United Broadcasting International Pty Limited v Turkplus Pty Limited

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website.

BETWEEN: UNITED BROADCASTING INTERNATIONAL PTY LIMITED (ACN 110 092 049)

REASONS FOR JUDGMENT 1 This is an application by the applicants for an interlocutory injunction restraining the respondents from infringing copyright in the broadcasts made by the second applicant (Turkuvaz) in Turkey which, since 2006, have been rebroadcast in Australia by the first applicant (UBI) and which the first respondent (Turkplus) has also rebroadcast in Australia since February of this year. The broadcasts are of a Turkish television channel known as the ATV Aurupa Channel (the ATV channel). 2 The relief sought against Turkplus is as follows: An order, pending the hearing and determination of these proceedings or further order, restraining the Respondents whether by themselves, their officers, employees, servants, agents or otherwise, from:

(a) re-broadcasting the television broadcast of the ATV Channel in Australia or communicating it to the public in Australia otherwise than by broadcasting;

(b) procuring or directing the re-broadcast of the television broadcast of the ATV Channel in Australia or communication of it to the public in Australia otherwise than by broadcasting; or

(c) authorising the re-broadcasting of the television broadcast of the ATV Channel in Australia or communication of it to the public in Australia otherwise than by broadcasting.

The wording of the proposed order reflects the language used in s 87(c) of the Copyright Act 1968 (Cth) which defines the exclusive right in the case of a television broadcast in which copyright subsists. 3 It is accepted that copyright subsists in the relevant broadcasts and that the copyright in them is owned by Turkuvaz. The principal issues for trial will be whether Turkplus holds a valid and enforceable exclusive licence to rebroadcast the ATV channel in Australia or, alternatively, whether Turkuvaz is estopped from denying that Turkplus and Turkuvaz are bound by such a licence. 4 It is common ground that the principles to be applied in determining whether or not to grant interlocutory relief are those stated by the High Court in Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57, in particular, at [65]-[72] per Gummow and Hayne JJ. At para [65] their Honours stated: The relevant principles in Australia are those explained in Beecham Group Ltd v Bristol Laboratories Pty Ltd. This Court (Kitto, Taylor, Menzies and Owen JJ) said that on such applications the court addresses itself to two main inquiries and continued:

"The first is whether the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief ... The second inquiry is ... whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted."

By using the phrase "prima facie case", their Honours did not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed; it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial. That this was the sense in which the Court was referring to the notion of a prima facie case is apparent from an observation to that effect made by Kitto J in the course of argument. With reference to the first inquiry, the Court continued, in a statement of central importance for this appeal:

"How strong the probability needs to be depends, no doubt, upon the nature of the rights [the plaintiff] asserts and the practical consequences likely to flow from the order he seeks."

5 UBI was party to an exclusive licence agreement made in May 2006 with Merkez ATV which is the predecessor in business of Turkuvaz (the May 2006 agreement). The May 2006 agreement was signed on behalf of UBI by the third respondent (Mr Bilge) who was then the Chief Executive Officer of UBI. It is common ground that the May 2006 agreement expired in May 2009 but that UBI has continued to rebroadcast the ATV channel in Australia since the expiration of the agreement. 6 Mr Bilge left his position as CEO of UBI in June 2009. In the second half of 2009 he worked on the establishment of a new Turkish television service in Australia. Turkplus was incorporated on 1 September 2009 and about this time Mr Bilge had some communications with Mr Fatih Ediboglu of ATV. Mr Bilge says that Mr Ediboglu's personal assistant directed him to Mr Murat Erker who was then the General Manager of the ATV channel in Turkey. 7 Mr Bilge and Mr Erker thereafter discussed the possibility of Turkplus obtaining an exclusive licence to rebroadcast the ATV channel in Australia. It is clear from the emails exchanged between Mr Bilge and Mr Erker that Mr Bilge was keen to ensure that the ATV channel was included in the package of channels that Turkplus was proposing to broadcast. He said in an email to Mr Erker on 6 November 2009: Mr Murat hi,

Is there a development regarding the agreement? We are delaying the printing of all our marketing materials (brochure, billboard, poster, etc). You would appreciate that we would prefer not to risk printing thousands of material without an agreement. We don't want to remove ATV from the materials and print before the situation is finalised either, just in case we can reach an agreement within the next couple of days. Shortly, we are in a gridlock in terms of marketing.

Based on our conversation a couple of weeks ago, I had given the instruction to transfer ATV Europe to Australia via fibre. ATV has been reaching our Sydney uplink from Europe via fibre for some time now. As you can imagine, this is a costly operation.

