Flashback Holdings Pty Limited v Showtime DVD Holdings Pty Ltd

REASONS FOR JUDGMENT 1 This matter was before me on Wednesday 11 March 2009. By a notice of motion filed in Court, the applicant seeks orders dealing compendiously with the joinder of additional parties, the concomitant amendment of its application and statement of claim and the striking out of the first and third respondents' defences. The application to join additional parties seeks to join Gaiam Inc, Gaiam Americas Inc, GT Holdings Inc and Jaffa Road LIV Limited Partnership to the proceeding as copyright owners. The applicant ("Flashback") claims to have an exclusive licence to distribute in Australia a range of children's DVDs and to have the other rights of the copyright owner in Australia. 2 The first respondent ("Showtime") imported a number of these DVDs into Australia and sold some of them. Subsequently Flashback commenced this proceeding against Showtime and others, alleging that the copyright in the films had been infringed by that importation and sale. Initially a New Zealand entity called Absolute Home Entertainment 2004 Limited ("Absolute") appeared to be the owner of the copyright. For various reasons which are not presently germane, the applicant refused to consent to the joinder of Absolute to the proceeding. On 17 October 2008 I ordered that Flashback's proceeding be stayed until Absolute was joined: see Flashback Holdings Pty Ltd v Showtime DVD Holdings Pty Ltd [2008] FCA 1541. 3 On 24November 2008, Flashback applied to lift the stay and to join Gaiam Inc as the copyright owner. It transpired that Absolute had, in fact, merely been a licensee from Gaiam Inc. I granted leave to join Gaiam Inc to the proceeding, and on an undertaking to amend the statement of claim accordingly, I lifted the stay: see Flashback Holdings Pty Ltd v Showtime DVD Holdings Pty Ltd (No 2) [2008] FCA 2008. At the same time, there was evidence before me suggesting a possible dissipation by Showtime of its assets and the possible sale by it of various films, which may have included the impugned children's DVDs. I ordered the filing by Showtime of an affidavit as to its assets and liabilities, and which also identified the videos which were, apparently, being sold by it at a particular warehouse, within seven days, that is, by 17 December 2008. 4 I made other procedural directions and fixed the matter for hearing before me on the three days commencing on 1 June 2009. The evidence before me on the question of joinder consists of a number of documents entitled "Confirmation Agreements" which are dated in or around February 2009. Putting it compendiously, the agreements purport to recite and confirm a series of transactions showing that the original copyright owner was Goodtimes Home Video Corporation, and that that copyright was assigned, transferred, or otherwise devolved to a number of entities ultimately ending up in the hands of the companies I have mentioned, that is, Gaiam Inc, Gaiam Americas Inc, GT Holdings Inc and Jaffa Road LIV Limited Partnership. 5 There is no direct evidence of any consent from these parties to be joined, but in the context of s 120 of the Copyright Act 1968 (Cth), that is probably not particularly material. In any event, it is apparent that they have participated in the preparation of the confirmation agreements, which is, I think, evidence of a lack of disinclination towards being joined. The respondents submitted that I should not join these parties because the applicant's claim that they were the copyright owners was a mere assertion. If the first and third respondents think that the copyright owner has not yet been joined, it seems to me they may apply as they have previously done for a stay under s 120. I do not propose to permit s 120 of the Act to be used as a source of endless and prolonged interlocutory disputation. 6 The applicant has evidently given considerable thought to the identity of the copyright owner, and in the absence at this stage of evidence that they are wrong, I propose to join the parties who have been nominated. The first and third respondents may take such course as they are advised. 7 I turn then to the procedural issues. Mr Ellicott, who appeared for the applicant, suggested that I should strike out the first and third respondents' defences as a result of serious and consistent failures to comply with the Court's prior orders. The matters he relied upon were five. First, he pointed to a failure by the first and third respondents to file their affidavits by 24 February 2009, in contravention of orders 4 and 6 made by me on 10 December 2008. No doubt that is a regrettable matter, but I do not think it comes close to providing the substratum necessary to strike out a defence, a most extraordinary remedy. The second and third matters were the failure by the first respondent to file an affidavit as to its assets and liabilities, and as to the identities of the videos in the first respondent's possession, by 17 December 2008. 8 An affidavit by Mr Leslie (who is the third respondent) was filed, out of time, on 24 December 2008. No application was made prior to that time for an extension. The affidavit patently does not comply with the orders made by me on 10 December 2008. It is not an affidavit setting out the assets and liabilities of the first respondent. Instead it is an affidavit setting out the assets and liabilities of Mr Leslie. It says nothing about the location of the videos and, despite the submission to the contrary, says nothing about the assets and liabilities of the first respondent. There was an argument put by Mr Lindsay that the third page of the affidavit showed that the first respondent had no assets. What that page in fact shows is Mr Leslie's balance sheet which in turn suggests that his shareholding in the first respondent is valueless. The documents are so obscure and lacking in substance that I do not think that the inference which Mr Lindsay suggests should be drawn. Indeed, during argument Mr Lindsay suggested, in answer to a question from me, that the first respondent may be insolvent. It seems to me in that circumstance that what has taken place is a serious breach of the Court's orders. Be that as it may, I do not think it is appropriate yet to strike out the first respondent's defence for non-compliance. 9 The fourth matter relied upon by the applicant was a failure by the first and third respondents to give discovery. Discovery was due by 18January 2009. Following that date it was suggested by the first and third respondents that a confidentiality regime needed to be implemented. As I understand it, that confidentiality regime was provided by the applicant on or around 18 February 2009, and yet discovery has still not been given. No explanation was proffered at the hearing as to why this lamentable state of affairs has come to pass, other than that it was said, for the first time as I understood it, that counsel for the applicant, being Mr Ellicott, had not yet signed the confidentiality undertaking. That seems to me to be a wholly absurd suggestion as a reason for why discovery could not have been provided at least to Mr Ellicott's instructing solicitors. I do not, however, think that it is a proper basis for striking out their defences. 10 The fifth matter which was relied upon was a suggestion that there had been a prior breach of an injunction by Rares J and there was evidence before me to suggest that the first and third respondents had breached an injunction in June 2008. That was a matter raised before Branson J at an earlier stage, but nothing further was done. It was submitted to me that there was a possible answer to it, and had it been pursued that answer might have been articulated. It seems to me that the fifth matter is raised rather too late for me to do anything about it now. Accordingly, the proper position is that I should not strike out the defences, but having regard to the manner in which the first and third respondents appear to be prosecuting their defence of the proceeding, that I should impose a timetable which is both rapid and strict. 11 I should say for completeness that the first and third respondents proposed a timetable by way of a notice of motion which I received after the hearing. However, in my opinion that timetable is too generous. I will make orders setting a new timetable, but I will not include any provision in that timetable for particulars to be requested of the pleading. This is because it is apparent that the amendments which have been articulated are strictly relating only to the addition of parties who are the copyright owners. The matters of substance in the pleadings have been alive now for a considerable period of time. I remind the parties, particularly the first and third respondents, that they are under a duty to cooperate and I wish to make it quite plain that the hearing will proceed on 1 June 2009. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.