eBet Ltd v Folino
[2012] FMCA 675
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| EBET LTD & ORS v FOLINO | [2012] FMCA 675 |
| COPYRIGHT – Urgent ex parte application supported by affidavits for orders to restrain the Respondent from reproducing the whole or part of, and making or authorising an adaption of the Applicants’ software – The Applicants’ software was in the possession and custody of the Respondent. PRACTICE & PROCEDURE – Amended Application in a Case seeking to have previous interlocutory and interim orders made in the proceedings vacated – Amended Application dismissed. |
| Copyright Act 1968 (Cth), s.31 Federal Court Rules 1979 (Cth) |
| Anton Piller KG v Manufacturing Processes Ltd [1976] Ch 55 Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 Authors Workshop v Bileru Pty Ltd (1989) 88 ALR 211 Avel Pty Ltd & Multicoin Amusements Pty Ltd (1990) 171 CLR 88 Breen v Williams (1996) 186 CLR 71 Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44 British Steel Corp v Granada Television Ltd [1981] AC 1096 City of Sydney v Streetscape Projects (Australia) Pty Ltd [2011] NSWSC 363 Columbia Pictures Industries Inc v Robinson [1987] Ch 38 Creative Brands Pty Ltd v Franklin [2001] VSC 338 Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588 De L v Director General, New South Wales Department of Community Services (1996) 187 CLR 640 De L v Director General, New South Wales Department of Community Services And Anor (No.2) (1997) 190 CLR 207 Ferguson Corporation Pty Ltd ACN 008 943 646 v Kowalewski [2008] FCA 593 Fletcher v George [2008] FMCA 1624 Hinchcliff v Abu-Dabat (1998) 41 IPR 400 Ice TV Pty Ltd & Anor v Nine Network Australia Pty Ltd (2009) 239 CLR 458 JC Techforce Pty Ltd v Pearce & Ors (1996) 138 ALR 522 Johnson v Mortgage Processing Centre Pty Ltd & Ors [2003] FMCA 483 Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 Mercantile Group (Europe) AG v Aiyela [1994] QB 366 Miltonbrook Pty Ltd v Westbury Holdings Kiama Pty Ltd (2008 71 NSWLR 262 Norwich Pharmacal Co v Customs and Excise Commissioners [1974] AC 133 P Dawson Nominees Pty Ltd v Australian Securities and Investments Commission (No 2) (2009) 255 ALR 466 Paino v Paino (2008) 40 Fam LR 96 Pivotel Satellite Pty Ltd v Optus Mobile Pty Ltd [2010] FCA 121 SmithKline Beecham plc v Alphapharm Pty Ltd [2001] FCA 271 Spencer & Rutherford v Horizons Holdings and Anor [2005] FMCA 1874 Sporte’ Leisure Pty Ltd v Paul’s International Pty Ltd [2009] FCA 445 Stratford Sun Ltd v OM Holdings Ltd; In the matter of OM Holdings Ltd [2011] FCA 414 Television Broadcasting Ltd v Nguyen (1988) 21 FCR 34 Walter Rau Neusser Oel Und Fett AG v Cross Pacific Trading Ltd [2005] FCA 955 Weston v Publishing and Broadcasting Ltd [2011] NSWSC 433 Wilkshire & Coffey v Commonwealth(1976) 9 ALR 325 |
| First Applicant: | EBET LTD ACN 056 210 774 |
| Second Applicant: | EBET SYSTEMS PTY LTD ACN 088 033 121 |
| Third Applicant: | EBET GAMING SYSTEMS PTY LTD ACN 086 218 831 |
| Respondent: | SAM FOLINO |
| File Number: | SYG 544 of 2011 |
| Judgment of: | Lloyd-Jones FM |
| Hearing date: | 5 July 2011 |
| Date of Last Submission: | 5 July 2011 |
| Delivered at: | Sydney |
| Delivered on: | 9 August 2012 |
REPRESENTATION
| Counsel for the Applicants: | Mr J. Hennessy |
| Solicitors for the Applicants: | Samaha & Associates, Solicitors |
| Counsel for the Respondent: | Mr M. Green and Ms B. Oliak |
| Solicitors for the Respondent: | Kennedys, Solicitors |
ORDERS
The Amended Application in a Case filed 1 July 2011 is dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 544 of 2011
| EBET LTD ACN 056 210 774 |
First Applicant
| EBET SYSTEMS PTY LTD ACN 088 033 121 |
Second Applicant
| EBET GAMING SYSTEMS PTY LTD ACN 086 218 831 |
Third Applicant
And
| SAM FOLINO |
Respondent
REASONS FOR JUDGMENT
Introduction
On 24 March 2011, the applicants, eBet Ltd, eBet Systems Pty Ltd and eBet Gaming Systems Pty Ltd, (collectively, “eBet”) filed an application with this court seeking relief under the Copyright Act 1968 (Cth) (the “Copyright Act”) against the respondent, Sam Folino. eBet sought the following final orders and declarations:
Declarations
1. A declaration that the respondent has infringed the second applicant’s copyright in:
a. the Cashier Module; and/or
b. the Membership Module
by
c. reproducing the whole or a substantial part of;
d. making one or more adaptations of;
e. authorising the reproduction of a whole or substantial part of; and/or
f. authorising an adaptation of,
the Cashier Module and/or the Membership Module.
2. A declaration that the respondent has breached his duty of confidentiality to each of the applicants by:
a. using; and/or
b. disclosing,
some or all of the Confidential Information without the consent of the applicants or any of them.
Final Injunctions
3. The respondent, whether by himself, its servant, agents or otherwise, be permanently restrained from:
a. reproducing the whole or a substantial part;
b. making any adaptation;
c. authorising the reproduction of the whole or a substantial part of; and
d. authorising an adaptation,
of the Cashier Module and Membership Module, without the prior written license of the applicants.
4. The respondent, whether by himself, his servants, agents or otherwise, be permanently restrained from:
a. using; and
b. disclosing,
the Confidential Information without the consent of the applicants.
Compensation, damages or account profits
5. An order for equitable compensation or alternatively, at the election of the applicants, an account of profits, for breach of confidence.
6. An order for damages for breach of contract.
7. An order for damages pursuant to s 115(2) of the Act or alternatively, at the election of the second applicant, an account of profits.
8. An order for damages pursuant to s 115(4) of the Act.
9. An order for damages pursuant to s 116(1) of the Act.
Other orders
Interest pursuant to s 76 of the Federal Magistrates Court Act 1999 (Cth).
11. Costs.
Such further or other orders or relief as the Court sees fit.
EBet also sought a number of procedural and interim orders on their application as follows:
Procedural orders
1. Leave be granted to the applicants to file in Court the:
a. application dated 24 March 2011 (Application);
b. affidavit of Tommy Wayne Powers sworn 18 March 2011;
c. affidavit of Alexander Francis Parle affirmed 22 March 2011;
d. affidavit of Ian Frederick Madden affirmed 22 March 2011;
e. affidavit of Anthony Peter Toohey sworn 23 March 2011;
f. affidavit of David James Greenslade sworn 23 March 2011; and
g. affidavit of Rodney David McKemmish sworn 23 March 2011.
(the affidavits in b. to g. above collectively referred to as the Affidavits)
2. The time for service of the Application be abridged to … am/pm on … March 2011.
3. Service of the Application and Affidavits be effected on the respondent by:
a. (other than confidential exhibit “IFM-1”) hand delivery to ‘Etienne Lawyers, Level 56, MLC Centre 19 – 26 Martin Place, Sydney, New South Wales’; or
b. (other than exhibits to the Affidavits) email to ‘[email protected]’; or
c. (other than exhibits to the Affidavits) email to ‘[email protected]’.
4. The proceeding be stood over until … 2011 for hearing of the Applicant’s application for interlocutory relief.
Interim order
Upon the applicants giving the usual undertaking as to damages, order that:
5. Until further order, the respondent, whether by himself, his servants, agents or otherwise, be restrained from:
a. removing any computer or electronic device storage device from his possession, custody or control whether located at [Kiama Downs, New South Wales] or elsewhere;
b. deleting or causing to be deleted any data on any computer or electronic storage device in his possession, custody or control; and
c. taking any step or causing any step to be taken which is likely to impede the recovery of any such data.
Other Interim and interlocutory orders
Upon the applicants giving the usual undertaking as to damages, order that:
6. Until determination of this proceeding or further order, the respondent, whether by himself, his servants, agents or otherwise, be restrained from:
a. reproducing the whole or a substantial part;
b. making any adaptation;
c. authorising the reproduction of the whole or a substantial part; and
d. authorising an adaptation,
of the Cashier Module and the Membership Module, without the express licence of the applicants given after this order is made.
7. Until determination of this proceeding or further order, the respondent, whether by himself, his servants, agents or otherwise, be restrained from:
a. using; and
b. disclosing,
the Confidential Information without the express consent of the applicants given after this order is made.
8. The respondent provide an officer of the applicants, the applicant’s solicitor and the applicant’s computer expert, Rodney McKemmish, with access within 2 days of the making of this Order, between the hours of 9am and 6pm, access to:
a. any computer in the respondent’s possession, custody or control which has been used by the respondent in the period 2000 to date; and
b. any data storage device in the respondent’s possession, custody or control which has been accessed or used by him since 2000 (a. and b. collectively referred to as the Electronic Material),
such access being sufficient to enable those representatives of the applicants to inspect and observe the Electronic Material and to allow Rodney McKemmish to copy any Electronic Material, including by taking or having a forensic image of the Electronic Material, in so far as it is relevant to the Cashier Module, the Membership Module or the Confidential Information (with all such copies to be held by Rodney McKemmish for the purposes of enabling him to prepare the evidence he is to give on behalf of the applicants).
9. By 6pm on Thursday 31 March 2011, the respondent deliver up to Samaha & Associates (attention: Denes Blazer) or such other party as is nominated by the applicants, all copies in his possession, custody or control of:
a. the Membership Module;
b. the Cashier Module; and
c. the Confidential Information.
10. The respondent make, file and serve on the applicants by 4pm on __ March 2011, an affidavit duly sworn or affirmed by him stating, to the best of his knowledge and belief and upon reasonable enquiry:
a. that:
i. all information and items the subject of order 8 have been delivered up in accordance with that order; and
ii. to the extent they have not been so delivered up, what has become of them.
b. providing a list and comprehensive description of all versions and copies of the Membership Module, the Cashier Module and the Confidential Information in his possession, custody or control as at the date of this order; and
c. in respect of all such versions and copies:
i. its location;
ii. the circumstances (including the date and manner) in which it came into his possession or control;
iii. the circumstances in which and purpose for which the respondent has had access to it at any time since June 2003;
iv. the use to which it has been put;
v. the identity and address of each person who, or entity that, has had access to it or received a copy of it or to whom it has been disclosed; and
vi. the circumstances in which and purpose for which each such access disclosure or receipt occurred.
