Centrestage Management Pty Ltd v Riedle
[2007] FMCA 1147
•19 July 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| CENTRESTAGE MANAGEMENT PTY LTD v RIEDLE | [2007] FMCA 1147 |
| COPYRIGHT – Computer program – ownership – whether respondent an employee or an independent contractor – whether implied term regarding ownership – whether applicant owned copyright in earlier version of program. CONTRACT – Implied terms – issues of fact. |
| Copyright Act 1968, ss.10, 14, 31, 35(2), 35(6), 126, 196(1), 196(3) Federal Court Rules 1979, O.11 rr.10, 13(3), 18 |
| Beck v Montana Constructions Pty Ltd (1963) 80 WN (NSW) 1578 Copyright Law Review Committee, Computer Software Protection (1994) |
| Applicant: | CENTRESTAGE MANAGEMENT PTY LTD (ACN 107 072 239) |
| Respondent: | TONY RIEDLE |
| Cross Claimant: | TONY RIEDLE |
| Cross-respondent: | CENTRESTAGE MANAGEMENT PTY LTD (ACN 107 072 239) |
| File number: | MLG 227 of 2006 |
| Judgment of: | Riley FM |
| Hearing dates: | 21, 22, 23 May 2007 and 12, 13, 14 June 2007 |
| Date of last submission: | 14 June 2007 |
| Delivered at: | Melbourne |
| Delivered on: | 19 July 2007 |
REPRESENTATION
| Counsel for the Applicant: | Dr R Dean |
| Solicitors for the Applicant: | R & G Lawyers |
| Counsel for the Respondent: | Michael Rivette |
| Solicitors for the Respondent: | Middletons |
ORDERS
The applicant's application filed on 14 February 2006 be dismissed.
The applicant (cross respondent) whether by itself, its directors, servants, agents or otherwise be restrained from reproducing the source code in the program written by the respondent in any material form.
The applicant pay the respondent the sum of $275 for work done.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 227 of 2006
| CENTRESTAGE MANAGEMENT PTY LTD (ACN 107 072 239) |
Applicant
And
| TONY RIEDLE |
Respondent
And
| TONY RIEDLE |
Cross-claimant
And
| CENTRESTAGE MANAGEMENT PTY LTD (ACN 107 072 239) |
Cross-respondent
REASONS FOR JUDGMENT
The applications
In this proceeding, the applicant seeks:
a)an order that the respondent delivers up a computer program known as the updated home collection program (“The Program”), its source code and any associated material in whatever form;
b)an order that the respondent destroys any electronic copies of The Program in his possession;
c)an injunction restraining the respondent from copying, using or disclosing The Program, its source code and any associated material in whatever form;
d)a declaration that the applicant is the proprietor of the copyright in The Program; and
e)damages.
The respondent cross claims, seeking:
a)a declaration that he owns the copyright in The Program;
b)an injunction restraining the applicant from reproducing the source code in The Program in any material form;
c)an order that the applicant pay the respondent $6,600 for work done in relation to stage three of the relevant project; and
d)damages.
Background
The applicant is a small company which provides administration and computer consultancy services. Its directors are David Roberts and his wife Connie Paglianiti. Ms Paglianiti was previously the director of a company called Advanced Administration Services Pty Ltd (“AAS”). In 2000, Mr Roberts, as an employee of AAS, wrote a computer program for the Salvation Army for its home collection services. The program was written in Visual Basic. In 2002, Mr Roberts upgraded the program, again in Visual Basic and again as an employee of AAS. On 21 November 2003, an administrator was appointed to AAS and it was wound up on 13 April 2005.
The applicant was incorporated on 18 November 2003. In or about late 2003, the Salvation Army advised Mr Roberts that it was contemplating a further upgrade of its home collection program. Consideration was being given to the program being written in a more robust and technologically advanced language than Visual Basic.
Mr Roberts was unable to do the upgrade himself, partly because at that time he was a full-time employee of a company called Eastern Ocean Pty Ltd.
Mr Roberts and his wife were friends of the respondent and his wife and, in December 2003, invited them home for dinner. The respondent was a computer programmer who had been retrenched from the National Australia Bank in about May 2003. The idea of the respondent doing the further upgrade for the home collections program was discussed at the dinner. It was decided that the respondent would prepare a proposal for the project to be given by the applicant to the Salvation Army. He did so.
Eventually, it was agreed that the applicant would provide an updated home collection program to the Salvation Army in three stages. The program would be written by the respondent in the .NET language. The respondent would be paid by the applicant $19,800 for the first stage, a fixed sum to be determined later for the second stage and $13,200 for the third stage. The applicant’s contract with the Salvation Army provided for the applicant to be paid for The Program a greater amount than the amount charged by the respondent to the applicant. The applicant provided a copy of the 2002 version of the home collections program to the respondent to enable him to update it.
The respondent provided stage one and the applicant paid him $19,800 for it. Stage two did not go ahead, as it was deferred pending the Salvation Army buying GPS equipment for its collection trucks. The respondent claims that he did a certain amount of work in connection with stage three for which he claims $6,600. It is not disputed that stage three was not completed.
Employee or independent contractor
It was common ground that a computer program is a literary work for the purposes of the Copyright Act 1968 (“the Act”). Pursuant to s.35(2) of the Act, the author of a literary work, subject to certain exceptions, owns the copyright in the literary work. Sub-section 35(2) of the Act states:
(2) Subject to this section, the author of a literary, dramatic, musical or artistic work is the owner of any copyright subsisting in the work by virtue of this Part.
One of the exceptions arises where the author is an employee. Subsection 35(6) of the Act provides that:
(6) Where a literary, dramatic or artistic work to which neither of the last two preceding subsections applies, or a musical work, is made by the author in pursuance of the terms of his or her employment by another person under a contract of service or apprenticeship, that other person is the owner of any copyright subsisting in the work by virtue of this Part.
Accordingly, the first question which arises in this case is whether the respondent was an employee of the applicant or an independent contractor when he wrote The Program. The contract between the parties was not in writing. There was no allegation by either party that there had been an oral agreement expressly stating that the respondent was either an employee or an independent contractor. Accordingly, the question falls to be determined from an examination of the parties’ conduct and the surrounding circumstances.
In Roy Morgan Research Centre Pty Ltd v Commissioner of State Revenue (Victoria) (1997) 37 ATR 528 at 533, the Court of Appeal of the Supreme Court of Victoria said:
Although technically it remans true that the question whether a person is engaged on a contract of service or for services is one of mixed law and fact, in reality the task of the trial judge in determining that question, on a case like the present one, involves the assessment and evaluation of evidence for the purpose of identification and isolating factors or indicia which are capable of pointing in one direction or the other, and then weighing or balancing those factors in accordance with established principles, none of which is conclusive, in order to reach a conclusion.
There are many relevant factors in determining whether a particular person is an employee or an independent contractor. At one time, the degree of control over the way in which work was to be done was regarded as almost determinative. However, Mason CJ said in Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16 at 24:
[T]he existence of control, whilst significant, is not the sole criterion by which to gauge whether a relationship is one of employment. The approach of this Court has been to regard it merely as one of a number of indicia which must be considered in the determination of that question: Queensland Stations Pty. Ltd v Federal Commissioner of Taxation (1945) 70 CLR 539, at p. 552; Zuijs' Case; Federal Commissioner of Taxation v Barrett (1973) 129 CLR, at p 401; Marshall v Whittaker's Building Supply Co (1963) 109 CLR 210, at p. 218. Other relevant matters include, but are not limited to, the mode of remuneration, the provision and maintenance of equipment, the obligation to work, the hours of work and provision for holidays, the deduction of income tax and the delegation of work by the putative employee.
