EdSonic Pty Ltd v Cassidy

Introduction 1 The applicant and first cross-respondent, EdSonic Pty Ltd, has been involved in publishing self-paced education and training materials. The second cross-respondent is an associated company. The third cross-respondent, Mr Robin Lick, is a director of both companies. The respondent and cross-claimant, Ms Barbara Cassidy, worked with the applicant from January 2001 to April 2002. In these reasons I do not use the word 'work' or derivatives of it to imply an employment relationship. I simply use them descriptively. 2 Ms Cassidy was involved in developing a number of works the subject of the applicant's claim, set out in schedule A of the statement of claim ('the schedule A Works'). The ultimate issue in these proceedings is who owns the copyright in the schedule A Works and other works in contest (referred to as the 'hospitality modules' - see [26] of these reasons), collectively 'the Works', and as a result is entitled to a sum of money currently being retained by the Copyright Agency Limited ('CAL'). This depends on whether s 35(6) of the Copyright Act 1968 (Cth) (the Act) has been engaged and operated to the benefit of the applicant. Somewhat simplified, that sub-section operates in circumstances where the author of a work is an employee and the sub-section renders the employer the owner of the copyright if the work was made by the author "in pursuance of the terms of his or her employment". The resolution of that issue depends on the resolution of one or two subsidiary issues. The first subsidiary issue is whether Ms Cassidy was an employee of the applicant during the relevant period and whether she made the Works during that employment. The second subsidiary issue is, if she was an employee, did she make the Works "in pursuance of the terms of her employment". 3 The applicant contends that Ms Cassidy was an employee between February 2001 and April 2002 and made the Works during the period of her employment. Ms Cassidy contends that she made the Works before she started working with the applicant and simply reformatted them once she did. She denies that any employment relationship existed, or if it did, contends that the contract of service was limited to employment on a particular project, namely creating material for the Property Council of Australia. 4 I have reached a firm conclusion that even if Ms Cassidy was an employee (and, as is often the case, some evidence points to her having been an employee but other evidence points in the opposite direction) and the Works were, in any relevant sense, made by her during the period she was employed, they were not made by her "in pursuance of the terms of her employment". Accordingly I will focus in these reasons on why I have reached this conclusion rather than entering into the detail of the factual and legal question of whether she was an employee. In the result I will describe, in the broad, the evidence concerning how Ms Cassidy came to work for the applicant and what she did. This creates the context for the factual findings underpinning the legal conclusion that she did not make the Works "in pursuance of the terms of her employment". 5 I should record that the applicant and the other cross-respondents were not legally represented at the hearing. I granted leave to Mr Lick to appear on behalf of the applicant at a directions hearing a few days before the hearing. Leave was given after the firm of solicitors he retained withdrew their representation shortly before the hearing. On the first day of the hearing I declined an adjournment application by Mr Lick. At the conclusion of the hearing I allowed the applicant and other cross-respondents some time to prepare responsive written submissions so they could, if they wished, obtain legal assistance in formulating them. The responsive written submissions do not, in terms, indicate they were prepared by a lawyer.

Background 6 Unless I indicate otherwise or the context suggests otherwise, the following represents findings of fact. Ms Cassidy has been involved in the Technical and Further Education (TAFE) sector since 1980. She was then offered a teaching position at the Department of TAFE and was shortly after posted to Moruya TAFE College. Since that initial posting, she has been posted to Dapto, Lithgow, Katoomba, Granville and Sydney TAFE colleges. She has also worked as a manager of various TAFE colleges and private training colleges, provided training and consultancy services to corporate training departments and private training organisations, written correspondence course materials for TAFE, developed curricula for TAFE and trained new TAFE teachers. Since 1991, Ms Cassidy has developed vocational and education training ('VET') materials, at different times for TAFE colleges, private training colleges, and her own businesses including 'The Workplace Learning Centre - The Dedicated Office' and 'WLC Online Training'. In 2000, Ms Cassidy began working as a manager at ISIS Communications Ltd. She was interviewed for her position at that company by Mr Lick, who was then employed in a more senior managerial role at the company. During the period they worked at ISIS, Mr Lick was based in Melbourne and Ms Cassidy was based in Sydney. 7 Mr Lick incorporated the applicant company on 18 October 2000. The applicant was to be a vehicle for a business venture involving Mr Lick. On the applicant's evidence, Mr Lick said that she "could come to work for [him] to develop online VET materials for business services", that the business was not hiring, and proposed that she "put together an application anyway". Ms Cassidy contends that she sought consulting work. On her evidence, she raised the possibility of a joint venture with the applicant, saying that she had been developing her VET materials into an online format and needed "assistance with marketing the materials and raising funds so I can focus on writing storyboards and developing more online modules". This is evidence (from both) of a conversation that took place almost ten years ago. More reliable evidence is likely to be any contemporaneous document. Shortly after the conversation Ms Cassidy sent Mr Lick a document outlining a proposal for an ongoing association. 