Microsoft Corporation and Ors v CPL Notting Hill Pty Ltd and Ors (No.5)
[2019] FCCA 1255
•16 May 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| MICROSOFT CORPORATION & ORS v CPL NOTTING HILL PTY LTD & ORS (No.5) | [2019] FCCA 1255 |
| Catchwords: PRACTICE AND PROCEDURE – Hearing on remittal from the Full Court of the Federal Court for re-hearing by a judge other than the primary judge – applicants sought two forms of amendments to the pleadings – where first amendment sought on ground inadvertent omission – seeks amendment of application – where second amendment sought requires amendment of both the application and the claim – whether remittal is a re‑hearing and continuation of the first trial under s.28(1)(c) of the Federal Court of Australia Act 1976 (Cth) (the Act) or whether remittal is a new trial under s.28(1)(f) of the Act – first amendment allowed, second amendment refused. |
| Legislation: Copyright Act 1968 (Cth), s.115 Federal Circuit Court Rules 2001 (Cth), rr.1.03, 1.05(2), 7.01, 16.01 Federal Court of Australia Act 1976 (Cth), s.28 Federal Court Rules 2011 (Cth), r.8.21 |
| Cases cited: Aon Risk Services Australia Ltd v ANU (2009) 239 CLR 175; [2009] HCA 27; 83 ALJR 951; 258 ALR 14 Community and Public Sector Union v Telstra Corporation Ltd (No. 2) [2001] FCA 479; (2001) FCR 324 CPL Notting Hill Pty Ltd v Microsoft Corporation (No 2) [2019] FCA 223 Fernando v Commonwealth of Australia (No 5) [2013] FCA 901 |
| First Applicant: | MICROSOFT CORPORATION |
| Second Applicant: | MICROSOFT PTY LTD (ACN 002 589 460) |
| Third Applicant: | MICROSOFT REGIONAL SALES CORPORATION |
| First Respondent: | CPL NOTTING HILL PTY LTD |
| Second Respondent: | WEI LI |
| Third Respondent: | CPL DISTRIBUTION PTY LTD |
| Fourth Respondent: | WANG JIN |
| File Number: | SYG 1205 of 2016 |
| Judgment of: | Judge Baird |
| Hearing date: | 3 April 2019 |
| Date of Last Submission: | 3 April 2019 |
| Delivered at: | Sydney |
| Delivered on: | 16 May 2019 |
REPRESENTATION
| Counsel for the Applicant: | Mr A Fox |
| Solicitors for the Applicant: | Mr G Hansen, Harris & Company |
| Counsel for the Respondents: | Mr P Bick QC and Mr W Newland |
| Solicitors for the Respondents: | Mr S. C. Smith, Smith & Associates |
THE COURT ORDERS THAT:
PURSUANT to rule 7.01 of the Federal Circuit Court Rules 2001 (Cth), the applicants have leave to file a further amended application, amended as set out in paragraph 3A to the annexure A annexed to the applicants’ application in a case dated 15 March 2019.
Paragraphs 1 and 2 of the application in a case otherwise be dismissed.
The question of costs be stood over to a date to be fixed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 1205 of 2016
| MICROSOFT CORPORATION |
First Applicant
| MICROSOFT PTY LTD (ACN 002 589 460) |
Second Applicant
| MICROSOFT REGIONAL SALES CORPORATION |
Third Applicant
And
| CPL NOTTING HILL PTY LTD |
First Respondent
| WEI LI |
Second Respondent
| CPL DISTRIBUTION PTY LTD |
Third Respondent
| WANG JIN |
Fourth Respondent
REASONS FOR JUDGMENT
Introduction
On 5 February 2019, a Full Court of the Federal Court of Australia (constituted by O’Callaghan J) (1) allowed the appeal from the decision of a judge of this Court, (2) set aside the orders made by the primary judge on 29 August 2018, (3) ordered that “the matter be remitted to [this Court] for re–hearing by a judge other than the primary judge”, (4) ordered that, “subject to any order of any Court that hears any retrial, the costs of the first trial be costs in the second trial”, and (5) ordered the respondents pay the appellants’ costs of the appeal. The matter is docketed to me, in the Court’s National Intellectual Property list.
For present purposes, save for the identification of the parties before me and a short chronology of the pleading amendments, the parties, the history of the proceeding, and the appeal that resulted in the remittal to this Court are sufficiently described in the reasons for judgment of O’Callaghan J published on 26 February 2019 in CPL Notting Hill Pty Ltd v Microsoft Corporation (No 2) [2019] FCA 223 (Appeal Reasons).
The applicants before me, whom I refer to in these reasons as the Microsoft parties, were the respondents on the appeal, and the respondents before me, the appellants on the appeal. The first applicant, Microsoft Corporation, is the owner of copyright in certain computer programs (the software), and certificates of authenticity (COAs). The second respondent, Ms Wei Li, is the sole director of the first respondent (CPL Notting Hill), and the fourth respondent, Mr Jin Wang, is the sole director of the third respondent (CPL Distribution).
At the first case management hearing on remittal before me on 6 March 2019, Mr Fox, counsel for the Microsoft parties, foreshadowed making an application to amend the Amended Application and the Further Amended Statement of Claim. I made certain interlocutory and procedural orders, set the matter down for trial (sic) on 19 August 2019, with an estimate of 3 to 5 days (noting that whilst I proposed an earlier hearing date, the listed dates are convenient to all parties), and listed for hearing on 3 April 2019 any application in the case seeking the foreshadowed amendments, if brought.
