The National Computing Centre Ltd v Woolworths Ltd

[1997] FCA 1329

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 249 of 1997

BETWEEN:	THE NATIONAL COMPUTING CENTRE LTD Applicant
AND:	WOOLWORTHS LTD Respondent

JUDGE(S):	LEHANE J
DATE:	17 NOVEMBER 1997
PLACE:	SYDNEY

EX TEMPORE REASONS FOR JUDGMENT

HIS HONOUR:   This is a motion by which the applicant seeks orders, relying on O 29 r 2 of the Federal Court Rules and on the inherent jurisdiction of the Court, that the issue of liability be tried separately to and before issues of quantum.  It seeks, also, consequential orders as to the scope of discovery.  The respondent opposes the motion.

The proceeding involves claims by the applicant for relief for breach of copyright in certain computer programs.  The applicant claims damages and additional damages.  The infringements alleged take the form of reproduction without the licence of the applicant.  The respondent by its defence puts in issue subsistence and ownership of copyright, denies infringement and relies on the so-called defence of innocent infringement should its denial of infringement not be upheld.

There is evidence before me on the motion as to the amount of time and effort likely to be involved in discovery and the preparation of evidence on the question of damages.  There is evidence also as to the likelihood, particularly on the part of the respondent, that witnesses whose evidence will be relevant to questions of damages will also be required to give evidence on the issue of liability and that at least some of those persons will be required to travel from interstate for the purpose of giving evidence.

It appears to be common ground that there will be no question of an election for an account of profits.  The sole remedy sought will be damages, including additional damages.  The case for the applicant on the motion is relatively straightforward.  It is that the Court ought to find it just and convenient to separate issues of liability and damages on the footing that there is a clear demarcation between the two questions and between the evidence which is likely to be relevant to each and that a hearing on damages will be unnecessary if either the applicants fail on infringement or the respondent succeeds in its defence of innocent infringement: and the proceedings in relation to damages may well be protracted and may well require a good deal of disputed evidence, particularly because of the claim for additional damages, and will, at least in part because of that claim, require circumstances to be traversed that are unlikely to be relevant to the question of liability.

The applicant points by way of example to the recent decision of Lockhart J in Polygram Pty Ltd v Golden Editions Pty Ltd (1997) 38 IPR 451, a case involving damages and additional damages for infringement of copyright the hearing of which extended over three days and involved matters of considerable complexity. That was a case in which, at an earlier stage of proceedings, an order had been made of the kind sought by the applicant here. The material before me does not, however, reveal whether that order was made by consent (as such orders commonly are) or whether, on the other hand, it was opposed or indeed, if it was opposed, which was the party proposing or seeking the order.

The respondent, in opposing the orders sought by the applicant relies on a number of matters.  It points out that the applicant bears the burden of establishing, to the satisfaction of the court, that it is just or convenient to make the orders sought.  It suggests, as must inevitably to some extent be the case, that at this stage in the proceeding the court can only speculate as to what ultimately is likely to prove just or convenient.  It points to evidence to the effect that the additional work required in order to prepare the case on damages is by no means unusual or oppressive in the context of a proceeding such as this.  It refers to the necessity that its witnesses will need to travel interstate to give evidence and that, of course, if the issues are separated, they will need to travel twice.  It suggests that there may well be overlap, possibly arising from issues to which the claim for additional damages will give rise, and that, if there is to be consideration of the question of damages, the total time taken by the proceeding is likely to be considerably greater than it would be were the whole of the matter to be heard together.

This is perhaps a somewhat borderline case.  As a general matter, I think there is a disposition at least fairly widespread in the court, to regard with scepticism claims that the interests of justice and convenience are likely to be served by ordering, at least at an early stage in proceedings, separate trials of liability and damages.  On the other hand, I think it is true that in copyright cases orders of that kind are quite commonly made, very often, in my experience, by consent.  My experience unfortunately does not enable me to say, with confidence, how commonly in copyright cases orders of this kind are made where the making of them is opposed.  At all events, the court is required to do the best it can having regard to the criterion and the information available to it.  I appreciate that what I am about to say involves an element of speculation.  It does, however, have some support in the statement of claim and the defence, in the evidence before me and in experience of the course of proceedings such as this.