11. Costs.
12. Such further or other orders as the Court sees fit.
The matter was filed and first listed before the Court on 24 March 2011, with Mr Hennessy appearing on behalf of the applicants. The following orders were made:
1. Leave be granted to the applicants to file in Court:
a) The application dated 24 March 2011 (Application);
b) The affidavit of Tommy Wayne Powers sworn 18 March 2011;
c) The affidavit of Alexander Francis Parle affirmed 22 March 2011;
d) The affidavit of Ian Frederick Madden affirmed 22 March 2011;
e) The affidavit of Anthony Peter Toohey sworn 23 March 2011;
f) The affidavit of David James Greenslade sworn 23 March 2011; and
g) The affidavit of Rodney David McKemmish sworn 23 March 2011.
(the affidavits in b. to g. above collectively referred to as the Affidavits).
2. The time for service of the Application be abridged to Thursday 24 March 2011 at 5 pm.
3. Service of the Application, a copy of this Order and the Affidavits be effected on the respondent by:
a) (other than confidential exhibit “IFM-1”) hand delivery to ‘Etienne Lawyers, Level 56, MLC Centre 19-26 Martin Place, Sydney, New South Wales’; or
b) (other than the exhibits to the Affidavits) email to ‘[email protected]’; or
c)(other than the exhibits to the Affidavits) email to ‘[email protected]’.
4. The proceeding be stood over until 10.15am on 29 March 2011 for the hearing of the Applicant’s application for interlocutory relief.
5. Upon the Applicants giving the usual undertaking as to damages until further order, the respondent whether by himself, his servants, agents or otherwise, be restrained from:
a) removing any computer or electronic storage device from his possession, custody or control whether located at [Kiama Downs, New South Wales] or elsewhere;
b) deleting or causing to be deleted any data on any computer or electronic data storage device in his possession, custody or control; and
c) taking any step or causing any step to be taken which is likely to impede the recovery of any such data.
6. Costs of this application be reserved.
The matter came back before the Court on 29 March 2011, with Mr Hennessy appearing for the applicants and Mr Lucarelli appearing on behalf of the respondent. After hearing submissions from both counsel I made the following orders:
Upon the applicants giving the usual undertaking as to damages, order that:
1. Until determination of this proceeding or further order, the respondent, whether by himself, his servants, agents or otherwise, be restrained from:
a. reproducing the whole or a substantial part;
b. making any adaptation;
c. authorising the reproduction of the whole or a substantial part; and
d. authorising an adaptation,
of the Cashier Module and the Membership Module, without the express licence of the applicants given after this order is made.
2. Until determination of this proceeding or further order, the respondent, whether by himself, his servants, agents or otherwise, be restrained from:
a. using; and
b. disclosing
the Confidential Information without the express consent of the applicants given after this order is made.
3. The respondent provide an officer of the applicants, the applicant’s solicitor and the applicant’s computer expert, Rodney McKemmish, with access within 2 days of the making of this order, between the hours of 9am and 6pm with access to:
a. any computer in the respondent’s possession, custody or control which has been used by the respondent in the period 2000 to date; and
b. any data storage device in the respondent’s possession, custody or control which has been accessed or used by him since 2000 (a. and b. collectively to be referred to as the Electronic Material),
such access being sufficient to enable those representatives of the applicants to inspect and observe the Electronic Material and further to allow Rodney McKemmish to undertake non- destructive testing of the Electronic Material and to allow Rodney McKemmish to copy any Electronic Material, including by taking or having taken a forensic image of the Electronic Material, in so far as it is relevant to the Cashier Module, the Membership Module or the Confidential Information (with all such copies to be held by Rodney McKemmish for the purposes of enabling him to prepare his evidence he is to give on behalf of the applicants).
4. By 6pm Thursday 31 March 2011, the respondent deliver up to Samaha & Associates (attention: Denes Blazer) or such other party as is nominated by the applicants, all copies in his possession, custody or control of:
a. the Membership Module;
b. the Cashier Module; and
c. the Confidential Information.
5. Costs of today’s proceedings be reserved.
6. The matter be listed for further directions on Friday 1 April 2011 at 12.30pm.
On 1 April 2011, the matter again came back before the Court. On that day I made the following orders:
1. By 2pm, on 15 April 2011, the respondent deliver up to Samaha & Associates (attention: Denes Blazer) or such other party as is nominated by the applicants, all copies in his possession, custody or control of:
a. The Membership Module;
b. The Cashier Module; and
c. The Confidential Information,
to the extent that the material was not delivered up by him on 31 March 2011 and 1 April 2011 pursuant to Order 4 made on 29 March 2011.
2. The proceedings be stood over until 21 April 2011 for the hearing of the balance of the applicant’s application for interlocutory relief in the form of proposed order 10 of the Application dated 24 March 2011.
3. Costs are reserved.
The following definitions apply within this order:
Membership Module consists of the database management system software (including source code, object code and executable programs), and enhancements and adaptations of it (including versions in other computer languages), which was initially written in Clarion code or language for VIP Loyalty Systems Pty Limited trading as ACE Club & Casino Systems (ACE) for use by gaming venues to electronically track, manage and account for information concerning customers of those venues.
Cashier Module consists of the database management system software (including source code, object code and executable programs), and enhancements and adaptations of it (including versions in other computer languages), which was initially written in Clarion code or language for Paecu Pty Limited trading as Magnetic Design Systems (MDS) for use by gaming venues to electronically track, manage and account for gaming machine payouts to customers of those venues.
Confidential Information consists of all expressions and copies of:
1. source code, object code, and executable programs (including binaries);
2. software design documentation, including data design, software architecture design, interface design and procedural design;
3. test data;
4. database tables;
5. database design documentation, including data dictionary and entity relationship diagrams, test data, database tables;
6. correspondence to or from the respondent, Mr Folino, concerning functionality and testing;
7. performance specifications; and
8. user manuals,
relating to the Cashier Module and the Membership Module and all information derived from any of those things or any part of them, whether maintained in hard copy or electronic form.
On 20 April 2011, the following orders were made with the consent of all the parties:
1. The respondent make, file and serve on the applicants by 4pm on 12 May 2011, an affidavit duly sworn or affirmed by him stating, to the best of his knowledge and belief and upon reasonable inquiry:
a) that:
i) all information and items the subject of order 4 made on 29 March 2011 and order 1 made on 1 April 2011 have been delivered up in accordance with those orders; and
ii) to the extent they have not been so delivered up, what has become of them.
b) providing a list and comprehensive description of all versions and copies of the Membership Module, the Cashier Module and the Confidential Information in his possession, custody or control as at the date of this order; and
c) in respect of all such versions and copies:
i) its location;
ii) the circumstances (including the date and manner) in which it came into his possession or control;
iii) the circumstances in which and purpose for which the respondent has had access to it at any time since 2 June 2003;
iv) the use to which it has been put at any time since 2 June 2003;
v) the identity and address of each other person who, or entity that, has had access to it or has received a copy of it or to whom it has been disclosed, at any time since 2 June 2003; and
vi) the circumstances in which and purpose for which each such access, disclosure or receipt occurred, at any time since 2 June 2003.
2. The directions hearing listed for 21 April 2011 be vacated.
3. The matter be listed for directions on 19 May 2011.
4. Costs are reserved.
…
The matter was next listed before the Court on 19 May 2011. On that date I noted that the respondent had filed and served an affidavit sworn by him, dated 12 May 2011, on the applicants. Counsel for the applicant suggested that the affidavit did not, however, conform with the requirements of Order 1 of the orders made on 20 April 2011, leaving the respondent in breach of that Order. The Court made the following orders:
1. The Respondent make, file and serve on the Applicants by 4pm on 2 June 2011, any supplementary affidavit, duly sworn or affirmed by him:
a) In further compliance with Order 1 made on 20 April 2011; and
b) Otherwise addressing the matters raised by the Applicants in letters written by their solicitors, Samaha & Associates, to the Respondent’s solicitors, Kennedys, on 13 May 2011 and 18 May 2011.
2. The matter be listed for directions on 6 June 2011 at 9:30am.
3. Costs reserved.
The proceedings next came before the Court on 6 June 2011. On that day I made the following direction:
The respondent articulate, in writing, precisely what amendments he considers ought to be made in the existing orders, the reasons for those amendments and the form of the proposed orders, and serve that document on the applicants by 4pm on June 7 2011.
The matter was also stood over for hearing on 5 July 2011 and costs reserved.
The respondent sought an urgent relisting of the matter on 10 June 2011. The respondent sought the listing on the basis of concerns about use of some of the information that had been acquired on the interlocutory basis. They filed in Court an Application in a Case seeking a number or orders (that was amended on 1 July 2011) which was set down for hearing on 5 July 2011. The Amended Application in a Case was in the following terms:
1. The interlocutory orders made by the Court on the following dates be vacated:
a) Order 5 of the orders made on 24 March 2011, save for the Applicants’ undertaking as to damages;
b) Orders 1 to 4 (inclusive) of the orders made on 29 March 2011;
c) Order 1 of the orders made on 1 April 2011;
d) Order 1 of the orders made on 19 May 2011.
(collectively, ‘the Orders of the Court’).
2. In the alternative to order 1, the Respondent’s obligation to make any affidavit (or further affidavit) or to provide any explanation (or further explanation) be set aside, being orders 1(b) and (c) of the orders made on 20 April 2011 and order 1 of the orders made on 19 May 2011.
3. In the alternative to order 2, the Respondent’s obligation to make any affidavit (or further affidavit) or to provide any explanation (or further explanation) be deferred until further order (and after the time at which the Applicants have filed and served a statement of claim and the Respondent has filed a defence).
4. The Applicants shall within 24 hours of these orders deliver up to Kennedys for safekeeping all materials taken or obtained by them in the course of the execution of the Orders of the Court.
5. The Applicants shall not use or divulge to any person any material taken or information obtained in the course of the execution of the Orders of the Court. For the avoidance of doubt, this includes but is not limited to any copies or summaries of the material or information; the affidavits of the Respondent (whether sworn or unsworn); and any information or documents created [as] a result of a chain of enquiry pursued by or on behalf [of] the Applicants following any disclosure made by the Respondent pursuant to the Orders of the Court.
