Sullivan v FNH Investments Pty Ltd t/as Palm Bay Hideaway
[2003] FCA 323
•10 APRIL 2003
FEDERAL COURT OF AUSTRALIA
Sullivan v FNH Investments Pty Ltd t/as Palm Bay Hideaway [2003] FCA 323
COPYRIGHT – whether claim for damages for infringement of copyright available where photographs produced pursuant to a contract– factors relevant in an award of additional damages under s 115(4) of the Copyright Act considered.
Copyright Act 1968 (Cth) ss 36, 115(4)
Gray v Motor Accident Commission (1998) 196 CLR 1 followed
Addis v Gramaphone Co Limited [1909] AC 488 referred to
Bailey v Namol Pty Ltd (1994) 53 FCR 102 followed
Interfirm Comparison (Australia) Pty Ltd v Law Society (NSW) (1975) 6 ALR 445 referred to
Raben Footwear Pty Limited v Polygram Records Inc (1997) 75 FCR 88 applied
Prior v LansdownePress Pty Ltd [1977] VR 65 referred to
Autodesk Inc v Yee (1996) 68 FCR 391 referred to
Polygram Pty Ltd v Golden Editions Pty Ltd (1997) 76 FCR 565 referred to
Concrete Systems v Devon Symonds (1978) 20 SASR 79 applied
Harris v Digital Pulse Pty Ltd [2003] NSWCA 10 referred to
Milpurrurru v Indofurn Pty Ltd (1994) 30 IPR 209 referred to
Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 applied
Ladbroke (Football) Ltd v William Hill (Football) Ltd [1964] 1 All ER 465 applied
Apple Computer Inc v Computer Edge Pty Ltd (1984) 1 FCR 549 appliedNORTH JOHN SULLIVAN & XYZ PRODUCTIONS PTY LIMITED (ACN 003 061 532) T/AS NORTH SULLIVAN PHOTOGRAPHY V FNH INVESTMENTS PTY LIMITED (ACN 087 919 908) T/AS PALM BAY HIDEAWAY
N467 OF 2002
JACOBSON J
10 APRIL 2003
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
N 467 of 2002
BETWEEN:
NORTH JOHN SULLIVAN
FIRST APPLICANTXYZ PRODUCTIONS PTY LIMITED
(ACN 003 061 532)
T/AS NORTH SULLIVAN PHOTOGRAPHY
SECOND APPLICANTAND:
FNH INVESTMENTS PTY LIMITED
(ACN 087 919 908)
T/AS PALM BAY HIDEAWAY
RESPONDENTJUDGE:
JACOBSON J
DATE OF ORDER:
10 APRIL 2003
WHERE MADE:
SYDNEY
THE COURT DECLARES THAT:
1.the first applicant is the owner of the copyright in the Photographic Images described as “the Work” in the Statement of claim.
2.the respondent has infringed the first applicant’s copyright in “the Work” by publishing it in the respondent’s brochure and in the magazines and websites referred to in par [43] of the judgment.
THE COURT ORDERS THAT:
3.the respondent is restrained from further infringing the first applicant’s copyright in “the Work” by publishing “the Work” without the licence of the First applicant.
4.the respondent is to pay the first applicant the sum of $7, 425 for damages for infringement of his copyright in “the Work” and additional damages of $15, 000 under s 115(4) of the Act.
5.the matter be stood over to a date to be fixed to hear argument on costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
N 467 of 2002
BETWEEN:
NORTH JOHN SULLIVAN
FIRST APPLICANTXYZ PRODUCTIONS PTY LIMITED
(ACN 003 061 532)
T/AS NORTH SULLIVAN PHOTOGRAPHY
SECOND APPLICANTAND:
FNH INVESTMENTS PTY LIMITED
(ACN 087 919 908)
T/AS PALM BAY HIDEAWAY
RESPONDENT
JUDGE:
JACOBSON J
DATE:
10 APRIL 2003
PLACE:
SYDNEY
REASONS FOR JUDGMENT
This is a claim for copyright infringement under s 36 of the Copyright Act 1968 (Cth) (“the Act”). The first applicant claims damages including additional damages for the flagrancy of the infringement under s 115(4) of the Act. The second applicant claims contractual damages of $7, 425. A claim for damages under the Trade Practices Act 1974 (Cth) and a claim for an account of profits were included in the application but were not pursued at the hearing.
The first applicant (“Mr Sullivan”) is a professional photographer. The second applicant (“the company”) is a company through which Mr Sullivan entered into contracts with third parties for the provision of his photographic and other services.
