FEDERAL COURT OF AUSTRALIA eify Pty Ltd v 3D Safety Services Pty Ltd [2018] FCA 1017 Appeal from: Application for extension of time: EIFY Systems Pty Ltd v 3D Safety Services Pty Ltd [2017] NSWSC 1310 File number: NSD 2120 of 2017 Judge: RARES J Date of judgment: 14 June 2018 Legislation: Copyright Act 1968 (Cth) ss 10, 21, 131B Federal Court of Australia Act 1976 (Cth) s 37M Federal Court Rules 2011 rr 36.03, 36.05 Uniform Civil Procedure Rules 2005 (NSW) r 51.8 Cases cited: Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Limited (2013) 250 CLR 303 FAI General Insurance Co Limited v Southern Cross Exploration NL (1988) 165 CLR 268 Jackamarra v Krakouer (1998) 195 CLR 516 Lodestar Anstalt v Campari America LLC (No 2) [2016] FCAFC 118 O'Brien v Komesaroff (1982) 150 CLR 310 R v Secretary for the Home Department; Ex parte Mehta [1975] 1 WLR 1087 Sydney Equine Coaches Pty Ltd v Gorst [2017] FCAFC 34 Tamaya Resources Ltd (in liq) v Deloitte Touche Tohmatsu (a firm) (2016) 332 ALR 199 United Dominions Corporation Ltd v Brian Pty Limited (1985) 157 CLR 1 Date of hearing: 14 June 2018 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Category: No Catchwords Number of paragraphs: 48 Counsel for the Applicant: Mr F Corsaro SC with Mr B Levi Solicitor for the Applicant: Proctor Phair lawyers Counsel for the Respondents: Mr K Andronos Solicitor for the Respondents: Norton Rose Fulbright ORDERS NSD 2120 of 2017 BETWEEN: EIFY PTY LTD Applicant AND: 3D SAFETY SERVICES PTY LTD First Respondent ANTHONY IAN CONACHER Second Respondent SIMON PAUL MORROW (and others named in the Schedule) Third Respondent JUDGE: RARES J DATE OF ORDER: 14 JUNE 2018 THE COURT ORDERS THAT: 1. The application for an extension of time be dismissed. 2. The applicant pay the respondent's costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT (REVISED FROM THE TRANSCRIPT) RARES J: 1 eify Pty Limited seeks an extension of time in which to file a notice of appeal from orders that the Supreme Court of New South Wales made on 28 September 2017 directing entry of judgment for the defendants, who are respondents to the present application, namely, 3D Safety Services Pty Limited, Anthony Conacher, Simon Morrow, 3D Safety Systems Pty Limited and Wishbone Consulting Pty Limited (collectively 3D Safety). Background to the extension of time 2 The trial took 20 days before the primary judge and involved a plethora of issues of fact and law. Those issues were presented in a way that made it not easy, at times, for his Honour and counsel to deal with matters. The presentation included a somewhat chaotically prepared court book. 3 His Honour heard oral address on the last day and a half of the hearing and then, because neither side had had an opportunity to read or address on the others' written closing submissions in chief, allowed the parties to file written closing submissions in reply, a course that his Honour came to lament because of the absence of oral addresses in those submissions. eify's written submissions in reply ran to 72 pages and the respondents' to about 31. There were no subsequent responses to either of those sets of submissions, albeit that they raised, at times, new matters. 4 eify explained through its solicitor, Russell Phair, that it had intended to appeal in the Court of Appeal of the Supreme Court of New South Wales. For that purpose, he prepared a notice of intention to appeal in accordance with the Supreme Court's rules following advice that he received from senior and junior counsel who appeared at the trial and also appeared in the application before me. On 6 October 2017, Mr Phair prepared and filed a notice of intention to appeal, but did not serve it within 28 days of 28 September 2017, contrary to r 51.8 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). He explained his failure to serve the notice of intention to appeal by saying that, because the principals involved in the litigation were members of the one family, who had had a very difficult relationship as a result of the dispute, he had not wanted to inflame matters. He said that he put the notice of intention to appeal aside intending that it would be hand delivered to the respondents' solicitors on the last day for service, namely, 26 October 2017, but by oversight that did not occur. 5 When he realised his mistake on 1 November 2017, he served the notice of intention to appeal by email. That led to a letter from the respondents' solicitors of 7 November 2017 informing Mr Phair that, by force of s 131B of the Copyright Act 1968 (Cth) any appeal had to be brought in this Court. By that time Mr Phair was out of time, first, under the UCPR to serve the notice of intention to appeal and would require an extension of time from the Court of Appeal in which to do so, and, secondly, under r 36.03 of the Federal Court Rules 2011, which required a notice of appeal to have been filed within 21 days after the final orders were made. It is not necessary to file a notice of appeal in the Court of Appeal until 90 days after the date the State court made the relevant orders if a notice of intention to appeal has been filed (as happened here). 6 The respondents do not suggest that they have suffered any prejudice, other than they will lose their currently vested right to rely on the primary judge's orders dismissing the claim and giving judgment in their favour. There is no suggestion that Mr Phair's oversight was the fault of eify. Mr Phair said that, once he realised his mistake, he instructed counsel to prepare a notice of appeal in this Court. The draft notice of appeal raises 25 grounds with multiple sub-grounds in over seven closely-typed pages. It was attached to his affidavit sworn 29 November 2017, being a date some 22 days after the letter from the respondents' solicitors. Principles governing the grant of an extension of time 7 The principles applicable to the grant of an extension of time in which to seek leave to appeal are well settled. Rule 36.05 requires an applicant for an extension of time in which to file a notice of appeal to comply with the procedural step of filing such an application. That can be done during, or after, the period limited by r 36.03. The application must be accompanied by the judgment or orders from which the appeal is to be brought, the reasons for judgment and an affidavit stating briefly, but specifically, the facts on which the application relies and why the notice of appeal was not filed within time. 8 The purpose of the power in r 36.05(2), to allow the application to be made after the period for appealing has expired, is to relieve against injustice. The court otherwise has a discretion that is unconfined as to whether or not it will grant the extension of time. Provisions of this nature are remedial in character: see FAI General Insurance Co Limited v Southern Cross Exploration NL (1988) 165 CLR 268 at 283-284 per Wilson J (with whom Brennan, Deane and Dawson JJ agreed, and see at 291 per Gaudron J) and Sydney Equine Coaches Pty Ltd v Gorst [2017] FCAFC 34 at [14]-[21] per Rares, Flick and Bromwich JJ. 9 However, as Allsop CJ, Greenwood, Besanko, Nicholas and Katzmann JJ said in Lodestar Anstalt v Campari America LLC (No 2) [2016] FCAFC 118 at [27]: … the power to make an order inconsistent with the Rules should be exercised for proper reasons which will generally only arise in exceptional circumstances. 10 An application for an extension of time in which to file an appeal challenges a respondent's vested right to retain the benefit of the judgment from which the appeal is sought, as Brennan CJ and McHugh J explained in Jackamarra v Krakouer (1998) 195 CLR 516 at 519-520 [3]-[4]; see also per Kirby J at 539-543 [66]. The Court deals with such applications in the way that each of their Honours said had been adopted by Lord Denning MR in R v Secretary for the Home Department; Ex parte Mehta [1975] 1 WLR 1087 at 1091, namely: We often like to know the outline of the case. If it appears to be a case which is strong on the merits and which ought to be heard, in fairness to the parties, we may think it is proper that the case should be allowed to proceed, and we extend the time accordingly. If it appears to be a flimsy case and weak on the merits, we may not extend the time. We never go into much detail on the merits, but we do like to know something about the case before deciding whether or not to extend the time. (emphasis added) 11 As Brennan CJ and McHugh J said in Krakouer 195 CLR at 519-520 [4], where an extension of time to lodge an appeal is made, the respondent to the application has a vested right to retain the judgment, the subject of the proposed appeal, and that the grant of such an application puts that vested right at risk. Background 12 The circumstances of the litigation below were that the parties had cooperated together with a view to forming a joint venture and, in fact, formed a company called 3D Safety Group Pty Limited, which adapted the name of the first respondent. The principal of eify was Patrick Culbert and the principals of the respondents were Mr Conacher and Mr Morrow. 13 eify had developed an online induction program that it had designed. It made the induction program available to its clients who wished to induct staff into work site operations. 14 The respondents conducted a business involving the provision online of safety information. 15 The parties had the idea that if they could integrate their systems they would have a useful product to sell to the market. In 2011, they began working together, without any formal agreement, and incorporated Group to conduct the proposed new business while they sought to develop an overall product that they could bring to market effectively. 16 In the course of this cooperative phase, Mr Culbert adapted for Group, as the primary judge found, some of the webpage material that he claimed to have created for eify. The primary judge made a number of significant adverse credit findings about Mr Culbert. His Honour concluded that Mr Culbert had been prepared to tailor his evidence to suit what he saw as being the needs of his case. The primary judge said that he would be careful before accepting any of Mr Culbert's evidence on any important point of factual contest unless that evidence was supported by some satisfactory corroboration. 17 The essence of the subjects in the 25 grounds on which eify seeks an extension of time in which to file an appeal come down to four substantive adverse findings that his Honour made, among numerous others. eify contends that his Honour erred in finding that eify had not proved that the respondents: (1) had breached any contractual duty of confidence; (2) had breached an equitable duty of confidence; (3) infringed eify's copyright in its web-based material; and (4) had breached their fiduciary duties as parties proposing to negotiate a joint venture in accordance with the principles identified by Mason, Brennan and Deane JJ in United Dominions Corporation Ltd v Brian Pty Limited (1985) 157 CLR 1 at 12. The duty of confidence cases 18 Grounds 5 to 12 in the draft notice of appeal assert that his Honour erred in failing to conclude that the respondents had breached a contractual duty to treat as confidential everything on the web-based platform that eify had developed for its induction program offered to clients. The reason that eify alleged that there was such a contractual duty of confidence was, in essence, that any person who wished to access those webpages needed to, first, pay eify a fee and, secondly, agree to its terms of confidentiality, including the prohibition in those terms against the person substantively reproducing or copying what was on the webpages to which he or she had gained access. 19 The substance of the complaint in this aspect is in ground 12. This alleged that his Honour erred where he found that none of the information that the respondents utilised was information belonging to eify or confidential to it. That finding was based partly on the fact that the source of the text of the material on the website, claimed to be confidential, had been supplied verbatim to eify by its client, Laing O'Rourke Australia Constructions. eify claimed that the way in which it caused a computer screen to present that information to a viewer, including graphics and the visual aspects appearing on the screen involved its own original copyright work that was confidential. 20 His Honour found that the problem with eify's confidentiality argument was that it had failed to demonstrate what of that material was confidential to eify. eify had asserted that all of it was confidential by reason of, first, its contractual terms under which a person gained access to the online computer material, secondly, its compilation of the visual presentation of the information in a way that no one else had done and, thirdly, its having sold access to the information only to people who were prepared to pay for its services and agree to its terms of access. 21 The primary judge found, after rejecting Mr Culbert's evidence to the contrary, that Group, and not eify, had prepared online computer induction programs for two clients, Thiess and Mirvac, pursuant to contracts between Group and each of Thiess and Mirvac. His Honour found that, to the extent that the online induction systems that Group had prepared for Thiess and Mirvac contained information that was confidential, and not the confidential information of the customer (i.e. Thiess or Mirvac), it would be confidential information of Group and not of eify. 22 His Honour also found that to the extent that Mr Culbert did graphic design work for customers or clients of Group, he had done so in his capacity as a director or officer of Group and not, as he asserted, in his own right or on behalf of eify. 23 The primary judge found that at one stage a programmer, Mr Quicke, through his company Clearsite Pty Limited had issued an invoice to eify for work done on the projects for Thiess and Mirvac. His Honour found that subsequently, at Mr Culbert's request, Clearsite re-invoiced Group for that work and Group paid Clearsite for that and later invoices for work Mr Quicke did for Group. 24 The primary judge found Mr Culbert must have been acting as a director of Group both when he instructed Clearsite to provide those services and directed it to invoice Group. In those circumstances, he found that the work done by Mr Quicke on the Thiess and Mirvac online inductions could not be regarded as falling within the scope of any consultancy services that Clearsite provided were the subject of a deed entered into, on 14 May 2015 (the 2015 deed), after the litigation commenced, between eify and Clearsite to which I will come shortly. 25 His Honour identified the difficulty with eify's confidential information case, both in contract and in equity. This was because eify propounded those cases in the same way that the failed claim for confidentiality came to be rejected in O'Brien v Komesaroff (1982) 150 CLR 310 at 326-328. There Mason J with whom Murphy, Aickin, Wilson and Brennan JJ agreed, emphasised the need for a person seeking court orders to protect information on the basis that it is confidential, to identify specifically what it was about the information that gave it the quality of confidentiality. The written material provided by Laing O'Rourke to eify itself could not have had the quality of confidentiality since it was not imparted in that context, was Laing O'Rourke's information, and that same information was then reproduced in all of the material thereafter both by eify for Laing O'Rourke and ultimately by Group for Thiess and Mirvac material. 26 eify argued that the way in which Laing O'Rourke had provided the verbatim text, that was subsequently reproduced in the same presentational format as eify had developed (without any additional text) and used in the web-based induction programs that Group prepared, involved a repetition of eify's confidential information. In my opinion that argument is, to use Lord Denning MR's metaphor, flimsy. 27 eify also argued that the 2015 deed between it and Clearsite created an assignment of copyright. His Honour had rejected that argument on the basis that the 2015 deed referred only to consultancy work between eify and Clearsite. He found as a fact, particularly because of Mr Culbert's conduct in directing Clearsite to invoice Group for work done for Mirvac and Thiess, that the 2015 deed did not apply to work that Clearsite and Mr Quicke had done for Group. He found that that re-invoicing occurred because Clearsite had not been acting on behalf of eify, but was acting on behalf of Group. 28 eify's argument that his Honour made some error in not accepting Mr Quicke's evidence that he understood he was working for eify, again, is flimsy. In my opinion, there is no real prospect that any appeal, were I to grant an extension, would have any real prospect of success on that argument. His Honour also noted that the assignment in the 2015 deed, to the extent it may have been effective to assign any copyright that Clearsite had as the author of the work that Mr Quicke had done on Mr Culbert's instructions, did not assign to eify any cause of action for past breaches of the copyright that Clearsite held at the time of any such breach. Again, reading the 2015 deed as a whole, the argument for granting leave on that ground is also flimsy. 29 The primary judge's rejection of eify's claim for breach of an equitable duty of confidence is challenged in grounds 14 to 18 of the draft notice of appeal. His Honour found that, in accordance with O'Brien 150 CLR 310, eify had failed to identify what about the information it sought to protect was confidential. In particular, ground 15 asserted that the primary judge made findings that were not based on any evidence or alternatively contrary to the weight of the evidence. eify's contentions on the proposed appeal in this respect depended or would depend, were they allowed to proceed, effectively on the Full Court accepting Mr Culbert's evidence, which his Honour roundly rejected. 30 The proposed grounds 14 to 18 are particularly based on an argument that also underlay the fiduciary obligations argument. That argument was that in resolutions that Mr Culbert, Mr Conacher and Mr Morrow all agreed on 15 December 2011, they acknowledged that they were identifying and documenting the intellectual property each party owned and had brought to the failed venture. These resolutions included, among others, that eify had provided access and information in good faith on the understanding that 3D Safety would not use the information, content, layout, process, knowledge or strategic plans obtained as a result of the process to create a financial gain, advantage or benefit to 3D Safety or that resulted in a financial loss, disadvantage or penalty to eify. 3D Safety gave a corresponding acknowledgment to eify. 31 eify complains that the primary judge should have used those acknowledgements to identify the nature of the fiduciary relationship between the parties and erred in not doing so. That submission led into a consideration of whether the claim based on breach of fiduciary duty could be made out. The equitable duties of the relationship giving rise to confidence substantively depended upon the same factors. 32 One of the complaints eify made was that the primary judge had not considered, or had misunderstood, an argument that eify put in its reply submissions, namely that after designing the induction systems for Thiess and Mirvac for which those companies paid Group, the parties had acted to ensure that eify was paid when individual employees of the two client companies used the induction system. His Honour said that had that claim been put (which it appears to me it was) it could have been argued that to that extent, there was a fiduciary relationship. 33 Assuming that the complaints that eify makes about his Honour's findings in relation to the imposition of fiduciary obligations on persons who negotiate for a joint venture, but have not yet agreed to its terms are arguably incorrect, in my opinion the real question is where that error would take the case that eify needed to make. That again comes down to the finding that the primary judge made that eify had not shown that any of the information that the respondents utilised was information of, let alone confidential to, eify, or that, even if it were, it was put to an improper use. 34 Again, it seems to me that eify's grounds 14-18 are flimsy. They are based on its claim for a breach of fiduciary duty and, assuming that his Honour erred in failing to find that the respondents owed fiduciary duties not to profit without eify's fully informed consent or to act in a position where the interest or duty of the respondents might be in conflict with those of eify, the result at which his Honour arrived was that eify had not proved that the information was confidential; hence any error that he made about eify's argument in its submissions in reply as to the existence of a fiduciary relationship did not affect the conclusion that the information was not confidential and so had not been misused by the respondents. Infringement of copyright case 35 Next, eify argued that the primary judge erred in rejecting its application, made at the beginning of the third week of the hearing, to amend the third further commercial list statement, being equivalent to a statement of claim and originating application combined, to allow it to argue in the alternative that not only were the website documents literary works within the meaning of the definition in the Copyright Act (as it had already pleaded), but they were also artistic works. 36 The Copyright Act defined "artistic work", "computer program" and "literary work" in s 10 as follows: "artistic work" means: (a) a painting, sculpture, drawing, engraving or photograph, whether the work is of artistic quality or not; (b) a building or a model of a building, whether the building or model is of artistic quality or not; or (c) a work of artistic craftsmanship whether or not mentioned in paragraph (a) or (b); but does not include a circuit layout within the meaning of the Circuit Layouts Act 1989. "computer program" means a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result. "literary work" includes: (a) a table, or compilation, expressed in words, figures or symbols; and (b) a computer program or compilation of computer programs. 37 Moreover, s 21(5) provided that a computer program would be taken to have been reproduced for the purposes of the Act, if an object code version of it were derived from a source code by any process, including compilation and vice versa. 38 His Honour found that there was no explanation as to why eify had not sought the amendment until the third week of the hearing, and that the amendment raised a distinct and hitherto unpleaded basis for the claim of copyright. He found that the amendment could only be granted, consistent with the interests of justice, were he, and he was not, persuaded that it could be dealt with fairly to all the parties on the basis of the existing evidence. He held that if the hearing had been adjourned to permit the respondents to undertake whatever investigations they were advised might be appropriate, the hearing could not resume until sometime in 2018 and that, in the absence of any, let alone any satisfactory, explanation for the delay in seeking the adjournment, the just, quick and cheap resolution of the real issues in dispute would not be accommodated by the inconvenience and very substantial expense that such an adjournment would occasion (cf. s 37M of the Federal Court of Australia Act 1976 (Cth)). 39 eify argued that his Honour erred in the exercise of his discretion and that it ought be allowed to raise a challenge to his Honour's discretionary decision to refuse to allow the amendment on the appeal. 40 I am unable to see how that argument could possibly succeed. In Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 at 215 [103], Gummow, Hayne, Crennan, Kiefel and Bell JJ discussed the principles applicable to an application to amend. They said (239 CLR at 217 [113]): In the past it has been left largely to the parties to prepare for trial and to seek the court's assistance as required. Those times are long gone. The allocation of power, between litigants and the courts arises from tradition and from principle and policy [Jolowicz, On Civil Procedure (2000), p 79]. It is recognised by the courts that the resolution of disputes serves the public as a whole, not merely the parties to the proceedings. (emphasis added) 41 In Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Limited (2013) 250 CLR 303 at 321 [51], French CJ, Kiefel, Bell, Gageler and Keane JJ said that: Speed and efficiency, in the sense of minimum delay and expense, are essential to a just resolution of proceedings. The achievement of a just but timely and cost-effective resolution of a dispute has effects not only upon the parties to the dispute but upon the court and other litigants. The decision in Aon Risk Services Australia Ltd v Australian National University was concerned with the Court Procedures Rules 2006 (ACT) as they applied to amendments to pleadings. However, the decision confirmed as correct an approach to interlocutory proceedings which has regard to the wider objects of the administration of justice. (emphasis added) 42 In Tamaya Resources Ltd (in liq) v Deloitte Touche Tohmatsu (a firm) (2016) 332 ALR 199 at 226 [154]-[156], Gilmour, Perram and Beach JJ discussed the nature of the explanation to be given where a party seeks the exercise of a discretionary power to make an order that would affect the way in which a case is managed. They noted that the nature of the explanation will depend on the circumstances of the case and said: It must be borne in mind that the explanation required is that of the moving party, not merely their solicitor or counsel. The client may very well know of matters relevant to the explanation for delay which are not known by the lawyers. Evidence as to the explanation for delay will often be given by an applicant's solicitor from their own knowledge but that may, in some cases, not be sufficient. (emphasis added) 43 A challenge to a judge's refusal to grant an amendment application made in the third week of a trial that the person applying for the amendment claims is necessary to enable justice to be done, which has not previously been foreshadowed and which, if granted, may require further evidence and consideration, imposes a heavy burden on the appellant to persuade the appellate court that a judge's refusal was an error in the exercise of his or her discretion. In my opinion, there is no real prospect that any such ground would succeed in this matter were I to grant an extension of time. 44 Ground 24 of the draft notice of appeal was: The primary judge erred (at [409]-[410]) in finding that irrespective of a high degree of similarity between the object codes of two visually similar web pages, the similarity between the object codes did not, of itself, constitute an infringement of any copyright which subsisted in the object code. The basis for his Honour's finding lies in the erroneous finding (at [421], [422] and [426] of the Reasons) that there is no copyright in the "look and feel" of a computer programme, as the "look and feel" of a computer programme is really part of the computer programmes' functionality, which is not the subject of copyright protection. His Honour should have found that where the same functionality or utility of a computer programme, may be achieved by or through multiple possible visual representations on a computer screen, generated by a computer's object code, the object code is not a mere functionality of the computer programme, but is liable to be protected by copyright, on the basis that the object code is the expression of the idea, rather than the idea itself. Accordingly, his Honour should have found a breach of copyright of the appellant's object code. 45 It is common ground that the respondents had not had access to any source code or the object code that eify used to produce the images presented to a viewer or user of its induction system on the screen. However, eify said and there was material before his Honour to support its contention that the visual appearance of what it produced, and caused the Group to produce, was very similar to the visual appearance of the induction system that 3D Systems subsequently used. The primary judge referred to an assertion by eify's expert witness, Professor Braun, that in cases where the appearances of screens are very similar, the underlying object code and the video RAM is also very similar. 46 His Honour found that, even assuming the requisite degree of similarity, it did not follow that the object code underlying the screen presentations in 3D Safety's online induction system or any other functional part of that system had resulted from any act that would constitute an infringement of any copyright that subsisted in the object code underlying the screen presentations in any version of eify's system. The primary judge said that there was no evidence comparing the subject and source codes of the rival computer programs. And, to the extent that the investigation of that question would involve examinations of the object and source codes and, possibly other matters, from the perspective that they were not literary works, but artistic works, then it would have depended on the rejected amendment application being granted, for which I have found there is no real prospect of success in any appeal. 47 It follows that I am not satisfied that eify has established a sufficient case to support it being granted an extension of time in which to appeal on its infringement of copyright grounds of appeal. Conclusion 48 For those reasons, I reject the application for an extension of time with costs. I certify that the preceding forty-eight (48) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares. Associate: Dated: 5 July 2018 SCHEDULE OF PARTIES NSD 2120 of 2017 Respondents Fourth Respondent: 3D SAFETY SYSTEMS PTY LTD Fifth Respondent: WISHBONE CONSULTING PTY LTD