PPCA Ltd v All Girls Entertainment Pty Ltd
[2010] FMCA 593
•20 July 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| PPCA LTD v ALL GIRLS ENTERTAINMENT PTY LTD & ORS | [2010] FMCA 593 |
| COPYRIGHT – Breach of s.115 – infringement – proceedings brought by collection society – where every attempt made to avoid litigation by society – where respondents ignored all efforts and made no licence payments – additional damages. |
| Copyright Act 1968, ss.101, 115 Federal Magistrates Court Rules 2001 |
| Autodesk Australia Pty Limited v Cheung (1990) 70 IPR 69 Microsoft Corporation v Goodview Electronics (2000) 49 IPR Raben Footwear Pty Limited v Polygram Records Inc (1997) 75 FCR 88 APRA v Cougars Tavern [2008] FMCA 369 Fraserside v Venus Adult Shops (2005) 222 ALR 388 PPCA v Adelaide City Entertainment (2005) FMCA 923 Phonographic Performance Company of Australia Limited (1977) 73 IPR 162 Aristocrat Technologies Australia Pty Limited v DAP Services (Kempsey) Pty Limited (In Liquidation) [2007] FCAFC |
| Applicant: | PHONOGRAPHIC PERFORMANCE COMPANY OF AUSTRALIA LIMITED (ACN 000 680 704) |
| First Respondent: | ALL GIRLS ENTERTAINMENT PTY LTD (ACN 124 839 167) |
| Second Respondent: | AURELIANO MILANESE |
| Third Respondent: | PETER KALLAS |
| File Number: | SYG 557 of 2010 |
| Judgment of: | Raphael FM |
| Hearing date: | 20 July 2010 |
| Date of Last Submission: | 20 July 2010 |
| Delivered at: | Sydney |
| Delivered on: | 20 July 2010 |
REPRESENTATION
| Counsel for the Applicant: | Mr S Balafoutis |
| Solicitors for the First and Second Respondents: | McKays Solicitors |
ORDERS
The Respondents, whether by themselves, their servants or agents or otherwise be permanently restrained from causing or authorising any sound recordings contained within the First Catalogue (as defined in attachment A hereto) being heard in public, without the licence of the Applicant or the respective copyright owner(s).
The First, Second and Third respondents shall pay the Applicant:
(a)the sum of $145,332.95 pursuant to s 115(2) of the Copyright Act 1968 (Cth) Act of which the Third Respondent’s liability shall not exceed $22,280.65;
(b)the sum of $14,953.56 as interest on s 115(2) damages of which the Third Respondent’s liability shall not exceed $4945.24;
(c)the sum of $90,000 by way of additional damages pursuant to s 115(4) of the Act of which the Third Respondent’s liability shall not exceed $36,000.
The Respondents to pay the Applicant’s costs of the proceedings to be assessed in accordance with Schedule 1 of the Federal Magistrates Court Rules 2001.
ATTACHMENT A
The First Catalogue means the catalogue of sound recordings licensed to the First Applicant, which contains recordings within the meaning of the Copyright Act 1968 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 557 of 2010
| PHONOGRAPHIC PERFORMANCE COMPANY OF AUSTRALIA LIMITED (ACN 000 680 704) |
Applicant
And
| ALL GIRLS ENTERTAINMENT PTY LTD (ACN 124 839 167) |
First Respondent
| AURELIANO MILANESE |
Second Respondent
| PETER KALLAS |
Third Respondent
REASONS FOR JUDGMENT
There comes before me today an application for summary judgment in respect of proceedings brought under s.115 of the Copyright Act 1968 (the “Act”) for infringement of copyright in certain musical works for which the applicant, the Phonographic Performance Company of Australia Limited, (PPCA), holds the copyright. The PPCA is a collection society which is responsible for the collection of copyright royalties in respect of recorded music that is played in public. It is not the collection society for royalties in the copyright of musical work or lyrics. That is a responsibility of the Australian Performing Rights Association (APRA).
