Copyright infringement – authorisation – summary judgment
The Applicant, Chapcon, is a company which is primarily involved in the construction industry. Chapcon alleged that it acquired certain assets from liquidators of Newstart Homes (SE Qld) Pty Ltd (NHSQ), including “copyright in the NHSQ Plans”. Chapcon’s claims against the third respondent (Mr Wiggett) pertained only to the NHSQ Plans. The first respondent (Spectrum Homes) is a competitor of Chapcon. The case against Spectrum Homes related to the Spectrum Plans.
Mr Wiggett applied for summary judgment pursuant to s 31A(2)(b) of the Federal Court of Australia Act 1976 (Cth) or, alternatively, r 26.01(1)(a), (b), or (c) of the Federal Court Rules 2011 (Cth) on the basis that the claims set out in the amended statement of claim had no reasonable prospects of success, were vexatious, or no reasonable cause of action was disclosed.
Justice Downes entered summary judgment for Mr Wiggett on the basis that the pleading failed to plead a reasonable cause of action against him, and suffered from numerous deficiencies which did not appear to be capable of being remedied.
Background Facts
Mr Wiggett is a chartered accountant, a financial turnaround expert, and the sole director and shareholder of Maraton Capital Pty Ltd. At the direction of the National Australia Bank, Maraton was engaged as a consultant to a group of companies (which included NHSQ) because the group was in a precarious financial position. Contrary to allegations in Chapcon’s pleading, Mr Wiggett was never employed by NHSQ and nor was he ever its chief operating officer and chief financial officer.
At all times during Maraton’s engagement, Mr Wiggett was based in Melbourne, solely working on strategic and financial solutions. He was not involved in the operational side of the group of companies, including NHSQ. Neither he nor Maraton had direct access to, or personal involvement with, the tendering or home design activities of NHSQ; NHSQ’s assets, plans or designs; or NHSQ’s client names or contract information, or documents relating to these matters. Nor were these documents in his (or Maraton’s) possession or control.
The engagement of Maraton was terminated on or about 2 August 2016, and liquidators were appointed to the group of companies on 17 October 2016. Mr Wiggett, through Maraton, had some limited involvement with the group of companies between 2 August 2016 and 17 October 2016, but had no operational involvement with NHSQ, or access to NHSQ documents.
Mr Wiggett then became a director of Spectrum Homes, which is a company which he and Mr Reeves formed on 17 October 2016. Initially, Mr Wiggett’s role was to provide administrative and financial services, with Mr Reeves, a registered builder, attending to the contracting and building side of the company. Mr Wiggett was not involved in the activities of Spectrum Homes such as tendering or client names or contract information.
During 2017, Mr Wiggett became involved in the development and creation of new smaller home designs, but only for designs which were not the subject of Chapcon’s claims. Mr Wiggett also became involved in “façade rendering” of three of the plans referred to in the pleading. However, these plans were created by the fourth respondent (Mr Melo) on the instructions of Mr Reeves. Mr Wiggett met Mr Melo for the first time after he had created the Acreage Plans, and his communications with Mr Melo were limited to the design of new smaller home designs. Mr Wiggett had no reason to believe or suspect that Mr Melo had reproduced or copied a substantial part of the Grange 38 Modified Plan and the Homestead 37 Modified Plan (two of the NHSQ Plans discussed further below), or that Mr Reeves would have given instructions to Mr Melo to copy or reproduce the NHSQ Plans.
Mr Wiggett ceased to be involved with, and ceased being a director of, Spectrum Homes on 5 October 2018 and Maraton also ceased to be a shareholder. All documents relating to Spectrum Homes were handed over to Mr Reeves and his associated company.
Allegations against Mr Wiggett
Chapcon alleged that Mr Reeves, Mr Wiggett and Mr Melo “caused, authorised, directed or procured [Spectrum Homes] to produce the Spectrum Plans which reproduce or substantially reproduce the NHSQ Plans and to build or cause to be built residential homes which substantially reproduce the NHSQ Plans in a material form” and that Mr Reeves and/or Mr Wiggett and/or Mr Melo “has infringed the copyright of the Applicant in the NHSQ Plans or authorised or directed or procured or participated in the said infringements”.