8 The document Ms Cassidy sent was entitled 'Proposal for VET Online Training Project', and was sent on 10 November 2000. It identified the "project deliverables" as being "online training programs to address Vocational Education and Training (VET) Programs that are delivered in Schools, TAFEs, Adult Community Education Centres (ACE) and private Registered Training Organisations (RTOs). These programs include modules that make up the Traineeship programs and address the National Competency Standards and Training Packages for: Business Studies (also Board endorsed modules for the New HSC in NSW), Hospitality, Travel and Tourism, Information Technology, Retail, Beauty and Hairdressing (not currently in schools)." The proposal identified two potential businesses that might deliver VET content online, namely Webtrain Pty Ltd ('Webtrain') and E-Cademy Pty Ltd ('E-Cademy'). The proposal proceeded to detail the target market, the payments received at the time by training providers for the delivery of existing services, the fees to charge training providers for the proposed modules, market research undertaken, projected student numbers and online training delivery platforms. It concluded with the role Ms Cassidy proposed for herself. It was, in terms: I would prefer to be an employee with salary around $120K base plus super and then paid royalties based on 10% revenue, payable after the 3rd quarter, and only if the project is returning a profit. If agreed, I would assign copyright to the company, provided I continue to receive 10% royalties on revenue for the programs, even if my employment ceased and that if the programs were onsold as part of any new business, I would receive 10% of the value put on the programs from that sale. Ms Cassidy included a copy of her curriculum vitae with the proposal. Plainly, Ms Cassidy was expressing a preference for being an employee. 9 On 1 December 2000, Ms Cassidy and the applicant signed a document entitled 'Mutual Confidentiality Agreement'. Mr Lick signed on behalf of the applicant. The agreement provided for the parties to the agreement to keep confidential all information disclosed in relation to the "mutual opportunities between the two companies in the education arena". The reference "[Insert Company/appropriate name]" at the signature space at the bottom right of the final page of the agreement suggests that it was drawn from a template. It is therefore tolerably clear that the reference in the agreement to 'companies' was a reference to the parties who signed the document, that is, the applicant and Ms Cassidy. Clause 5 of the agreement stated "[t]his agreement does not transfer any interest in any intellectual property". At the same time, Ms Cassidy agreed with Mr Lick's suggestion that the materials the subject of the confidentiality agreement be branded as the copyright of the applicant. During the hearing it was accepted by both parties, including Mr Lick in cross-examination, that on the face of this agreement, as at 1 December 2000, neither party regarded Ms Cassidy as an employee of the applicant, though in submissions Mr Lick put the position differently.

The business relationship 10 The parties commenced their financial relationship when Ms Cassidy was offered shares in the applicant by letter of 13 December 2000, an offer she accepted. The letter was signed by Mr Lick on behalf of the applicant. It provided that Ms Cassidy was to pay a "nominal fee" of $120 for 5% of the total share capital of the applicant, that is, 600 of a total of 12,000 ordinary shares. The letter said, in part: This issuance of shares is in lieu of any remuneration such as salary or wages while EdSonic sources funding. It is not the intention of EdSonic to issue shares in lieu of salary or wages indefinitely or [sic] does this letter make an offer for employment. Any offer for employment or management consulting will be via a separate negotiation process and agreement. It is confirmed however that that issuance of shares is in addition to any royalties due and payable to yourself or nominee for courseware written by you and sold. The letter involved, in terms, a rejection for the time being of the notion that Ms Cassidy would be employed as advanced by her in her proposal sent 10 November 2000. It also affirmed the idea in her document of 10 November 2000 that she would be paid royalties for material she wrote and which was sold to others. 11 The parties accepted that the offer of shares was in consideration of work that Ms Cassidy would do in educational course work development, consultation in the areas of education and educational standards, assistance in the sales and marketing of the applicant's new products and services, and other assistance to be provided through the expertise and experience of Ms Cassidy. On Mr Lick's evidence, during December 2000 the applicant was in discussions for a joint venture arrangement with Entertainment World Limited. Although that joint venture was formalised by agreement on 2 April 2001, it had the effect of providing working capital to the applicant once funds were received on 8 March 2001. Mr Lick's evidence was that in a conversation with Ms Cassidy in early December 2000, he made reference to this joint venture arrangement, telling her that "your application looks good. But we don't have funding yet. We're getting funding through a joint venture. In the meantime as a temporary measure just to get you started on the materials I can give you shares in the company instead of wages, and can give you royalties for the courseware on top of the shares. Then, once we get our funding, we can hire you." His evidence was that Ms Cassidy agreed. On Ms Cassidy's evidence, the shares were "consideration for the work and expertise I was contributing to the joint project". On her evidence, Ms Cassidy had been looking for work in late 2000, prior to her association with the applicant, and decided not to pursue other work opportunities in order to involve herself in her work with the applicant. Again, these are competing accounts of conversations almost ten years ago and the more reliable evidence of the nature of the relationship is the letter of 13 December 2000. 