Micro Focus (US) Inc v State of New South Wales

Solicitor for the Third Respondent: Baker & McKenzie

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 640 of 2011

AND: STATE OF NEW SOUTH WALES (NEW SOUTH WALES POLICE FORCE)

STATE OF NEW SOUTH WALES (NEW SOUTH WALES OMBUDSMAN)

JUDGE: JAGOT J DATE OF ORDER: 15 JULY 2011 WHERE MADE: SYDNEY

1. The third respondent's notice of motion filed 28 June 2011 be dismissed.
2. The third respondent pay the applicants' costs of the notice of motion as agreed or taxed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 640 of 2011

AND: STATE OF NEW SOUTH WALES (NEW SOUTH WALES POLICE FORCE)

STATE OF NEW SOUTH WALES (NEW SOUTH WALES OMBUDSMAN)

JUDGE: JAGOT J DATE: 15 JULY 2011 PLACE: SYDNEY

INTRODUCTION 1 By a notice of motion filed on 28 June 2011 the third respondent, the State of New South Wales (New South Wales Ombudsman) (the NSW Ombudsman), seeks orders setting aside, dismissing or staying the proceeding against it. 2 The proceeding involves allegations of breach of copyright. Insofar as the NSW Ombudsman is concerned, the applicants claim that since at least July 2010 the NSW Ombudsman has infringed the applicants' copyright in a computer software program known as "ViewNow for Mainframe" (ViewNow) by reproducing in material form the whole or a substantial part of one or more versions of ViewNow. The applicants claim relief against the NSW Ombudsman under s 115(2) of the Copyright Act 1968 (Cth) (the Copyright Act) consisting of an order restraining the NSW Ombudsman from reproducing the whole or a substantial part of ViewNow without the licence of the third applicant, damages (including additional damages), and an account of profits. 3 The NSW Ombudsman contends that s 35A of the Ombudsman Act 1974 (NSW) (the Ombudsman Act) provides protection from liability for the alleged infringement of copyright, with the consequence that the proceeding against it cannot be maintained or has no reasonable prospect of success. According to the NSW Ombudsman it follows that the application against it should be set aside (O 9 r 7 of the Federal Court Rules) or the proceeding dismissed to that extent (s 31A of the Federal Court of Australia Act 1976 (Cth)). Alternatively, the NSW Ombudsman contends that the proceeding should be stayed unless and until leave is granted by the Supreme Court of New South Wales for the bringing of the proceeding as required by s 35A(2) of the Ombudsman Act. In answer the applicants contend that s 35A(1) (and thus s 35A(2)) of the Ombudsman Act is not engaged by their claims. Alternatively, if s 35A is engaged, the applicants say that the Copyright Act (as Commonwealth legislation) provides otherwise to s 35A so that, to this extent, s 35A of the Ombudsman Act (being State legislation) is not binding on this Court under s 79 of the Judiciary Act 1903 (Cth) (the Judiciary Act). 4 To understand these competing contentions, further information about the facts and statutory provisions is required.