My apologies for pushing you in your busy environment but we need to conclude this matter.

8 He followed Mr Erker up again on 9 November 2009. It is plain that there was no binding agreement in place by 1 December 2009. The defence filed by Turkplus pleads that a binding agreement was made on 4 February 2010 which is the date Mr Erker signed a letter which I will return to shortly. However, on 1 December 2009 Turkplus and the second respondent (Globecast) entered into a Satellite Transmission Service Agreement (the STSA). What is significant for present purposes is that the STSA was entered into before the exclusive licence relied upon by Turkplus came into existence. 9 It is true that Turkplus also relies upon an estoppel. It alleges that from about 1 December 2009 Turkuvaz induced in Turkplus an assumption that (a) Turkuvaz would execute the licence agreement in the form that it then took and (b) that notwithstanding that the document had not yet been executed the licence agreement was nevertheless final and binding. There are particulars given of that allegation most of which relate to communications between Mr Bilge and Mr Erker in January and February 2010. The other communications relied upon are emails exchanged between Mr Bilge and Mr Erker on 1 December 2009. Having read those emails I do not think they could give rise to a reasonably held belief that a binding agreement was in place as at that date or that Turkuvaz was bound to enter into a binding agreement at any time thereafter. Moreover, emails sent from Mr Erker to Mr Bilge in January 2010 make it quite clear that Mr Bilge was under no such understanding. 10 The evidence of Mr Erker is that he made it clear in his discussions with Mr Bilge that he did not have authority to enter into the exclusive licence agreement with Turkplus and that any such agreement had to be signed by its authorised signatory, the deputy chairman, Mr Serhat Albayrak. According to Mr Erker's evidence, he had a number of conversations with Mr Bilge in which he indicated that he was not an authorised signatory and that only Mr Albayrak had authority to sign the agreement on behalf of Turkuvaz. 11 Turkplus alleges that Mr Erker had actual authority to enter into an exclusive licence agreement on behalf of Turkuvaz and that if he did not, he had ostensible authority to do so. There is no evidence before me to suggest that Mr Erker had actual authority to enter into such an agreement; the evidence is all the other way. As to the case based upon ostensible authority, it seems to me that it would fail if Mr Erker's evidence is accepted, which is to the effect that he told Mr Bilge on a number of occasions during the course of their discussions that he did not have the authority to sign the exclusive licence and that the final decision on whether or not to enter into such an arrangement was for the board of directors. 12 It appears that negotiations between Mr Bilge and Mr Erker reached the point where, at least as between them, there was nothing left to agree upon. However, much of the email correspondence that was admittedly exchanged between Turkplus and Turkuvaz at the relevant times appears to me to confirm that Mr Erker made it known to Mr Bilge that he did not have authority to enter into the exclusive agreement on behalf of Turkuvaz. 13 If that is where matters were left, I would regard Turkplus' defence based upon the existence of a concluded contract or an estoppel as extremely weak. However, the issue is complicated by the existence of a letter written by Mr Erker, purportedly on behalf of ATV Avrupa (which I assume is a business name of Turkuvaz), dated 4 February 2010. This letter was written by Mr Erker at Mr Bilge's request. The letter states: To Whom It May Concern

We herewith this letter confirm that TurkPlus Pty Ltd of Australia holds the sole and exclusive rights to the programming content, whole or in part; to the ATV Avrupa TV channel of Turkey; including the rights to the distribution, transmission and re-broadcasting of ATV Avrupa TV channel in the Australia and New Zealand territories.

TurkPlus Pty Ltd exclusively holds the above mentioned rights until year end of 2015.

Kind Regards Murat D. Erker General Manager ATV Avrupa

14 According to Mr Erker, this letter was written by him at the request of Mr Bilge to provide to the Australian Broadcasting Authority (ABA) so that Turkplus could progress its plans to rebroadcast the ATV channel in Australia in anticipation of the exclusive licence being signed by Mr Albayrak. Mr Erker's evidence, which is disputed by Mr Bilge, is that he agreed to provide the letter for the stated purpose only and in circumstances which, if his account is accepted, made it very clear to Mr Bilge that the exclusive licence was yet to be signed by Mr Albayrak and that there would be no binding agreement until that occurred. 15 It is important for the purposes of the interlocutory application to put the letter of 4 February 2010 into some context. On the basis of my reading of their email exchanges, it appears that by 13 January 2010 both Mr Erker and Mr Bilge were frustrated by the delays in finalising the agreement. On 13 January 2010 Mr Bilge sent an email to Mr Erker which stated: I could not reach you on the phone. I have an important request to make.