The respondent (“FNH”) is the operator of a holiday resort known as Palm Bay Hideaway Resort (“the Resort”) in the Whitsunday Islands. In November 2001, the applicants entered into a contract with FNH for Mr Sullivan to take photographs of the Resort. The contract price was $14,850 of which $7,425 was payable in advance and the balance within 30 days of invoice.
The contract provided for a licence to FNH to use the photographs for a period of two years. The terms of the licence were, inter alia, that the licence was granted “[o]n receipt of full payment.” FNH paid the sum of $7,425 in advance. Mr Sullivan took the photographs which he supplied to FNH. FNH refused to pay the balance of the contract price, ostensibly upon the ground that the photographs were not of the quality required by the contract.
Notwithstanding FNH’s failure to pay the full contract price and its complaints about the adequacy of the photos, FNH used at least three of the photographs in a brochure for the Resort. The brochure was an attractive marketing document which FNH used to advertise the Resort to prospective holidaymakers.
The brochure contains the slogan “Somewhere in the Whitsundays”, of which Mr Sullivan claims to be the author. I find that Mr Sullivan suggested those words to the General Manager of the Resort. However, a question arises as to whether Mr Sullivan has copyright in the slogan. He makes a claim for copyright infringement for the use of the slogan in the brochure.
FNH distributed the brochure with full knowledge of the first applicant’s claim for copyright in the photographs. Indeed, the evidence establishes that FNH knew at the time when it commenced to circulate the brochure that it did not have the right to use the photographs.
Not only did FNH ignore Mr Sullivan’s personal protests but it continued to circulate the brochure after it received a letter from the applicants’ solicitors drawing attention to the breach of copyright. The letter threatened a claim for “the maximum damages available for the infringement” of copyright. Moreover, there was evidence of FNH’s disregard of the applicants’ claim after the commencement of these proceedings. Even then, FNH continued to circulate the brochures containing the applicants’ photographs.
For these reasons, Mr Sullivan claims that there has been a flagrant infringement of the copyright in the photographs and that an award of additional damages ought to be made under s 115(4).
FNH admits that it has infringed Mr Sullivan’s copyright in three photographs which were used in the brochures. However, it says that the copyright was the subject matter of a contract and therefore the claim is in substance a claim for breach of contract. It is well established that, at common law, exemplary damages are not available for breach of contract; see Gray v Motor Accident Commission (1998) 196 CLR 1 at 6; Addis v Gramaphone Co Limited [1909] AC 488 at 492.
Thus, FNH says that on any view damages cannot exceed the unpaid balance of the contract price, that is to say $7,425.
FNH’s position in these proceedings is that it is not bound to pay the outstanding balance of $7,425 due under the contract because, as I have said, it claims that the photographs did not accord with the terms of the contract.
FNH claims to have terminated, or to have been entitled to terminate, the contract for breach, notwithstanding the fact that it used three of the photographs in the brochure. Expert evidence was called on both sides as to the quality of the photographs.
For reasons referred to below, I am of the view that FNH’s contention that the photographs did not conform with the contract has not been made out. It follows that, in my view, FNH in breach of the terms of its contract with the applicants, failed to pay the balance of the agreed price.
This breach was flagrant. The question which then arises is whether it was in substance a flagrant breach of contract which carries no exemplary damages or flagrant infringement of copyright for which I have power to award additional damages under s 115(4) of the Act.
The Facts
FNH purchased an interest in the Resort in about June 2000. Mr Alexander M Davidson (“Mr Davidson”) and his wife, Mrs Gale M Davidson (“Mrs Davidson”) are directors of FNH. Mr Matthew J Hill (“Mr Hill”) was the general manager of the Resort.
Mr Sullivan met Mr Davidson in August 2001 on a ferry from Daydream Island where Mr Sullivan had completed a photo-shoot for the Daydream Island Resort. They discussed the possibility of Mr Sullivan doing some photography for the Resort. Mr Davidson suggested that Mr Sullivan contact Mr Hill.
The contract which was entered into between the parties was partly oral and partly written. The oral part of the contract was made in conversations between Mr Sullivan and Mr Hill in August, October and November 2001 and in conversations between Mr Sullivan and Mrs Davidson on or about 5 October 2001.
The written part of the contract was comprised in three documents. The first, and for present purposes the most important document, was a facsimile transmission from Mr Sullivan dated 3 November 2001 headed “Photographic Assignment Terms and Conditions”.
