Generate Group Pty Limited v Sea Tech Automation Pty Limited

PARTIES : Generate Group Pty Limited (Plaintiff) Sea Tech Automation Pty Limited (Defendant)

COUNSEL : Mr T Brennan (Plaintiff) Ms C Cochrane (Defendant)

SOLICITORS : SBA Lawyers (Plaintiff) Diamond Conway Lawyers (Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

Tuesday 20 March 2007 ex tempore Revised 21 March 2007

1687/07 Generate Group Pty Limited v Sea-Tech Automation Pty Limited JUDGMENT The state of these proceedings 1 The interlocutory hearing of these proceedings took place on 12 March 2007. Judgment was reserved and was delivered on 15 March 2007. 2 There is before the Court a notice of motion under cover of which the defendant seeks orders "that the Court's reasons for judgment delivered on 15 March 2007 be recalled and that the Court give different reasons for judgment that omit paragraph 71". The principles 3 Neither party has taken issue with the principles which obtain in relation to an application of the present type. Those principles found expression in Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300 at 302-303 where Mason CJ identified various circumstances in which, under the authorities, the Court has exercised the jurisdiction to reopen a judgment which had apparently miscarried. The guiding principle as stated by Mason CJ at 302 is as follows:

"These examples indicate that the public interest in the finality of litigation will not preclude the exceptional step of reviewing or rehearing an issue where a court has good reason to consider that in its earlier judgment, it has proceeded on a misapprehension as to the facts or the law." 4 Plainly enough, the current notice of motion deals with an interlocutory judgment and not a final judgment. 5 In Twenty-First Australia Inc v Shade [unreported, Supreme Court of New South Wales, Young J (as the Chief Judge in Equity then was), 31 July 1998], observed that the procedure in the Equity Division has been that because counsel are in court to assist the judge rather than with the prime purpose of winning the case, a freer attitude is taken to reopening decisions than may be the case elsewhere. Notwithstanding that observation special care plainly requires to be taken before a decision is reopened: the touchstone inheres in the interests of justice. The burden of the submissions in support of notice of motion 6 The burden of the submissions put by Ms Cochrane of counsel in support of the notice of motion draws attention to paragraph 71 of the reasons for judgment, which was in the following terms: "71. Further considerations include the following: i. The defendant admits that the plaintiff owns the copyright in the object code of the computer programs in question in these interlocutory proceedings.

ii. In those circumstances the defendant is unable to commercially use or reproduce any of those computer programs.

iii. Assuming the defendant owns the copyright in the source code, that code can only have commercial value to the defendant to the extent that the defendant might so modify the source code that any object code version it produces on compilation would not constitute a substantial reproduction of the plaintiff's copyright.

iv. There is no suggestion that that circumstance is technically feasible, let alone actually contemplated by the defendant.

v. It arguably follows that the defendant gains no commercial advantage (other than that which might flow from its ability to do damage to the plaintiff) from the situation which will apply if the interlocutory relief sought by the plaintiff is not granted." [emphasis added] 7 The particular proposition for which Ms Cochrane contended was that paragraph 71 did not reflect the manner in which the interlocutory hearing is said to have been conducted for the reason that the defendant, it is now said, did not admit that the plaintiff owned the copyright in the object code of the computer programs. The contention is that it is and was the defendant's case that, regardless of whether the plaintiff had title to the chattel that is the computer software, the defendant at all times retained copyright in the entirety of the computer program, regardless of whether it is written in source code or object code. Returning to the interlocutory hearing 8 As will have been apparent from the judgment which was delivered there were many issues, both of fact as well as of law, which were the subject of close examination through the respective submissions, both in writing as well as from the Bar table. 9 At one stage through the hearing of the interlocutory application the Court put a number of questions to Ms Cochrane about the definition to be found in clause 7 of the subject agreement, which provided:

"Title in the partially completed software shall vest in the customer as at the date hereof." 10 The material portion of the transcript [at 68-69] was as follows: His Honour: "Could I just ask you a question about the definition of "title" in the agreement on page 3? It says, "Title in the partially completed and completed software shall vest in the customer as at the date hereof". My question really asks you to leave aside the problems with the words "as at the date hereof" and to just focus on the rest of the sentence. What is "partially completed" and what is - I suppose one ought to know what completed software is - but "title in partially completed software shall vest in the customer"? That is a curious form of words "partially completed software". 11 Ms Cochrane then took the Court back to a diagram which she had appended to her earlier submissions and in response to the question put to her by the Court the transcript records Ms Cochrane as saying, inter alia,

"Ms Cochrane: So the diagram at point 4, that is the partially completed software program, that it is an evaluation program that is provided to the customer and it is provided to evaluate the program and so forth, whereas it is the completed program at point 5 that is the one that is installed and so what we have in this case is the version 5 software that is completed, and that is a completed program, it is installed at end users' sites, whereas the version 6 software is still an evaluation program.