Amendments sought
By application in a case dated 15 March 2019, the Microsoft parties seek leave to make two forms of amendment to the pleadings:
(a)first, to include in the Application a claim for s.115(2) Copyright Act 1968 (Cth) damages (that is, compensatory damages) against the second respondent, Ms Li, and the fourth respondent, Mr Wang;
(b)secondly, to add a claim against all four respondents for liability for copyright infringement on the basis of joint tortfeasorship.
The first amendment sought requires amendment of the Application but does not require any amendment of the Claim. The second amendment sought requires amendment of both the Application and the Claim.
Overview of the parties’ positions in relation to the amendments
As to the first amendment, the Microsoft parties say that the purpose of the amendment is to align the Application with the Claim. Mr Fox submits that the omission in the Application of the claim for s.115(2) Act damages against the individual respondents was inadvertent. He submits that the respondents were plainly on notice of the s.115(2) Act damages claim against all respondents well before trial (including by the Claim, and written opening submissions), and that the respondents did not take a pleading point on this omission until closing address.
Mr Fox points to references in the Claim to the s.115(2) Act case against all four respondents, but acknowledges that the Application, in its form pressed at trial made that claim, formally, only against the first and third respondents – the corporate respondents.
As to the second amendment, the Microsoft parties accept that this involves a new claim, but say that it arises principally out of the evidence at trial, and that it also relies on affidavit evidence served by the respondents, but not read.
The Microsoft parties assert that there is no prejudice to the respondents in the event the amendments are allowed. They point to the time until the re-hearing is to be heard (August 2019). They do not propose filing any additional affidavit evidence in relation to the amendments, and do not oppose the respondents being given an opportunity to file evidence if leave is granted.
In support of the amendment application, Microsoft parties have filed and served a proposed amended Application and proposed amended Claim, together with an affidavit in support of Mr Grant Hansen affirmed 15 March 2019. Mr Hansen is the solicitor having primary carriage of the matter on behalf of the Microsoft parties, including at the hearing before the first trial judge, and on the appeal. He was cross‑examined on his affidavit at the hearing of the application to amend.
The respondents oppose the grant of leave. The respondents have not put on any evidence of any prejudice should leave be granted. The consequences of the amendments however, are apparent from (at least) the Appeal Reasons at [47] – [54] in relation to the first amendment, and at [42] – [46] in relation to the second amendment. If compensatory damages are sought against the director respondents, the way is open for the Microsoft parties to seek to persuade the Court to order nominal damages, even if actual damage is not proved, and thence to order additional damages against the director respondents pursuant to s.115(4) of the Act.
Shortly put, Mr Bick QC and Mr Newland, counsel for the respondents, say that a re–hearing pursuant to orders as made by O’Callaghan J, does not operate as an opportunity for the Microsoft parties to re–open their case to amend the pleadings, that there was no inadvertence, the trial had concluded, and on appeal O’Callaghan J had observed the failure of the Microsoft parties to make claims of the type now sought to be made (see Appeal Reasons at [11]–[15], [47]–[49]). I am cognisant of O’Callaghan J’s trenchant criticisms expressed in the Appeal Reasons of the manner in which the first trial judge dealt with the proceeding, the disconformity between the Microsoft parties’ pleaded case and evidence, and the first trial judge’s findings and deficiencies in reasoning.
In their written outline of submissions, the respondents’ counsel submit that this Court “is effectively being asked to treat the trial before [the primary judge] as a practice run for the applicants, and this application as the opportunity to considerable expand a case determined on appeal by the remitting court to be a narrow one.”
They say that paragraph 3 of the Order made 5 February 2019 is an order made under s.28(1)(c) of the Federal Court of Australia Act 1976 (Cth) (FCA Act) (see below), and that I am constrained in my task on remittal for re–hearing by Finkelstein J’s decision in Community and Public Sector Union v Telstra Corporation Ltd (No. 2) [2001] FCA 479; (2001) FCR 324 (CPSU), esp. at [17]. They point to the limited circumstances in which a party may re–open their case, and submit that it would be contrary to the interests of justice, and the application of principles of case management following Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175, to grant the leave sought.
Orders disposing of the appeal
The parties’ arguments focus attention on the meaning and consequences of the orders made by O’Callaghan J on the disposition of the appeal on 5 February 2019, specifically paragraph 3. I have touched on those orders at [1] above. As expressed in the Order made, they are:
1.The appeal be allowed.
2.The orders made by the primary judge on 29 August 2018 be set aside.
3.The matter be remitted to the Federal Circuit Court of Australia for re–hearing by a judge other than the primary judge.
4.Subject to any order of any Court that hears any retrial, the costs of the first trial be costs in the second trial.
5.The respondents pay the appellants’ costs of the appeal, including the costs reserved on 26 September 2018.
Relevant statutory provisions and Rules
The Microsoft parties bring their application to amend pursuant to the Court’s general power to amend in r.7.01 of the Federal Circuit Court Rules 2001, which rule relevantly provides:
(1)At any stage in a proceeding, the Court or a Registrar may allow or direct a party to amend a document (other than an affidavit), in the way and on the conditions the Court or the Registrar thinks fit.
