Acohs Pty Ltd v Ucorp Pty Ltd [2010] FCA 956 | Case summary

indemnity costs 2 The basis upon which the respondents sought indemnity costs subsequent to 30 September 2004 was that, on 29 September 2004, they participated in the making of an offer of compromise which was not accepted by the applicant. At the time, there were six respondents in the proceeding, the present respondents and Wesfarmers Ltd, J Blackwood & Son Ltd, Bunnings Ltd and Motion Industries Pty Ltd. It was alleged by the applicant that those companies had authorised Ucorp Pty Ltd ("Ucorp") (at the time, the second respondent) to infringe the applicant's copyright by entering into agreements or understandings with Ucorp to permit hyperlinks to appear on their respective websites to the "Chemwatch" website. 3 The offer of compromise of 29 September 2004 was made on behalf of all the then respondents. They offered to pay the applicant $10,000, plus costs, in settlement of the applicant's claims. The present respondents say that, having been completely successful in the proceeding, they achieved a more favourable outcome than was proposed in the offer of compromise, and should have their costs on an indemnity basis. 4 Although the offer of compromise was made pursuant to O 23 of the Federal Court Rules, at the relevant time there was no provision which corresponded to the present subr (6) of r 11. The Federal Court Rulesprovided for a presumptive entitlement to indemnity costs where a respondent's offer of compromise had been rejected, and the applicant ultimately achieved an award less favourable to it than contained in the offer, but said nothing about a situation in which judgment was given for the respondent. This apparently anomalous situation arose in Alpine Hardwoods (Aust) Pty Ltd v Hardys Pty Ltd (2002) 190 ALR 121, and it arises again in the present case. In the result, the respondents cannot rely upon the terms of O 23 r 11 in support of their application for indemnity costs. 5 Thus the respondents rely upon the broad discretion which the court has in the matter of costs, and the principles which inform the exercise of that discretion in circumstances in which an applicant has rejected an offer of compromise, and subsequently fails to improve upon the offer. In such a circumstance, the position which obtains is that referred to by the Full Court in CGU Insurance Ltd v Corrections Corporation of Australia Staff Superannuation Pty Ltd [2008] FCAFC 173 at [75]: From the tenor of claims which have come before the court in recent years, there appears to be a view abroad that the failure of a party who has rejected a Calderbank offer ultimately to achieve a better outcome than provided for in the offer leads to a presumptive entitlement to indemnity costs with respect to the period subsequent to the offer. Such a view would be mistaken. Where a moving party (including a cross-claimant) offers to settle for a sum which is less than he or she eventually achieves at trial, there is a presumptive entitlement to indemnity costs under O 23 r 11(4) of the Federal Court Rules. However, where recourse is not had to the O 23, but reliance is placed upon the court's general discretion, it is necessary for the party seeking indemnity costs to demonstrate that the other party's refusal of the Calderbank offer was unreasonable: Black v Lipovac (1998) 217 ALR 386, 432; Maniotis v JH Lever & Co Pty Ltd (No 2) [2006] FCAFC 28. It is not sufficient that the offer was a reasonable one: Alpine Hardwoods (Aust) Pty Ltd v Hardys Pty Ltd (No 2) (2002) 190 ALR 121, 128 [35]; Dais Studio Pty Ltd v Bullet Creative Pty Ltd [2008] FCA 42, [11]. In considering this question in a particular case, the matter of unreasonableness will be judged by reference to the circumstances facing the offeree at the time of the offer. While the eventual outcome in the case may go part of the way in this regard, there is no presumption that ultimate success in the proceeding for the offeror necessarily renders the offeree's rejection unreasonable. The question in the present case, then, is whether the applicant acted unreasonably in rejecting the then respondents' offer of compromise made on 29 September 2004. 6 In pressing for an affirmative answer to be given to this question, the respondents encountered two substantial difficulties. The first was that the single basis upon which the applicant ultimately failed in relation to MSDSs as such authored by its own staff was that I accepted the respondents' case that their reproduction of such works was done pursuant to a licence implied by law of the kind referred to in Acohs Pty Ltd v RA Bashford Consulting Pty Ltd (1997) 144 ALR 528. At the time when the respondents' offer of compromise was made, their Defence did not raise this point. It is true that proof of unlicensed reproduction was part of the applicant's case, but the applicant was entitled to assume, and I infer that it did so, that, had the respondents intended to take the point, they would have made it a matter of specific pleading (as ultimately they did) pursuant to O 11 r 10 of the Federal Court Rules. Absent the implied licence point, it could not be said that the applicant acted unreasonably in regarding $10,000 as insufficient compensation for the respondents' reproduction of its house‑authored MSDSs. 7 The other difficulty is that the offer of compromise invited the applicant to settle its claims not only against the present respondents, but against all the then existing respondents, for the global sum of $10,000. The claims which the applicant then had against the other respondents ranged well beyond the copyright aspects that were the subject of contention at trial. During the lengthy period that the proceeding stood in the list of the court, the applicant secured a settlement with those other respondents which, in some respects at least, could not be regarded as less favourable, from its point of view, than the proposal held out by the offer. However that outcome may be, there was in any event insufficient material before the court, on the respondents' present application, to justify the conclusion that the applicant was acting unreasonably in declining to accept the sum of $10,000 plus costs in settlement not only of its claims against the now respondents, but also of its claims against those other respondents. Ultimately, so much was accepted by counsel for the respondents. 8 I conclude, therefore, that the applicant's failure to accept the offer of compromise made in September 2004 was not such as should give rise to an entitlement to indemnity costs on the part of the now respondents. 