Proceeding VID 497 of 2017
3 In this proceeding I found that Mr Bowd breached his contract of employment with EG and breached the copyright of EG. I dismissed the claim in detinue; by the time of the hearing of the trial that claim had become spent or exhausted.
4 EG seeks orders for the payment of $1 as nominal damages and a further payment of $50,000 pursuant to s 115(4) of the Copyright Act 1968 (Cth) (the "Copyright Act"). The EG parties also seek an ordinary order for costs (with no reduction for the dismissal of the claim in detinue) and an order for indemnity costs for the period between 25 May 2017 and 17 August 2017. This was the period during which Mr Bowd retained the EG parties' confidential information notwithstanding the execution on him of search orders issued by this Court.
5 Mr Bowd agrees that he should pay $1 as nominal damages but not additional damages of $50,000. He seeks indemnity costs in his favour. In essence, his contention is that because EG suffered no loss as a result of the breaches of contract and copyright, in simple terms, this proceeding should not have been pursued.
6 I agree that I should order nominal damages of $1 in accordance with the principle that a party that has breached a contract is liable to pay at least nominal damages even if the breach was not causative of any loss: Simply Irresistible Pty Ltd v Couper [2010] VSC 601 at [397] per Kyrou J (as his Honour then was).
7 I do not agree that an amount of damages should be paid pursuant to s 115(4) of the Copyright Act. That provision relevantly provides as follows:
(4) Where, in an action under this section:
(a) an infringement of copyright is established; and
(b) the court is satisfied that it is proper to do so, having regard to:
(i) the flagrancy of the infringement; and
(ia) the need to deter similar infringements of copyright; and
(ib) the conduct of the defendant after the act constituting the infringement or, if relevant, after the defendant was informed that the defendant had allegedly infringed the plaintiff's copyright; and
(ii) whether the infringement involved the conversion of a work or other subject-matter from hardcopy or analog form into a digital or other electronic machine-readable form; and
(iii) any benefit shown to have accrued to the defendant by reason of the infringement; and
(iv) all other relevant matters;
the court may, in assessing damages for the infringement, award such additional damages as it considers appropriate in the circumstances.
8 In Leica Geosystems Pty Ltd v Koudstaal (No 3) [2014] FCA 1129; (2014) 245 IR 422, Collier J summarised the authorities concerning the word "flagrancy". At [96] her Honour said:
In Raben Footwear Pty Ltd v Polygram Records Inc [1997] FCA 370; (1997) 75 FCR 88 at 103 Tamberlin J described "flagrancy" within the meaning of s 115(4) in the following terms:
In ordinary usage "flagrancy" connotes conduct which could probably be described as "glaring, notorious, scandalous" or "blatant." See the New Shorter Oxford English Dictionary, 1993 at 965.
Copinger and Skone-James on Copyright 13th edn 1991 at 344 state that:
Flagrancy implies scandalous conduct, deceit including deliberate and calculated infringement where a defendant reaps a pecuniary advantage in excess of the damages he would otherwise have to pay.
In Prior v Lansdowne Press Pty Ltd [1977] VicRp 6; [1977] VR 65, Gowans J, in considering a claim for additional damages under s 115(4) of the Act, said at 70:
I have come to the conclusion that the evidence as to the publication shows primarily a case of mistake and perhaps carelessness, but it does not show a case of flagrancy, or calculated disregard of the plaintiff's rights or cynical pursuit of benefit, or other matter justifying the award of additional damages beyond what is required for compensation.
(Emphasis in the original.)
9 Here, I found that Mr Bowd breached copyright when he copied files onto a USB drive on 23 May 2017. I also found at [193] of my Reasons as follows:
Mr Bowd explained that he copied information because of the direction from the AFP and because, in his view, the ASIC and AFP investigations were ongoing. I accept that explanation.
10 EG relied on Mr Bowd's conduct in taking its intellectual property, in refusing to return that property in the face of five lawful directions to so do, his lack of co-operation when search orders were sought to be served upon him (which I add included the making of a false statement that all the property was in the hands of his solicitor and the Australian Federal Police ("AFP")), and my finding that the Australian Securities and Investments Commission ("ASIC") complaint was made to avoid dismissal on reasonable grounds.