The first respondent is a company which has, and still does, run a nightclub in Northern Queensland known as the Platinum Lounge in the city of Mackay. The second and third respondents were originally directors of the company. The third respondent appears to have ceased to be a director of the company on 19 May 2008. When the second and third respondent purchased the business of the Platinum Lounge in August 2007 a letter was written by the PPCA dated 24 August 2007. The letter advises that the PPCA has become aware that they have taken over the ownership of the Platinum Lounge and then explains the role of the PPCA as a licensing organisation. It explains the difference between a PPCA licence and an APRA licence and it provides a confirmation sheet which the recipients could have completed and returned indicating whether a licence was required at all and, if so, what type of licence. The letter also had as an attachment the various tariffs that were applicable or might be applicable to premises of the type that PPCA believed the Platinum Lounge was.
The letter was, in effect, an invitation to the company and its directors to enter into an agreement with PPCA for the appropriate licensing of music based upon the numbers of persons in respect of whom the premises were licensed. Regrettably, as appears from the affidavits filed in the proceedings, the respondents made little effort to deal with the licence and have at no stage taken one out. Further letters were written on 14 September 2007 and 5 October which also warned the directors that if recordings were played without a licence from the PPCA that they would also be liable.
The PPCA is a small organisation with a large responsibility. It does not always move with quite the speed that one might wish. Indeed, not even at a speed that those who are in charge of the organisation might wish. This is more because of its lack of resources than of any unwillingness to ensure that licence fees for which it is responsible are paid. In this particular case nothing appears to have happened until 11 December 2008 when an inspector was sent up to the property and he reported that music that was the responsibility of the PPCA licence regime was being played in the premises.
On 7 January 2009 the company and the two respondents were informed that proceedings against them would be prepared and on 21 January 2009 Mr Milanese, the second respondent, was spoken with. The company was also sent a further licence application, because it is my understanding from familiarity with cases brought by the society, that every effort is always made to avoid litigation and to get parties to sign up to licences and pay their obligations. These discussions continued throughout the first half of 2009.
On 29 June 2009 the society wrote to the second and third respondents enclosing copies of draft applications that they intended to bring, but for one reason or another, whilst this did not produce a response, or at least any satisfactory response from the respondents, nothing was done until 16 March 2010 when an application was lodged. It should be stated here that Mr Kallas resigned as a director of the company on 19 May 2008 but he would appear to have continued to have some involvement because on 2 February 2009 he was spoken to by Ms Small of the society.
When proceedings of this type are issued in this court an early directions hearing is fixed. In this case that occurred on 29 April 2010. There was no appearance for the respondents. The applicant asked for summary judgment but the court determined that the matter should be stood over to 11 May and the applicants were told to advise the respondents that if they made no appearance on that day they would apply for summary judgment pursuant to O.13, r.13.07 of the Federal Magistrates Court Rules 2001 (the “Rules”).
On 11 May the applicant did appear by a solicitor and orders were made which provided for the filing of evidence, the issuing of subpoenas and, at the request of the respondents, for mediation. The hearing was set down for today. This is the practice of this court. It ensures parties that if a mediation is not successful then the matter will be proceeding to a hearing within a short space of time. It appears to be effective because many cases are settled at mediation. In this particular case both the court and the applicant attempted to arrange for a mediation date but they were met with no response from the respondents and eventually the mediation was abandoned. The respondents did not file any evidence. They did not take out any subpoenas and on 9 July a Notice of Ceasing to Act came in from the solicitors who were up to that time on the record.
This morning Mr Milanese contacted the court by telephone. He gave certain information to my associate as a result of which it was agreed that he could appear by telephone. When the matter was called for hearing a Mr McGrath, solicitor, advised the court that he was now appearing for the first and second respondents and had just been instructed, although he was familiar with Mr Milanese from having previously acted for him. The court is grateful to Mr McGrath for his assistance in relation to this case.
With his help an agreement was entered into pursuant to which the first and second respondents acknowledged the copyright ownership of the applicant and agreed that the amount of licence fees unpaid for which damages would be awarded against the parties under s.115(2) of the Act would be $145,332.85 together with interest in the sum of $14,953.56. That left outstanding the liability of the third respondent and the liability of all respondents to damages known as “additional damages” under s.115(4).
