Jedis Limited v Vodafone New Zealand Limited

[2012] NZHC 2448

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2010-404-6270 [2012] NZHC 2448

BETWEEN  JEDIS LIMITED Plaintiff

ANDVODAFONE NEW ZEALAND LIMITED First Defendant

ANDVODAFONE AUSTRALIA LIMITED Second Defendant

ANDIBM NEW ZEALAND LIMITED Third Party

Hearing:         17 September 2012

Appearances: C R Pidgeon QC  for Plaintiff

N J Scampion for Second Defendant
No appearance for First Defendant or for Third Party

Judgment:      17 September 2012

INTERIM ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL

Solicitors:

Pidgeon Law (R S Pidgeon), P O Box 6535 Auckland 1141 for Plaintiff

Email:   [email protected]

Wilson Harle (N Scampion) P O Box 44539 Auckland 1140, for Second Defendant

Email:   [email protected]

Copy for:

Colin R Pidgeon QC, P O Box 105-294 Auckland 1143.

Email:   [email protected]

JEDIS LIMITED V VODAFONE NEW ZEALAND LIMITED HC AK CIV-2010-404-6270 [17 September

2012]

[1]      Vodafone  Australia  Ltd  has  been  joined  as  a  second  defendant  in  this proceeding.  It is an Australian corporation.  It filed an appearance under protest to jurisdiction.1   Jedis Ltd has applied to strike out the appearance.  Vodafone Australia Ltd contests the jurisdiction of this court but the arguments it raises in opposition are directed primarily at the merits of the claim against it by Jedis Ltd, more so than issues of appropriate forum under the forum non conveniens doctrine.

[2]      Jedis Ltd is a New Zealand company.   It carries on business as a software designer.  In this proceeding it is suing for infringement of its copyright in a software programme.

[3]     The first defendant, Vodafone New Zealand Ltd, is a New Zealand telecommunications company.

[4]      Vodafone Australia Ltd runs a telecommunications business in Australia, but it says that it does not operate in New Zealand and has no assets in New Zealand. Vodafone Australia Ltd also refers to a subsidiary, Vodafone Network Pty Ltd, which is also Australian and has no New Zealand operation or assets.  Jedis Ltd maintains that Vodafone Network Pty Ltd and Vodafone Australia Ltd are one and the same but there is no evidence to support that, and the evidence from Vodafone Australia is to the contrary.

[5]      When Jedis Ltd applied to join Vodafone Australia Ltd as a second defendant under r 4.56, there was no objection from Vodafone New Zealand Ltd or from IBM New Zealand Ltd.  I made an order for joinder in November 2011.  Jedis Ltd did not seek leave to serve the proceeding abroad.   Instead, it says that it was entitled to serve Vodafone Australia  Ltd  overseas  without  leave.    Jedis  Ltd  relies  on  four paragraphs under r 6.27(2) of the High Court Rules as gateways for serving the proceeding on Vodafone Australia Ltd without leave. They are:

(a)       A claim in tort.

(e)      That the subject matter of the proceeding is land or other property situated in New Zealand; and

(h)(i)  That Vodafone Australia Ltd is a necessary or proper party to proceedings and there is a real issue between Jedis Ltd and Vodafone New Zealand Ltd.

(j)        A claim arising out of an enactment, namely the Copyright Act 1994.

[6]      After Vodafone Australia Ltd filed its appearance protesting the court’s jurisdiction,  Jedis  Ltd  applied  to  set  aside  the  appearance.    That  application  is decided under r 6.29.  That, in turn, requires consideration of rr 6.27 and 6.28.  The leading  decision  in  this  area  is  the  Court  of Appeal’s  judgment  in  Wing  Hung Printing Co Ltd v Saito Offshore Pty Ltd,2  which I shall follow.   That decision follows the amendment to the High Court Rules introducing the present version of rr

6.27(2) to 6.29.  It is important to bear that in mind, as earlier cases were not made under those rules and the new rules may affect the way earlier cases apply.

[7]      These questions arise:

(a)       How strong is the claim of Jedis Ltd against Vodafone Australia Ltd? (b)      Does Jedis Ltd have a good arguable case for one of the paragraphs in

r 6.27(2)?

(c)      Should  the  court  assume  jurisdiction  by  reason  of  the  matters  in r 6.28(5)(b)-(d)?

How strong is the claim of Jedis Ltd against Vodafone Australia Ltd?

[8]      It is helpful to assess the strength of the claim by Jedis Ltd at the outset, as that is relevant at various stages of the enquiry under r 6.29.

[9]      Jedis Ltd sues for copyright infringement.  It claims copyright in a software programme.  Under the s 2 of the Copyright Act, the definition of “literary work” covers computer programmes.3    In this case the software programme is called “Network Interface Daemon” (NID).  The claims by Jedis Ltd that this is an original work made by its officers and employees, and that it owns copyright in the work, are not challenged.  In August 2004 Jedis Ltd entered into a limited use software licence agreement with MetaSolv Software Inc, a Delaware corporation, with offices in Texas,  United  States.    The  software  was  to  operate  as  an  interface  between MetaSolv’s ASAP4 software, and the ISSAC system for MetaSolv’s customers, IBM Australia Ltd and Vodafone Network Pty Ltd.  Apart from the limited use granted under the licence agreement, Jedis Ltd reserved all its other intellectual property rights in the software.

