Roadshow Films Pty Ltd v iiNet Limited

Roadshow Films Pty Ltd v iiNet Limited - [2010] FCA 645 - FCA 2010 case summary — Zoe

[14]

APPORTIONMENT 6 The Court's decision found that iiNet had not authorised any breach of the applicants' copyright. Accordingly it was unnecessary for iiNet to rely upon two potential defences, namely a defence it raised under the provisions of the Telecommunications Act 1997 (Cth) ('the Telco Act') and a defence under s 112E of the Copyright Act 1968 (Cth) ('the Copyright Act'). The Court nevertheless considered it appropriate to make findings in respect of those defences. The applicants' claim for costs relates to the Court's findings in respect of those defences and in respect of the Court's construction of the phrase 'make available online' as contained in the definition of "communicate" in s 10 of the Copyright Act. 7 The applicants submit that they should not be required to pay iiNet's costs in respect of issues decided adversely to iiNet. The applicants rely upon various decisions of this Court in which costs have been apportioned depending upon the success or failure of separate issues. The applicants have referred the Court to the decision in Universal Music Australia Pty Ltd v Cooper [2005] FCA 1878 in which the primary judge awarded the successful parties 80% of their costs although the applicants had been entirely successful in achieving the relief they sought. The allowance was made consequent upon the fact that the applicants had raised certain issues upon which they did not succeed. 8 The applicants further submit that the Court should take a global approach to the award of costs and referred to Dias Aluminium Products Pty Ltd v Ullrich Aluminium Pty Ltd (No 2) (2005) 225 ALR 569 in which Crennan J at [7]-[9] undertook a broad assessment of the costs of a claim and cross-claims in order to reflect the success of an applicant in some of the claims whilst recognising the respondent's proportion of success in its defence and cross-claim. A similar approach was adopted in Aristocrat Technologies Australia Pty Ltd (ACN 001 660 715) v Global Gaming Supplies Pty Ltd (ACN 008 548 589) (No 2) [2010] FCA 277 at [18].

[18]

Electronic transmission and infringement by iiNet users 16 The applicants submit that the arguments in respect of the electronic transmission issue required complex technical evidence and consideration of principles decided in both Universal Music Australia Pty Limited v Sharman License Holdings Ltd and Others (2005) 65 IPR 289 and Universal Music Australia Pty Ltd and Others v Cooper and Others [2005] 150 FCR 1. 17 The applicants further submit that the submissions of iiNet in respect of the 'make available online' issuewere unsuccessful and significant work was required to answer such defence. Accordingly the applicants claim that they were successful on this issue. 18 IiNet submits that it was entitled to defend itself by relying upon defences which were clearly arguable and further that the issues in respect of which the Court ruled against it were not clearly separable. IiNet acknowledges that the Court did not wholly accept its submissions, but submits that the Court did not accept the applicants' submission that a vast number of infringements had occurred. Accordingly, iiNet submits that the applicants cannot claim to have had a distinct 'victory' and that no separate costs order should be made on this issue. 19 As a general observation, iiNet refers to the manner in which the applicants conducted these proceedings as a further reason to oppose apportionment in the applicants' favour. IiNet submits that the applicants did not willingly provide information when requested and that the applicants unduly prolonged the hearing by unnecessary cross-examination of Mr Malone, which extended over three days and occupied 276 pages of transcript, and of Mr Dalby when both were clearly credible witnesses. IiNet submits that some 39 pages of submissions were dedicated to unnecessary attacks on the credit of Mr Malone and Mr Dalby and that 19.5 pages of submissions were devoted by iiNet to refuting the attacks on the credit-worthiness of both witnesses. 20 For the above reasons, iiNet submits that there is no basis for any apportionment as claimed by the applicants.

[26]

28 Some authorities suggest that where multiple issues arise, the Court should not generally attempt to differentiate between those in which a party was successful and those in which it failed: see Waters v PC Henderson (Australia) Pty Ltd (1994) 254 ALR 328 at 330-331; Elite Protective Personnel Pty Ltd & Another v Salmon (No 2) [2007] NSWCA 373 at [6]-[7]. 29 In Doric Products Pty Ltd v Lockwood Security Products Pty Ltd (2002) 54 IPR 495 Hely J at [10] observed that the '…courts have cautioned against too ready a resort to apportionment according to issue based outcomes'. In that casehis Honour nevertheless made a 25% allowance for costs where the applicant had failed on certain issues. This proportion was later varied: see Lockwood Security Products Pty Ltd v Doric Products Pty Ltd (No 2) [2007] FCAFC 172. 30 Various other authorities have also held that apportionment of costs between parties should be ordered. However the authorities suggest that apportionment should only be made if a reason exists justifying a departure from the usual rule that successful party be awarded costs. Bray CJ in Cretazzo at 11 observed as follows: I think the guiding principle still stands as it left the House of Lords in the famous case of Donald Campbell & Co. v Pollak, that the general discretion is absolute and unfettered, except that it must be exercised judicially, not arbitrarily or capriciously, and that it cannot be exercised on grounds unconnected with the litigation. [Footnotes omitted]. 31 His Honour then continued at 12: It follows, therefore, that there is now jurisdiction to order a successful party, even a wholly successful party and whether plaintiff or defendant, to pay his opponent's costs in part or in whole. Of course, it by no means follows that it would be a judicial exercise of the discretion to do so and it may well be that in many cases it would not, since there must be some reason for departing from the settled practice whereby the successful party receives his costs from his opponent; see Donald Campbell & Co. v. Pollak, per Viscount Cave L.C. at p. 812. [Footnotes omitted]