The relevant factors were further described by the New South Wales Court of Appeal in Vabu Pty Ltd v Commissioner of Taxation (1996) 33 ATR 537 at 538 where the court said:
Whilst it is almost never an easy task to decide whether a given person is an employee or an independent contractor, there is no doubt what the legal tests are. The old test of “control’ is now superseded by something more flexible. This is made clear by the judgement of Mason CJ in Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16, and in the earlier judgment of Dixon J in Queensland Stations Pty Ltd v Federal Commissioner of Taxation (1945) 70 CLR 539.
Learned senior counsel for the respondent, Mr Trew QC, stressed in the course of his submission, that the company always retained a considerable measure of control over the couriers, and that the couriers were employees. Thus, the documents to which I have referred provide that operatives are to be neat and tidy, are to wear uniforms provided by the company, are to replace their vehicles when the company considers them to be unsatisfactory, are to observe a starting time and work a prescribed number of hours, and are not to use foul language on the telephones. They must accept work allocated to them by the company, deliver goods in the manner directed by the company, accept re-routing if told to by the company, and take no more leave than is permitted. The cumulative effect of these conditions certainly gives the company a deal of control over its courier. However, a person may supervise others without becoming their employer.
And there are several considerations which make me think that on balance the couriers are not employees. In the first place, they supply their own vehicles (be they bicycles, motorbikes, cars, utilities or vans). They have to bear the expense of providing for and maintaining these vehicles: they pay for running repairs, petrol, insurance and registration. The company provides telephones, uniforms and signage. The couriers’ expenses are very considerable. To quote McKenna J in Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497 at 526: “the ownership of the assets, the chance of profit and the risk of loss in the business of carriage are his and not the company’s”, a consideration which points to the couriers being independent contractors.
The taxation position of the couriers is also important. The couriers were taxed as independent contractors and not as employees. The gross payments to each carrier were subject to deduction of the 20% Prescribed Payment System tax, which does not apply to employees. In this regard, Mr Trew QC submitted that the tax documents should be disregarded because they are self- servicing declarations by the taxpayer and as such are hardly evidence of anything. This is true, but it misses the point. What is significant is not that the couriers tell the Commissioner that they are independent contractors not employees, but that the Commissioner, presumably after making whatever investigation he deems proper, acquiesces in their description of themselves and taxes them accordingly.
Another indicium is that the couriers have to provide themselves with their own street directories, telephone books, trolley, ropes, blankets and tarpaulins.
Another, very important, indicium is that the couriers receive no wage or salary. Normally, if they were true employers, one would expect a certain sum to be paid each day, week or month. The company’s documents provide for no such thing. They are paid a prescribed rate for the number of successful deliveries they make. It is not, I think, fanciful to say that each courier conducts his own operation, permitting himself for his own economic advantage to be supervised by the company. If this were not so, why would the documents anticipate the courier may use a business name or corporate name if he so wishes? A company does not usually have employee corporations.
Although this part of the case is hardly without difficulty, on the whole I am disposed to conclude that at common law the couriers must be classified as independent contractors.
In the United Kingdom, the fundamental test has been described as one of economic reality. In Market Investigations Ltd v Minister of Social Security [1969] 2 QB 173 at 184, Cook J said the following:
In United States of America v Silk (1946) 331 US 704, the question was whether certain men were “employees” within the meaning of that word in the Social Security Act, 1935. The judges of the Supreme Court decided that the test to be applied was not “power of control, whether exercised or not, over the manner of performing services to the undertaking,” but whether the men were employees “as a matter of economic reality.”
The observations of Lord Wright, of Denning LJ and of the judges of the Supreme Court suggest that the fundamental test to be applied is this: “Is the person who has engaged himself to perform these services performing them as a person in business on his own account?” If the answer to that question is “yes,” then the contract is a contract for services. If the answer is “no,” then the contract is a contract of service. ...
Similarly, in Beloff v Pressdram Ltd [1973] 1 ER 241 at 250, the Court said:
The test which emerges from the authorities seems to me, as Denning LJ said [footnote: in Stephen Jordan and Harrison Ltd v Macdonald and Evans [1952] 1 TLR at 111], whether on the one hand the employee is employed as part of the business and his work is an integral part of the business, or whether his work is not integrated into the business but is only accessory to it, or ... the work is done by him in business on his own account.
In the present case, there are a number of matters suggesting that the respondent was in business on his own account. He had an Australian Business Number (“ABN”). The respondent sent tax invoices to the applicant for the work that the respondent did on The Program. Those invoices bore the respondent's ABN. They also included an amount for GST. Mr Roberts, on behalf of the applicant, admitted that the applicant claimed an input tax credit for the amount of GST charged by the respondent.
The applicant did not advise the Australian Taxation Office that the respondent was an employee of the applicant and did not deduct pay as you go income tax instalments from payments made to the respondent. The applicant did not provide the respondent with annual leave, sick pay, superannuation benefits or workers compensation insurance. The respondent used his own motor vehicle when he travelled to the Salvation Army’s premises and did not receive any petrol, mileage or other allowances from the applicant. The respondent used his own paper for the proposals that he wrote and worked from home. He used his own email account for any communications. He paid for his own telephone calls and received no contribution from the applicant towards his telephone or home office expenses.
The respondent was to be paid a fixed amount irrespective of how many hours he worked. The amounts were calculated by the respondent on the basis that he would charge $55 per hour for his work. However, if he worked more hours than he expected, he was not to be paid more than the agreed amount. To that extent, the respondent took the risk of whether the job would be profitable for him or not. The respondent was free to do the work at whatever times suited him. The respondent was free to take other work with other parties while he was working on The Program and he did so. Mr Roberts did not supervise the respondent on a daily basis. The respondent attended meetings at the Salvation Army without any representative of the applicant being present to supervise him.
In the letter of demand sent to the respondent in December 2005, the applicant's solicitor described the respondent as an independent contractor. Mr Roberts himself in cross examination admitted that the respondent was an independent contractor rather than an employee. While the view that the parties take of the status of the alleged employee can be a relevant matter, I do not regard the description by the applicant's solicitor or the admission by Mr Roberts himself as being matters of any significant weight. It is necessary to consider the substance of the arrangement.
Notwithstanding the matters set out above, the applicant maintains that the respondent was its employee. The first argument put by the applicant is that the respondent must have been an employee because the consequences of the respondent owning the copyright in the program to the exclusion of the applicant and the Salvation Army were so great as to negate any suggestion that the parties intended the respondent to be an independent contractor. The applicant argues that, “[B]usiness efficacy dictates that the parties could not have intended for the relationship to be such that it divested CSM and the Salvation Army of control over the very program they were creating”. The applicant relies on the officious bystander test and says that, if it had been suggested that the respondent would own the copyright in The Program, the parties would have said, “of course not” and therefore the respondent must be an employee.
However, this does not appear to me to be a correct analysis. The ownership of the copyright in The Program, absent other contractual terms, is a consequence of the respondent being an employee or an independent contractor. Whether he is an employee or an independent contractor depends on an assessment of a number of indicia concerned with the nature of the relationship between the parties, including control, integration and whether the respondent is in business on his own account. The copyright consequences of a person being an employee or an independent contractor are not one of the established indicia for determining whether a person is an employee or an independent contractor.