As you know, relying on the probability of the verbal agreement we already had is to be signed any moment, we have been enduring costs of the fibre line for ATV's access to Australia and booking fees for the satellite for the last four months. However, not being able to receive any positive or negative response from you makes our job difficult.

Because, if we stop the relay, the restarting is a process and requires spending for another set-up. To continue in this manner without a time frame put us in difficult position with our board of directors.

My sincere request from you, please convey us the latest situation. Is it in signature process? Is it forgotten? Given up? If not, can you give us a date for finalization of the agreement, so that we continue the relay with fiber.

(emphasis added) 16 Mr Erker responded to this email on or about the same day and said: First of all, I am personally sorry that this subject has dragged for so long. However, as we said before there is not any smallest problem from our viewpoint. The agreement has been found suitable by all the interested units including myself and signed.

The last signature we are waiting for is the authorising signature of Mr Serhat Albayrak, Deputy Chair of Board of Directors, on behalf of the company.

Mr Suleyman, I want to work in Australia exclusively with you and the strategy I want to employ is: wherever there are Turkish people that's where we are interested in and every opportunity should be employed to take our broadcasting over there.

We are not giving up or deferring and we don't have other plans.

After I receive Mr Serhat Albayrak's signature, I'll send two copies of the wet signed agreement to you.

(emphasis added) The second paragraph of that email reiterates what Mr Bilge had already known i.e., that the licence agreement had to be signed by Mr Albayrak. 17 On or shortly prior to 4 February 2010 Mr Bilge and Mr Erker had a telephone conversation. There is a dispute as to what was said. Mr Bilge then sent another email to Mr Erker which attached what he described as a "sample authorisation document". Attached to it was a draft of the letter signed by Mr Erker that day. Mr Bilge stated: As per our telephone conversation yesterday evening, I'm sending you the sample authorization document. ATV Europe letter head and your signature will suffice.

If you also send the presently signed copy of the agreement we can get the permission from Australian Broadcast Authority (Australia's RTUK) within a few days and start the broadcasting.

And the file will be completed when Mr Serhat is convenient to sign.

My request from you: if you can get them faxed before you send the original authorization document and the copy of the agreement by DHL, we'll have at least the opportunity to start the application process on Monday.

18 But for the context in which Mr Erker came to write the letter of 4 February 2010, it would constitute powerful evidence of an exclusive licence agreement having been entered into between Turkuvaz and Turkplus. To my mind, however, the other email communications between Mr Erker and Mr Bilge provide considerable support for the applicants' contention that the letter was signed by Mr Erker for the purpose outlined in Mr Bilge's email, i.e., to allow him to obtain the necessary ABA permission which would allow Turkplus to start broadcasting the ATV channel. 19 There is one matter that is particularly significant in this regard. Although Mr Bilge's email indicates that the documents requested by him were required to obtain ABA permission, it appears that no such permission was in fact required. There is no evidence that Turkplus ever applied for any such permission around the time Mr Bilge received the letter or at any time thereafter. Subsequently, when Mr Erker wrote to Mr Bilge on 26 March 2009 complaining that he was deceived by Mr Bilge, he said: That was a letter of intent which you requested, and the content of which you provided. You told us that such a letter was required on our letterhead for the express purpose of submitting to the broadcasting authorities in Australia, to enable you to commence interim test broadcasts of our channel. The letter was given to you on that basis, and for no other purpose. However, we have since learned that such a letter was not, in fact, required to be submitted to the broadcasting authorities in Australia. What you told us seems to have been untrue.

At the hearing before me, Turkplus was still unable to explain why ABA permission was required. 20 The evidence shows that Mr Bilge made the letter of 4 February 2010 available to Turkplus' lawyers who then attached it to a letter of demand from Turkplus to UBI dated 22 February 2009 which alleged that UBI was infringing Turkplus' copyright by rebroadcasting the ATV channel. 21 On 17 March 2010 Mr Bilge sent another email to Mr Erker which reinforces the view I have taken of the 4 February 2010 letter. In that email Mr Bilge said, relevantly: Dear Mr Murat Eker

I was sad to learn from our telephone conversation yesterday that you and ATV decided to refer the matter to your Board of Directors to re-assess the conditions under which ATV would work with TurkPlus and I would like to bring the following points to your attention to clarify some points.

