Redrock Holdings Pty Ltd v Hinkley

[2001] VSC 277

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION
INTELLECTUAL PROPERTY LIST

No. 7088 of 1999

REDROCK HOLDINGS PTY. LTD.	Plaintiff
V
A. HINKLEY AND OTHERS	Defendants

No. 7158 of 1999

HOTLINE COMMUNICATIONS LTD & ORS.	Plaintiffs
V
A. HINKLEY AND OTHERS	Defendants

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JUDGE:	HARPER, J.
WHERE HELD:	MELBOURNE
DATE OF HEARING:	2 AUGUST 2001
DATE OF JUDGMENT:	2 AUGUST 2001
CASE MAY BE CITED AS:	REDROCK HOLDINGS PTY. LTD. AND HOTLINE COMMUNICATIONS LTD. v. ADAM HINKLEY & ORS.
MEDIUM NEUTRAL CITATION:	[2001] VSC 277

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CATCHWORDS:      Judgments, Orders and Declarations – Copyright – Whether orders sought in relation to certain pieces of computer software follow from reasons for judgment – Costs orders.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr. M. Goldblatt	Davies Collison Cave
Mr. A. Hinkley	In person
Mr. P. Hinkley	In person & for the Third Defendant

HIS HONOUR:

1. On 4 April 2001 I delivered judgment in this matter.  I have since convened the court on several occasions to enable the parties to put to me submissions concerning the orders which should follow my judgment, including orders for costs.  I now deal with the latter question as well as with an application by the plaintiffs for a declaration that in the development of the software known as "e-Text" the second and third defendants infringed the plaintiffs' copyright in the AW library or libraries.

1. It has always been the defendants' position that a relationship, a degree of inter-connectedness, existed and exists between e-Text and the AW library.  Indeed, in July 1995 Mr Paul Hinkley and his son signed a document which purported to give to the former a licence to use the library for e-Text purposes; and in September 1997 Mr Paul Hinkley sought the agreement of Hotline Communications Ltd to his continued use of the library for those same purposes.  This approach was made following the agreement ("The shareholders' agreement") of 17 September 1997 by which (as I have found) Adam Hinkley assigned all his interest in the library to Hotline Communications.

1. These actions on the part of Paul Hinkley are only explicable on the basis of his belief that the copyright in AW might be infringed by his work on or use of e-Text.  The defendants now submit, however, that e-Text does not infringe and that no orders reflecting the contrary position should be made.

1. During the course of the trial the defendants challenged the validity of the assignment of 17 September 1997.  In the course of discussing this challenge I examined in my judgment (at paragraph [138]) a proposition put forward by Mr Paul Hinkley that in his belief the assignment was in effectual.  In the light of that belief Mr Paul Hinkley (as he put it) also believed that his continued use of the AW software for the development of e-Text was justified under the licence granted by his son in July 1995.  I continued in my judgment:

"My findings in relation to s.2.06 of the shareholders' agreement lead me to conclude that if Mr Hinkley had this belief it was mistaken.  However, it seems to me Mr Hinkley's conduct in seeking reassurance from Mr Page about his position and submitting a form of licence to Hotline Communications points to the fact that at that time he did not believe that his son retained any of the copyright in the AW library.  On the other hand he did, in my opinion, believe on reasonable grounds that Hotline Communications had no objection to his use of the AW library for the development of e-Text."

1. In the light of this passage from my judgment, when read with others to which I was referred by Mr Goldblatt, Mr Goldblatt submitted that I found that e-Text was a product the copyright in which was held by his client. The reference to "reasonable grounds" for Mr Paul Hinkley's belief was, Mr Goldblatt submitted, a reference to s.116 2(b) of the Copyright Act 1968. This provides that a plaintiff is not entitled by virtue of s.116 to any pecuniary remedy other than costs if it is established that at the time of the conversion in question the defendant believed, and had reasonable grounds for believing, that the relevant copies were not infringing copies.