Counsel for the Microsoft parties directs attention to r.8.21 of the Federal Court Rules 2011, which operate in this Court through the gateway of r.1.05(2) of the Rules when this Court’s Rules are insufficient or inappropriate, which Mr Fox submits is the situation before me. Rule 8.21(1) of the Federal Court Rules 2011 provides in part:
(1)An applicant may apply to the Court for leave to amend an originating application for any reason, including:
(a)to correct a defect or error that would otherwise prevent the Court from determining the real questions raised by the proceeding; or …
(g)to add or substitute a new claim for relief, or a new foundation in law for a claim for relief, that arises:
(i)out of the same facts or substantially the same facts as those already pleaded to support an existing claim for relief by the applicant; or …
(ii)in whole or in part, out of facts or matters that have occurred or arisen since the start of the proceeding.
Mr Fox also draws attention to r.16.01 of this Court’s Rules which provides that “The Court may, at any stage in a proceeding on the application of a party, give any judgment or make any order even if the claim was not made in an originating process.”
Counsel for the respondents emphasise r.103 which provides for the object of the Rules, that at (1) the object of the Rules is to “assist the just, efficient and economical resolution of proceedings”, at (3) that the Court will apply the Rules in accordance with their objects, and at (4) that “to assist the Court, the parties must: avoid undue delay, expense and technicality”.
The statutory basis of the orders made by the Full Court is to be found in s.28 of the FCA Act, which provides as follows:
(1)Subject to any other Act, the Court may, in the exercise of its appellate jurisdiction:
(a)affirm, reverse or vary the judgment appealed from;
(b)give such judgment, or make such order, as, in all the circumstances, it thinks fit, or refuse to make an order;
(c)set aside the judgment appealed from, in whole or in part, and remit the proceeding to the court from which the appeal was brought for further hearing and determination, subject to such directions as the Court thinks fit;
(d)set aside a verdict or finding of a jury, and enter judgment notwithstanding any such verdict or finding;
(e)[repealed]
(f)grant a new trial in any case in which there has been a trial, either with or without a jury, on any ground upon which it is appropriate to grant a new trial; or
(g)award execution from the Court or, in the case of an appeal from another court, award execution from the Court or remit the cause to that other court, or to a court from which a previous appeal was brought, for the execution of the judgment of the Court.
The Parties contentions on section 28(1)(c) and (f) FCA Act
Mr Bick QC and Mr Newland contrast s.28(1)(c) with s.28(1)(f) of the FCA Act, and as I have said above, they submit that the remittal to this Court falls under s.28(1)(c).
Mr Fox submits that the remittal is under s.28(1)(f), and is a new trial. He points to transcript of O’Callaghan J’s rejection on the hearing of the appeal of a proposed limitation on the draft form of remittal order that “the court hear and determine the matter afresh based upon the pleadings as they stand with no further affidavit evidence to be filed by either party”, and his Honour’s view that it was inappropriate for him to fetter the discretion of any judge re–hearing the case as to how it is to proceed.
Mr Bick QC, in oral submissions, reiterated that paragraph 3 of the Order is the operative order remitting the matter. It is that order that sends the matter back to this Court, and there is no doubt arising from the language used what his Honour intended. The language of that paragraph 3 is that of s.28(1)(c) FCA Act. It is not to be read subject to the language of paragraph 4. The operative wording of paragraph 3 cannot be changed by reference to paragraph 4 because that is not the operative order. It is not my function, he submits, to interpret what his Honour may have meant outside the wording of paragraph 3, but to give effect to the words of the order.
Senior counsel submits that the Appeal Reasons make this even clearer – the re–hearing is a continuation of the first trial, there is a significant difference between a re–hearing and a new trial, and by reason of CPSU and authorities that have approved and applied CPSU, a re–hearing is a much more limited process. He submits that I am constrained to read the transcript of the first trial, affidavits and exhibits, the written submissions. The appeal court has not ordered that the whole process should start again.
Short chronology of the pleadings and their form at trial
The proceeding was initially commenced by the Microsoft parties as against CPL Notting Hill and Ms Li on 16 May 2016. On 4 August 2017, the first trial judge heard a discovery application against the then two named respondents, and granted the Microsoft parties leave to file and serve a further amended statement of claim (that is, the Claim) and to join any further party or parties to that Claim. On 11 September 2017, pursuant to the orders made, the Microsoft parties filed the Application and the Claim, joining CPL Distribution and Mr Wang to the proceeding. The respondents filed a joint defence to the Claim on 6 October 2017, and a joint amended defence to the Claim on 17 August 2018. It is those pleadings on which the parties relied at the final hearing before the first trial judge on 27 to 29 August 2018.
The Application
The final orders that were sought in the Application are set out in the Application as follows (underlining and strike through in the original document):
Final orders sought by the applicants
On the grounds stated in the statement of claim, accompanying affidavit or other documents prescribed by the Rules, the Applicants claim:
1.The relief for infringement of copyright set out in paragraphs 1 to 5 of annexure A to this application.
2.The relief for contravention of the Australian Consumer Law set out in paragraphs 6 to 10 of annexure A to this application.
3.The relief for infringement of trade mark set out in paragraphs
1110A to 15 of annexure A to this application.Grounds of application
The grounds of the application are contained in the statement of claim filed on even date.