We have been receiving information that the UBI executives are presently in Turkey and they are visiting the channels that we have exclusive agreements with such as NTV and Show TV and the channels that we had in-principle-agreement with such as ATV to launch an anti-campaign and make baseless allegations especially directed at me.

In your email dated 13 January 2010 you confirmed that "The agreement has been found suitable by all the interested units including myself and signed. The last signature we are waiting for is the authorising signature of Mr Serhat Albayrak, Deputy Chair of Board of Directors, on behalf of the company" and as a result of this statement TurkPlus committed itself to long-term satellite capacity agreements. We also received confirmation from the authorities when you conveyed to us the wet signed confirmation document the principles of which were agreed to by the required units.

To move away from the framework of the agreement we concurred on will place TurkPlus in financial and non-pecuniary difficulties.

22 This email recognises that Mr Bilge and Erker had reached an "in principle agreement". 23 UBI was aware as a result of the letter of demand sent on 22 February 2010 that Mr Bilge, its former CEO, had obtained or was attempting to obtain an exclusive licence for Turkplus from Turkuvaz and, it may be inferred, other overseas television broadcasters. UBI arranged meetings in Turkey with Turkuvaz that culminated in UBI being granted an exclusive licence to rebroadcast the ATV channel in Australia commencing in April 2010. An exclusive licence agreement between UBI and Turkuvaz was signed in April 2010. 24 On the basis of the material before me it appears to me that Mr Bilge was at all relevant times on notice that an exclusive licence of the kind sought by Turkplus required the approval and signature of Mr Albayrak and that neither party contemplated that they would be bound to such an arrangement before that occurred. 25 So far as the defence based on estoppel is concerned, it seems to me that the matters which lead me to conclude that the case based upon the existence of a binding exclusive licence is weak, also apply to the defence based upon estoppel. It may be accepted for present purposes that Turkplus advanced its plans for the launch of its new Turkish channels in the expectation that Turkuvaz would enter into an exclusive licence agreement. It may also be accepted that by 1 December 2009 it believed that it was highly likely that Turkuvaz would enter into such an agreement. But that of itself would not give rise to an estoppel which had the effect of holding Turkuvaz to an exclusive licence agreement which it never entered into in the first place. 26 I am satisfied that the applicants have a prima facie case for the relief which they seek and, in my estimation, their case is a strong one. That brings me to the question of the balance of convenience. 27 The evidence relied upon by the applicants on the balance of convenience was given by Mr Parker who is the Chief Executive Officer of UBI. I accept his evidence that it would be extremely difficult for UBI to quantify the loss of revenue it would suffer in the event that Turkplus is permitted to continue rebroadcasting the ATV channel on a free to air basis. I also accept that the ATV channel is an important component of the larger package of channels which UBI makes available to its customers on a subscription basis. While I accept that his estimate of the revenue losses UBI is likely to suffer if the interlocutory relief sought is not granted may be excessive, I accept that they are likely to be substantial. Further, in light of the evidence given by Turkplus concerning its financial viability in circumstances where it might not be entitled to rebroadcast the ATV channel (which I will come to shortly) it seems likely that damages would not be an adequate remedy. 28 The evidence concerning balance of convenience from Turkplus was given by its director Mr Kaya. He says that Turkplus was formed on 19 September 2009 and commenced broadcasting Turkish television channels in Australia on 16 November 2009. That is well before any of the dealings between Mr Bilge and Mr Erker upon which Turkplus relies in its defence. 29 Mr Kaya says that Turkplus has entered into a number of contracts with advertisers who have agreed to place advertisements on the Turkplus channels for forward periods of up to 6 months. He produced four examples of such contracts which are said to be confidential. I have reviewed those contracts. I do not think they support Mr Kaya's assertion that advertisers who have contracted to place advertisements could cancel their contracts and sue Turkplus for breach of its obligations to broadcast their advertisements on the ATV channel. In any event the sums of money involved appear to be quite modest. I reject the suggestion that Turkplus would suffer any substantial harm if an interlocutory injunction was granted as a result of any alleged incapacity to fulfil contracts it has made with advertisers. 30 Mr Kaya also referred to Turkplus' commitments under the STSA and another agreement made between Turkplus and Globecast dated 1 May 2010 (the 2nd STSA). As I have already mentioned, the STSA took effect on 1 December 2009, at a time when Mr Bilge should have been aware that he had not yet secured a binding commitment from Turkuvaz. Mr Kaya says that "[t]he forward financial commitments of [Turkplus] under the Globecast Contracts total approximately $2.3 million and cannot be met by [Turkplus] unless it has the right to broadcast the ATV Channel." 31 The 2nd STSA was entered into at a time when Turkuvaz was contending that it did not have a binding agreement with Turkplus and that Mr Bilge had procured the letter dated 4 February 2010 by misrepresentations made to Mr Erker. I have previously referred to Mr Erker's letter of 26 March 2010 which made this abundantly clear and it probably explains why cl 8.2(d) was included in the 2nd STSA. Clause 8.2(d) provides: Up until and including month 5 of this agreement TurkPlus is granted the option to cancel this agreement (terminate the agreement) however on doing so will forfeit the combined deposit of [redacted] in addition to any outstanding "Service Charge" due up to the date of such termination."

