Vartzokas Architects Pty Ltd v Nazero Group SA Pty Ltd and Anor (No.3)
[2017] FCCA 2280
•22 September 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| VARTZOKAS ARCHITECTS PTY LTD v NAZERO GROUP SA PTY LTD & ANOR (No.3) | [2017] FCCA 2280 |
| Catchwords: COPYRIGHT – PRACTICE & PROCEDURE – Copyright claimed in architectural drawings – drawings provided to third party for technical specifications to be included – pleadings – further and better particulars required – matters to be considered. |
| Legislation: Copyright Act 1968 (Cth), ss.31, 32, 115, 131D Federal Circuit Court Act 1999 (Cth), ss.14 & 15 Federal Circuit Court Rules 2000, r.5.01 |
| Cases cited: Bruce v Oldhams Press Ltd [1936] 1 KB 697 Gaven & Gaven (No 2) [2012] FMCAfam 1005 Rana v University of South Australia (2004) 136 FCR 344 Autodesk Inc & Ors v Ginos Engineers Pty Ltd & Anor [2009] FMCA 14 |
| Applicant: | VARTZOKAS ARCHITECTS PTY LTD |
| First Respondent: | NAZERO GROUP SA PTY LTD |
| Second Respondent: | WARDY YOUNAN |
| File Number: | ADG 150 of 2017 |
| Judgment of: | Judge Brown |
| Hearing date: | 10 August 2017 |
| Date of Last Submission: | 10 August 2017 |
| Delivered at: | Adelaide |
| Delivered on: | 22 September 2017 |
REPRESENTATION
| Counsel for the Applicant: | Mr Anderson |
| Solicitors for the Applicant: | FBR Law |
| Counsel for the First Respondent: | Ms Walker |
| Counsel for the Second Respondent: | Sachs Gerace Broome Lawyers |
ORDERS
The applicant to provide further and better particulars of paragraphs 12, 20, 21 and 28 of the amended application as requested in the correspondence from the response dated 25 May 2017 within seven (7) days of today’s date.
The time for the respondents to file and serve their response to the amended application be extended to no later than 14 days after receipt of the particulars referred to in order (1) above.
The applicant to pay the respondents costs in an amount to be agreed between the parties and failing agreement to be determined by the court with the costs to be reserved to the final hearing of the matter.
Further consideration of the matter is adjourned to 1 December 2017 at 9:30am for directions.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADG 150 of 2017
| VARTZOKAS ARCHITECTS PTY LTD |
Applicant
And
| NAZERO GROUP SA PTY LTD |
First Respondent
And
| WARDY YOUNAN |
Second Respondent
REASONS FOR JUDGMENT
Introduction
These reasons for judgment arise as a consequence of an application in a case, filed by the first respondent, Nazero Group SA Pty Ltd, in which it seek further and better particulars of the applicant’s amended statement of claim filed on 10 May 2017.
The application is governed by the Federal Circuit Court Rules 2001 “the FCCR”. Significantly, pursuant to rule 1.05(2), if the FCCR are insufficient or inappropriate to deal with any particular situation, the court is authorised to apply the Federal Court Rules 2011 “the FCR” to any general federal law proceedings.[1]
[1] See also section 43(2) of the Federal Circuit Court of Australia Act 1999 (Cth)
These proceedings are concerned with allegations of breaches of the Copyright Act 1968 (Cth). Accordingly, they are proceedings arising in the court’s general law jurisdiction.
Background
The applicant Vartzokas Architects Pty Ltd “Vartzokas” is a firm of architects. It alleges that the second respondent “Nazero”, a land developer of which the first respondent “Mr Younan” is a director and shareholder, breached its copyright in certain architectural plans, which it provided to another company “Nazero No 1”, now in liquidation, to enable the construction of a block of units on land at Prospect, an Adelaide suburb.
Nazero, on the one hand and Vartzokas on the other, approach the issue of particulars from different aspects of the FCCR and, in Nazero’s case, from the more specialised and intricate perspective of the FCR. Nazero contends that the fact that Vartzokas has, in effect, elected to conduct the proceedings by filing a statement of claim mandates the application of the more comprehensive FCR to the pleadings to be filed in the matter.
The ethos of the Federal Circuit Court and the objects underpinning its establishment are set out principally in section 3(2) of the Federal Circuit Court of Australia Act 1999 “the FCC Act”. The court is directed to operate as informally as possible in the exercise of judicial power; and, in so doing, it is encouraged to use streamlined procedures.