The contract between the applicant and the respondent was essentially for the production of a computer program. It was an oral contract. In such circumstances, a term can be implied for reasons of business efficacy if it is so obvious that it would go without saying. However, even if the parties had said to the officious bystander, “of course he is an employee”, that would not have resolved the matter. It is always necessary to consider the substance of the arrangement. As noted above, the views of the parties are a relevant matter. However, in the circumstances of this case, I do not regard them as being of substantial weight.
For the applicant to succeed in this argument, it would be necessary for the court to imply terms going to the substance of the relationship between the parties. Those terms could not be inconsistent with the known terms of the arrangement and they would need to tip the balance in favour of an employment relationship. The applicant has not identified any terms of that nature that could be implied in the circumstances of this case.
In any event, it seems to me that if an officious bystander had said that the arrangement between the parties was such that the respondent was an independent contractor and would therefore own the copyright in The Program, the parties would probably have attempted to negotiate a term of the contract dealing with the ownership of the copyright. I very much doubt that they would have changed the substance of the arrangement by, for example, agreeing that the respondent would have income tax instalment deductions taken from his pay and would be entitled to annual leave, sick pay and superannuation benefits.
The applicant then argues that there was a considerable amount of control exercised by Mr Roberts over the respondent in the conduct of his work. This was said to be evidenced by the many emails sent by the respondent directly to Mr Roberts or copied to Mr Roberts. However, there appear to be no emails from Mr Roberts back to the respondent telling him how to go about his work. Moreover, the emails on the whole appear to be sent for Mr Roberts’ information rather than for the purpose of Mr Roberts providing any supervision or other input.
In relation to the control argument, the applicant also relied on the proposal for The Program which was prepared by the respondent. In that proposal, Mr Roberts was described as the project manager. It was said in the proposal that Mr Roberts would oversee the project for the applicant, coordinate and manage the applicant's resources, provide weekly progress reports to the Salvation Army and review and undertake quality assurance work undertaken by the applicant. In the proposal, the respondent described himself as the applicant's development manager for the project and said that he would develop the project plan, develop solutions architecture, coordinate and manage the applicant's development resources, be responsible for development documentation, supervise and contribute to development, resolve technical issues and be responsible for project implementation.
The respondent gave evidence on oath that Mr Roberts provided negligible supervision. I accept that evidence. For much of the relevant time, Mr Roberts was working full time at Eastern Ocean, and then worked part time for that company. There was nothing before the court that indicates that Mr Roberts contributed in any substantial way to the preparation or production of The Program or the proposal for the project.
Having said that, Mr Boyle of the Salvation Army gave evidence which I accept that he and Mr Roberts spoke frequently and at length by mobile telephone when they were driving home from work. I have no doubt that Mr Roberts had a major role in the interface with the client and the overall direction of the project. However, I do not accept that Mr Roberts had the technical know how to effectively supervise the respondent in the writing of The Program, which was in the .NET language, or to provide quality assurance in relation to The Program. Mr Roberts admitted that he did not, at the relevant time, have any great knowledge of the .NET environment. This being so, I do not accept that he could have exercised any detailed control over the design of the project.
The applicant in relation to the control argument also relied on a status report prepared by the respondent on 4 June 2004. That report sets out the various tasks that needed to be undertaken in connection with the project and specified who was responsible for each task. There were numerous tasks that the respondent alone was responsible for including the building and implementation of The Program. There were no tasks that Mr Roberts alone was responsible for.
Mr Roberts and the respondent were together responsible for the business model design. This is a matter that concerns the overall direction of the project rather than how The Program should be written. It does not appear to me to be indicative of control of the manner of work in relation to the writing of The Program. Similarly, Mr Roberts, Mr Boyle and the respondent were jointly responsible for design sign off. Again, this is a matter which concerns the overall direction of the project. Mr Roberts and the respondent and in some cases Mr Boyle were nominated as being responsible for the testing of the programs that were produced. Mr Boyle was the client. The respondent gave evidence that he was not aware that Mr Roberts did any of the testing and that in fact the respondent did the testing. The respondent said that Mr Roberts did a limited amount of project management. I accept that evidence. It seems to me that Mr Roberts’ role was not technical but in the nature of client relations and the overall direction of the project.
Accordingly, I do not accept the applicant’s argument that Mr Roberts exercised any appreciable level of control over the work done by the respondent in relation to the writing of The Program. Of course, in the case of a highly skilled person such as a computer programmer, the absence of control over the manner of work is not taken as being a significant factor against the proposition that the person is an employee: Zuijs v Wirth Brothers Pty Ltd (1955) 93 CLR 561 at 571.
On the other hand, I do accept that Mr Roberts exercised a measure of control over the overall direction of the project. As it happened, the respondent was engaged not only to write The Program, but also to work on the design of the proposal for the project as a whole. I consider that Mr Roberts exercised a measure of control over the work done by the respondent on the design of the project but not in relation to the writing of The Program itself.
The applicant then argues that the respondent was integrated into the applicant's business in that the respondent did major work on the applicant's project with the Salvation Army. The work undertaken by the respondent on behalf of the applicant may have been a very substantial project for the applicant. However, that does not necessarily suggest that the respondent was an employee. There is no reason that an organisation could not engage independent contractors to undertake virtually all of its work. I do not consider this to be a significant factor in the context of this case.
The applicant then argues that the integration of the respondent is demonstrated by the fact that the respondent was able to act directly on the instructions of the Salvation Army without on each occasion securing the agreement of the applicant. The applicant argues that an independent contractor could not behave in that way without breaching his contract whereas an employee could. I do not accept this argument. It seems to me that in the case of both employees and independent contractors, there could be certain sorts of work which they might be authorised to accept without reference to their principals or employers. In the present case, the respondent was clearly authorised by the applicant to act on the instructions of the Salvation Army. This fact does not appear to me to indicate either that the respondent was an employee or that he was an independent contractor.
In relation to the integration test, the applicant argues that in D & D Tolhurst Pty Ltd v Commissioner of State Revenue (1997) 38 ATR 1001, the investment advisers were found to be employees because when they dealt with the company's clients they bound the company and were thus part of the business. The applicant says that is the situation that arose in the present case. This point was dealt with at page 1013-4 of Tolhurst where it was said that:
[31] Mr Berglund submitted that the conclusion to be drawn from the many authorities is that there is no single determinative factor to be considered in ascertaining whether a relationship is one of employer and employee or principal and independent contractor. Rather, it is the totality of the relationship between the parties which must be considered and (within the totality) relevant indicative factors. Mr Berglund then directed attention to what he submitted were the relevant indicative factors in this case. The first of those, he submitted, was the fact that the investment advisers have no business beyond the business of Tolhurst. That is to say, whilst they think of the clients with whom they deal as their own clients, and deal only with their own clients, all of those clients are clients of Tolhurst and all of the business which is transacted with those clients is transacted on behalf of Tolhurst. Thus it was submitted, and I agree, if one applies what is sometimes called the “whose business test” to the facts of this case, it yields the answer that the business which is conducted by the advisers is the business of Tolhurst: cf Stevens, at CLR 35; Market Investigations Ltd v Minister of Social Security [1969] 2 QB 173 at 184-5; Bailey v Victorian Soccer Federation [1976] VR 13 at 32-3.
