016, Mr Maletic sent an email to Ms McLean arising out of his discussions with Mr Meissner, putting the proposition to Ms McLean that DDPL was content for the licence to be extended to B&S until 17 October 2016 and that Mr Meissner was willing and able to advance payment for the licence fee upon confirmation as to the amount owing and the account into which the funds had been paid. On 9 October 2016, Ms McLean responded saying that DDPL had been paying a monthly fee and knew the account details for payment. Ms McLean observed that, in any event, Mr Maletic’s email did not address (and nor had Mr Meissner addressed in a satisfactory fashion) the request for an undertaking to be provided by Mr Semmens. In that context, Ms McLean said this:
Our client is already aware of activity that has given rise to the necessity to seek the undertakings that have been requested. If no questionable activity is anticipated then we would have expected that there would have been absolutely no resistance to what was sought. This is not the case and accordingly, our client has made a decision based on the response received.
[emphasis added]
On 10 October 2016, Ms McLean sent an email to Mr Meissner pressing for the payment of the fee of $5,000. Ms McLean confirmed the account details and pressed Mr Meissner for the undertaking from Mr Semmens which, if not given, would result in the licence ending that day. Mr Meissner responded that day saying that he had no control over Mr Semmens who was taking his own legal advice.
On 10 October 2016 at 5.45pm, Ms McLean advised Mr Maletic that she looked forward to hearing when Mr Semmens had received his advice, and also looked forward to receiving confirmation of payment of the fee. Ms McLean observed that upon both events occurring, access to DreamDesk would be reinstated.
That evening, B&S’s access to DreamDesk was brought to an end.
The Toolbox system went “live” on 10 October 2016.
At [149], the primary judge accepted that Mr Semmens took a series of steps on 11 October 2016 that deleted particular records, copied others and ran a copy of a DreamDesk sub‑domain which remained undisclosed to CPL.
In November 2016, the parties agreed to appoint an independent forensic IT expert, Mr Justin Geri, to inspect the Toolbox system and report as to whether there was any potential copying from the DreamDesk system. Mr Geri is the director of Forensic IT at Ferrier Hodgson Forensics. In order for Mr Geri to undertake that task, Ms McLean made a request of Mr Maletic for his clients to provide Mr Geri with access to the “GitHub repository” which logs all changes made in the development of Toolbox. On 24 November 2016, Mr Maletic provided Ms McLean with a log file which the Court‑appointed expert, Mr Taylor, later identified and described as having had multiple changes made to it including 233 author changes from (Semmens at dreamdesk) to (Semmens at a private email address) and 54 changes in “commit descriptions”. Mr Stoner gave evidence that he did not ask Mr Semmens to make the changes in the log file to be provided for Mr Geri’s analysis but also said that Mr Semmens had “told him” that “he had changed it [the Git log repository) because he had the email address in there [the repository] of DreamDesk” and “I gave clear instructions to David to remove any mention of DreamDesk” in that “when David was building the system, I made very clear I didn’t want DreamDesk mentioned in anything” : PJ, [153] and [154].
At [155], the primary judge found that Mr Stoner and B&S did not want Toolbox to be based in any way on the intellectual property related to DreamDesk, and did not want there to be “any argument that it was so related or references to DreamDesk from which such an argument could be made”, and “it was for that reason that Mr Stoner did not want DreamDesk to be ‘mentioned in anything’”. The primary judge concluded that Mr Semmens realised there was, in fact, “mention of DreamDesk, or some similar description, in the Toolbox system which he wished to conceal”. The primary judge found that Mr Semmens did not take those steps on the instruction of any other person. The primary judge accepted Mr Stoner’s evidence that he did not ask Mr Semmens to change the log file.
As to Mr Semmens, the primary judge makes a number of adverse observations about the conduct of Mr Semmens at [157] to [161] read in conjunction with [164] to [168]. It is not necessary to repeat them all. They are serious especially in the context of his conduct overall as found. It is sufficient to note that at [168] the primary judge finds that:
Given the evidence as a whole, I conclude that Mr Semmens altered or purposefully deleted some files and accounts, and disposed of computers, in order to prevent access to files by [CPL] through compulsory processes available to [CPL] in the present proceeding.
In Mr Geri’s preliminary report of 19 January 2017, he observes that based on discussions with CPL and Mr Semmens, his understanding was that Mr Semmens was a key developer of both DreamDesk and Toolbox. He makes a number of observations at paras 27 and 28 about significant similarities in tables, front end menu options and functionality. He observes that a comparison of 51 different front end options available to users was undertaken between the two systems which identified “exact matches” between 47 of the 51 options examined. At paras 30 and 31, Mr Geri expresses the following view:
30.In relation to my instructions regarding “the potential copying or duplication of any intellectual property” in my opinion there is a high probability that intellectual property purchased by [CPL] has been used in the development of Real Estate Toolbox. The applications have been developed by the same developer who had access to both systems during the development process.
31.To forensically confirm if [CPL] intellectual property has been used in the development of Real Estate Toolbox a forensic examination of the servers responsible for hosting and managing the Real Estate Toolbox application should be undertaken. Further to this an examination of any device used by Mr Semmens during the development [of] both applications should also be undertaken to identify if any [CPL] intellectual [property] exists on the devices.
[emphasis added]
On 19 January 2017, Ms McLean sent an email to Mr Maletic arising out of the opinion expressed by Mr Geri of a “high probability” that the intellectual property of CPL had been used in the development of Toolbox. Ms McLean called upon Mr Maletic’s clients to cease operating the “Real Estate Tool Box system” failing which proceedings would be commenced.
On 20 January 2017, Mr Maletic responded on behalf of at least B&S, RETB, Mr Stoner and Ms Bartels (although he seems to make an observation on behalf of Mr Semmens as well). He said these things.
First, Mr Maletic said that to “enable” his clients to respond to the demand, CPL would need to “clarify” “what the intellectual property (IP) is that your client asserts that it owns”. Of course, at this point, Mr Maletic’s clients well understood that the DreamDesk software and its component systems earlier developed by Mr Semmens was the source of CPL’s rights and that it had been acquired from DDPL with a licence‑back to 3 October 2016 with controversy over the extension of the licence. Moreover, B&S, RETB, Mr Stoner, Ms Bartels, Meissner and DDPL (but not Mr Semmens) had all given a signed undertaking about the rights in DreamDesk. Mr Maletic, standing in the shoes of B&S, RETB, Mr Stoner and Ms Bartels, was asking, on their behalf, for something they well knew and comprehensively understood. Mr Maletic himself had directly engaged in the licence‑back discussions, the extension and the undertaking.