[5 paragraphs of allegations of fact are then struck through] …
Annexure A to the Application then provides (underlining and strike through in the original document) (excluding formal parts):
In Relation to Infringement of Microsoft’s Copyright
1A.A declaration that each of the First to Fourth Respondents has infringed the First Applicant’s copyright in the computer programs described in the annexure hereto (Microsoft Programs) by reproducing or authorising the reproduction of Microsoft Programs or a substantial part thereof without the licence of the First Applicant.
1.An order, pursuant to section 115(2) of the Copyright Act 1968 (Cth) that the First and Third Respondents, whether by themselves, their servants, agents or otherwise howsoever, be restrained from infringing the First Applicant’s copyright in the Microsoft Programs
computer programs described in the annexure hereto (Microsoft Programs)by reproducing or authorising the reproduction of Microsoft Programs or a substantial part thereof without the licence of the First Applicant.1B.An order pursuant to section 115(2) of the Copyright Act 1968 (Cth) that the Second and Fourth Respondents, whether by themselves, their servants, agents or otherwise howsoever, be restrained form (sic) directing or authorising any person or entity from infringing the First Applicant’s copyright in the Microsoft Programs.
2.An order that each of the First and Third Respondents pay to the First Applicant
s:a.Damages for infringement of copyright pursuant to section 115(2) of the Copyright Act 1968 (Cth);
b.Additional damages pursuant to section 115(4) of the Copyright Act 1968 (Cth)
3.In the alternative to 2 above, an order pursuant to section 115(2) of the Copyright Act 1968 (Cth) that each of the First and Third Respondents account to the First Applicants for profits made as a result of the First and Third Respondents’ infringement of the First Applicant’s copyright.
That there was no claim in the Application for compensatory damages for infringement of copyright under s.115(2) of the Act sought by the Microsoft parties against the individual respondents was a matter of some analysis by O’Callaghan J: see Appeal Reasons at [47]–[54].
The Claim
In support of their application for the first amendment and that the omission was inadvertent, the Microsoft parties say that paragraphs of the Claim put the respondents on notice that the Microsoft parties claimed s.115(2) compensatory damages against all respondents, and thus the individual respondents. Mr Fox points to the matters pleaded against all the respondents in the Claim at [31] to [33] under the subheading “Applicants’ loss and damage for Copyright Infringement”, and to the penultimate paragraph of the Claim, [44], under the heading “General”. Paragraph [31] is as follows (underlining and strike through in the original document):
Applicants’ loss and damage for Copyright Infringement
31.The First Applicants have suffered loss and damage by reason of the acts of the First to Fourth Respondents’
actsParticulars
(a)Damages pursuant to section 115(2) of the Act.
(b)The Applicants reserve the right to provide further particulars of the Applicants’ loss as a result of the reproduction and/or authorisation of reproduction and sale of Microsoft Programs by the Respondents following discovery from the Respondents and any interlocutory steps.
(I note that [32] and [33] then make allegations and particularise conduct relating to the claim for s.115(4) additional damages against the “First to Fourth Respondents”, not relevant to the present application for amendment).
Paragraph [44] states:
[44]By reason of the matters pleaded above, the Applicants have suffered loss and damage and the Respondents have made profits.
Particulars
(a)Damages under section 115(2) and 115(4) of the Copyright Act 1968 (Cth)
(b)[Australian Consumer Law damages claim]
(c)[Trade Marks Act damages claim].
The Defence
In the respondents’ joint defence and amended defence, in relevantly unamended paragraphs in each pleading, adopting the numbering of the Claim, the respondents deny the allegations contained in each of the above referenced paragraphs of the Claim, and in further response to [31], in [31(a)–(c)] of both forms of defence asserted a defence of innocent infringement under s.115(3) of the Act. Paragraph [31(a)] asserts:
(a)by the reason of the matters aforesaid they [the respondents] are entitled to rely upon section 115(3) of the Copyright Act 1968, whereupon the Applicants are not entitled to claim the relief claimed;
Paragraphs [31(b)] and [31(c)]) then make positive allegations of the Applicants’ conduct as failing to mitigate its loss and damage, and alternatively that it has not suffered loss as it received good consideration on initial sale.
The first amendment
The parties’ positions at the first trial
The Microsoft parties filed detailed opening submissions on 13 July 2018, and annexed the form of orders they sought at trial. The orders they sought in relation to damages for infringement of copyright were, relevantly (emphasis added):
4.An order that each of the First to Fourth Respondents pay to the First Applicant damages for infringement of copyright pursuant to section 115(2) … in the sum of $256,066.08 together with interest …
5.An order that each of the First to Fourth Respondents pay to the First Applicant additional damages for infringement of copyright pursuant to section 115(4) … in the following amounts:
[sub–paragraphs (a) to (d) then specified separately in respect of each respondent an amount of $500,000, thus $2 million in total].
The respondents’ brief outline of submissions filed 27 July 2018 was directed to issues of liability, and lack of knowledge.
Mr Hansen, solicitor for the Microsoft parties, attests that in that outline the respondents were silent on the award of compensatory damages as against the respondents pursuant to s.115(2) of the Act. Whilst that is true, the Microsoft parties’ outline of submissions addressed the method of calculation of compensatory damages, and their quantification, referring to the “Respondents”, and did not distinguish any one or other of the respondents’ several liability. In relation to additional damages, the Microsoft parties’ opening submissions focussed primarily on the conduct of the First Respondent, although not exclusively.