[10]     The  NID  software   was   installed   and   physically  hosted   in  Vodafone Australia’s servers in Australia and was used as part of the telecommunications system in Australia.  There is no objection to that use of the software in Australia as that is within the scope of the licence agreement.

[11]     Jedis Ltd says that Vodafone New Zealand Ltd, the first defendant, has been using the NID software in New Zealand without its consent.  The statement of claim says that there has been unauthorised use of the software.  As evidence that the NID software is being used in New Zealand, Jedis Ltd relies on the following:

(i)       Mr Smith, the director of Jedis Ltd, says that in December

2008 Jedis Ltd requested a NID software audit by IBM New Zealand Ltd.  That audit was concluded in January 2009.  A Mr Jules Clements and a Mr Subramaniyam Chandrasekaran advised by emails that the NID software is on the Vodafone New Zealand network.

(ii)      In  July  2010,  Mr  Raanan  Nauman,  a  contractor  to  IBM

working on the Vodafone New Zealand account, requested the

3      Copyright Act 1994, s 2 definition of literary work.

4      A service activation and provisioning system.

assistance of Mr Smith in respect of an existing fault, and emailed Mr Smith a diagnostic file.   Mr Smith has put that email in evidence.  Mr Nauman’s email confirms the presence of the software on servers in New Zealand.

(iii)     Mr Jules Clements allegedly confirmed to Mr Smith that there

had been a “shift and lift” of the software.

[12]     The case for Jedis Ltd is that the source of the software in Vodafone New Zealand Ltd’s servers was Vodafone Australia Ltd, and therefore Vodafone Australia Ltd must be implicated in its New Zealand sister company obtaining and using the NID software.   Mr Smith has attached to  his  affidavit  a schematic diagram he prepared which he says shows how the NID software fits into the telephone systems for Vodafone in both Australia and New Zealand.

[13]     Vodafone Australia Ltd rejects that.  In general, it says that the NID software provided an interface that was required only for its Australian network and was not required in New Zealand.   There was no reason to transfer the software to New Zealand or for it to be used in New Zealand.   It says that it did not transfer the software to New Zealand or authorise its use in New Zealand.  If the NID software is in New Zealand, Vodafone Australia Ltd did not intend it to be used in New Zealand and had no reason to believe that it would be used here.

[14]     Mr Kelly, a Vodafone demand and solutions manager of Sydney, Australia, and Mr Clince, the head of portfolio - IT for Vodafone New Zealand Ltd, have sworn affidavits in support of this position.   Mr Kelly gives extensive background information.  He says that in 2003 three Vodafone companies - Vodafone Network Pty Ltd in Australia, Vodafone New Zealand and Vodafone Fiji, collectively known as “Vodafone Pacific”- started a programme to upgrade their core IT systems and replace them with a new common set of systems.   This programme was called Project Sam.  Vodafone New Zealand Ltd has referred to it in its pleadings as the Systems Integration Project.

[15]     Mr  Kelly  says  that  the  aims  of  the  project  were  to  provide  better infrastructure processes across Vodafone Pacific, to enhance the companies’ ability to work efficiently and effectively together, and to provide an integrated and compatible technology infrastructure to support their core customer care and billing businesses.  This would be done by creating shared core IT systems that would be hosted in one of the territories used by the Vodafone Pacific companies.  Those core systems would then be integrated into the remaining country-specific systems for each company.

[16]     Mr Kelly was the lead architect on Project Sam.  He led the design work, and IBM New Zealand Ltd and IBM Australia Ltd built the systems according to the design.  He also explains that IBM dealt with most of the software side of Vodafone Pacific’s systems.  One of those components was called ASAP, a service activation and network provisioning system.  ASAP had been authored by MetaSolve Software Inc.   It was part of the customer management and application package that IBM consulted on before Project Sam.

[17]     That  part  of Mr Kelly’s  evidence does  not  refer to  any use of the NID software by the Vodafone Pacific companies.  He explains that the use of the NID software was part of Vodafone Australia’s 2G Capacity Replacement Project.   He says that in 2004 Vodafone Australia Ltd’s second generation telecommunication network was approaching full capacity and risked becoming overloaded.     They consulted with IBM to find a solution – and that was the 2G Capacity Replacement Project. Vodafone Australia Ltd had already created a new core network to support its third generation telecommunications network customer base, when it decided to move some of its second generation customers onto that new network rather than build  further  capacity  on  its  older  second  generation  network.     The  second generation network had used Ericsson network elements to allow customers to make and receive mobile phone calls.  However, the third generation mobile network used Nokia network elements instead.