facts 5 The facts, for present purposes, are not in dispute. Consistent with the amended statement of claim filed on 14 June 2011 it must be assumed that ViewNow, including all versions thereof, is an original literary work in which copyright subsists for the purposes of the Copyright Act. Further, it must be assumed that since 1 November 2010 the third applicant has owned the copyright subsisting in ViewNow and that, before that date, the first and then the second applicant owned the copyright subsisting in ViewNow. It must also be assumed that the NSW Ombudsman, since at least July 2010, has reproduced in material form the whole or a substantial part of one or more versions of ViewNow without any licence from the copyright owner to do so and, thereby, has infringed copyright in those works. 6 According to Vincent Riordan, an officer of the NSW Ombudsman whose evidence was not challenged, the NSW Ombudsman and officers of the NSW Ombudsman use ViewNow on their computers to access the computerised records of the New South Wales Police Force (the NSW Police Force) relating to all police operational activity - a system known as COPS (the Computerised Operational Policing System). The NSW Ombudsman and officers of the NSW Ombudsman use ViewNow for the purpose of exercising functions under Pt 8A of the Police Act 1990 (NSW) (the Police Act), which empowers the NSW Ombudsman to investigate complaints against the NSW Police Force and to monitor investigations of the NSW Police Force conducted by the Commissioner of Police (NSW), as well as to keep under scrutiny the systems established within the NSW Police Force for dealing with complaints and to provide special reports to the NSW Parliament on any matter arising in connection with these functions. 7 Mr Riordan's evidence discloses a disjunction between the applicants' case and the answer of the NSW Ombudsman which should be noted immediately. Copyright does not protect against use. The rights which copyright protects in respect of a literary work are specified in s 31 of the Copyright Act as the right to "reproduce the work in a material form", to "publish the work", to "perform the work in public", to "communicate the work to the public" and to "make an adaptation of the work". The applicants contend that the NSW Ombudsman has infringed copyright by reproducing (that is, copying) the whole or a substantial part of ViewNow. The relevant acts, accordingly, are the acts involved in the reproduction of ViewNow (which must be assumed for the purposes of the present application to have taken place). As presently particularised, the acts of reproduction in question are the installation of ViewNow so as to enable about 25 users within the office of the NSW Ombudsman to have access to that software (and, by the software, to the COPS database). The applicants' submissions disclose a possible amendment to their claim insofar as the act of using ViewNow may also reproduce, in whole or as to a substantial part, the software program, thereby giving rise to further infringements. As matters presently stand, however, the applicants' claim is that the NSW Ombudsman has copied ViewNow onto computers within the NSW Ombudsman's office without a licence to do so and has thus infringed copyright.

THE IMMUNITY PROVISION 8 Section 35A of the Ombudsman Act provides as follows: (1) The Ombudsman shall not, nor shall an officer of the Ombudsman, be liable, whether on the ground of want of jurisdiction or on any other ground, to any civil or criminal proceedings in respect of any act, matter or thing done or omitted to be done for the purpose of executing this or any other Act unless the act, matter or thing was done, or omitted to be done, in bad faith. (2) Civil or criminal proceedings in respect of any act or omission referred to in subsection (1) shall not be brought against the Ombudsman or an officer of the Ombudsman without the leave of the Supreme Court. (3) The Supreme Court shall not grant leave under subsection (2) unless it is satisfied that there is substantial ground for the contention that the person to be proceeded against has acted, or omitted to act, in bad faith. 9 It may be accepted, as the NSW Ombudsman submitted, that the office of the Ombudsman is unique, with the Ombudsman exercising extensive powers in the public interest for the purpose of improving public administration and accountability (Ainsworth v The Ombudsman (1988) 17 NSWLR 276 (Ainsworth) at 283 and Botany Council v The Ombudsman (1995) 37 NSWLR 357 at 367-368). It may also be accepted that the NSW Ombudsman and officers thereof only use ViewNow for the purpose of exercising functions conferred on the NSW Ombudsman by the Police Act (noting that s 6(8) of the Ombudsman Act provides that the Ombudsman may exercise functions conferred or imposed by the Ombudsman Act or any other Act). It may further be accepted that use of the ViewNow system provides an effective and efficient means for the NSW Ombudsman and officers thereof to discharge their statutory functions under Pt 8A of the Police Act. All these matters may be accepted without leading to the conclusion that s 35A of the Ombudsman Act is engaged so as to protect the NSW Ombudsman from liability for infringements of copyright as alleged in this case. 10 It was common ground that provisions such as s 35A are to be strictly construed (Board of Fire Commissioners of New South Wales v Ardouin (1961) 109 CLR 105 (Ardouin) at 116). The NSW Ombudsman nevertheless emphasised the breadth of the language of s 35A(1) (noting that the protection from liability applies "in respect of any act, matter or thing done or omitted to be done for the purpose of executing this or any other Act…"). According to the NSW Ombudsman, any act of reproducing ViewNow would have been done for the sole purpose of accessing the COPS database and thus for the sole purpose of complying with statutory obligations and exercising statutory discretions. Any such act must thereby fall within the protection of s 35A(1). This, it was said, is the necessary consequence of the pleading against the NSW Ombudsman (at para 50 of the amended statement of claim) that the Ombudsman has used and uses computer software and hardware "for the purpose of carrying out its functions". 11 It is apparent that the NSW Ombudsman's submissions assume that the words "for the purpose of executing this or any other Act" mean "as a step along the way in executing", "with the ultimate object of executing", or "so as to enable or facilitate the execution of" the the Ombudsman Act or any other Act. This not the ordinary or natural meaning of those words. Nor is it the construction which would be adopted on a strict interpretation of those words (which the NSW Ombudsman acknowledged is required). A statutory office-holder executes an Act by doing something the Act requires or authorises to be done. Acts, matters or things done or omitted to be done for the purpose of executing an Act, accordingly, occur in the process of doing that which the Act requires or authorises. On this basis, the first and most obvious answer to the NSW Ombudsman's contention is that the act of copying software onto a computer without the licence of the owner of the copyright in the software is not something which either the Ombudsman Act or the Police Act requires or authorises to be done. 12 This construction of s 35A(1), moreover, accords with common sense and authority. In terms of common sense, the NSW Ombudsman and officers thereof presumably do many things "as a step along the way in executing", "with the ultimate object of executing" or "so as to enable or facilitate the execution of" the Ombudsman Act and other relevant Acts. The things done for that purpose may extend to provision of accommodation for the Ombudsman's office, the provision of furniture and equipment for that office, the employment of officers to perform tasks delegated by the Ombudsman, the training of officers for their employment, the attendance by officers at work or other premises for their employment, and so on. But none of those things is done "for the purpose of" executing any Act. 13 In terms of authority, it is true that immunity provisions differ and close attention must be paid to the terms of the particular provision in question. Nevertheless, a number of decisions indicate that the NSW Ombudsman's contentions are inconsistent with the weight of authority. In Ardouin a provision of the Fire Brigades Act 1909-1956 (NSW) provided immunity from liability for any damage caused in the bona fide exercise of powers conferred by the Act or by-laws. Although the NSW Fire Brigade was bound to proceed with all speed to a fire, the provision was held not to protect against liability for negligent driving of a fire truck to a fire. Dixon CJ considered that the provision was directed at the exercise of statutory powers which "of their nature… involve interference with persons or property", or which "[depend] upon the statute and [involve] detriment or disadvantage to others, either necessarily or in consequence of [their] improper or faulty exercise". As driving along a public road in a fire truck was an act "of an ordinary character involving no invasion of private rights and requiring no special authority", the provision was not engaged (at 109-110). Kitto J considered that, to be protected, the act had to be the "very thing, or an integral part of or step in the very thing" which the Act or by-laws empowered to be done and not "an act which was merely incidental to, or done by the way in the course of, the exercise of a power" (at 117). Taylor J considered that it would be erroneous to treat the expression "powers conferred by this Act" as including the "aggregate of the capacities which the Board [of Fire Commissioners] enjoys as a body corporate" as opposed to the "extraordinary powers" conferred on the Board so it could exercise its functions (at 124). 14 Dixon CJ's approach in Ardouin would limit s 35A(1) of the Ombudsman's Act to acts or omissions in the course of the exercise of statutory powers which involve "interference with persons or property" - the most "conspicuous" examples of which, according to Dixon CJ, were acts which would otherwise be illegal (at 109). In the case of the NSW Ombudsman, such acts might include acts done in the course of obtaining information and investigating complaints, as well as monitoring such investigations and reporting thereon. However, the description would not apply to acts such as the installation of software, which does not of its nature involve interference with persons or property, does not depend on the Ombudsman Act or any other Act, and does not entail any necessary detriment to others. If the approach of Kitto or Taylor JJ is applied, the conclusion which should be drawn is that copying software onto a computer is not the "very thing" which the NSW Ombudsman does under Pt 8A of the Police Act. Nor is it an integral part of or step in that very thing. It is at best preliminary to the "very thing" the NSW Ombudsman does under Pt 8A of the Police Act. Further, copying software onto a computer is not a power vested in the NSW Ombudsman under any Act; it is merely part of the aggregate of powers which the NSW Ombudsman enjoys. 15 In Puntoriero v Water Administration Ministerial Corporation (2000) 199 CLR 575; [1999] HCA 45 (Puntoriero) the immunity provision protected against liability for loss or damage suffered as a consequence of the exercise of a statutory function. Gleeson CJ and Gummow J adopted the approach of Dixon CJ in Ardouin and construed the provision as operating only in respect of acts in the exercise of functions which of their nature involve interference with persons or property (at [18]). McHugh J, at [35], noted that: Understandably, the legislature might wish to protect the authority from actions which the statute would otherwise have authorised. It is another matter to read such provisions as protecting ordinary actions for breach of contract or negligence where the actions can be carried out without the need for specific legislative authority. 16 Callinan J, at [116], concluded that it was no part of the respondent's functions to introduce phytotoxins to crops (the act in respect of which the immunity provision was claimed to operate), with the consequence that the immunity provision was immaterial and the ordinary principles of negligence applied. 17 Applying the approach of McHugh J in Puntoriero, the NSW Ombudsman required no statutory authority to install software on the computers used by the Ombudsman or the Ombudsman's officers. This could be done without any specific legislative authority. In terms of the approach of Callinan J it was no part of the NSW Ombudsman's functions to copy software onto a computer in breach of copyright. 18 Although The Ombudsman v Laughton (2005) 64 NSWLR 114; [2005] NSWCA 339 (Laughton) concerned the relationship between two State Acts, the same approach is evident. Spigelman CJ said that s 35A of the Ombudsman Act must be construed purposively. The purpose of the section is to "protect from challenge the substantive conduct of the Ombudsman", with the consequence that the words "'executing (an) Act' do not necessarily extend to the performance of any statutory function or the exercise of any statutory power" (at [25]). Handley JA construed the words "in respect of any act, matter or thing done or omitted to be done for the purpose of executing this or any other Act" as "words of limitation which confine the protection afforded by the section to acts or omissions done or omitted in exercising or refusing to exercise the statutory powers of obtaining information and investigating complaints conferred by the Act" (at [29]). On either approach the copying of software onto a computer to enable access to the COPS database is outside the scope of s 35A. The act of copying is not "substantive conduct" of the NSW Ombudsman but conduct preliminary or incidental thereto. The act of copying is also not done in the exercise of or refusal to exercise the NSW Ombudsman's powers of obtaining information or investigating complaints. It is done merely in order to provide the NSW Ombudsman with a method or means of facilitating the exercise of the Ombudsman's powers of obtaining information or investigating complaints. In this sense, acquiring software is no different from acquiring any tool to assist in the exercise of those powers such as a laptop, a photocopying machine or the like. 19 The decisions in Ainsworth and Commissioner of Police v The Ombudsman (unreported, Supreme Court of New South Wales, Sackville AJ, 9 September 1994) concerned judicial review of the NSW Ombudsman's substantive exercises of power. As such, s 35A of the Ombudsman Act applied, consistent with the decisions referred to above. It is apparent from the observations of Sackville AJ in Commissioner of Police v The Ombudsman (at p 13) that both cases concern the application of s 35A to judicial review of the conduct of the NSW Ombudsman and do not concern other causes of action. 20 For these reasons I do not accept the contention of the NSW Ombudsman that s 35A(1) of the Ombudsman Act is engaged in this case. It follows that the requirement for leave under s 35A(2) is also inapplicable. This conclusion also renders moot the applicants' other answer to the NSW Ombudsman's notice of motion, that by s 79 of the Judiciary Act s 35A does not apply to this proceeding. This argument of the applicants depended on s 35A(1) being construed as the NSW Ombudsman contended. I deal with the arguments about s 79 of the Judiciary Act below.

THE JUDICIARY ACT 21 Section 79 of the Judiciary Act is in these terms: The laws of each State or Territory, including the laws relating to procedure, evidence, and the competency of witnesses, shall, except as otherwise provided by the Constitution or the laws of the Commonwealth, be binding on all Courts exercising federal jurisdiction in that State or Territory in all cases to which they are applicable. 22 The applicants submitted that if the proper construction of s 35A(1) of the Ombudsman Act were as the NSW Ombudsman contended then, pursuant to s 79 of the Judiciary Act, s 35A(1) (as a law of the State) was binding on this Court except "as otherwise provided" by the Copyright Act (as a law of the Commonwealth). As s 35A(1) excluded liability for the infringement of copyright in this case, and the Copyright Act provided for such liability, the Copyright Act "otherwise provided" within the meaning of s 79. As a result there was no scope remaining for the operation of s 35A(1) of the Ombudsman Act. 23 The difficulty this issue poses is that the facts of the present case, for the reasons outlined above, are far removed from the circumstances by which s 35A(1) of the Ombudsman Act might be engaged on a purposive construction of the section. In the present case the applicants are strangers to any exercise of statutory power by the NSW Ombudsman. They are not the subject of or in any way affected by any such exercise of statutory power. The only connection between the applicants and the NSW Ombudsman is that, on the applicants' case, the NSW Ombudsman has gained access to versions of the applicants' ViewNow software and copied that software without having obtained the applicants' licence to do so, thereby infringing the applicants' copyright in their software. By this proceeding the applicants seek only to vindicate their exclusive right to reproduce their software and to protect it from infringements by the NSW Ombudsman's acts of alleged unauthorised reproduction. The description of the factual circumstances of this case and the discussion above disclose why it is well beyond the scope of s 35A(1), a section concerned with protecting the NSW Ombudsman from liability for substantive exercises of statutory powers to obtain information, investigate conduct, monitor investigations and report thereon. The difficulty is that the factual circumstances of this case are so far outside the contemplation of s 35A(1) that they invite an inappropriate approach to s 79 of the Judiciary Act. 24 In short, if s 35A(1) of the Ombudsman Act operates to protect the NSW Ombudsman from liability for copyright infringement in all circumstances other than those involving an exercise of bad faith (and even then conditions the ability to bring proceedings on a grant of leave), the conclusion that the Copyright Act "otherwise provides" for the purposes of s 79 is attractive. The Copyright Act binds the Crown including in right of the States (ss 7 and 10 of the Copyright Act). It also provides specific remedies for copyright infringement (Pt V of the Copyright Act, ss 115 and 116 in particular). At least insofar as the NSW Ombudsman is concerned s 35A(1), if construed in accordance with the Ombudsman's submissions, might be said thereby to so reduce the ambit of the Copyright Act as to be irreconcilable with it (Northern Territory of Australia v GPAO (1999) 196 CLR 553; [1999] HCA 8 at [81] and Austral Pacific Group Limited (in liquidation) v Airservices Australia (2000) 203 CLR 136; [2000] HCA 39 at [17]). See, by (albeit imperfect) analogy, Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd (2007) 164 FCR 450; [2007] FCA 1216 at [32]-[34]. 25 If s 35A(1) of the Ombudsman Act is properly construed, however, different considerations come into play. For the reasons given above, s 35A(1) must be construed purposively. The section provides immunity for a limited class of acts and omissions of the NSW Ombudsman and officers thereof. The section does not confer immunity for acts or omissions merely because they are acts or omissions of the NSW Ombudsman or its officers. The section does not confer immunity for acts or omissions merely because they are acts or omissions preparatory to or which facilitate or enable the performance of any statutory power of the NSW Ombudsman or its officers. Nor does the section confer immunity for acts or omissions merely because they are acts or omissions incidental to the performance of any statutory power of the NSW Ombudsman or its officers. As Handley JA said in Laughton, the words "in respect of any act, matter or thing done or omitted to be done for the purpose of executing this or any other Act" are words of limitation. They confine the scope of the section to acts or omissions which arise in the actual execution of the NSW Ombudsman's statutory powers to obtain information, investigate conduct, monitor investigations and report thereon. Once this is accepted, it is difficult to characterise the Copyright Act as "otherwise providing" within the meaning of s 79 of the Judiciary Act. The immunity conferred on the NSW Ombudsman and its officers is limited in scope and extent. If, in actually executing its statutory powers to obtain information, investigate conduct, monitor investigations and report thereon, the NSW Ombudsman or an officer thereof acting in good faith infringes copyright, it is not difficult to accept that s 35A(1) of the Ombudsman Act would confer immunity from liability in that respect. It is also not difficult to accept that the nature and degree of inconsistency with the Copyright Act would be insufficient, in those circumstances, to found the conclusion that the Copyright Act "otherwise provides" for the purpose of s 79 of the Judiciary Act. 26 In other words, in the present case, it is inappropriate to attempt to resolve the operation of s 79 of the Judiciary Act on an assumed construction of s 35A(1) of the Ombudsman Act which I do not accept and in circumstances which appear to be to be far removed from those which s 35A(1) is intended to cover.

CONCLUSION 27 Section 35A(1) of the Ombudsman Act does not protect the NSW Ombudsman from liability in respect of the applicants' claims in this case. Accordingly, the notice of motion must be dismissed. Costs should follow the event. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.