9 The basis upon which the respondents sought indemnity costs from the filing of the Fourth Further Amended Statement of Claim in January 2007, or at least from the filing of the Fifth Further Amended Statement of Claim in December 2007, was that the applicant's case was advanced in wilful disregard of known facts and established law, and should therefore be taken to imply an ulterior motive. Alternatively, it was submitted that the way the applicant conducted its case justified an award of indemnity costs, particularly with respect to claims which were persisted with to the eleventh hour, and then abandoned at trial. 10 In the first way of putting their claim, the respondents relied upon the following well-known passage from the judgment of Woodward J in Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397, 401: I believe that it is appropriate to consider awarding "solicitor and client" or "indemnity" costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law. Such cases are, fortunately, rare. But when they occur, the court will need to consider how it should exercise its unfettered discretion. The respondents invoked also what was said by Branson J in Yates Property Corporation Pty Ltd v Boland (No 2) (1997) 147 ALR 685, 693: The fact that the applicant persisted with the proceeding without apparent regard to significant deficiencies in the evidence available to be called to establish its case is sufficient, in my view, to enliven the discretion of the court to make orders for costs on a basis other than a party and party basis. 11 Yates Property was one of a number of cases mentioned by the Full Court in what is the most recent statement as to the approach which should be taken when indemnity costs are sought upon the ground that an applicant's case is conspicuously weak, Seven Network Ltd v News Limited(2009) 262 ALR 160, 393 [1102]: Usually costs are ordered on a party and party basis but if there is "some special or unusual feature in the case to justify the court exercising its discretion" costs may be ordered on some other basis: Preston v Preston [1982] 1 All ER 41 at 58. There must, however, be some justification to depart from the ordinary rule. The discretion to depart from an order for party and party costs will not be exercised unless there is some special or unusual feature or the justice of the case so requires: Re Wilcox; Ex parte Venture Industries Pty Ltd (1996) 72 FCR 151; 141 ALR 727. The categories of case in which it might be appropriate to do so are not closed: Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; 118 ALR 248 (Colgate-Palmolive). An applicant who should have known that his or her proceeding was foredoomed to failure could be obliged to pay costs on an indemnity basis: Smolle v Australia and New Zealand Banking Group Ltd (No 2) [2007] FCA 1967. A clearly hopeless proceeding may mean that the unsuccessful applicant should be subjected to an order for indemnity costs. An applicant who persists in prosecuting a proceeding without regard to the evidentiary difficulties in the case may be called upon to pay costs on some basis other than the usual basis: Yates Property Corporation Pty Ltd v Boland (No 2) (1997) 147 ALR 685. Specific examples of cases which might attract the exercise of the discretion to award indemnity costs were given by Sheppard J in Colgate-Palmolive at FCR 233; ALR 256-7. 12 I am not prepared to hold that the applicant commenced or continued the proceeding in wilful disregard of known facts and established law. The Fourth Further Amended Statement of Claim was signed by senior counsel experienced in the relevant branch of the law, and there was no previous authority which dealt with technological and commercial facts of the particular kind presented by the applicant's operations. As pointed out on behalf of the applicant, there is a general sense in which the wholesale reproduction of works authored by someone else might be viewed as calling for legal redress of some kind. As it happened, I upheld the applicant's case that the MSDSs authored by its staff were original works in which it owned the copyright. The applicant ultimately failed on this aspect of its case because of Bashford, but to reach that point I was required to apply the law as declared by Merkel J to somewhat different facts, and even, on one way of viewing it, to cross a gap in the development of the law. 13 In support of their submission that the proceeding was being prosecuted by the applicant for an ulterior motive, the respondents drew my attention to two letters, which had come to their attention, from the applicant to certain users of substances to which MSDSs related. The first was addressed "Dear Infosafe Customer", headed "Re: Letter to Clients" and dated 2 December 2004. It referred to this proceeding, and to the undertaking given by the respondents on 3 September 2004 (to the terms of which I refer below in another context). The writer of the letter advised the addressee "that you must not provide Infosafe MSDS to any person other than users of the substance…." It is true that this edict overreached both the terms of the regulations and the undertaking given by the respondents, but on no view does it provide support for the proposition that the proceeding as a whole was being prosecuted for an ulterior purpose. I should add that the undertaking itself was set out in the letter, such that the addressee could consider for himself or herself the extent of the restraints to which the respondents had consented. 14 The other letter was dated 23 June 2006, and was to Victoria University, then a recent convert from the applicant's system to the respondents' system. The general nature of the concern expressed by the writer was that the University might make available to Ucorp large numbers of Infosafe MSDSs to which it had access. The writer referred to this proceeding, and to the undertaking of September 2004, which remained extant at that time. The University was warned that, by accessing, downloading or copying Infosafe MSDSs, it may be acting in infringement of the applicant's copyright, or aiding and abetting Ucorp to do so. Certain undertakings were sought, failing the tender of which the applicant reserved its right to commence proceedings against the University. In my view, although it implied a perspective on the prospects of the applicant's claims which can now be seen to have been optimistic, this is very much the kind of letter that any party, taking the view that the conduct of another may be actionable in the context of existing proceedings in which interlocutory restraints had been imposed, might well send to that other. The letter did not reflect adversely on the applicant's motives for commencing or continuing the present case. 15 Thus I am not satisfied that the applicant's purpose in commencing and continuing this proceeding was a collateral one, or that I should award indemnity costs in favour of the respondents on that ground. 