Second, Mr Maletic asked for proof of ownership of the IP including copies of any agreements as between DDPL and CPL and proof of assignment of the copyright.
Third, his clients asked for any contracts or agreements that would have the effect of excluding Mr Semmens from maintaining any rights in the DreamDesk IP said to be owned by CPL.
Fourth, Mr Maletic’s clients sought details of prejudice suffered by CPL and the “basis you say your client’s IP has been breached”.
The point of Ms McLean’s email was the question of addressing Mr Geri’s opinion arising out of the concerns expressed on 29 September 2016 which ultimately gave rise to the undertaking of 3 October 2016, and Mr Geri’s engagement. Mr Maletic’s clients wanted to say, in effect: “We don’t understand what you’re talking about”. Mr Maletic’s email of 20 January 2017 is an exercise, at least in part, in obfuscation and deflection by his clients for whom, at all relevant times, he spoke. That approach was compounded by Mr Maletic’s email of 2 February 2017 when he said that due to no response to his email of 20 January 2017, his clients would proceed on the basis that they denied that CPL owned the intellectual property it asserted it owned and denied any breach of CPL’s rights.
On 3 February 2017, Ms McLean responded by letter emailed that day challenging the bona fides of Mr Maletic’s clients in adopting the position reflected in Mr Maletic’s email of 20 January 2017. Taking up Mr Geri’s report, Ms McLean noted that Mr Maletic’s clients had not provided Mr Geri with unfettered access to accounts, schema, front end code, the GitHub repository or access to a complete forensic copy of the server for Toolbox for analysis.
Next, the letter makes the point about the curiosity of being called upon to clarify the IP in issue, and the bona fides of Mr Maletic’s clients in doing so. The letter says this (among other observations on this topic:
•You have asked us to clarify what the “intellectual property” (IP) is that our client asserts that it owns.
•We find it curious that your client chooses to raise this query now, after an allegation by our client that your client has copied or otherwise improperly duplicated or caused to be duplicated the intellectual property that our client purchased. Your client acknowledged our client’s rights in relation to the intellectual property regarding the [DreamDesk] system so to raise that question now bespeaks an absence of bona fides.
Notwithstanding that observation, the letter, in response to the request, sets out the cluster of works comprising the DreamDesk system acquired from DDPL, and CPL’s rights in Process 55 acquired by CPL to overcome the difficulty of Mr Semmens having “deliberately used” the intellectual property of others in developing the business of DreamDesk (as he had conceded in writing).
As to the production of documents in proof of CPL’s ownership of the intellectual property, the letter says this:
•In circumstances where your client has, at all times been aware of and acknowledged our client’s rights as an owner of the intellectual property relating to the [DreamDesk] system and that that has been confirmed to your client by the director of [DDPL], Mr Meissner, we do not consider it to be necessary to provide you with a copy of any of the agreements which relate to the intellectual property which it now owns.
The letter then addresses the question of prejudice. It then sets out contentions as to breach, all of which so far as Mr Semmens is concerned, were made good at trial as to primary infringement of DreamDesk. The letter concluded by seeking an undertaking that any use of Toolbox be ceased by 6 February 2017.
Mr Maletic responded on 9 February 2017. As to the complaint about a lack of unfettered access for Mr Geri to the material, sources or sites relating to Toolbox identified in detail in Ms McLean’s letter, Mr Maletic characterised those requests as “an attempt to fish for evidence that may support your client”.
As to the source and ownership of the intellectual property in the component works of DreamDesk, Mr Maletic’s clients maintained, in effect, the earlier position adopted on 20 January 2017. As to breach, Mr Maletic’s clients asserted that no breach of CPL’s rights had occurred and that Toolbox does not use the DreamDesk source code nor any other component of DreamDesk.
Of course, Toolbox did use the source code and other works of DreamDesk, as ultimately found at trial.
More importantly, notwithstanding the complaint made on 29 September 2016, the giving of the undertaking on 3 October 2016 in the face of that complaint and the requests for extension of the licence, and the preliminary report of Mr Geri, Mr Maletic’s clients had no independent basis for any of the contentions made in the correspondence by Mr Maletic, all of which were shown at trial to be wrong so far as title to DreamDesk works were concerned and the extensive use and copying of DreamDesk to build Toolbox.
In the result, Mr Maletic’s clients refused to cease using Toolbox and the litigation ensued.
Biggin & Scott continued to use Toolbox until June 2018. RETB ceased trading at that time. Biggin & Scott transitioned to a new system in April 2018 called “REDHQ”. Biggin & Scott, Ms Bartels and Mr Stoner’s family company all hold shares in REDHQ.
Mr Semmens is the Chief Technology Officer of REDHQ.
Each day that users of the Toolbox system used that system (from the moment it went “live” (PJ, [289])) it contained a substantial part of the DreamDesk source code. At the time it went live, Toolbox was based, in substantial part, on the DreamDesk database and table structures. Importantly, the use of the Toolbox system by users (including the more than 40 agencies in the B&S group and B&S itself) “causes the source code to be copied into memory and run” and thus “use of Toolbox involved a reproduction of a substantial part of the DreamDesk source code”: PJ, [289] and [290]. Each and every day after 29 September 2016, Mr Stoner, Ms Bartels, B&S and RETB were on notice of a serious contention that use by users involved an act of infringement as Toolbox was run copying and replicating the DreamDesk source code and other works. On 3 October 2016, they had given an undertaking not to use any system making use of any of the intellectual property comprising the DreamDesk system. By 19 January 2017, they knew that Mr Geri, the director of Forensic IT at Ferrier Hodgson Forensics had expressed the preliminary view (as an informed view of an expert) that there was a “high probability” that CPL’s intellectual property in DreamDesk had been used in the development of Toolbox. Mr Stoner and Ms Bartels also knew as they confronted the events on and after 29 September 2016 that the problem they were now confronting through the contended actions of Mr Semmens (and developers under his direction) in developing Toolbox concerned a person who had previously caused a similar problem for Mr Meissner and DDPL by Mr Semmens’ conduct of using, unlawfully, Process 55 to develop DreamDesk, which in turn had led to the blunt statements of protection or insurance recited in Mr Stoner’s letter of 3 August 2016. Now, the possible conduct of Mr Semmens that Mr Stoner was concerned about inherent in the letter of 3 August 2016 and against which he sought to protect himself (and Ms Bartels, and RETB as it would emerge in due course) had emerged as a real and present danger for the Toolbox system and B&S, RETB, Mr Stoner and Ms Bartels.
