REASONS FOR JUDGMENT
1 The facts giving rise to this action are, regrettably, not uncommon. A group of officers and employees left their employment to establish a competing business. They allegedly took with them, probably in the form of computer programs, copies of documents in which there is copyright and other documents which may contain confidential information about their former employer's business. This action is not, however, brought by the former employer. It is brought by a company which was established by a number of executives of the employer to purchase the employer's business including, so it is said, its copyright and confidential information. This new company, the applicant, seeks injunctions and damages. In the short term, however, the applicant seeks orders for (1) interlocutory injunctions preventing what it asserts to be the misuse of its "property" (it is convenient at this stage to refer to the applicant's alleged copyright and confidential information as "property") and (2) immediate discovery to ascertain the extent to which its "property" has been taken, presumably as a precursor to further interlocutory relief. It is this interlocutory application which I must now resolve.
2 The history of the dispute can be briefly stated. The former employer, Trollope Silverwood and Beck Pty Ltd, commonly referred to as TS & B, designed, manufactured and installed fit-outs and displays of commercial and retail space such as department stores, supermarkets, service stations and the like. In the course of its business TS & B developed a software and database system which contained its product design library, bill of materials and a part number catalogue and customised job costings quotation, inventory management and purchasing information capabilities. The information includes product and manufacturing drawings of individual components used to fit-out premises, as well as coded catalogues of so called master numbers which refer to fittings and parts, coded catalogues of suppliers as well as parts and components that are manufactured in accordance with TS & B's drawings. In 1999, TS & B purchased a software package known as ACUITY™ which has been described as a high level financial accounting, reporting and management tool. TS & B entered the information into the software program so all of it could be easily accessed and updated when necessary.
3 TS & B operated a successful business for many years. This, however, was not to last. On 28 October 2002, TS&B's bankers appointed receivers and managers over its property. On the same day the company procured the appointment of administrators to take charge of its affairs. The receivers continued to conduct the company's business, though at a reduced rate, while seeking to find a purchaser for the assets. In due course the company's assets were sold to the applicant, a company established by the former chief executive officer of TS & B. Included amongst the assets sold to the applicant were TS & B's "intellectual property and proprietary rights", "copyright and all other intellectual property and proprietary rights in all drawings regarding production and tooling" and "all rights of the vendor in all software used in the conduct of the business". The purchase price was $650,000. Settlement took place on 20 March 2003.
4 During the course of the receivership three employees of TS & B, the respondents Peter Vanderzaag, Francis D'Mello and Garry William Smith, began to operate a business in competition with TS & B through their company, 3fold Resources Pty Ltd, the first respondent. Documents and computer programs belonging to TS & B, which included its database and part numbering and pricing documents, were, possibly dishonestly taken by one or other of these men and have been used in the 3fold business.
5 The receivers discovered what had occurred in January 2003. Consequently, on 31 January 2003, the receiver's solicitors wrote a detailed letter of demand alleging that the former employees had breached their duties of good faith and confidence, had committed certain offences under the Corporations Act as well as "violations of TS&B's intellectual property (in particular, copyright in numerous documents)". The solicitors sought numerous undertakings and the immediate return of all documents belonging to TS & B. The respondents retained their own lawyers who were instructed to respond to the demand. Two aspects of the response should be noted. First, it was alleged that "there has been no misappropriation by [the respondents] and no use of the Company's intellectual property. There has been reliance placed solely on personal knowledge and expertise by [the respondents]." Secondly, in the same latter, the respondents' lawyers made the following proposal:
"Solely in order to give your client comfort, and without prejudice to all of our clients' rights, and further with a denial of liability, we are instructed our clients (sic) (including 3fold and all employees of 3fold who were employees of the Company) are prepared to return any remaining material of the company to the Receiver and Manager within 2 business days after receipt of your written confirmation that no further action will be taken as threatened in your letter. We are instructed that all such documentation has been retained as consultants via 3fold only."