32 I shall not set out the amount of the "combined deposit" or "Service Charge" since they are said to be confidential. However, I am not satisfied that either the STSA or the 2nd STSA give rise to $2.3 million in forward financial commitments as stated by Mr Kaya. 33 Mr Kaya also stated that Turkplus has entered into long term agreements with other major broadcasters from Turkey including NTV and Show TV. The evidence shows that these were entered into on 9 September 2009 and 26 January 2010 respectively. Mr Kaya stated that he does not believe that it is financially viable for Turkplus to continue broadcasting just NTV and Show TV. There was no real attempt to provide a factual foundation for that view in Mr Kaya's evidence. He did not provide any indication of the amount of revenue which he expects will be foregone if Turkplus is unable to broadcast the ATV channel and how this compares to revenue that was being generated when only NTV and Show TV were being broadcast. More importantly, his evidence raises the question of why Turkplus entered into the various commitments he refers to before the letter of 4 February 2010 was obtained and why Turkplus commenced broadcasting before that time if, as is now suggested, the viability of the whole enterprise was conditional upon obtaining a licence to rebroadcast the ATV channel. I am not satisfied that what Mr Kaya says is correct or, more importantly, that the predicament Turkplus now finds itself in should weigh against the granting of an interlocutory injunction. 34 Mr Kaya also stated that various other amounts have been spent and various other obligations have been incurred in reliance upon representations made by Turkuvaz. But it is clear that the process of establishing and launching the Turkplus business was underway well before the letter of 4 February 2010 was written. A lease agreement produced by him which relates to premises he says have been fitted out at a cost of approximately $150,000 was executed on behalf of his company, Kaya Group Pty Ltd, on 6 March 2009. There is no evidence to suggest that any of the fit out costs were incurred after 4 February 2010 or in reliance upon any representations that may have been made by Mr Erker. 35 Mr Kaya also stated that it is his belief that the negative publicity that will be attracted if there is an interlocutory injunction will harm Turkplus' relationship with businesses that have previously advertised with Turkplus and those that have contracted to do so in the future and that if Turkplus is restrained from broadcasting the ATV channel it will lose all credibility in the market place. He said that he considers it likely that Turkplus will have to close and enter into voluntary liquidation "due to law suits which would most likely emanate from its advertisers, suppliers and staff." Generally speaking, I regard his evidence as exaggerated and not supported by the contracts and business records that he exhibited to his affidavit. 36 The respondents have quite properly raised the matter of security for the undertaking as to damages. The applicants have offered not only their own undertakings but also the undertakings of various third parties. In the circumstances I think the respondents should not be left in a position where they must look to undertakings given by third parties in circumstances where there should be no difficulty in the applicants providing security in what I think is the more appropriate form. The respondents contended that security in the amount of $3 million should be required based upon the evidence of Mr Kaya. I think that is excessive. 37 I will require the applicants to lodge security by way of bank guarantee in the amount of $300,000. I will grant the interlocutory injunctions sought but stay their operation for 7 days so that a bank guarantee can be lodged with the Court and copies provided to the solicitors for the respondents. I shall grant liberty to apply on 3 days notice or on such shorter period of notice as a Judge of the Court allows. 38 The respondents raised the possibility of an early final hearing. Although I am satisfied that the applicants are entitled to interlocutory relief I also think that it is desirable that the proceeding be heard as soon as practicable. The proceedings are to be listed for directions before Yates J on 16 June 2010. 39 The applicants' costs of the interlocutory application are to be their costs in the cause as against the first and third respondents. I reserve the costs of the interlocutory application as between the applicants and the second respondent. There will be a more limited form of interlocutory injunction against the second respondent. It agreed to submit to such an order on a without admissions basis should the applicants succeed against the other respondents. I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Nicholas.