The document was described as an agreement between the company, which was described as the photographer, and FNH, which was described as the client. It stated the estimated cost of the photographs at $14,850. It then specified the following conditions under the heading “Terms of Licence”:-
“On receipt of full payment, the Client is thereby licensed to use the photography in production of advertising, marketing and collateral material throughout Australia for 2 years unless otherwise agreed.
Conditions
1.The prices submitted are estimates only.
2.Prior to the commencement of the assignment, the Agency agrees to pay the Photographer 50% of fees and expenses in advance.
3.Any changes to the brief may incur additional charges.
4.The Photographer retains the right to direct and oversee any retouching and post production applied to the original photography. The resulting image remains within the definition of Photography for the purposes of this agreement and the Photographer’s copyright applies to all original film material and all digital retouched image files produced from the original photographic film.
5.In the event that the photographer is unable to photograph at the scheduled time due to unfavourable weather conditions or factors outside his control, the following additional charges will incur, 1st day No Fee/All Expenses, 2nd day Half Fee/All Expenses, All other days Half Fee/All Expenses
6.Cancellation of an assignment after final confirmation shall incur Full Fee plus all Expenses incurred to date.
7.The Photographer retains the right to use the photographs for self promotional purposes and the Agency and Client grant the photographer reasonable access to all material produced from the photography.
8.The Photographer must be suitably credited with the photography in any instance where the photography is used for Public Relations purposes in trade or mainstream publications.
9.Balance of account to be paid within 30 days of invoice.
10.Estimates are valid for 30 days from date of issue.”
It is unnecessary to refer to the second document which was Mr Sullivan’s fee estimate. The third document was a photography proposal faxed by Mr Sullivan to Mr Hill on 20 November 2001. This is pleaded as being a document comprised in the written part of the contract even though the contract is said to have been made on or about 17 November 2001.
It should be noted that the proposal is described in Mr Sullivan’s covering facsimile only as a “guide” to the production of the photos.
The photography proposal stated, inter alia, that there had been a desire to produce three “signature” photos which could be widely used to represent the Resort. These photos were to be an atmospheric shot from the water, a view from inside a bungalow and a “new image” to replace the current photo of yachts tied up to palm trees.
The proposal also stated that Mr Sullivan recommended a four day shoot which he anticipated would result in approximately fifteen selected photographs from 25 to 30 situations.
Mr Sullivan engaged three models to use in the photography. One was his girlfriend. The others were his brother and his brother’s girlfriend. Their travel and accommodation expenses were paid by FNH.
In my view, it was apparent to Mrs Davidson and Mr Hill that these people were not professional models. I find that no complaint was made about it when the shoot was carried out.
Mr Sullivan travelled to the Resort on 4 December 2001 with a photographic assistant. He took photos of the Resort without models on 5, 6 and 7 December 2001. Mr Sullivan’s brother and their partners arrived on 7 December 2001 and photographs were taken using them as models on 7, 8 and 9 December 2001. Mr Sullivan, in accordance with his usual practice, took Polaroid pictures before the photographic shoot commenced. He showed the Polaroids to Mrs Davidson or Mr Hill who approved the shoot in accordance with the Polaroids.
Mr Sullivan returned to Sydney on 9 December 2001. He processed and edited the photographs on 10 and 11 December 2001 and copied a selection on to a compact disk which he posted to Mr Hill on 18 December 2001.
Between 20 December 2001 and 7 January 2002, Mr Sullivan made a number of telephone calls to the Resort in an effort to speak to Mr Hill. He left messages but Mr Hill did not return his telephone calls. On 10 January 2002, Mr Sullivan received a call from Mrs Davidson and Mr Hill and they had a conference call. Mrs Davidson and Mr Hill said that the Davidsons were unhappy with the quality of the photographs. There was discussion about Mr Sullivan retouching one of the photographs.
On the same day, Mr Sullivan emailed the retouched photograph to Mr Hill. The email did not use Mr Sullivan’s ordinary email return address but used a false address including the words “f--- off” [expletive deleted]. Mr Sullivan was not aware when he sent the email that it had this address. He sent an apology on 14 January 2002. He explained in his affidavit evidence why the email contained the false address. The explanation was that the false return email address had been produced earlier in response to unwanted emails from a spammer. He was not challenged on this. However, it is likely that the use of the false address in the email of 10 January 2002 did nothing to promote the likelihood of an amicable resolution of the dispute between the parties.
Between 12 January 2002 and 30 January 2002, Mr Sullivan made a number of unsuccessful attempts to contact Mr Hill by phone. None of his messages were returned.