12 During January and February 2001, the parties were engaged in exploring business opportunities. This included negotiating work for the two companies identified in Ms Cassidy's proposal dated 10 November 2000, namely E-Cademy and Webtrain. E-Cademy was to develop the VET materials produced by Ms Cassidy into an online format. The development of the online storyboards required Ms Cassidy to take existing content and storyboards she had scripted for a previous business venture on which the E-Cademy developers could work. In early 2001 a draft memorandum of understanding was prepared between the applicant, Ms Cassidy and E-Cademy, which expressed the relationship between the three parties to the document as independent contractors. The memorandum provided that Ms Cassidy would author various course modules "under the EdSonic brand" with limited co-branding rights to E-Cademy, that the development by E-Cademy of that content would be subject to the direction of Ms Cassidy, and that the applicant in conjunction with Ms Cassidy would have the rights to market the product in Australia. That memorandum was not executed and the joint project did not proceed. 13 However, a document broadly similar to that memorandum was executed by Webtrain, the applicant and Ms Cassidy on 27 and 28 February 2001. It provided, in part: 1(b) Barbara Cassidy on her own right has developed course modules and through edSonic wishes to have these modules converted to online delivered courses. … 1(e) EdSonic through its corporate structure in conjunction with Barbara Cassidy will have the rights to market the product in Australia and selected regions limited only to the suitability of the product within those regions and limitations imposed by the publishers. … 2(b) Barbara Cassidy for no compensation except for intellectual property royalties will author the modules and oversee the online content conversion process. 2(c) The royalty payable to Barbara Cassidy is set at 10% of Gross Sales not including textbook and workbook sales. This royalty is payable for the life of the product. … 2(f) In conjunction with Barbara Cassidy, EdSonic will develop marketing and sales plans, develop marketing and sales materials and work to market and sell the end product to the target client base. … 3(e) This arrangement is non-exclusive to WebTrain and Barbara Cassidy in conjunction with EdSonic retains the right to enter into similar arrangements with other parties. 3(f) Barbara Cassidy agrees to author the courses under the EdSonic brand and that WebTrain will have limited co-branding rights. 3(g) All intellectual property, copyright content or other rights brought into the project that is required to complete the project or products will remain the property of the rightful owners. This condition only applies if the above-mentioned financial structure does not change. 3(h) Under this agreed arrangement revenues will be paid into EdSonic including all applicable charges and taxes and at the end of each calendar month a statement of sales will be circulate to each party accompanied by a payment of revenue share and royalties due calculated on the previous month's sales. … 8 It is understood that the relationship between the parties is one of independent contractors and nothing in this agreement will be interpreted as being an employee/employer relationship, partnership or agent of or for each party. The project with Webtrain ultimately did not proceed. Mr Lick gave evidence, which was not disputed, that the quality of materials produced by Webtrain was not to the standard that the applicant deemed acceptable to take to the market. 14 The primary basis on which the applicant was able to pay Ms Cassidy throughout the period of their association was as a result of the work that Ms Cassidy performed for the Property Council of Australia. Mr Lick accepted this proposition in cross examination. Ms Cassidy applied for a contract with the Property Council in a personal capacity in January 2001. She applied in response to an advertisement in a newspaper. In around early February 2001, she was interviewed by Ms Deborah Achelles, the Property Council's National Education Manager, and was told by telephone that she had been successful in obtaining the contract. Ms Cassidy was sent a letter of offer from the Property Council though that letter was not in evidence. The term of the contract was until 30 June 2001, and Ms Cassidy was to be paid the equivalent of $80,000 per annum, to be paid per hour for 10-20 hours per week. According to Ms Cassidy, she advised Mr Lick of her success, and he recommended she take the job. I accept this. She approached the applicant and asked it to enter the contract she had obtained with the Property Council so that she could invoice the Property Council for her work through the applicant so she "wouldn't have to mess around with the GST and BAS [Business Activity Statements] statements". She also did not want to have to get an Australian Business Number at that time. The applicant agreed to pay Ms Cassidy 85% of the Property Council fees, an amount for superannuation and workers' compensation, and to retain a percentage for itself. Ms Cassidy responded to the letter of offer, but could not recall whether she did so in her personal capacity or on behalf of Edsonic. If it was necessary to characterise the relationship between Ms Cassidy and the applicant arising from this transaction, it was probably an employment relationship. However, it was plainly directed to employment on a particular project or task, namely providing material to satisfy the arrangement with the Property Council. 