The Dempsey Group Pty Ltd v Spotlight Pty Ltd (No 2)
[2019] FCA 238
•28 February 2019
FEDERAL COURT OF AUSTRALIA
The Dempsey Group Pty Ltd v Spotlight Pty Ltd (No 2) [2019] FCA 238
File number: VID 41 of 2017 Judge: DAVIES J Date of judgment: 28 February 2019 Catchwords: COPYRIGHT – declaratory relief – applicable principles
– form of declaration – damages – compensation for loss of profits – methodology for calculation – discounting for uncertainty of gross profit figures
Date of hearing:
Determined on the papers
Registry: Victoria Division: General Division National Practice Area: Intellectual Property Sub-area: Copyright and Industrial Designs Category: Catchwords Number of paragraphs: 8 Counsel for the Applicant: Ms S Ryan Solicitors for the Applicant: DLA Piper Counsel for the Respondent: Mr L Merrick Solicitor for the Respondent: Cornwall Stodart ORDERS
VID 41 of 2017 BETWEEN: THE DEMPSEY GROUP PTY LTD (ACN 004 722 936)
Applicant
AND: SPOTLIGHT PTY LTD (ACN 005 180 861)
Respondent
JUDGE:
DAVIES J
DATE OF ORDER:
28 FEBRUARY 2019
THE COURT ORDERS THAT:
1.The applicant is to provide an amended proposed form of declaration by 8 March 2019.
2.On or before 15 March 2019, the respondent pay to the applicant:
(a)the sum of $35,112.76 in compensatory damages for loss of profits;
(b)the sum of $10,000 in compensatory damages for loss of reputation; and
(c)interest on the above amounts accruing from 2 December 2016 at the following rates:
(i)from 2 December 2016 until 31 December 2016 – at the rate of 5.75%;
(ii)from 1 January 2017 until 28 February 2019 – at the rate of 5.50%; and
(iii)from 1 March 2019 until the date payment is made – at the rate of 7.5%.
3.The parties are to provide minutes of proposed orders as to the costs of the proceeding by 8 March 2019.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
DAVIES J:
On 18 December 2018, the Court delivered judgment in this proceeding and the parties were ordered to provide minutes of proposed orders giving effect to the reasons by 8 February 2019.
The applicant’s proposed orders seek a declaration in the following terms:
The respondent has infringed the applicant’s copyright in each of the Dempsey artistic works (comprising the Constantinople artistic work, the Bosphorus artistic work and the Rimona artistic work as illustrated in the schedule to this order) by selling and offering for sale each of the Spotlight products from 2 December 2016.
The respondent has submitted that declaratory relief should not be granted, contending that the judgment sets out with clarity the nature and extent of the infringing conduct, a declaration is not required to guide the respondent as to any future conduct, and nor is a declaration required to inform the marketplace of how the dispute has been resolved. The respondent submitted also that the form of the declaration is inappropriate in that it uses terms defined in the judgment to which the reader of the declaration would need to have regard in order for the declaration to be meaningful.
The Court has a broad discretion to grant declaratory relief on the application of a person who has a real interest in obtaining it but there must be some call for making a declaration beyond the mere fact that the plaintiff seeks it: see Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 at 437–438 per Gibbs J, citing Lord Dunedin in Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd [1921] 2 AC 438 at 448 and Lord Radcliffe in Ibeneweka v Egbuna [1964] 1 WLR 219 at 225. In my view, there is utility in this case in making a declaration. A declaration serves the public interest by identifying the infringing conduct and, since copyright is not a registrable right, also serves as a permanent and public record of the applicant’s copyright in the relevant artistic works. It was put against the need for a declaration that the applicant has taken steps itself to publicise the finding of infringement and a trade publication named “Ragtrader” has published an article adopting a press release issued by the applicant in January 2019 referring to the infringement. However, the fact that there has been some publicity does not gainsay the utility of the declaration as a permanent and public record.
However I agree with the respondent that the form of the declaration is unsatisfactory and consideration must be given to redrafting it so that the declaration is clear and meaningful on its terms.
The Court has also been asked to fix the amount of compensatory damages for loss of profits. At [162] of the judgment, I found that the applicant had not established that the sales of its products were impacted detrimentally by the infringing conduct and, on the basis that any impact was relatively negligible, it was reasonable to assess damages on the basis that the applicant would have lost 20% of its sales to the respondent. I also concluded that the damages computation should be discounted by a further 5% in reflection of the uncertainty about the reliability of the gross profit figures used in the applicant’s calculation. In applying those discounts I adopted the methodology set out in Norm Engineering Pty Ltd v Digga Australia Pty Ltd (2007) 162 FCR 1 at [266]–[271], which both parties agreed was the correct approach for a loss of profits assessment. In that case the following steps were identified in assessing damages for lost profits:
(1)examine the number of sales made by the infringer;
(2)assume the infringer was trying to capture the sales from the copyright owner;
(3)assume that the number of sales made by the infringer is equal to the number of sales lost by the copyright owner;
(4)discount the number referred to in sub-paragraph (c) to reflect that not all of the infringer’s sales will have been lost sales for the copyright owner; and
(5)apply any further discount necessary in the circumstances of the case.
The applicant has put forward two possible calculations, based on that methodology. Calculation 1 applies the 5% discount for uncertainty about the applicant’s gross profit figures to the calculated damages sum at the end of the calculation process, whereas calculation 2 applies the 5% discount directly to the gross profit figure, rather than to the calculated damages sum. The effect of these alternative approaches is that calculation 1 yields a higher figure by $9,363.39.
Calculation 1 Calculation 2 Agreed lost revenue $320,664.50 Agreed lost revenue $320,664.50 Multiplied by Dempsey’s confidential gross profit margin (derived from the evidence of Mr Dempsey $234,085.09 Multiplied by Dempsey’s confidential gross profit margin (derived from the evidence of Mr Dempsey) $234,085.09 Minus 80% (to reflect finding as to lost sales – see Judgment, [162]) $46,817.02 N/A N/A N/A N/A Minus 85% (to reflect finding as to lost sales and finding as to uncertainty relating to gross profits – see Judgment, [162]) $35,112.76 Minus 5% (to reflect finding as to uncertainty relating to gross profits – see Judgment, [162]) $44,476.15 N/A N/A Total: $44,476.15 Total: $35,112.76
In my view integer 5 of Greenwood J’s methodology is to be applied to the gross profit figure as the additional 5% discount is in reflection of the uncertainty about the reliability of the gross profit figures used in the applicant’s calculation. Accordingly I consider that calculation 2 is the appropriate calculation to adopt. It follows that the interest to be applied on the compensatory damages for loss of profits is to be calculated on the sum of $35,112.76.
I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Davies. Associate:
Dated: 28 February 2019
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