11 Additional damages may be awarded pursuant to s 115(4) for breach of copyright, but not for other conduct found to have been wrongful. That is not to isolate the act of copying from context. But the focus must nonetheless be on whether the act of copying was flagrant. I find that it was not. Whilst I am satisfied that Mr Bowd made his complaint to ASIC for an improper purpose (if necessary, I make the same finding about his complaint to the AFP), it does not follow from this that his belief that he should retain copies of EG's intellectual property for the purposes of the ASIC and AFP investigation was unreasonable. I find that in May 2017, Mr Bowd subjectively believed that such investigations were taking place. He also subjectively believed that he had a right to make copies because the AFP had told him to retain the evidence. That belief was mistaken. But it was held in the context of Mr Bowd suffering from a degree of emotional upheaval. EG has not otherwise suffered any loss or damage. All of the intellectual property has been returned. In those circumstances, I am not, and with great respect, satisfied that Mr Bowd's breach should be characterised as "glaring, notorious, scandalous" or "blatant". Rather, the breach was the product of misconceptions held by Mr Bowd.
12 The EG parties submitted that no order should be made for costs that reflected my dismissal of the claim in detinue. They were ultimately successful in this proceeding and this was not a case where the claim dismissed was clearly dominant or separable. The EG parties relied upon Network Ten Pty Ltd v TX Australia Pty Ltd (No 2) [2019] NSWCA 51 at [13] where Bathurst CJ said:
One circumstance where the discretion may be exercised differently is where the successful party has been unsuccessful on discrete issues raised by it in the proceedings. However, generally speaking, an apportionment to take account of that fact will only be made when the issues on which the successful party was unsuccessful were clearly dominant or separable: Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 at [64]; Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd (No 2) [2018] NSWCA 266 at [10]-[14].
13 The EG parties also wanted an order for indemnity costs for the period set out above. During this time, Mr Bowd retained the intellectual property he had copied notwithstanding the search orders made by this Court. With respect, I decline to make that order. The retention of the EG parties' intellectual property during this period was the result of a misconception held by Mr Bowd during a period of personal crisis.
14 As already mentioned, Mr Bowd wanted an order for indemnity costs in his favour. He relied upon a decision of Bell J in Actrol Parts Pty Ltd v Coppi (No 3) (2015) 49 VR 573. In that case, the plaintiff ("Actrol") had established that Mr Coppi had breached his contract of employment for one day. It commenced proceedings and went to trial on a point of principle seeking only nominal damages. Bell J refused to awards costs in its favour. Instead, his Honour ordered that Mr Coppi's costs should be paid on an indemnity basis.
15 Mr Bowd submitted that the case against him was "indistinguishable" from Actrol Parts. He noted that the proceeding here had commenced with claims for breach of confidentiality and for damages. These claims were later dropped. The EG parties nonetheless persisted with the proceeding even though on 17 August 2017 all of the company property had been returned and they had not suffered any actual loss or damage. Implicitly, the EG parties' persistence was thereafter unreasonable.
16 With respect, I do not think that the decision of Actrol Parts is "indistinguishable" from the current proceeding. I think it is very different. In Actrol Parts, Bell J made findings that Actrol had breached the "overarching obligations" set out in ss 16 to 26 of the Civil Procedure Act 2010 (Vic) (the "Civil Procedure Act"). Those obligations include, in general terms, obligations of honesty, to use reasonable endeavours to resolve disputes, and to ensure that costs are incurred on a reasonable and proportionate basis. At 596 [82]-[83], Bell J refused a grant of nominal damages and instead dismissed Actrol's proceeding pursuant to s 28 of the Civil Procedure Act because of its breach of the "overarching obligations". His Honour said:
In my view, the court possesses power to dismiss the present proceeding under s 28(1) and, taking into account Actrol's contravention of its overarching obligation, should exercise it. This is especially so because the nature of its contravention has some analogies with abuse of process, including abuse constituted by oppression of a relatively unequal party. The court's new power in s 29(1) to make any order it considers appropriate should also be exercised to make an order dismissing the proceeding because it is in the interests of justice to do so. This is especially so having regard to the overarching purpose in s 7(1) (in this regard, see the court's obligation in s 8(1)), the objects in s 9(1) and, particularly, the overarching obligation in s 24(1) of ensuring reasonable and proportionate costs.