On 25 January 2002, Mr Sullivan sent 61 original photographs of the Resort to Mr Hill. In his covering letter, Mr Sullivan stated that he would issue “the appropriate usage licence” for the photographs when the balance of his account was paid. The letter also stated:-
“As you probably already know, any use of the material prior to the issuing of the licence, constitutes a breach of copyright.”
On 29 January 2002, Mr Hill wrote to Mr Sullivan. The letter formally advised of FNH’s disappointment with the quality of the photographs. The letter proposed a re-shoot at Mr Sullivan’s own expense “to ensure that we receive the quality product promised”. The letter stated that FNH was “in the uncomfortable position of withholding the remaining money until such time as we are satisfied with the end product.”
The letter also stated that:-
“… we feel that we have been most accommodating with your requests even to the point of not chasing you for your outstanding charges that were not settled on departure from the Resort.”
There was a telephone conversation between Mr Hill and Mr Sullivan on or about 6 February 2002. Mr Sullivan said he was not prepared to do a re-shoot at his own expense.
On 9 March 2002, Mr Sullivan saw an advertisement in the Sydney Morning Herald travel section for the Resort. It contained a photograph which bears a remarkable resemblance to one of Mr Sullivan’s photographs.
The evidence establishes that, by 9 March 2002, FNH had prepared the brochure using Mr Sullivan’s photographs. Evidence has been given of a request made (not by Mr Sullivan personally) to FNH on that date for a brochure. A few days later, the brochure arrived in the mail.
The brochure contained four photographs. Three were admitted in these proceedings to have been taken by Mr Sullivan. The evidence does not establish whether the fourth photo was taken by him but it was very similar to one of Mr Sullivan’s photographs.
On 19 March 2002, Mr Sullivan sent an email to Mr Hill. The email requested settlement of Mr Sullivan’s account less any outstanding charges from “the shop”. There was no complaint about the photograph which appeared in the Sydney Morning Herald on 9 March 2002 or about the brochure.
On 26 March 2002, Mr Davidson sent a letter to Mr Sullivan. The letter stated that FNH was “disappointed” with Mr Sullivan’s photographs which were said to be “almost useless”. The letter also said:-
“You are not entitled to be paid for what you have delivered and I will fight you tooth and nail before I agree to the balance of your account. You are totally unprofessional and nothing short of a rip-off”.
This was plainly a very aggressive stance which fails to mention that FNH had by that time used at least three of Mr Sullivan’s photographs in its brochure which was already in circulation.
On 9 April 2002, the applicants’ solicitor wrote to FNH. The letter stated that it had recently come to Mr Sullivan’s attention that whilst asserting that the images were inferior and unusable and refusing to pay the outstanding fee, FNH made use of, and published some of the images in breach of copyright.
The letter specified three copyright infringements. These were: first, by publishing the brochure containing the photos, second by permitting the photographs to be published in “Vogue Entertainment and Travel” and “Conde Nast Traveller” magazines and websites, and third by converting images from the film to digital format.
Demands were made by the solicitors including payment of the outstanding balance and FNH was informed that if it did not comply proceedings would be commenced. The letter concluded as follows:-
“In the event that our client takes proceedings, it will seek the maximum damages available for the infringement of its copyright in addition to the recovery of the contractual debt.”
On 16 April 2002, the applicants’ solicitor received a telephone call from Mr Davidson and a conversation took place in which Mr Davidson said:-
“I am just ringing to let you know that we have received your letter but that I am not prepared to comply with it as I have a beef with Mr Sullivan. I have seen a solicitor and you will be receiving a letter in the next few days.”
On 19 April 2002, FNH’s solicitors wrote to the applicants’ solicitors. The letter stated that FNH was “completely dissatisfied” with the photographs. However, it continued:-
“Our client acknowledges that it is using three photographs produced by your client. This is a matter of necessity, not choice. Our client needed some photographs for brochures that were just about to be printed. You have our client’s assurance that none of the remaining photos will be used. Our client engaged another photographer to take photos on the island. These photos have now been produced. As soon as the new promotion material is printed the existing brochures will be destroyed. Only the new photographs will be included.”
The evidence discloses that two new photographers were engaged by FNH. However, their photos were not used in the brochure or in the other publications.
On 23 April 2002, the applicants wrote to FNH’s solicitors stating that the infringement was a most serious matter which was wilful and continuing. The letter also stated:-
“Clearly, your client has no intention of complying with the demands of our letter of 9 April 2002, and in the circumstances our client will take the action threatened in that letter.”