The present case is somewhat different in that the respondent was free to have other clients and was free to transact business with them separately from his business with the applicant and separately from any business the applicant might have with them. More particularly, the respondent was free to transact other business with the Salvation Army and did so. The essential point in Tolhurst was that the investment advisers did not conduct business on their own account because all of the business they conducted was conducted on behalf of Tolhurst. The present case is different, because the respondent was able to and did conduct other business on his own account, even if he sometimes conducted business on behalf of the applicant.
In relation to integration more generally, I note that in the case of Beloff v Pressdram Ltd, it was held that the plaintiff, who was a journalist, was integral to the business of The Observer in circumstances where she was employed as a permanent, full-time member of staff who received an annual salary and was entitled to a pension and regular holidays. She was supplied with equipment and resources such as a typewriter, office and secretary. She did not contribute her own capital and her remuneration was not affected by the profitability of the newspaper. The present case is quite different. The respondent did not have many of the rights or benefits commonly enjoyed by employees, such as an annual salary, holiday pay and a workspace at the applicant’s premises. In all the circumstances, I do not consider that the respondent was integrated into the business of the applicant to a significant degree.
The applicant then points out that all the cases in this area turned on their own facts. The applicant notes that the cases show that a person can be an employee where he does not have regular hours of work, or where he works for others as well, or where he works wherever he chooses, or where there is no capacity to give him instructions, or where he works for a fixed fee or a commission, or where a formal agreement says that he is an independent contractor, or where he receives no holiday pay or sick pay, or where he is only paid on results or where he is not given any superannuation benefits: Market Investigations Ltd v Minister of Social Security [1969] 2 QB 173; D & D Tolhurst Pty Ltd v Commissioner of State Revenue (1997) 38 ATR 1001; Federal Commissioner of Taxation v Barrett & Ors (1973) 129 CLR 395; Roy Morgan Research Centre Pty Ltd v Commissioner of State Revenue (Victoria) (1997) 37 ATR 528.
The applicant says that there are a number of other factors which point to the respondent being an employee. Firstly, it is said that the respondent had no separate business as an independent contractor and had never previously worked as an independent contractor. It is a fact that the respondent, before entering into the arrangement with the applicant, had not succeeded in obtaining any work as an independent contractor. However, the question of whether the respondent had a separate business as an independent contractor at the relevant time is a matter to be determined by the court in the light of all the evidence.
The applicant says that the respondent had none of the tools required for stage one of the project. It was agreed that the applicant provided to the respondent a computer with the 2002 version of the home collection program installed on it. The applicant also provided to the respondent some other development software. This is a factor that tends to suggest that the respondent was an employee.
The applicant also says that it had a past pattern of employing programmers on an ad hoc part-time basis and no facilities for employees to work at its office. I am not satisfied that the applicant had previously employed programmers. The terms under which the applicant had engaged programmers previously were not before court. Mr Roberts displayed in cross-examination a very loose understanding of the notion of being an employee. He said that a photographer who was paid for producing a series of photographs would be an employee of the person who commissioned the photographs. In these circumstances, I am unable to accept his claim that the applicant had previously employed programmers under contracts of service.
The applicant says that the nature of the computer programming industry in boutique operations is that the programmers are taken on for specific jobs, they work agreed hours and they work from their homes as employees. I do not accept Mr Roberts’ evidence on this issue because I do not accept that he appreciates the difference between an employee and independent contractor. Similarly, I do not give any significant weight to Mr Boyle’s evidence that the respondent was an employee. He said, for example, that the respondent at all times took instructions from the applicant and worked under the immediate direction and scrutiny of Mr Roberts. That is, at best, a gross overstatement. The respondent generally worked at home alone or at the Salvation Army premises at times when Mr Roberts was at work some kilometres away at Eastern Ocean.
I also consider that general evidence that the industry practice is that computer programmers are generally employees, where the actual terms of the arrangements between the programmers and the alleged employers are not in evidence, is not particularly useful. The question of whether a particular person is an employee often involves a consideration of a large number of factors and a careful balancing exercise. The opinions of people in the industry about whether programmers in general are employees do not significantly assist with the question of whether the respondent is an employee.
The applicant says that there was no tender or quote for a specific job. It is correct that the applicant did not put the project out to tender. However, that was a choice that the applicant made in circumstances where Mr Roberts apparently decided to give some work to a friend. The absence of a tender process in the circumstances of this case does not indicate that the respondent was an employee. In my view, it is not correct to say that there was not a quote for specific work. The respondent did in fact specify that he would charge certain amounts for each of stage one and stage three and a certain amount once the parameters of stage two were determined. This is tantamount to a quote.
The applicant says that the respondent was paid per hour over an agreed number of hours. However, that is not correct. The respondent was to be paid a fixed amount which he had calculated by reference to his estimate of the number of hours the job would take. He was not engaged on the basis that, if the job took more hours than he had estimated, he would be paid for those additional hours. The respondent said that he had estimated that stage one would take 360 hours and in fact he spent about 690 hours on it. He did not charge for the additional hours and there was no suggestion that he was entitled to charge for them.
The applicant refers to the respondent's tax invoice dated 22 September 2004 for the Williamstown Server Configuration. This invoice shows that the respondent charged the applicant for 21 hours at the rate of $50 per hour. However, the respondent gave evidence that this invoice was for work outside the scope of the principal project and that it was separately agreed that the respondent would do this work at the agreed hourly rate. I accept that evidence.
The applicant argues that computer programming is cooperative work and that to the extent possible, the respondent was under the supervision of Mr Roberts. I do not accept this argument in its entirety. I accept, as noted above, that Mr Roberts exercised some control over the respondent in relation to the overall direction of the project. However, Mr Roberts did not have the technical skill to effectively supervise the writing of The Program itself. Based on evidence given by the respondent about the sorts of supervision he had exercised over programmers in his team at the National Australia Bank, I consider that a more experienced programmer is able to look at a program written by a less experienced programmer as it is being written and provide guidance and, if appropriate, correction. Mr Roberts did not do this.
The applicant argues that it would be catastrophic for the industry if programmers were to own the copyright in the programs they created in situations like the present. The applicant says this was noted by the Copyright Law Review Committee in an extract from a report that was provided to the court. The Copyright Law Review Committee, which is no longer in existence, was a specialist advisory body established in 1983 by the Attorney-General to inquire into and report to the Government on specific copyright law issues. The report referred to by the applicant was published in 1994 under the title, Computer Software Protection.
The extract provided to the court does not refer to any catastrophes. The extract says that the Committee initially proposed that copyright in computer programs be owned by the person who commissioned the project, regardless of whether the author was an employee or an independent contractor. However, after receiving submissions, the Committee decided to recommend that there be no change to existing arrangements. The relevant passage is as follows:
EMPLOYED OR COMMISSIONED AUTHORS
[7.06] The present position is ameliorated to a degree by the provisions of s.35(6) which provides that where a literary work, to which neither of the last two preceding subsections (subsections (4) and (5)) applies, is made by the author in pursuance of the terms of his employment by another person under a contract of service or apprenticeship, that other person, ie, the employer, is the owner of any copyright subsisting in the work. Reference will be made to s.35(4) and (5) a little later. The present position then is that where the author of a program is an employee and it is made in pursuance of the terms of his/her employment, it will be the employer who is the owner of the copyright and not the employee. The Committee is of the opinion that this provision should be retained in relation to computer programs.