[18]     One matter that this replacement project had to address was the interface

between  ISSAC  and  the  Nokia  elements.     ISSAC  is  a  “MVNO”  network

provisioning system.5   It passes requests between the MVNO customer management systems  and  Vodafone  Australia’s  network  elements.    Support  of  this  MVNO business required specialist systems, in particular ISSAC.  Before the 2G Capacity Replacement Project, provisioning requests were sent between the ISSAC and the Ericsson network elements via the Ericsson Service Order Gateway.  For technical reasons, Vodafone Australia decided not to make any changes to ISSAC, but instead to  allow it  to communicate with ASAP and  Nokia elements.   This  required  an interface to take the place of the Ericsson Service Order Gateway.  IBM approached MetaSolv to provide this.  MetaSolv in turn went to Jedis.  Jedis developed the NID software and supplied it to MetaSolv under the limited use software licence agreement.   MetaSolv, in turn, provided it to IBM who installed it in Vodafone Australia’s servers in Australia.  Vodafone Australia emphasises that only it needed the NID software.  Vodafone New Zealand did not have an equivalent to Australia’s MVNO business, and did not need to use ISSAC.  Although Vodafone New Zealand used the shared system, its use did not involve use of the NID software, as it did not use ISSAC or Nokia elements and its provisioning requests did not have to go between ISSAC and ASAP.

[19]     The next part of Mr Kelly’s evidence deals with “Project Norfolk”.  Project Norfolk is called the Separation Project in the pleadings.  The background to this is that the Vodafone parent company, Vodafone Group plc, and an Australian company called Hutchison 3G Australia Ltd, entered into a joint venture.   A joint venture company was formed - Vodafone Hutchison Australia Pty Ltd.   That is now the holding company for Vodafone Australia Ltd.

[20]     Under Project Norfolk many of the shared systems were separated so as to allow Vodafone New Zealand to operate those systems itself, independently of Vodafone Hutchison Australia Pty Ltd.   Mr Clince explains that Vodafone New Zealand Ltd initiated the project.   Telecom NZ, a competitor, had an interest in Vodafone Hutchison Australia Pty Ltd.  Vodafone New Zealand Ltd wanted to make sure that no sensitive information was available to Telecom New Zealand Ltd.  IBM New Zealand Ltd extracted information from Vodafone Australia Ltd that Vodafone

New Zealand required.   It was apparently substantial – it was in 30 to 40 servers,

5      An MVNO is an organisation that re-sells a mobile carrier’s network and brands it as their own.

allegedly containing hundreds of thousands of software programs and associated files.  Vodafone Australia Ltd makes the point that IBM New Zealand, not it, was responsible for extracting the software from its servers.

[21]     Project  Norfolk  was  completed  in April  2010.    It  is  re-emphasised  that Vodafone New Zealand does not use NID software following Project Norfolk, and has no need to.  Mr Clince attaches to his affidavit an email of 18 February 2010 from  IBM to Vodafone New Zealand confirming that as the NID software was required for an Australian interface, IBM would not be bringing it over.

[22]     Vodafone Australia also challenges the evidence Mr Smith relies on.   The email  correspondence  in  2008  and  2009  is  before  Project  Norfolk.    It  is  only evidence that the NID software was installed on servers in Australia, at the same time that the core IT functions for the Vodafone Pacific companies were installed in servers  in  Australia  following  Project  Sam  and  the  2G  Capacity  Replacement Project.  It is not evidence of any use of copyright material outside the terms of the limited use software licence agreement.

[23]     The  email  of  Mr  Nauman  is  after  Project  Norfolk  and  confirms  the installation of NID software in New Zealand.   The Vodafone witnesses say that it was on development/test servers and Mr Nauman’s email is not evidence that the software was to support the business of Vodafone New Zealand.

[24]     On these facts Vodafone Australia Ltd has presented a strong defence that the NID software is not required for Vodafone New Zealand’s telecommunications network.  It was only stored on servers in Australia.  It should not have been sent to New Zealand and it is of no commercial benefit to Vodafone New Zealand Ltd.  But is it strong enough for me to say that Jedis Ltd does not have a case on the facts?  If either of the Vodafone companies had applied for summary judgment as defendants, I would not grant the applications.   I would apply the cautious approach under

Westpac Banking Corporation Ltd v MM Kembla NZ Ltd:6

[63] Except in clear cases, such as a claim upon a simple debt where it is reasonable  to  expect  proof  to  be  immediately  available,  it  will  not  be

6      Westpac Banking Corporation Ltd v MM Kembla NZ Ltd [2001] 2 NZLR 298 (CA).

appropriate to decide by summary procedure the sufficiency of the proof of the plaintiff's claim. That would permit a defendant, perhaps more in possession  of  the  facts  than  the  plaintiff (as  is  not uncommon  where  a plaintiff is the victim of deceit), to force on the plaintiff's case prematurely before completion of discovery or other interlocutory steps and before the plaintiff's evidence can reasonably be assembled.

...  At the end of the day, the Court must be satisfied that none of the claims can succeed. It is not enough that they are shown to have weaknesses. The assessment made by the Court on interlocutory application is not one to be arrived at on a fine balance of the available evidence, such as is appropriate at trial.