16 As noted above, the respondents next contended that indemnity costs should be awarded where the applicant had made and/or persisted with particular claims that were doomed to fail. The claims which the respondents put in that category were, first, claims that were made and never withdrawn, but not persisted with at trial, and secondly, claims that were rejected in my judgment of 10 June 2010. 17 Of the claims that were not persisted with, a first group - contravention of ss 52 and 53 of the Trade Practices Act 1974 (Cth), passing off and infringement of trade mark - was, according to the applicant, the subject of no material in its evidence in chief, filed more than a year before the trial. Accordingly, it should have been obvious to the respondents that these claims were not being pressed. The applicant pointed to the absence of any relevant material in the respondents' own evidence in chief as demonstration of the fact that it was so obvious. A second group of claims was apparently persisted with to trial, but then not pursued. These claims were the copyright claim with respect to PDF source code, the claim for copyright in the layout, presentation and appearance of an MSDS as such, and the damages claims save those which related to Blackwoods and Victoria University. 18 Situations of this kind always present the difficulty that the court is being asked to hold that claims are hopelessly weak when those claims themselves, and the evidence which might have been led to support them, were never the subject of examination. There is also a certain tension between having recourse to the absence of evidence in support of a claim as a basis to infer that the claim itself never had any prospects and recognising that that very circumstance may, and usually will, reflect a prudent slimming-down, as it were, of the party's case, such that only the claims which do have prospects are given attention at trial. The latter,of course, should never be discouraged. It would be most unfortunate if the impression were created that a party might drop its obviously weak claims only at the risk of suffering an indemnity costs order. In these respects, see Ragata Developments Pty Ltd v Westpac Banking Corporation (1993) 217 ALR 175, 178-179 and Peet Ltd v Richmond [2009] VSC 585 at [97]-[100]. 19 The applicant's allegations made in reliance on ss 52 and 53 of the Trade Practices Act, as set out in its Fifth Further Amended Statement of Claim (the amendments shown being those made since the fourth), were as follows: 18. Further, the HTML and PDF files appearing on the said Chemwatch websites and in 'The Collection' copied from the Infosafe System include indicators such as copyright notices, use of "Infosafe" names and Infosafe MSDS numbers which would be recognised by relevant consumers as belonging to or indicating a trade source being or an association with, ACOHS, contrary to the fact. …. 21. Further or alternatively, by the said conduct of the respondents in creating websites containing the said reproductions which contain indicators of source recognised to be referable to ACOHS such as "Infosafe" and Infosafe number, the layout presentation and appearance of ACOHS' templates (contained in Annexure B to the Particulars of Copyright Ownership) and by using hyperlinks under or by reference to the name "MSDS On-Line" which is known to be associated with ACOHS, they have represented to the public, contrary to the fact, that the said websites, hyperlinks and database are those of ACOHS or associated with or authorised by, ACOHS. 22. Such conduct of the respondents referred to in paragraphs 15-18A and 21 above has been conduct in trade or commerce. 23. As a result, the said conduct referred to in paragraphs 15-18A and 21 above is in breach of the provisions of s. 52 Trade Practices Act 1974 (Cth). 24. Further or alternatively the said conduct referred to in paragraphs 15-18A and 21 above is in breach of s. 53(c), (d), (eb) or one or more of them. 25. Further, Bialkower is and was a person who has aided, abetted, counseled or procured such conduct referred to in paragraphs 23 and 24 above in contravention of the Trade Practices Act and is thereby personally liable under the provisions of s. 75B Trade Practices Act 1974 (Cth). These allegations were denied by the respondents, without elaboration. 20 The applicant's MSDSs copied by Ucorp and included in the Collection were so included, and subsequently provided to Ucorp's customers, with the words "Infosafe No" still appearing on them. That was, of course, a reference to the applicant and to the applicant's system. In the absence of any submissions on the subject from the respondents, I would not be prepared to hold that it should have been apparent to the applicant and its advisers in January and December 2007 that a case which proposed that the inclusion of these words on an MSDS made available to a customer indicated a connection with the applicant would be an obviously hopeless one. Although there may be very good reasons, known to the parties, why such a case would have been unlikely to succeed, on the face of it there seems to be at least a colourable sense in which the allegations, if made good, would have had the potential to yield a positive result under ss 52 and 53. 21 The applicant's case in passing off was, as often happens, advanced in tandem with its case under ss 52 and 53. It was alleged that the same conduct amounted to passing off "of the said websites and their contents as and for those of ACOHS or as things associated with or authorised by, ACOHS". I would reach the same conclusion here as I have above with respect to the Trade Practices Act allegations. 22 It was alleged by the applicant that "Infosafe" was its registered trade mark. The respondents admitted that allegation. The applicant next alleged that the respondents had infringed that mark, by distributing, licensing and supplying MSDSs under or by reference to the word "Infosafe", and had distributed brochures containing MSDSs which bore that word. It was said that the use of the word in these ways was use as a trade mark. In their Defence to those allegations, the respondents denied that they had distributed brochures which contained the word "Infosafe", and said that any use by them of that word was not use as a trade mark, or was done with the implied consent of the applicant. 