It is apparent from their opening written submissions that the Microsoft parties approached the issue of s.115(2) compensatory damages in a rolled up fashion – seeking a lump sum, and focussing on the conduct of the corporate respondents. This is in contrast to the separate sums expressly sought as against each respondent under s.115(4) of the Act of $500,000 each, the appropriateness of which, as against each respondent, was vigorously contested by the respondents’ legal representatives in their further outline of opening submissions, but without drawing any attention to the limited form of the relief sought for compensatory damages.
The respondents filed a further, and detailed, outline of submissions on 23 August 2018. Those submissions characterised the applicants’ copyright claims as comprising three parts, the first as against CPL Notting Hill, the second as against CPL Distribution, and the third concerning the director respondents and being allegations made of authorisation by reason of their respective directorships. As to that third case brought by the Microsoft parties, the respondents submitted it evinced a fundamental misconception of what is required to establish authorisation, that the claim ought be dismissed, and in respect of damages, made submissions on the application of s.115(3), quantification, and the limitations of s.115(4) in the factual circumstances. The respondents remained silent on the disconformity as among the Claim, the Application, and the Orders annexed to the Microsoft parties’ opening submissions (see at [34]).
Mr Fox submits that as a matter of fairness it was beholden on the respondents to raise the pleading point in their defence, or at least in opening submissions. He points out that the respondents’ defence and the submissions was focussed on a defence of innocent infringement, and quantification.
The Microsoft parties did not in the body of their 19 pages of opening outline expressly distinguish as among the individual, director respondents and the corporate respondents, or the question of compensatory s.115(2) damages in respect of, or payable by, each of the respondents, but did do so in respect of s.115(4) damages, by analogy with the decision of Microsoft Corporation v PC Club Australia Pty Ltd [2005] FCA 1522; (2005) 148 FCR 310; (2005) 67 IPR 262, proceedings concerned with a corporate respondent and three director respondents.
From my perusal of both parties’ opening written submissions, it is clear that neither side expressly addressed the limitations of the pleadings in respect of the subject matter of the first amendment, and specifically that the relief sought in the Application did not extend to relief under s.115(2) of the Act against the director respondents.
The pleading issue was raised by the respondents in closing submissions, and then orally. It seems that these submissions were handed up during closing oral submissions.
The transcript records the following exchange between Mr Fox and the first trial judge in reply to Mr Zappia QC’s submissions on behalf of the respondents:
MR FOX: In relation to the pleading point, can I just make this observation. The words in both paragraphs 38(c) and 38(e) say that the third respondent and also the fourth respondent were people involved in – directly involved in the – – –
HIS HONOUR: I don’t think there’s any pleading point that’s alive other than the suggestion that the relief in the originating application didn’t refer to particular respondents. Your substantive pleading clearly does.
MR FOX: Thank you, your Honour. Moving to the next point, in relation to the damages submissions that were made, we draw a distinction between what our friends say about the Autodesk v Cheung case. The Microsoft v Tyn matter that I gave to your honour, we say, is clearly authority that one doesn’t need to apply what might be described as a net revenue approach. Clearly Stone J didn’t provide any deduction at all. In relation to the at large point that your Honour asked a question of Mr Zappia about, “What if I took – the Court took the at large approach”, and it was then said that we hadn’t produced any evidence of damage. To the contrary, we have.
Mr Fox says that in these circumstances he apprehended that the first trial judge did not require the Microsoft parties (or perhaps, more accurately, Microsoft) to make any formal application to amend the Application to seek s.115(2) Act damages as against the director respondents.
The Second Amendment
By the second amendment the Microsoft parties seek to add a claim of liability of the respondents as joint tortfeasors in respect of the infringement of Microsoft’s copyright in the software. Repeating and relying on the existing allegations of copyright infringement in the Claim, new [34B] and [34C] are sought to be introduced into the Claim as follows:
[34B]With respect to the allegations of infringement at paragraphs 20 to 28, 29 and 30 above the Third and Fourth Respondents together with the First and Second Respondents acted in concert to infringe the First Applicant’s copyright in the Microsoft Programs through a common design.
(Then follow 16 sub–paragraphs of particulars, referring to at least 16 affidavits from 8 people, including Ms Li, but otherwise not being persons called by the respondents at trial, Mr Wang, and 2 persons who appear to be lawyers for the Microsoft parties, transcript references from Ms Li’s cross–examination and exhibits.)
[34C]Further, with respect to the allegations of infringement at paragraphs 28A to 28F above the First and Second Respondents together with the Third and Fourth Respondents acted in concert to infringe the First Applicant’s copyright in the Microsoft Programs through a common design.
(Then follow 5 sub–paragraphs of particulars, first repeating the above particulars and directed to the COA labels, and allegations of authorisation of reproductions of the software.)
The particulars to each of proposed [34B] and [34C] conclude with a sub–paragraph as follows:
Further particulars are matters for evidence. The Applicants may provide further particulars following the completion of evidence, including the completion of oral evidence at trial.
Paragraph [34D] concludes the proposed joint tortfeasor claim, pleading:
By reason of the matters pleaded at paragraphs 34A to 34C above, the Respondents are liable as joint tortfeasors in respect of the infringement of the First Applicant’s copyright in the Microsoft Programs.