His Honour: You say your box number 4 is to be equated to the term "partially completed software"?

His Honour: And so its then title, subject to the proper construction of the words "as at the date hereof", title as soon as the software is partially completed for beta program purposes vests in the customer. That is how you read that clause?

Ms Cochrane: Yes ...". 12 Ms Cochrane then, as the transcript records, continued to draw the Court's attention to the Charles Dickens' case [In re Dickens; Dickens v Hawksley [1935] Ch 267] and to the proposition that in the context of the subject agreement, simply because a person obtained title to a chattel, a computer disk with a program on it, did not mean that that person obtained copyright to the whole of the program. 13 Later in the same transcript at pages 79 to 80 Mr Brennan of counsel appearing for the plaintiff is recorded as putting the following matters to the Court:

"Mr Brennan: On the question of what 'title' means in clause 7, your Honour, the concession which my friend made that what is in box [4] is that to which title passes, as I understood the submission at least it was that that equates to partially completed software… My submission when you go to the Apple case, on which we both rely, and then the other High Court cases that have been cited, the court has been consistent in dealing with this distinction between source code and object code and saying they're different code versions of the one program and so if it be the case that the object code version in box 4, the title to that, meaning intellectual property rights to that, has passed to the plaintiff, in my submission it follows as night follows day that title to the source code passes. This is not a case that is analogous to Dickens for the reason that the title passes to software and software is defined as 'programs developed under the agreement'." [emphasis added] 14 It is plain enough, it seems to me, that not only I but also Mr Brennan had formed the view that the concession to which Mr Brennan referred, had been made during the argument put by Ms Cochrane. 15 The Court accepts that Ms Cochrane, as she has today put to the Court from the Bar table, did not intend to concede in the section of the transcript to which I have adverted, that the plaintiff owned the copyright in the object code of the computer programs. It is true to say that Ms Cochrane commenced the answer to which I have referred at transcript page 69 line 31 with the word "Yes" and then continued to refer to a particular distinction. 16 It seems to me, with the greatest respect to Ms Cochrane, that both Mr Brennan and the Court were entitled to draw the conclusion from what had actually been said in answer to the Court's question, that the concession has been made. 17 Nonetheless, the matter being interlocutory and being apparently of special sensitivity to the defendant, the Court clearly has a discretion to reopen the judgment for the purpose of making clear that the defendant on the motion today has strongly contended that it should not have been taken to make the concession, did not make the concession and that Ms Cochrane had no instructions to make the concession. Other considerations 18 Returning to the proper exercise of the discretion to permit the judgment to be reopened, the following may be said:

1. The whole of what appears in paragraph 71 constituted only one of a number of matters which informed an assessment of the relevant balance of convenience.

2. There was, as the plaintiff has today pointed out, at least some material then before the Court in support of the proposition that back in January 2007, the defendant had taken the stance that there was a distinction in the market between copyright in the source code and copyright in the object code and that the reference to the word "programs" in the contract meant the object code that was recognised by a computer. In this regard that correspondence involved (A) a letter from the plaintiff's solicitors to the defendant's solicitors of 24 January 2001 reading: "Your client's position appears to be founded on the proposition that: A distinction is to be drawn between the copyright in the source code of the relevant computer programs in the copyright object code of those programs; and the effect of the contract between our respective clients is to provide that our client owns the object code copyright and your client owns the source code copyright."

(B) an email from the defendant's solicitors reading, inter alia: "We note the comments [in SBA's letter of 24 January 2007] regarding your client's position concerning the source code ... . Our instructions are that there is a distinction in the market between source code and object code and that the reference to 'programs' means the object code that is recognised by a computer." 19 It is in any event clear that even without the inclusion of any part of paragraph 71 of the judgment delivered on 15 March 2007, the very same decision would have been reached on the balance of convenience issue, addressed in a number of other paragraphs of the same judgment. 20 For those reasons the principled exercise of the discretion is not to accede to the making of an order recalling the reasons for judgment or for the Court to give different reasons for judgment that omit paragraph 71. 21 Against the event that the sensitivity to which the defendant refers and which goes to the inclusion of paragraph 71 may otherwise be material [for example, to a judicial officer called upon to hear some other interlocutory application or during submissions made on the final hearing], to my mind the principled exercise of the Court's discretion should be simply to publish these present reasons, which will make plain:

(a) that notwithstanding the manner in which the previous hearing was conducted, the defendant has now made clear that it did not intend to make the admission referred to in paragraph 71(i);

(b) that having closely considered the matters pursued on the application to reopen, the Court is entirely satisfied that, even had paragraph 71 in its entirety not been included in the judgment, the very same decision as to serious case and balance of convenience would have been reached. 22 Finally, it is common ground that the judgment did not hand down, even at an interlocutory level, any finding [in the circumstances informed by the subject agreement] as to which party had title to the source code. That matter has naturally been left for final hearing. Indeed nothing in the interlocutory judgment will bind a judge who presides over the final hearing. 23 In the result, by reason of the matters earlier set out in these reasons, there was sufficient in the materials before the Court on the interlocutory hearing to justify an interlocutory finding of the matters set out in paragraph 71. 24 For those reasons, the notice of motion will be dismissed. Costs 25 The remaining matter to be dealt with concerns costs. In that regard there is an application by the defendant that the plaintiff pay the defendant's costs of the adjournment application of 7 March 2003. There are cross-contentions as to the manner in which the costs of the hearing of the notice of motion should be treated with, in which respect the plaintiff seeks its costs of the notice of motion and the defendant contends that the costs of that notice of motion should be costs of the final proceedings. There is finally the question of costs of the notice of motion filed today dealing with the application for the Court to recall its reasons for judgment. 26 Dealing firstly with the most significant parameter of costs, namely the costs of the notice of motion seeking interlocutory relief, the judgment delivered on 15 March 2007 in self-explanatory terms travels through the number of somewhat difficult factual and legal parameters with which the Court had to deal in terms of the interlocutory application. 27 There is an important additional matter, which must be accepted. That is that the undertakings proffered to the Court by the plaintiff and referred to in paragraphs 68 and 69 of the main judgment only came forward during the hearing of the motion, as best I can recall it either late in the morning as to one of the undertakings and early in the afternoon as to the other, or in some such general sequence. 28 Ms Cochrane has submitted, and I accept, that the circumstances in which those undertakings came forward made it particularly difficult for the defendant to provide proper instructions on an informed basis. Mr Brennan contends that the undertakings which were announced in open court permitted of instructions being taken from the defendant, but to my mind, whilst certainly some attempts to take such instructions could presumably have occurred, it is particularly important that on an important case such as the present, a party being asked to closely consider the weight and significance of particular undertakings, be given a proper opportunity on an informed basis to make a decision as to whether or not the undertakings were acceptable. It is often extraordinarily difficult in the courtroom context, for parties to quickly readjust to a proffering of undertakings. 29 Certainly the giving of those undertakings represented an important issue in terms of the approach taken by the Court to the balance of convenience. 30 Another matter which Ms Cochrane has carefully addressed concerns what is suggested to have been an entirely justifiable approach taken by the defendant in its concern at the confidentiality of the source code and in its justification for resisting provision of the source code because of the high interest in its secrecy. 31 Whilst in many circumstances the Court's decision in respect of costs of an interlocutory application will be for the loser to pay the costs of the successful party, my own view is that the matters to which I have referred and the whole of the subject matter of this very bitter dispute concerning rights to which each party has claimed as particularly important source code, mandates the principled exercise of the Court's discretion being to order that costs of the notice of motion seeking interlocutory relief be costs of the proceedings. 32 In relation to the other two sets of costs, the defendant did succeed in its application for an adjournment on 7 March. That application and the matter before the Court on 7 March did lead to the Court effectively persuading the parties of the huge significance in having a very early hearing of the notice of motion. As I recall it, both parties very sensibly accepted as an accommodation an entirely new timetable to that which had been previously considered. In the event, the Court was able to deal with the matter on the following Monday and was able fairly expeditiously to produce a judgment. 33 To my mind, the principled exercise of the Court's discretion in relation to that adjournment application is to do exactly the same as with the interlocutory application for injunctive relief, namely, costs of the adjournment application of 7 March 2007 should also be costs of the cause. 34 Finally, in relation to costs of the application made today by the defendant to reopen the reasons for judgment, whilst the defendant has not succeeded in that regard, insufficient justification for a reopening being put forward, there being some question marks as to exactly how certain parts of the transcript should be read, it is true to say that the defendant has at least succeeded in obtaining from the Court in this supplementary judgment, a clear statement of what the defendant apparently always intended to put as its position. Likewise, and in relation to endeavouring to provide a seamless result which is fair to all parties, my own view is that costs of the defendant's application to reopen qua the notice of motion filed in court today should also be costs of the proceedings and orders will be made in relation to costs in the fashion I have now indicated.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.