6 Notwithstanding the unsatisfactory nature of this proposal, the receivers did not commence proceedings against the former employees substantially because they did not believe that litigation would result in a higher offer for the purchase of the company's assets. Consequently, it was left to the purchaser to commence this action to protect the "property" it acquired from the receivers.
7 The respondents resist the grant of any interlocutory relief. Contrary to what appeared in the correspondence from their solicitors, the respondents now deny taking any information from TS & B. Although the respondents concede having in their possession drawings that originated from TS & B, they claim that they received those drawings from a former customer of TS & B (Kmart) who now wishes to engage 3fold to fit out its premises. On the copyright claim, two defences are raised. First, it is said that if copyright subsists in those drawings, that copyright lies with the independent consultants who were engaged by TS & B to create the works in question. Secondly, it is said that TS & B licensed each customer to reproduce the drawings that had been prepared and paid for by that customer and that the respondents are not going beyond that license. In relation to the confidential information claim, the respondents assert that none of the information is confidential because it has always been freely available to former employees, customers, manufacturers and the like.
8 In an application of this kind it was once necessary for the plaintiff to establish a prima facie case for the legal right which he sets up. Unless he could show that he would probably succeed in his action, an interlocutory injunction would usually be refused. This approach often required the court to undertake a close investigation of the merits of the plaintiff's claim before it could reach a non-binding view about the case. On occasion, a hearing could take days with many witnesses being called by both sides.
9 A more flexible approach was envisaged by Lord Denning MR in Hubbard v Vosper [1972] 2 QB 84, 96. There Lord Denning said:
"In considering whether to grant an interlocutory injunction, the right course for a judge is to look at the whole case. He must have regard not only to the strength of the claim but also to the strength of the defence, and then decide what is best to be done. Sometimes it is best to grant an injunction so as to maintain the status quo until the trial. At other times it is best not to impose a restraint upon the defendant but leave him free to go ahead … The remedy by interlocutory injunction is so useful that it should be kept flexible and discretionary. It must not be made the subject of strict rules."
10 In American Cyanamid Co. v Ethicon Ltd. [1975] AC 396 the House of Lords rejected what had previously been the inflexible approach of requiring the plaintiff to demonstrate a strong prima facie case. Lord Diplock said (at 407):
"Your Lordships should in my view take this opportunity of declaring that there is no such rule. The use of such expressions as "a probability", "a prima facie case" or "a strong prima facie case" in the context of the exercise of a discretionary power to grant an interlocutory injunction leads to confusion as to the object sought to be achieved by this form of temporary relief. The court no doubt must be satisfied that … there is a serious question to be tried."
11 Lord Diplock then went on to set out a series of steps that should be followed in determining whether an interlocutory injunction should be granted. The court should firstly consider whether the plaintiff has presented a case which is not frivolous or vexatious. It is then necessary to inquire whether damages will provide the plaintiff with an adequate remedy. If damages are adequate no injunction should be granted. If damages are not an adequate remedy the court must consider whether the plaintiff's undertaking in damages would provide adequate compensation to the defendant should he succeed at trial for loss sustained because of the interlocutory injunction. If that produces an affirmative answer then there is a strong case for an interlocutory injunction. But where there is doubt as to the adequacy of the respective remedies in damages the case will turn on the balance of convenience. At this point, according to Lord Diplock, weight may be placed on the court's prediction of the proceeding's ultimate success. But only in those cases where:
"… the extent of the uncompensatible disadvantage to each party would not differ widely [that] it may not be improper to take into account in tipping the balance the relative strength of each party's cases as revealed by the affidavit evidence adduced on the hearing of the application. This, however, should be done only where it is apparent upon the facts disclosed by the evidence as to which there is no credible dispute that the strength of one party's case is disproportionate to that of the other party. The court is not justified in embarking upon anything resembling a trial of the action upon conflicting affidavits in order to evaluate the strength of either party's case." (at 409)
12 The Cyanamid test has been followed by numerous Australian cases and has been approved by the High Court: see Murphy v Lush (1986) 60 ALJR 523; Castlemaine Tooheys Limited v The State of South Australia (1986) 161 CLR 148; Minister for Immigration and Multicultural Affairs, Re Ex parte Fejzullahu (2000) 74 ALJR 830.