15 Ms Cassidy commenced working for the Property Council on 2 February 2001, and performed a number of functions. She assisted it in obtaining accreditation for its courses. She wrote course and assessment materials for residential workshops. These courses included Shopping Centre Management, Shopping Centre Marketing, Corporate Real Estate, Asset Management, Property Development and Property Investment and Finance. Content was provided by subject-matter experts from the industry members of the Property Council, such as Westfield, Stocklands, CB Richard Ellis and Meriton. In his oral evidence, Mr Lick accepted the proposition that there was no overlap in the content of the work Ms Cassidy undertook with the Property Council and the work she undertook in conjunction with the applicant, namely the development of VET content, saying that it was "definitely, totally different". However, he later appeared to recant this acceptance in the submissions he filed after the hearing on behalf of the applicant. His evidence on this point is consistent with other evidence and I find there was this difference. 16 In June 2001, the Property Council of Australia extended this consultancy arrangement for a further six months. Ms Cassidy continued to be paid as she had before under that extended arrangement, with 85% of moneys received by the applicant from the Property Council being remitted to Ms Cassidy. During the hearing Mr Lick sought to establish that there was an agreement between the parties that the applicant pay Ms Cassidy a regular salary from August 2001, however the only evidence of this are the records of payments made to Ms Cassidy in consequence of receipt of funds from the Property Council in response to invoices sent by the applicant. 17 Ms Cassidy's first payment from the applicant concerning the Property Council project was made on 1 March 2001. This flow of funds, which the applicant characterised as salary or wages, ceased when Ms Cassidy's work for the Property Council ceased. This happened in February 2002. Ms Cassidy did not, during the period 1 February 2001 to 1 February 2002, render any invoices to the applicant for her work at the Property Council. The applicant paid workers compensation insurance for Ms Cassidy from 1 March 2001, with the policy listing Ms Cassidy as an employee. On 14 November 2001 Ms Cassidy provided her superannuation fund details, and the applicant paid superannuation into that account on 14 November 2001 and 24 August 2002 in the sums of $3,682.16 and $2,067.20 respectively. The applicant withheld income tax on Ms Cassidy's behalf. Importantly, the tax withheld (and later remitted to the Australian Tax Office as PAYG amounts) related to the amounts paid to her for the work she did directly for the Property Council. Also importantly, no such deductions were made for royalty payments discussed in [23] of these reasons. 18 The applicant asserts, and Ms Cassidy disputes, that payroll tax was paid. There is no documentary evidence of it having been paid. In the absence of such documentary evidence, which could readily have been procured, I am not satisfied payroll tax was paid. The applicant paid for a computer and software for Ms Cassidy, though the cost of both was deducted from the moneys due to Ms Cassidy in respect of the Property Council work. The applicant contributed to the cost of Ms Cassidy's telephone account by reimbursing her for calls she made from her home in New South Wales in relation to marketing for the company, although in early 2002 the expenses previously reimbursed were deducted from payments otherwise due to Ms Cassidy. 19 The income Ms Cassidy received from the applicant fluctuated in ways that corresponded directly with the amount of money that was being generated by the work being done for the Property Council and the hours Ms Cassidy actually worked on the project. The applicant submits, and Ms Cassidy disputes, that this was evidence of a consistent salary relating to her work at the Property Council. The applicant submits, and Ms Cassidy disputes, that from August 2001, the invoices to the Property Council from the applicant, invoices generated according to the hours Ms Cassidy worked, evidence a regular salary. The applicant contends, and Ms Cassidy disputes, that Ms Cassidy was paid a commission on sales, in addition to what the applicant contends was her salary and wage remuneration. Even if this income stream received by Ms Cassidy from the work done for the Property Council can be characterised as salary, and probably it can, it was for service as an employee which was very narrowly focussed. 20 In February 2002, the payments to the applicant from the Property Council in relation to Ms Cassidy's work ceased. Ms Cassidy's final payment from the applicant in relation to the Property Council work was made on 28 February 2002. 21 From mid 2001 Ms Cassidy also did consulting work for the Christian City Church and Choice Consulting. Her payment for those two projects was to be by the same method as her payment for the Property Council work, with the applicant invoicing the companies and remitting a percentage of the money received to Ms Cassidy. However the evidence was insufficient to find affirmatively that such payments were actually made to Ms Cassidy 22 In addition to the payments the applicant made to Ms Cassidy for her work with the Property Council, the applicant paid Ms Cassidy royalties. This resulted from the sale by the applicant of material to a TAFE entity called Open Training and Education Network ('OTEN'). In September and October 2001, the parties negotiated with OTEN for the distribution of online materials. Ms Cassidy and Mr Lick met with OTEN with a view to selling it the online materials, and she updated some existing materials to conform to new course codes released by the Australian National Training Authority. An issue arose about OTEN clients not having online access. As a result, OTEN requested the materials be provided in print format. Ms Cassidy rebadged the updated print materials as 'Copyright EdSonic Pty Ltd' and 'Copyright EdSonic Courseware Pty Ltd'. She noted her name as the author in the inside front cover and obtained International Standard Book Numbers (ISBNs) to include in the printed materials. Ms Cassidy gave evidence that she agreed to mark the VET materials as the copyright of the applicant because at that stage she was engaged in the joint venture with the company and understood it was actively seeking investors. I accept this evidence. I give little weight to draft agreements with OTEN (not drafted, I find, by Ms Cassidy though she did amend them) which address, in part, ownership of intellectual property though which were never executed. 