[7.07] In its Draft Report the Committee advanced the view that, so far as computer programs were concerned, it would take the position somewhat further. It took the view that no distinction should be made between employees and persons (not employees) who were retained, for example as consultants or independent contractors, to create a program. The Committee saw this as avoiding unnecessary inquiries into whether particular relationships were employment relationships or contractual relationships of a different kind. More importantly, it seemed to the Committee to be more sensible and more equitable to confer ownership on the person who had commissioned the writing of a program rather than upon those, whether employees or not, who were the authors of it. In so saying, the Committee noted that it would, of course, be possible for the parties to any arrangement to reach an agreement providing expressly for the ownership of the copyright. It would be open to them to agree that, notwithstanding the provisions of the legislation, the copyright was to be owned by one or more specified persons, whether the authors, the commissioner or some other person or persons or by persons falling into all or some of these categories. It seemed to the Committee that, if the present s.35(6), insofar as it applies to computer programs, were amended along the lines favoured, a great many of the potential problems which may exist in relation to works of joint authorship would tend to disappear. In the Committee’s view, there would be more certainty and a fairer regime.
[7.08] At least eight submissions commented on the view of the Committee, in its Draft Report, that ownership of copyright in commissioned computer programs should reside with the commissioning party. All of the comments opposed that view. However, reports of public discussion include comments supporting the Committee’s view, as did at least one journal article ([1994] 2 European Intellectual Property Review 78). Also, the Committee did not attach a lot of weight to one of the criticisms of its view, namely, that adoption of original copyright ownership by commissioning parties would set us apart from, and complicate cross-border transactions with parties in, other countries.
Recommendation regarding all authors
[7.09] The Committee has the impression that there is already a variety of approaches around the world to ownership of copyright in works by employed and commissioned authors. Nevertheless, after reviewing the various comments on its Draft Report, the Committee accepted that the task of identifying the author(s) of computer program was not so much more difficult—if indeed more difficult at all—than in the case of some other types of copyright works as to justify a different allocation of copyright ownership from that applying to other works. Accordingly the Committee now recommends against any change to the provisions of s.35(6) in its application to computer programs (Recommendation 2.05).
In any event, even if there were unsatisfactory consequences for at least some parts of an industry if the authors of computer programs were not employees, that would not mean that the respondent was an employee. It would simply mean that thought should have been given at the outset of the project to the ownership of the copyright in The Program and an appropriate agreement should have been negotiated.
The applicant then notes that the respondent gave evidence that he realised after the terms of the contract with the applicant were formed and at the time that he began drafting The Program that it could be adapted for use by other call centres and he formed the intention to exploit The Program for that purpose. The applicant said that the respondent did not suggest that he had ownership of The Program until 2 November 2005 when he sent an email to the applicant saying that he wished to discuss payment for the IP. The respondent said that he raised the issue of IP with Mr Roberts in August 2004 at the Groove Lounge when he claims to have said that he “wanted the IP”. The applicant says that this form of words in itself indicates that the respondent knew that he did not own the copyright in The Program and says further that there was no such meeting and no such discussion.
However, this evidence does not greatly assist in determining whether the respondent was an employee or an independent contractor but goes primarily to the consequences of the determination of that question. As noted above, whether the parties thought the respondent was an employee or an independent contractor is not a particularly significant factor in the context of this case. Similarly, whether the parties appreciated at the outset the copyright consequences of the arrangements that they made between themselves does not assist in determining whether the respondent was an employee or an independent contractor.
The applicant then notes that the proposal drafted by the applicant said at the beginning, “The information in this proposal is proprietary and it is for the sole use of Centrestage Management in conjunction with Salvation Army Family Stores.” The applicant says this statement is an acknowledgement that the proposal and therefore The Program were owned by the applicant and that therefore the respondent was an employee. Again, in my view, this evidence does not greatly assist in determining whether the respondent was an employee or an independent contractor. At most, it might indicate what one of the parties might have thought the relationship was and that is not in this case, in my view, a matter of significant weight.
Finally, the applicant notes that the respondent describes himself in the proposal as “Centrestage Management Development Manager”. The applicant says that this means that the respondent acknowledged that he was not an independent contractor but that he occupied a position as a designated employee of the applicant. In my view, that reads too much into the title the respondent gave himself. The proposal was to be provided to the Salvation Army. As between the applicant and the Salvation Army, the respondent was on the applicant's team. That was sufficient to explain the respondent's description of his position. The description does not seem to me to indicate that the respondent was holding himself out as an employee. In any event, it would only be evidence of his view at the time. As previously stated, I do not consider the views of the parties, or even their solicitors, to be of significant weight in the context of this case.
Taking into account all of the matters mentioned above and considering the matter as a whole, it is clear to me that the respondent worked for the applicant as an independent contractor. The respondent had his own ABN. He charged the applicant GST. The applicant claimed an input tax credit for the GST. The applicant did not conduct pay as you go income-tax instalment deductions from the amounts paid to the respondent. The respondent charged the applicant a fixed price for the work. The respondent was given no holiday pay, sick pay, superannuation or workers compensation insurance. The respondent was free to take other work and did including other work from the Salvation Army. The respondent, in my view, was clearly in business on his own account. Notwithstanding that Mr Roberts exercised some control over the overall direction of the project, and the respondent was doing a major job for the applicant, the respondent was not an employee.
Implied term
The applicant then argues that even if the respondent were found to be an independent contractor, for reasons of business efficacy, the law of copyright implies a licence for the person who paid for the work for a particular purpose to use it for that purpose. The applicant referred to De Garis & Anor v Neville Jeffress Pidler Pty Ltd (1990) 18 IPR 292 at pages 302 to 303 where it was said that:
If copyright material is produced for a particular purpose, then there is an implied permission or consent or licence to use that material to carry out that purpose: see R & A Bailey & Co Ltd v Boccaccio Pty Ltd (1986) 4 NSWLR 701 at 711; 77 ALR 177.
The applicant referred to Beck v Montana Constructions Pty Ltd (1963) 80 WN (NSW) 1578 at 1582 where Jacobs J said:
I think it is a principle which can be found to be applied in a number of cases. It relates to permission or consent to what must have been taken to have been within the contemplation of the parties at the times of the engagement. After all, it must be borne in mind that it is the engagement which brings the copyright material into existence.
When that principle is applied in the present case it seems to me to be inevitable that one should conclude that the payment for sketch plans includes a permission or consent to use those sketch plans for the purpose for which they were brought into existence, namely, for the purpose of building a building in substantial accordance with them and for the purpose of preparing any necessary drawings as part of the task of building the building.
The applicant also referred to the New Zealand case of Pacific Software Technology Ltd v Perry Group Ltd [2004] 1 NZLR 164. In that case it was ordered that an independent contractor deliver up the source code for a particular computer program it had written. However, that result was apparently dependent in part on the terms of s.21 of the Copyright Act 1994 (New Zealand) which provides that a person who commissions the making of a computer program is the first owner of the copyright in the program. As there is no equivalent of that section in the Australian Act, I do not consider that Pacific Software Technology provides useful guidance in the present matter.