23 On the present application, the respondents relied upon the passage from Yates Property which I have set out at para 10 above, and upon the judgment of Hollingworth J in Peet. In each of these cases - in which indemnity costs were awarded - however, the moving party had prosecuted its presumptively weak claims to an advanced stage. In Yates Property, Branson J held that the applicant had "persisted with the proceeding without apparent regard to significant deficiencies in the evidence", and in Peet, the plaintiff had maintained a number of causes of action, on which substantial preparation had apparently been required, to the first day of the trial, when they were abandoned. With respect to the trade mark claim in the present case, the applicant's conduct stands in contrast to that with which their Honours were concerned in Yates Property and in Peet. Although no formal abandonment of the claim was announced, it would have been apparent to the respondents from the filing of the applicant's evidence in chief, more than a year prior to the date upon which the trial ultimately commenced, that no evidence would be led in support of the trade mark claim. I am not persuaded that the circumstances warrant the making of an indemnity costs order in favour of the respondents. 24 Turning to the applicant's claims that were persisted with to trial, but not then prosecuted, I commence with the claim to copyright in PDF source code. That the source code of a PDF file was an original work in which the applicant owned copyright was an allegation made by the applicant at least to the stage of final submissions. It appeared to me that the applicant may not be persisting with a copyright claim in relation to PDF source code, and I sought clarification from its senior counsel. He responded: Well, it is claimed, I think, in that part of the claim for copyright that talks about source code. It's the source code of HTML and PDF files. The difference probably matters more because, for the most part, it seems, the reproductions have been by converting HTML or other original material to PDF. That is to say, PDF files were ultimately an aspect of the applicant's case not because it owned the copyright in the source code for them, but because they represented the form into which, it was alleged, HTML files had been converted by Ucorp. 25 The respondents' case, relevantly to the present point, was that the source code for PDF files was an electronic artefact generated by third‑party proprietary software ("Crystal Reports") as a means of displaying a particular MSDS on the user's screen. That case was made good on the evidence. Indeed, it was no part of the applicant's evidentiary case to establish that that source code was written - either directly or by machine - by any of its employees. It was also established on the evidence that PDF source code is not human‑readable; although, it seems that an appropriately trained technician would be able to understand the purpose of particular elements of it. That is, of course, neither here nor there in the present context: the critical fact is that the relevant allegation in the applicant's pleading was always the only place where it was suggested that PDF source code was a copyright work of which the applicant's employees were the authors. 26 The existence of copyright in the PDF source code was a matter about which, in the nature of things, the applicant itself was best‑placed to make a viable and realistic allegation. It related to facts within the applicant's own systems and technologies. The respondents were, in my view, obliged to take the allegation seriously. They were required to meet it both in their evidence and in their preparations generally. It was apparent to me that considerable effort had been put into the preparation of the cross‑examination of the applicant's witnesses on the question of PDF source code, and into understanding the dimensions of the question generally. It was a technically challenging question for a party's legal advisers. However, on the hearing of the present application, no attempt was made on behalf of the applicant to demonstrate that its employees wrote PDF source code. This is, I am bound to conclude, an allegation that ought never to have been made. It was quite unrealistic, and should have been so perceived by the applicant from the outset. 27 In the circumstances, I propose to order that the respondents' costs of resisting the allegation that PDF source code was an original work in which the applicant owned the copyright, and the allegation that any such copyright had been infringed, be taxed on an indemnity basis. 28 Turning to the claim that the layout, presentation and appearance of an MSDS should be regarded, as such, as an original copyright work, on the hearing of the present application, counsel for the applicant emphasised that this claim had never been abandoned: it was only clarified. With respect, I consider that to be a somewhat tendentious characterisation to give to the events to which I described in my interlocutory judgment on 18 September 2009: see Acohs Pty Ltd v Ucorp Pty Ltd (No 2) (2009) 82 IPR 493. On the other hand, I do accept that there is a sense in which the amendment which the applicant was then given leave to make might be regarded as having a purpose of correcting a technical deficiency in the applicant's pleading, rather than as making a fundamental change to the basis of its copyright claims. Indeed, the case which the applicant ultimately ran - that the layout, presentation and appearance of an otherwise unoriginal MSDS should be regarded as providing the originality necessary to found a claim for copyright - was one which the respondents were manifestly prepared to meet. Thus, while I would accept that the form of this claim introduced in January 2007 was, strictly speaking, misconceived, even then, the claim involved a layer of substance which was, to the end, at the centre of the applicant's copyright case. In my view, it would be inappropriate to treat the making of that claim as the occasion for an award of indemnity costs. 29 The proposition that the absence of any evidence of loss or damage in the applicant's case save with respect to Blackwoods and Victoria University should tell in favour of an award against it of indemnity costs is, in my view, untenable. As things turned out, the point of considering the damages which the applicant suffered was never reached. The respondents did not make clear what costs of theirs ought to be taxed on an indemnity basis on this ground, in which circumstances I am disposed to infer that events probably took a conventional course, namely, that the respondents incurred costs only to the extent that specific items of damage were particularised, or proved in evidence, by the applicant. If the applicant's case was otherwise one which might legitimately have been brought, its failure to establish loss or damage save across a narrow front would on no view be regarded as a sufficient justification for an award of indemnity costs against it. I reject this aspect of the respondents' present claim. 