I make the dismissal order against Actrol, not in favour of Mr Coppi. It is done by way of sanction of one party, not by way of compensation (for prejudice) of the other party. Actrol will thereby be deprived of the fruits of a pyrrhic victory that was obtained by illegitimate means: this is a purpose of the order. Mr Coppi will thereby be (somewhat) advantaged and Actrol will thereby be (somewhat) disadvantaged in relation to costs: this is a consequence not a purpose of the order.
(Footnote omitted.)
Mr Coppi, and not Actrol, was thus the successful party and entitled to his costs. As Bell J said at 601 [103]:
As Mr Coppi is the successful party in the proceeding, according to the general rule he is entitled to an order for costs unless there is some reason justifying a different result. There is no such reason. Moreover, taking into account the contravention of Actrol's overarching obligation to ensure costs are reasonable and proportionate, it is appropriate that an order for costs should be made against Actrol.
(Footnote omitted.)
17 Because of Actrol's contravening conduct, Bell J decided that costs should be paid on an indemnity basis. At 603-604 [112], his Honour said:
In my view, the court must appropriately sanction Actrol's contravening conduct. That sanction would not, in the circumstances, be adequately represented by an order for costs in favour of Mr Coppi on an indemnity basis only from mid-June 2015, especially as this would have been the order under the existing rules with respect to unreasonably refusing offers of settlement and indemnity costs (see above). By way of sanction, Actrol should be ordered to pay Mr Coppi's costs (including any reserved costs) on an indemnity basis from the commencement of the proceeding. I will so order.
18 The circumstances here are very different. I was never asked to dismiss the EG parties' proceeding. Nor was it submitted to me that the EG parties had commenced the proceedings in breach of the equivalent "overarching obligations" found in ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth). EG, and not Mr Bowd, was plainly the successful party and as such, entitled to an award of costs in its favour.
19 In that respect, I find that the proceedings were reasonably commenced. When initiated, Mr Bowd retained company property following his dismissal. He had refused to return that property notwithstanding repeated requests. The EG parties had no alternative but to commence these proceedings and to seek urgent search orders. Mr Bowd made a partial return of property on 24 May 2017. Thereafter, the EG parties persisted with the proceedings and discovered that Mr Bowd's compliance with the search orders had been delinquent because of the copying which had taken place in May. All of the company property was disgorged on 17 August 2017.
20 I respectfully agree with the submission that I should not discount any award of costs in favour of the EG parties because I dismissed the claim in detinue. That claim formed a very minor part of the dispute before me. I also think that the EG parties are clearly entitled to the costs of commencing the proceedings, and of obtaining and executing search orders. Mr Bowd should also pay the EG parties' costs incurred until 17 August 2017, and for a short period thereafter to take account of any steps that needed to take place to verify that all the property had been returned. In other words, Mr Bowd should pay for the costs incurred (on an ordinary basis) to obtain full recovery of all company property. Thereafter, in my discretion, I am not satisfied that Mr Bowd should pay the EG parties' costs of persisting with the claims. It was not clear to my why the proceeding had been kept on foot in circumstances where the EG parties accepted that they had not suffered loss or damage and had recovered all of the company property. I am left with the impression that the proceeding formed part of the pressure points which ordinarily arise in civil litigation and to which Mr Bowd was exposed. There may have been a forensic benefit in keeping all of those pressure points on foot. In my view, however, that would not justify an order of costs in favour of the EG parties for the period following the return of the company property in the circumstances of this case.
21 For these reasons, I will order that Mr Bowd pay nominal damages of $1 to EG for breach of contract and the EG parties' costs for the period ending on 30 August 2017.