Peterson v Lucas Mill Pty Ltd HC Auckland CIV 2009-404-7762

[2010] NZHC 721

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2009-404-007762

AND UNDER IN THE MATTER OF BETWEEN	Copyright Act 1994 Alleged Copyright Infringement C J PETERSON
Plaintiff
AND	LUCAS MILL PTY LTD First Defendant
AND	REX CAMERON LUCAS Second Defendant
AND	KATICA LUCAS Third Defendant
AND	WARREN GEOFFREY LUCAS Fourth Defendant
AND	JENNIFER MARGARET LUCAS Fifth Defendant
AND	GEOFFREY WILFRED LUCAS Sixth Defendant
Hearing:	AND 3 May 2010	DOLORES VIVIENNE LUCAS Seventh Defendant

Appearances: Mr C Peterson on own behalf

Ms T Walker and Mr E Gray for Defendants

Judgment:      17 May 2010 at 11.30 a.m

JUDGMENT OF ASSOCIATE JUDGE DOOGUE

This judgment was delivered by me on

17.05.10 at 11.30 a.m., pursuant to

Rule 11.5  of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Counsel:
Mr C Peterson, #3 Arahiwi Road, Mamaku, Rotorua – [email protected]

Simpson Grierson, Private Bag 92518, Auckland – tr[email protected]

PETERSON V LUCAS MILL PTY LTD AND ORS HC AK CIV-2009-404-007762  17 May 2010

[1]      The defendant has filed an application for an order that the plaintiff provide security for costs.  Before I deal with the application itself it is necessary to set out a very  much  condensed  account  of  the  dealings  between  the  parties  which  have resulted in the present proceedings being commenced.

Background

[2]      The  plaintiff  is  an  inventor  and  manufacturer  of  portable  sawmills.    He carried on the business through a company, Peterson Portable Sawing Systems Limited  (“PPSSL”).  The  market  for  his  machines  is  the  geographical  area  of Australia, New Zealand, the Pacific Islands and Papua New Guinea.  The sawmills that he designed and manufactured are portable and relatively low-cost.   A ready market for the machines was found particularly amongst farmers.  In 1992 the first defendant became a distributor of the products in Australia.  The defendant is also a manufacturer and inventor.  The business was carried on through the first defendant by the various other defendants who are members of the Lucas family.  In 1994 the defendants began to manufacture a sawmill which the plaintiff said was a copy of his machine.

[3]      The plaintiff said that his machine had a number of unique features.   The machine was designed to be erected over a log.   Sets of pipes at each end of the structure were arranged as rectangles.  They were connected by rails which ran the length of the mill once assembled.   The rails supported a movable carriage which could be propelled along the length of the machine and on which was fixed a power head and saw.   The saw was designed in such a way that it could operate in the horizontal and vertical planes.  The operator could by moving the carriage make a cut along the length of the log in either of those planes.

[4]      The machine which the defendant invented, manufactured and marketed had many of the same features. The defendant says however that many of the characteristics which the plaintiff’s machine embodied were commonplace. The defendants say that, for example, the movable carriage idea was similar in concept to overhead or gantry cranes.  Indeed members of the Lucas family claimed to have a

high degree of familiarity with the design and operation of such cranes.  Then, as to the rectangular arrangement of the pipes at each end at right angles to the rail, the defendants’ counsel, Ms Walker, asked rhetorically, how original such an arrangement could possibly be? The defendant denied copying the plaintiff’s machine.

[5]      In  its  newsletter  dated  30  June  1994,  PPSSL  made  reference  to  the defendants’ machine.  The article was to the effect that the plaintiff recognised that the defendant was not liable for infringing copyright in the plaintiff’s machine because some additional features had been built into their machine which were not present in that which the plaintiff had designed and manufactured.  I understand that these  features  included  positive  action  winches  for  simultaneously lowering  the height at which the rails on the carriage ran were set.

[6]      The plaintiff says that the defendants’ machine began to make inroads into the market share of the plaintiff.     In 1994 the defendants registered a patent in Australia and commenced patent infringement proceedings in 1998 against the plaintiff arising out of alleged similarities between the two parties’ products.

[7]      The plaintiff took a less accommodating stance than previously and in its November 1999 newsletter stated that there had been blatant copying of its designs and announcing an intention to prosecute patents and copyright infringements vigorously.  In response to prior complaints from the defendants, Mr Peterson had made some changes to his machine.  Specifically, he removed the top bar to each of the rectangular end frames.

[8]      The  hearing  of  the  defendants’  patent  proceedings  got  underway  in  the Auckland High Court in July 2003.  The eventual outcome was that Fisher J gave rulings on seven of the points of claim allowing only one.  Eventually the plaintiff appealed against that determination as far as the Supreme Court, which in due course concluded that there was no basis for claiming patent in the way alleged on the seventh claim.  In the end those proceedings were discontinued after being remitted to the High Court.   There have been other proceedings between the parties in the

intervening years.  No useful purpose will be served by detailing all of the litigation that this dispute has spawned.