[25]     The email from Mr Nauman shows that the NID software has been brought into New Zealand and is on Vodafone New Zealand servers in New Zealand.  The software came from the servers of Vodafone Australia.  It is arguable that Vodafone Australia Ltd was in some way involved in allowing software to be taken from its systems and to be installed in New Zealand.

[26]     That is enough to give Jedis Ltd an arguable case on the facts, but I would not rate it as a strong case at present.   This is still at a preliminary stage in the case. Matters may change following discovery.  Jedis Ltd has applied for further discovery against Vodafone New Zealand Ltd, and I am to hear it on 19 September 2012.  So far, barring its appearance objecting to the jurisdiction, and the evidence given in opposition to the present application, Vodafone Australia has taken no steps in the proceeding.  Later steps may bring more evidence to light.

[27]     Vodafone Australia Ltd also attacks the case for Jedis Ltd on legal grounds:

(a)      Jedis Ltd’s pleading does not clearly articulate the legal basis for its

claim for copyright infringement.

(b)As Vodafone Australia Ltd is based solely in Australia, New Zealand’s Copyright Act  1994  cannot  apply to  it  as  it  did  not  perform  any relevant act of infringement in New Zealand.

(c)      A New  Zealand  court  cannot  hear  a  claim  for  infringement  of  a foreign copyright.

(d)      The evidence does not disclose any relevant act of infringement under

Part 2 of the Copyright Act.

[28]     The complaint about the pleadings is sound.   Part 2 of the Copyright Act

1994 deals with infringement and sets out particular infringement provisions.   It deals separately with primary and secondary infringement.

[29]     The pleading of infringement against Vodafone Australia Ltd is:

[24] The Second Defendant gave or transferred the abovementioned software to the First Defendant at a date and time which is within the knowledge of the Second Defendant subsequent to 2004 without the express written permission of the Plaintiff

[25] Such action was in breach of the Plaintiff’s copyright in the said NID software

and related products.

[30]     It is not clear which provisions of Part 2 this pleading applies to. As such, the pleading is embarrassing.   Vodafone is entitled to know which of the acts of infringement under Part 2 of the Copyright Act are alleged against it.  It is not clear whether the pleading of giving or transferring covers copying (which is a matter of primary infringement) or being party to some form of secondary infringement.  That distinction is important.   Secondary infringement involves some form of dealing with a product, where the infringer knows or has reason to know that a particular item is an infringing work.  There is a key element of knowledge that is required to establish liability.  For primary infringement, the mental test is different.  There can be a mental component to an act of primary infringement, but it is not the same as knowledge or having reason to know.   Some acts of primary infringement may involve strict liability, or where there can be subconscious or unintentional copying.

[31]     The vagueness of the pleading has required Vodafone Australia to guess the basis on which it is sued.   If Jedis Ltd is to maintain its claim against Vodafone Australia, it will need to amend its pleading so as to articulate clearly the particular provisions under the Copyright Act on which it relies as being relevant acts of infringement.

[32]     Vodafone Australia’s second submission is based on the territorial scope of New Zealand’s Copyright Act.   In general, the Act protects copyright in original works.  Under s 16 the owner of copyright has the exclusive right to do certain acts in New Zealand.7   Vodafone Australia says that as it was always based in Australia, and that anything it did in relation to the NID software occurred only in Australia, that is outside the reach of the New Zealand Act.

[33]     Its presence outside the borders may not be enough to place it outside the reach of the Act.   It is possible that someone who remains entirely outside New Zealand at all material times may still infringe under the New Zealand Act.  In these days of electronic communication, it is not hard to think of cases of disseminating pirated materials into New Zealand, even though the pirate may be based off-shore. It will require a closer examination of the particular acts of infringement in issue.

[34]     Vodafone’s submission that a New Zealand court cannot hear a claim for infringement  of a foreign  copyright  is  based  on  dicta of Tipping J  in  Atkinson Footwear v Hodgskin International Services Ltd:8

Similarly an assertion that acts done or threatened to be done outside New Zealand constitute an infringement of the copyright law of another country is not  justiciable  in  the  New  Zealand  courts;  nor  is  an  infringement  of copyright under foreign law actionable under New Zealand law...The simple principle is that copyright law gives a monopoly within the country that grants it.   There can be no infringement in Australia of a New Zealand copyright...Whether copyright exists in another country and whether the plaintiff has title to it there are treated as questions in rem not in personam and thus outside the general proposition with which I started this discussion.

[35]     The context for the statements of Tipping J was his refusal to grant an interim injunction preventing the importation of infringing articles from a third country into Australia,  while  at  the  same  time  he  also  enjoined  their  importation  into  New Zealand.    A reluctance  to  grant  interim  injunctive  relief  wider  than  is  strictly necessary is  understandable.   The  report  of  the  case  does  not  indicate  that  the plaintiff was invoking Australia’s copyright statute.  Instead, Tipping J could base his decision on the territorial limits of the New Zealand Act.  The part of his decision

where he says that foreign copyright laws are not justiciable in New Zealand is

7      Subject to exceptions under Parts 3 and 8.

8      Atkinson Footwear Ltd v Hodgskin International Services Ltd (1995) 31 IPR 186 (HC), at 190.

strictly obiter.  In support of that proposition he relied on these decisions: Potter v BHP Pty Co Ltd9, Steinhardt & Son Ltd v Meth 10and Tyburn Productions Ltd v Conan Doyle.11   The first two were patent cases, the third was an English copyright case.