6. The Applicants shall within 24 hours of these orders delete irrevocably any information obtained during the execution of the Orders of the Court. For the avoidance of doubt, this includes but is not limited to any copies or summaries of the material or information; the affidavits of the Respondent (whether sworn or unsworn); and any information or documents created as a result of a chain of enquiry pursued by or on behalf of the Applicants following any disclosure made by the Respondent pursuant to the Orders of the Court.
7. The Applicants shall within 48 hours of these orders provide a verified list to the Respondent of all people who, to the knowledge of its proper officers after reasonable inquiry, have had access directly or indirectly to any material taken or information obtained in the course of the execution of the Orders of the Court. For the avoidance of doubt, access includes but is not limited to access to any copies or summaries (whether written or oral) of the material or information; and the affidavits of the Respondent (whether sworn or unsworn).
8. Order that Mr Rod McKemmish of KPMG:
a. within 48 hours of these orders deliver up to Kennedys all of the material taken or obtained by him in the execution of the Orders of the Court;
b. shall not use or divulge to any person material taken or information obtained by him in the course of the execution of the Orders of the Court. For the avoidance of doubt, this includes but is not limited to any copies or summaries of the material or information; the affidavits of the Respondent (whether sworn or unsworn); and any information or documents created by him or on behalf of the Applicants following any disclosure made by the Respondent pursuant to the Orders of the Court;
c. shall within 72 hours of these orders delete irrevocably any information obtained by him during the execution of the Orders of the Court and any information generated there from. For the avoidance of doubt, this includes but is not limited to any copies or summaries of the material or information; the affidavits of the Respondent (whether sworn or unsworn) and any information or documents created by the Applicants following any disclosure made by the Respondent pursuant to the Orders of the Court; and
d. have not further involvement in the matter, save as permitted with the leave of the Court on proper application.
9. The Applicants’ solicitors immediately advise Mr McKemmish of these orders.
10. The affidavits of the Respondent be removed from the Court file and returned to Kennedys.
11. The Applicants serve a draft pleading on the Respondent which:
a. complies with FCR Order 58 Rule 16 and which otherwise fully pleads each of the copyright works subject of the proceedings and the actions alleged by any of the applicants to constitute infringement of copyright by the respondent and any matters relating to the justification for special relief including s.115(4) and s.116(1) of the Copyright Act within 7 days.
b. Precisely identifies the confidential information the subject of the proceedings, the basis for the existence of an obligation of confidence and the precise basis upon which they allege that the Respondent breached any confidence allegedly owed by him to the Applicants or any of them within 7 days.
12. In so complying with order 11 above, the Applicants shall not use or make any reference to any material taken or information obtained in the course of the execution of the Orders of the Court. For the avoidance of doubt, this includes but is not limited to any copies or summaries of the material or information; the affidavits of the Respondent (whether sworn or unsworn); and any information or documents created as a result of a chain of enquiry pursued by or on behalf of the Applicants following any disclosure made by the Respondent pursuant to the Orders of the Court.
13. The Applicants pay the costs of the Respondent to date.
14. Such other orders as the Court thinks fit.
The matter was next returnable before the Court on 5 July 2011. On that the following order was made:
1. Order 5 of the order made on 24 March 2011 be varied by the deletion of sub-paragraphs 5(b) and (c) thereof, so that from the time of the making this order on 5 July 2011 the restraint upon the Respondent (formerly operating as Order 5) now be in the following form:
Upon the Applicants giving the usual undertaking as to damages, until further order, the Respondent whether by himself, his servants, agents or otherwise, be restrained from removing any computer or electronic storage device from his possession, custody or control, whether located at [Kiama Downs, New South Wales] or elsewhere.
Hearing 5 July 2011
Mr Green, who appeared with Ms Oliak for Mr Folino indicated to the Court that it was necessary for him to read a number of affidavits. However, before proceeding, he indicated his instructions, received that morning, were that Mr Folino was medically unwell and that it would not be of assistance to the Court to have Mr Folino cross-examined or even examined in chief due to the medication he was taking and this was described in Mr Folino’s second affidavit that had been marked confidential. The other matter relevant was that on the afternoon of 4 July 2011 Mr Folino’s legal representatives were served with a 47 page report by Mr McKemmish and that it was necessary for Mr Green and his instructing solicitors to have some time to be able to consider that report in detail and have Mr Folino provide instructions in relation to it. Mr Green stated that, given the lateness of the report and Mr Folino’s state of health at the time, it had not been possible for him to obtain instructions.
Mr Green indicated that the Amended Application in a Case sought to have certain orders of this Court, already made, vacated. Mr Green indicated that if the Court was to vacate the orders previously made the material, obtained as a consequence of the orders, would pass to the possession of his instructing solicitor and that material would not be dissipated. Mr Green claimed that eBet’s case was speculative and would not have access to material until such time as it had properly pleaded its case and made good an application for access to the material, being the material subject to the claim. In this Court, under s.45 of the Federal Magistrates Court Act 1999 (Cth) (the “FMC Act”) discovery is not allowed in relation to proceedings unless the court declares that it is appropriate in the interests of the administration of justice to allow so. The court must be convinced that the gate to s.45 is so triggered. At this stage of the proceedings no declaration has been made in respect of subsection 45(1) of the FMC Act under the provisions of Rule 14.02 of the Federal Magistrates Court Rules 2001 (Cth) (the “FMC Rules”).
Mr Green indicated that the other issues he wished to raise in respect of the Amended Application in a Case were:
a)That Mr McKemmish himself was named in the orders and the affidavit of Mr Milton which he sought to read, deposed to the concerns held by Mr Folino that Mr McKemmish continued to hold Mr Folino’s materials which he used in his consulting practice to generate computer programs for other clients;
b)The manner in which eBet commenced these proceedings was an ex parte application supported by affidavits. That affidavit material did not identify with any degree of certainty the copyright works. Consequently this did not allow Mr Folino to engage sensibly with a plea in the case and understand which copyright works were put in issue and which were not. Mr Folino wished to know the case he had to meet and the justification for an allegation of special damages for conversion;
c)Mr Folino wished to know why material which included user manuals and other materials, made available to third parties in the ordinary commercial course, were now subject to confidentiality orders;
d)In the Amended Application in a Case it was the first time that Mr Folino had an opportunity to put evidence before the Court as to why the kinds of orders that had been originally sought and made were not appropriate. At the time the original orders were made there were matters that were not disclosed or material that was not properly put to the Court in accordance with the principles set out by his Honour Allsop J in Walter Rau Neusser Oel Und Fett AG v Cross Pacific Trading Ltd [2005] FCA 955. Mr Green acknowledged that the hearing on 24 March 2011 was ex parte and the hearing on 29 March 2011, although Mr Folino was represented by counsel, the application was to adjourn the matter so that Mr Folino could obtain proper instructions; and
e)The issue of s.45 of the FMC Act was not the subject of any submissions during the initial hearing. Mr Green contended that there was no attempt to place before the Court the material to satisfy the requirements for s.45 to be triggered. The Court was not taken to the applicability of s.43. There were a number of matters that the representatives of eBet did not take the Court to, being:
i)The agreement placed before the Court was only a draft;
ii)The deed referred to an agreement, which in turn referred to some of its definitions that were not in evidence so the making good of the assignment was not available;
iii)EBet did not refer at all to the facts that Mr Folino provided to one of the original deponents copies of the material; and
iv)It was not disclosed that Mr McKemmish was not merely an independent expert as he was someone who was intimately concerned with the investigation of the material.
Mr Green then provided an outline of each affidavit which he sought to read. Mr Hennessy, appearing for eBet, indicated that he raised objections of relevance to all of the affidavits. I indicated that I would note Mr Hennessy’s objections and conditionally allow the affidavits to be read subject to relevance.
Mr Green read the following affidavits in support of Mr Folino’s application in the case:
a)Affidavit of Sam Folino sworn 13 May 2011 (“First Folino Affidavit”);
b)Confidential affidavit of Sam Folino sworn 13 May 2011 (“Second Folino Affidavit”);
c)Affidavit of Sam Folino sworn 13 May 2011 (“Third Folino Affidavit”) – initial response to Norwich Pharmacal relief;
d)Affidavit of Sam Folino sworn 30 June 2011 (“Fourth Folino Affidavit”) – revised response to Norwich Pharmacal relief;
e)Affidavit of Michael Milton sworn 9 June 2011 (“First Milton Affidavit”);
f)Affidavit of Michael Milton sworn 29 June 2011 (“Second Milton Affidavit”); and
g)Affidavit of Michael Nobbs sworn 8 June 2011 (“Nobbs Affidavit).
Mr Green also tendered the following documents:
a)Transcript of hearing of 24 March 2011; and
b)Transcript of hearing of 29 March 2011.
Mr Green indicated that he sought to tender the affidavits that were read before the Court at the earlier hearings and were identified in the original orders. Mr Green indicated that they were tendered by way of background so that the Transcript references would be available and it recorded the case originally advanced on behalf of eBet. All material was limited to the issues raised by the Amended Application in a Case and not to the proceedings generally as this was an interim application and not the final hearing. The relevant affidavits are:
a)Affidavit of David Greenslade sworn 23 March 2011;
b)Affidavit of Alexander Francis Parle sworn 22 March 2011;
c)Affidavit of Ian Frederick Madden affirmed 22 March 2011;
d)Affidavit of Rodney David McKemmish sworn 23 March 2011;
e)Affidavit of Anthony Peter Toohey (aka Tony Toohey) sworn 23 March 2011; and
f)Affidavit of Tommy Wayne Powers sworn 18 March 2011.
Objection was raised to the content in whole or in part in all of these affidavits on the basis of relevance. I indicated that I noted the objections and would allow the material in on a limited basis. When preparing the written judgment I would consider the submissions and the affidavit material but would reject material if it was not relevant to the Amended Application in a Case.
Mr Hennessy sought to tender the following Transcripts:
a)1 April 2011; and
b)6 June 2011.
Mr Hennessy also sought to tender the following:
a)Affidavit of Rodney David McKemmish sworn 4 July 2011; and
b)Affidavit of Rodney David McKemmish sworn 10 June 2011.
Mr Hennessy indicated that the affidavit of Mr McKemmish dated 4 July 2011 annexed a 46 page report. Mr Green raised numerous objections to the tender of the affidavit and attached report. Mr Green argued that the filing of the affidavit would perpetuate the injustice done to Mr Folino in relation to the orders that had been made by the releasing of material that constituted his confidential material and the receiving of that affidavit should be deferred. Mr Green stated that if the affidavit was to be received on a limited basis there would be substantial objections.