23 In the result, OTEN purchased some of the materials in January 2002, and Ms Cassidy was paid a royalty of 10% in respect of the printed materials. She gave evidence that there was no discussion about the amount she should receive, and she did not understand how her entitlement to the 10% share had been calculated. She was paid subsequent royalties between February and April 2002. In total, she was paid $437.20. She said she received no income in the form of salary or wages for the development of these VET materials, simply the royalties. There is no evidence to the contrary and I accept her account. 24 On 15 April 2002, Ms Cassidy emailed the applicant and requested a separation certificate so as to secure unemployment benefits. On 23 April 2002 Ms Cassidy notified Mr Lick that the applicant was no longer permitted to use the Works, and the parties' relationship broke down. 25 As noted earlier, the applicant is based in Victoria, and Ms Cassidy was at all relevant times based in New South Wales. During the period of Ms Cassidy's association with the applicant, she worked from her home in New South Wales. Ms Cassidy would provide the applicant with the materials that she was developing or formatting initially via email, then follow up by sending the final materials on a floppy disc. Some graphics were added by others later. From time to time, Ms Cassidy presented herself as part of the applicant organisation. This included referring to herself as an employee in relation to qualifying for unemployment benefits. Ms Cassidy also marked a number of materials that she prepared as being the copyright of the applicant or associated companies. 26 It is necessary to discuss in a little more detail what are the works in suit and how they came into existence. At the hearing the applicant sought to extend its claim of copyright to materials not included in its pleadings. In its statement of claim, the schedule A works were:- CMN201 The Changing Environment CMN202 Personal Work Effectiveness CMN203.1 Developing Oral Communication Skills CMN203.2 Developing Written Communication Skills CMN204 Working in Teams CMN205 Business Technology CMN206 Processing and Maintaining Files CMN207 Processing Financial Documents CMN211 Occupational Health and Safety CMN212 Processing Incoming and Outgoing Mail CMN213 Producing Simple Documents - Word Processing CMN213 Worksheets CMN214 Producing Simple Documents - Spreadsheets CMN304 Creating and Using Databases CMN307 Maintaining Business Resources Legal secretaries' manual - Certificate III in Business Services (Legal Administration) Preparing for and searching public records Legal terminology for legal secretaries Maintain confidentiality and security Introduction to the legal system and the legal office The changing environment for the legal office Contribute to effective workplace relationships in a legal practice Maintaining financial records in a legal practice Prioritising and planning in a legal practice Including any materials developed that has [sic] used the content in the above modules. In her amended cross-claim, Ms Cassidy claimed ownership over these works, and a number of other modules that were not the subject of the applicant's claim. These additional modules included 'HCOR01/2B Communication in the Work Environment', 'HCOR03B Health, Safety and Security in the Hospitality Industry', and 'HCO01B Develop and Update Hospitality Industry Knowledge' ('the hospitality modules'). In their defence to the cross-claim, the cross-respondents disputed that the cross-claimant owns the copyright in the hospitality modules. Approximately $67,000 of the approximately $96,000 currently held by CAL pending resolution of these proceedings is held in respect of the unit 'HCO01B Develop and Update Hospitality Industry Knowledge'. 27 Ms Cassidy submitted that none of the hospitality modules can be relevant to the applicant's claim against her, as they are not included in the statement of claim. This is probably true, though if the applicant had sought to amend the statement of claim, I probably would have allowed the amendment. However, given the ultimate conclusion I have reached, this pleading point does not really matter. In any event it is necessary to address the ownership of the hospitality modules, as they are, in part, the subject of the cross-claim. 28 Ms Cassidy's evidence, which I accept, was that she had been writing the Works since 1998 initially when running her own business and had further developed them between 2000 and 2002. It is tolerably clear that the Works were certainly started and substantially completed by Ms Cassidy while operating her own business and prior to any association with the applicant. Ms Cassidy gave evidence, which I accept, that she wrote the materials, namely the Schedule A Works and the hospitality modules. The burden of her evidence was that she substantially developed the Works prior to working for the applicant and later amended or adapted them, or assisted the applicant in amending or adapting them, to suit immediate needs. On occasions, this process of amendment or adaptation involved the Works going through a number of stages of development before a final version emerged. On occasions, the applicant contributed graphics to the Works. In the absence of evidence which would indicate otherwise, I accept Ms Cassidy's evidence that, in substance, she wrote the Works. I am fortified in this finding by a consideration of Ms Cassidy's perspective, as evidenced by the proposal she put to the applicant at [8] above, that the underlying motive for her association with the applicant was the transformation of her written materials into online training programs and online VET modules. The memoranda between the parties and Webtrain and E-Cademy both make mention that Ms Cassidy on her own right developed course modules and through the applicant wished to have those modules converted to online delivered courses. 