[36]     The refusal to hear claims for breach of foreign intellectual property claims is surprising.  Under normal conflicts of laws principles a wrong under a foreign law may  be  actionable  in  New  Zealand,  subject  to  various  matters  which  are  not necessary to set out here.   If this refusal were upheld, it would mean that a New Zealand court could not hear claims against a New Zealand resident and citizen for infringement of a foreign copyright.   It could potentially turn New Zealand into a sanctuary for international copyright pirates.

[37]     However, the decision of Tipping J is not the last word on the subject.   In KK Sony Computer Entertainment v van Veen,12 MacKenzie J followed a decision of the English Court of Appeal in Pearce v Ove Arup Partnership Ltd13  that a Dutch copyright could be enforced in England.   MacKenzie J granted relief against infringement of English and Hong Kong copyright legislation as well as the New

Zealand Copyright Act.  MacKenzie J also “tweaked” the double actionability rule in Phillips v Eyre14  to overcome the territorial scope of copyright legislation.   The United Kingdom Supreme Court reviewed the matter in Lucasfilm Ltd v Ainsworth.15

It held that an English court could hear a claim for infringement under United States legislation.  In doing so it referred to the decisions of Tipping J and MacKenzie J as well as extensively reviewing other Commonwealth authorities.

[38]     It  closely  examined  the  reasons  for  the  decision  of  the  High  Court  of Australia in Potter v BHP Pty Co Ltd.   The Supreme Court held that the rule in British  South  Africa  Co  v  Companhia  de  Moçambique16   did  not  apply  (just  as

MacKenzie J had held in his case).  The act of state doctrine might be relevant when

9      Potter v BHP Pty Co Ltd (1906) 3 CLR 479 at 494.

10     Steinhardt & Son Ltd v Meth (1961) 105 CLR 440 at 443.

11     Tyburn Productions Ltd v Conan Doyle (1990) 19 IPR 455, [1990] 1 All ER 909.

12     KK Sony Computer Entertainment v van Veen (2007) 71 IPR 179.

13     Pearce v Ove Arup Partnership Ltd [2000] Ch 403 (CA).

14     Phillips v Eyre (1870) LR 6 QB 1.

15     Lucasfilm Ltd v Ainsworth [2012] 1 AC 208 (UKSC).

16     British South Africa Co v Companhia de Moçambique [1893] AC 602 (HL).

a grant of patent was in issue but did not apply in a copyright claim.  It noted that the double actionability rule for claims in tort has been repealed in England.  As I read its decision, the Supreme Court also held that there were no issues of policy that went against enforcement of foreign copyright and that there is an international interest in mutual recognition and support of copyright laws.

[39]     For present purposes, given the decision of MacKenzie J in Sony Computer Entertainment and the decision of the United Kingdom Supreme Court in Lucasfilm, I accept that a New Zealand court may hear a claim to enforce a foreign copyright law.  Having said that, I note that those cases involved proceedings against someone present and resident in the country where the claim was being heard.  There may be different considerations when the defendant is also outside the jurisdiction.

[40]     I now come to Vodafone’s argument that the evidence does not disclose any relevant act of infringement under Part 2 of the Copyright Act.

[41]     Vodafone Australia says there cannot be any claim for primary infringement because there is no basis for holding that any of its acts were carried out in New Zealand.  First, it may be possible for Jedis Ltd to plead a relevant act of primary infringement in Australia under that country’s copyright law.  However, Mr Pidgeon QC disclaimed relying on that, saying that Jedis Ltd was relying only on acts carried out in New Zealand.   Rather, Jedis Ltd was relying on breach of a New Zealand copyright, not on breach of an Australian copyright.

[42]     The next aspect is that if Vodafone Australia Ltd gave the NID software for Vodafone New Zealand Ltd for use in this country, then Vodafone Australia Ltd may be a party to unauthorised copying in this country, by facilitating it.   Its presence outside New Zealand does not give it immunity.   However, for it to be liable for primary infringement as a party, there must be some knowledge or intention on the part of Vodafone Australia Ltd to enable unauthorised copying in this country.  At this stage the evidence for Jedis Ltd does not carry matters as far as showing such knowledge on the part of Vodafone Australia Ltd.

[43]     Vodafone Australia also submitted on secondary infringement. In particular it drew on the importance of the requirement for knowledge components.  It referred to the  decision  of  Smellie  J  in  Husqvarna  Forest  and  Garden  Ltd  v  Bridon  New Zealand Ltd.17    Smellie J referred to  and applied the decision of Morritt LJ in LA Gear Inc v Hi-Tech    Sports plc18  as to the question of knowledge for secondary infringement.  English legislation seems to be in the same terms as New Zealand’s.