In the Application the corresponding additional relief sought at new [1AA] is, further to the declaration of copyright infringement by reproduction or authorising the reproduction of the software currently sought, a declaration that “the Respondents have, as joint tortfeasors, infringed the First Applicant’s copyright in the Microsoft Programs.”
Although not remarked upon by any counsel in argument before me, for completeness I note that the existing trade marks infringement claim in the Claim includes allegations of liability for the infringements of CPL Notting Hill by each of Ms Li and Mr Wang as a joint tortfeasor, whilst the Application seeks corresponding declarations.
Mr Fox submits that the second amendment arises out of a matter that has been pleaded before, namely the existing copyright claim. He submits that there is no principle that precludes the Microsoft parties from bringing such an amendment in the context of a new hearing, no prejudice is identified, and there is no suggestion that the respondents do not have capacity to meet the claim.
Mr Bick QC says that the position is that as with the first amendment, but a fortiori, the Microsoft parties should not be permitted to advance the second amendment.
Principles and guiding authorities
In CPSU Finkelstein J was concerned with a matter the Full Court remitted to him, as the trial judge. He described the circumstances thus, (at [1]): The trial was conducted before me. I dismissed the application. … Being dissatisfied with the result, the unions appealed to the Full Court. The Full Court allowed the appeal, set aside the order made at trial and “remitted [the matter] to the primary judge to be determined in accordance with [the Full Court’s] reasons for judgment.” The question for his Honour was how that remitted application should be conducted – afresh as if there were never a trial, or, since each side closed its case at trial, should it be determined on the evidence led at trial, which neither party can supplement.
His Honour gave a brief description how the dispute arose as to the conduct of the remitted application. At [3] – [6], his Honour described that matter, and the different opinion the Full Court reached on the question of prejudice, which left for determination whether Telstra had acted for a prohibited reason, a matter, given his Honour’s conclusion at trial, that had not been necessary for him to decide. Finkelstein J said that the Full Court had considered whether it could resolve the issue, and referred to evidence given by a witness, Mr Cartwright, but was not appraised why he had not been cross–examined (the parties had reached agreement). The Full Court explained that it was not possible to determine why he was not cross–examined. The Full Court accordingly remitted “the issue of reason … to the trial judge”. Finkelstein J stated “But, it is clear that the Full Court intended to remit only one aspect of the matter”: (see CPSU at [6]).
At [13], after setting out the terms of s.28(1)(a), (c), and (f) FCA Act, his Honour observed (emphasis added): Looking at the words of its order, the Full Court seems to have proceeded under s.28(1)(c). So much is accepted by the parties. The question then is: What is the nature of the “further hearing” that is to be undertaken? …”. His Honour considered the competing views, and concluded, at [17]:
The better view appears to me to be that an order under s.28(1)(c) does not result in a new trial. Accordingly, the “further hearing” will be conducted on the basis that it is a continuation of the first trial, where the parties can only mend their hand or change course in accordance with well known rules.
His Honour declined to permit the unions to resile from their position at trial not to cross–examine Mr Cartwright. He explained that the rule in Browne v Dunn did not require the unions to cross–examine Mr Cartwright about a certain matter, there was nothing unfair about the manner in which the unions had conducted their case. He determined that the trial would resume so the remitted issue may be dealt with, but the unions would not be permitted to cross–examine Mr Cartwright.
CPSU was approved by Siopsis J in Fernando v Commonwealth of Australia (No 5) [2013] FCA 901, which was then the subject of appeal in Fernando v Commonwealth of Australia [2014] FCAFC 181; (2014) 231 FCR 251; (2014) 315 ALR 547 (Fernando Appeal).
In Fernando, Siopsis J was concerned with a proceeding remitted to him, as the trial judge, by the Full Court. His Honour explained at [21]: “None of the parties was particularly impressed with my judgments. The Commonwealth and the former Acting Minister appealed and Mr Fernando cross–appealed”. On appeal, the Full Court made orders allowing the appeal in part and the cross–appeal in part, set aside certain orders, and ordered: (5) The proceeding be remitted to the trial judge to assess damages on the basis that the respondent (cross–appellant) was falsely imprisoned by the defendant between 5 October 2003 and 18 January 2007.
A decision of the Supreme Court of the United Kingdom delivered after his Honour’s orders in the first trial came to Siopsis J’s attention in the course of case management on remittal, and he drew it to the parties’ attention. The Commonwealth foreshadowed that, based on that authority, it intended to advance a case that Mr Fernando was entitled to no more than nominal damages. It was common cause that this was not a case the Commonwealth had advanced at trial. Mr Ferrnando objected. His Honour considered the Full Court’s reasons, and whether he would be acting inconsistently with its decision because it had expressed an expectation that on remittal his Honour would make an award of substantial damages in Mr Fernando’s favour (at [41], [45]–[46]). His Honour came to the conclusion that he was not precluded by the observations of the Full Court from permitting the Commonwealth to advance its argument on nominal damages (at [49]). Turning to the question of whether, in fairness, the Commonwealth should be allowed to do so, his Honour considered the authorities on re–opening, first (at [59]) having regard “to the position of the Court when the Full Court has, as it has in this case, remitted a matter to the trial judge under s.28(1)(c) … following the hearing of any appeal”. He referred to CPSU at [17].