Mr Hennessy indicated that in order to resolve the matter during the scheduled hearing that he would discontinue the tender to avoid an adjournment application in order for Mr Folino’s legal representatives to read, take instructions and seek technical advice on the contents of the report, a course which Mr Folino’s legal representatives indicated they intended to pursue if the tender of the report was still sought.
Mr Hennessy tendered correspondence between the solicitors for the parties during the period of April 2011. This correspondence was marked as Exhibit R1.
Cross-examination of Mr Nobbs
Mr Nobbs is the principal of VIP Loyalty Systems Pty Ltd trading as ACE Club and Casino Systems (“ACE”), a company providing computer support services to the gaming industry. He confirmed that he had made an affidavit for the purposes of these proceedings, sworn on 8 June 2011. Mr Hennessy then cross-examined Mr Nobbs. His evidence was that he wrote the code for the Membership Module in a programming language called DataFlex and this was subsequently moved across to a language called Clarion. Mr Nobbs confirmed that he initially believed that the rights to the Membership Module were owned by ACE and that he had negotiated with a company trading as Magnetic Design Systems (“MDS”) to sell the Membership Module to that organisation but he was not able to locate a signed contract for that deal with MDS. A document annexed to Mr Greenslade’s affidavit was tabled and shown to Mr Nobbs which recorded details of a meeting that took place between Mr Nobbs, Mr Greenslade and Mr John Samaha on 25 November 2010 that contradicted Mr Nobbs’ impression of who the ownership of the software. The document tabled by Mr Samaha was on ACE letterhead and expressed that the full rights to the Membership Module would be granted on the payment of AUD $25,000.
Submissions made on behalf of Mr Folino
Mr Green, in his written submissions, indicated that Mr Folino submitted that the orders under challenge are characterised as follows:
a)Interlocutory (prohibitory) injunctive relief: Order 5 of 24 March 2011 and Order 1 and 2 of 29 March 2011;
b)Search (and seizure) orders: Order 3 of 29 March 2011;
c)Deliver up orders: Order 4 of 29 March 2011 and Order 1 of 1 April 2011; and
d)Interrogatories and mandatory verification: Order 1 of 20 April 2011 and Order 1 of 19 May 2011.
Mr Green submitted that the Court should discharge each of the above kinds of orders and should make orders protecting the material extracted by Mr McKemmish and received by the solicitors acting for eBet.
Mr Green indicated that the challenge takes place at 3 levels.
First, an overarching challenge to the availability of the extraordinary interlocutory relief granted in the context of the originating process and the evidence relied upon by eBet to date. This challenge rests upon what Mr Folino submits were material non-disclosures by eBet prior to obtaining the relevant relief (Walter Rau Neusser Oel Und Fett AG v Cross Pacific Trading Ltd [2005] FCA 955 per Allsop J at [38] and in Weston v Publishing and Broadcasting Ltd [2011] NSWSC 433 per Wall J at [303]).
These non-disclosures were identified as:
a)If properly rendered, the impossibility of establishing a case of infringement on the material put forward having regard to the case set out in the originating process. Mr Green contends that the approach is discussed in Stratford Sun Ltd v OM Holdings Ltd per Foster J; In the matter of OM Holdings Ltd [2011] FCA 414 and the appropriate test for injunctive relief is addressed in the High Court decision in Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 at [65] and the principle summarised by his Honour Foster J in Stratford (supra);
b)Failure of the applicant to seek to have the Court apply and thereupon to meet the requirements of Order 25B Rule 3 of the Federal Court Rules 1979 (Cth) (The “Federal Court Rules”) (now repealed with the introduction of the Federal Court Rules 2011 (Cth) on 1 August 2011) as applied in Fletcher v George [2008] FMCA 1624 per Burnett FM;
c)Regardless of the application of the Federal Court Rules Order 25B the failure of eBet’s representatives to draw to the Court’s attention the current jurisdictional position in relation to the limited availability of search orders: Television Broadcasting Ltd v Nguyen (1988) 21 FCR 34 per Lee J at [38];
d)The absence of any evidence justifying the existence of any supposedly incriminating material, let alone any threat to destroy that material in the possession of Mr Folino (he was legally represented at all times) and the fact that eBet’s legal advisers had been in discussion with Mr Folino’s legal advisers for a considerable period; and
e)Failing to draw, unambiguously, to the Court’s attention the decidedly limited problematic nature of the assignments which (arguably) cannot support eBet Systems Pty Ltd (the second applicant) becoming the copyright owner (even if Mr Folino’s primary position that it was his material which appears in emails passing from him to eBet) is to be disregarded. Further, the irrelevance of eBet’s representatives belief that they obtained an assignment of anything and that they considered the so-called “Confidential Information” to be “highly confidential” when its very definition told against any such epithet.
This first challenge also rests upon the unchallenged appearing in Mr Nobbs’ affidavit as to the apparent use being made by senior officials of eBet to threaten others (not party to the present proceedings).
Secondly, a challenge to the specific form in which the orders were made:
a)The orders work an injustice to Mr Folino because they:
i)Effectively preclude him from defending the proceedings;
ii)Are manifestly disproportionate to the evidence brought forward by eBet in support of the orders;
iii)Preclude Mr Folino from conducting legitimate business;
iv)Require Mr Folino to disclose his own Confidential Information without any appropriate protection, and before any final orders have been made; and
v)Require Mr Folino to answer a case which has not been adequately set forth or otherwise which comes within a known legal category, either of copyright or Confidential Information.
b)The orders operate to effectively pre-judge the proceedings without eBet having their evidence tested (being the practical effect of injunctions granted on 24 March 2011 and the orders for delivering up and the width of the orders for the making of verified interrogatories);
c)The rules concerning discovery do not permit discovery for the purposes of creating a case. They fortiori, the making of orders for delivering up, search orders and mandatory verification must even less so be available: Ferguson Corporation Pty Ltd ACN 008 943 646 v Kowalewski [2008] FCA 593 per McKerracher J as the present application amounts to little more than a “fishing expedition”: Creative Brands Pty Ltd v Franklin [2001] VSC 338 per Warren J (as her Honour then was) at [16]–[18] and [22] (also cited by McKerracher J in Ferguson (supra)); and
d)The search orders leave to Mr McKemmish a discretion as to whether something is relevant or not. However, the case put forward does not permit appropriate identification of something as a copyright work within a known legal category. It is even less clear in the case of the so called Confidential Information. Had Federal Court Rules Order 25B been followed Mr McKemmish’s role would have been more limited and he would not have been permitted to act as a witness for either party, rather, he would only have been permitted to act as an independent computer expert.
Thirdly, now that this issue is raised by Mr Folino, in any event, orders should be made protecting material which has been obtained. The necessary scope of these orders is set out in Mr Folino’s Amended Application in a Case, requiring:
a)Mr McKemmish to deliver up to Mr Folino’s instructing solicitors any material in his possession and, thereafter, restraining Mr McKemmish from further participation in the matter and from making any disclosure of that material;
b)Returning to Mr Folino his second affidavit and not permitting the applicant to make any use of it;
c)Putting in place a regime in which eBet properly plead their case including requiring compliance with Federal Court Rules Order 58 Rule 16 as to an identified infringement of each of the works in each of the manners alleged (including by authorisation); and
d)In so pleading their case, eBet be precluded from using or making reference to any of the material obtained by them in the course of the execution of the orders of the Court which are subject to challenge.
In addition, now that the issue is raised, Mr Folino should be protected against any risk of self-incrimination. Mr Folino’s evidence objectively tells against relevant employment relationship during the period of continuing software development. Given the uncertainty of the identity and ownership status of alleged copyright works in suit, the first step should be to defer the question of whether an affidavit of the kind sought by eBet unless and until the precise copyright works are identified and the manner in which those works have been said to have been infringed is also properly alleged.
Submissions on behalf of eBet
Mr Hennessy, in his written submissions, contended that while the adequacy of eBet’s case advanced against Mr Folino includes for the purposes of interlocutory relief and the material in support thereof is familiar to the Court. However in light of the nature of the allegations contained in Mr Green’s written submissions it may assist, ahead of the hearing, to note the following:
a)eBet correctly commenced the application with the Application dated 24 March 2011 (Federal Magistrates Court Rules, Reg. 4.01). It was accompanied by affidavits in conformity with Reg. 4.05 in that they set out the facts relied upon by eBet including those referred to below;
b)The identity and the role of each of the eBet companies including eBet Systems Pty Ltd as the current owner of the Membership Module and Cashier Module (the “Copyright Works”) was made plain;
c)The relevant information about Mr Folino was put before the Court. That includes the fact he was a software developer and was, at the relevant times, an employee of ACE Club & Casino Systems, the original owners of the Membership Module, and MDS (the subsequent owner of the copyright in Membership Modules and the original owner of the copyright in Cashier Module). It is also made claim that Mr Folino’s work history included times as a contractor for both MDS and eBet;
d)The Copyright Works (together with the Confidential Information) were identified and the relevant history concerning their creation, ownership and assignment was set out;
e)EBet identified that Mr Folino held their copyright works and Confidential Information at his residence in Kiama. Further, eBet put forward the basis for them suspecting that Mr Folino reproduced and/or adopted the Copyright Works and the Confidential Information. (Mr Folino’s delivery up of copies of copies of the copyright work and confidential information has confirmed eBet’s reasonable grounds of submissions – Mr McKemmish’s reports advances eBet’s case even further);
f)EBet demonstrated there were reasonable grounds for suspecting that the Copyright Works and Confidential Information in Mr Folino’s possession should be secured;
g)EBet demonstrated there was reasonable cause for concern that other wrongdoers may have been involved in infringing their Copyright Works and using their Confidential Information (thus warranting Norwich Pharmacal relief);
h)The only order made on the ex parte application on 24 March 2011 that is the subject of Mr Folino’s attack now, was Order 5 (an interim injunction), the matter was otherwise made returnable to the Court two business days later at which point in time, and thereafter, the matter has proceeded inter partes.
Mr Hennessy submitted that much of what was then said on behalf of Mr Folino was the adoption by his counsel of a new forensic approach which was inconsistent with their conduct in the case up until June 2011. Mr Folino’s application depended upon his mischaracterisation of:
a)The nature of the case before the Court;
b)The evidence in support of the case;
c)The circumstances surrounding both the making of the application for interlocutory relief and the relief so granted; and
d)The form of orders made by the Court.