The words “has reason to believe” occur in the English Copyright Act 1988, just as they occur in the New Zealand 1994 Act.  Morritt LJ said:19

Nevertheless  it  seems  to  me  that  “reason  to  believe”  must  involve  the concept of knowledge of facts from which a reasonable man would arrive at the relevant belief.   Facts from which a reasonable man might suspect the relevant conclusion cannot be enough.

[44]     Vodafone Australia Ltd says that none of the evidence so far comes anywhere near suggesting that Vodafone Australia Ltd either had the requisite knowledge or that knowledge could be imputed to it under that test applied by Smellie J in the Husqvarna case.

[45]     Vodafone Australia Ltd also refers to the particular secondary infringement provisions of the Copyright Act.  As for importation under s 35, it accepts that a person who  sends  goods  into  another  country might  be  held  to  be involved in importing them, referring to a criminal case of Collector of Customs v Kozanic.20

But it says that there is no evidence that it, as opposed to IBM, was involved in

removing the NID software to New Zealand.   On that point it is asking for a pre- emptive ruling in its favour before all the evidence is available.  It also denies that any copy of NID software could be an infringing copy.  However, if NID software was copied   in Australia for the purpose of transmission to New Zealand, that is arguably outside the terms of the software licence.  Again, I make the point that on questions of knowledge, this case is at an early stage and it would be premature to say that Vodafone Australia Ltd did not have that knowledge when Jedis Ltd has not

had full discovery.

17     Husqvarna Forest and Garden Ltd v Bridon New Zealand Ltd [1997] 3 NZLR 215.

18     LA Gear Inc v Hi-Tech Sports plc [1992] FSR 121 (CA).

19     Ibid, at 129.

20     Collector of Customs v Kozanic (1983) 1 CRNZ 135.

[46]     I accept that Vodafone Australia Ltd is on stronger grounds on ss 36 and 37. Section 36 is about possessing or dealing with infringing copies.  There is no basis for holding that Vodafone Australia Ltd has infringed in New Zealand under s 36. Similarly, I see no basis for claiming infringement for providing means to make infringing copies under s 37.

[47]     I summarise  on  the  strength  of  the  case  for  Jedis  Ltd  against Vodafone Australia Ltd.  It is arguable that Vodafone Australia Ltd was in some way implicated in some breach of copyright in the NID software, but it is only just arguable.   Its claim is not well-articulated.   Jedis Ltd needs to say what are the specific acts of infringement under Part 2 of the Copyright Act it relies on, and whether it sues under New Zealand law, Australian law, or both.  If it alleges secondary infringement, or it alleges that Vodafone Australia Ltd was party to somebody else’s primary infringement, it needs to set out particulars of relevant knowledge.   The requisite mental element should be clearly put so that Vodafone Australia Ltd can know the case against it and squarely answer to it.

Does Jedis Ltd have a good arguable case for one of the paragraphs in Rule

6.27?

[48]     Jedis Ltd first relies on paragraph (a), a claim in tort.  Vodafone Australia Ltd submits that a claim for breach of copyright is not a claim in tort.  It refers to the dicta of Tipping J in Atkinson that a claim for breach of copyright is a claim that was created under statute and is not known to the common law.    It needs to be noted, first of all, that tort liability can be created under statute just as it can arise under common law.  It is only necessary to think of the Deaths by Accident Compensation Act 1952 as an example of tort liability created by statute.

[49]     A claim for copyright infringement is tortious in character, being a civil claim for breach of intellectual property rights.  Its tortious character was recognised in the discussion of the double actionability rule in Phillips v Eyre for foreign tort claims in KK Sony Computer Entertainment v van Veen and Lucasfilm Ltd v Ainsworth.

[50]     But Jedis Ltd must show a good arguable case that its case comes within r

6.27(2)(a):

(2)      An originating document may be served out of New Zealand without leave in the following cases:

(a)  when a claim is made in tort and—

(i)       any  act  or  omission  in  respect  of  which  damage  was sustained was done or occurred in New Zealand; or

(ii)      the damage was sustained in New Zealand:

[51]     It is not sufficient for it simply to show a good arguable case that damage was sustained in New Zealand.  It must show that there has been a tort to a good arguable case standard.   For this judgment I regard the “good arguable test” standard as imposing a higher burden on a plaintiff than simply requiring it to show that there is a serious issue to be tried.  The difference in language between r 6.29(1)(a)(i) and

6.28(5)(b) shows that those who drafted the rules clearly intended different tests to be applied.

[52]     In Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran21 Lord Goff referred  to  an  earlier decision  of the  House  of  Lords,  Vitkovice Horni  a  Hutni Tezirstvo v Korner,22  where members of the House of Lords had used the words “strong argument” and “a strong case for argument” as being similar to a “good arguable case”.  While a prima facie case is not required, nor proof on the balance of probabilities, it is certainly something more than a serious question to be tried.

[53]     Given that I have found that, even on the facts, Jedis Ltd has only a barely arguable case – and not anything more than that – I find that Jedis Ltd does not have a good arguable case in tort against Vodafone Australia Ltd.