[31]

The Telco Act defence 38 The Telco Act defence was included in paragraph 63(o) of iiNet's Defence filed on 5 February 2009 and again in paragraph 63(o) of iiNet's Amended Defence filed on 15 May 2009. The defence was particularised on 11 August 2009. 39 The Telco Act defence is addressed in [511]-[555] of the Court's decision. The applicants correctly submit that the raising of such defence required the parties to prepare extensive submissions on this discrete issue and in consequence it was necessary for both parties to devote extensive time and consideration to such issue. 40 The Court found that the Telco Act would not have operated to prevent disclosure of the information claimed by iiNet to be protected. However, in doing so the Court did not reject every element of the defence relied upon by iiNet. For example, the Court held that disclosure or use by iiNet of information which falls under s 276(1) of the Telco Act was prohibited unless excepted by that Act. The Court concluded that the exceptions provided by ss 280 and 290 would have operated to prevent iiNet disclosing the information. However, the provisions of ss 279 and 289 would not have prevented iiNet from using the information it obtained as a carrier under s 276 of the Telco Act. Accordingly this defence would have failed but only because two of the four exceptions to the prohibition contained in s 276 would not have been satisfied. 41 The Telco Act defence had never been raised previously in any litigation so far as the Court is aware. Had iiNet been found liable to the applicants, such defence could have potentially provided an answer to the applicants' claims. Taking these matters into account, the Court considers that the defence was properly raised. 42 It was not necessary for iiNet to rely on the defence in view of the Court's findings regarding the issue of authorisation. Further, the issues relating to the defence were not found wholly in favour of the applicants. Accordingly, the Court considers that apportionment is not warranted in the circumstances and that the cost associated with such defence should comprise part of the costs of the proceedings.

[33]

Electronic transmission and infringement by iiNet users 46 This question raised three separate issues, namely whether electronic transmission of the whole or substantial part of the applicants' films and programs had occurred; whether the infringement could only be engaged in by the person receiving the file and not the sender; and whether the communication was 'to the public'. The applicants claimed that there had been a vast number of infringements of copyright and that infringement occurred every time a connection and reconnection occurred in the course of the electronic transmission. Such issue also raised the question of the proper construction of the legislative phrase 'make available online'. 47 The issue of electronic transmission was essential to the applicants' claim not only to determine the statutory meaning of 'electronic transmission' but also to determine the statutory meaning of 'make available online'. 48 Prior to the hearing the applicants had made material available which showed that their AFACT investigators had downloaded 100% of a film. IiNet readily conceded that a computer at an identified IP address was sharing 100 per cent of such film and that a user of that computer was making the whole or a substantial part of that film available online to the public within the meaning of the Copyright Act. The Court accepts that iiNet's concession was a genuine attempt to minimise the costs of this issue. The Court did not accept iiNet's claims made in respect of 'electronic transmission', but nor did it wholly accept the applicants' contentions relating to the interpretation of such term. 49 To resolve the central issue before the Court, namely the issue of authorisation, it was necessary for the Court to determine the characterisation of 'electronic transmission'. In reaching its conclusions, the Court was required to consider the competing claims of both parties and the voluminous evidence produced by both parties. The applicants have demonstrated only partial success in respect of issues which were not ultimately relevant to the Court's determination. In these circumstances the Court considers that the determination of the 'make available online' issue does not warrant an apportionment of costs.

[36]