The applicant argues that it is an agreed fact that The Program was created for the purpose of updating the Salvation Army's home collection program. Part of that purpose was to enable the Salvation Army to use The Program. The respondent maintains that he was engaged to produce an executable program and says that he has provided that program to the Salvation Army via the applicant. The respondent says that the Salvation Army can use The Program. The applicant says that The Program does not work properly and that if the applicant were provided with the source code for The Program, the applicant could make the necessary modifications.
While there can be little doubt that both the applicant and the Salvation Army have an implied licence to use The Program, that licence does not extend, in my view, to a right to ownership of the copyright in The Program or the delivery up of the source code of The Program. Having the source code of The Program would enable the applicant or the Salvation Army to modify the program and adapt it for the future needs of the Salvation Army. However, it can be used for its original purpose in the form that the respondent provided, subject to the alleged defects in The Program. I do not consider that an implied licence to use a computer program extends to the licensee being put in a position to amend it for possible future uses, or to correct any alleged defects in it. The cases referred to by the applicant, except the New Zealand case, do not go as far as the applicant suggests.
In any event, I am not satisfied that there were any defects in The Program. It appears that the Salvation Army is not using The Program. However, the respondent said that Mr Boyle from the Salvation Army had tested stage one of The Program after it was installed on five or six computers in the call centre and had approved stage one of The Program on 25 February 2005. Mr Boyle now says that he should never have approved stage one. Nevertheless, it was pleaded by the applicant and admitted by the respondent that stage one of The Program was paid for in three instalments, the last in or about March 2005. There is no doubt that stage one was tested and paid for. It would be surprising if it had been tested and paid for when it did not work.
Moreover, the respondent said and I accept that he had never been directly advised of any defects in The Program until he received the letter of demand dated 7 December 2005. That letter of demand says that the program is “not functioning properly” without specifying any particular problems. There is no document that was previously sent to the respondent recording any complaints about The Program.
Mr Boyle sent an email to Mr Roberts on 31 January 2005 complaining of delays and asking Mr Roberts to advise the respondent of the direction to take, or to take responsibility for the production of The Program or to advise that the task was too difficult. This email does not indicate that stage one of The Program, which was subsequently tested and paid for, is defective. Mr Boyle said squarely in evidence that he did not advise the respondent directly of any defects in The Program.
Additionally, the emails that precipitated this dispute did not mention any defects in The Program. About six months after the last payment for stage one of The Program, Mr Roberts sent an e-mail to the respondent on 7 November 2005 which began by saying that
Mr Roberts had been unaware that the respondent had been seriously ill. This was apparently a reference to the heart attack suffered by the respondent in July 2005. The email then said:
I have to look at the Home Collection's database for the Salvos as they are reassessing what they would want to do with their call centres. Is it possible for you to e-mail me the project files or if too big I can drop by to collect them. I will have to get a backup of the SQL database as well but I can get this from Williamstown.
About two weeks later, on 21 November 2005, Mr Roberts’ wife sent another email to the respondent which again referred to his state of health and then said:
I refer back to David’s e-mail dated 7 November 2005, regarding the home collections database to which we have not heard from you. I hope there is nothing serious. As this is extremely urgent, could I please pick this up tonight as I am working in your area today.
In neither of these emails was there any suggestion that The Program contained any defects or that the applicant needed The Program for the purpose of correcting any defects. I consider that it is likely that the request for The Program would have mentioned defects if there had been any, especially as that request was made about six months after the approval and final payment. Instead, the request for The Program alluded to the Salvation Army contemplating a change of approach with their call centres.
The respondent also said that he regarded himself as responsible for The Program and for correcting any defects in it. That accords with the usual situation where a manufacturer would correct defects in a product under warranty that had been supplied and paid for. If there had been any defects in The Program, the usual course would have been to identify them and give the respondent the opportunity to rectify them. That has not occurred in this case. All in all, as stated above, I am not satisfied that The Program is defective.
My view that an implied licence to use a computer program in general does not extend to the licensee being put in a position to amend the program for possible future uses also seems to me to coincide with the particular circumstances of this case. The question of the future dealings with The Program was addressed in evidence. The respondent said that he agreed to do the work at a particular rate because he expected to do the ongoing maintenance work for The Program. Mr Roberts was cross examined about this issue. He initially said that The Program would need to be maintained and that he discussed with the respondent the possibility of him being involved in the ongoing maintenance, depending on how things “panned out”. Mr Roberts then said that the respondent was to provide backup for Mr Roberts.
Later, the following exchange occurred:
I put it to you that he agreed to write this program for the rate that he did because it involved ongoing work. Do you have a comment in relation to that?---He may have agreed to the rate because he - there may have been the possibility for ongoing work, but there's no guarantee.
It was discussed, the ongoing work?---It was discussed that there could be.
The maintenance work was discussed too. He wrote the code, it made sense. Is that correct? It was discussed?---It was discussed that there would be - there may be some support that came from that, yes.
His position is that it was not only discussed but that it was agreed that he would maintain it. What do you say to his position?---No, because if the Salvation Army choose not to use the program any more he wouldn't be maintaining it so ‑ ‑ ‑
I agree with that?--- - - - so, no.
I'm talking about the discussion that you had with him. Let's leave the Salvation Army out of it?---Okay.
I put it to you that you had a discussion with Mr Riedle where it was agreed that he would do the ongoing maintenance on the program?---No, it was agreed that he would provide support to me on the maintenance of the program; that he would be my support because I needed backup for me.
Let's talk about that. When you say "support" you're saying that the contract would be held with CSM for the maintenance ongoing?---Yes, that's correct.
Mr Riedle would support CSM in relation to the maintenance?---In relation to anything that we ‑ ‑ ‑
Anything. So there would be an ongoing role for Mr Riedle?---There could be.
I put it to not that there could be, but that there was going to be an ongoing role for Mr Riedle?---There may not have been because the Salvation Army were changing what they wanted to do.
… The question was a very simple one, that it was discussed between you and Mr Riedle that he would have an ongoing role in the maintenance and support of the program that he had written?---No.
I put it to you that that's not correct and that Mr Riedle's version of that is correct. Do you agree or not agree?---I disagree with you.
In the light of this evidence, I find that the question of future maintenance and modification of The Program was discussed and it was agreed between the applicant and the respondent that, if the Salvation Army continued to use The Program and required any future work on it, the respondent would do that work on behalf of the applicant. Neither the applicant nor the respondent considered that the Salvation Army would do any future maintenance or modification of The Program without the assistance of the applicant, as it would have been able to do if it had been entitled to the source code. This reinforces my view that there was no implied licence that extended to the Salvation Army being entitled to the source code.
Copyright
The applicant initially claimed that it was the owner of the copyright in the 2002 version of the Salvation Army's home collection program and was therefore the owner of the version that constituted The Program. The respondent argued that the applicant was never the owner of the copyright in the 2002 version of the Salvation Army's home collection services program and therefore cannot assert ownership of the updated program prepared by the respondent regardless of how similar it might be to the 2002 version. In short, the respondent argued that, once it is accepted that he was not an employee, the applicant has no standing to bring a copyright claim in respect of The Program.
The respondent bases this argument on the fact that the 2002 version was created by Mr Roberts before the applicant was incorporated on
18 November 2003. Mr Roberts created the 2002 version as an employee of AAS. The opening page of the 2002 version shows that AAS asserted copyright in it. However, under cross examination, Mr Roberts said that the copyright in the 2002 version was assigned to the Salvation Army and Mr Boyle said that the Salvation Army “owned all the rights” in the 2002 version.