[54]     Rule 6.27(j) allows for claims under an enactment:

(j) when the claim arises under an enactment and either—

(i)        any act or omission to which the claim relates was done or occurred in New Zealand; or

(ii)      any loss or damage to which the claim relates was sustained in New Zealand; or

21    Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran [1994] 1 AC 438 at 452-453.

22     Vitkovice Horni a Hutni Tezirstvo v Korner [1951] AC 869 (HL).

(iii)      the enactment applies expressly or by implication to an act or omission that was done or occurred outside New Zealand in the circumstances alleged; or

(iv)      the  enactment  expressly  confers  jurisdiction  on  the  court over persons outside New Zealand (in which case any requirements of the enactment relating to service must be complied with):

[55]     A claim for breach of copyright is not only a claim in tort but also a claim under an enactment - the Copyright Act 1994.  Again, for the same reasons as I have given for the claim in tort, Jedis Ltd has not made out a claim to the “good arguable case” standard.

[56]     Jedis Ltd also relies on r 6.27(e) that the subject matter of the proceedings is land or other property situated in New Zealand.  The relevant property in this case is the New Zealand copyright in the NID software.  As copyright is a chose in action, for  conflicts  of  laws  purposes,  copyright  is  situated  in  the  country  whose  law governs the existence of the copyright.23    For New Zealand copyright in the NID software, the copyright exists in New Zealand, not in any other country.   On that point, Jedis Ltd has a good arguable case under 6.27(e).  At the same time, if it were to claim for breach of Australian copyright, it could not rely on (e) because that is

relying on copyright located in another country – Australia.

[57]     Jedis Ltd also relies on r 6.27(h)(i).  That is available when any person out of the  jurisdiction  is  a  necessary  or  proper  party  to  proceedings  properly  brought against another defendant, served or to be served, whether within New Zealand or outside New Zealand under any other provision of the rules, and there is a real issue between the plaintiff and that defendant that the court ought to try.  Vodafone Australia Ltd helpfully referred to Equitcorp Industries Group Ltd v Hawkins.24

Wylie J referred25 to the decision of Speight J in Pratt v Rural Aviation (1963) Ltd26

and said:

There is nothing magical in the term “proper” party in the context of R 219. Had the person to be served been within the jurisdiction and could have been

23     Novello & Co Ltd v Henrichsen Edition Ltd [1951] Ch 595 (HC) at 604.

24     Equiticorp Industries Group Ltd v Hawkins [1991] 3 NZLR 700.

25     Ibid, at 714.

26     Pratt v Rural Aviation (1963) Ltd [1969] NZLR 46 at 48.

properly sued in this Court - which I take to mean could have been the subject of a claim which disclosed a   tenable cause of action – then that person is a “proper party” within para (h): Massey v Heynes & Co (1888)

21 QBD 330.

[58]     I do not regard the “necessary party” test as having been satisfied in this case. Jedis Ltd can bring its claim against Vodafone New Zealand Ltd adequately, without having to join Vodafone Australia Ltd as a party.  However, on the “proper party” test, as there is an arguable claim against Vodafone Australia Ltd if it were present in New Zealand, then it could be a proper party under the test applied by Wylie J.

[59]     Next is the question as to whether there is a real issue to be tried between Jedis Ltd and Vodafone New Zealand Ltd.  It has become apparent during the course of the hearing, as well as in addition to the evidence it relied on by Mr Smith, that there is a real issue to be tried between Jedis Ltd and Vodafone New Zealand Ltd in respect of its possession of the NID software in its servers within New Zealand.

[60]     I summarise on r 6.29(1)(a)(i).   Jedis Ltd has established a good arguable case under r 6.27 (h) and (e) (but (e) only in respect of New Zealand copyright, not in respect of any Australian copyright).  On the other hand it has not established a good arguable case under (a) or (j).  It only needs to show a good arguable case for one of the paragraphs. It has done that.

Should the court assume jurisdiction by reason of the matters in r 6.28(5)(b)-(d)?

[61]     The first question is whether there is a serious issue to be tried on the merits: r 6.28(5)(b). I have found that Jedis Ltd has a serious claim on the merits – but only just, and it is certainly no stronger than that.  If I were to reject that submission, I would be required to accept the evidence of Vodafone Australia Ltd in its entirety and to reject the evidence of Jedis Ltd out of hand.  I cannot dismiss the evidence of Jedis Ltd entirely.  The email from Mr Nauman is probably the high point in the case for Jedis Ltd, but it shows that there is something in the complaint by Jedis Ltd and gives grounds for the case to run.  I bear in mind that more information may come to light with discovery.

[62]     The next question is whether New Zealand is the appropriate forum for the trial: r 6.28(5)(c).

[63]     Vodafone Australia Ltd did not submit on that issue.  I take it from its silence that it does not contend that the matters ought instead to be litigated in Australia. The factors favouring New Zealand are:

(a)        the case is primarily about the use of software in New Zealand;

(b)the case is primarily a claim under New Zealand’s Copyright Act.  A New  Zealand  court  is  in  a  better  position  than  courts  of  other countries to apply New Zealand copyright legislation.    It is advantageous for a local court to apply its own law rather than a foreign law because it saves difficulties in proving foreign law.   A court applying its own law is far more familiar with it than with

getting to grips with foreign law.27

(c)      the  bulk  of  the  witnesses  -  that  is,  witnesses  for  Vodafone  New Zealand, witnesses for Jedis Ltd, witnesses for IBM New Zealand – all seem to be within New Zealand, whereas there may be relatively few witnesses required to come to New Zealand from Australia for Vodafone Australia Ltd.