54 No particulars were forthcoming. On 5 February 2009 iiNet filed its Defence, paragraph 57(h) of which asserted that iiNet had provided 'listed carriage services' by providing inter alia, 'connections for copyright material or the intermediate and transient storage of copyright material in the course of transmission, routing or provision of connections within the meaning of s 116C of the Act'. 55 On 19 February 2009 the applicants filed their Amended Statement of Claim ('ASoC'). Paragraphs 67A to 67F thereof alleged primary infringement by iiNet of the applicants' copyright in their films. A claim for damages for conversion or detention was made under 116(1A)(a) of the Copyright Act. 56 On 23 February 2009 iiNet filed a Notice of Motion seeking, inter alia, to strike out the conversion claim contained in paragraph 22 of the Application and paragraphs 67A and 67F of the ASoC alleging that inadequate particulars had been supplied. Further correspondence seeking further and better particulars was sent from iiNet to the applicants on 25 February 2009 and 13 March 2009. On 19 March 2009 the applicants provided the first particularisation of the conversion and of the primary infringement claim. 57 IiNet's motion was heard on 25 March 2009 and judgment was delivered on 15 April 2009 (see Roadshow Films Pty Ltd v iiNet Limited [2009] FCA 332). In summary the Court found that the primary infringement claim was sufficiently pleaded but that the conversion claim required amendment. By letter dated 27 April 2009 the applicants advised iiNet that the conversion claim had been abandoned, but stated that the primary infringement claim would remain. 58 On 28 April 2009 iiNet requested the applicants to amend their Application and ASoC to reflect the discontinuance of the conversion claim and warned that the continuing maintenance of the primary infringement claim would impact upon the length of the hearing. 59 At the directions hearing held on 8 May 2009, the applicants filed an Amended Application and Further Amended Statement of Claim ('FASoC') reflecting the discontinuance of the conversion claim but maintaining the primary infringement claim. IiNet drew the attention of the Court to the increased technical evidence that would be required and the possible impact on the length of the hearing due to the inclusion of the primary infringement claim. The Court made orders, inter alia, for supplementary discovery and granted leave to iiNet to file a notice of motion seeking further particulars of the primary infringement claim. 60 On 14 May 2009 iiNet's solicitors sought further and better particulars of the primary infringement claim. A follow-up letter was sent to the applicants on 27 May 2009. 61 As at 2 June 2009 the particulars requested by iiNet had not been provided. Accordingly on 2 June 2009 iiNet filed a Notice of Motion seeking such particulars. On the same day, the applicants filed a Notice of Motion seeking orders to strike out portions of iiNet's Amended Defence and seeking discovery in aid of their primary infringement claim. 62 The motions were heard on 9 and 15 June and 19 August 2009. At the hearing on 19 August 2009 iiNet indicated that it would not press its motion for particulars of the primary infringement claim because it had obtained expert evidence from its United States expert, Dr Caloyannides, who had visited Australia. 63 In respect of the applicants' claim for discovery, the applicants nominated approximately 50 categories of documents relating to a wide range of issues. The Court was required to determine whether such documents could conceivably be relevant, with little guidance as to the precise reason for their relevance. The Court made its rulings in a summary procedure, affording the parties the opportunity to review its findings. In respect of certain issues the parties did seek different rulings on the Court's summary determination and the Court varied its findings after further submissions were made. 64 On 22 September 2009 the applicants served their opening outline. It was observed by the Court that no statements had been made that were directed to the primary infringement claim. On the inquiry of the Court seeking clarification, the applicants informed the Court that they would not press such claim. No notification of this decision had previously been communicated to iiNet.

[37]

Submissions on Indemnity Costs Claim 65 IiNet submits that the applicants' claim that iiNet had engaged in primary breaches of copyright was untenable; that the applicants' conduct in raising such claim was entirely unreasonable from its inception; and that particulars of such claim were sought by iiNet repeatedly but none were provided. 66 IiNet submits that it was necessary for it to consider and prepare an answer to the claim including seeking particulars, seeking discovery, preparing and filing applications to the Court, retaining an expert from the United States, Dr Caloyannides, to prepare a report on this issue, consulting with officers of iiNet and otherwise preparing for that claim. In view of the failure to proceed with the claim six days before the hearing and the lack of an adequate explanation for the abandonment of the claim, iiNet submits that it is entitled to indemnity costs. 67 The applicants maintain that this is not a case which would justify such an order. The applicants refer to various authorities including Preston v Preston (1982) 1 All ER 41 at 58 in which Brandon LJ held that there had to exist some 'special or unusual feature' to justify a court departing from the usual rule. See also Ragata Developments Pty Limited v Westpac Banking Corporation and Stanley Thompson Valuers Pty Limited [1993] FCA 72. 68 The applicants submit that they included the primary infringement claim after iiNet filed its Defence, paragraph 57(h) of which implied that iiNet had engaged in the acts included in the primary infringement claim. The applicants further submit that iiNet refused to agree to discovery of categories of documents relating to the primary infringement claim. The applicants also submit that their expert witness, Mr Nigel Carson, was only able to undertake a limited inspection of iiNet's computer equipment and as a result he was precluded from giving any evidence in connection with the primary infringement claim. 69 As to the reliance upon Dr Caloyannides' report, the applicants submit that such report was never read and accordingly cannot form any part of the costs to which iiNet would be entitled, unless the entirety of the report could be said to address the primary copying claim. The applicants submit that iiNet have indicated that this is not the case. 70 The applicants referred to the importance of their 'specific discovery requests' made in respect of their primary copying claim in relation to the nature, type and configuration of iiNet's network and equipment and the transitory copying of files travelling over that network. The applicants submit that they were prevented from advancing such claim because iiNet refused to agree to discover the relevant categories of documents and that the Court declined to order access to such material. 71 On this issue the applicants submitted that: The Court then made rulings on the parties' proposed discovery categories. In doing so the Court did not permit the applicants any discovery under the categories relevant to the primary infringement claim. The applicants were, therefore, denied access to material vital to the establishment of the primary infringement claim. Thereafter the applicants did not file any affidavit evidence in chief in support of the claim.

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