Mr Hennessy made the following submissions in respect of the three grounds upon which Mr Folino’s Amended Application in a Case is based, being:
a)The first ground is an amalgam. It includes an allegation that there has been “material nondisclosures” by the eBet companies. That allegation is supported by submissions that fall within the following categories:
i)Assertions by Mr Folino that bear no resemblance to a question of material nondisclosure; and
ii)Incorrect assertions about the absence of evidence and matters withheld from the Court.
(While Mr Folino’s attempts to introduce into his application generally and, in particular, in support of his first ground of challenge an allegation of breach of implied undertaking, Mr Hennessy draws the Court’s attention to the distinct nature of that allegation and the separate process that will have to be pursued if Mr Folino wishes to maintain it. It is submitted that this is a diversion.)
b)The second ground is a challenge that can only go to that of Mr Folino’s application directed to variation of the Court’s orders, rather than vacation of them. It is submitted that this ground is comprised of a miscellany of complaints about the form of the Court’s orders. Mr Folino contends that he is suffering an injustice. He submits that he is precluded from conducting “legitimate business” and defending the proceedings. It is submitted that this is a matter which, even if it was true, cannot be sustained in light of Mr Folino’s proposed orders. The balance of Mr Folino’s submissions about injustice and other matters said to support the second ground involve unformulated, incorrect and/or irrelevant complaints; and
c)The third ground, rather than being a ground, is an assertion that “orders should be made protecting the material which has been obtained” which mentioned mergers with a recording of Mr Folino’s desire for some of the additional orders sought in his application to be made immediately. Mr Hennessy argues that Mr Folino makes no attempt to justify the basis for the making of such orders, let alone the need for them.
Nowhere does Mr Folino address the utility of making the orders sought by him in circumstances where the material relevant to and comprising the Copyright Works and Confidential Information have now been secured and have enabled Mr McKemmish to compile his report on behalf of eBet.
Consideration
At the scheduled hearing on 5 July 2011 Mr Hennessy appeared for eBet, the respondents to the Amended Application in a Case and Mr Green appeared with Ms Oliak for Mr Folino, the applicant on the Amended Application in a Case. Mr Green indicated that the application was brought by way of an Amended Application in a Case which was filed on 1 July 2011. The application sought to have the Court vacate certain orders previously made in the proceedings and then to have the Court make additional or alternative orders. Mr Green indicated that if the Court decided to vacate the orders previously made, the material obtained under those orders would pass into the possession of his instructing solicitors, Kennedys. Consequently, the material would not be dissipated completely. Mr Green indicated that the purpose was that eBet would not have access to that material until such time as it had been properly pleaded and allow the application for access to that material. Further, as discovery is not a matter of right in this Court, it must be established that the gate to s.45 of the FMC Act is triggered.
During the course of the hearing I indicated to the parties that I had a very deep concern about Mr Folino’s position because of claims that his ongoing work was being severely curtailed as he could not use particular sets of software, especially the compiler and some of the sub-routines that he required to continue his work for other clients. I acknowledged that this had been raised earlier on behalf of Mr Folino by his counsel, Mr Lucarelli, and I attempted at that stage to make it plain that the orders did not capture the use of his compiler. That apparently was insufficient because Mr Folino’s concerns were wider than the use of his compiler and now included standard sub-routines to which he required access to in order to carry on his occupation and service his other clients. On the resumption of the hearing after lunch Mr Hennessy referred to the Amended Application in a Case which sought that Order 5 made on 24 March 2011 be vacated. Mr Folino, in his third affidavit at paragraph 24(d), indicated that he had problems in complying with the order because of sub-paragraphs 5(b) and 5(c) of the orders. Mr Hennessy indicated that the proposed variation to the existing Order 5 was to remove sub-paragraphs 5(b) and 5(c) and to keep eBet’s undertaking as to damages in place to simply ensure that Mr Folino held on to his computer.
Mr Green indicated that Mr Folino accepted the amendment to Order 5 made on 24 March 2011, however, there were two other orders that required some modification in order to let Mr Folino cope in the interim period. The modification required was in the definition of the Cashier Module and Membership Module so that the definition of each of those modules accorded with the definition used by Mr Samaha in his letter of 12 November 2010 to Mr Folino (Mr Folino’s third affidavit at p. 22, Annexure “E”). On the first page of the letter the Membership Module is identified as being that in the Turbo System called Club Manager Professional and the Cashier Module is a definition of the single and multiple uses of the Cashier Modules within that system called Smart Cashier. Mr Green argued that if those definitions were adopted on an interim basis that would help to ameliorate the problem of the wide definition that appears in the orders, because it was used not only for the Cashier Module and Membership Module, but also finds its way into Confidential Information.
If the definitions were taken as they appeared in the orders technically Mr Folino, despite the changing of Order 5, would still be precluded from anything in relation that might believably be a reproduction or adaptation, and also may be disclosing Confidential Information. Mr Green submitted that the proposed amendments precluded Mr Folino from discussing the matter with his legal advisors because they would come into the disclosure. Mr Green pressed the adoption of Mr Samaha’s formulation which was applied by eBet immediately before the commencement of these proceedings and would permit Mr Folino to have access to legal advice.
In the absence of agreement between the parties as to the definitions of the Membership Module and Cashier Module I indicated that I would leave open to the parties that if the definition was amended because the present definition inhibited Mr Folino from continuing with his work for other clients I would consider a further amendment in chambers in order to allow Mr Folino to continue that work. This was accepted by the parties, however, the Court has not received any subsequent requests to amend the definitions.
In addition, Mr McKemmish himself is named in the orders and Mr Milton’s latest affidavit deposes to the fact that Mr McKemmish continues to hold that material and Mr Folino takes issue with that continuing situation. EBet commenced these proceedings by way of application supported by affidavit material and it is argued that the case is speculative because the affidavit material does not identify, with any degree of certainty, the Copyright Works, nor does it allow Mr Folino to engage sensibly with the plea in the case and understand which copyright works are put in issue and which are not. Mr Folino wishes to know the case that he has to meet and, significantly, wishes to know why it is said that material which includes user manuals and other materials available to third parties in the ordinary commercial course justifies an obligation of confidence in this matter. Mr Green submitted that this is the first opportunity that Mr Folino has had to put before the Court evidence as to why the kind of orders that were originally made ought not to have been and, secondly, were made in circumstances in which there were matters which were not disclosed or where material was not properly put.
Mr Hennessy, in his opening, made the observation in respect to these proceedings that there had been a forensic decision made on behalf of Mr Folino to adopt a new approach to the running of this matter. In deciding to adopt a new forensic approach a party needs to take into account the extent to which that desired new forensic approach can comfortably sit with the facts of the case, as opposed to being the facts that the party wishes to exist so that it is progressing better in the litigation than it is. Mr Hennessy submits that, having regard to the procedural history in this matter, it is without doubt to the events at the beginning of June 2011 indicates that a new forensic approach was adopted by Mr Folino’s legal representatives and it first became evident from Mr Folino’s third affidavit, particularly in the way in which that affidavit has been drafted.
Mr Hennessy claimed that the affidavit indicates this shift in approach because it takes to the absolute extremes the notion that a lay witness simply swears an affidavit. Accepting that lawyers must, of necessity, get involved in the drafting of an affidavit Mr Folino’s third affidavit takes the form of a submission from a lawyer, rather than an affidavit from someone, who, in his earlier two affidavits seems to be on a completely different path. In order to appreciate the opposing claims now before the Court it is important to summarise what occurred at the initial ex parte hearing and the subsequent five inter parte hearings. Various orders were made and with the exception of the initial ex parte orders which were consented to at the next inter parte hearing three days later, all of the subsequent orders made at the inter parte hearings were similarly consented, in order to appreciate the nature of the claim now before the Court.
Ex parte Application 24 March 2011
This matter initially came before the Court on 24 March 2011 at 12.02 pm as an urgent application. Mr Hennessy appeared with Ms Beaumont for eBet. It was an ex parte application in which short service was sought as well as some interim relief to preserve materials pending a return by the next week. The applicants are all part of the eBet Group, being a group of companies involved in the gaming industry. The first applicant, eBet Ltd ACN 056 210 774 is a publicly listed company. The second applicant, eBet Systems Pty Ltd is the owner of the intellectual property within the group including copyright works. The third applicant, eBet Gaming Systems Pty Ltd is the principal business unit for the group. Collectively, the applicants also own associated confidential information that is relevant to the copyright claim in this case.
The product in question is called “Turbo Bonus” and is a support system for gaming machines. Mr Hennessy submits that, in terms of the Copyright Works and indeed the principal subject matter of the Confidential Information are two modules; being the Membership and Cashier Modules. Both are database management systems with the Membership Module containing membership information for clubs that operate gaming machines on their promises. The Cashier Module is another database system which accounts for payments to be made from gaming machines on clubs’ premises. Mr Hennessy submitted that both Modules, in their own right, are pieces of software and fall within the description of copyright works for the purposes of Part III Division 1 of the Copyright Act therefore, exclusive rights reside with eBet Systems to reproduce those pieces of software and to make adaptations under s.31 of the Copyright Act. Those pieces of software and the material associated with them is Confidential Information.
Mr Hennessy advised the Court that eBet came to own this software in November 2002. In the supporting affidavit material filed during the hearing the Membership Module was initially created by a business known as VIP Loyalty Systems trading as ACE Club and Casino Systems (“ACE”). ACE sold the Membership Module and the Cashier Module to another business called MDS. In November 2002 eBet purchased the business assets of MDS and, in the course of that acquisition, acquired the Copyright Works and the Confidential Information which are the subject of this application. The genesis of the Cashier Module is similar, but not exactly the same. It does not concern ACE but was developed at MDS and then transferred to eBet pursuant to the business acquisition.
The Court was advised that Mr Folino was a computer programmer by profession and had been involved, to some extent, in the history of both pieces of software. He was an employee at ACE and in due course worked at MDS when MDS acquired the Membership Module. Based on the affidavit material, it appears that at both ACE and MDS, Mr Folino was involved in the maintenance of that software, although he was not the author of it. While he was employed at MDS he created the Cashier Module in his capacity as an employee of that company. There are documents annexed to the affidavits which make plain that the rights of both the Cashier Module and the Membership Module were then transferred to eBet as a part of the business acquisition.
Mr Folino was an employee of MDS for approximately two years and then for a short period of time worked as a consultant to MDS and part of that role was to support the two pieces of software. Mr Folino undertook this work in circumstances where his role was important insofar as both pieces of software were written in a computer language called Clarion which was not common in the gaming industry in terms of computer languages normally used. Mr Hennessy submits that when it came to MDS and then eBet other employees of both MDS and eBet were not familiar with Clarion and therefore Mr Folino’s role was important in terms of being able to take care of the software. When eBet acquired MDS it appears that Mr Folino continued for some period of time to assist with the software on an unwritten basis but was considered as a consultant. The affidavits disclose that there was some attempt by eBet to formalise the arrangement with Mr Folino in terms of his consultancy, however, he was not overly keen to take up the offer unless and until eBet resolved what he saw as an issue relating to outstanding payments owed to him, not by eBet, but by MDS. EBet formed the view that this was MDS’s problem. Mr Folino was disgruntled and did not enter into a formal consultancy agreement with eBet.