[9]      In November 2009, the plaintiff issued the present proceedings in which he claimed that the defendants had made many sawmills which have infringed his designs over the years.   In February of this year the defendants filed the present application for security costs.

Principles

[10]     I have  been  guided  by the  authority of  McLachlan  v  MEL  Network  Ltd

CA39/02, 29 August 2002:

[15]The rule itself contemplates an order for security where the plaintiff will be unable to meet an adverse award of costs. That must be taken as contemplating also that an order for substantial security may, in effect, prevent the plaintiff from pursuing the claim. An order having that effect should be made only after careful consideration and in a case in which the claim has little chance of success. Access to the courts for a genuine plaintiff is not lightly to be denied.

[16]Of course, the interests of defendants must also be weighed. They must be protected against being drawn into unjustified litigation, particularly   where   it   is   over-complicated   and   unnecessarily protracted.

[17]In this case evidence and argument were directed to whether the likelihood that the McLachlan interests would be unable to meet an award of costs could be causally linked to the alleged conduct for which remedies are claimed. It is, of course, open to the Court to order security for costs whether or not such a link exists. Potter J indicated  in  her  judgment  that  if  she  had  been  satisfied  of  the linkage, that would have justified some reduction in the amount of the security ordered. It is not entirely clear from her judgment why she found the link “has not been established”. That conclusion is preceded by a passage in which she said it is too early to tell whether the joint venture was not viable or whether Network acted to the detriment of the McLachlan interests. This suggests that the link was not established because the McLachlan interests had not shown that their claims are sustainable. If that is what was intended, linkage could not be established until after trial and investigation on an application for security would be pointless.

Discussion

Impecuniosity

[11]     I will now discuss some aspects of the case in the light of the principles set out above.

[12]     In the first place there is no dispute on the plaintiff’s part that he will not be able to meet any award that might be made against him if the litigation proves unsuccessful.  He says though that his impecuniosity has been brought about by the actions of the defendant which he complains of in this litigation.  He says that he has a good claim against the defendant.  He says that if an order for security for costs was made against them that will effectively bring his case to an end.  I will discuss these points in the succeeding parts of my judgment.

[13]     It has been established to my satisfaction that if an order for security of costs is made at any meaningful level, the plaintiff will not be able to pay it and that will result in the proceeding being stayed and never coming to trial.

Impecuniosity caused by defendants?

[14]     The plaintiff says that because of the scale on which the defendant breached his copyright, it effectively ruined sales that he might have made.

[15]     Ms Walker in her clear and helpful submissions suggested that the difficult financial  circumstances  that  the plaintiff  now  finds  himself  in  are  due  to  other causes. She says that even back in 2003 the plaintiff’s conduct in the patent proceeding was hampered by his shortage of money.  He had difficulties paying his legal advisers. She says that the large-scale litigation that the patent proceedings turned into was the cause of the plaintiff’s financial exhaustion.  This was followed by the failure of the plaintiff’s marriage and the withdrawal of his wife from the family company.

[16]     In his notice of opposition, the plaintiff ascribes his impecunious financial situation to several factors:

a)        the diversion of energy and financial resources into the defendants’

failed patent application;

b)the  long-running  injunction  granted  in  those  proceedings  which prevented PPSSL producing its product;

c)        the need to reduce prices due to “infringing” competition; and d)      the failure of PPSSL.

[17]     The notice of opposition concludes with the assertion that had the Lucas company and family never infringed the plaintiff’s copyright, the original plaintiff company would presently be enjoying the same or better profit and prosperity that the first defendant now enjoys.

[18]     The evidence on the point is scant.  Nonetheless, I consider that it is arguable that the plaintiff, whose fortunes were closely tied up with those of PPSSL, was financially harmed by the company’s involvement in litigation with the defendants. I do not consider that in the circumstances of this application it would be reasonable to take an overly-technical approach to determining whether there are grounds for assuming that the conduct complained of in this proceeding was the cause of impecuniosity.   The patent proceeding – like the present copyright proceeding – sought  to  resolve  whether  he  had  the  intellectual  property  in  the  design  of  a particular type of portable sawmill.  There is substantial commonality between the two sets of proceedings; for example, in the nature of the acts which are relied upon to establish damages or compensation.   At its heart, it is the appropriation of the design of the sawmill which has caused loss.  That conclusion seems to be correct irrespective of whether the route to recovering compensation is via copyright or patent law.

[19]     I therefore conclude that the there is arguably a causative link between the alleged conduct of the defendant which is under question in these proceedings and the impecuniosity of the plaintiff.

Merits of plaintiff’s case

[20]     The Court can make an order for security even where the effect of doing so will be to bring the plaintiff’s claim to an end.  The Court should only contemplate an order under such circumstances in those cases where the plaintiff’s claim has little prospect of success.