13 With these considerations in mind I now turn to the applicant's claims, dealing first with its claim in copyright. The applicant seeks to restrain the respondents from reproducing its copyright. The evidence on the ownership of copyright here is inconclusive. No doubt the applicant has copyright (by assignment) in some of the material which it seeks to protect by an interlocutory order. That material has come into existence over a lengthy period (from 1930 if one takes into account the activities of the two companies which were ultimately merged to establish TS & B) and it is difficult to resist the conclusion that the "authors" of much of this material were employees (that is persons under a contract of service) of TS & B or its predecessors: see s 35(6) of the Copyright Act 1968 (Cth). On the other hand, the respondents contend that not all of the copyright is owned by the applicant as many of the works (an approximate number was not provided) were "authored" by persons who were engaged under contracts for services and it is they, and not the applicant, who own the copyright in these works.
14 There are many cases in which there has been an attempt to explain the difference between a contract of service and a contract for services. In Australia the leading cases include Humberstone v Northern Timber Mills (1949) 79 CLR 389; Zuijs v Wirth Brothers Proprietary Limited (1955) 93 CLR 561; Stevens v Brodribb Sawmilling Company Proprietary Limited (1986) 160 CLR 16. Although there is no universally accepted test, and while there is a great deal of debate about the utility of many of the suggested indicia, the classic tests include: (1) the employer's power of selection of his or her workers; (2) the payment of wages or other remuneration; (3) the employer's right to control the method of doing the work; and (4) the employer's right of suspension or dismissal: Short v J. and W. Henderson, Limited (1946) 62 TLR 427, 429. I favour, however, the more simple test of identifying an employee as "a person who sells his labour and not the product of his labour": Konrad v Victoria (1999) 91 FCR 95, 127.
15 Whatever be the true test, the question whether a particular person is under a contract of service or a contract for services is a mixed question of fact and law. The problem at this stage is that I have no evidence upon which to form a judgment as to the degree of probability that all or only some of the copyright was authored by employees and is thus owned by the applicant. I have the applicant's evidence which asserts that all the works were authored by TS & B's employees. The factual basis upon which this assertion might be based is not provided. Conversely, the respondents assert that many of the authors were "contractors … to TS & B". As with the applicant's claim, no evidence is presented which would enable me to form even a preliminary view about the correctness of this statement. It inevitably follows that the applicant's contention that it is the owner of the copyright is at least arguable in the sense that it is possible that the facts at the trial will support that claim. Moreover, even at this preliminary stage, I have the impression that the claim has some strength, if only for the reason that the respondents do not contend that none of the copyright material is owned by the applicant. It appears that at trial they will only seek to establish that the applicant does not own all the copyright.
16 Subject to one qualification, the evidence is clear in relation to the infringement claim. Copies of a number of drawings have been made. This was conceded by the respondents when they stated that the reproductions were made by one Graham Butler, "a contractor to 3fold". Butler, however, has been engaged by 3fold to prepare the drawings. Therefore, whilst Butler himself may have infringed copyright, so too has 3fold by procuring that infringement.
17 The qualification concerns the respondents claim that TS & B had impliedly licensed its customers to use the drawings prepared on a customer's behalf. It was argued that the customer was in turn consequently entitled to licence 3fold to use the drawings for that customer's purposes. According to the evidence, the only drawings which have been reproduced are those that were prepared by TS & B for Kmart. I have what may be classed as the terms of the agreement between TS & B and Kmart pursuant to which the drawings were prepared. It is not an executed agreement; according to the applicant, however, it formed the basis of the relationship between TS & B and Kmart. Clause 4.2 of the agreement provides:
"TS&B shall provide to Kmart upon request copies of all design documents, drawings, specifications, samples, patterns, plans and the like used in the manufacture, supply and installation of the Goods. Kmart is free to use and incorporate Kmart's equipment any ideas, suggestions or recommendations provided by TS&B without payment of royalties. In consideration of this, Kmart agrees to not disclose, publish or disseminate any of the information referred to in this paragraph without prior written approval to do so from an authorised representative of TS&B."
