Brilliant Digital Entertainment Pty Ltd v Universal Music Australia Pty Ltd [2004] FCA 448 | Case summary

REASONS FOR JUDGMENT 1 These reasons concern two applications for leave to appeal from a judgment of Wilcox J, given on 4 March 2004, refusing applications to set aside Anton Piller orders made by his Honour on 5 February 2004 (see Universal Music Australia Pty Ltd v Sharman License Holdings Ltd [2004] FCA 183). 2 The hearing before Wilcox J took place on 20 February 2004. There were two Notices of Motion seeking discharge of Anton Piller orders made by his Honour on 5 February 2004. The orders were made in a proceeding intended to be instituted by six applicants, Universal Music Australia Pty Ltd, Festival Records Pty Ltd and Mushroom Records Pty Ltd trading as Festival Mushroom Records, EMI Music Australia Pty Limited, Sony Music Entertainment (Australia) Limited, Warner Music Australia Pty Limited and BMG Australia Limited. These parties are the respondents to the two motions that have been brought before me, and it is convenient to refer to them in these reasons as "Universal". 3 One motion before me is brought by five of the respondents to the principal proceeding, Sharman License Holdings Ltd, Sharman Networks Ltd, LEF Interactive Pty Ltd, Nicola Anne Hemming and Philip Morle. I will refer to these parties collectively as "Sharman". The other motion before me is that of Brilliant Digital Entertainment Pty Limited ("BDE") and Kevin Glen Bermeister. I will refer to these as "Brilliant". Although not respondents to the principal proceeding, the Brilliant parties were named in Schedule 1 of the Anton Piller orders (along with the other respondents) as "Kazaa Parties". They were subjected to the operation of the Anton Piller orders in the same way as if they had been respondents to the principal proceeding. 4 The orders were sought on the basis of a claim that Sharman and a number of third parties were in possession of documents and computer records in relation to what is alleged to be a widespread breach of copyright in respect of music downloaded from the internet by means of software known as the Kazaa system. 5 The relevant principles in relation to making an Anton Piller order under s 23 of the Federal Court of Australia Act 1976 (Cth) ("the FCA Act")are settled, as Lee J remarked in Television Broadcasts Limited v Nguyen (1988) 21 FCR 34 at 38: "The grant of an Anton Piller order is a peremptory and severe interference with the ordinary rights of a party when it is done without the support of any binding judgment and care must be taken to see that the order is only granted in appropriate cases with due safeguards: 'First, there must be an extremely strong prima facie case. Secondly, the damage, potential or actual, must be very serious for the applicant. Thirdly, there must be clear evidence that the defendants have in their possession incriminating documents or things, and that there is a real possibility that they may destroy such material before any application inter partes can be made.' …" (Emphasis added) 6 Because the proposed appeals are in respect of interlocutory orders, leave to appeal is required under s 24(1A) of the FCA Act. The principal issue raised before me was whether the leave application should be heard separately from the hearing of the substantive appeal or whether the leave application and the appeal should be heard together. 7 The relevant factual background is detailed in the reasons for judgment of Wilcox J and it is not necessary to set it out in detail. 8 On the hearing before me, Brilliant made some observations as to its position, but indicated that it was prepared to submit to any order which the Court makes after hearing the other parties. At the time when Wilcox J made the Anton Pillar orders, Brilliant was not a party to the proceedings. Brilliant has foreshadowed that, amongst other matters, on the hearing of the leave application and the appeal it will argue that its non-joinder is a ground to set aside the orders. 9 Counsel for Sharman contends that the leave application and appeal should be heard together. The matter is said to be urgent and of public importance and it is submitted that it is appropriate that the appeal be expedited. If the matter is expedited, it is said by Sharman that it is appropriate, convenient, and time saving to have the two matters heard at the same time by a Full Court comprised of the same members. The hearing of the leave application and the substantive appeal are estimated by Sharman to take about a day, to a day and a half at the most. Universal submitted that if both hearings were to be heard together, then it could take more than two days. They submitted that if the leave application were heard separately then the leave application would take one day or less. 10 Counsel for Sharman has drawn attention to a number of asserted errors in the reasons for judgment of Wilcox J and submits that there is sufficient doubt to warrant the grant of leave to appeal. The merits of the leave application are not a matter for my consideration at this point, although to a limited extent they are factors to take into account when considering the appropriate way to determine the questions raised. Sharman's case before Wilcox J, as determined by his Honour, was essentially that Universal had not disclosed material facts to Wilcox J on the ex parte application for the Anton Piller orders, and that therefore those orders ought to be set aside. The alleged non-disclosures concern, among other matters, the failure by Universal, as the applicants for the Anton Piller orders, to refer to facts concerning related proceedings in the United States, and in particular, the conduct of Sharman as defendants in the United States proceedings. These facts were said to be material in the proceedings before Wilcox J on the premise that such conduct was important and relevant to making a determination as to whether there was any threat to destroy documents, or danger that any relevant documents would be unavailable in those proceedings, if such an order was not granted. 11 Wilcox J decided that although details of the proceedings in the United States were not disclosed to him, the non-disclosure was not material and would not have affected his decision to make the Anton Piller orders. Accordingly, his Honour refused to set them aside. 12 Universal relied on several matters in support of separate hearings. They first submitted that Wilcox J's reasons are not attended with sufficient doubt and that there has been no demonstrable error of principle or law. They also contended that no substantial injustice will be caused if the leave to appeal is not granted. Reference is made to the well settled principles applied by the Court in Décor Corp Pty Limited v Dart Industries Inc (1991) 33 FCR 397 ("Décor Corp") at 400. Universal also said that the question raised is one of fact only, namely, the materiality of certain facts with respect to the proceedings in the United States. Although Wilcox J stated that this was the only question for his determination, Sharman does not agree that this was the case. Universal submitted that the decision to make the Anton Piller orders is discretionary and concerns an issue of practice and procedure, and that in such a case the Court should keep a tight rein on the grant of leave to appeal: see Adam P Brown Male Fashions Pty Limited v Philip Morris Inc (1981) 148 CLR 170 ("Adam P Brown") at 177. 13 Universal submitted that there would be substantial differences regarding the length of time between hearing the leave application and substantive appeal separately, as opposed to together, and that therefore the matters should be heard separately. 14 Universal also submitted that because of the way the matter was decided by Wilcox J, it was not necessary for his Honour to deal with a "host of other matters" raised in the proceeding, whereas on appeal it would be necessary to consider the whole matter at greater length. They also raised the question of a possible application for security for costs in relation to the appeal. 15 Sharman drew my attention to the fact that with the benefit of detailed written submissions, the hearing before Wilcox J only required one day, and this should be taken into account when estimating the likely duration of the hearing together of the leave application with the appeal. 16 In further support of their resistance to the joint hearing, Universal referred to the statements of principle in Genetics Institute Inc v Kirin-Amgen Inc (1999) 43 IPR 189 ("Genetics Institute") and Renaud Cointreau v Cordon Bleu International Ltee (2001) 52 IPR 382 at 401 ("Renaud Cointreau"). These decisions were considered by French J sitting as a member of the Full Court in Kenman Kandy Australia Pty Limited v Registrar of Trade Marks (2002) 122 FCR 494 ("Kenman") at [30]. Having pointed out that the discretion to grant leave to appeal must not be constrained by elevating particular approaches to its exercise in particular classes of cases to rules of general application, his Honour said: "30 The procedure to be adopted on an application for leave to appeal from a decision of a single judge will vary according to the circumstances of the case. The statutory requirement for leave must be respected and applied and not given mere lip service. Routinely to hear concurrently argument on the leave application and argument on the foreshadowed substantive appeal would be to defeat the legislative intention. On the other hand, the Court can, and should, take a sensible pragmatic and flexible approach to the procedures it adopts. Giving directions in the Genetics Institute case, Black CJ listed the application for leave to appeal for hearing, but only so as to allow submissions to be made in relation to the grant of leave and nothing more - Genetics Institute Inc v Kirin-Amgen Inc (1999) 43 IPR 189. That course was approved by the Full Court in Renaud Cointreau at 401. In the latter case, as it turned out, the matter had been listed before the Full Court for two days and the Court heard all the submissions that the parties wished to make on the leave application and on the issues raised in the draft notice of appeal. The only matter before the Court, however, unless and until leave were granted, was the application for leave. The Court there indicated to the parties that it would deliver judgment on the leave application and if it considered leave should be granted would proceed to judgment on the substantive appeal. That course was adopted in this matter. The issue before the Court is largely one of law and the submissions in aid of the leave application necessarily canvassed the issues to be debated on the appeal. 31 There are a number of ways in which applications for leave to appeal under s 195(2) of the Trade Marks Act can be dealt with. The leave required is that of 'the Federal Court' in relation to an appeal to 'the Full Court of the Federal Court'. 'Federal Court' is defined in s 6 as …'the Federal Court of Australia'. Section 195(2) may be read with s 25(2) of the Federal Court of Australia Act 1976 (Cth) which relevantly provides that applications for leave to appeal to the Court may be heard and determined by a single judge or by a Full Court. These applications can therefore be considered by a single judge of the Court, including the judge at first instance. They could also conceivably be dealt with by a Full Court on the papers and on written submissions. That is a matter which can be the subject of direction in particular cases and which might also usefully be provided for in the Rules of Court." (Emphasis added) 17 The concern raised by Universal in relation to the hearing of the leave application together with the substantive appeal is that this course will detract from the substance of the requirement for leave, will blur the distinction between the way in which the matter should be approached in each case, and thereby effectively circumvent the shorter hearing contemplated on a leave application and avoid the necessity to satisfy the requirements for leave to be granted. This would, so it is said, unnecessarily burden the appellate court with the necessity to canvass submissions which travel considerably beyond those relevant in order to satisfy the requirements for an interlocutory leave application. 