During April and May 2002, FNH continued to circulate its brochure.
These proceedings were commenced by an application filed on 22 May 2002.
After the application was filed, the applicants’ solicitors learned that FNH was distributing brochures through the Queensland Travel Centre. Indeed, on 27 May 2002, a further consignment of brochures was delivered to the Queensland Travel Centre Agencies.
On the same day, the applicants’ solicitors wrote to FNH’s solicitors stating that it was clear that FNH was “intent on taking every possible opportunity to further infringe our client’s copyright for its own commercial advantage”.
There was evidence of a further delivery of brochures on 4 June 2002 to another person who had requested brochures from FNH toward the end of May 2002.
The Witnesses
Most of Mr Sullivan’s evidence was as to matters which were not genuinely in dispute.
I accept him by and large as a witness of truth. Where his evidence conflicts with Mr and/or Mrs Davidson and Mr Hill, I prefer the evidence of Mr Sullivan.
There is one item of evidence which Mr Sullivan gave which I cannot accept. He was asked, over objection, to estimate the amount he could have obtained as a licence fee for the three photographs which were used in the brochure if he had been asked by FNH to give a renewed licence for those photographs at the end of the initial two year period.
Mr Sullivan’s evidence was that he would estimate the sum of $50,000 as the amount which he could obtain from his client. This was somehow said to support a claim for additional damages of $50,000 under s 115(4) of the Act.
I reject this evidence. I cannot accept that any commercial resort operator would pay a fee for three photographs (or even four of them) which was more than three times the amount which the operator agreed to pay for the initial portfolio of photographs. Nor could Mr Sullivan have genuinely believed that his client would have been prepared to pay that amount. In my view, Mr Sullivan overestimated the value of the photographs for the purpose of supporting his claim for additional damages.
There are two aspects of Mr Davidson’s evidence which I do not accept. First, he told me that when he spoke to the applicants’ solicitor on 16 April he was unaware that the brochures incorporated Mr Sullivan’s photographs. There are a number of reasons why I cannot accept this evidence.
Most importantly, Mr Davidson was an owner, through FNH, of the resort. His evidence, which I accept, was that he was concerned to ensure that the photos which Mr Sullivan took presented the Resort in the best possible light.
It is true that he left the day to day implementation of the photography project to his wife and to Mr Hill. It is also true that he “juggled” his business interests between running the Resort and his property development activities in Melbourne.
However, he was, as he said, passionate about the Resort and it was clear to me that he played a significant role in the operation of the Resort. Indeed, it was my impression that Mrs Davidson and Mr Hill would have kept him apprised of important matters affecting the operation of the Resort including the publicity for the Resort through the medium of the brochure. I do not accept that, having regard to the strong views he expressed to Mr Sullivan and to the applicants’ solicitors, he would have been unaware, as to who had taken the photos which appeared in the brochure.
Mr Davidson’s evidence was that his wife told him that she was dissatisfied with the quality of the photos. I accept this. But I find that he was so incensed by what she told him that he was determined to use, what he regarded as a small number of photos, without paying the agreed fee for a licence. His evidence indicates he believed he had paid more than enough to justify the use of those photos. He was determined to use them regardless of the terms of the contract and regardless of the warnings given to him by Mr Sullivan and by the applicants’ solicitors.
His determination was such that he gave no instructions to Mr Hill or other employees of the Resort to withdraw the brochures from circulation after the warning from the applicants’ solicitors and indeed notwithstanding the commencement of these proceedings. I do not accept his evidence that he gave express instructions to Mr Hill to recall the brochures. His attitude was quite plainly shown in the contemporaneous correspondence. Also, there would have been no reason for Mr Hill to disregard the express instructions of the owner of the Resort.
I accept much of Mrs Davidson’s evidence. She frankly acknowledged that she understood the terms of the contract and she agreed that she knew that FNH had no right to use the photos in the brochures or other publications.
I accept her evidence that she was disappointed with the quality of the photographs. There was independent expert evidence to which I will refer below which supports a view that the photos were, overall, only of average quality. It is true that there were at least three photos which were of high enough quality to enable FNH to present attractive images in its marketing brochure. Nevertheless, it seems to me that there is a good deal of subjectivity in the appreciation of photography and Mrs Davidson could well have formed the view, quite honestly, that the bulk of the photos supplied by Mr Sullivan were not up to the standards which he had depicted on his website.