The NHSQ Plans were not referred to or identified in the documents which were pleaded to support the conclusion that Chapcon owns the copyright in the NHSQ Plans, and no evidence that might support copyright ownership was identified at the summary judgment hearing. Indeed, Spectrum Homes received correspondence from Newstart Homes Australia Pty Ltd (which had the same sole director as Chapcon) which asserted that Newstart Homes Australia was the owner of the copyright in “drawings and plans that were drafted by [NHSQ], which were subsequently sold and assigned exclusively” to it, including the “Homestead 37” Plan (a plan referred to in the pleading). Newstart Homes Australia’s website advertised two of the pleaded plans (the Grange 38 Plan and the Homestead 37 Plan) as at June 2023.
Justice Downes concluded that the absence of evidence as to ownership was a deficiency which tended to indicate that no other evidence would be able to be adduced by Chapcon at trial. Her Honour concluded that there was a serious doubt about whether Chapcon was the owner of any copyright which might subsist in the NHSQ Plans, providing strong support for the conclusion that Chapcon has no reasonable prospect of success in its claims against Mr Wiggett.
For the NHSQ Plans, no material fact was pleaded as part of any cause of action brought against Mr Wiggett in relation to the Logan 31 plan, or the Milan 29 plan. The other two plans were the Grange 38 Modified Plan and the Homestead 37 Modified Plan. The pleading purported to plead a case that Spectrum Homes had infringed Chapcon’s copyright “in the Grange 38 and/or Grande 38 modified Plans” and that Mr Wiggett and Mr Reeves authorised the infringement. However, Chapcon did not plead that it owned copyright in the Grange 38 Plan. On the assumption that the reference to the “Grande 38 modified Plans” was intended to be the Grange 38 Modified Plan, Mr Wiggett’s evidence was that he had never seen it or authorised Spectrum Homes to engage in the pleaded conduct. This evidence was not challenged or contested.
Justice Downes observed that the fact that Mr Wiggett was a director of Spectrum Homes was not enough to establish the case pleaded against him. Chapcon had not pleaded when the conduct occurred and there was a real prospect that Mr Wiggett (who ceased to be a director nearly five years ago) was not a director at the relevant time, even if the conduct occurred. Her Honour observed that it was not clear in what way, and the basis upon which, Mr Wiggett was said to have had knowledge of the alleged infringement by Spectrum Homes, or why Mr Wiggett was in a position to authorise (or prevent) any infringement of copyright by Spectrum Homes, because no material facts were pleaded and no particulars were provided. The same fundamental problems arose in relation to the allegations relating to the Homestead 37 Modified Plan. Again, Mr Wiggett’s evidence in relation to those plans, which refuted the allegations made against him, was not challenged or contested.
For these reasons, Justice Downes held that Chapcon had no reasonable prospect of success in its claims against Mr Wiggett and that no reasonable cause of action had been pleaded against Mr Wiggett.
Relief claimed against Mr Wiggett
Justice Downes also held that since Mr Wiggett had made out that he was not aware, and had no reasonable grounds for suspecting, there had been an infringement of copyright, s 115(3) of the Copyright Act 1968 (Cth) was invoked and Chapcon had no reasonable prospect of obtaining damages against Mr Wiggett, and could only claim an account of profits. However, no allegation was made that Mr Wiggett derived a profit from the alleged conduct, and so Chapcon had no reasonable prospect of obtaining an account of profits. Since Mr Wiggett was no longer a director of Spectrum Homes, was not involved with its business and no longer had any documents in his possession or control which related to its business, Chapcon also had no reasonable prospect of obtaining an injunction against him or for delivery up. Nor would there be any utility in the declarations sought by Chapcon. Her Honour considered that these matters provided a further reason to conclude that Chapcon had no reasonable prospect of success in its claims against Mr Wiggett.
Abuse of process
Justice Downes concluded, based on the submissions of Chapcon’s counsel, that the failure to plead material facts to sustain the plea that Mr Wiggett “caused, authorised, directed or procured” Spectrum Homes to do the pleaded things or “authorised” the conduct of Spectrum Homes was no accident. In truth, Chapcon did not know whether Mr Wiggett did the things which its pleading alleged that he did, but planned to use this Court’s processes to find out and then, if it could, flesh out the allegations against him. Her Honour observed that to commence the proceeding against Mr Wiggett was vexatious and an abuse of process, providing another reason to summarily dismiss the claims against Mr Wiggett.
Some comments from the authors
This judgment highlights the need to plead material facts supporting an allegation that an alleged authoriser of copyright infringement was aware of the conduct which is said to constitute the infringement (over and above the fact that the authoriser was a director of the alleged infringer, particularly where that fact changed over the relevant period). If those facts are not known to a potential applicant and cannot be obtained by corresponding with the other side, the appropriate course is to seek preliminary discovery, not to commence litigation and hope to obtain evidence in the course of proceedings.