18 A number of comments can be made about cl 4.2. The provision firstly imposes an obligation upon TS & B to make available to Kmart information which, according to the applicant's evidence, TS & B would have regarded as confidential. On the other hand, TS & B has extracted a promise that Kmart would not disclose, publish or disseminate that information. Secondly, it is unclear whether the right conferred upon Kmart to use "ideas, suggestions or recommendations provided [to it] by TS & B" constitutes permission to reproduce copyright. Although I have not formed a final view about the matter, I am presently inclined to think that it does not authorise a reproduction of copyright and, in particular, it does not permit Kmart to authorise third parties (such as competitors of TS & B) to infringe copyright.
19 There is further evidence which the respondents put forward to make out the alleged licence. With particular reference to Kmart, the respondents stated that TS & B produced drawings which were issued to Kmart and, from those drawings, Kmart produced working drawings for issue to suppliers wishing to participate in a tender for the manufacture of the items in the drawings.
20 On this aspect, however, there is a direct conflict in the evidence. According to the applicant's witnesses, TS & B did not issue working drawings for the manufacture of components to any of its customers. It says the only drawings which were supplied to customers were concept or isometric drawings none of which contained confidential information, in particular, information concerning the products or components to be utilised in a particular fit out. What persuades me at this early stage to lean in favour of the applicant's account of events is that Kmart was subpoenaed to produce, amongst other documents, "product drawings or design specifications prepared, compiled or otherwise supplied by 3fold or any 3fold subordinate related to or connected in any way with the Tender [for works to fit out Kmart stores]" and, in response, Kmart produced only isometric drawings which originated from TS & B. If the respondents' account was correct, one would expect other drawings and diagrams to have been produced. In the end there may be an acceptable explanation, however, none is apparent at this time. On balance, therefore, I am not persuaded that there is a strong case of either an express or implied licence.
21 From the foregoing I am of opinion that the applicant's case for copyright infringement has a degree of substance.
22 The second injunction sought is to restrain the respondents from using, publishing, communicating or disclosing what is asserted to be confidential information. The confidential information for which protection is now sought is much narrower than that sought when the matter first came on for hearing. The confidential information is now, in substance, confined to comprise each of the drawings in respect of which there is copyright, each of the component and part numbers and the corresponding component descriptions as contained in identified lists of drawings, concepts and descriptions.
23 This part of the case raises an interesting question in relation to confidential information. I will assume for the moment that the information which is said to be confidential satisfies the requirements which must be established in order to warrant protection by the court. The information was brought into existence by TS & B and perhaps its predecessors. The receivers purported to assign that information to the applicant as part of the assets which the applicant purchased for $650,000. The applicant contends that this assignment gives it standing to bring an action to protect the information as confidential information.
24 For my part, I believe that while commercial parties may deal in confidential information, it is clearly not an asset which is capable of being assigned. It is incapable of assignment because confidential information is not property. In The Federal Commissioner of Taxation v United Aircraft Corporation (1943) 68 CLR 525, 534 Latham CJ said:
"I am unable to regard the communication of information as constituting a transfer of property. Upon such a communication the transferor still has everything that he had before and the transferee continues to hold what he has received … Knowledge is valuable, but knowledge is neither real nor personal property. A man with a richly stored mind is not for that reason a man of property."
See also Boardman v Phipps [1967] 2 AC 46 where Lord Cohen at 102-103 and Lord Upjohn at 127-128 made it clear that in their view information is not property. That was also the position adopted by Deane J (with whom Gibbs CJ, Mason, Wilson and Dawson JJ concurred) in Moorgate Tobacco Co. Limited v Philip Morris Limited [No. 2] (1984) 156 CLR 414, 437-438: ("Like most heads of exclusive equitable jurisdiction its rational basis does not lie in proprietary rights".)
25 While confidential information appears not to be assignable, that is not to deny that a person who has acquired such information (in the sense of having had it imparted to him by another) cannot approach a court of equity to obtain protection by preventing the disclosure or use of that information by a third party. This was the view taken by the House of Lords in O'Mustad & Son v Dosen, a decision handed down in 1928 but only reported in [1964] 1 WLR 109 and (1963) 80 RPC 41. There the House of Lords considered the situation where the plaintiff was the purchaser of the assets (including trade secrets) from a bankrupt business. The plaintiff lost his attempt to protect the secret because he had disclosed details of it to the world in a patent application. However, in the course of its decision the House of Lords did not cast any doubt on the plaintiff's ability to enforce rights in the secrets he had purchased. The case may be distinguished because it may have proceeded on the assumption that the confidential information which the plaintiff had purchased was "property". Whatever the position is in England, it is not a sustainable view in Australia. However, in spite of this there are Australian and New Zealand cases which have acknowledged that a purchaser can protect his confidential information. The cases include Millwell Holdings Ltd v Johnson (1988) 12 IPR 378; Askew v Seventh Granite Pty Ltd (unreported, Federal Court of Australia, 17 August 1995); and Cortis Exhaust Systems Pty Ltd v Kitten Software Pty Ltd [2001] FCA 1189. While each case accepts that confidential information may be protected by an assignee, there is no reason explaining why this should be so. For the sake of completeness, it should be noted that the current authors of Meagher, Gummow and Lehane's Equity Doctrines and Remedies, at para 41-070, are of the view that "many obligations of confidence are unassignable".
26 As with its claim in copyright, the applicant sought an order to restrain the respondents from making any use of an ill-defined category of so-called confidential information. I made it clear that I would not be disposed to grant such an order, even if I were of opinion that the applicant had established a sufficiently arguable case for relief. Unsurprisingly, the applicant has lowered its expectations and now seeks a remedy which is confined to dealings with information which is contained in the copyright material.
27 According to the applicant, its codes, part numbers, drawings and designs were kept confidential by TS & B. Customers and suppliers were not provided with this information except for limited purposes and then only on the basis that the information be kept confidential. Finally, it is alleged that TS & B instructed its staff not to remove this material from the office.
28 These allegations are "strenuously contested" (being the usual discription parties employ in the circumstances). For their part, the respondents contend that the designs, drawings and part numbers were widely distributed to both customers and manufacturers with no requirement that the information be kept confidential. The respondents were able to compel the applicant to concede that at least its isometric drawings were widely distributed. As the applicant conceded, however, little confidential information is disclosed in those drawings. It may be that other drawings were also distributed to customers or suppliers but, at present, the position seems to be that this was done on the basis that they be kept confidential. This was certainly the case in relation to the drawings which TS & B was required to provide under its contract with Kmart.
29 It is difficult in these circumstances for me to assess the strength of the applicant's case. Plainly it is an arguable one. Common sense suggests that the information which the applicant seeks to protect is the type of information which a commercial organisation is likely to keep confidential. I appreciate that on this aspect of the case, much of the material is simply assertion and counter-assertion. It is therefore impossible to come to a conclusion, one way or the other, as to whether there is any material substance in the claim or the defence. I have, however, sufficient information which suggests that the applicant's claim is not trivial.
30 The third form of relief sought by the applicant is, in an expanded form, the continuation of orders already made restraining the respondents from altering or parting with any of the copyright or confidential information which they presently have in their possession. The only dispute here concerns the breadth of the order.