However, it does not follow that FNH was entitled to withhold payment while at the same time using three of the photos for its own commercial advantage.
Her evidence establishes quite clearly the flagrancy of FNH’s conduct, because, as I have said, she agreed that she used the photos knowingly without any entitlement to do so.
Mr Hill was not a satisfactory witness. I do not accept his evidence that he gave instructions to withdraw the brochures from circulation. He went so far as to say that his wife, who was employed at the Resort, sent out a brochure on 30 May 2002 after he had instructed her not to do so. That evidence was so incredible that I could not possibly accept it.
It was clear from Mr Hill’s evidence that FNH was prepared to use Mr Sullivan’s photos without regard to the legal consequences. As late as 18 July 2002, he gave instructions for a further brochure to be prepared using Mr Sullivan’s photos.
Publication of the brochure did not go ahead but it shows the lengths to which FNH was prepared to go. Mr Hill’s attitude was that he could use the photos because FNH had paid more than enough for them. This was Mr Davidson’s view as well. He expressed it in his fax of 26 March 2002 and through his solicitors’ letters. In my opinion, this was the approach that was taken by Mr and Mrs Davidson and Mr Hill until shortly after 18 July 2002.
The Experts
Mr Roche gave expert evidence for the applicants as to the quality of the photos. His evidence was to the effect that, as a body of work, it was appropriate for the subject matter of the contract and the price quoted.
The respondents called two witnesses, Mr Israel and Ms Heath. I was impressed by Ms Heath. She is employed by ACP Magazines as the Art Director of “Gourmet Traveller”. She is not a photographer but she works with photos every day, doctoring them and altering images so as to make them suitable for presentation in high quality publications. In my opinion, she was well qualified to give expert evidence as to the quality of the photos.
Ms Heath’s view was that Mr Sullivan’s photos were of average quality. In her opinion, of the images supplied to her, there were eleven shots of magazine publication quality.
Mr Israel’s evidence was that there were nine shots which were commercially acceptable for the assignment and two which could be used as signature shots. He said that four of the photos were “borderline”. It seems to me that borderline photos would have been useable. In any event, it cannot be said that borderline photos were not in conformity with the contract.
I am not satisfied on the expert evidence that FNH has made out a case that the photographs did not conform with the contract. In order to do this it would have been necessary for FNH to prove, as a first step in its argument, that all of the transparencies had been delivered to the experts. The evidence was not clear as to this although I find that the solicitors for FNH supplied to Mr Israel and Ms Heath all of the transparencies in the solicitors’ possession.
In any event, I find that on the basis of all of the expert evidence called before me the photographs supplied by Mr Sullivan to FNH were of sufficient quality to comply with the applicants’ contractual obligations. It is true that Mr Israel and Ms Heath made some criticisms but, in my opinion, on the evidence, and also bearing in mind what Mr Roche said, the photographs were, overall, of merchantable quality.
In my view, if it was a term of the contract that there be three “signature” photographs as mentioned in the photography proposal, it is plain that this term was fulfilled. The use of three photos in the brochure and the publication of the photos in high quality magazines and corresponding websites provides more than sufficient evidence of this.
Even if it was a term of the contract that there be fifteen useable photos, my view on all the evidence is that there was such a number. I note that on the evidence of Mr Israel and Ms Heath there were said to be only eleven to thirteen useable photographs. Bearing in mind the degree of subjectivity involved in the assessment, it is my opinion that there were more. However, it seems to me that it was not a term of the contract that there be fifteen photos. This was only an approximate guide to the number that was likely to emerge from the photo-shoot.
Copyright Infringement or breach of contract?
In my view this question turns upon the terms of engagement in particular those set out in the fax of 3 November 2001.
It seems to me that the terms were clear. The licence to use the photos was granted only upon full payment. The opening words of the “Terms of Licence” say so in clear words. This is how Mrs Davidson understood them.
It is true that the terms included a clause that the balance of the fee was payable 30 days after invoice. The effect of this was that pending payment of the balance there was no licence. If FNH wished to use the photos before the expiration of the 30 days, it would have been necessary for it to make earlier payment.
Thus, FNH had no licence to use the photographs. It must follow that it did so in breach of copyright. Mr Sullivan is the owner of the copyright. This was admitted. FNH, not being the owner of the copyright and without the licence of the owner infringed Mr Sullivan’s copyright as provided in s 36 of the Act.
Mr Sullivan’s claim is for damages under s 115(2) of the Act and for additional damages under s 115(4). It is clear that he is entitled to damages for infringement of his copyright. In addition, the company has a claim for damages for breach of contract but there cannot be double recovery of damages.