At [65], Siopsis J reiterated that the Commonwealth had not sought to re–open its case for the purpose of seeking to lead further evidence. He concluded that the question should be determined on the basis of the guiding principle in respect of re–opening a case, namely whether the interests of justice are better service by permitting or not permitting the Commonwealth to rely on the nominal damages contention. He permitted the Commonwealth to advance its contention that Mr Fernando was entitled to no more than nominal damages. The Commonwealth was successful in that contention.
On appeal, in Fernando Appeal at [51], Besanko and Robertson JJ (Barker J agreeing), observed that the orders of the previous Full Court seem to have been an exercise of the power contained in s.28(1)(c), and at [53], approved the approach in CPSU at [17], saying:
53. With respect, it seems to us that that approach is correct. It means, in this case, that the orders of the previous Full Court under s 28(1)(c) of the FCA Act did not result in a new trial. However, the respondents in this case were not seeking a new trial. They were not seeking to call any further evidence and they were prepared to argue the remitted matter, that is, the matter identified in the fifth order, on the basis of the evidence as it stood at trial. The previous Full Court gave no direction associated with the remitter other than the direction that damages were to be assessed on the basis that the appellant was falsely imprisoned by the Commonwealth between 5 October 2003 and 18 January 2007, and the nominal damages contention did not contradict that basis. In our opinion, nothing in s 28(1)(c) of the FCA Act, or the terms of the previous Full Court’s orders, precluded the primary judge from entertaining the nominal damages contention. Furthermore, we do not think the previous Full Court’s reference to substantial damages was an implied limitation on the remitter. It is not referred to in the orders and, in any event, is too indefinite to constitute a limitation on the remitter.
54. The primary judge had a discretion as to whether he allowed the respondents to put the nominal damages contention.
Consideration
I turn first to the wording of paragraph 3 of the Order. On its face, and contrary to the respondents’ contentions, it does not adopt the precise wording of s.28(1)(c) of the FCA Act: the remittal is for “re-hearing”, not “further hearing”. However, nor does paragraph 3 adopt the wording of s.28(1)(f): there is no “grant [of] a new trial”. Paragraph 3 does not in its terms provide the guidance given to Finkelstein J in CPSU, and to Siopsis J in Fernando, nor, unlike in both those proceedings, is there any agreement between the parties that the remittal is made under s.28(1)(c); to the contrary.
I note that in both CPSU and Fernando, however, whilst their Honours each determined the question before them on the basis that the remittal was not for a new trial, permitting the parties to start afresh, the determination that the remittal was, in each case under s.28(1)(c) did not preclude the possibility that a party could change their case. In each case, the issue was determined by his Honour guided by what was best in the interests of justice.
As my consideration of CPSU and Fernando demonstrate, in each case, their Honours determined what the Full Court ordered by having regard to the reasons of the Full Court. In the light of these authorities, and the Full Court’s approval in Fernando Appeal, I am not persuaded by the respondents’ submission that I must look only at paragraph 3. To the extent that the respondents’ counsel submitted that I could not have regard to the Appeal Reasons, I reject that submission. In the light of the consideration of the respective Full Court’s reasons by Finkelstein J in CPSU and by Siopsis J in Fernando, I construe what is ordered by paragraph 3 of the Order having regard to the schema of the Order, and the Appeal Reasons.
At [62] of the Appeal Reasons his Honour states:
I have not in these reasons dealt with all the reasons advanced by the appellants in support of their case that the matter must be reheard. There are, as I have explained, myriad reasons why the judgment and the orders and declarations made by the primary judge cannot stand, and, in light of the conclusion made by Senior Counsel for Microsoft that the appeal must be allowed, it is unnecessary to deal further with the submissions advanced by the appellants.
At [63] of the Appeal Reasons his Honour then states (omitting citations):
“… It is a regrettable fact that the decision and reasons of the primary judge are “wholly unsatisfactory” and that they justify the appellants asserting that the matter must be tried again: cf Mifsud v Campbell. The simple, and obvious, fact is that, as in Mifsud v Campbell, there has been “a failure to do what the nature of the [judicial] office requires”.
I note that in Mifsud v Campbell (1991) 21 NSWLR 725; (1991) 13 MVR 243 the Court of Appeal found that there had been a mis-trial, allowed the appeal, set aside the orders made below, and held that a new trial be ordered on all issues.
In the Appeal Reasons, his Honour then said, at [64] (omitting citations):
Where an appellate court concludes that the primary judge has failed to give adequate reasons, it has a discretion as to whether a new trial should be ordered. See Pollard v RRR Corp Pty Ltd. But in a case such as this it is not appropriate for an appellate court to embark upon what would, on the alternative case that the appellants seek to advance, be a retrial of the proceeding. That is especially so because the primary judge’s findings of fact (unsatisfactory though they are for the reasons described above) were purportedly based in significant part upon his assessment of the credibility of Ms Li; cf Waterways Authority v Fitzgibbon. (The position might be different where there is no credit issue. Then an appeal court may be in as good a position to decide the matter as the trial judge. See Hunter v Transport Accident Commission.)
His Honour considered the appellants (respondents before me) justified in asserting that the matter be tried again. However, because, particularly, of the credit issue, he considered that it was not appropriate for him, as the appellate court, to embark on a retrial. He therefore remitted the matter for “re-hearing”.