30 The respondents' case for indemnity costs was based also on two aspects of the applicant's case at trial which were unsuccessful, namely, the allegation that MSDSs which were merely transcribed were original copyright works and the allegation (implicit in the 2007 pleadings) that there could be joint authorship by collaboration between computer programmers and authors/transcribers. According to the respondents, these were contrived allegations which could never have prevailed. 31 The applicant's case with respect to transcribed MSDSs cannot be considered in isolation from its case with respect to the layout, presentation and appearance of MSDSs. The applicant never claimed originality in the content of transcribed MSDSs. Rather, it said that the MSDSs in question were original because of their layout, presentation and appearance. As indicated in my reasons of 10 June 2010, there was some authority to support the view that a work whose contents as such were wholly derived from other sources might yet be an original one by reason of how those contents were arranged, organised etc. This provided a foothold for the applicant to propose that the attributes which it described as "layout, presentation and appearance" might provide the necessary originality to found a claim of copyright in relation to transcribed MSDSs. In the light of the reasons which I ultimately gave, it might be concluded that this was a creative claim, the acceptance of which would have required the court to move somewhat beyond the established frontiers. However, by no means could the claim be described as a hopeless one, or as one which could not responsibly have been made. As articulated at trial, the claim had a certain coherence, and perhaps a scintilla of support from at least one of the decided cases. The rejection of it does not, in my view, provide a basis for an award of indemnity costs. 32 The respondents' submissions as to the applicant's collaboration case amounted to little more, in effect, than to emphasise the obviousness of the findings which I expressed in para 59 of my reasons of 10 June 2010. This is not a conventional approach to a claim for indemnity costs. The collaboration case was decided against the applicant after what I hope was a careful analysis of the facts apropos the creation of the applicant's MSDSs. Although the conclusion I reached was ultimately an unequivocal one, on no view was this a case which ought to have been perceived from the outset as doomed to fail. The applicant's operations are, in a sense, sui generis, and it was, in my view, legitimate for its advisers to have expressed their claim to originality in the way that they did. 33 For the above reasons, save with respect to PDF source code, I reject the respondents' claim for their costs to be taxed on an indemnity basis.

damages on the undertakings 34 On 3 September 2004, the applicant gave the usual undertaking as to damages in return for the present respondents undertaking not to - (i) reproduce or use a substantial reproduction of any of the Applicant's HyperText Mark up Language (HTML) files relating to Material Safety Data Sheets (MSDS) or the Applicant's compilation of such HTML files known as Inforsafe [sic] MSDS database: and in particular not to: (ii) conduct, operate or maintain a website which contains or uses the database of HTML files or a substantial reproduction of the HTML files relating to the MSDS contained in Appendix A to the affidavit of Ian Thomas Cowie herein sworn 9 July 2004 or any of the databases which are exhibits JAG-1, JAG-2 and JAG-3 to the affidavit of Jason Andrew Gossit herein sworn 9 July 2004; and not to (iii) represent that they or any business operated by them or any website operated by them is that of the Applicant or associated with or authorised by the Applicant or contains or uses the applicant's MSDS HTML files or Infosafe MSDS database compilation; 35 On 16 October 2006, the respondents were released from the undertaking given on 3 September 2004, and, in place thereof, gave the following undertaking: (a) Save as to the extent contemplated by sub-paragraph (b) below and order 2 below, the Respondents and each of them will not, by themselves, their servants or agents or otherwise howsoever include in any electronic storage means or database created by either or both of them or on their behalf or otherwise make available to any person, a copy or substantial reproduction or adaptation of any HTML source code relating to any Material Safety Data Sheet ("MSDS") that contains the words "Infosafe No" and/or "Chemsafe" ("the Infosafe MSDS"). (b) For the avoidance of doubt, this undertaking does not prevent the Respondents from: (i) copying, substantially reproducing or adapting an Infosafe MSDS that is made available to the Respondents in a format other than HTML, including by locating and viewing the MSDS, including the MSDS in an electronic storage means or database and making the MSDS available to any person; or (ii) locating and viewing an Infosafe MSDS in HTML format, printing the MSDS, photocopying or electronically scanning such print and thereafter including such scanned print in an electronic storage means or database and making it available to any person. On this occasion too, the applicant gave the usual undertaking as to damages. 36 On 3 June 2009, the court released the respondents from their undertaking given on 16 October 2006. In place thereof, the following order was made: Save to the extent necessary to permit - (i) copying, substantially reproducing or adapting a material safety data sheet that contains the words "Infosafe No." and/or "Chemsafe" (referred to in this order as "Infosafe MSDS") that is made available to the respondents in a format other than HTML (including by locating and viewing the data sheet), including the data sheet in an electronic storage means or database, and making the data sheet available to any person; or (ii) locating and viewing an Infosafe MSDS in HTML format, printing the data sheet, photocopying or electronically scanning such print and thereafter including such scanned print in an electronic storage means or database, and making it available to any person; the respondents and each of them be restrained, whether by themselves, their servants or agents or howsoever otherwise, from including in any electronic storage means or database, created by either or both of them or on their behalf, or otherwise making available to any person, a copy or substantial reproduction or adaptation of any HTML source code relating to any Infosafe MSDS. Again, the applicant gave the usual undertaking as to damages. 