Damages
Putting aside considerations applicable to an award of additional damages under s 115(4), the purpose of the award of damages for infringement of copyright is of course to compensate the wronged party for the loss suffered as a result of the breach; see Bailey v Namol Pty Ltd (1994) 53 FCR 102 at 110-111 (“Bailey”) per Burchett, Gummow and O’Loughlin JJ.
However, the circumstances in which copyright infringements occur vary widely and the measure of damages in every case must be appropriate to the particular circumstances; Bailey at 110-111; Interfirm Comparison (Australia) Pty Ltd v Law Society (NSW) (1975) 6 ALR 445 at 446-447 per Bowen CJ in Eq.
As the members of the Full Court observed in Bailey (at 112), in many cases a licence fee or royalty will be an appropriate measure.
Here, the infringement consisted of the doing of acts set out in s 31(1)(b) of the Act, ie reproducing and publishing the work as well as communicating it to the public. These acts were able to be done by FNH only because Mr Sullivan supplied FNH with the photos in the expectation that the balance of the contractual fee would be paid thereby giving rise to a licence from the copyright owner for the use of the work.
FNH agreed to pay Mr Sullivan (or the Company) a fee of $14,850 of which $7,425 remained outstanding, it seems to me that the appropriate measure of damages in the present circumstance is the sum of $7,425. This represents the fee which would have been charged or the licence fee which would have been assessed.
The effect of this award is that the company will not have suffered any loss because its principal will be paid an amount equal to the balance outstanding under the contract.
Additional Damages
Additional damages may be awarded under s 115(4) where the Court is satisfied that it is proper to do so not only upon the ground of the flagrancy of the infringement but also on the ground of any of the other matters referred to in sub-paras (ii), (iii) and (iv) of sub-section 4(b). The Court need only be satisfied that one or more of those circumstances exists in order to enliven the discretion; see Raben Footwear Pty Limited v Polygram Records Inc (1997) 75 FCR 88 (“Raben Footwear”) at 93 per Burchett J and 103 per Tamberlin J.
Although it follows that flagrancy is not a necessary prerequisite, it is plain that the infringement here was flagrant.
In Raben Footwear, Tamberlin J said (at 103) that in ordinary usage flagrancy connotes, amongst other things, glaring or blatant conduct. His Honour referred (at 103) to authority for the proposition that a flagrant infringement is one which shows calculated disregard of the copyright owner’s rights or cynical pursuit of benefits; see Prior v Lansdowne Press Pty Ltd [1977] VR 65 at 70.
I have referred above to the aggressive determination on the part of Mr and Mrs Davidson and Mr Hill to use the photographs without regard to the legal consequences and in spite of ample warnings. Their behaviour satisfies all of the tests of flagrancy referred to by Tamberlin J.
Additional damages are awarded under s 115(4) on principles which correspond to those which govern awards of aggravated and exemplary damages at common law; see Autodesk Inc v Yee (1996) 68 FCR 391 at 394 per Burchett J.
Exemplary damages at common law may be awarded where there has been conscious wrongdoing in contumelious disregard of another’s rights; see Gray v Motor Accident Commission at 7. The conduct of Mr and Mrs Davidson and Mr Hill also satisfies that test.
Counsel for FNH submit that I ought not to award additional damages because here there was no secret or deceitful behaviour by FNH. Rather, in his submission, FNH openly used the photos and informed Mr Sullivan of its intention to do so. To concede this is tantamount to an admission of the flagrancy of the infringement. In any event, secrecy and deceit are not the sole tests for flagrancy.
Moreover, in this case there were other circumstances which fell within s 115(4)(b)(ii) and (iii). First, FNH converted the photos from hardcopy to digital format. Second, FNH plainly obtained a benefit by reason of the infringement because it was likely to have attracted custom by publishing the photos in its brochure and in high quality travel magazines and their corresponding websites, although benefit need not necessarily be pecuniary; see Polygram Pty Ltd v Golden Editions Pty Ltd (1997) 76 FCR 565 at 576 and authorities cited therein.
I do not consider that Mrs Davidson’s belief that the photos were unsatisfactory to be a relevant matter within s 115(4)(b)(iv). It is sufficient for me to say that she could not have held that belief in relation to the three photos published in the brochure and in the travel magazines and their corresponding websites. In any event, she conceded that she knew she had no right to use the photos.