It seems to me that, in this case, in common perhaps with many copyright cases but perhaps less usually in cases of other kinds, the issues which will be relevant to the question of damages will overlap only slightly with those which the court will have to decide in order to reach a determination on questions of liability.  The principal issues in relation to liability will be subsistence and ownership of copyright, and an act without the requisite authority constituting infringement. There will also be questions, on the respondent's side, arising from its defence of innocent infringement.  If the applicant succeeds on subsistence, ownership and infringement, and the respondent fails on innocent infringement, then a number of questions will arise as to damages, particularly questions relating to the way in which the licence fees charged by the applicants are customarily set, the extent to which discounts are customarily sought or allowed, and a number of other matters relevant to the question whether additional damages should be awarded, matters particularly going to aggravation and flagrancy.  I accept that it is not possible to make a completely confident and accurate prediction at this stage, but this does appear to me to be a case in which it is highly likely that questions relevant to damages will extend well beyond those relevant to liability, are likely to involve substantial discovery and evidence, and  possibly a lengthy trial, none of which will be required if any of the liability issues which I have identified is decided in favour of the respondent.

On the other hand, there is the question whether the amount of work likely to be required for the preparation of the case on damages is so extensive as to cause or be likely to cause real inconvenience if all matters are heard together.  In that respect, I think that mere reference to the number of files involved, the number of witnesses and the amount of work to be done on documents is likely to be found in the end slightly misleading.  The more time consuming aspects of it may well prove to be the possible involvement of third parties with whom the applicants have licence agreements, and matters going to aggravation or flagrancy.

That witnesses will be required to give evidence twice and will have to travel in order to do so are relevant matters, but in my view insufficient to tip the balance in favour of the respondent.  If, as I think likely, their evidence as to the two aspects of the case will be substantially discrete, the extent of their evidence, and particularly of their cross-examination, will be substantially reduced if, in the end, there is no hearing on the question of damages.  And if there is to be a hearing on the question of damages, then, it seems to me, with proper management there ought to be little significant overlap between their evidence on the two aspects of the case.

As for travel, I accept what was said by counsel for the applicants, that travel these days is a common fact of business life.  These are substantial parties.  If there is real inconvenience involved, then there are other means available by which evidence can be taken.

My conclusion, reached with some hesitation,  is that this is an appropriate case in which to make the orders sought.  Accordingly, the appropriate orders are those numbered 1 and 2 in the applicant's notice of motion. 

[Argument ensued as to costs and directions]

HIS HONOUR:   The applicant seeks its costs of the notice of motion.  The respondent opposes an order for costs on the footing that it was a borderline case and that future events will determine more accurately than one can know at present whether an order for costs is appropriate;  the respondent’s submission, therefore, is that costs should be reserved.  There is no application for an order that the applicant be at liberty to tax and recover any costs forthwith: this would not in any event be an appropriate case for such an order if an order for costs is made.

In my view this is a discrete aspect of the matter in which, whether on a fine balance or not, the applicants have been successful: I think costs should follow the event.  If circumstances later arise indicating that a different result ultimately should follow, then, there being no liberty to tax or recover the costs, it is open to the respondent to seek that the order be vacated.

The appropriate order, therefore, I think is order 8, as set out in the Short Minutes handed up, that is to say an order that the respondent pay the applicants' costs of the motion dated 27 October 1997.

As to other matters, I have amended the short minutes to cover both the first two orders I pronounced, and also directions for the future conduct of the proceeding.  I make the orders, as set out in the Short Minutes so amended, which I will initial and date and place with the papers.

I certify that this and the preceding four (4) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Lehane

Associate:

Dated:            17 November 1997

Counsel for the Applicant:	Mr A S Bell
Solicitor for the Applicant:	Gilbert & Tobin
Counsel for the Respondent:	Ms K Howard
Solicitor for the Respondent:	Clayton Utz
Date of Hearing:	17 November 1997
Date of Judgment:	17 November 1997