Yet, each day (until June 2018 as it transpired), Mr Stoner, Ms Bartels, B&S and RETB, were content for the B&S group members and other users to use Toolbox engaging reproductions of the DreamDesk source code (as users caused the source code to be copied into memory and run) and other infringements of component parts of DreamDesk (that is, Source Code Works, the Database Work, the Table Works and the Menu Work).
They must also be taken to have been content with the obfuscating response of Mr Maletic on 20 January 2017 in responding to the concerns put to them by CPL, by asking questions about matters they already well understood rather than addressing the affirmative things that might have been done to investigate the concerns put to them by CPL through Ms McLean and the concerns raised by the preliminary view expressed by Mr Geri. Ms McLean correctly called into question the bona fides of the response as explained in her letter attached to the email of 3 February 2017. Mr Maletic’s clients well knew and understood the source of the rights being asserted against them.
Part V: The reasoning concerning the authorisation case against Mr Stoner, Ms Bartels, B&S and RETB
The authorisation case against B&S was that it authorised the reproduction of a substantial part of the Database Work, the Table Works and the Menu Work and as to use by users of Toolbox, B&S was said to have authorised the reproduction of a substantial part of the Source Code Works, the Database Work, the Table Works and the Menu Work. B&S was also said to have authorised the loading, editing and modification of Toolbox.
As against RETB, the authorisation case was that it authorised the reproduction of a substantial part of the Source Code Works, the Database Work, the Table Works and the Menu Work. It was said to have authorised the communication of a substantial part of the Source Code Works and the Menu Work.
As to use by users, RETB was said to have authorised their use in the same way that B&S had authorised infringements by users.
As against Mr Stoner and Ms Bartels, they were said to have authorised reproductions of a substantial part of the Database Work and the Table Works; a reproduction or communication of a substantial part of the Source Code Works and Menu Work; and as to use by users of the Toolbox system, a reproduction of a substantial part of the Source Code Works, the Database Work, the Table Works and the Menu Work. They were also said to have authorised the loading, editing or modification of Toolbox.
The authorisation case against all four of these respondents was described by the primary judge as a claim that they authorised the infringements of the developers (essentially in bringing Toolbox into “live” existence) and that they authorised the infringements by users: PJ, [296]. No distinction is made by the primary judge between the period up to 29 September 2016 and the materiality of evidence of events engaging the four respondents on and after 29 September 2016. The primary judge dismissed the authorisation case against all four of these respondents in its entirety.
The primary judge dismissed the authorisation case according to the following exposed reasoning.
(1)Because Mr Stoner knew of the events concerning Mr Semmens and Process 55, it was “hardly surprising” that Mr Stoner sought the assurance of 3 August 2016 from him not to infringe the rights of others in building a new web to print delivery system. The primary judge repeats his earlier finding that Mr Stoner “trusted” Mr Semmens not to infringe the rights of DDPL or CPL and that he “did not want Mr Semmens to misuse the intellectual property belonging to others” in developing Toolbox. The primary judge reached the same conclusion concerning Ms Bartels. The primary judge finds that they each considered that Mr Semmens “could build the [new] system in sufficient time given his expertise”: PJ, [297](1).
(2)It was not unusual that Mr Stoner and Ms Bartels “left the development of the system to Mr Semmens”: PJ, [297](2).
(3)The instructions given to Mr Semmens by B&S (by Mr Stoner) were to build a computer system with functionality equivalent to DreamDesk without infringing the intellectual property of others: PJ, [297](3).
(4)Neither Mr Stoner nor Ms Bartels (nor B&S nor RETB) conducted any independent audit or verification that the system developed for them did not infringe another company’s intellectual property rights. The primary judge did not regard that matter either “of itself” or “cumulatively with other circumstances” (that is, any other circumstances) as establishing authorisation: PJ, [297](4). The primary judge then said this at [297[(4):
Rather, that is a reflection of the facts that: an instruction had been given not to infringement intellectual property rights; each of Mr Stoner and Ms Bartels trusted there would be no infringement; in all likelihood, neither turned their mind to whether an independent audit should be carried out; and a lack of ready means to carry out an independent audit in the time frame which would have been required.
[emphasis added]
(5)Thus, neither Mr Stoner nor Ms Bartels (nor, therefore, B&S nor RETB) likely ever turned their minds to an independent audit. The reference to a lack of ready means to carry out an independent audit “in the time frame” seems to suggest that the primary judge had in mind the time frame to build the new system. Mr Stoner and Ms Bartels could have turned their mind to an independent audit and did have the time to facilitate such an audit during the course of the events on and after 29 September 2016 until a view had been reached through such a process.
(6)Mr Stoner did not tamper with the Git log repository; he did cause B&S to pay the invoices of Mr Semmens, unsurprisingly; he or B&S or RETB loaned money to Mr Semmens, again unsurprisingly, as Mr Stoner, Ms Bartels and Mr Semmens were “friends”: PJ, [297](5) and (6).
(7)The primary judge makes the conclusionary observation that RETB did not communicate or authorise a communication of a substantial part of the source code: PJ, [298].
(8)Nor did RETB, B&S, Mr Stoner and/or Ms Bartels authorise a reproduction of a substantial part of the Source Code Works, the Database Work, the Table Works and/or the Menu Work: PJ, [299]. Also at [299], the conclusionary observation is stated that none of RETB, B&S, Mr Stoner or Ms Bartels “relevantly authorise[d]” reproduction of any of the works in issue “either through the user’s use of the Toolbox system”, or the loading, editing or modification of Toolbox.