As the members of the Full Court said in Bailey, an assessment of an award of additional damages under s 115(4) is, of necessity, an imprecise exercise. There need not be any proportionality between the amount of damages awarded under s 115(2) and the amount awarded under s 115(4); Raben at 93 per Burchett J and at 103 per Tamberlin J.
It is evident that the Court has a very wide discretion and that there is an ability to award exemplary damages that contain a punitive element in the amount which is to be awarded; Raben at 103; Concrete Systems v Devon Symonds (1978) 20 SASR 79 at 85.
It is true that at common law exemplary damages are awarded rarely; Gray v Motor Accident Commission at 6. It is also true that there is a legislative trend against the power to award exemplary damages; Harris v Digital Pulse Pty Ltd [2003] NSWCA 10. These were matters on which FNH relied. But the short answer to this is that s 115(4) specifically provides for the award of this form of damages. Furthermore, as I have said, the matters which enliven my discretion to make an award are satisfied.
Having regard to all of the factors which I have mentioned, it seems to me that the appropriate figure to award under s 115(4) is $15, 000. In my opinion, damages of this amount sufficiently express the Court’s disapproval of FNH’s conduct. Accordingly, I propose to order FNH to pay damages in that amount to Mr Sullivan.
I do not think that there is anything in Mr Sullivan’s conduct which would justify a reduction in the quantum of the exemplary damages below the figure of $15, 000.
Mr Sullivan’s counsel submitted that I ought to take into account in the amount of the award Mr Sullivan’s hurt suffered as a consequence of FNH’s actions. Whilst personal hurt and injury has been held to constitute a relevant matter to be taken into account in an award under s 115(4); see Milpurrurru v Indofurn Pty Ltd (1994) 30 IPR 209 at 244-7; Williams v Settle [1960] 1 WLR 1072, I do not find any alleged hurt of Mr Sullivan’s of a degree which would justify an additional compensable sum over and above that of $15, 000.
Mr Sullivan’s counsel also submitted that the quantum of the award should reflect the costs of bringing these proceedings. I do not accept this submission. The question of costs seems to me to be a separate consideration.
Nevertheless, in my opinion, the circumstances of this case may well be such as to warrant an order for indemnity costs upon the basis of the principles stated in cases such as Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225.
My provisional view is that an order for indemnity costs should be made because on a proper consideration of its position it should have been apparent to FNH that it had no defence to this claim.
This is because FNH admitted, quite properly, that Mr Sullivan had copyright in the photos. It also admitted that three of the photos had been used. Moreover, FNH knew that it had no licence to use the photographs.
FNH’s attempt to defend the claim did not address these matters. Even if Mr Sullivan and the company were in breach of contract, which they were not, this did not amount to a defence to the claim for damages for copyright infringement. In any event FNH did not even offer in the course of proceedings to pay the sum of $7, 425. Its approach was that it should pay a lesser, unspecified sum.
I will hear argument at a convenient time before coming to a final view as to whether to award indemnity costs.
Copyright in the Slogans
I have determined above at paragraph [6] that Mr Sullivan was the author of the slogan “Somewhere in the Whitsundays”. However, he did not point to anything which showed the requisite degree of judgment, effort and skill to make it an original literary work in which copyright may subsist; see Ladbroke (Football) Ltd v William Hill (Football) Ltd [1964] 1 All ER 465; Apple Computer Inc v Computer Edge Pty Ltd (1984) 1 FCR 549 at 558 and 578.
I make the same finding in relation to the other slogan, namely “the Resort that Offers Precious Little”. Although, I find that Mr Sullivan suggested the wording of the slogan to Mr Hill, it did not involve the required degree of judgment, effort or skill.
Accordingly, I find that there is no copyright in either of the slogans “Somewhere in the Whitsundays” or “the Resort that Offers Precious Little”.
Orders
I propose to make orders in terms of paras 7(a), (c) & (e)(i) of the application. I will also order FNH to pay to Mr Sullivan the sum of $7, 425 for damages for infringement of his copyright in the photographs and additional damages of $15, 000 under s 115(4) of the Act.
I stand the matter over to a date to be fixed to hear argument on costs.
I certify that the preceding one hundred and sixteen (116) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson. Associate:
Dated: 10 April 2003
Counsel for the Applicant: Mr R K Weaver Solicitor for the Applicant: Watson Mangioni Counsel for the Respondent: Mr P Walsh Solicitor for the Respondent: Mason Sier Turnbull (by their agent Cornwall Stodart) Date of Hearing: 28 February 2003 Date of Judgment: 10 April 2003
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