In response to this argument, the applicant refers to s.126 of the Act which states that:
In an action brought by virtue of this Part:
(a)copyright shall be presumed to subsist in the work or other subject‑matter to which the action relates if the defendant does not put in issue the question whether copyright subsists in the work or other subject‑matter; and
(b)where the subsistence of the copyright is established--the plaintiff shall be presumed to be the owner of the copyright if he or she claims to be the owner of the copyright and the defendant does not put in issue the question of his or her ownership.
In the present case, the applicant pleaded that Mr Roberts wrote the 2000 version of the home collection program on behalf of the applicant and pleaded that the applicant was and remains the proprietor of the copyright in that program. The applicant also pleaded that between 2000 and 2003, Mr Roberts updated that program on behalf of the applicant. In his defence, the respondent said he did not admit these allegations.
The applicant says that the non-admission is insufficient to put in issue the ownership of the copyright in the 2002 version. The applicant refers to Order 11 rule 10, 13(3) and 18 of the Federal Court Rules 1979 which state:
Rule 10: Matters for specific pleading
In a pleading subsequent to a statement of claim a party shall plead specifically any matter of fact or point of law (for example, performance, release, any relevant statute of limitation, fraud or any fact showing illegality) that:
(a)the party alleges makes a claim or defence of the opposite party not maintainable;
(b)if not specifically pleaded might take the other party by surprise; or
(c)raises issues of fact not arising out of the preceding pleading.
Rule 13 (3): Admissions and traverse
Subject to subrule (4), every allegation of fact made in a statement of claim or counterclaim which the party on whom it is served does not intend to admit must be specifically traversed by him in his defence or defence to counterclaim, as the case may be; and a general denial of such allegations, or a general statement on non-admission of them is not a sufficient traverse of them.
Rule 18: Denial to be substantial answer
When a party in any pleading denies an allegation of fact in the previous pleading of the opposite party, he must not do so evasively or generally, but must answer the point of substance, in accordance with rule 13 of this Order.
In my view, the respondent's non-admission of the applicant's claim to be the owner of the copyright in the 2002 version of the home collections program is sufficient to put that question in issue, at least in the Federal Magistrates Court. Under Rule 1.05 of the Federal Magistrates Court Rules 2001 (“the FMCR”), this court has a discretion to apply the Federal Court Rules where our own rules are insufficient or inappropriate. The FMCR do not presently provide for pleadings. By Rule 1.05(3)(b) of the FMCR, some of the Federal Court Rules are specifically applied in this court. Those rules do not include the pleading rules. By Rule 1.06 of the FMCR, any of the rules of this court can be dispensed with. Rule 1.03 of the FMCR states that an object of the rules is to help the court operate informally and requires the parties to avoid undue technicality.
The requirement in the rules of this court that matters be dealt with informally and without undue technicality suggests that it would not be appropriate to import the intricacies of the pleading rules that may be desirable in the Federal Court. In the circumstances of this case, I decline to apply the pleading rules nominated by the applicant in this proceeding.
In any event, Mr Roberts, on behalf of the applicant, resiled from the claim that the applicant owned the copyright in the 2002 version. He said that the copyright was assigned to the Salvation Army, impliedly by AAS in 2002. The applicant then argued that, notwithstanding Mr Roberts’ evidence, the copyright in the 2002 version was not assigned to the Salvation Army because, pursuant to s.196 of the Act, an assignment of copyright can only be effected by writing signed by or on behalf of the assignor. Section 196 of the Act states:
(1)Copyright is personal property and, subject to this section, is transmissible by assignment, by will and by devolution by operation of law.
...
(3)An assignment of copyright (whether total or partial) does not have effect unless it is in writing signed by or on behalf of the assignor.
The applicant argued that there was no assignment in writing. The evidence relied upon for this argument was that all relevant documents had been discovered and there was no written assignment in the discovered documents. I cannot accept this argument. It is commonplace in litigation that relevant documents are not discovered. In any event, the admission that there was an assignment obviates the need, in this proceeding, for the production of a written assignment. The time to deal with this issue was in re-examination when Mr Roberts could have been asked how the assignment of the copyright in the 2002 version was effected. That would have enabled some evidence of the matter to be obtained.
Furthermore, the applicant’s chronology filed on 16 May 2007 states that an email was sent by Mr Roberts to the Salvation Army on
12 August 2002 “confirming copyright in home collection program belongs to the Salvation Army”. That email is exhibit DR13A to the affidavit sworn by Mr Roberts on 30 October 2006. It appears to be sent from an AAS email address and actually says:
… Please note that you (SAFS) will be the owners of the code for this database.
…
Please keep in mind that at the end of this, SAFS will own the entire database including the source code.
The email was not signed in the traditional sense. However, I consider that an email with the usual sign off for an email would be sufficient for the purposes of s.126 of the Act, provided that the provenance of the email was properly established. There is no doubt in this case that the email was sent by Mr Roberts.
However, the email of 12 August 2002 is not an assignment of copyright as such. Rather, it is a quotation for the construction of a database. The effect of the passages set out above is that it was a term of the contract between AAS, as an independent contractor, and the Salvation Army, that the Salvation Army would own the copyright in the computer program produced by AAS pursuant to the quotation. Such a term is probably effective to give ownership of the copyright in the 2002 version of the home collection program to the Salvation Army.
In any event, this is not a proceeding between AAS and the Salvation Army, where the applicant could say that in the absence of signed writing, there was no assignment and the Salvation Army could produce the signed writing, if any. In this proceeding, the respondent, as a third party to the arrangement between AAS and the Salvation Army, is entitled to rely on the admissions made by the applicant to the effect that the Salvation Army was the owner of the copyright in the 2002 version of the home collection program.
Moreover, even if AAS had not assigned the copyright in the 2002 version to the Salvation Army, or contracted on the basis that the Salvation Army would have ownership of the 2002 version from the beginning, it would not mean that the applicant owned the copyright in the 2002 version. The applicant was a separate company from AAS, although Mr Roberts worked for both of them in succession.
Mr Roberts in re-examination gave evidence that the applicant bought the assets of AAS in the context of its winding up, including the copyright in the 2002 version of the Salvation Army’s home collection service. I do not believe this claim. AAS had agreed that the Salvation Army would own the copyright in the 2002 version. I cannot accept that the liquidator of AAS would have sold to a third party copyright in a program that AAS was obliged pursuant to the email dated 12 August 2002 to transfer to the Salvation Army.
There was no documentary evidence in support of the claim that AAS transferred all of its assets to the applicant. More particularly, there was no written assignment signed by the liquidator of AAS put into evidence. Accordingly, pursuant to s.126 of the Act, there was no reason to suppose that AAS did assign ownership of the copyright in the 2002 version to the applicant.
The applicant also argues that the allegation that the Salvation Army owned the copyright was inconsistent with the respondent's claim to be an independent contractor and the owner of the copyright. However, this argument misunderstands the respondent's argument. The respondent argued that the Salvation Army was the owner of the copyright in the 2002 version but not in The Program.
The applicant then argues that the ownership of the copyright in the 2002 version is irrelevant. It was argued that if the applicant did not have the copyright in the 2002 version then Mr Roberts did. That cannot be right. Mr Roberts was an employee of AAS when he wrote the 2002 version and the copyright in any programs he wrote clearly belonged to AAS, subject to any separate contractual arrangement. If the copyright in the 2002 version did not pass from AAS to the Salvation Army, then it remains with AAS, a defunct company.
