FNH Investments Pty Ltd v Sullivan

Introduction 1 This is an appeal from a judgment of a single judge of this Court of 10 April 2003 in which his Honour awarded the first respondent, Mr Sullivan, damages and additional damages under the Copyright Act 1968 (Cth) ('the Act') and a judgment of 30 April 2003 ordering the appellant, FNH Investments Pty Ltd ('FNH'), to pay Mr Sullivan's costs (and the costs of a service company he used ('the service company') which was the second applicant below) on an indemnity basis. The proceedings concerned photographs Mr Sullivan had taken and the use of them by FNH in breach of Mr Sullivan's rights under the Act.

Background 2 The following emerges from the findings made by the primary judge. FNH operated and owned an interest in Palm Bay Hideaway Resort ('the Resort'). Mr Sullivan was a photographer who (personally or through his service company) entered a contract with FNH to take photographs of the Resort. The directors of FNH were Mr and Mrs Davidson. The general manager of the Resort was Mr Hill. Mr Davidson met Mr Sullivan on a ferry from Daydream Island where Mr Sullivan had finished a shoot for the resort there. Mr Davidson suggested that Mr Sullivan contact Mr Hill regarding the possibility of doing some photography for the Resort. 3 In November 2001 the contract was concluded for Mr Sullivan to take photographs of the Resort. The contract was partly oral and partly written. The primary judge left open the question of whether the contract was with Mr Sullivan or his service company and it is not an issue raised for determination in this appeal. The relevant written aspects of the contract were as follows: 'The estimated cost for photography is AUD $14,850.00 Terms of License On receipt of full payment, the Client is thereby licensed to use the photography in production of advertising, marketing and collateral material throughout Australia for 2 years unless otherwise agreed. Conditions … Prior to the commencement of the assignment, the Agency agrees to pay the Photographer 50% of fees and expenses in advance. … Balance of account to be paid within 30 days of invoice.' 4 FNH paid Mr Sullivan $7425 in advance. It was not in issue that the fees agreed were $14,850 notwithstanding the use the expression 'estimated cost'. 5 Mr Sullivan took photos over five days in December 2001. On three of those days he engaged his girlfriend, his brother and his brother's girlfriend as models. None were professional models and FNH paid for their accommodation and travel expenses. Though playing a significant role in the operation of the Resort, Mr Davidson left the day to day implementation of the photography project to his wife and Mr Hill. In accordance with Mr Sullivan's usual practice, he took Polaroids before the shoot and showed them to Mrs Davidson and Mr Hill who approved the shoot based on the Polaroids. Within two weeks he sent a selection on compact disc to Mr Hill. From a conference call with Mrs Davidson and Mr Hill it emerged that the Davidsons were unhappy with the quality of the photographs. There was discussion about Mr Sullivan retouching one of the photographs which he did and emailed to Mr Hill the same day. 6 On 25 January 2002, Mr Sullivan sent 61 original photographs to Mr Hill accompanied by a letter stating that he would issue 'the appropriate usage licence' for the photographs when the balance of the account was paid. The letter also stated: 'As you probably already know, any use of the material prior to the issuing of the licence, constitutes a breach of copyright.' 7 On 29 January 2002, Mr Hill wrote to Mr Sullivan advising him of FNH's disappointment with the quality of photographs. The relevant aspects of the letter were as follows: '…we would like to propose a re-shoot, under taken at your own expense, to ensure that we receive the quality product promised. … Unfortunately, until we receive the same quality that was offered by you and displayed on your website, we find ourselves in the uncomfortable position of withholding the remaining money until such time that we are satisfied with the end product. … …we feel that we have been most accommodating with your requests even to the point of not chasing you for your outstanding charges that were not settled upon departure from the Resort.' 8 Mr Sullivan told Mr Hill that he was not prepared to do a re-shoot at his own expense. There was an issue at the trial about the quality of the photographs. The evidence of one expert called by FNH was that the photos were, overall, only of average quality. However, speaking at a level of generality, the trial judge did not accept that evidence. 9 On 9 March 2002 the Sydney Morning Herald published a photo in an advertisement for the Resort. Mr Sullivan saw the photograph and it bore a remarkable resemblance to one of his. By that time, FNH had prepared a brochure using Mr Sullivan's photographs. It contained four photographs, three of which were certainly taken by Mr Sullivan. On 19 March 2002, Mr Sullivan sent an email to Mr Hill requesting that the balance of his account be settled. There had been no complaint about any of the photos used in the advertisement or the brochure. 10 Mr Davidson replied by letter to Mr Sullivan that FNH was 'disappointed' with Mr Sullivan's photographs which were said to be 'almost useless'. Taking what the trial judge found to be 'plainly a very aggressive stance' Mr Davidson also said: 'You are not entitled to be paid for what you have delivered and I will fight you tooth and nail before I agree to the balance of your account. You are totally unprofessional and nothing short of a rip-off.' 11 On 9 April 2002 Mr Sullivan's solicitors wrote to FNH requesting payment of the outstanding balance under threat of legal action for infringement of copyright and breach of contract. The letter detailed three infringements of Mr Sullivan's copyright. They were first, by publishing the brochure containing the photos, secondly, by permitting the photographs to be published in magazines (namely 'Vogue Entertainment and Travel' and 'Conde Nast Traveller') and on websites and thirdly, by converting images from the film to digital format. 12 On 19 April 2002 FNH's solicitors wrote to Mr Sullivan's solicitors saying that FNH was 'completely dissatisfied' with the photographs. The letter went on to say: 'Our client acknowledges that it is using three photographs produced by your client. This is a matter of necessity, not choice. Our client needed some photographs for brochures that were just about to be printed. You have our client's assurance that none of the remaining photos will be used. Our client engaged another photographer to take photos on the island. These photos have now been produced. As soon as the new promotion material is printed the existing brochures will be destroyed. Only the new photographs will be included.' 13 Though new photographers were engaged, their photographs were not used in the brochure or other publications. 14 On 23 April 2002 the respondents' solicitors wrote again to FNH's solicitors advising them of the respondents' intention to take legal action in light of their wilful and continuing infringement. Throughout April and May 2002, FNH continued to circulate the brochure. 15 The proceedings in this Court were commenced by an application filed on 22 May 2002. After this date, brochures continued to be distributed. Mr Sullivan's solicitors wrote again to FNH stating that it was clear that FNH was 'intent on taking every possible opportunity to further infringe our client's copyright for its own commercial advantage'. After this letter there was another delivery of brochures on behalf of FNH to a person who had requested them toward the end of May 2002. Also, as late as 18 July 2002, Mr Hill gave instructions for a further brochure to be prepared using Mr Sullivan's photos (although publication of this brochure did not go ahead). 16 The primary judge accepted that at no point did Mr Davidson give instructions to any of the Resort's employees to withdraw the brochures from circulation after the warning from the applicant's solicitors and notwithstanding the commencement of proceedings. Nor did FNH, in the course of proceedings, offer to pay the sum of $7425.