In addition, pursuant to section 42 of the FCC Act, the court is directed by the use of the word must to:
“…proceed without undue formality and must endeavour to ensure that the proceedings are not protracted.”
Proceedings, in the court, must be commenced by the filing of an application in approved form. However, in pursuit of the aspiration that the court’s processes be flexible and adaptable to the circumstances prevailing, an applicant is given a choice as to what is to be filed with any such application.
Essentially, an applicant in a general federal law proceeding has an election as the appropriate mechanism for defining the issues, which are the subject of the litigation in question. Having made the relevant election, the rules direct what course a respondent must take.
Pursuant to rule 4.05, an applicant must ordinarily file an affidavit stating the facts relied upon. However, pursuant to rule 4.05(2), an affidavit is not required if, in a general law proceeding, a statement of claim or points of claim are filed.
Pursuant to rule 4.05(3), if a statement of claim or points of claim are filed, any relevant respondent must file a defence or points of defence instead of an affidavit. It is Nazero’s contention that Vartzokas has utilised a statement of claim to delineate its claim against it and therefore it is required to file a defence. Nazero asserts that it cannot file such a defence, at present, because of defects in the pleadings contained in the statement of claim.
The term pleading refers to the formal documents in which litigants set out the presentation of their claims and defences to those claims, in the suit, which they wish the court to determine. They are filed and served sequentially, according to the rules of the particular court in question.
A statement of claim must identify a set of alleged facts that have a particular quality, which if established at trial, will entitle the applicant to the remedy or remedies claimed. A defence is the formal rebuttal of those alleged facts.
This specific quality, which is distinct from a mere allegation, is characterised as a material fact. Material facts, in this context, have been defined as facts, whose existence is “necessary for the purpose of formulating a complete cause of action”.[2] By necessary implication, to provide a legal answer to the cause of action so raised, a defence must provide a rebuttal of each such material fact. Accordingly, there must be a connection between the material fact alleged and a legal principle, which founds the relevant cause of action.
[2] See Bruce v Oldhams Press Ltd [1936] 1 KB 697 at 712
In Gaven & Gaven (No 2) Judge Jarrett, of this court, succinctly summarised the distinction between an affidavit and a pleading in the following terms:
“An affidavit is a statement, sworn or affirmed, by a deponent who gives evidence. The purpose of an affidavit is to provide evidence. An affidavit is different to a pleading. A pleading alleges facts and facts alone (or at least is intended so to do). An affidavit, however, is of a quite different character.”[3]
[3] Gaven & Gaven (No 2) [2012] FMCAfam 1005
Formal pleadings are not mandated in the Federal Circuit Court by its Rules. However, at the same time, the Rules recognise that some types of proceedings are likely to be better served by the use of pleadings. The FCCR do not specifically indicate which type of cases is better suited to the use of affidavits and which is more amenable to pleadings.
In my view, the issue should be determined largely by reference to the overarching ethos of the court – what is the process more amenable to achieving the objectives of cheaper and expeditious justice, in a lower level federal court, in keeping with the directive to the court contained in section 42. In Rana v University of South Australia Lander J said as follows:
“The Federal Magistrates Court has abandoned pleadings in favour of affidavits. In doing so, it has recognised that the Court has been created to offer relatively inexpensive and expeditious justice. It is a Court which should proceed without undue formality and should ensure proceedings are not protracted: [section 42]. It has abandoned the formal procedures of superior Courts. That course is consistent with the Act and the FMCA Rules.”[4]
[4] Rana v University of South Australia (2004) 136 FCR 344 at [34]
Given the scope of Rule 4.05(3), it may be premature to state that this court, the successor to the Federal Magistrates Court, has abandoned pleadings altogether. However, it remains a lower level court and as Lander J has observed has been directed by the legislature to eschew the formality of superior courts.
These proceedings began as an urgent ex-parte application for an asset preservation order in respect of Nazero’s sale of the Prospect land to another entity. Vartzokas filed an affidavit, sworn by its principal, Anastasios Vartzokas, on 26 April 2017.
At a later stage, after the asset preservation order had been granted, Mr Younan filed an affidavit setting out his evidence in respect of his involvement with both Vartzokas and the now defunct corporate entity with which Vartzokas had contracted in respect of the proposed development of the Prospect land.
Essentially, it is Nazero’s position that it held an implied licence to use any plans produced by Vartzokas, in respect of the Prospect land for the purpose of developing that land and could pass such a licence on to any subsequent purchaser for its use.
It is the position of Vartzokas that its amended application and the various affidavits subsequently filed have adequately delineated the various issues in dispute between the parties. It would characterise the issues in contention between the parties as being relatively straight forward, albeit highly controversial.