The applicant then argues that the case is actually about the respondent not having copyright in The Program. However, there can be no doubt that the respondent wrote The Program. As I have found that he did not do so as an employee, he would have copyright in The Program unless it were substantially the same as the 2002 version. Even in that case, the respondent argues, the applicant cannot bring the claim because it is not the owner of the copyright in the 2002 version.
I accept that the applicant is not and never has been the owner of the copyright in the 2002 version. Therefore, only the Salvation Army or AAS could bring the claims predicated on ownership of copyright that are made in this proceeding. Clearly, the Salvation Army and AAS are not parties to the proceeding. In these circumstances, I consider that the applicant’s copyright claims are unsustainable. To the extent that the application concerns ownership of copyright, it must be dismissed.
In relation to the respondent’s application for a declaration that he owns the copyright in The Program, I am concerned that the Salvation Army, which appears to be the owner of the copyright in the 2002 version, is not before the court. There is a view that any declaration I make in this proceeding would only bind the parties. However, Byrne J in Bungay Pty Ltd v Spear (VSC, Byrne J, No 4505/91, 3 October 1991, unreported) referred to the undesirability of a court making a declaration with the consent of some parties where an inconsistent finding might be made in relation to other parties. His Honour refused to grant the declaration in that case.
In the present case, the applicant has put forward evidence and argument to the effect that the changes made by the respondent to the 2002 version of the home collection program were so minor that The Program was not an original work. It may be that the applicant has put forward the best possible case on that issue. However, it is also possible that the Salvation Army might wish to bring proceedings in relation to this issue, and might put forward a better case. In any event, in my view, the Salvation Army ought to have the opportunity to be heard before any declaration is made about the ownership of the copyright in The Program. There is also a very remote possibility that the liquidator of AAS would wish to have the company reinstated so that it might be heard on this issue as well. In all the circumstances, I decline to make any declaration about ownership of the copyright in The Program. However, the injunction sought by the respondent is confined to an injunction against the applicant and its directors, servants and agents. As the applicant can have no copyright in The Program, it is appropriate that such an injunction be issued and I will do so.
Applicant’s claims in contract and conversion
The applicant claims that, in breach of its employment agreement with the respondent, the respondent provided an unworkable program and refused to deliver up the source code. As indicated above, I do not consider that The Program was defective. It was installed and tested and paid for. No complaint was made to the respondent about The Program until he asked for payment for the intellectual property in The Program. As also indicated above, I do not consider that the respondent was obliged under the contract with the applicant to deliver the source code to the applicant or the Salvation Army. I consider that the respondent was retained to produce an executable program which he provided. For the reasons expressed above, there was no implied term or licence requiring him to deliver up the source code. For the same reasons, the applicant’s claim in conversion is not maintainable.
Respondent’s claims in contract
The respondent claims that he has suffered loss and damage being:
a)$6,600 for work done on stage three of the project;
b)$6,600 being the fee that would have been payable for completing stage three of the project;
c)$20,000 that would have been the fee for stage two of the project; and
d)$10,600 per annum, being 20% of the value of the ongoing maintenance work to be completed by the respondent under the agreement.
I do not accept that there was a concluded or definite agreement for the respondent to do the ongoing maintenance work in relation to The Program. The agreement that was made was conditional on the Salvation Army requiring the applicant to do ongoing maintenance and other work on The Program. Moreover, there was no suggestion that any particular fee for the future work was ever discussed. Nor was there any suggestion that there was a discussion of how much time might be needed for the ongoing maintenance of The Program. In these circumstances, I do not accept that there was any concluded or clear agreement for the respondent to do any ongoing maintenance work on The Program, or any particular amount of maintenance work on the program. Accordingly, there was no breach of contract in this regard.
Similarly, there was no concluded or definite agreement about the scope of stage two of the project. The price for that stage was deliberately left undetermined because the scope of the work had not been determined. As the respondent said in the cross-claim, the sum for stage two “would be determined once the scope and requirements of this stage had been determined with SAFS”. While the applicant and the respondent had agreed in principle that the respondent would work on stage two for a price, that price was left completely up in the air. Accordingly, there was no binding agreement in relation to stage two of the project. At most, there was unenforceable agreement to agree. This conclusion is reinforced by the last sentence of the executive summary of the proposal dated 13 May 2004. It said, “A fixed price contract will be offered for Release 2 when the Scope and Business Requirements have been finalised.” A fixed price contract for stage two was never offered.
In relation to stage three of the project, I consider that the contract between the applicant and the respondent was conditional upon the continuation of the contract between the applicant and the Salvation Army. By December 2005, it was clear and that the Salvation Army no longer wished the applicant to upgrade the home collection services program at least if the respondent was involved. The project had taken much longer than anyone had anticipated and had caused a great deal of frustration. The reasons for this, in my view, were partly that Mr Roberts did not have the necessary skills to design and supervise the project, partly that the respondent did not have the necessary skills at the outset to design and implement the project, partly that the respondent was unwell in the latter part of 2005 and partly that the Salvation Army's existing computer system presented some unforeseen problems.
The interplay of these factors presents some complicated issues in contract law which were not explored by counsel for the parties in their submissions. Nevertheless, without going into a detailed analysis of the legal consequences of each factor, I consider that the respondent had no contractual entitlement to be paid for the whole of stage three when he did not complete stage three and when the agreement between the applicant and the Salvation Army for stage three was terminated.
That leaves the question of payment for the work done by the respondent in relation to stage three. He has claimed $6,600. At $55 per hour, that claim represents 120 hours work. At eight hours per day, that would equal 15 days or three working weeks.
The evidence is that the respondent began work on the design phase of stage three of the project in or about May 2005 and in June 2005 became ill with the flu. On 21 June 2005, the respondent emailed to Mr Boyle and Mr Roberts a description of the reports that could be programmed from the call centre. He also indicated that he would need to start writing a specification and that he intended to design the reports more fully before they were programmed. Additionally, he said that an event engine would need to be programmed into the call centre program to collect the information for the reports and a number of new reporting tables would be required as well. All of these things were to be part of stage three. An enclosure with the e-mail was a three page sparsely typed document. I do not doubt that it took some skill and knowledge. However, I cannot believe that it would have taken a competent computer programmer more than a few hours to prepare.
On 22 June 2005, Mr Boyle by e-mail said that the proposal for the reports looked fine but asked for a table to be created for certain telephone details to be included. On 24 June 2005, the respondent sent another email to Mr Boyle and Mr Roberts saying that he would create a table to hold the telephone details. I consider that receiving
Mr Boyle's email, considering how to deal with the request and replying by email would not have taken a competent computer programmer more than a matter of minutes.
There is no indication that the respondent did anything else in relation to stage three. In late July 2005 he suffered a heart attack and was hospitalised for two or three days on two occasions. In October 2005, Mr Boyle told the respondent to stop work on stage three as the Salvation Army was making some key decisions in relation to the project.
In the circumstances, I do not consider that the respondent spent more than about five hours on stage three of the project. At $55 per hour, that works out to be $275. I consider that the respondent is entitled to be paid that amount, whether by way of damages or as a form of quantum meruit. There will be orders accordingly. I will hear counsel on the questions of costs.
I certify that the preceding one hundred and one (101) paragraphs are a true copy of the reasons for judgment of Riley FM
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