Mr Kallas has not seen fit to appear here today. He was, as I understand it, previously represented by the solicitors who represented the other parties. The applicant has provided the court with some short minutes of order, the effect of which is to limit his liability to approximately 40% of the total on the basis of his time as a director. I am prepared to accept that limitation in the absence of any defence from Mr Kallas and, having read the affidavits tendered by Mr Balafoutis on behalf of the society, namely, those of Mr Garland dated 15 January 2010, Ms Petrovska of 15 March 2010, Ms Lyn Small of 15 March 2010 and a second affidavit of Anna Killick of 14 July 2010 I am satisfied that Mr Kallas was a director of the company, that the PPCA is the copyright owner and does have the right to bring these proceedings and that therefore Mr Kallas is someone who is responsible for the actions of the company whilst he was a director pursuant to s.101(1) of the Act.
Section 115(4) is in the following form:
“(iv)[Additional Damages] Where, in an action under this section:
(a) an infringement of copyright is established; and
(b)the court is satisfied that it is proper to do so, having regard to:
(i) the flagrancy of the infringement; and
(ia) the need to deter similar infringements of copyright; and
(ib) the conduct of the defendant after the act constituting the infringement or, if relevant, after the defendant was informed that the defendant had allegedly infringed the plaintiff’s copyright; and
(ii) ...
(iii) any benefit shown to have accrued to the defendant by reason of the infringement; and
(iv) all other relevant matters;
the court may, in assessing damages for the infringement, award such additional damages as it considers appropriate in the circumstances.”
The award of additional damages is now quite a common occurrence in copyright infringement actions and there are a number of seminal authorities from the Federal Court concerning the way in which such damages should be calculated and the matters that should properly be taken into account. I mention here only a few: Autodesk Australia Pty Limited v Cheung (1990) 70 IPR 69; Microsoft Corporation v Goodview Electronics (2000) 49 IPR; Raben Footwear Pty Limited v Polygram Records Inc (1997) 75 FCR 88 and in this court APRA v Cougars Tavern [2008] FMCA 369; Fraserside v Venus Adult Shops (2005) 222 ALR 388 and PPCA v Adelaide City Entertainment (2005) FMCA 923. The breach of copyright has been established and I believe that I should now consider the matters set out in s.115(4) for the purposes of deciding whether or not to award additional damages and, if so, the amount.
In regard to the flagrancy of the infringement my attention has been drawn to the fact that the respondents were made aware of their liability to pay from the time that they took over the business. It should also be noted that the two directors were also involved in another nightclub in respect of which payment of the PPCA licence fee was required so that they were not completely unaware of the existence of the society or the necessity to pay a fee. The conduct of the company and its directors thereafter, which constitutes both flagrancy and the conduct after being told of the alleged infringement, was to my mind reprehensible.
Almost three years have passed since these respondents became liable to start making payments and nothing has been paid at all. They have been consistently warned of the dangers that they face for not complying with the requirements of the PPCA licence and they have prevaricated and done nothing to ameliorate the debt that they owe. They have required the applicant to expend a large sum of money in sending up an inspector to the premises. They have required the society to bring these proceedings and, having brought the proceedings, they suggested that the matter might be settled by mediation and then did nothing to permit that mediation to occur.
The conversations which the employees of the Society had with the directors and which are referred to in the affidavits that I have cited, seem to indicate that the directors were at all times aware of the necessity to pay the licence fee but just did not wish to do so because they felt that the licence fee should be charged in accordance with the number of persons who came through the door rather than the number of persons to whom the premises were licensed. It would be clear to anyone that a licence fee based upon different attendances on different nights would be impossible to police and that the only reasonable basis is the one chosen, namely, that of the maximum number of people who may attend the premises under a licence from the licensing authorities. A suggestion was made by the society that one of the rooms, which was independently licensed, might be closed down so that a licence fee calculated only on the other room could be fixed but this does not appear to have occurred.