As such, counsel for Vartzokas, Mr Anderson submits that the matter is an appropriate one for the streamlined processes of the Federal Circuit Court, which occupies the lowest run of the Federal judiciary. He contends that his client’s case is adequately set out in the documents filed to date and Nazero knows what it has to answer and what are the factual parameters of the issues in dispute.
In support of his contention, Mr Anderson relies on rule 1.03(1) of the FCCR which promulgates the objects of the rules is to assist the just, efficient and economical resolution of proceedings. Mr Anderson would categorise Nazero’s request for further and better particulars of his client’s application to be unduly technical and nit picking and so not in keeping with the ethos of the court as encapsulated in both sections 3 and 42 of the Act and Rule 1.03.
Rule 4.02 of the FCCR provides as follows:
“4.02 Content of application
An application must precisely and briefly state the orders sought and (if the application is for a general federal law proceeding) the basis on which the orders are sought.”
It is the contention of Mr Anderson that his client’s amended application has complied with the requirements of this rule and Nazero has been appropriately and properly made aware of his client’s claim against him, both in it and the affidavit of Mr Vartzokas filed in support of the asset preservation order application.
Nazero does not agree. Its position is that Vartzokas has not properly pleaded its case and, as a consequence, it is not aware of the case to which it must respond and therefore cannot file a defence as required by rule 4.05(3) of the FCCR. It is Nazero’s position that the technicalities of copyright law entitle it to be forewarned of each material fact, in the technical sense of this expression, on which Vartzokas relies, so it can properly defend itself.
Necessarily Nazero asserts that the recital of evidence by Mr Vartzokas and the allegations of fact made in the relevant application do not amount to such material facts, as they have not been posited upon some clearly enunciated principle of law, to which it can in turn respond appropriately.
In these circumstances, given the subject matter of the current proceedings, Ms Walker, counsel for Nazero, submits that it is incumbent upon this court to utilise the specific provisions of the FCR, which deal with pleadings. These provisions are principally contained in Part 16 of the FCR.
Rule 16.02(1)(c) of the FCR provides that a pleading must identify the issues that the party wants the court to resolve; and Rule 16.02(1)(d) indicates that each pleading must:
state the material facts on which a party relies that are necessary to give the opposing party fair notice of the case to be made against that party at trial but not the evidence by which the material facts are to be proved.
Rule 16.03 places a positive obligation on a party to plead a fact if it is necessary to meet a denial by the other party or if a failure to plead it would take the other party by surprise in its absence.
Rule 16.41 deals with particulars and again places a positive obligation on the pleading party to provide necessary particulars of each claim, defence or other matter pleaded. Drummond J said as follows in respect of the distinction between a pleading and particulars:
“…a pleading must contain only a statement in summary form of the material facts, but not the evidence by which those facts are to be proved, while the primary function of particulars is to ensure that effect is given to the overriding principle that the litigation between the parties, and particularly the trial should be conducted fairly, openly, and without surprises and incidentally to reduce costs…”[5]
[5] Queensland v Pioneer Concrete (Qld) Pty Ltd [1999] FCA 490 at [12]
Accordingly, the emphasis in pleading is to ensure that each party knows of the structure of the case which it must meet, particular in the form of its legal components, so that at trial, no one will be surprised or embarrassed by some element of the opposing case in respect of which no forewarning was provided. The FCR make provision for the amendment of pleadings, both with and without the leave of the court.
Particular provisions deal with the avoidance of surprise to a party in certain specified circumstances. For example, Rule 16.43 requires that a party who pleads that an individual’s state of mind is a material fact must particularise the facts giving rise to that, particularly if it is asserted that a person ought to have known something.
The difficulty arising in this case is occasioned by the lack of precision, in the court’s rules, regarding the occasions in which a proceeding is to be governed by pleadings or alternatively through the provision of affidavit evidence alone.
In the current case, the applicant has provided both a detailed application in which numbered assertions of fact and law are contained and an affidavit of evidence. No specific direction has earlier been made by the court as to whether a statement of claim or points of claim is to be filed or whether an application alone, supported by an affidavit is sufficient.
In my view, this issue, which arises in many general federal law proceedings, is to be resolved by a consideration of how the litigation is to be best managed within the overarching objectives of the court that it is to provide relatively inexpensive and expeditious access to justice.