[64]     While this was not covered in submissions, I raise a question in my mind as to how the case would be conducted in Australia if there were to be concurrent claims in Australia for breach of New Zealand copyright and for breach of Australian copyright.   Again – and I express myself tentatively here because I heard no submissions  on  it  and  because  I  do  not  claim  any  expertise  in  Australian constitutional law – I note that the Australian copyright statute is a Commonwealth statute and presumably any claim for breach of Australian copyright would be heard in a federal court.  On the other hand, claims for breach of New Zealand copyright is something that could be heard by a state court and would not need to be heard in a

Federal court.  There may be a problem in Australia for claims for breach of both

27     The Eleftheria [1970] P 94 at 105.

New Zealand and Australian copyright laws having to be divided between courts.28

On the other hand, that would not be a problem in New Zealand because claims for breach of copyright under the laws of both countries could be heard in the one court at the same time.

[65]     As I say, there was no submission that a court in Australia would be a more convenient court to hear this case.  I bear in mind that the plaintiff has the burden of establishing that New Zealand is the appropriate forum.   In the absence of any submission promoting Australia and an Australian court as an alternative forum, I find that Jedis Ltd has made out its case for New Zealand.

[66]     There remains the final consideration under r 6.28(5)(d) whether any other relevant circumstances support an assumption of jurisdiction.  That has come to be the crucial factor in my consideration of this case.   Vodafone Australia Ltd says that Vodafone New Zealand Ltd would be good for any relief that Jedis Ltd might be seeking in this proceeding.  Jedis Ltd is claiming a monetary remedy.  It is asking for a compensatory award. Any damages that it might be awarded would be by way of a notional royalty or licence fee for the use of software in New Zealand.  Vodafone New  Zealand  Ltd  has  given  evidence  that  it  would  be  good  for  any  award  of damages.  Jedis Ltd has not suggested that it would not be.

[67]     Vodafone Australia Ltd says that if Vodafone New Zealand Ltd is good for any award for damages then there is no real practical purpose to be served by bringing it into the proceeding as well.   It  also refers to the court’s traditional reluctance to assert jurisdiction over someone outside the jurisdiction (referring in particular to the Dreyfus29 case which has been applied and upheld in New Zealand, a recent authority being the Wing Hung decision).

[68]     While Vodafone Australia Ltd did not refer to it, I note that the English courts have taken a robust view in other cases with an international dimension.  I refer to

the decision of the English Court of Appeal in Jameel (Yousef) v Dow Jones & Co

28     See Re Wakim: ex p McNally (1999) 198 CLR 511 that held that federal courts cannot have jurisdiction in state matters.

29     Société Générale de Paris v Dreyfus Bros (1885) LR 29 Ch D 239.

Ltd.30    That was a case of internet defamation.   The plaintiff in that case was not English.  Dow Jones & Co was an American corporation.   It published statements defamatory of the plaintiff on the internet.  It was established that only a handful of people in England had read the article on the internet.   It was alleged that the plaintiff was a financier of Al Qaeda terrorism.   Notwithstanding, the gross defamation, the English Court of Appeal struck out the claim, saying that no useful purpose would be served by the proceeding. The court said:

If the claimant succeeds in this action and is awarded a small amount of damages, can it be said that he will have achieved vindication for the damage done to his reputation in this country for both the damage and the vindication will be minimal. The cost of the exercise will have been out of all proportion with what has been achieved.  The gain will not merely not have been worth a candle, it would not have been worth the wick.”

[69]     That was in a different context, but Vodafone Australia Ltd’s submissions are along the same lines.   Its contention is that even if the NID software had been brought into New Zealand and has been installed on servers within New Zealand, it is no practical benefit to Vodafone New Zealand Ltd.  It says that it would be a great waste of time for it to be dragged into this proceeding where the issues are relatively minor.

[70]     Rather than make a final decision on this aspect, I would be assisted in coming to my decision if Vodafone Australia Ltd were to provide further discovery to see whether its involvement in the matter is as limited as it says.   If it makes discovery from which it is apparent from its documents that it has had minimal involvement, and even if that involvement might give rise to arguable liability, then I may be prepared to consider exercising the discretion under s 6.28(5)(d) against assuming jurisdiction over it.

[71]     On 19 September 2012, I am to hear Jedis Ltd’s application for particular discovery against Vodafone New Zealand Ltd.  I intend at that hearing to hear from counsel as to the scope of discovery which ought to be ordered against Vodafone Australia Ltd for the purposes of this application so that orders can be given and I

can resume my consideration of this matter.

30     Jameel (Yousef) v Dow Jones & Co Inc. [2005] QB 946.

........................................

R M Bell

Associate Judge