29 The burden of Ms Cassidy's evidence, which I accept, was that she authored the hospitality modules (at [26]-[27] above) in February 2002. Parts of the three hospitality modules - HCOR01/2B ('the first module'), HCOR03B ('the second module') and HCO01B ('the third module') - were exhibited to one of her affidavits. On the first page of the first module the words 'Barbara Cassidy' and 'February 2002' are in large type. The second page is marked, in part, 'Copyright 2002 Barbara Cassidy'. The bottom of each page contains a footer reading 'Copyright 2002 Barbara Cassidy'. The contents page identifies at least 85 pages in the first module, however only 6 pages were exhibited. The first and second pages of the second module are similarly marked as the first module, except that the front page also contains the words 'Copyright Barbara Cassidy 2002' in large type. The bottom of each page of the second module is similarly marked as the first module by a footer reading 'Copyright 2002 Barbara Cassidy'. The contents page identifies at least 52 pages in the second module, however only 12 pages were exhibited. The pages of the third module are similarly marked as the second module. The contents page identifies at least 52 pages in the third module, however only 12 pages were exhibited. Mr Lick pursued a line in his cross-examination of Ms Cassidy concerning the third module, which is curious in the sense that the contents page appears to contain errors and omissions, such as jumping from 2.6 to 2.10 and 3.4 to 3.7, and the header of each page appears mislabelled as 'HCOR03B Health, Safety and Security in the Hospitality Industry'. In my view, this line of cross examination was of no moment. 30 I did not understand it to be suggested by the applicant that the hospitality modules were created by Ms Cassidy as part of her work for the Property Council. A comprehensive list of materials created by Ms Cassidy for the Property Council was not in evidence, but rather simply the outline of the work performed by Ms Cassidy for the Property Council as described earlier at [15] of these reasons. Ms Cassidy's evidence, which I accept, was that she created the hospitality modules in February 2002 after she finished her work for the Property Council. It is tolerably clear that the hospitality modules were neither created by Ms Cassidy for the Property Council, nor part of the work she performed for it. This conclusion is reinforced by Mr Lick's evidence that the work Ms Cassidy performed for the Property Council was "definitely, totally different" to the work she performed in conjunction with the applicant, namely the development of VET content.

The law 31 The applicant seeks relief under s 115 of the Act and ss 68 and 72 of the Fair Trading Act 1987 (NSW). 32 The applicant relies on section 35(6) of the Act, which provides:- Where a literary, dramatic or artistic work… is made by the author in pursuance of the terms of his or her employment by another person under a contract of service or apprenticeship, that other person is the owner of any copyright subsisting in the work by virtue of this Part. 33 As noted earlier in these reasons, of central importance is the scope and operation of the expression "in pursuance of the terms of his or her employment" in the subsection. There are few authorities dealing with s 35(6) in the context of ownership of copyright. Before considering them a convenient starting point is authorities concerning the creation by a person in employment of material to which intellectual property rights attach under the Patents Act 1990 (Cth). There is no equivalent in the Patents Act to s 35(6) of the Act. 34 The entitlement of an employer to the grant of a patent for an invention is largely determined by general principles of common law and equity and the terms of employment. The existence of the employer and employee relationship alone does not give the employer ownership of inventions made by the employee during the period of employment. This issue was addressed in Victoria University of Technology v Wilson (2004) 60 IPR 392 which concerned the intellectual property rights to a patentable invention and two related computer programs. Two senior academic staff designed an electronic international trade exchange. The university claimed ownership in the patent for the system. Nettle J observed at [104]: It is an implied term of employment that any invention or discovery made in the course of the employment of the employee in doing that which he is engaged and instructed to do during the time of his employment, and during the working hours, and using the materials of his employers, is the property of the employer and not of the employee. Having made a discovery or invention in course of such work, the employee becomes a trustee for the employer of that invention or discovery, and he is therefore as a trustee bound to give the benefit of any such discovery or invention to his employer. But the mere existence of the employer/employee relationship will not give the employer ownership of inventions made by the employee during the term of the relationship. And that is so even if the invention is germane to and useful for the employer's business, and even though the employee may have made use of the employer's time and resources in bring the invention to completion. Certainly, all the circumstances must be considered in each case, but unless the contract of employment expressly so provides, or an invention is the product of work which the employee was paid to perform, it is unlikely that any invention made by the employee will be held to belong to the employer. (Emphasis added) 35 The matter has been considered more recently by a Full Court in University of Western Australia v Gray (2009) 259 ALR 224. A central issue was whether an academic, Dr Gray, who had invented ways in which to produce and use microspheres for the targeted treatment of liver cancer in humans, could himself or through others patent the relevant inventions. Dr Gray's duties were principally teaching and research. His interest in ways