Mr Hennessy informed the Court that because of the unusual nature of the language in which these Modules were written Mr Folino held the source and object codes and the surrounding information at his premises in Kiama. Because that electronic information was supported in a so-called development environment Mr Folino owned the server so the information resided with him. When it came to eBet taking over ownership of the software they were faced with a position where Mr Folino nonetheless held the material as eBet felt it was better that he handled it, given his knowledge of Clarion and the lack of that necessary knowledge within eBet. EBet continued to license the Turbo Bonus System to various clubs from 2002 onwards and continues to do so.
Mr Hennessy indicated that there was a competitor of eBet called Independent Gaming Pty Ltd that operated a rival product called “Flexi-Net”. That product assumed more and more importance as eBet investigated the issue of Mr Folino and what had happened to eBet’s Copyright Works. This became apparent in April 2008 when officers of eBet were attending a trade fair “PAGCOR” in Manila. They visited the Independent Gaming desk at the trade fair and there was a presentation being conducted by Mr Dean Egan. Mr Egan was known to these officers as he had formerly been an employee of eBet. During the demonstration Mr Egan indicated the Flexi-Net looked very similar to the eBet product because he had been involved in its development and had copied the structure and format of the Membership Module and Cashier Module in order to develop Flexi-Net. The two eBet officers called their chief executive officer, Mr Toohey, and it is Mr Toohey who deposed to this conversation in his affidavit at [15], where he sought to inform the Court that he believed that was an accurate account of what had been said by Mr Egan. He also sought to inform the Court in his affidavit that at that stage, in April 2008, he did not necessarily see Independent Gaming as a serious competitor, nor did he know whether what Mr Egan was saying was correct.
Mr Hennessy indicated that by 2010 the situation had changed. Mr Toohey states in his affidavit that Independent Gaming had become through the vending of its Flexi-Net product a serious competitor of eBet’s. Mr Toohey had greater concerns about the information he had received in April 2008 about whether this competitor’s product in fact involved at least a substantial part of eBet’s software. This prompted Mr Toohey to commence some serious investigations in to what had been occurring. Those investigations included dealings with Mr Egan, who had a reduced involvement with Independent Gaming, Mr Folino and Mr Nobbs who was the principal of ACE and the author of the Membership Module. (Mr Toohey’s Affidavit, Annexures “B”, “C” and “D”)
Mr Hennessy indicated that the affidavits he tendered revealed that the eBet group went to considerable trouble to establish the history, but this was made more difficult because eBet did not actually have the software because it resided with Mr Folino. At the end of November 2010 letters were sent to Mr Egan, Mr Folino and Mr Nobbs that outlined eBet’s concerns and were designed to progress the matter in terms of establishing what had been occurring. All these letters are in evidence.
Mr Hennessy informed the Court that a significant part of these investigations have been conducted on a without prejudice basis because Mr Egan and Mr Folino have, at various stages, asked to have legal representatives involved and also sought at various stages to enter into agreements with eBet in respect to whether eBet group would pay for Mr Folino’s legal representation in the course of receiving advice about these issues. In the course of these investigations eBet’s concerns increased in relation to whether Mr Folino had in fact made unauthorised reproductions and adaptations of the software. Those concerns are explicitly identified in the affidavit evidence insofar as conversations with Mr Nobbs were concerned where Mr Nobbs said certain things about understanding that Mr Folino might have made copies for the purposes of assisting Mr Egan in creating the Flexi-Net product for Independent Gaming.
Mr Hennessy indicated that eBet had increased concerns, in part because of things that Mr Nobbs had said, and that is recorded in the affidavit of Mr Toohey at [19] and [20]. EBet’s concerns also arise out of direct conversations that Mr Toohey had with Mr Folino in the course of trying to have Mr Folino cooperate, provide the software, and advise what had occurred, which is contained in Mr Toohey’s affidavit at [21] – [23] and at [27]. Mr Hennessy indicated that eBet’s case is that Mr Folino said things to Mr Toohey that would cause eBet to believe that he was involved in using the software for third party development. Mr Hennessy acknowledges that in the course of these investigations people had expressed a wide variety of views, some inconsistent, and consequently eBet has been endeavouring to evaluate just where the truth might lie in order to move forward.
Mr Hennessy informed the Court that in respect to Mr Folino from November 2010 through to March 2011 eBet has taken extraordinary steps to cooperate with him to avoid commencing an action against Mr Folino. To a considerable extent Mr Folino has indicated that he would cooperate. Mr Toohey, in his affidavit, states that Mr Folino was indicating to Mr Toohey that eBet were welcome to come to his house at Kiama, and pick up all the electronic information, however, recently Mr Folino ceased to cooperate and has avoided taking any phone calls from Mr Toohey. In the end Mr Toohey was attempting to speak to Mr Folino’s wife and she was trying to act as an intermediary. As a consequence the legal representatives of eBet finally sent a letter of demand in the second week of March 2011 in which they sought undertakings from Mr Folino, but he was not prepared to provide those undertakings.
This action was precipitated, not only because of the possible infringement of copyright and breaches of Confidential Information, but that Mr Folino had had dealings with one of eBet’s competitors and as Mr Folino held eBet’s intellectual property he might have been doing things with that property that he was not authorised to do. Mr Hennessy confirmed that the affidavit is presented with evidence in conformity with Avel Pty Ltd & Multicoin Amusements Pty Ltd (1990) 171 CLR 88 to the effect that he is not licensed to use it for any other purpose and eBet has not granted him this authorisation. Mr Hennessy informed the Court that it is on that basis that eBet has now commenced this action because Monday 21 March 2011 was the deadline for Mr Folino to provide the undertakings. Mr Folino had provided no response and he had enjoyed the benefits of legal representation prior to this deadline.
EBet was also aware that, at some stage, a professional indemnity insurance broker was consulted by Mr Folino as that broker contacted Mr Toohey concerning this issue, noted in his affidavit at [29]. Mr Hennessy submits that Mr Folino was well aware of the issues and has received some advice, yet there has been no response in relation to the letter of demand so eBet was seeking, on an urgent basis, orders to permit the service of documents on Mr Folino. In correspondence that has been tendered as evidence, Mr Brown of Etienne Lawyers had actually informed eBet’s legal representatives that he was able to accept service on behalf of Mr Folino, so eBet was seeking to serve Mr Folino by way of serving that solicitor at Level 56 MLC Centre, 19-26 Martin Place Sydney (Mr Toohey’s affidavit annexure “E”).
Mr Hennessy indicated that, because of the subject matter in the dispute, eBet sought an interim order, at least until the matter was next brought before the Court, to preserve the sort of material that was covered within these definitions of Membership Module and Cashier Module together with the Confidential Information so that the electronic environment within which they all exist was not compromised. It was brought to the Court’s attention that Mr McKemmish, who is well known within the federal jurisdiction as an eminent forensic computer expert, has sworn an affidavit already in this proceeding in which he talks about the importance of that environment not being disturbed. Deleting information from computers and/or altering time stamps on records, whilst sometimes recoverable, can affect the metadata on the computer.
In Vivid Entertainment LLC & Ors v Digital Wholesalers Discounters Pty Ltd & Anor SYG 1341 of 2006, Driver FM made orders to allow the applicant’s forensic expert by consent to access the computer on site for the purpose of inspection and to produce a report by the applicant’s forensic expert.
Mr Hennessy indicated that there were two exhibits in folders before the Court. One is marked “Confidential Exhibit” and eBet seeks, in respect to that “Confidential Exhibit”, that it was not served on anyone at that stage, at least until a party emerges represented by a solicitor who can proffer a form of undertaking that was sought by eBet before it was released. Mr Hennessy then assisted the Court by going through the form of orders that had been handed up and was sought by eBet.
The matter returned to the Court on Tuesday 29 March 2011 at 10.17am with Mr Hennessy appearing for eBet and Mr Lucarelli appearing for Mr Folino. Mr Hennessy informed the Court that since the hearing on Wednesday 24 March 2011 the relevant materials were served on Mr Folino’s then legal representative Etienne Lawyers without response. On Monday 28 March 2011 Mr Hennessy’s instructing solicitors placed calls with Mr Brown of Etienne Lawyers who had been representing Mr Folino. They eventually responded to that call by email, indicating that they were no longer acting for Mr Folino. Later on the Monday eBet’s solicitors were advised that an insurer had appointed a solicitor from Kennedys to act for Mr Folino, but attempts to make contact with that firm’s solicitors were unsuccessful, although a solicitor from Kennedys was present in Court.
Mr Hennessy indicated that at approximately 3.30pm on Monday 28 March 2011 he received a call from Mr Lucarelli. Mr Hennessy further indicated that immediately before the commencement of the hearing on 29 March 2011 Mr Lucarelli informed him that Mr Folino was seeking a one month adjournment of the matter and that he would proffer some undertakings to secure that adjournment. Mr Hennessy indicated that, in light of negotiations in which Mr Folino had been represented since November 2010, eBet would strenuously oppose any application to adjourn the matter. Mr Hennessy indicated that in support of his client’s position he referred to matters that were put before the Court on 24 March 2011 which were contained in the affidavit of Mr Toohey.
At [18] of Mr Toohey’s affidavit, Mr Toohey makes reference to investigations and that on 12 November 2010 Mr Hennessy’s instructing solicitors sent letters to Mr Folino (Annexure “D”) containing a lengthy analysis as to eBet’s intellectual property and on the second page of that Annexure it sets out what eBet was seeking. This included urgent access and copies of relevant documents and a written undertaking. Annexure “E” contains the response of Mr Folino’s solicitors which includes, in the fifth paragraph, a request for payment of legal fees to assist Mr Folino. In Annexure “H” which was written on 16 December 2010 negotiations between eBet and Mr Folino reached a stage where eBet was putting forward a proposal which involved assistance of various kinds and culminated with a request for preservation of the materials. In Annexure “J” Mr Folino’s solicitors rejected the terms of the proposed agreement and advised that he would accept service if that was what eBet’s intention was. At Annexure “K” Mr Toohey sets out the further correspondence, later, in the month of February 2012 indicating that negotiations had been continuing for two months and the time for further discussions were about to expire.