37 Having been successful in the proceeding generally, the respondents now seek compensation for the damages they have suffered as a result of complying with the interlocutory undertakings, and the order, referred to above. They led evidence in support of that claim, from which it is clear that Ucorp alone suffered damage to some extent. It was not suggested that Dr Bialkower was entitled to compensation. As to Ucorp's claim, it was not submitted on behalf of the applicant that an entitlement to compensation did not arise, nor that the court should, for discretionary or other general reasons, not award compensation by reference to the damage suffered as a result of the operation of the undertakings and order to which I have referred. The applicant's position, rather, was that the evidence relied upon by Ucorp was insufficient to establish that it had in fact suffered damage, either at all or to the extent claimed. To resolve this dispute, it will be necessary to examine each of the items in Ucorp's claim. 38 Ucorp claims the sum of $16,401.45, said to be overtime payments made to its staff in order to take the steps necessary to comply with the undertakings and order. In an affidavit affirmed on 19 July 2010, the administration manager of Ucorp, Catherine Imelda Jeddou, set out the steps taken by Ucorp to comply with its undertakings, and with the order. She identified the employees who were required to work overtime for that purpose and, broadly, the nature of the work which they performed. In a table in her affidavit, she named each of the relevant employees and stated the hours of overtime worked in each case, and the proportion of that overtime which was directly attributable to compliance with undertakings and order. Those proportions were calculated on the basis of estimates by Ms Jeddou herself, from the observations which she was able to make in her role as supervisor, and from discussions which she had with the employees concerned. Each of the relevant employees also made a short affidavit in which direct evidence was given as to the proportion of his or her overtime which was attributable to compliance with the undertakings and order. Although the applicant submitted that these calculations involved a degree of estimation which was not backed up with more detailed evidence, none of the witnesses was cross-examined at this level, and, given the nature of the subject matter, I see no reason not to accept the evidence led on behalf of Ucorp. I shall allow the sum claimed for overtime. 39 Ucorp claims the sum of $29,219.12, as having been paid by it to its Indian contractor, Elogix Software Private Ltd ("Elogix"), for work done by that company at the direction of Ucorp to ensure that Ucorp complied with the undertakings and order. In my reasons dated 3 June 2009, I explained, broadly, the role of Elogix in Ucorp's operations: see Acohs Pty Ltd v Ucorp Pty Ltd [2009] FCA 577 at [33]. Relevantly for present purposes, it is sufficient to note that it was Elogix's staff who undertook the function of sourcing, obtaining and registering MSDSs which had been published by others on the Internet. Here it is important to note that the second undertaking, and the order which replaced it, prohibited Ucorp from copying into the Collection any HTML source code relating to an Infosafe MSDS. Ucorp was, however, permitted to print and to scan an MSDS in HTML format, and to copy, reproduce or adapt an MSDS obtained in a format other than HTML. On the present application, the applicant emphasised that, unless an MSDS had been obtained in HTML format, the undertaking and order imposed no restraint upon Ucorp in relation to it. The applicant led evidence from which I would conclude on the probabilities that at least a very substantial number (indeed, as the applicant submitted, probably most) of the MSDSs obtained by Elogix were in PDF format. 40 According to the affidavit of Sourav Banerjee, a contractor engaged by Elogix, the approach which Elogix took to compliance with the undertaking and order involved checking every MSDS obtained by Elogix to see if it contained an indication of association with the applicant, most commonly by reference to the word "Infosafe". Only once this had been done, it seems, were the HTML files dealt with in compliance with the undertaking and order. On the present application, the applicant submitted that Elogix had thus imposed upon itself a much greater burden than was made necessary by the undertaking and order. There was no necessity for Elogix to have searched PDF files for some indication of origin with the applicant. To the extent that it did so, it was performing work not required by the undertaking and order, and the cost of that work should not be to the applicant's account. 41 The respondents answered this submission at two levels. First, they submitted that, the applicant having obtained an interlocutory restraint, it was for Ucorp, as the object of that restraint, to determine the means by which it would discharge its obligations. If there were a way of doing so which fell within the reasonable range, the court should not be astute to devise some other, less costly, means by which Ucorp might have complied. At the general level, I accept that, at least where it involves the modification of the operational procedures of a business, a person who is restrained by an interlocutory order should be allowed a certain flexibility in the selection of the means by which his or her obligations will be discharged. It is that person, after all, who best knows how normal business procedures might be modified so as to observe the restraint. However, the respondents really had no answer to the applicant's proposition (supported as it was by evidence which was not challenged) that Elogix had, without any obvious justification, adopted a procedure which went beyond anything that might reasonably be required to comply with the undertaking actually given, or with the order actually made. I do not think that this is a case in which the applicant is splitting hairs with respect to the practical means by which Ucorp chose to organise its business operations in a way best calculated to achieve compliance with the undertaking and order. Rather, I think that the case falls into the category proposed by the applicant, namely, where Ucorp has no ready explanation for having gone beyond what was required. 42 The respondents next said that, if I should be unpersuaded that the whole sum of $29,219.12 was an expense incurred by Ucorp in compliance with the undertaking and order, it should be held that at least some of the MSDSs obtained and searched by Elogix were in HTML format, and that I should allow some percentage of the claimed sum. The difficulty with this submission is that there was no evidence from which I might make even an approximate estimate of the extent to which the MSDSs received by Elogix were in HTML format. Ucorp, which was well-placed to provide that evidence, did not do so. The applicant, which was not so well-placed, undertook a procedure which appeared to demonstrate that nearly all of the relevant MSDSs were in PDF format. Any specification of a proportion of the MSDSs that were in HTML format on my part could only be a matter of guesswork. It is, of course, established that, on occasion, a court may have no alternative but to fix damages by a process approximating guesswork, but this is not such a case. It was not suggested on behalf of the respondents that Elogix was unable to provide an estimate of the extent to which the MSDSs which it obtained from the Internet were in HTML format, and, intuitively, I can perceive no reason why some such estimate might not have been made. I am bound to treat this as a case in which the party claiming to have suffered a loss could have, but did not, lead the evidence necessary to quantify that loss. 43 For the foregoing reasons, I reject Ucorp's claim for $29,219.12. 44 Ucorp claims the sum of $3,114.22, representing the cost of work done by Elogix in printing and scanning "Infosafe" MSDSs. Mr Banerjee's evidence was that the only printing and scanning work undertaken by Elogix on behalf of Ucorp between January 2007 and June 2010 was in respect of "Infosafe" MSDSs. There were two invoices from Elogix addressed to Ucorp which required the latter to pay "costs of consumable MSDS scanning and printing". In its present application, Ucorp has included the sums claimed in these invoices. Additionally, there was other work performed by Elogix staff on printing and scanning MSDSs, which appears to have been invoiced to Ucorp in the normal course by reference to the number of "man-months" undertaken by Elogix on Ucorp's work. Putting these items together, Ms Jeddou calculated the amount of Ucorp's relevant loss, in the sum referred to above. The applicant protested that part only of this sum was represented by Elogix invoices, and that there was no evidence that the remainder was ever invoiced, or that the work to which it related was other than part of the general daily activities of Elogix staff, for which no costs additional to regular remuneration were incurred. I do not find this an attractive submission. The staff of Elogix were occupied on the work of Ucorp, and Elogix, apparently, rendered invoices by reference to a "man-month" charge-out rate. If some part of the work done by Elogix was rendered necessary by compliance with the undertaking and order, and if a reasonable estimate of the extent and value of that work might be made, I consider it both obvious and just that Ucorp should be compensated accordingly. I shall allow this item. 45 Ucorp claims the sum of $4,329.75, as the cost of work done by Elogix in developing software programs to identify "Infosafe" MSDSs. In his affidavit read on the present application, Mr Banerjee said that, after he was informed in late 2006 of the need to remove all Infosafe MSDSs in HTML format from the Collection, he developed a program to search for the word "Infosafe", and to generate a list of all of the document ID numbers for the MSDSs in question. This took him about two man-days. He also developed a program that could be run across the Collection to check for the template of an Infosafe MSDS, so as to provide a further means of ensuring that no Infosafe MSDSs in HTML format remained in the Collection. This took him about 15 man-days. Then in February 2008, he supervised the development of a program which converted MSDSs to text files, and then searched for the word "Infosafe". Ms Jeddou calculated the notional cost to Ucorp of these activities by reference to the "charge per man-month" levied by Elogix with respect to the classifications of staff concerned. She thus derived the figure of $4,329.75 referred to above. It was submitted on behalf of the applicant that there was no evidence that Elogix had in fact invoiced Ucorp for this work. That is true, but, even if the work were included within the general run of work performed by Elogix on behalf of Ucorp, and paid for as such, I consider that a case has been made for the award of compensation to Ucorp. Here I refer to the approach which I took in the previous paragraph. The applicant also submitted that, particularly with respect to the program which converted MSDS files to text files, the procedure adopted was quite unnecessary, and that it would have been a far simpler approach simply to search the Collection for HTML files which, the applicant assured me, was a relatively simple undertaking. This aspect of the applicant's submission, however, requires me to assume certain technical matters which are beyond the scope of the evidence before the court. 46 The only relevant evidence is that of Mr Banerjee, and he was not cross‑examined (as he is a resident of India, I accept that this may have presented difficulties, but no suggestion was made by the applicant that it was disadvantaged by the absence of Mr Banerjee from the witness box). Further, my own experience of the interlocutory stages of this case, as docket Judge, leads me to observe that, if the applicant's approach had any single theme, it was that the respondents had been remiss in their observance of the undertaking which they had given, and of the order which was made. On a number of occasions it was put to the court that there were Infosafe files remaining within the Collection which should not be there. In this forensic environment, Ucorp was, in my view, entitled to take a "belt and braces" approach, and to adopt any measure reasonably calculated to identify the presence of any MSDS in the Collection which should not be there. Given the importance which the applicant placed on scrupulous observance of the undertaking and the order, Ucorp was entitled to proceed rather more meticulously than might, in other circumstances, have been considered necessary. I shall, therefore, allow this item. 47 Ucorp claims the sum of $3,844.92 to compensate it for the costs of miscellaneous steps taken by Elogix to assist Ucorp in compliance with the undertakings and order. According to the affidavit of Mr Banerjee, there were four categories of work to which this item related. First, there was the removal, in February 2007, of all Infosafe MSDSs in HTML format from the copy of the Collection stored on the Elogix server in India. Secondly, there were regular discussions had between Mr Banerjee and the staff of Elogix for him to instruct them on the steps to be taken to ensure that no Infosafe MSDS in HTML format was uploaded to the Collection; and Mr Banerjee's own monitoring of the work of the staff to ensure that this was done properly. Thirdly, there was the reporting, by the staff of Elogix to Ucorp, upon the identification of Infosafe MSDSs that appeared during the registration process. And fourthly, there was regular correspondence between Mr Banerjee and the respondents with respect to the steps taken by Elogix to ensure that no Infosafe MSDS in HTML format was uploaded to the Collection. Mr Banerjee estimated that he spent about "one man month" in undertaking these tasks, and that the staff members of Elogix spent about "two man months" in this work. Ms Jeddou applied these times to the rates charged to Ucorp by Elogix, and derived the figure set out above. The only basis upon which this item was resisted by the applicant was that there were no invoices or timesheet summaries to support the proposition that the work was done, or that Ucorp was invoiced for it. However, Ms Jeddou (who was in court on the hearing of the respondents' application, and was briefly cross-examined with respect to another matter) was not challenged on her evidence that this item did represent a cost to Ucorp. It seems that this was part of the work generally done by Elogix on behalf of Ucorp, for which Ucorp paid in the normal course, by reference to man‑months of labour input. I shall allow this item. 48 Ucorp claims the sum of $1,952.50, said to be the cost to it of services provided by Ridwan Ahmed, a "web systems developer" who is responsible for maintaining the web applications for Ucorp, the services on which those applications are deployed, managing client access to Ucorp's web server and providing technical assistance to clients. He affirmed an affidavit on 16 July 2010, in which he set out the tasks which he had undertaken with respect to the steps necessary for Ucorp to comply with the undertakings and order, the time which he spent on those tasks, and his hourly rate of remuneration. The only basis upon which the applicant challenged this item was that Mr Ahmed, although technically (perhaps "ostensibly" would be a better word) an independent contractor, worked for Ucorp on a full‑time basis in the same way as an employee. That being the case, it was submitted that Ucorp would have paid, and would have been obliged to pay, for Mr Ahmed's services during the relevant period, whatever he was doing. It was submitted that there was no evidence that Mr Ahmed was engaged for longer hours (eg by way of overtime or the equivalent) as a result of Ucorp's obligation to comply with the undertakings and order and that, if he had not been engaged upon the tasks referred to in his affidavit, he would have been doing something else, or possibly even nothing at all. In short, it was submitted on behalf of the applicant that Ucorp had not demonstrated that it was obliged to incur labour costs additional to those which it would have incurred in the normal course. 49 I must say, with respect, that I find this neither an attractive nor a persuasive submission. The task upon which I am engaged is to identify the level of compensation which it would be just to require the applicant to pay Ucorp for the circumstance that the former obtained interlocutory restraints which obliged the latter to carry on business differently, and in a more restricted way, than would otherwise have been the case. In order to observe that restraint, Ucorp found it necessary to deploy its staff (whether directly employed or contractors) on tasks which would not otherwise have been performed. I can see no reason not to value the hours thus occupied by the staff of Ucorp by reference to the remuneration which they were paid. I do not need to consider whether they would, in other circumstances, have been carrying out productive work of value to Ucorp, or possibly might have been idle. The fact is that Mr Ahmed was spending part of his time performing tasks which, absent the interlocutory restraints obtained by the applicant, would not have been done. The cost of that time, in my view, should be to the applicant's account. I shall allow this item. 50 Ucorp claims the sums of $6,380 and $2,300 for work undertaken by Roddi Walker and Bao Pham, respectively, in connection with Ucorp's compliance with the undertakings and order. They too are independent contractors engaged by Ucorp, but work full‑time in its business. The applicant made the same submission with respect to them as it had made with respect to Mr Ahmed. Subject only to the aspect dealt with in the next paragraph in relation to Mr Pham, I reach the same conclusion on these claims as I did above in relation to the claim for the costs of Mr Ahmed's work. I shall allow the sums of $6,380 and $2,300. 51 Mr Pham himself did not give evidence. Ms Jeddou said that she instructed him to scan Infosafe MSDSs for inclusion into the Collection. She estimated that he scanned approximately 3000 such MSDSs, and was told by him that, on average, it took him about two minutes per MSDS. Based upon the hourly rate which Ucorp pays Mr Pham, Ms Jeddou estimated the sum of $2,300 referred to above. It was submitted on behalf of the applicant that there was no evidence that the Infosafe MSDSs scanned by Mr Pham were received by Ucorp as HTML files. With respect to those involved, I consider this to be a somewhat disingenuous submission. The whole point of Ms Jeddou's affidavit was to set out the respects in which Ucorp had been subjected to exceptional costs by reason of having to comply with the undertakings and order. I can think of no reason why Ucorp would have engaged in the unnecessary step of scanning files that might otherwise have been placed into the Collection directly, by electronic means. If there were any such reason, it was not put to Ms Jeddou at the time when she was briefly cross-examined with respect to another aspect of her evidence. 52 For the reasons given above, I propose to order that the applicant pay Ucorp the sum of $38,322.84 by way of compensation for the steps which it took in compliance with its obligations under the interlocutory undertakings and order referred to. I certify that the preceding fifty-two (52) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jessup.

Acohs Pty Ltd v Ucorp Pty Ltd

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