FEDERAL COURT OF AUSTRALIA Universal Music Australia Pty Ltd v Cooper [2004] FCA 78 PRACTICE AND PROCEDURE - addition and removal of parties - applications for joinder and removal of parties in proceeding for copyright infringement and misleading and deceptive conduct - (CTH) Federal Court Rules O 6, rr 8 and 9 - rules confer discretion - test to be applied - where claim so obviously untenable it cannot possibly succeed - case against party seeking to be removed not manifestly untenable - company officers and employees - personal liability - test - "authorised, procured or directed" - case against parties to be joined not manifestly untenable - application for removal dismissed - application for joinder granted. Copyright Act 1968 (Cth) Trade Practices Act 1974 (Cth) Fair Trading Act 1987(NSW) Review Australia Pty Limited v Redberry Enterprises Pty Limited [2003] FCA 1009 cited Tytel Pty Limited v Australian Telecom Commission (1988) 11 IPR 223 cited General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 applied Lotus Development Corporation v Mayne Nicholas Limited (1991) 100 ALR 167 refererd to ICI Australia Operations Pty Limited v Trade Practices Commission (1992) 110 ALR 47 distinguished Microsoft Corporation v Auschina Polaris Pty Limited (1996) 71 FCR 231 discussed Sony Music Entertainment (Aust) Limited v CEL Music Pty Limited (in liq) [2002] FCA 193 cited Henley Arch Pty Limited v Clarendon Homes (Aust) Pty Limited (1998) 41 IPR 443 cited UNIVERSAL MUSIC AUSTRALIA PTY LIMITED, EMI MUSIC AUSTRALIA PTY LIMITED, SONY MUSIC ENTERTAINMENT (AUSTRALIA) LIMITED, WARNER MUSIC AUSTRALIA PTY LIMITED, BMG AUSTRALIA LIMITED, FESTIVAL RECORDS PTY LIMITED AND MUSHROOM RECORDS PTY LIMITED TRADING AS FESTIVAL MUSHROOM RECORDS v STEPHEN COOPER, E-TALK COMMUNICATIONS PTY LIMITED TRADING AS COMCEN INTERNET SERVICES, COM-CEN PTY LIMITED (SUBJECT TO DEED OF COMPANY ARRANGEMENT) N1551 OF 2003 TAMBERLIN J 13 FEBRUARY 2004 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N1551 OF 2003 BETWEEN: UNIVERSAL MUSIC AUSTRALIA PTY LIMITED (ACN 000 158 592) FIRST APPLICANT EMI MUSIC AUSTRALIA PTY LIMITED (ACN 000 070 235) SECOND APPLICANT SONY MUSIC ENTERTAINMENT (AUSTRALIA) LIMITED (ACN 000 033 581) THIRD APPLICANT WARNER MUSIC AUSTRALIA PTY LIMITED (ACN 000 815 565) FOURTH APPLICANT BMG AUSTRALIA LIMITED (ACN 004 157 564) FIFTH APPLICANT FESTIVAL RECORDS PTY LIMITED (ACN 000 111 197) AND MUSHROOM RECORDS PTY LIMITED (ACN 005 594 043) TRADING AS FESTIVAL MUSHROOM RECORDS SIXTH APPLICANT AND: STEPHEN COOPER FIRST RESPONDENT E-TALK COMMUNICATIONS PTY LIMITED TRADING AS COMCEN INTERNET SERVICES (ACN 097 058 994) SECOND RESPONDENT COM-CEN PTY LIMITED (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (ACN 061 300 169) THIRD RESPONDENT JUDGE: TAMBERLIN J DATE OF ORDER: 13 FEBRUARY 2004 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The application for removal of the second respondent, E-Talk, is dismissed with costs. 2. The application for joinder of Messrs Bal and Takoushis is granted with costs. 3. The parties are directed to bring in Short Minutes of Order within the next fourteen days dealing with appropriate directions for the further conduct of the matter. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N1551 OF 2003 BETWEEN: UNIVERSAL MUSIC AUSTRALIA PTY LIMITED (ACN 000 158 592) FIRST APPLICANT EMI MUSIC AUSTRALIA PTY LIMITED (ACN 000 070 235) SECOND APPLICANT SONY MUSIC ENTERTAINMENT (AUSTRALIA) LIMITED (ACN 000 033 581) THIRD APPLICANT WARNER MUSIC AUSTRALIA PTY LIMITED (ACN 000 815 565) FOURTH APPLICANT BMG AUSTRALIA LIMITED (ACN 004 157 564) FIFTH APPLICANT FESTIVAL RECORDS PTY LIMITED (ACN 000 111 197) AND MUSHROOM RECORDS PTY LIMITED (ACN 005 594 043) TRADING AS FESTIVAL MUSHROOM RECORDS SIXTH APPLICANT AND: STEPHEN COOPER FIRST RESPONDENT E-TALK COMMUNICATIONS PTY LIMITED TRADING AS COMCEN INTERNET SERVICES (ACN 097 058 994) SECOND RESPONDENT COM-CEN PTY LIMITED (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (ACN 061 300 169) THIRD RESPONDENT JUDGE: TAMBERLIN J DATE: 13 FEBRUARY 2004 PLACE: SYDNEY REASONS FOR JUDGMENT ON JOINDER AND REMOVAL APPLICATION 1 These reasons relate to two Notices of Motion. The first application is made by the six applicants in the main proceeding ("the applicants") for the joinder of three additional respondents to the main proceeding. That application is not now pressed in respect of one of those proposed respondents, Mr Stevens. The second application is made by the second respondent to the main proceeding ("E-Talk") for its removal from that proceeding, on the ground that there is no possible case against it, as a respondent, in that proceeding. 2 The principal application is brought against the first two respondents. A third respondent ("Com-Cen") was added by consent on 28 October 2003. The proposed Statement of Claim alleges various infringements of copyright under the Copyright Act 1968 (Cth). There are also claims against the first three respondents based on the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987 (NSW)for misleading and deceptive conduct. 3 The applicants' case is that there are arguable claims against the proposed additional respondents and against E-Talk. 4 The case sought to be made against the proposed additional respondents in copyright is that they authorised the infringing acts of the first three respondents (respectively, Cooper, E-Talk and Com-Cen). It is also said that they entered into a common design with those respondents in the commission of the acts complained of, because they directed or procured the infringements, or acted in such a way as to adopt those acts as their own. principles of joinder and removal of parties 5 Order 6 r 8 of the Federal Court Rules ("FCR") provides for the addition of parties, and O 6 r 9 deals with the removal of parties, in the following terms: "Order 6 Rule 8 – Addition of parties (1) Where a person who is not a party: (a) ought to have been joined as a party; or (b) is a person whose joinder as a party is necessary to ensure that all matters in dispute in the proceeding may be effectually and completely determined and adjudicated upon; the Court, on application by him or any party or of its own motion, may order that he be added as a party and make orders for the further conduct of the proceeding. (2) A person shall not be added as an applicant without his consent. Order 6 Rule 9 – Removal of parties Where a party: (a) has been improperly or unnecessarily joined; or (b) has ceased to be a proper or necessary party, the Court, on application by any party or of its own motion, may order that he cease to be a party and make orders for the further conduct of the proceeding." 6 The rules confer a discretion and should be construed liberally so that a determination of related disputes is achieved. The applicant on a joinder application must show that there is an arguable case sufficient to resist the entry of summary judgment by the respondent sought to be joined: see Review Australia Pty Limited v Redberry Enterprises Pty Limited [2003] FCA 1009 at [5] ("Review Australia"); Tytel Pty Limited v Australian Telecom Commission (1988) 11 IPR 223 at 225; General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 ("General Steel"). 7 The threshold test to be applied in relation to an application for joinder of a party is whether summary judgment could be entered by the respondent sought to be joined. The test is that stated by Barwick CJ at 128-129 in General Steel. His Honour there said thatthe claim must be "so obviously untenable that it cannot possibly succeed", or that it is "manifestly groundless" or "such that it does not admit of argument." His Honour uses a number of other similar expressions. These principles have been applied in relation to an application for removal: see Lotus Development Corporation v Mayne Nicholas Limited (1991) 100 ALR 167 at 168 per Foster J; and in relation to an application for joinder: see Review Australia per Heerey J at [5]. REMOVAL OF E-Talk 8 The allegations against E-Talk in the Statement of Claim are that: i. it authorised the infringement of copyright by Cooper (the first respondent) and others, ii. it entered into a common design with, or procured, Cooper and others, including Com-Cen, to commit infringements of copyright, iii. it breached the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987 (NSW)by making false representations. 9 In order to support the continuation of E-Talk as a respondent in the proceeding, the applicants rely on detailed affidavit evidence, including documents referred to in the Third Affidavit of Michael Williams, sworn 28 November 2003, which includes the following information: * The website www.mp3s4free.net from which the music files can be downloaded is located on servers with an address www.comcen.com.au. The website www.mp3s4free.net contains a direct reference to Com-Cen. * A search of the domain name "comcen.com.au" lists E-Talk as the owner, as of November 2002. * There are e-mails linking Cooper and Com-Cen, and referring to the website of www.comcen.com.au. * The business name "Comcen Internet Services" is currently the registered business name of E-Talk, which is used as an Internet provider. * E-Talk's website states that it is now trading under the name "Comcen Internet Services". * Cooper is a retail customer of Com-Cen Pty Limited, trading as "Comcen Internet Services", which provides hosting services. * There is no Australian corporation with the corporate name "Comcen Internet Services". * Terms and conditions at the Com-Cen website refer to the Australian Business Number ("ABN") of E-Talk. * An invoice by "Comcen Internet Services" dated 2 September 2003, bears the ABN of E-Talk under the title "Comcen Internet Services". * Invoices prior to that date refer only to the ABN of Com-Cen. * Searches indicate that Com-Cen and E-Talk had the same registered office address. 10 References to specific documentation are set out in paragraph 6 (a)-(n) (inclusive) of the Third Affidavit of Michael Williams. 11 E-Talk denies that it has any sufficient relationship to the alleged infringing acts. It submits that the evidence establishes that there is no relevant relationship between E-Talk and the applicants or the first respondent, Cooper. E-Talk seeks to explain the reference to its ABN on the invoice of Comcen Internet Services as a printing error and relies on an affidavit by a director of E-Talk, Liam Bal, sworn 28 November 2003, to that effect. Similarly, E-Talk seeks to explain away the applicants' arguments regarding the effect of the documents that they rely on. 12 In an application for removal it is not sufficient to show that the case alleged, or the evidence presented, is not likely to succeed, or that the respondent has a very strong case. It is said by E-Talk that there was a "clerical error" in relation to the ABN of E-Talk being on the Com-Cen invoice, however, this remains to be tested. It is not appropriate on an application such as the present to embark on a comprehensive investigation of the correctness of the evidence filed by the applicant. At this preliminary stage of the proceedings, it is not possible to decide questions of credibility, or questions as to the weight or sufficiency of evidence adduced. Interlocutory processes such as interrogatories, discovery, subpoena and, on the hearing, cross-examination, have yet to be undertaken. It is apparent that the evidence is at a very early stage. 13 In substance, E-Talk's case for its removal from the main proceeding is based upon asserted points of law, issues of fact, and analyses of the evidence presented, which give rise to substantial areas of dispute, and it is not sufficient to persuade me that the applicants' case against E-Talk is manifestly untenable. 14 E-Talk submits that the applicants have not properly invoked the jurisdiction of the Court and refers, in support of this submission, to the remarks of Gummow J in ICI Australia Operations Pty Limited v Trade Practices Commission (1992) 110 ALR 47 at 65. The suggestion appears to be that there is not a "matter" of the type referred to under Chapter III of the Australian Constitution to enable this Court to exercise its jurisdiction. In my view, in the present case, the application and the proposed Statement of Claim clearly raise questions directed to the determination of a legal controversy and give rise to a matter. In particular, the claims are based on federal legislation, and indeed, E-Talk has raised, in argument, interpretation of s 112E of the Copyright Act 1968 (Cth), to support its submission that there is no case against it. 15 I do not accept the assertion by Counsel for E-Talk that only "an absurdly superficial basis" can be demonstrated for asserting that the relief sought will be supported by evidence at a final hearing. At this stage, it is simply speculation on the part of E-Talk. I refuse the application to remove E-Talk as a respondent. Joinder of Bal 16 Mr Bal is a director of E-Talk, and the majority share-holder in E-Talk, through a company of which he is the sole director. That company owns 73% of the shares in E-Talk. In addition, Mr Bal is a director-secretary and majority shareholder of Com-Cen. Mr Stevens was a director of Com-Cen and he is a minority shareholder in E-Talk. Mr Stevens has given evidence that he played no active part in relation to the activities of E-Talk, and this supports the conclusion that Mr Bal was effectively in control of E-Talk. As noted above, the applicants do not press their application to join Mr Stevens to the main proceeding. 17 Mr Bal's e-mail address, his listing as the technical contact for the domain name "comcen.com.au", as well as his listing as a "salesperson" in invoices relating to the hosting of the website by Comcen Internet Services, also support the case that he is involved in the conduct complained of. 18 Mr Bal was present at the premises of E-Talk on the execution of the Anton Piller orders in this matter on 17 October 2003. There is evidence that the office arrangement at the premises was an open plan in which work stations were in close proximity, so that workers could readily communicate with each other from their work stations. 19 In my view, although the evidence is at a preliminary stage, sufficient material has been presented by the applicants to avoid a strike out application on General Steel grounds in relation to the case sought to be raised against Mr Bal. The material is sufficient to justify his joinder. This is not a case where it could be said that Mr Bal is sought to be made liable only by reference to the holding of "an office" as director or secretary in relation to the second respondent. The concept of "involvement" extends considerably beyond the holding of "an office", and in the present case, as can be seen from the material, there is significant additional evidence in relation to his involvement apart from the holding of a position. No meaningful determination can be made at this point as to the strength of Universal Music's case until the matter has progressed further. The applicants have produced sufficient material to warrant joinder in the absence of any strong evidence to the contrary. 20 It is not sufficient to point to claimed inadequacies and insufficiencies in the pleadings or lack of detailed particulars in view of the fact that there may be amendment. Deficiencies in pleadings are not of themselves a ground for a strike out. The alleged inadequacy of pleadings is a matter for determination after the parties have been joined, and the allegations against them have been fully formulated. 21 My conclusion is that the application to join Mr Bal should be granted. joinder of Takoushis 22 Mr Takoushis' position is different to Mr Bal's position. He is an employee, rather than an "officer" of the second and third respondents. That of itself does not prevent him from being a party or being involved. The notion of involvement in conduct does not require that a person must occupy a particular position. As Lindgren J pointed out in Microsoft Corporation v Auschina Polaris Pty Limited (1996) 71 FCR 231 at 243-4, affirming the "authorised, procured, or directed" test in relation to tortious conduct by companies: "What seems to underlie this test is the notion that, necessarily, companies can engage in tortious conduct only through human beings, and, at least ordinarily, where a particular human being involved and responsible to an appropriate extent can be identified, he should, as a matter of policy, be liable." (Emphasis added) 23 This extract emphasises the fact-specific nature of each determination. It does not follow that a person must be involved in what can be described as "an executive decision-making role" although that may be an important consideration: see Sony Music Entertainment (Aust) Limited v CEL Music Pty Limited (in liq) [2002] FCA 193 at [26]; Henley Arch Pty Limited v Clarendon Homes (Aust) Pty Limited (1998) 41 IPR 443 at 463. 24 The submissions for Mr Takoushis rely largely on the assertion that he was not an office holder, and that he was merely a low level employee performing clerical or technical functions. The question of Mr Takoushis' involvement in the conduct complained of is one of fact and degree, and requires careful consideration on the evidence adduced, in order to determine whether he had a sufficient degree of involvement in the conduct. No general rule can be laid down as to any level of responsibility which must attach to his position. 25 In the present case, sufficient evidence has been presented by the applicants to persuade me that the case sought to be brought against Mr Takoushis cannot be said to be manifestly untenable in accordance with the principles set out in General Steel. Mr Takoushis signed off on a check list that designated the service that hosted the website that has been implicated in the alleged infringing activities in question. He provided technical information and advice on an ongoing basis for that website, and assisted Cooper in operating and working the website. He appears also to have been involved in preliminary arrangements for the hosting of websites on behalf of E-Talk or Com-Cen. He was involved in discussions on behalf of E-Talk or Com-Cen regarding an agreement with Cooper to provide advertising on the website, in exchange for free hosting services. Importantly, there is evidence that he was the "primary contact" between Com-Cen and Cooper. In my view, this material provides a sufficient degree of involvement to support the addition of Mr Takoushis as a respondent. 26 Mr Takoushis relied upon an affidavit sworn by him on 8 December 2003, and filed on his behalf. However, this affidavit does not provide a sufficient basis for refusal of a joinder application. Mr Takoushis' evidence has not been tested. 27 For these reasons, I consider that the application to join Mr Takoushis as a respondent should be granted. 28 My conclusion is that the application for removal of E-Talk as a respondent should be dismissed with costs, and that the applications for joinder of Messrs Bal and Takoushis should be granted with costs. I consider it appropriate that costs should be ordered to this point because the dispute as to joinder and removal presented a discrete issue and I see no reason why the usual rule should not be applied. I direct the parties to bring in Short Minutes of Order within the next fourteen days dealing with the appropriate directions for the further conduct of this matter. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin. Associate: Dated: 13 February 2004 Counsel for the Applicants: J V Nicholas SC C Dimitriadis Solicitor for the Applicants: Gilbert + Tobin Solicitor for the First Respondent: Corrs Chambers Wesgarth Counsel for the Second and Third Respondents: M J Cohen Solicitor for the Second and Third Respondents: Watson Mangioni Solicitor for Mr Takoushis: Tebbutt & Sons Date of Hearing: 10 December 2003 Date of Judgment: 13 February 2004