At Annexure “L” a letter of demand written on 7 March 2012 recounts the various allegations that had been canvassed with Mr Folino and summarises Mr Folino’s non-cooperation, despite those negotiations, even though during those discussions Mr Folino said he had no objection to providing the undertakings and delivering up the intellectual property. However, it notes Mr Folino’s specific refusal to provide the undertaking or to deliver up the intellectual property and to further cooperate with eBet.
Mr Hennessy referred to the submissions that he had made on 24 March 2011 in that eBet had reached the end of their tether as they had made every attempt over a series of months to deal with someone who they had every reason to suspect was infringing their intellectual property. Further, in Mr Toohey’s affidavit at [29], Mr Toohey recalls that on 1 March 2011 he received a telephone call from the insurance broker acting for Mr Folino, and Mr Toohey informed the Court of the conversation in which he was told that the insurer was looking at Mr Folino’s claim on his policy. Consequently, eBet certainly knows that at some time, probably close to 1 March 2011 the insurer had been examining this matter and no doubt had been conversing with Mr Folino to establish the nature of the claim.
Mr Hennessy submitted that these communications demonstrated that Mr Folino had the benefit of legal advice from November 2010 and one is entitled to assume that there has been continuity in respect of that advice and an orderly handover of the matter from one solicitor to another. Despite this, eBet’s legal representatives had not been provided with any affidavit that was intended to be read in support of the adjournment application.
Mr Lucarelli indicated to the Court that the issue before the Court was what interlocutory regime could be put in place to preserve the status quo so that he and his instructing solicitors could obtain a period of time to understand the history of the matter. Mr Lucarelli indicated that Mr Folino came before the Court ready to consent to practically all of the interlocutory injunctions that were being sought by eBet. Mr Lucarelli referred to the interim orders contained in the original application. Order 5 made on 24 March 2011 was made ex parte. Mr Lucarelli indicated that Mr Folino would consent to an extension of that order upon the continuance of the undertaking as to damages until the matter next came before the Court. That then would protect the integrity and the existence of all the data. Mr Lucarelli indicated that his instructing solicitors would receive instructions on Friday 25 March 2011 and that he personally received instructions that afternoon followed by a telephone conference with Mr Folino. He informed the Court that Mrs Folino was in court and was willing to provide, on oath, details of Mr Folino’s present medication which included morphine for an acute and agonising condition resulting in him being housebound and unable to attend Court.
Mr Lucarelli indicated that Mr Folino was prepared to consent without admissions for a certain period to the injunction sought in draft order 6 and the injunction sought in draft order 7 (original application filed 24 March 2011 – other interim and interlocutory orders – that became Order 1 and 2 ). Mr Lucarelli submitted that those interim orders protected eBet and preserved the status quo on that basis. Mr Lucarelli indicated that, if need be, Mr Folino would file an affidavit and give those instructions if he was provided with sufficient time to prepare the document.
Mr Lucarelli indicated that he had not been able to obtain instructions going back to events in 2000 and earlier. He indicated that he was appearing to assist the Court in providing an interim regime which preserved the status quo and it was in those circumstances that the undertakings were given. In the absence of any submissions on behalf of eBet that pointed to any urgency there did not appear to be any reason for the granting of a super fast timetable, being a timetable that Mr Folino would be unable to meet. Mr Lucarelli submits that the undertakings preserved the status quo and permitted him to go back to the events in 2000 and get proper instructions. Mr Lucarelli submitted that the appropriate course, without admissions, until a date that was found that was suitable to the Court the temporary injunctions ought to be granted and would provide Mr Lucarelli with time to obtain detailed statements from Mr Folino.
Mr Hennessy, in response, challenged a number of the submissions made by Mr Lucarelli and indicated that eBet sought, in the way of relief, an order in the form identified in the House of Lords decision in Norwich Pharmacal Co v Customs and Excise Commissioners [1974] AC 133 at [173]-[174] and [175] which are commonplace in this Court in relation to copyright infringements. In Sporte’ Leisure Pty Ltd v Paul’s International Pty Ltd [2009] FCA 445 his Honour Perram J indicated that previous Norwich Pharmacal orders had been made in the Federal Court in Authors Workshop v Bileru Pty Ltd (1989) 88 ALR 211 at [214]-[215] per Lockhart J and Hinchcliff v Abu-Dabat (1998) 41 IPR 400 at [401] per Cooper J. His Honour Perram J noted that it is clear from those authorities that such an affidavit should not be ordered where there is evidence that there is a real or appreciable risk of criminal proceedings against the respondents. This is because the requiring of such an affidavit might impede the respondent’s right to avoid self-incrimination. As the respondent in the matter before this Court was represented and the order was consented to this is not an issue.
In the High Court decision in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 the Court held at [103]:
The armoury of equitable remedies includes that species of discovery with which the House of Lords dealt with in Norwich Pharmacal Co v Customs And Excise Commissioner [1974] AC 133 and British Steel Corp v Granada Television Ltd [1981] AC 1096. This remedy extends to disclosure of the identity of the wrongdoer in those tortious acts the defendant has, even innocently, become involved (Breen v Williams (1994) 186 CLR 71 at 120) and the English Court of Appeal has held that it goes beyond the disclosure of the identity of a tortfeasor (Mercantile Group (Europe) AG v Aiyela [1994] QB 366 per Hoffman Ld).
Similar orders have been made in this Court in Spencer & Rutherford v Horizons Holdings and Anor [2005] FMCA 1874 per Connolly FM and Johnson v Mortgage Processing Centre Pty Ltd & Ors [2003] FMCA 483 at [29] per Raphael FM.
At a directions hearing on 1 April 2011 Mr Hennessy advised the court that Mr Folino provided access to his premises on 31 March 2011 to Mr McKemmish, Mr Blazer and Mr Sawczuck in the presence of Mr and Mrs Folino and Mr Folino’s solicitor, Mr Milton. 32 gigabytes of data including source code, object code and executable files were identified and transferred to an external hard drive. In addition the computer was run overnight to retrieve further files and that material was delivered to Samaha & Associates prior to the hearing on 1 April 2011.
Consequently the purpose of Order 5 made on 24 March 2011 being the only ex parte order in these proceedings had been satisfied by the commencement by the directions hearing before this Court on 1 April 2011. However Mr Folino’s legal representatives indicated that their client was deeply troubled and concerned by the residual effect of Order 5 in relation to the use of his Clarion complier and the associated subroutines that he relied upon for his ongoing business arrangement with other clients. I discussed this at [113] above. The nature of the remedy was to remove Order 5(b) and (c).
The primary purpose of Order 5 has been fulfilled and no submissions have been forthcoming to indicate the failure of that objective. The subsidiary issue concerning Mr Folino’s access to his Clarion Compiler and associated subroutines was resolved between the parties by consenting to the removal of Orders 5(b) and 5(c) during the hearing on 5 July 2011. No other concern was ventilated in respect to this order that would warrant it to be vacated. As a result Order 1(a) of the Amended Application in a Case is dismissed.
On 29 March 2011 the Court made the access and delivery orders. The detailed submissions in respect of these orders are found in the Transcript of 29 March 2011. There was one ground of opposition taken to this order and that was that Mr Folino’s legal representatives were offering an alternative to the orders sought by eBet. The proposal that was advanced was that Mr Folino would burn copies of the Copyright Works and Confidential Information on to a CD and hand it to Samaha & Associates. Significantly, at this time, there was no issue raised on behalf of Mr Folino as to his lack of understanding of what the Works consisted of.
The parties were granted a brief adjournment for them to determine, respectively, their capacity to undertake this task or, alternatively, the availability of Mr McKemmish, a recognised forensic analyst, to do so. After hearing submissions from both parties I preferred, for reasons effectively to do with the safety and adequate maintenance of the Electronic Material, that the orders sought by eBet be made, rather than the suggested path proposed that Mr Folino undertake the task. Once the parties were advised of my decision there was no further opposition to the making of those orders, which is immediately apparent from the transcript of that directions hearing. At [117] above the issues that I took into consideration are set out.
I was particularly influenced by the contents of the last paragraph of Mr McKemmish’s affidavit which addresses the inadvertent damage to critical information, including timestamps for the dates of creation and variations to documents, that could inadvertently occur during the process of copying data (see [117] above). Further, taking into account the full contents of Mr McKemmish’s affidavit I am satisfied that he was put forward by the legal representatives of eBet as an independent party to access electronic material for the purposes of preserving it and preparing a report. Nothing was raised by those representing Mr Folino that an independent solicitor and an independent expert should be appointed to undertake this task.
Importantly, this Order was not made ex parte but was made in an application that was made inter partes and the details were discussed with the parties prior to the making of the Order. No grounds of opposition were raised, nor was there any attempt to alter the wording of the Order based on any problem with the order not being able to be understood by Mr Folino as to what was required. All of these procedural steps covered by orders 1 – 4 made on 29 March 2011 have been completed and do not now warrant the vacating of those orders for the purposes of revisiting them. Order 1(b) of the Amended Application in a Case should be dismissed.
The matter was before the Court on 1 April 2011 in order to inform the Court as to what had occurred in relation to the access that had taken place at Mr Folino’s premises on 31 March 2011. The issue on that day concerned the 44,000 to 48,000 emails retained by Mr Folino that were stored, not in discrete folders but, simply in his Explorer program. It was envisaged that Mr Folino would be required to review those emails in order to extract those that are relevant pursuant to the previous orders. It was acknowledged that it would take Mr Folino some time to comply with the previous order, so a new order was proposed which replicated the existing delivery up order in respect to the outstanding emails so that Mr Folino would have a further 7 days in which to provide them, pursuant to Order 4 made on 29 March 2011.
Mr Lucarelli indicated that there were 48,000 emails to be reviewed and indicated that the parties had worked cooperatively, and had extended the time, allowing for the materials to be handed over prior to the hearing. Mr Lucarelli indicated there was no suggestion that Mr Folino was making the issue difficult or doing anything to thwart the process. It was just a question of time for his client to go through the 48,000 emails and extract the relevant material.