(9)At [300], the primary judge observes that, “it might be difficult to infer authorisation where the relevant person [any of RETB, B&S, Mr Stoner and Ms Bartels] ‘neither knew nor had reason to suspect that the act might be done’”. The primary judge then said this at [300]:
It has not been established that RETB, [B&S], Mr Stoner or Ms Bartels knew (or that they should reasonably have known) that any of the works had been reproduced in the Toolbox system or that they knew that use by users of the loading, editing or modification of the Toolbox system by developers or others might involve reproduction of a substantial part of the DreamDesk system. This is not a case where the act of using the Toolbox system was known necessarily to involve an act of reproduction, such as might be the case in providing a photocopier for the purpose of copying library books. I am not satisfied that [B&S], RETB, Mr Stoner or Ms Bartels relevantly authorised any infringement, whether of Mr Semmens or of other developers or users.
[emphasis added]
All members of the Full Court sitting on this appeal accept and agree that the question of whether any or all of B&S, RETB, Mr Stoner and Ms Bartels authorised infringements of the copyright subsisting in, “put simply”, the DreamDesk works, by users of Toolbox (or by Mr Semmens in developing Toolbox and modifying it), by adopting a position of indifference to the sequence of events that emerged on and from 29 September 2016, was in controversy before the primary judge and thus formed part of the appellant’s case at trial.
However, there is no discussion by the primary judge of that case and no analysis of or findings concerning the evidence and matters material to that case in the reasoning in determining the authorisation case made on and after 29 September 2016. There is no mention of the letter of 29 September 2016, the exchanges that followed it, the seeking, and ultimately obtaining of, the undertakings, the circumstance that Mr Stoner knew that Mr Semmens had not signed the important letter of 3 August 2016 as put to him by Mr Stoner or the undertaking put to Mr Semmens which had been discussed with Mr Stoner. Nor is there any discussion of the implications of Mr Geri’s report or any of the matters relevant to that part of the case observed at [117] to [119] of these reasons.
Having identified error by the primary judge, I deal next with what inference is open to be drawn from all of the evidence that was before the primary judge. The finding by the primary judge that Mr Stoner and Ms Bartels trusted Mr Semmens not to infringe the intellectual property rights of DDPL, or the appellant in developing the new system, is quintessentially a finding of fact that turns upon the advantage enjoyed by him in observing each witness and in considering the entirety of the material placed before him upon the trial. Likewise, the finding that Mr Meissner was shocked to discover that Mr Semmens had used Process 55 in the development of DreamDesk is in my view not one that is open to challenge upon this appeal. Those findings are not “glaringly improbable”, “ contrary to incontrovertible facts or uncontested testimony” or “contrary to compelling inferences”: Lee at [55]; Minister for Immigration and Border Protection v SZVFW (2018) 264 CLR 541; [2018] HCA 30 at [33], Gageler J; ABT17 v Minister for Immigration and Border Protection (2020) 269 CLR 439; [2020] HCA 34 at [62], Nettle J.
In my view those findings by the primary judge stand firmly against the drawing of an inference that the represented respondents (or any one or more of them) either knew, or that they should reasonably have known, that any of the works that had been reproduced in the Toolbox system or that they knew, or should reasonably have known, that use by users of that system might involve a reproduction of a substantial part of the DreamDesk system, to use the language of the primary judge at PJ [300]. The correspondence of 3 August 2016 expressly directed Mr Semmens not to infringe intellectual property rights and to only use “off the shelf products” in developing the new system. Although Biggin & Scott, and necessarily Mr Stoner and Ms Bartels, had the power to prevent Mr Semmens from infringing the copyright of the appellant, such as by terminating the joint venture and his engagement as the developer, those persons had no reason to consider the exercise of that power between 3 August 2016 and 29 September 2016 because of that express direction and the trust they placed in Mr Semmens to abide by it. Additionally, one must accept the unchallenged evidence of Mr Stoner that he repeatedly sought assurances from Mr Semmens (even though the date of each assurance was not explored nor the content of what was said) and in combination with the instruction of 3 August 2016, it is clear that he did not have actual knowledge and I am not satisfied that he should reasonably have suspected that Mr Semmens had failed to comply with his express direction.
Nor am I satisfied that the nature of the relationship between Biggin & Scott, Printco, ABC, and Mr Semmens as joint venturers on and from 9 September 2016 required Biggin & Scott to take any further step to ensure that Mr Semmens had not and was not breaching the intellectual property rights of the appellant until 29 September 2016. Ordinarily, the parties to a joint venture are fiduciaries (See: United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1; [1985] HCA 49), with mutual trust and honesty at its core, which in this case strengthens the conclusion of the primary judge that Biggin & Scott and Mr Stoner were entitled to place trust in the assurances that had been given by Mr Semmens.
It follows from these conclusions that Biggin & Scott, RETB, Mr Stoner, and Ms Bartels did not know and were not obliged to take reasonable steps to avoid infringement of copyright by Mr Semmens prior to 29 September 2016 for the reason that objectively there was no reason to doubt that Mr Semmens had not (or would not) comply with the direction of 3 August 2016 and nor was there any reason to doubt the truthfulness of the assurances that he gave to Mr Stoner.
As for Mr Meissner and DDPL, I do not consider that the finding of the primary judge at PJ [305(1)] that Mr Meissner was “shocked to discover that Mr Semmens had used Process 55 in the development of DreamDesk” as either contrary to compelling inferences or glaringly improbable. On the evidence, Mr Meissner learnt that fact on or around 28 May 2016. For essentially the same reasons that I have set out in relation to the other respondents, I am not satisfied that Mr Meissner either knew, or ought reasonably to have known, that Mr Semmens had infringed the copyright of the appellant in developing the Toolbox system until 29 September 2016. The primary judge found that Mr Semmens was not an employee of DDPL or Mr Meissner and that finding is not challenged on this appeal. Mr Semmens was a contractor to DDPL. The primary judge did not accept that “…instructions were issued to Mr Semmens in terms, express or implied, which requested or required him to infringe any person’s intellectual property rights.” His Honour also found: “I conclude that it was understood by Mr Semmens that Mr Meissner wanted no such thing to occur given the events which had unfolded before the development of the Toolbox system”: PJ [305(5)]. Those findings of fact were clearly open to the primary judge. Further, his Honour found that DDPL and Mr Meissner did not take steps to prevent or avoid infringements by Mr Semmens for the reason that Mr Meissner “…did not know of any events which called for his (or DDPL’s) intervention”: PJ [305(6)]. In my view that finding was also open to his Honour.