Pleadings will usually be more appropriate in more complex litigation where, if some aspect of a claim is not stated with sufficient clarity and its connection with the legal principle, which founds relief, not delineated with precision, this lack of clarity may create surprise in the opposing party, leading, in turn, to delay in the litigation in question be completed or, in extreme cases, some species of miscarriage of justice. For obvious reasons, such an outcome, as Drummond J points out, is likely to be antithetical to expeditious and indeed cost effective litigation.
Cases more amenable to an application and the filing of an affidavit are likely to be less legally and factually complex. An application can set out the relief sought; the evidence the factual basis on which the particular orders are based. In turn, a response and answering affidavit can delineate efficiently the parameters of issues in dispute between the parties concerned. As with many things, what is the best mechanism in any particular piece of litigation must be approached as a question of horses for courses.
In addition, too a large extent, it will also depend on the degree of collaboration or cooperation between the parties concerned (and their legal advisors), who, for obvious reasons, are not likely to have entirely congruent views in respect of what, after all, remains an adversarial process. Some parties may readily agree on the parameters of the dispute in question; others may not.
In my view, the current proceedings are to be characterised as having a degree of legal complexity about them. The factual and legal basis of this complexity is outlined in the earlier published reasons for judgment. In general terms, I accept that Nazero is entitled to know each material fact, on which Vartzokas relies to found its action for breach of copyright against it and the particulars relating to each such material fact.
Accordingly, I consider that this is a proceeding more amenable to the use of pleadings than through the filing of an application, response and affidavit evidence alone. In my view, the use of pleadings, in this matter, is more likely to achieve the legislatively mandated objects of the Federal Circuit that it provide expeditious and cost effective litigation than otherwise.
Given the level of complexity, in my view, without the comprehensive encapsulation of the parties’ respective claims in pleadings, there is a risk one or other of them will claim to be at risk of prejudice through not having been advised of the case against them. This had the potential to lead to the protraction of the case than otherwise.
The current application
In its application in a case filed on 30 May 2017, Nazero seeks further and better particulars of four specified paragraphs of Vartzokas’ amended application. Thereafter it seeks further time to prepare and serve its defence and costs, in respect of this application, on an indemnity basis. The application is supported by an affidavit of its solicitor, Mr Hagon.
Vartzokas has not formerly responded. However, I have been provided with correspondence, which has passed between the solicitors concerned and which, regrettably, has not resulted in the resolution of the controversy arising between them. I will now refer, in more detail, to each of the paragraphs concerned.
Paragraph 12 of the amended application reads as follows (deletions excluded):
“Whilst providing the architectural services, various documents were provided by the applicant to Nazero No 1, which included plans incorporating the designs for the development (the plans).”
Nazero seeks details of what these various documents were, particularly when and how many such documents were provided and what is their relationship to these proceedings.
Ms Walker, in her submissions to the court contends that the use of the expression plans, in the context of a copyright application applying to the provision of architectural services is imprecise and therefore unsatisfactory. She submits that Nazero is entitled to know precisely what are the documents or materials in which Vartzokas claims copyright.
In her submission, this is not unreasonable, given the number of potential breaches of copyright is clearly relevant to her client’s position and further given that architectural drawings and related materials are routinely dated or bear particular serial numbers, which make their idiosyncratic identification easy.
On the other hand, Mr Anderson contends that Nazero has been made aware of what is meant by the expression plans by means of the affidavit of Mr Vartzokas, which indicates what materials were provided by the applicant to Mr Younan in the course of the former’s provision of architectural services in respect of the development of the subject land at Prospect. Essentially, Mr Anderson contends that it is axiomatic that Nazero knows what intellectual material owned by his client it has infringed.
In my view, given Vartzokas seeks a declaration that Nazero has infringed its copyright pursuant to the provisions of the Copyright Act, Nazero is entitled to particulars of the specific works affected by the alleged breaches.
In my view, it is not a proper answer to the application for further and better particulars that the respondent concerned already knows those particulars. It remains incumbent upon the party asserting a breach of a relevant legal provision to provide the material facts which support such assertion. Accordingly, I rule in favour of Nazero in respect of this aspect of its application.
Paragraph 20 of the amended application reads as follows:
“The respondent is representing itself to be the owners of the plans.”
Nazero contends that it is entitled to be provided with particulars of the facts, matters and circumstances on which Vartzokas relies in alleging that Nazero represented itself to be the owner of the plans. In particular Ms Walker contends that the specific provisions of rule 16.43 are engaged in that Vartzokas is required to plead or particularise the facts establishing the state of mind of Nazero in the alleged representations regarding the ownership of the plans.