Viewing the Appeal Reasons in their entirety it is clear that by paragraph 3 of the Order O’Callaghan J intended that the parties have the opportunity for their cases to be heard again, for the parties to make submissions, and for another judge to make findings and provide reasons. His Honour’s references at [63] to Mifsud v Campbell, and his discussion at [64], and observation that the findings of fact of the first trial judge were purportedly based in significant part upon his assessment of the credibility of Ms Li, lead to the conclusion that paragraph 3 of the Order operates to enable a new trial to occur upon remittal. His Honour envisaged that the judge on remittal would have the benefit of seeing the witnesses under cross-examination, forming her own views as to the credibility of witnesses, and reaching her own findings of fact and credit.
That is not to say, however, that the Microsoft parties have a free hand to change the case that they have pleaded and on which they went to the first trial. This much is clear from the tenor of the Appeal Reasons viewed in their entirety.
I am guided by Finkelstein J in CPSU, and by Siopsis J in Fernando, as considered by the Full Court. In each case, what was to occur on the remitter was governed by the particular limitations and deficiencies identified on appeal. In each of CPSU and Fernando, the court hearing the matter on remittal was assisted by the observations of the appellate courts in their respective reasons.
Conclusion on the first amendment – s.115(2) compensatory damages
Mr Hansen has given evidence that the omission in the Application of a claim for s.115(2) relief against Ms Li and Mr Wang was inadvertent. That may be so, his explanation was not seriously shaken in cross‑examination. The underlining in the paragraphs of the Application does not assist me in reaching a conclusion, one way or another. However, I am persuaded that the paragraphs of the Claim that do refer to s.115(2) Act relief are paragraphs that are referrable to all four respondents, and that the Claim put the respondents on notice that such relief would be sought against the director respondents, as well as the corporate respondents. The Claim was dated 7 September 2017, approximately a year before the trial commenced. It was accepted as filed on 11 September 2017, and the defence filed 6 October 2017 and an amended defence filed 17 August 2018.
Whilst it is the Application that states the relief sought, based on the grounds pleaded in the Claim, and the Application did not seek s.115(2) Act damages against the director respondents when filed in 2017, I consider that it would be apparent upon a fair reading of the Claim that the omission of that prayer for relief from the Application was an oversight.
The orders annexed to the Microsoft parties’ opening submissions expressly claim s.115(2) relief against all four respondents – as stated, the “First to Fourth Respondents”. Although no specific amount is specified as against each respondent, I consider that all four respondents were thereby on notice of the total amount claimed from them by way of s.115(2) Act damages. Thus, before the commencement of trial, the respondents were on notice that the Microsoft parties sought s.115(2) relief against all four respondents. That was the time to object. They did not. They remained silent in both opening outlines.
In the circumstances, I consider that the Microsoft parties’ application to make the first amendment comes within the first class of cases where a party may be permitted to reopen: see Inspector‑General in Bankruptcy v Bradshaw [2006] FCA 22, at [24]. I accept Mr Hansen’s evidence, and the submission that the omission from the Application of claims for s.115(2) Act damages against the second and fourth respondents was inadvertent.
The question then arises whether in the circumstances of a “re-hearing”, in the light of r.1.03 of the Rules and the objects there set out, and the case management principles in Aon, the amendment ought be allowed. I observe that the respondents have not put on any evidence that they are not able to meet the amendment, and I take into account that there is time until the hearing in August for them to file further evidence. I take note of the assurances given by the Microsoft parties that there will not be any further evidence from them. In my discretion I propose to allow the first amendment.
Conclusion on the second amendment – joint tortfeasorship
The second amendment may be disposed of shortly. The Microsoft parties seek to expand their case. They accept it is a new claim, but say it won’t take any more time or additional evidence to that made available to them in the course of the proceeding to date.
However, the Microsoft parties did plead and seek relief on a claim for joint tortfeasorship within their claim for infringement of trade mark. I am able to infer from that distinction between the trade mark claims and the copyright claims pleaded, that the strategic and forensic decision made by the Microsoft parties up until the appeal – perhaps up until the proceeding was remitted to this Court - was not to raise or rely on a copyright infringement claim of joint tortfeasorship. No application to re‑open was made on the appeal (compare the exchange between the First Trial judge and Mr Fox, see at [43] above). That decision should not be revisited. The principles of case management in Aon apply. The objects stated in the Rules do not support the introduction of another cause of action. Whether or not there will be no additional evidence from the Microsoft parties than that available to them in the first trial (as they assure me), there will be time and expense expended in written submissions, and in oral argument. I do not know whether the respondents will rely on further or other evidence, but it is clear that they will have to spend considerable time and expense in meeting that additional cause of action.
Although the four classes of case in which a court may grant leave to re-open are not exhaustive (see Bradshaw at [24]), the second amendment does not fall within the four recognised classes, nor am I persuaded that the interests of justice are better served in this case, on remitter, by allowing the Microsoft parties to add such a new cause of action. In my discretion, I refuse the second amendment.
Overall Conclusion
I will allow amendment to paragraph 3A to the Application in the form set out in annexure A to the application in a case dated 15 March 2019. I otherwise dismiss paragraphs 1 and 2 of the application in a case. I will stand over the question of costs and pre-trial directions to a date to be fixed.
I certify that the preceding eighty (80) paragraphs are a true copy of the reasons for judgment of Judge Baird
Date: 16 May 2019
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