Mr Lucarelli made submissions in respect to Mr Folino’s health to assist in the assessment of Mr Folino’s ability to review those emails. In submissions, Mr Lucarelli contended that his side was not complaining about this order as they, too, wished to complete the process. The only question for the Court was what was a reasonable time to allow the 48,000 emails to be gone through and the relevant emails extracted. Mr Lucarelli submitted that the status quo was amply protected and there was just a question of completing the email search and he believed that his client needed three weeks for that to occur. Mr Lucarelli indicated that there were still orders on foot preventing any destruction of any of the material to the extent that they are relevant and that Mr McKemmish had now made a copy of all of the subject material. Mr Lucarelli also indicated that he envisaged that an analysis of the emails was to some extent relevant for an assessment of whether Mr Folino would oppose a Norwich Pharmacal affidavit because if there were relatively few emails showing source code being moved then that would naturally affect Mr Folino’s attitude to that order, whether it was consented to or some alternative put forward. Consequently, the analysis of emails was relevant to Mr Folino’s final approach to Order 10. Mr Lucarelli conceded that there was no evidence before the Court of any difficulty, any opposition, or any problem being experienced by Mr Folino, rather, it was just a perfectly normal practical problem of going through that amount of material in circumstances where Mr Folino was heavily medicated and there was a medical certificate to that effect. Mr Lucarelli requested that draft Order 1 before the Court be amended to read “27 April 2011”, being three weeks in which to complete the review task.
Mr Lucarelli requested that the order sought ought not to, if at all possible, operate in a manner which was in truth oppressive to his medicated client. This did not mean that eBet’s interests would be ignored, it just meant that Mr Folino sought to find a balance in respect to what was possible in the overall scheme of the proceedings. On the understanding that there were injunctions, data was secured, and there was a regime in place that the process of renewing the emails was to be done sensibly. An invitation was also extended to Mr McKemmish to assist in the analysis of the 48,000 emails. After further argument (see Transcript 1 April 2011 p.8; line 29 – p.11; line 41) I indicated that I would amend the draft orders handed up to read “15 April 2011” on the understanding that there was a progressive feed of material as Mr Folino went about completing his task and the material was forwarded to the other side. I indicated that I would list the matter for directions on 21 April 2011 which was the Thursday before Easter. If there was some complication or deterioration in Mr Folino’s health I expected the parties to first notify the Court that those dates would have to be varied or vacated and some compromise as to what alternative arrangements had been made, and advise the Court of these details together with available dates of the parties after Wednesday 27 April 2011. I indicated that I expected any possible amendment to be resolved between the parties and if the analysis had not been completed by the target date to notify the Court.
Ultimately, these arrangements were accepted by the parties and there was no reference back to the Court in respect of these issues. At no stage during this hearing was there any indication from those representing Mr Folino that there was any misunderstanding as to what was required. Consequently, this order was complied with and subsequently there has been no approach to the Court to clarify anything that was required for compliance with the order or any difficulty in understanding the scope and requirements. Again, this is a step in the proceedings that has been completed and there does not appear to be any utility in now vacating this order. Consequently, Order 1(c) of the Amended Application in a Case is dismissed.
Order 1(d) in the Amended Application in a Case seeks to have the Order made on 20 April 2011 vacated. This Order, throughout the judgment, has been referred to as the Norwich Pharmacal relief affidavit and was made with the consent of the parties after they had provided the Court with a draft order that had been agreed between them. The details and circumstances of this consent order are discussed above at [130]-[131]. The affidavit is identified as the Third Folino affidavit sworn 13 May 2011 (see [15] at (c) above). Mr Green contended that the affidavit gave a background to the software and Mr Folino’s experience as a computer programmer for at least 16 years. Mr Folino indicated at [12] that he did not write the software for the Relational Database System. He then gives evidence about how he uses the Clarion Programming System together with third party software libraries which he acquired under license. Mr Folino stated that he had a lot of software making up the material in dispute which did not deserve the description of “Cashier Module” or “Membership Module”. Further, there was a regular need to update the software to take in to account new versions of the system. In addition he wrote numerous small programs and put into separate files or templates. Consequently, there were multiple programs, not all of which were touched when any modification occurred and it was a complex issue to track and identify all modifications and program changes.
Mr Folino then gave evidence about problems in respect to complying with the present orders:
a)Practical issues about breadth of definition – at [24(a)];
b)Most of the software was developed in a period when Mr Folino was either an independent contractor or when he was not an employee – at [24(b)];
c)He was never an employee of or contractor to eBet;
d)The software has been continuously improved and enhanced; and
e)The fact that something is functionally similar does not mean, necessarily, that there is a copyright infringement.
Another problem Mr Folino claimed he was faced with is that he was unable to use the software itself in order to give a better answer to the issues raised without breaching the injunction presently applied. Although the submissions filed by Mr Hennessy on behalf of eBet indicated a willingness to consent to a variation of Order 5, while it went some way to assisting Mr Folino, it did not address his concerns about his livelihood and certainly did not address his concern about the ambulatory definitions of the Cashier Module and Membership Module. The binary application file is needed by Mr Folino in order to understand how each software item fits together and he needs to use Clarion to perform this analysis. Mr Folino was also concerned that he would be required to disclose all amendments, modifications and improvements he made to the software which he stated were his intellectual property. Mr Green referred to the affidavit of Alexander Francis Parle dated 22 March 2011 which attached an email from Mr Folino (Annexure “D”) which referred to a number of requests made by Mr Parle for access to software part of the Turbo Suite of programmes. In that email Mr Folino claimed ownership of various parts of that material and put eBet on notice in respect to that issue.
Mr Green argued that the requirements of that order were for Mr Folino to give an explanation of all of the definitions, versions and copies involved. However, Mr Folino indicated that within that material there was a large amount that he did not create, including numerous third party libraries, and to comply with the order he would have to attempt to analyse the third party material. The problem was made worse, in that Mr Folino did not refer at any stage to a Membership Module or Cashier Module. He referred to components and functionality but not in the terms expressed in the order. Therefore, he was being asked to refer to something that was different from the way in which he understood its structure to be. Mr Folino, in his third affidavit at [28], gives evidence of his employment history and, relevantly, that in July 2002 he gave Mr Madden of MDS, at his request, a copy of the source code and other materials. Mr Green claimed that the impression given to the Court was that the only source of software was Mr Folino and that unless and until Mr Folino provided all of the software which was asserted in its entirety to be eBet’s. As there was to be no hesitation or doubt of this material to be the property of eBet the Court should immediately sign a revocation order in relation to it.
This complaint by Mr Folino is raised, although originally consented with the benefit of legal advice, that he does not understand what the Copyright Works are. His new claim is that a lot of the Copyright Works are his and an injustice was being worked upon him, because of the content of the orders. The argument advanced by Mr Folino’s legal representatives was that they did not understand what the Copyright Works were and that the Norwich Pharmacal relief was granted without foundation and was unjust.
The procedural history in respect to Mr Folino submitting to the Norwich Pharmacal relief is discussed at [130]-[133] above. That order is now subject to a wide ranging criticism, based on the allegation that it was improperly obtained, however, there is no reference in the submissions advanced on behalf of Mr Folino that the affidavit required for Norwich Pharmacal relief was not consented to. Nor is there any sworn affidavit setting out the elements of this complaint or criticism. On receipt of the correspondence from Mr Blazer of Samaha & Associates that there was consent to the issue, along with draft consent orders, the order was ultimately made in chambers and issued on 20 April 2011.
The matter was before this Court again on 19 May 2011, but on that date there was no suggestion that there was any problem with that order or any other order made over the previous two months. To the contrary, on 19 May 2011, the legal representatives of eBet indicated that they believed there were inadequacies in the way in which Mr Folino had sworn his Norwich Pharmacal affidavit and it was suggested that he may wish to reconsider his position to determine whether he wanted to swear a supplementary or further affidavit to satisfy the order issued on 20 April 2011. As there is an avenue to seek to file a new or supplementary to satisfy the requirements of the Norwich Pharmacal relief order there is no utility in now vacating the original order. There has already been one supplementary affidavit filed in respect of this order. Consequently, order 1(d) of the Amended Application in a Case is dismissed.
Order 1(e) of the Amended Application in a Case seeks to vacate Order 1 made on 19 May 2011 which provided Mr Folino the opportunity to file a supplementary affidavit in further compliance with Order 1 made on 20 April 2011, in effect, the supplementary Norwich Pharmacal relief affidavit. It is noted that Mr Folino elected to file a supplementary affidavit identified as the fourth Folino Affidavit sworn 30 June 2011 (see [15(d)] above). However this affidavit does not address the issues identified in the Samaha & Associates letter of 12 November 2010 (Annexure “D” to the affidavit of Mr Toohey sworn 23 March 2011), but rather sets the new forensic approach to be adopted by Mr Folino. As the issues addressed in this fourth affidavit are not of the nature raised in argument in respect of Orders 1(a)-1(d), of the Amended Application in a Case I am not satisfied that Order 1(e) is relevant to the thrust of the main argument and should be dismissed.
In the Amended Application in a Case filed on 1 July 2011 the second Order seeks:
In the alternative to Order, the respondent’s obligation to make any affidavit (or further affidavit) or to provide any explanation (or further explanation) be set aside, being Order 1(b) and (c) of the orders made on the 20 April 2011 and Order 1 of the orders made on the 19th of May 2011
Both of these orders address the issue of filing a supplementary or alternatively a new affidavit to address issues that are claimed to fall within the material required by the Norwich Pharmacal relief affidavit. Mr Folino has already filed two affidavits in respect of this issue being the Third Folino Affidavit sworn 13 May 2011 (see [15(c)] above) and the Fourth Folino Affidavit sworn 30 June 2011 (see [15(d)] above).
This issue was addressed by Mr Hennessy at the end of submissions (see Transcript 5 July 2011, p. 99; line 31-35) where he stated:
Your Honour, I hesitate to rise but there was one point I should have made so that no one is labouring under a misapprehension. My client has no application before the Court and has no present intention on making an application for any further Norwich Pharmacal affidavit. I just want to make that plain. That goes to the question of utility. May it please the Court.
Although this is not totally binding for Mr Hennessy or his client he is correct in stating that at this point in the proceedings there is no application before the Court in respect of the Norwich Pharmacal relief affidavit. If at some future point an application is lodged, then the issue can be argued but at the present time there is no need for an order in the form set out above and this should be dismissed.
The same reasoning must apply to proposed Order 3 of the Amended Application in a Case. It may become relevant at some future stage, however, at the moment there is no justification for the Court making such an order. The balance of the Orders, being 4 – 12, is consequential on the relief being granted under Order 1. In the hearing the emphasis was placed on Order 1 with little or no reference to the subsequent orders. It is not my intention at this stage to dismiss those proposed orders and leave it to the representatives of Mr Folino to seek to ventilate them should they seek to do so with the required supporting affidavit material.
I certify that the preceding one hundred and eighty (180) paragraphs are a true copy of the reasons for judgment of Lloyd-Jones FM
Date: 9 August 2012
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