[21]     One of the matters that was central to the argument before me was that the plaintiff’s proceedings did not appear to identify any particular artistic work embodying the concept of the sawmill which could be the subject of a copyright claim.

[22]     Certainly the statement of claim – an unfocused document which is burdened with much irrelevant material – does not seem to identify such an artistic work. During the course of argument before me I gathered that the plaintiff’s approach would be to allege that he had built a model of what he calls the “standard frame” sawmill and subsequent production models were copies of that model.

[23]     Section 14 of the Copyright Act 1994 provides as follows:

14       Copyright in original works

(1)Copyright is a property right that exists, in accordance with this Act, in original works of the following descriptions:

(a)       literary, dramatic, musical, or artistic works: (b)    sound recordings:

(c)       films:

(d)      communication works:

(e)       typographical arrangements of published editions. (2)       A work is not original if—

(a)       It is, or to the extent that it is, a copy of another work; or

(b)It infringes the copyright in, or to the extent that it infringes the copyright in, another work.

[24]     Ms Walker accepted for the defendant that a model would come within the ambit of an artistic work. There is some evidence supporting Mr Peterson’s submission.  That takes the form of a statement given by his former wife Kathy, who stated that included in the productions of PPSSL was a “Standard Frame walk- through frame design, being an original design first expressed in 3 dimensional form on our Ngakuru property during Feb of 1991, and that was first publicly displayed at the Australian ‘Farmwood’ show in March of 1991”.

[25]     The second ground which the plaintiff relies upon to establish he had an artistic  work  was  a  sketch  of  the  mill  which  he  says  was  the  basis  of  an advertisement that the plaintiff placed in Tree Grower magazine in August 1991.

[26]     It would seem that the sketch in question did contain some of the elements that later became part of the Standard Frame sawmill.

[27]     Ms Walker drew attention to the fact that the so-called Standard Frame mill, when examined in its constituent parts, did not seem to have anything particularly original about it.  However in my view it is clear from Henkel KGaA v Holdfast New Zealand Ltd [2007] 1 NZLR 577 that what matters is the originality of the overall arrangement and that is so even although the constituent elements might not be described as original. I also note the statement by the Supreme Court in that case at [37] that:

To  be  original  for  copyright  purposes  the  work must  originate  from its author and must be the product of more than minimal skill and labour.

[28]     I conclude that it is at least arguable that more than minimal skill and labour was put into the development of the model and the sketch to which I have just made reference.

[29]     For the defendant other miscellaneous points were made, including that the claim could hardly be described as bona fides when it has been allowed to languish

for so many years.  The defendant asks why the copyright claim was not brought up at the same time as the patent proceedings were dealt with in 2001.  That is a fair point.   The impression that I have, though, is that the scale of the battle that the plaintiff found itself embroiled in when the patent proceedings got underway and the difficulties that the plaintiff had in resourcing representation in the dispute could very well provide the answer to Ms Walker’s question.   Ms Walker raised other issues, such as doubts about the extent of any damages that the plaintiff might be entitled to as that question is affected by the limitation considerations. While that might be a legitimate point to be taken as part of any defendant copyright suit, it is not an issue which would have an influential bearing on the question of whether the plaintiff’s case lacks any merit.

[30]     I also note that at an earlier stage in the history of the dispute between these parties, the owner of the enterprise which manufactured the sawmills and owned the intellectual property was PPSSL rather than Mr Peterson.  In the current proceeding Mr Peterson asserts that he is now the party entitled to enforce rights under the alleged copyright.   He says that there has been an arrangement reached between himself  and  PPSSL  to  that  affect.    No  doubt  the  position  will  be  explored  in discovery and by other means.  At this point I am not prepared to view that aspect of the case as being a major obstacle for Mr Peterson.

[31]     Ms Walker referred me to the potential oppressiveness that can occur where defendants in the position of her client are put to great expense and trouble in defending cases which do not enjoy any real prospect of success.  I agree that that is a factor but it needs to be weighed against the countervailing policy of the courts that other than in hopeless cases, the plaintiff should not be denied access to the courts.

Summary

[32]     My overall conclusion is that were security for costs to be ordered in this case, that would effectively bring to an end the plaintiff’s claim.  I consider that the plaintiff has some prospects of success.  I would stop short of concluding that it is probable that he will be successful.  But he does have a claim which he is entitled to

have heard.  I accept that he is impecunious and that in the event that the defendants are successful they will not recover anything by way of costs.  I accept that a number of  factors  in  combination  have  contributed  to  the  plaintiff’s  impecuniosity. However, the account that the plaintiff gives of matters is that his impecuniosity was at least contributed to by the breaches of copyright that he complains of and I consider that his complaint is plausible.   It would not be just, in the overall circumstances of the case, to make an order for security for costs which would bring his claim to an end.  In these circumstances, I do not propose to order security for costs.  The defendants’ application is dismissed.  The parties should file memoranda

not exceeding 5 pages on the issue of costs.

J.P. Doogue

Associate Judge