31 The applicant also seeks, what is in effect, an Anton Pillar order requiring the respondents to permit the applicant's advisers to enter their business premises to inspect and have access to their computers and any device used for the electronic storing and retrieval of information such as hard discs, floppy discs and back-up tapes. The usual purpose for an Anton Pillar order is to preserve evidence necessary to enable the plaintiff to establish his case in circumstances where there is a significant risk that the respondent will destroy that evidence. It is for this reason that the order is applied for ex parte and dealt with in secrecy: Columbia Pictures Industries Inc. v Robinson [1987] Ch 38, 71. The fact that this application is made on notice implies that the risk that the defendant will destroy evidence is not great. That in itself is a sufficient reason to refuse the relief.
32 However, it is not appropriate for such a bar to be absolute. While I will not permit an enter and search order, I believe that the respondents should be required to deliver up to the court copies (by way of discs) of all data that is stored in the computers used in relation to the business of 3fold. When that occurs, the applicant will be in a position, although not in a perfect position, to assess whether the respondents have attempted to cover the fact that they may have taken copyright and confidential information. The discs will not be handed over to the applicant but will remain with the court to await the outcome of the trial.
33 I should also mention that Anton Pillar orders serve a secondary purpose which, in a copyright and confidential information case, is to trace the whereabouts of infringing works and confidential material. The applicant also seeks orders to that effect. On the view which is urged by the respondents, the applicant should await discovery where, in the normal course, the information it seeks will become available. I think, however, that some relief should be granted to enable the applicant to quickly discover whether other persons may be infringing their rights. In the end, there was limited resistance to this course.
34 As far as the balance of convenience is concerned, the injunctions sought by the applicant will not, as the respondents contend, deprive them of their ability to conduct their business. A good deal of the respondents' material was designed to show that if the injunctions were granted they would suffer immediate and serious damage. This may have been true if the injunctions originally sought had been granted; such orders however will not be made. If granted, the injunctions will require the respondents to conduct their business from their own resources. If they possess the knowledge and skill asserted, that should not be a problem. On the other hand, I have no doubt that if the respondents continue to use the copyright and the information said to be confidential, this will undermine the applicant's ability to conduct its newly purchased business. The proof of this lies in the fact that the respondents have already succeeded in securing a contract from Kmart, having made use of copyright for that purpose. Fairness suggests that this situation should not continue.
35 The respondents placed much reliance on the applicant's and its predecessor's delay in asserting their claim. Delay in asserting one's rights often has an evidentiary significance. It is often said that a reasonable person is unlikely to sleep on a well-founded claim. This is not, however, the way the respondents argue their case. Quite apart from the evidentiary significance of delay, delay is an aspect of a more general principle which takes into account the injustice of awarding relief against a party who will be prejudiced on account of the change of position which results from the acts or omissions of the party seeking relief. In The Lindsay Petroleum Company v Prosper Armstrong Hurd, Abraham Farewell and John Kemp (1874) 5 LR PC 221, 239-240 Sir Barnes Peacock said:
"Now the doctrine of laches in Courts of Equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by its conduct, done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases, lapse of time and delay are most material … Two circumstances, always important in such cases, are, the length of the delay and the nature of the acts done during the interval, which might effect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy."
36 The respondents say that they have been prejudiced by the applicant's delay in bringing the proceeding. The prejudice to which they refer is the significant costs which have been incurred this year in establishing the business. The costs include approximately $814,000 worth of purchases from suppliers, the commitment to a three month lease of office space at a rent of $14,000 per month, fitting out a warehouse at a cost of approximately $26,000, the purchase of office equipment at an approximate cost of $16,000, the engagement of staff, a Work Care insurance premium of approximately $21,000 and public liability and general business insurance costing approximately $15,000. The responent submits that they would not have expended these monies if they had known that they may be restricted in their ability to use the copyright or the information.