On those findings, although DDPL had power to terminate the consultancy of Mr Semmens, it was not reasonable in my view for that power to be exercised because Mr Meissner did not know (and reasonably ought not to have known) of the happening of any event which called for its exercise at least until the question of the undertakings was raised in September 2016.
However, I have reached a different conclusion to that of the primary judge on the authorisation case within the period 29 September 2016 to June 2018 and I am satisfied that the appellant has established error by the primary judge in failing to make findings of fact upon the evidence within this period.. The correspondence from Ms McLean to Mr Meissner and DDPL of 29 September 2016 put those parties on notice (and shortly thereafter the other parties) that the appellant asserted breach of its intellectual property in the DreamDesk system. That claim when read with the requirement to provide certain undertakings, in order to extend the licence period for one week from 3 October 2016, reasonably should have caused each to make specific inquiries of Mr Semmens in order to be satisfied that he had not copied, and was not intending to copy, any of the intellectual property of the appellant in development of the DreamDesk system. But Mr Meissner made no inquiry to that effect at that time. Further, a reasonable person in the position of Mr Meissner when asked to give an undertaking that intellectual property owned by the appellant “will not be used for any purpose” and that any intellectual property “already obtained or duplicated would be destroyed immediately” would not in my view have agreed to each of those requirements absent detailed inquiry as to whether it was appropriate to undertake to the appellant in the terms requested.
Mr Meissner, in his response of 30 September 2016, agreed “in principal” [sic] without making any disclosed inquiry of Mr Semmens and, quite disingenuously in my view, claimed: “I do not understand your reference to another company, and your involvement statement.” A reasonable person in the position of Mr Meissner who lacked that knowledge ought to have at least sought further details from Ms McLean in order to be satisfied that the requested undertakings could appropriately be given.
As to Biggin & Scott, RETB, Mr Stoner and Ms Bartels, apart from the evidence of Mr Stoner that he sought unspecified assurances from Mr Semmens and trusted him not to copy the intellectual property of the appellant, no specific inquiries were made before Mills Oakley Lawyers advised that their clients would provide the undertakings. For the same reasons that I have given in relation to Mr Meissner, acting reasonably at the time Biggin & Scott, RETB, Mr Stoner, and Ms Bartels were clearly on notice of a claim of copyright infringement on or shortly after 29 September 2016 and correspondingly ought to have more carefully and fully investigated that claim at that time before agreeing to give undertakings on 6 October 2016.
Ms McLean, in her correspondence of 9 October 2016 to Mills Oakley Lawyers, noted the failure of Mr Semmens to give the requested undertakings, restated her client’s assertion that it was aware “of activity that has given rise to the necessity to seek the undertakings” and that “if no questionable activity is anticipated then we would have expected there would have been absolutely no resistance to what was sought.” The course of the correspondence between 29 September and 10 October 2016 plainly fixed the represented respondents with knowledge that the appellant had grounds to assert that its intellectual property rights had been infringed. Acting reasonably and having been put on notice to that effect, the represented respondents should have been proactive. A reasonable person in the position of each of the represented respondents (they all had the same solicitor from 6 October 2016) knowing that Mr Semmens had failed, for whatever reason to give the requested undertakings, in my view ought to have made genuine and specific inquiry from Mr Semmens as to why he had not given the undertakings and if it was because the copying allegations were true. It is no answer to these propositions to point to the fact that the represented respondents gave the requested undertakings on 6 October 2016. To the contrary, in my view a reasonable person in the position of the represented respondents would not have given the comprehensive undertakings in relation to the intellectual property of the appellant in the DreamDesk system, with the consequential exposure to potential liability, without making specific inquiries in order to be satisfied that it was safe to give the undertakings. For that reason, and to the extent to which counsel for the represented respondents submitted that giving the undertakings was a reasonable step, it was insufficient in the circumstances of this case.
It was also put to us by counsel for the represented respondents that each of those parties acted reasonably and appropriately in agreeing to the appointment of the independent forensic IT expert in November 2016. I accept that step was appropriate, but in my view it was taken at too late a point in time. It will be recalled that Ms McLean repeatedly stressed in her correspondence the importance of receiving the undertaking signed by Mr Semmens, asserted that his failure to give it was unsatisfactory and that it was evidence of “questionable activity”. Mills Oakley Lawyers did not ever directly address those matters. It is also the case that the Toolbox system was used, clearly for commercial purposes, at all times on and from 10 October 2016 and where notice had clearly been given to the represented respondents that it likely contained source code (and other intellectual property) owned by the appellant. The inference that I draw is that the represented respondents were content to be, at best indifferent, to the rights of the appellant, which they subjugated to the economic interests of Biggin & Scott, RETB and DDPL. A reasonable person in the position of the represented respondents would reasonably have suspected that Mr Semmens had engaged in, and likely was intending to engage in, acts which infringed the appellant’s copyright.
Moreover, and more compellingly, the represented respondents were on actual notice of the “high probability” that intellectual property of the appellant in Campaigntrack had been unlawfully copied and used in the development of Toolbox from the time of receipt of the preliminary report of Mr Geri on 19 January 2017. In serving that report, Ms McLean very politely requested that “your clients” (which at that point were each of the represented respondents of Mills Oakley Lawyers) should “immediately shut down and cease use of” the Toolbox system. That did not occur. Instead, Mills Oakley Lawyers engaged in a series of correspondence, commencing on 20 January 2017, which was obstructive and objectively must have been intended to delay the appellant in the prosecution of its claims.
With respect to the primary judge, his Honour failed to interrogate the authorisation claims of the appellant through the lens of the correspondence and the conduct of the represented respondents from 29 September 2016. With respect to the primary judge, in my view that was an error. Accepting, as I am bound to, each of the findings of the primary judge to the effect that Mr Stoner trusted Mr Semmens and Mr Meissner was, ultimately, shocked to learn that Process 55 had been used in the development of Toolbox, does not preclude the drawing of the necessary inferences by me upon the appellant’s authorisation case and by reference to all of the evidence that was before the primary judge. The trust that Mr Stoner placed in Mr Semmens and the state of mind of Mr Meissner do not answer the implied authorisation case that was put to the primary judge and which his Honour correctly understood in the expression of his Honour’s reasons at PJ [300] that the represented respondents had reason to suspect, within the time frame that I have identified, that Mr Semmens had, without the licence of the appellant, infringed its intellectual property rights in the DreamDesk system by copying components of it in the development of Toolbox.
