Express Australia Pty Ltd (Trustee) v Windsor Wholesale Australasia Pty Ltd [2005] FCA 1119

FEDERAL COURT OF AUSTRALIA

Express Australia Pty Ltd (Trustee) v Windsor Wholesale Australasia Pty Ltd [2005] FCA 1119 EXPRESS AUSTRALIA PTY LTD (as Trustee for XPRESS TRUST) v WINDSOR WHOLESALE AUSTRALASIA PTY LTD No QUD 125 OF 2005 SPENDER J 8 AUGUST 2005 BRISBANE

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY QUD 125 OF 2005

BETWEEN: EXPRESS AUSTRALIA PTY LTD as Trustee for XPRESS TRUST

APPLICANT

AND: WINDSOR WHOLESALE AUSTRALASIA PTY LTD

RESPONDENT

JUDGE: SPENDER J

DATE OF ORDER: 8 AUGUST 2005

WHERE MADE: BRISBANE

THE COURT ORDERS THAT: 1. The applicant have leave to serve its amended application and statement of claim on the second respondent outside the Commonwealth in accordance with O 8, Div 3 of the Federal Court Rules. 2. Costs be costs in the proceedings.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY QUD 125 OF 2005

BETWEEN: EXPRESS AUSTRALIA PTY LTD as Trustee for XPRESS TRUST

APPLICANT

AND: WINDSOR WHOLESALE AUSTRALASIA PTY LTD

RESPONDENT

JUDGE: SPENDER J

DATE: 8 AUGUST 2005

PLACE: BRISBANE

REASONS FOR JUDGMENT 1 This is a notice of motion filed on 21 July 2005 seeking that the applicant have leave to serve its amended application and statement of claim on the second respondent outside the Commonwealth, in accordance with O 8, Div 3 of the Federal Court Rules, and that the costs of this application be costs in the proceeding. 2 There was also late service by the first respondent, Windsor Wholesale Australasia Pty Ltd, of a notice of motion seeking an order that, pursuant to O 20 r 2 of the Federal Court Rules, the proceedings against the first respondent be dismissed or, alternatively, that the application against the first respondent be permanently stayed. That motion seeks that the applicant pay the first respondent's costs of and incidental to this notice of motion. Mr Donald Farrands, who appears for the first respondent, accepts that the relief claimed by his notice of motion is consequential on the disposition of the first notice of motion. 3 I say at the outset that I will grant the leave sought by the notice of motion filed by the applicant on 21 July 2005. I do so for these reasons. 4 Australia and the United States are not parties to a convention as to the service abroad of judicial documents. The consequence is that O 8 r 2 of the Federal Court Rules applies. By that rule, service outside the Commonwealth of originating process is not valid unless the service is in accordance with the prior leave of the Court given under subrule (2). Subrule (2) provides: 'The Court may, by order, give leave to serve originating process outside the Commonwealth in accordance with Division 2 or 3 of this Order … on such terms and conditions as it considers appropriate, if the Court is satisfied that: (a) the Court has jurisdiction in the proceeding; and (b) rule 1 applies to the proceeding; and (c) the party seeking leave has a prima facie case for the relief sought by the party in the proceeding.' 5 It is not in dispute that this Court has jurisdiction in respect of infringement of copyright under the Copyright Act 1968 (Cth) ('the Copyright Act') and under the Trade Practices Act 1974 (Cth) ('the Trade Practices Act'). 6 The contention by the respondent that a prima facie case is not made out by the applicant is founded on two assertions. The first is concerning the nature of the licence which the applicant has shown it has, and in particular whether that licence is such as to confer rights on it as against third parties who have distributed copies of the Buttman Magazine, the copyright of which is in the second respondent. The second relates to whether the applicant has alleged an essential element of each of its claims, both under the Copyright Act and under the Trade Practices Act, namely, the suffering of loss and damage. Subject to those two matters, there is no doubt that the proceeding comes within those set out in O 8, r 1. 7 In determining whether a prima facie case exists, a court does not exercise the kind of scrutiny that would occur in the submission of "no case to answer" at the end of an applicant's case for trial. It is sufficient if there is placed before the Court material from which inferences are open which, if they were findings of fact, would support the relief claimed: Trade Practices Commission v Gillette Company and Others (No 2) (1993) 118 ALR 280 at 285-286. 8 In this case, the applicant is seeking against the second respondent only a declaration that the second respondent is the owner of the copyright in the Buttman Magazine. It is necessary that the owner of the copyright be a party to these proceedings, as has been conceded on behalf of the first respondent. The real question, then, is whether the first applicant has demonstrated a prima facie case against the first respondent. 9 "Exclusive license" is defined in s 10 of the Copyright Act as meaning: '… a licence in writing, signed by or on behalf of the owner or prospective owner of copyright, authorizing the licensee, to the exclusion of all other persons, to do an act that, by virtue of this Act, the owner of the copyright would, but for the licence, have the exclusive right to do, and exclusive licensee has a corresponding meaning.' 10 Section 37 of the Copyright Act provides: '(1) Subject to Division 3, the copyright in a literary, dramatic, musical or artistic work is infringed by a person who, without the licence of the owner of the copyright, imports an article into Australia for the purpose of: (a) selling, letting for hire, or by way of trade offering or exposing for sale or hire, the article; (b) distributing the article: (i) for the purpose of trade; or (ii) for any other purpose to an extent that will affect prejudicially the owner of the copyright; or (c) by way of trade exhibiting the article in public; if the importer knew, or ought reasonably to have known, that the making of the article would, if the article had been made in Australia by the importer, have constituted an infringement of the copyright. (2) In relation to an accessory to an article that is or includes a copy of a work, being a copy that was made without the licence of the owner of the copyright in the work in the country in which the copy was made, subsection (1) has effect as if the words "the importer knew, or ought reasonably to have known, that" were omitted.' 11 Pursuant to section 119 of the Copyright Act, the exclusive licensee of the copyright has the same right to relief under ss 115 and 116, except as against the owner of the copyright, that the owner of the copyright would have. 12 In the light of those statutory provisions, to establish a prima facie case for relief under s 115 of the Copyright Act, there must be material before the Court from which the Court can draw inferences: first, that the second respondent is the owner of the copyright in the Buttman Magazine; second, that the applicant is the exclusive licensee of the copyright in the Buttman Magazine; and thirdly, that the first respondent infringed the copyright by selling or distributing the Buttman Magazine without the licence of the second respondent or the applicant in circumstances where the first respondent knew or ought reasonably to have known that this constituted an infringement of the copyright. 13 There is no doubt that, on the material, the second respondent owns the copyright in the Buttman Magazine. The applicant, to establish its claim that it is the exclusive licensee, relies on a series of documents, in particular a letter dated 9 December 1999 from Christopher Norman, Marketing Director Publications, Evil Angel, to a person named "Barry," the terms of which are as follows: 'This is to confirm that Xpress Australia has exclusive rites to distribute Buttman Magazine and video products in Australaisa. The one exception to this is Video Wholesalers in New Zealand whom sell product in their own shops. I have re confirmed this with John Stagliano and if you have any problem you can contact him direct 818 7871414. There are NO other authorized bodies to sell Buttman, John Stagliano product in Austrilasia.' 14 There is a second letter dated 8 December 2004, again from Mr Norman, who this time is styled Vice President Operations, EA Productions, in these terms: 'To whom it may concern: Please be informed that EA Productions/Buttman Magazine has entered into an exclusive distribution arrangement for the territory of Australia. This will include all new Magazine product created from November 2004 onwards. This Arrangement is with Xpress Australia PTY whom will be our only authorized dealer of Buttman Magazine and other EA Publications. If you have any questions please do not hesitate to contact me directly at 818 787 1414 ext 104.' 15 The respondent, however, draws attention and relies quite heavily on a letter from Mr Norman sent to "Xpress Australia Pty" bearing date 20 December 2004, which is in these terms: 'Dear Josh, To clear up any misunderstanding, EA Productions has choosen to comit to distributing directly only Xpress Australia the Buttman Magazine. This deal is in place ONLY for product created by Buttman Magazine from November 2004 onwards. Xpress does not have our support to pursue other vendors in Australia for Buttman Magazines they have in stock nor that they may buy from a third party. Our favourable pricing to Xpress and our commitment not to pursue other sales directly for Buttman Magazine in Australia is the only indorsment. I really hope that is your understanding of our deal. I have learned of your pursuance of Winsor Distribution. I believe this to be unfair and can not support your insitance that they relinquish the stock of Buttman Magazine to you. If you have any questions please do not hesitate to contact me directly at 818 787 1414 ext 108.' 16 Each of those letters is written on the letterhead of EA Productions, 14141 Covello Street, Unit 8C, Van Nuys California 91405, except the letter of 9 December 1999 which, while it has the same address, is headed Evil Angel Video. 17 The contention by the first respondent is that the letter of 20 December 2004 either illustrates that there is a relevant qualification on the rights of the applicant as exclusive licensee, or that there has been a revocation of that exclusive licence, or perhaps a revocation of that licence insofar as it relates to vendors who have old product in stock or vendors who buy from a third party. However, there are two further difficulties about that. First, the contentions are really matters going to evidence concerning the claim to be the exclusive licensee which the applicant advances, and do not detract from the need to establish simply a prima facie case. The letter may, in fact, reflect an imperfect understanding of the implications of the grant of an exclusive licence by Mr Norman, but in any event I am satisfied that there is an allegation of a prima facie case of an exclusive licence fit to go to trial. 18 The matter becomes a lot stronger, of course, when one has regard to two further letters which are exhibited to the affidavit of Michael Steven Kennedy affirmed 20 July 2005. The first of those, on the letterhead of EA Productions at its address, is addressed to Xpress Australia Pty Ltd, dated 15 February 2005, and is in the following terms: 'Dear Jos, I hereby re-confirm the appointment of Xpress Australia Pty. Ltd. as our exclusive distributor for Australia from the November 2004 edition onwards. The comment made in my fax of 20th December re: 'the third party' was just that, a comment, and was not intended to diminish your exclusive rights in any shape or form.' 19 The second letter is dated 30 April 2005 from EA Productions at its address, and it is headed Xpress Australia, Re Australian Distribution of Buttman Magazine: 'Dear Josh, Please accept this letter as formal notice to all parties, That the exclusive distribution of Buttman Magazine in the territory of Australia has been arranged between EA Productions/Buttman Magazine and Xpress Australia. EA Productions can only support the the exclusive representative of Buttman Magazine in Australia, Xpress. EA Productions can not support the gray market product of Buttman Magazine. Xpress Has EA Productions full support to persue any vendor they feel infinges on their exclusive status. If you have any further questions please do not Hesitate to call me or my assistant Sandee Johnson at (818) 787 1414.' 20 I am quite satisfied that the applicant has demonstrated a prima facie case in respect of the claims in its amended statement of claim, subject to the second question concerning whether there has been established, to a prima facie level, the suffering of loss and damage, an essential ingredient to both causes of action. 21 If the facts alleged as to the unauthorised selling by the first respondent of a magazine of which the applicant has the exclusive licence of the copyright owner to distribute are established, it is not difficult to infer that there has been loss or damage constituted by the inability to make sales which, in the absence of unauthorised selling, would have been made. 22 There is, however, more direct evidence in the material before me as to loss and damage suffered by the applicant as a consequence of the sales in Australia made by the respondent. 23 As the correspondence set out in detail above indicates, and in particular the letter of 20 December 2004, it seems to suggest that the sales to Windsor Distribution of the Buttman Magazine by the first respondent have been at a lower price than those which were supplied to Windsor Distribution by the applicant earlier, pursuant to its exclusive distribution licence. This is, it seems to me, evidence from which the clear inference can be drawn that sales have been lost to the applicant by virtue of the second respondent undercutting its price to a person to whom the applicant previously distributed the magazine. 24 It is true that the applicant has not particularised the loss and damage suffered, and in particular, there has been no dollar and cents figure given as to its loss or damage. However, having regard to the state of the trial, and in the absence thus far of discovery in particular, and other avenues of inquiry that are available to an applicant in circumstances like this, it is not surprising that a detailed quantified claim for loss and damage has not been made. 25 I am quite satisfied that the material permits the inference that there has been some loss and damage suffered. The fact that it has not been able to be quantified, even in terms of the order of loss, does not mean that a prima facie case of loss and damage has not been made out. No doubt the question of quantification and proper pleadings are matters for the future. 26 In the result, I am satisfied that the applicant has made out the requirements of O 8 and, for the reasons which I have given, I give the applicant leave to serve its amended application and amended statement of claim on the second respondent outside the Commonwealth in accordance with Order 8, Division 3 of the Federal Court Rules. 27 After hearing from the parties on costs, Mr Farrands has persuaded me from the order that I had indicated. The reason for that is not that the applicant could have avoided this by asking for the consent of the second respondent, although that is a possibility. Being realistic, this proceeding was brought because it was demanded by the first respondent at the last directions hearing, and the grant of leave was opposed by the first respondent, and that would have provided a basis on which I might have ordered that the costs of these proceedings be the applicant's costs in the proceedings. 28 The reason that I have decided to resile from that proposed order is simply that all that the notice of motion sought concerning costs was that the costs of the application be costs in the proceeding. It is a small point, but I think at the end of the day, having regard to that circumstance, I will simply order that the costs of this application be costs in the proceeding. 29 In relation to the second notice of motion listed for mention today, it was, as Mr Farrands has indicated, consequential on my findings in relation to the first matter. I dismiss the relief claimed by the notice of motion filed 5 August 2005 by the respondent. In the circumstances, it is appropriate to make no order as to costs of that motion. I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Spender