in which to produce and use microspheres for the targeted treatment of liver cancer predated his employment with the University. Although Dr Gray had undertaken further work on this research during his employment, the inventive concept had been identified before he worked for the university. The subsequent work was "in the nature of verification or reduction to practice" and "not by way of conception giving rise to inventorship and entitlement". From their Honours' consideration of implied terms and employee inventions at [148]-[158], the following propositions emerge:- · There have been "shifts in emphasis and the tensions that have attended the evolution of the principles" of ownership of an invention, with the tendency at common law to increase the presumption of ownership in favour of the employer. · Unless the contract of employment expressly so provides, or an invention is the product of work which the employee was paid to perform, it is unlikely that any invention made by the employee will be held to belong to the employer: following Nettle J in Victoria University of Technology v Wilson (2004) 60 IPR 392, which in turn crystallised the leading English authorities. · The question to be answered is "what is it that [the employee] is paid to do". Their Honours indicated that where the work in issue is the product of what the employee was paid to do, it will belong to the employer unless otherwise agreed. · The task the Court must undertake, namely to define the subject matter over which an employee's responsibility to the employer extends, can be difficult, and care must be taken in fulfilling this function, with lessons to be drawn from the "parallel problem in fiduciary law" of defining the subject matter over which the fiduciary obligations extend. Their Honours observed (at [156]): To illustrate the care that needs to be taken in determining what a person is employed to do, Jacob LJ in [LIFFE Administration and Management v Pinkava [2007] 4 All ER 981] helpfully indicated (at [97]) that this may not be revealed by looking at an employee's day-to-day work: [97] Take for instance a research chemist working on a cancer cure for the last 10 years. Suppose he came up with a cure for arthritis. He could not seriously contend that he owned the invention because he was day-to-day working on a cancer cure. His duty as a research chemist is clearly wider than his day-to-day work. 36 In surveying the authorities concerning the ownership of copyright in material created by an employee, a convenient starting point is the United Kingdom. The analogue to s 35(6) is found in the Copyright, Designs and Patents Act 1988 (UK). Section 11(2) of that Act provides "[w]here a literary, dramatic, musical or artistic work is made by an employee in the course of his employment, his employer is the first owner of any copyright in the work subject to any agreement to the contrary." A number of authorities have examined the antecedents of that section. 37 Stephenson Jordan & Harrison Ltd v MacDonald & Evans (1952) 69 RPC 10 concerned an employee who had written manuals for the company and delivered lectures to universities and other professional societies. The Court of Appeal concluded the manuals were created by the employee under his contract of service and were viewed as integral to the business of the company. The text of the public lectures were not. It was the copyright in this latter work that he owned. Evershed MR observed (at 18): … prima facie I should have thought that a man, engaged on terms which include that he is called upon to compose and deliver public lectures or lectures to some specified class of persons, would in the absence of clear terms in the contract of employment to the contrary be entitled to the copyright in those lectures. That seems to me to be both just and commonsense. The obvious case to which much reference by way of illustration was made in the course of the argument is the case for the academic professions. Lectures delivered, for example, by Professor Maitland to students have since become classical in the law. It is inconceivable that because Professor Maitland was in the service at the time of the University of Cambridge that anybody but himself, one would have thought, could have claimed the copyright in those lectures. 38 Similarly in Antocks Lairn Ltd v I Bloohn Ltd [1972] RPC 219, the Chancery Division of the UK High Court addressed the ownership of the copyright in drawings of furniture made by the managing director of a furniture company. It held the managing director owned the copyright because the work was not created within the scope of his usual management duties. In that matter, Graham J relied on Lee v Lee's Air Farming Ltd [1961] A.C. 12, a decision of the UK Privy Council, and said (at 221-222): … [Lee] clearly establishes that there may be cases where a managing director may act in two capacities. … I do not think the intention [of s 4(4) of the Copyright Act 1956 (UK), the immediate antecedent to s11(2) of the Copyright, Designs and Patents Act 1988 (UK)] was to include… a managing director who, as part of his management activities, from time to time acted as if he was a servant or employee of the company rather than as a director, particularly where as here, no service agreement as such, whether formal or informal, to do this particular work was proved. Such a managing director would, of course, hold the drawings he made in trust for his company and would have to assign the copyright in them to his company if and when called upon to do so. No such assignment was made here; and, as [the managing director] is not a party to the action, [the drawings he created] must be excluded from consideration. 