18 Sharman seeks to distinguish the observations made in Genetics Institute and Renaud Cointreau on the basis that there were special considerations in those cases arising from the subject matter, namely the patent and trade mark issues, and the statutory context. In my view, the principles stated in those decisions are relevant to take into account on the present question before me. However, as can be seen from the approach taken in Renaud Cointreau at [46], it is necessary to adopt a practical approach when deciding which course to adopt in relation to the hearing of the leave application and the substantive appeal. 19 Generally, a leave application calls for a lower level of satisfaction, namely, sufficient doubt as to the correctness of the primary decision. Examination of this question can require a considerably more cursory examination of the material than that necessitated by the hearing of an appeal. In addition, there is the question on a leave application of whether it would be unjust to grant leave to appeal from the decision below. Leave applications can often be dealt with in a relatively short time. It is estimated that the hearing of leave application in the present matter should take no more than half a day. The High Court, for example, allows a very short period for consideration of special leave applications. Too liberal an approach to the joint hearings of leave applications with appeals could mean that in many cases applicants will seek to have a trial run by arguing the whole matter under the guise of a leave application. That is not desirable if interlocutory appeals on questions of practice and procedure are to be generally discouraged: cf. Bright v Femcare Ltd (2002) 195 ALR at 575; re the Will of F B Gilbert (deceased) (1946) 46 SR (NSW) 318 at 323 per Jordan CJ; and Adam P Brown at 177. 20 It is important that the distinction should be maintained between the threshold questions which go to the question as to whether leave should be granted, and the actual hearing of the appeal, so that the requirement to cross the threshold for a leave application must be satisfied before the substantive appeal is heard. Nevertheless, this approach does not require that in every instance there must be a separate hearing of the leave application and the appeal. The determination is discretionary and must be made by reference to particular circumstances. For example, if it were the case that a leave application could be determined in half a day, and a full hearing would take four days, then a cogent case could be made that the practical and convenient course would be for the leave application to be heard separately from the substantive appeal. On the other hand, if the leave application were to take a considerable time and the substantive appeal not a great deal more, then there is much to be said for both matters being canvassed at the same time before the same members of the Court, although always maintaining the clear distinction between the requirements for leave and the determination of the matter on appeal. This is what the Court did in Renaud Cointreau. However, in that case the Court was faced with a fait accompli, because time had been set aside for the hearing of the appeal, and so as a practical matter it was convenient for the Court to hear the leave application and the appeal together. In Genetics Institute the Full Court only heard the leave application. 21 A further matter to take into account is that in a complex case, where there are many difficult issues, the separate determination of a leave application may serve to narrow the issues on appeal and thereby shorten the appeal hearing. The determination at the leave stage, in addition to this filtering role, may also assist in negotiations between the parties as to whether settlement should take place generally. 22 It was suggested by the applicants that to save time and expense the hearing of the leave application could be heard by a single judge, thereby reducing the demands on the Full Court, with consequent saving in time and expense. I do not think this course is appropriate in this case because the question that has been raised would be more appropriately determined by a Full Court. 23 In this case, a consideration against joining the hearing of the leave application and the substantive appeal is that the time for hearing the leave applications and the appeals together may be substantial. In my estimate, from what I have heard from Counsel, the leave applications could take about half a day. Even with the benefit of well-drawn written submissions and experienced counsel, the parties may need two days or more to deal with the substantive appeals. There is some difference between the parties as to what will be considered on the appeal hearing, having regard to the relatively narrow basis on which Wilcox J determined the matter. It may be that more time is required for the appeal hearing. If the hearing of the leave applications is combined with the hearing of the appeal, this may mean that the Court considers lengthy material which travels well beyond what is necessary to consider on a leave applications. This could waste considerable time and expense if leave to appeal were not, in fact, granted. 24 By contrast, if the hearing of the leave applications is separated from the hearing of the appeal, the requirements for, and the purpose of, the application for leave to appeal will not be diminished, and the leave applications will not be merged in the appeal. The need to satisfy the distinct specific requirements for leave need to be addressed, and unless this is done, the approach indicated in Décor Corp may not be observed. Moreover, it will be easier to obtain an expedited date for a leave application than for a full appeal and this will assist on the issue of expeditation. 25 In conclusion, adopting an approach along the lines referred to in Kenman to the circumstances of this case, my decision is that the two questions should be heard separately. Written submissions should be exchanged within fourteen days before the appeal. The leave applications should take not take longer than half a day. The matter is one which I consider warrants expedition. The costs of the present application should be costs on the appeal. I order that the matter be expedited and I order that the question of leave be heard separately from the hearing of the appeal. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin.

Brilliant Digital Entertainment Pty Ltd v Universal Music Australia Pty Ltd

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