Addressing specifically the factors that must be taken into account as required by s 36(1A) of the Copyright Act, the primary judge found, and I accept, that DDPL and Mr Meissner “had power to prevent the infringements, including by not engaging the DDPL and JGM Advertising staff to develop the Toolbox system, by not paying for that work and by not paying for the AWS invoices”: PJ [305(4)]. As for Biggin & Scott, there was a contractual relationship with Mr Semmens as found by the primary judge at [297(3)], but in addition Biggin & Scott and Mr Semmens proposed to be and became joint venturers, and in that case there was clearly power that was open to be exercised by Biggin & Scott by putting an end to the joint venture. Although the exercise of either of those powers might not have prevented Mr Semmens from continuing on his own account to copy and use the intellectual property of the appellant, termination of the contractual and joint venture arrangement would at the very least have significantly disrupted the primary infringements of Mr Semmens in his continued development of the Toolbox system for ultimate commercial use. Indirect power of that character is relevant, although clearly not dispositive: iiNet HCA at [69]–[70], [139].
I have comprehensively set out the nature of the relationship between Mr Semmens and the represented respondents. As contracting parties and, in the case of Biggin & Scott, joint venturers, the represented respondents stood to gain financially from the development of the Toolbox system. As the letter of 3 August 2016 demonstrates it was open to Biggin & Scott to give directions to Mr Semmens. He was accountable to his contracting counterparties, Biggin & Scott and DDPL. The primary judge found, and I agree, that DDPL and Mr Meissner could also issue instructions to Mr Semmens: PJ [305(5)]. Overall, the relationship between Mr Semmens and the represented respondents was such that how Mr Semmens went about his task of constructing the Toolbox system was capable of being directly influenced by the represented respondents. After those parties were put on specific notice of potential infringement, and the fact that Mr Semmens had failed to give the undertaking, steps ought to have been taken within the context of that relationship to “get to the bottom of the allegations” and, if found to be substantiated, to end the contractual and commercial relationship with Mr Semmens.
The final statutory factor is whether the represented respondents took any (and if so what) reasonable steps to prevent or avoid the doing of the infringing acts by Mr Semmens. For the detailed reasons that I have set out, they did not after 29 September 2016.
Whether a person has authorised the doing of any act comprised in the copyright of a copyright owner is, necessarily, a fact sensitive and fact intensive inquiry. Authorisation takes many and varied forms and is insusceptible of clear definition in abstract which point was made by Herring CJ in Winstone v Wurlitzer Automatic Phonograph Company of Australia Pty ltd [1946] VLR 338 at 345:
It is, of course, a question of fact in each case what is the true inference to be drawn from the conduct of the person said to have authorised the act complained of. And as the acts that may be complained of as infringements of copyright are multifarious, so, too, the conduct that may justify an inference of authorisation may take on an infinite variety of differing forms. In these circumstances any attempt to prescribe beforehand ready-made tests for determining on which side of the line a particular case will fall, would seem doomed to failure. So, too, will it be impossible to determine any particular case by reference merely to the relationship that may exist between the person said to have authorised the act complained of and the actual infringer, though no doubt in the case of principal and agent an authorisation may be more readily inferred then in a case of vendor and purchaser. In the end the matter must in each case depend on a careful examination of all the relevant facts.
That reasoning was endorsed in iiNet HCA at [125], Gummow and Hayne JJ. It should also be understood that I have considered the statutory factors at s 36(1A) of the Copyright Act as interrelated questions. My conclusion, in consequence of all of the matters that I have considered, is that the primary judge erred in not concluding that the appellant’s authorisation case was made out against each of the represented respondents and within the period 29 September 2016 to June 2018. Accordingly, I uphold these grounds to that extent.
A consequential matter that I must address is the appellant’s claim for additional damages pursuant to s 115(4) of the Copyright Act and for that which it pleaded was flagrant misconduct by each of the represented respondents. By way of example, and as against Biggin & Scott, the appellant pleaded that it ought reasonably to have known that it was the owner of copyright in the DreamDesk system, that it knew that the acts of Mr Semmens would infringe those rights or acted with reckless disregard of those rights, established a competing product with substantial benefit to it and gave the undertakings and breached them. Apart from the contention that Biggin & Scott had actual knowledge that the acts of Mr Semmens were infringing acts, those contentions are made out. In my view, it is not however appropriate for this Court to determine the question of additional damages; that will be a matter for the primary judge upon remittal when considering the assessment of damages against each of the respondents and in accordance with the orders that he made on 31 August 2021.
Contract claims grounds
The appellant makes multiple complaints that the primary judge erred in respect of certain alternative contract claims described as the “transfer term”, the “password term”, the “non-modification term”, and the “compliance term”.
To understand these grounds, it is convenient to reproduce a number of paragraphs from the primary decision:
317.The DreamDesk sale agreement included the following terms addressing, respectively, transfer and assistance:
1.5. Dream Desk will provide to the Purchasers any document or equipment required by it to effect a transfer of the Intellectual Property on payment of the Purchase Price by the Purchasers.
1.6. On payment of the Purchase Price Dream Desk will provide all reasonable assistance that the Purchasers require so as to properly and effectively use, exploit and understand the Intellectual Property, including the imparting of knowledge and the provision of the following information:
1.6.1. Amazon Webservices Password
1.6.2. Administrator Password to Dream Desk Platform
1.6.3. Management Password for Dream Desk
1.6.4. Any client logins as requested
1.6.5. Any other passwords and access details required for the day-to[-]day operation of Dream Desk
1.6.6. Any other passwords and access details required for the management and configuration of Dream Desk
1.6.7. Technical and programming assistance as required
318.These provisions must be read in light of the agreement as a whole. They are intended to facilitate cll 1.1 and 1.4 which provided:
1.1. Dream Desk agrees that it will sell to Campaigntrack and New Litho (the “Purchasers”) the DreamDesk Platform and all intellectual property associated with the operation of the DreamDesk Business, including copyright (including any rights to source code), design, patents and trademarks and all rights to the business name of the DreamDesk Business and all domain names registered by Dream Desk, including dreamdesk.com.au (the [“]Intellectual Property”).
...
1.4. All rights, entitlement and interest in and title to the Intellectual Property will pass to the Purchasers on payment of the Purchase Price.
319. Campaigntrack alleged that, by certain letters, it requested:
(1) assistance from DDPL “to properly and effectively exploit the DreamDesk Copyright Works in this proceeding”; and
(2) the execution of a written assignment of copyright to the extent that DDPL’s ownership was equitable: FASOC [76].
320.Campaigntrack alleged that these terms were breached by DDPL failing to provide assistance as requested: FASOC [77]-[78].
These claims are confined to DDPL and Mr Meissner. The appellant pleaded the transfer term claim in the FASOC by contending that DDPL breached cl 1.5 of the Dream Desk sale agreement. It is to be observed that this clause imposed the obligation that DDPL “will provide” any document or equipment “required by” the appellant to effect a transfer of the intellectual property the subject of the agreement. The specific breach pleaded by the appellant was that on various dates in 2017 and 2018 it requested, “to the extent that DDPL’s ownership of copyright was equitable, the execution of a written assignment of copyright”.
The notice of appeal does not elide with that contention. Rather, the appellant asserts that the primary judge wrongly failed to conclude that DDPL breached the transfer term in that the intellectual property pursuant to the agreement included the domain name DreamDesk.com.au, that Mr Semmens continued to control the DNS records for that domain name (as late as July 2020), and that therefore DDPL failed to effect a transfer of the intellectual property as required by cl 1.5. That claim of breach was nowhere pleaded in the FASOC.
In an attempt to avoid that difficulty, the appellant relied upon a portion of its written closing submission of 21 August 2020 that was before the primary judge at paragraph [559(b)]. A considerable amount of documentation, which should have been included in Part C of the appeal book as required by r 36.54(c) of the Federal Court Rules 2011 (Cth) but was not, was “handed up” to us during the course of the argument by counsel for each party. At the direction of the Court, supplementary electronic versions of Part C were filed. Paragraph [559(b)] has not been provided to us, which is unsatisfactory to say the least. The clear purpose of r 36.54(c) is to provide the Court with all of the documents that are relevant to each appeal ground and which are, or are intended to be referred, to in the submissions of each party in order that the appeal may be conducted consistently with the overarching purpose to it according to law and as quickly, inexpensively and efficiently as possible: FCA Act, ss. 37M and 37N. That obligation is essentially relevant to our core function which is to conduct a real review of all of the relevant material that was before the primary judge.
Those criticisms aside, the more fundamental problem that the appellant faces is that referencing a particular aspect of the evidence in closing submissions is no substitute for the articulation of each cause of action, by identification of the material facts relied upon, in a pleading. No application was made by the appellant to further amend its pleading, even as late as the date on which closing submissions were made to the primary judge. Proceeding in that way deprived DDPL of the opportunity to raise any question of prejudice. And it was contrary to “the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her” framed in accordance with the pleadings with the consequence that “in general, relief is confined to that available on the pleadings”: Banque Commerciale SA (En Liqn) v Akhil Holdings Ltd (1990) 169 CLR 279; [1990] HCA 11 at 286, per Mason CJ and Gaudron J. For these reasons, the trial judge did not err in failing to address a claim that was not pleaded.
The password term ground turns upon cl 1.6 of the DreamDesk sale agreement and three facts as found by the primary judge: the purchase price was paid on 6 or 7 September 2016, a request was made for provision of the passwords on 7 September 2016 and those passwords were not provided until between 20 and 28 September 2016.
Clause 1.6 operates “on payment” of the purchase price. From that point in time, DDPL became obliged to provide “all reasonable assistance” so that the purchaser might “properly and effectively use, exploit and understand” the intellectual property. Correctly, the primary judge at PJ [318] observed that these requirements must be read with the entirety of the agreement. He concluded that these obligations facilitate clauses 1.1 and 1.4 which provide:
1.1.Dream Desk agrees that it will sell to Campaigntrack and New Litho (the “Purchasers”) the DreamDesk Platform and all intellectual property associated with the operation of the DreamDesk Business, including copyright (including any rights to source code), design, patents and trademarks and all rights to the business name of the DreamDesk Business and all domain names registered by Dream Desk, including dreamdesk.com.au (the [“]Intellectual Property”).
...
1.4. All rights, entitlement and interest in and title to the Intellectual Property will pass to the Purchasers on payment of the Purchase Price.
The uncomplicated pleaded contention of the appellant was that various passwords were not provided “on payment of the purchase price” by reason of the delay between 7 and 28 September 2016. The primary judge reasoned at PJ [327] that; “breach is not established merely because the passwords were not provided on payment of the purchase price. DDPL provided reasonable assistance by providing the passwords reasonably promptly after they were requested.” His Honour had regard to what reasonable assistance would be understood by commercial business people. There is no error in that approach: Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at 656. He continued by reference to the uncontroversial fact that the appellant purchased the intellectual property in order to shut down DreamDesk. That step could not be taken immediately because of the licence that appellant granted to DDPL. Thus there was no evident need to transfer the passwords immediately – in my view, DDPL provided reasonable assistance within the time period complained of.
The appellant also submits that his Honour erred by failing to consider his earlier finding at PJ [9] that, until the passwords were provided, it did not have any access to DreamDesk. That submission mischaracterises the finding that his Honour made in that paragraph. It is a finding that clients (users of the system) did not have access to the underlying source code, which was stored on a remote server and protected by a password or a key. Further, the primary judge at PJ [83] set out the correspondence of 7 September 2016 that is the request for access to the passwords. The author did not state that an urgent response was required and nor was an immediate demand made. Clearly the DreamDesk system was capable of being (and was in fact) used by DDPL without the appellant having access to the passwords. DDPL did not in my view breach the reasonable assistance term: if the objective intent of the parties was that the passwords were required to be provided urgently, then it would have been a simple matter to specify a time frame in the agreement. The primary judge did not err as contended.
The non-modification term rests upon an implied term of the DreamDesk agreement that the appellant pleaded at paragraph [93] of the FASOC to the effect that DDPL and Mr Meissner would effect a transfer of the intellectual property without modification. That pleading was admitted. The primary judge identified the area of dispute at the trial (PJ [332]) as:
…principally directed to a complaint that modifications were made after 18 July 2016 to “intellectual property associated with the operation of the DreamDesk business”, namely the running of the migration scripts and the deleting of development history and certain audit logs…
The primary judge was satisfied that Mr Semmens made relevant modifications to these components of the intellectual property after 18 July 2016, but that such modifications were neither “engaged in” or “authorised by” DDPL or Mr Meissner. The appellant correctly observes that the primary judge did not expose his reasoning for that conclusion. From that premise the appellant submits that the evidence of Mr Semmens that the primary judge set out at PJ [58] leads to the conclusion that Mr Meissner authorised Mr Semmens to make those modifications. I do not accept that proposition. What the primary judge said at PJ [58] was:
Mr Semmens accepted that he ran the migration scripts. In cross-examination, Mr Semmens stated that Mr Meissner had instructed him to “export the client’s data out” or give the client their data, but later clarified:
Was it Mr Meissner?---He would have just said give the client their data, I’m not sure. I don’t think he would have said synchronise their data.
This must also be read with PJ [61]:
It is important to appreciate, as Mr Semmens emphasised in submissions, that the running of migration scripts only transferred a client’s data from one database to another. The data so transferred was not the intellectual property of Campaigntrack.
That evidence when read with acceptance of that explanation does not support a conclusion that Mr Meissner authorised the modifications. The appellant does not say that the primary judge erred in making a wrong finding of fact at PJ [58]. Further, as the represented respondents submit (and which the appellant did not dispute before us) Mr Meissner was not cross-examined about modifications to the migration scripts (and his asserted authorisation of that conduct) with the consequence that it would be fundamentally unfair to accede to the appellant’s submission: Browne v Dunn (1894) 6 R 67; MWJ v The Queen (2005) 80 ALJR 329; [2005] HCA 74 at [38]; and Seymour v Australian Broadcasting Commission (1977) 19 NSWLR 219, at 225.
The final contract claim concerns the compliance term, which the primary judge dealt with from [348]. This claim rests upon a heads of agreement entered into on or about 16 July 2016 between the appellant, New Litho, DDPL and Mr Meissner. That document at cl 1.3 provided that Mr Meissner would do all things reasonably necessary to ensure that DDPL complied with the DreamDesk sale agreement. As the appellant correctly conceded, it cannot succeed on this ground unless one or more of its contract claim grounds are made out. Thus the ground fails.
For these reasons I dismiss each of grounds 10, 11, 12 and 13 of the appeal.
CONCLUSION
It follows that I would in part allow the appeal and make certain of the orders sought by the appellant as follows:
In these orders:
DreamDesk Source Code Works means the literary works in the source code of the DreamDesk system and includes the three PHP files named “src\Functions\edms.php”, “views.adhoc-edit.php” and “views\adhoc-edit2.php”;
DreamDesk Database and Table Works means the literary works in the DreamDesk database and 18 tables within the database;
PDF Works means the literary or artistic works in the PDF templates in the “client_data” folder in the DreamDesk system;
Toolbox system means the “Real Estate Tool Box” software system.
THE COURT ORDERS THAT:
1.The appeal be allowed.
2.Set aside orders 6 and 8 made on 31 August 2021 in proceeding NSD 772 of 2017.
3.In lieu thereof:
(a)Declare that the first, second, sixth and seventh respondents have between 29 September 2016 and June 2018 infringed:
(i)the copyright in the DreamDesk Source Code Works, by:
A.authorising the third respondent to reproduce the whole or a substantial part of the DreamDesk Source Code Works in material form in developing the Toolbox system;
B.authorising other developers of the Toolbox system to reproduce a substantial part of the DreamDesk Source Code Works in material form in developing the Toolbox system;
C.authorising users of the Toolbox system to reproduce a substantial part of the DreamDesk Source Code Works in material form in using the Toolbox system; and
(ii)the copyright in the DreamDesk Database and Table Works, by:
A.authorising the third respondent to reproduce a substantial part of the DreamDesk Database and Table Works;
B.authorising users of the Toolbox system to reproduce a substantial part of the DreamDesk Database and Table Works.
(b)Declare that the first respondent has infringed the copyright in the DreamDesk Source Code Works, by authorising between 29 September 2016 and June 2018 the third respondent to communicate a substantial part of the DreamDesk Source Code Works to the public, in developing the Toolbox system.
(c)Declare that the fourth and fifth respondents have infringed between 29 September 2016 and June 2018:
(i)the copyright in the DreamDesk Database and Table Works, by authorising the third respondent to reproduce a substantial part of the DreamDesk Database and Table Works;
(ii)the copyright in the PDF Works, by authorising the third respondent to reproduce the whole of the PDF Works in material form.
(d)The first, second, sixth and seventh respondents be permanently restrained from reproducing or authorising the reproduction of the whole or a substantial part of:
(i)the DreamDesk Source Code Works;
(ii)the DreamDesk Database and Table Works,
in material form, without the licence of the copyright owner.
(e)The first respondent be permanently restrained from communicating or authorising the communication of the whole or a substantial part of the DreamDesk Source Code Works to the public, without the licence of the copyright owner.
(f)The fourth and fifth respondents be permanently restrained from reproducing or authorising the reproduction of the whole or a substantial part of:
(i)the DreamDesk Database and Table Works;
(ii)the PDF Works
in material form, without the licence of the copyright owner.
(g)Within 28 days of the date of these orders, each of the first, second, fourth, fifth, sixth and seventh respondents permanently destroy or erase, on oath or affirmation, all reproductions of the DreamDesk Source Code Works, the DreamDesk Database and Table Works and the PDF Works in their possession, custody, power or control, such verification to set out steps undertaken to give effect to the destruction or erasure.
(h)The matter be remitted to the primary judge for an inquiry as to damages or profits in respect of copyright infringement.
4.The Parties file and exchange any submissions as to costs or other consequential orders not to exceed 3 pages within 7 days.
5.The question of costs, and any consequential orders, be determined on the papers.
I certify that the preceding one hundred and ninety-eight (198) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McElwaine. Associate:
Dated: 6 July 2022
SCHEDULE OF PARTIES
NSD 1015 of 2021 Respondents
Fourth Respondent:
DREAMDESK PTY LTD ACN 604 719 735
Fifth Respondent:
JONATHAN MICHAEL MEISSNER
Sixth Respondent:
PAUL GEOFFREY STONER
Seventh Respondent:
MICHELLE BARTELS
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