1. It follows, so Mr Goldblatt argued, that I must have found that e-Text was for the purposes of s.116 an "infringing copy" of the AW library.  Otherwise any reference to "reasonable belief" and hence to s.116 was unnecessary.

1. I did at this point in my judgment have s.116 in mind.  My process of reasoning, however, was to the effect that if Mr Paul Hinkley, through his use of e-Text, did infringe Hotline Communications' copyright, then nevertheless he was covered by s.116 sub-s.(2).  I made no direct and I meant no implied finding that e-Text was or is an infringing copy of the AW library.  In my view there was insufficient evidence put before me at the trial upon which to form that conclusion.  Accordingly, I will not grant the declaration sought by the plaintiffs in this regard.

1. I should, nevertheless, point out that I have made, and I make, no finding that e-Text is not an infringing copy.  I make no finding one way or the other.  Accordingly, if Mr Paul Hinkley uses the AW library for the purposes of e-Text's development or operation, or both, he runs the risk of further litigation.  He may or may not be successful were such litigation to be instituted. 

1. There remains the question of costs.  Although costs are in the discretion of the court that discretion is strictly limited; it is limited by the law.  The relevant law does not allow a judge to award costs as the individual judge thinks fit without consideration of matters which must be considered in the exercise of the discretion or considering matters which should not be considered in the exercise of the discretion. 

1. In their submissions on costs, however, the defendants have put to me matters which, according to the law, I must not take into account in the exercise of my discretion.  For example, Mr Paul Hinkley has pointed to what he refers to as "humanitarian principles" for the exercise of my discretion in making an order in his favour on this issue.  The court is simply not able by law to take into account when determining issues of costs the considerations which (as I understand it) Mr Hinkley has in mind.  The defendants also at various points in their submissions referred to what they see as unjust enrichment on the part of the plaintiffs which, as I understand them, they submit should be set off against any costs which might otherwise be awarded against them.  Again, it is impossible for me to find here that there has been any unjust enrichment on the part of the plaintiffs or, if there was, that costs orders should reflect that position. 

1. In aid of their submissions the defendants turned to what they saw as the moral position.  Morals have a very important part to play in the administration of justice.  At the same time this court is not a court of morals.  This case illustrates the very wide differences between what each side sees as the moral position of the other.  Each side points to the behaviour of the other as exhibiting a degree, if not a great degree, of immorality.  It is a pity, not to say highly regrettable, that at times these proceedings have degenerated into such a finger-pointing exercise.  It is an exercise which inevitably takes the court beyond, not only the pleadings, but that which it is within the court's jurisdiction to determine.  The court has limited powers and it must remain within the boundaries laid down by the law.  It would go well beyond those boundaries for the court to adjudicate upon the issues, or at least some of them, which were raised this morning and which have been raised at other times during the course of these proceedings.

1. I intend to exercise my discretion in relation to costs in what I see as being within the strict and proper limits of that discretion.  It seems to me that in proceeding No.7088 of 1999 the costs must follow the event and must be borne by the defendants.  It also seems to me that the greater proportion of those costs should be borne by the first defendant, Mr Adam Hinkley.  Most of the litigation and most of the time of the trial was occupied with matters which directly related to his position.  He was unsuccessful in the overwhelming majority of those issues which concerned his position.  Accordingly, it seems to me that Mr Adam Hinkley should bear responsibility for paying four-fifths of the plaintiffs' costs in proceeding No.7088 of 1999 and Mr Paul Hinkley should bear the remaining one-fifth.

1. In proceeding No.7158 of 1998 the plaintiff put forward an offer of compromise which was rejected by the defendants.  That offer of compromise was one which was more favourable to the defendants than the position reached by me in my judgment.  The rules provide that in those circumstances the costs up to the making of the offer should be borne on a party/party basis and thereafter should be borne on a solicitor/client basis.  I see no reason in this instance why the rules should not be followed.  Accordingly, I will make orders as to costs in proceeding No.7158 of 1998 which reflect the position as laid down by the rule which governs costs following the rejection of an offer of compromise where ultimately the losing party is in a worse position than would have obtained had the offer been accepted.

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