39 I now turn to consider the limited authorities in which the operation of s 35(6) has been considered directly. The Supreme Court of New South Wales, in Erica Vale Australia Pty Ltd v Thompson & Morgan (Ipswich) Ltd (1994) 29 IPR 589, examined the working relationship between a director of a company and the company itself to determine the ownership of copyright in the wording of various seed packets and the operation of s 35(6). The Court held that the directors of the company were also employees working under contracts of service and their work was done as part of the business of the plaintiff. The directors were paid salaries, not directors' fees and worked in the business on a daily basis, performing a variety of tasks. None were engaged to do particular work for a fee, rather they worked for a regular salary. The work of the director in writing the seed instructions was performed under a contract of service. 40 In Redrock Holdings Pty Ltd v Hinkley (2001) 50 IPR 565 the Supreme Court of Victoria held that the employer owned the copyright in a computer library of code (called Adam's App Builder or AppWarrior) which the appellant had initially written while he was at school because it had been extensively developed during his employment under a contract of service. There was copyright in the library as it was in November 1995, however by September 1997 the library was a new literary work, transformed during his employment and it was a necessary component in the operating software written for Redrock. The separate copyright in the 1997 library vested in the company pursuant to s 35(6) of the Act. 41 There is no authority of which I am aware which addresses, directly, the scope of the expression "is made by the author in pursuance of the terms of his or her employment". However what the expression raises for consideration, in my opinion, is not the bare question of whether the author is employed under a contract of service at the time a work is made but whether the relevant work is made in furtherance of the contract of employment with the employer. That is, did the employee make the work because the contract of employment expressly or impliedly required or least authorised the work to be made. Approached in this way, it is an expression which comprehends notions similar to those addressed by the Full Court in Gray in the context of patent law though plainly I must ultimately focus on and give effect to the words used in the Act itself.

Consideration 42 The first question which logically arises is whether Ms Cassidy was an employee of the applicant during the period of their association. As I noted at the beginning of these reasons some evidence points to her having been an employee but other evidence points in the opposite direction. Some factors which point to her having been an employee include the following. Ms Cassidy was paid amounts from which income-tax was deducted. The amounts she was paid were directly referable to the hours she worked. Amounts were paid by the applicant towards her superannuation. The applicant effected workers compensation insurance which covered Ms Cassidy in her work. She initially sought to work as an employee. When her work with the applicant came to an end, she sought and was given a separation certificate. From time to time she described herself as an employee. (see the decision of the NSW Court of Appeal in Australian Air Express Pty Ltd v Langford (2005) 147 IR 240 at [48]-[55] and more generally see Roy Morgan Research Pty Ltd v Commissioner of Taxation [2010] FCAFC 52 per Keane CJ, Sundberg and Kenny JJ). 43 Against these factors must be balanced the fact that the whole arrangement concerning the Property Council might be viewed as having been nothing more than a device to relieve Ms Cassidy of the burden of action which would have been required of her were she an independent contractor. 44 However, it seems tolerably clear to me that Ms Cassidy, if an employee, was an employee of the applicant for the purposes of the Property Council work only. If the amounts she was paid (and in respect of which tax was deducted) can properly be characterised as salary, it was salary only for the work she did under the arrangements with the Property Council. The payment of the "salary" finished at the end of February 2002 though her work with the applicant continued for almost a further two months. Other work she did when working for the applicant was remunerated on an entirely different basis. She was paid royalties. The amount she was paid as royalties was not calculated by reference to the time taken to perform the work but rather the price the applicant received for the sale of the material. No income-tax was deducted from the royalty payments. It seems to me there is little room to doubt that both Ms Cassidy and the applicant treated the work she did for which royalties were paid as being of an entirely different character to the work she did to give effect to the arrangements with the Property Council. It cannot be said, in my opinion, that the work she did in creating or developing the Works was in furtherance of her contract of employment with the applicant. That is, she did not make the Works "in pursuance of the terms of ... her employment". 45 Accordingly, the applicant's claim to any copyright in works made by Ms Cassidy is limited to any materials made in furtherance of the arrangements with the Property Council provided that such materials were created during her employment. The applicant does not gain the benefit of s 35(6) in relation to the Works. I should add that almost certainly the applicant had an implied licence to sell or otherwise deal with the Works (or least some of them) during the period Ms Cassidy worked for it ending in April 2002 and perhaps for some time beyond that. But the applicant's case has not been advanced on the footing that it has conducted itself as a licensee. It has asserted ownership of the Works and has failed.

Disposition 46 As the respondent was not an employee of the applicant in relation to her making of the Works the applicant's claim to the copyright of those works must fail. It also has the consequence that the applicant's cross-claim should, in substance, succeed. What I propose to do at this point is direct the parties provide short minutes to give effect to these reasons. Whether it is necessary for some further adjudication of residual issues is a matter I can address when the short minutes are brought in on 30 September 2010. I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore.