mixed. The court refused to grant the plaintiffs' declaration that e-Text infringed the AW library due to insufficient evidence and made no finding either way (see [21], [24]). Costs in proceeding No.7088 of...
Key principles
Where the trial evidence is insufficient to establish that a software product is an infringing copy of a plaintiff's work, a declaration of infringement should not be granted...
Section 116(2) of the Copyright Act 1968 can operate to protect a defendant who, at the time of the alleged conversion, believed and had reasonable grounds for believing that the...
In exercising the judicial discretion as to costs a judge must observe the legal limits imposed by law and cannot base the exercise of that discretion on considerations outside...
Where a plaintiff makes an offer of compromise which is more favourable to the defendant than the ultimate judgment and that offer is rejected, the rules governing costs apply:...
Issues before the court
Whether the plaintiffs were entitled to a declaration that e-Text infringed the plaintiffs' copyright in the AW library or libraries.
Plain English Summary
Harper J refused the plaintiffs' request for a declaration that the e-Text software infringed the plaintiffs' AW library because the trial evidence did not establish infringement. The judge noted s.116(2) of the Copyright Act and that Mr Paul Hinkley may have had a reasonable belief covering him if infringement occurred, but made no finding either way on infringement and warned of future litigation risk. On costs, Harper J rejected arguments based on humanitarian, moral or unjust enrichment grounds as impermissible, ordered costs to follow the event in one proceeding (with Adam Hinkley to pay 4/5 and Paul Hinkley 1/5) and applied the ordinary rules governing a rejected offer of compromise in the other proceeding.
AI-generated legal information, not legal advice. Zoe can make mistakes. Check the cited source, and for advice about your situation consult a qualified Australian lawyer.
Deep Dive
1,735 words · generated 18/06/2026
What happened
This judgment, delivered by Harper J on 2 August 2001, resolves two post-judgment matters arising from earlier reasons delivered on 4 April 2001: (1) whether the plaintiffs should be granted a declaration that the software known as e-Text infringed the plaintiffs' copyright in the AW library or libraries, and (2) what costs orders should follow the judgment (see [2], [5], [11], [36], [39]).
Proper exercise of the court's discretion as to costs and permissible considerations in that exercise.
Cited legislation
No linked legislation citations have been extracted yet.
Key factual background presented in the reasons includes:
Paul Hinkley and his son executed a document in July 1995 purportedly giving Paul a licence to use the AW library for e-Text purposes, and in September 1997 Paul sought the agreement of Hotline Communications Ltd to his continued use (see [5], [8]).
On 17 September 1997 a shareholders' agreement was entered into, by which the court has found Adam Hinkley assigned his interest in the AW library to Hotline Communications; the defendants challenged the validity of that assignment at trial (see [5], [11]).
The plaintiffs sought a declaration that e-Text infringed the AW library; the defendants maintained that e-Text did not infringe and pressed licence and assignment-based defences (see [5], [8], [11]).
Harper J ultimately refused the declaration sought because the evidence at trial was insufficient to establish that e-Text was an infringing copy (see [21], [24]). The judge also made explicit cost orders. In proceeding No.7088 of 1999 the costs "follow the event" and are to be borne by the defendants, apportioned 4/5 to Mr Adam Hinkley and 1/5 to Mr Paul Hinkley (see [36]). In proceeding No.7158 of 1999 the plaintiffs had made an offer of compromise that was more favourable to the defendants than the judgment; consequently the court applied the rules that govern rejected offers of compromise: costs up to the making of the offer on a party/party basis and thereafter on a solicitor/client basis (see [39]).
Why the court decided this way
Two principal strands underlie Harper J's reasoning.
Evidence threshold for a declaration of infringement and role of s.116(2)
Harper J carefully considered the parties' factual matrix about licences and assignment and the subjective and objective aspects of Paul Hinkley's belief. The judge noted passages in his earlier reasons addressing s.2.06 of the shareholders' agreement and Paul Hinkley's conduct in seeking reassurance and tendering licence forms (see [11]). From that conduct the judge inferred that Paul did not believe his son retained copyright, but he did believe on reasonable grounds that Hotline Communications had no objection to his use of the AW library (see [11]).
Critically, Harper J states that he had s.116 in mind. Section 116(2) operates so that a defendant who believed and had reasonable grounds for believing that the copies were not infringing copies is not entitled to a pecuniary remedy other than costs. But the judge did not find, either directly or implicitly, that e-Text was an infringing copy. He expressly held the evidence was insufficient to support such a conclusion and therefore refused the requested declaration (see [15], [18], [21]). The effect is that although s.116 was a relevant consideration (and could protect a defendant if infringement were made out), the plaintiffs failed to prove infringement on the evidence before the court.
Costs discretion constrained by law
On costs, Harper J emphasised the legally constrained character of the judicial discretion (see [27]). He rejected defendants' invitations to have the court consider humanitarian principles, moral exposition, or alleged unjust enrichment when fixing costs (see [30], [33]). Those matters, the judge held, were not within the proper legal considerations for costs. Instead, the court applied orthodox cost rules: costs follow the event where appropriate and apportionment may reflect which defendant primarily engaged the litigation; and where an offer of compromise was rejected, the statutory or rule-based consequences of rejection apply (see [36], [39]).
Thus the court's decision rests on evidentiary insufficiency as to infringement and adherence to established legal controls on costs discretion and on the prescription that rejected settlement offers change the costs footing.
Before and after state of the law
Before: The relevant legal principles are well established in Australian jurisprudence and statute:
Declarations of infringement require proof; courts will not award declaratory relief unless the plaintiff establishes its case on evidence.
Section 116(2) Copyright Act 1968 limits pecuniary remedies where the defendant believed and had reasonable grounds to believe the copies were non-infringing.
Costs discretion is bound by law and the procedural rules; offers of compromise have fixed costs consequences once rejected.
After: Harper J applied those principles to decline the plaintiffs' declaratory relief because of evidentiary insufficiency and to make cost orders strictly according to the law:
The judgment underscores that invocation of s.116 is a live and important consideration where the defendant's reasonable belief can reduce remedies (see [21]).
It reiterates that moral or humanitarian appeals and unproven assertions such as unjust enrichment cannot substitute for legal basis when fixing costs (see [27], [30], [33]).
It affirms the usual operation of offer-of-compromise rules on costs (see [39]).
This case thus confirms two points in practice: the need for a sufficiently founded evidentiary basis before granting declarations of copyright infringement, and the strict limits on the matters relevant to costs.
Key passages with plain-English translation
Paragraph [11] (quoted passage)
Court text: The passage explains the judge's findings about Paul Hinkley's belief and conduct: Mr Hinkley sought reassurance and submitted licence forms, which the judge read as indicating he believed Hotline Communications would not object to his use of the AW library.
Plain English: The judge found Paul acted as if Hotline Communications did not claim copyright, and he honestly thought he had permission to use the library for e-Text.
Paragraph [21]
Court text: The judge says he did have s.116 in mind and that even if Paul infringed, s.116(2) might protect him; but crucially the judge did not find e-Text to be an infringing copy because the evidence was insufficient.
Plain English: The judge considered the statutory defence but had no evidence enough to say e-Text copied the plaintiffs' work, so he would not make the declaration.
Paragraph [24]
Court text: The judge warns he makes no finding that e-Text is not infringing and that further litigation is possible.
Plain English: Refusing the declaration is not a clean bill of health for the defendants; if they continue to use AW material, they could still be sued.
Paragraph [27]
Court text: Costs discretion is strictly limited by law.
Plain English: Judges cannot pick any reason they like when deciding who pays costs; the reasons must be legally allowed.
Paragraph [36]
Court text: Costs in No.7088 follow the event, with Adam bearing four-fifths and Paul one-fifth.
Plain English: Because most of the contested issues related to Adam and he lost most of them, he should pay most of the plaintiff's costs.
Paragraph [39]
Court text: The plaintiff's offer of compromise was better for the defendants than the judgment; hence costs consequences follow the accepted rule.
Plain English: The defendants rejected a better deal than what they got at trial, so they pay the extra costs from the moment the offer was made.
What fact patterns trigger this precedent
This judgment is relevant where:
A plaintiff seeks a declaratory judgment that a software product infringes copyright in a software library, but the evidentiary record does not clearly demonstrate copying or substantial similarity.
A defendant advances a bona fide belief (and evidence of steps taken consistent with that belief) that they had permission or that the copies were not infringing, engaging s.116(2) considerations.
Costs submissions attempt to rely on moral, humanitarian or unjust enrichment arguments rather than recognised legal bases.
A party has rejected an offer of compromise that would have left them in a better position than the eventual judgment, engaging the cost-shifting rules.
In short, where the facts are contested on ownership/licence and evidence of copying is equivocal, courts will refrain from making declarations and will be careful to apply costs rules strictly.
How later courts have treated it
The judgment itself does not record subsequent judicial treatment. The reasons emphasise established legal points (evidentiary threshold for declarations, s.116, limits on costs discretion and offer-of-compromise rules) rather than creating novel law. From the text alone we cannot identify later authorities that have followed, distinguished, or overruled this decision; the judgment functions primarily as an application of settled principles to its facts. Any analysis of subsequent treatment would require research beyond the judgment itself.
Still-open questions
From the reasoning in this judgment, several practical and legal uncertainties remain for future litigation:
The precise evidentiary standard in software copying cases: Harper J found the evidence insufficient here, but the judgment does not catalogue the precise types of technical proof that would have been adequate. Practitioners must still determine what technical and expert evidence will satisfy the court in similar cases.
The interplay between assignments, informal licences and later corporate assignments: the court found certain beliefs by Paul Hinkley but did not finally resolve all assignment challenges at this stage; how informal licence arrangements interact with formal assignment mechanics in software contexts may require fuller adjudication.
The boundaries of s.116(2): while Harper J applied s.116 conceptually, the judgment does not develop a detailed test for when a belief amounts to 'reasonable grounds' in complex software-development settings; that remains a factual inquiry but one needing clearer indicators.
Use of moral or humanitarian arguments in costs cases: Harper J rejects such considerations as legally impermissible, but questions remain about circumstances in which equitable or restitutionary remedies (separate from costs) might address alleged unjust enrichment.
Practical risk management: the judge's caution that refusal of a declaration is not an exoneration highlights continuing commercial risk for software developers who use contested libraries; clients must weigh litigation risk despite absence of declaratory relief.
Conclusion: Redrock Holdings v Hinkley is an instructive example of a court adhering to evidentiary discipline in copyright declaratory relief, applying s.116(2) as a limiting factor, and enforcing the legal limits on costs discretion and the consequences of rejected offers of compromise. For practitioners, it signals the necessity of robust technical and documentary proof when alleging or defending software copying, and the limited utility of moral argument in costs applications.
Catchwords
Judgments, Orders and Declarations - Copyright - Whether orders sought in relation to certain pieces of computer software follow from reasons for judgment - Costs orders.
Judgment (14 paragraphs)
[1]
On 4 April 2001 I delivered judgment in this matter. I have since convened the court on several occasions to enable the parties to put to me submissions concerning the orders which should follow my judgment, including orders for costs. I now deal with the latter question as well as with an application by the plaintiffs for a declaration that in the development of the software known as "e-Text" the second and third defendants infringed the plaintiffs' copyright in the AW library or libraries.
[2]
It has always been the defendants' position that a relationship, a degree of inter-connectedness, existed and exists between e-Text and the AW library. Indeed, in July 1995 Mr Paul Hinkley and his son signed a document which purported to give to the former a licence to use the library for e-Text purposes; and in September 1997 Mr Paul Hinkley sought the agreement of Hotline Communications Ltd to his continued use of the library for those same purposes. This approach was made following the agreement ("The shareholders' agreement") of 17 September 1997 by which (as I have found) Adam Hinkley assigned all his interest in the library to Hotline Communications.
[3]
These actions on the part of Paul Hinkley are only explicable on the basis of his belief that the copyright in AW might be infringed by his work on or use of e-Text. The defendants now submit, however, that e-Text does not infringe and that no orders reflecting the contrary position should be made.
[4]
During the course of the trial the defendants challenged the validity of the assignment of 17 September 1997. In the course of discussing this challenge I examined in my judgment (at paragraph [138]) a proposition put forward by Mr Paul Hinkley that in his belief the assignment was in effectual. In the light of that belief Mr Paul Hinkley (as he put it) also believed that his continued use of the AW software for the development of e-Text was justified under the licence granted by his son in July 1995. I continued in my judgment:
[5]
"My findings in relation to s.2.06 of the shareholders' agreement lead me to conclude that if Mr Hinkley had this belief it was mistaken. However, it seems to me Mr Hinkley's conduct in seeking reassurance from Mr Page about his position and submitting a form of licence to Hotline Communications points to the fact that at that time he did not believe that his son retained any of the copyright in the AW library. On the other hand he did, in my opinion, believe on reasonable grounds that Hotline Communications had no objection to his use of the AW library for the development of e-Text."
[6]
In the light of this passage from my judgment, when read with others to which I was referred by Mr Goldblatt, Mr Goldblatt submitted that I found that e-Text was a product the copyright in which was held by his client. The reference to "reasonable grounds" for Mr Paul Hinkley's belief was, Mr Goldblatt submitted, a reference to s.1162(b) of the Copyright Act 1968. This provides that a plaintiff is not entitled by virtue of s.116 to any pecuniary remedy other than costs if it is established that at the time of the conversion in question the defendant believed, and had reasonable grounds for believing, that the relevant copies were not infringing copies.
[7]
It follows, so Mr Goldblatt argued, that I must have found that e-Text was for the purposes of s.116 an "infringing copy" of the AW library. Otherwise any reference to "reasonable belief" and hence to s.116 was unnecessary.
[8]
I did at this point in my judgment have s.116 in mind. My process of reasoning, however, was to the effect that if Mr Paul Hinkley, through his use of e-Text, did infringe Hotline Communications' copyright, then nevertheless he was covered by s.116 sub-s.(2). I made no direct and I meant no implied finding that e-Text was or is an infringing copy of the AW library. In my view there was insufficient evidence put before me at the trial upon which to form that conclusion. Accordingly, I will not grant the declaration sought by the plaintiffs in this regard.
[9]
I should, nevertheless, point out that I have made, and I make, no finding that e-Text is not an infringing copy. I make no finding one way or the other. Accordingly, if Mr Paul Hinkley uses the AW library for the purposes of e-Text's development or operation, or both, he runs the risk of further litigation. He may or may not be successful were such litigation to be instituted.
[10]
There remains the question of costs. Although costs are in the discretion of the court that discretion is strictly limited; it is limited by the law. The relevant law does not allow a judge to award costs as the individual judge thinks fit without consideration of matters which must be considered in the exercise of the discretion or considering matters which should not be considered in the exercise of the discretion.
[11]
In their submissions on costs, however, the defendants have put to me matters which, according to the law, I must not take into account in the exercise of my discretion. For example, Mr Paul Hinkley has pointed to what he refers to as "humanitarian principles" for the exercise of my discretion in making an order in his favour on this issue. The court is simply not able by law to take into account when determining issues of costs the considerations which (as I understand it) Mr Hinkley has in mind. The defendants also at various points in their submissions referred to what they see as unjust enrichment on the part of the plaintiffs which, as I understand them, they submit should be set off against any costs which might otherwise be awarded against them. Again, it is impossible for me to find here that there has been any unjust enrichment on the part of the plaintiffs or, if there was, that costs orders should reflect that position.
[12]
In aid of their submissions the defendants turned to what they saw as the moral position. Morals have a very important part to play in the administration of justice. At the same time this court is not a court of morals. This case illustrates the very wide differences between what each side sees as the moral position of the other. Each side points to the behaviour of the other as exhibiting a degree, if not a great degree, of immorality. It is a pity, not to say highly regrettable, that at times these proceedings have degenerated into such a finger-pointing exercise. It is an exercise which inevitably takes the court beyond, not only the pleadings, but that which it is within the court's jurisdiction to determine. The court has limited powers and it must remain within the boundaries laid down by the law. It would go well beyond those boundaries for the court to adjudicate upon the issues, or at least some of them, which were raised this morning and which have been raised at other times during the course of these proceedings.
[13]
I intend to exercise my discretion in relation to costs in what I see as being within the strict and proper limits of that discretion. It seems to me that in proceeding No.7088 of 1999 the costs must follow the event and must be borne by the defendants. It also seems to me that the greater proportion of those costs should be borne by the first defendant, Mr Adam Hinkley. Most of the litigation and most of the time of the trial was occupied with matters which directly related to his position. He was unsuccessful in the overwhelming majority of those issues which concerned his position. Accordingly, it seems to me that Mr Adam Hinkley should bear responsibility for paying four-fifths of the plaintiffs' costs in proceeding No.7088 of 1999 and Mr Paul Hinkley should bear the remaining one-fifth.
[14]
In proceeding No.7158 of 1998 the plaintiff put forward an offer of compromise which was rejected by the defendants. That offer of compromise was one which was more favourable to the defendants than the position reached by me in my judgment. The rules provide that in those circumstances the costs up to the making of the offer should be borne on a party/party basis and thereafter should be borne on a solicitor/client basis. I see no reason in this instance why the rules should not be followed. Accordingly, I will make orders as to costs in proceeding No.7158 of 1998 which reflect the position as laid down by the rule which governs costs following the rejection of an offer of compromise where ultimately the losing party is in a worse position than would have obtained had the offer been accepted.
Parties
Applicant/Plaintiff:
Redrock Holdings Pty Ltd
Respondent/Defendant:
Hinkley [2001] VSC 277
AI Analysis
Outcomemixed
Disposition:
The court refused to grant the plaintiffs' declaration that e-Text infringed the AW library due to insufficient evidence and made no finding either way (see [21], [24]). Costs in proceeding No.7088 of 1999 were ordered to follow the event and be borne by the defendants, apportioned 4/5 to Adam Hinkley and 1/5 to Paul Hinkley (see [36]). In proceeding No.7158 of 1999 costs were ordered in accordance with the rules governing a rejected offer of compromise: costs up to the making of the offer to be on a party/party basis and thereafter on a solicitor/client basis (see [39]).