It is clear from the fact that this court sees a small but, regrettably, regular number of cases of premises similar to this one being brought for failure to pay licence fees, that this is conduct which should be deterred. Mr Balafoutis draws to my attention some alleged conversations between the society’s staff and Mr Kallas in which it was suggested that Mr Kallas said that he had spoken to other nightclub owners in the vicinity about the necessity of paying licence fees and Mr Balafoutis suggests that this type of action meant that the possibility of getting away with non payment of fees was known in the area. I cannot give much weight to that matter. The evidence is too slight. But I do give weight to the general need to ensure that these collection societies are able to carry out their work without the necessity of expending the large sums of money in legal and other costs that have been placed upon them by these respondents and that this should be known within the industry.
The respondents have obtained a significant benefit from not paying three years’ worth of fees. The fees are not small and if they are not paid then it is easier to keep open the doors of the business and this in turn provides the non payer with an unfair competitive advantage over those who do comply with their obligations. Mackay is a reasonable sized town. There are probably a number of venues of this type and a venue that does not pay its fees should not thus have a competitive advantage.
In regard to any other relevant matters I would note that I have included in my views about flagrancy my views about the conduct of the defendants following the advice given to them at the time they opened the business in their own names. I would also note that today Mr Milanese on behalf of himself, and the company, eventually realised the error of his ways. Mr McGrath explained to me that the venue was being sold. We have no details of the sale price. He says that the sale price did not reflect a profit based upon non payment of fees. He said that the venue was not particularly successful and any success that it had was as a drinking establishment rather than as a nightclub to which people went for the purposes of listening to music. He has provided me with no evidence of this but I am prepared to take it into account.
In regard to the quantum of damage Mr Balafoutis has asked me to consider the value of this music to the establishment, which was discussed by the Copyright Tribunal in reference by Phonographic Performance Company of Australia Limited (1977) 73 IPR 162 at [112 and 216]. The Tribunal accepted evidence of a survey that valued the patrons’ willingness to pay to visit a nightclub playing recorded music at $6.97 and attributed the sum of $2.32 to the owner’s rights in the sound recordings being played. It then imposed a licence fee of $1.05 per visitor as the cost of the PPCA licence. Mr Balafoutis submitted that this indicates the value to patrons of the opportunity to listen to music. It is a submission I am prepared to accept. If the premises were as unsuccessful as Mr McGrath indicates this may be because the director’s choice of music was infelicitous rather than reflecting on the value of holding a PPCA licence.
When considering the amount to be paid by way of additional damages one does not utilise the amount of general damages as an indicator. The two types of damages are entirely separate. Perhaps the most appropriate authority to quote as having been considered by myself in calculating the amount payable is Aristocrat Technologies Australia Pty Limited v DAP Services (Kempsey) Pty Limited(In Liquidation) [2007] FCAFC 40 where the Chief Justice discusses the nature of the award at [41-45].
The applicant has asked for additional damages to be awarded in the sum of $150,000.00. To my mind this is at the very high point of the range. Whilst I could see that the conduct of the parties in this case was flagrant and reprehensible and whilst I accept the importance of a deterrent factor, I believe that the figure to be awarded should be somewhat less. I know nothing of the financial position of the company or of Mr Kallas or Mr Milanese themselves but I suspect an order in the figure requested would be unlikely to be met, especially as it is compounded with one of more than that amount under s.115(2). To my mind there is little punishment or deterrent in being made to pay a figure so large that it is impossible to pay. A party may suffer more from being required to pay just about as much as he can.
In those circumstances I propose to make an award of additional damages in the sum of $90,000.00. I propose in the orders which I will make to limit Mr Kallas’ liability to 40% of that sum being $36,000.00. I propose to make all the respondents liable for the applicant’s costs as Mr Kallas is still a respondent to these proceedings who has not even had sufficient respect for the court to do as Mr Milanesi has done and obtain the services of a legal representative, albeit at the eleventh hour.
Mr Balafoutis has provided me with some helpful draft orders. These include a permanent injunction which I have not previously mentioned but which I believe should be granted. It provides that all recordings licensed by PPCA not be heard in public without the licence of the first applicant. I have made amendment to those draft orders to reflect the way in which I believe Mr Kallas should be dealt with.
I certify that the preceding twenty-four (24) paragraphs are a true copy of the reasons for judgment of Raphael FM
Date: 4 August 2010
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