Mr Anderson, on behalf of Vartzokas, contends that his client cannot provide the particulars sought, as it does not know how, in specific terms, Nazero represented itself to be the owner of the plans in question. However, it does know that the plans were provided to Archi-Build International, by Mr Zaarour, in order for working plans to be produced from the original drawings produced by Vartzokas.
In response, Ms Walker contends that, if this is what Vartzokas alleges, it should formally plead it. I agree with her in this regard. In my view, the applicant is not in a position to make an allegation and later assert it is unable to particularise such an allegation because that is, in effect, an element of its opponent’s case.
Similar issues arise in respect of paragraph 21, of the amended application, which reads as follows:
“The first respondent is using, reproducing, communicating and/or publishing the plans prepared by the applicant.”
Once again, the respondent seeks further and better particulars of this paragraph and in particular seeks the factual basis on which it is asserted Nazero is using, reproducing, communicating and/or publishing the plans.
Once again, Mr Anderson points to the fact that his client is aware that Archi-Build International has utilised his client’s plans to provide further working documents of the Prospect development. In addition, Vartzokas is aware that the additional further conditions in the contract of sale entered into between Nazero and Eyi Hong Capital Pty Ltd, in respect of the Prospect land, Nazero purported to have full use of the developmental approval, which Vartzokas had earlier obtained from the relevant planning authority.
In these circumstances, he asserts that Nazero, by necessary implication has, in its control, the information or knowledge, about any use of these plans, apart from those relating to Archi-Build and others and therefore the request for particulars is otiose.
Ms Walker again characterises the paragraph as lacking precision and asserts that Vartzokas should provide the material facts on which it relies to make such an assertion. Essentially, she contends that it is not up to her client to assume or intuit what is the use of the plans to which Vartzokas refers.
Rather Nazero is entitled to know the specific incidents of each alleged use. If others examples of use come to the knowledge of Vartzokas later, she contends the statement of claim can be amended to reflect these matters. Again, I agree with her submission.
The final paragraph of the statement of claim in respect of which further and better particulars is sought in paragraph 28,which reads as follows:
“From a date unknown to the Applicant, the Second Respondent:
28.1 authorised the acts of the First Respondent as alleged in paragraphs 19 to 27 above;
28.2 induced or procured the acts of the First Respondent as alleged in paragraphs 19 to 27 above; and
28.3 directed or procured the infringement of the First Respondent as alleged in paragraph 24 above, or deliberately or recklessly committed or directed the commission of those infringements so as to make the infringing conduct his own.”
Ms Walker categorises this pleading as being conclusionary in nature because it contains no material fact. She poses the rhetorical question, which she says arises from the pleading and which demonstrates its inherent defect, how did Mr Younan authorise, procure or otherwise the acts of Nazero as so alleged.
It is Ms Walker’s submission that the mere fact that Mr Younan is a director and shareholder of Nazero is not sufficient. Rather, it is necessary for Vartzokas to plead the specific examples, which it alleges amount to the conduct attributed to Mr Younan. Essentially, her clients are entitled to know the specific actions alleged to have been committed by Mr Younan.
It is Mr Anderson’s position that his client is not in a position to provide these particulars, which are in the sole domain of Mr Younan, who in effect knows what he did, in his capacity as a director of Nazero. He asserts that Vartzokas is not in a position to provide the further and better particulars sought without direct disclosure from the respondents.
In this context, Mr Anderson relies on what was said by Lloyd-Jones FM (as His Honour then was) in Autodesk Inc & Ors v Ginos Engineers Pty Ltd & Anor[6]. This was a case involving issues relating to the authorisation of copyright. His Honour referred to authority, which indicated that the expression authorised had the meaning of sanction, approve or countenance. As a consequence, he considered that the express or formal permission or active conduct indicating approval was not essential to constitute an authorisation.
[6] Autodesk Inc & Ors v Ginos Engineers Pty Ltd & Anor [2009] FMCA 14 at [32]
In these circumstances Mr Anderson contends that the fact that Mr Younan was a director of Nazero may, as a matter of law, necessarily amounts to his providing sufficient authorisation for others to use Vartzokas’ copyright. This may be so, but in my view, the respondents are entitled to particulars of the specific actions, said to have been committed by Mr Younan, which give rise to the statements contained in paragraph 28.
For all these reasons, I propose to make the orders sought by the respondent in order 1 of the application in a case. I decline to make an order for indemnity costs. Rather, I will direct that the applicant pay the respondent’s costs in an amount to either be agreed between the parties or determined by the court, with those costs to be reserved to the final hearing.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding sixty-nine (69) paragraphs are a true copy of the reasons for judgment of Judge Brown
Date: 22 September 2017
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