37 There are many answers to this submission. The first is that, notwithstanding this evidence, it is inherently unlikely that the respondents made the decision to establish their business on the premise that they could freely misuse copyright or confidential information which may belong to a third party. The true position is likely to be that the respondents believed that if they could use the copyright and the claimed confidential information that would be an advantage, but not a necessary prerequisite to commencing a business. Perhaps the respondents expected they could use the material because of the insolvency of TS & B. However, even if the respondents could not use that material, it seems to me that they are still likely to have commenced their business.
38 Second, and more importantly, the evidence suggests that the respondents knew that they were running a risk of an infringement action. A short time after receivers were appointed to TS & B, the individual respondents began to establish the new business in breach of the duties owed to their then current employer. The respondents conduct was discovered and they promised to cease these activities. When the respondents resumed these activities in January they received a strongly worded letter of demand alleging misuse of copyright and confidential information. The respondents obtained legal advice. No doubt that advice considered the merits of the receivers' claims and the possible consequences of a continuation of the conduct about which complaint was being made. The conduct continued, probably because it was perceived that it was unlikely that the receivers would take action. That belief was well-founded. The receivers took no action but instead sold TS & B's assets to the applicant.
39 Perhaps the respondents believed that a purchaser of the assets would not take action. If they were of that belief it was not induced by the receivers or by the applicant. Moreover, the applicant itself did not delay the institution of proceedings. As I mentioned earlier it completed the purchase of the assets on 20 March 2003 and began this proceeding eleven days later.
40 Finally I must consider the ability of the applicant to meet an undertaking in damages. The position is not as bleak as first painted by the respondents. The respondents contend that the applicant, a newly incorporated company, has paid up capital of only $2 (a submission supported by a company search) with little cash flow (a point obviously made in virtue of the fact that the applicant is a newly established company) with a likelihood that it has significant debts (for example, the $650,000 required to purchase the assets from the receivers). In reality, however, the company has a paid up capital of $1,000,000, little or no debt, and "hard" assets (based on a valuation) of around $650,000. That is a sufficiently strong position to convince me that the undertaking in damages will not be an empty promise, especially in view of the fact that the relief that I propose to grant will not be as destructive of the respondents' business as they assert.
41 I propose to make orders in accordance with the minutes I will now distribute to the parties. It will be noticed that the injunction restraining the reproduction of copyright material goes further than is strictly necessary. For instance, it covers copyright in works which are likely to be out of date. I am of the opinion that no useful purpose would be served in requiring the applicant to go through its list of allegedly copyright works to delete material which is out of date and is unlikely to be reproduced by the respondents. That exercise would be lengthy and costly, and the respondents will not in any way be prejudiced by the breadth of the order. Further, the order does not, as the respondents suggest that it should, confine itself to Kmart documents. It is true that up to now the applicant has only been able to discover alleged copyright infringement in respect of drawings prepared for Kmart. However, it would be optimistic to believe that if the restraining order was confined to Kmart drawings, the respondents would inevitably regard it as impermissible to infringe copyright in other drawings. Finally, on this aspect the order will operate to prohibit the use of copyright and confidential information in relation to the performance by 3fold of any contract it may have with Kmart. At one stage I thought it proper to exempt any such contract from the operation of the order. On reflection, however, it seems to me to be just in the circumstances that the contract not be excluded. If it turns out that Kmart is unfairly prejudiced by the operation of the order, it can make application for it to be appropriately varied: Cretanor Maritime Co Ltd v Irish Marine Management Ltd [1978] 1 WLR 966.
42 The order also contains a limited extension to the existing order which prevents the respondents from altering any of the copyright materials that may presently be in their possession. The additions are de minimus.
43 Each of the parties sought costs, the applicant on the basis that if it succeeds costs should follow the event, and the respondents on the basis that the applicant's position has changed so dramatically during the course of the hearing that they have incurred unnecessary trouble and expense. I do not wish to take any time on this aspect. It seems to me that this is a clear case where costs should follow the event of the litigation. There will be an order to that effect.