Re Martin Peter Dyason and Ors v Autodesk Inc and Autodesk Australia Pty Limited NoV G300 of 1989 Fed [1990] FCA 469; 24 FCR 147 (27 November 1990)

FEDERAL COURT OF AUSTRALIA

Re: MARTIN PETER DYASON and ORS.
And: AUTODESK INC. and AUTODESK AUSTRALIA PTY. LIMITED
No.V G300 of 1989
FED No. 719
[1990] FCA 469; 24 FCR 147

COURT

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Northrop J.(1)

HEARING

MELBOURNE
27:11:1990

DECISION

Before the Court is a motion brought by Autodesk Inc. and Autodesk Australia Pty. Limited being the respondents to the appeal V. No. G300 of 1989 seeking orders against the appellants Martin Peter Dyason, Christine Dyason and Peter Vincent Kelly in which the Autodesk interests are seeking the following orders:-
"1. That the orders for costs contained in Orders 3 and

4 of the Order of the Full Court of the Federal Court made
14 September 1990, be stayed until the hearing of the
determination of the appeal to the High Court of
Australia.
2. That the date for the taxation of the Bills of
Costs be vacated."

2. The effect of Orders 3 and 4 of the Order of the Full Court was that the injunction granted be set aside and the application by the Autodesk interests be dismissed and that they pay the costs of the trial and appeal. The motion was argued on the basis the words "for costs" had been deleted from the first order sought.

3. The notice of motion is dated 26 November 1990 and was heard today but the Kelly interests, and I use that to describe the appellants, raised no objection to the motion being heard on short service.

4. In order to understand the nature of the orders being sought it is desirable to state in brief outline the history of litigation between the parties. In March 1989, on the application of the Autodesk interests, the Court made interim injunctions restraining initially Mr and Mrs Dyason and then subsequently Mr Kelly from selling or attempting to sell certain devices of electronic equipment known as Auto-Key to enable the Autodesk computer programme to be operated. Those interim orders were continued by way of interlocutory orders until the trial and determination of the action which had been brought by the Autodesk interests, judgment in which was published on 7 August 1989 and formal orders made on 15 September 1989. The judgment and orders dealt only with the question of the liability of the Kelly interests. The action was based upon a number of causes of action including breach of copyright under the Copyright Act 1968 based on the definition of "computer programme" as contained in that Act. The orders made on 15 September included a permanent injunction restraining the Kelly interests. The Kelly interests appealed to the Full Court of the Federal Court of Australia pursuant to leave granted. On 14 September 1990, the Full Court allowed the appeal and set aside the judgments and in lieu thereof dismissed the claims brought by Autodesk. It should be noted that at no stage has the question of damages been considered and no evidence had been led on any question of damages. The only issue raised being in relation to liability and the injunction to protect the rights of the Autodesk interests. Autodesk desired to seek leave to appeal to the High Court, Apparently at the time the Full Court gave judgment, an undertaking was given on behalf of the Kelly interests that they would not sell the Auto-Key for some short period to allow an application to be made for a stay of the order of the Full Court. By a motion heard on 19 September 1990, the Court heard the motion which sought orders as follows:-

"1. An order that the Orders of the Full Court be
stayed for a period of 21 days.
2. An order that upon the filing of an application for
special leave to appeal to the High Court of Australia
that stay continue until such application is heard, or if
leave be granted, the appeal instituted pursuant to leave
granted by the High Court of Australia is disposed of or
until the High Court of Australia otherwise orders."

5. The motion came before the Court constituted by Hill J. who had not been involved either at the trial of the action or as a member of the Full Court which heard the appeal. To that extent His Honour did not have the benefit of the knowledge of the case in the sense which was referred to by Brennan J. in Jennings Construction Limited v Burgundy Royale Investments Pty. Limited (1986) 61 ALJR at p 103. On 19 September, Hill J. made certain orders upon undertakings being given on behalf of the Autodesk interests, the relevant orders being that the order of the Full Court be stayed for a period of 21 days and an:-

"4. Order that upon filing of an application for
special leave to appeal to the High Court of Australia the
stay in order 3 continue until 27 November 1990 or the
refusal of special leave by the High Court, whichever
first happens."

6. At that time there were two affidavits filed in support or opposition of the motion as the case may be, and His Honour also gave directions for the filing of further affidavits. The reason why the motion came before the Federal Court, presumably, was because of the views expressed by Brennan J. to which I referred earlier and are set out at page 103 of the report. There his Honour indicated that it is better for the Court from which the appeal is being sought for special leave to appeal to deal with the stay rather than go to the High Court but that was in the context of a pending application for special leave. It is noted that the order of Hill J. was limited to that period.

7. On 16 November 1990 the High Court granted special leave to appeal to the Autodesk interests. That appeal is likely to be heard in April 1991 although there could be some time after that before judgment is given. It is in these circumstances that the present motion is being heard. Attention is drawn to the fact that Hill J. did not deal with that part of the motion before him which sought an order to stay the operation of the Full Court judgment pending the hearing and determination of the High Court appeal if special leave was granted. That is the matter which is now before this Court.

8. It would appear that the basis of the jurisdiction or power of this Court to hear and determine the motion, is s.77U of the Judiciary Act 1903 as well as O.37 r.10 of the Federal Court Rules which enables this Court to stay the operation of any order. One can infer there is a similar power conferred by O.70 of the High Court Rules but I do not need to rely upon that since counsel for the Kelly interests concede that this Court has jurisdiction and power to deal with the motion on the basis that if this Court, constituted by a single Judge, makes an order staying the operation of the order of the Full Court the effect is that the injunction granted would continue in operation until the hearing and determination of the High Court appeal with the effect that from March 1989, the Kelly interests have been restrained from selling the Auto-Key device.

9. In considering the motion it was urged upon the Court by counsel for the Autodesk interests that in view of what had happened, this Court should treat the present motion as being dependent upon a change of circumstances occurring to justify a variation or different approach to the order made by Hill J. It was argued that His Honour had dealt in some detail with the law to be applied and the facts remained the same as for the limited period and that prima facie, therefore that stay should now continue pending the hearing and determination of the appeal itself unless there were additional facts established which justified a departure from that course.

10. That submission is rejected. It is quite common for a Court at first instance to grant a stay of 21 days when a judgment is given to enable a dissatisfied party to consider whether to appeal or not. If an appeal is filed and a further stay is sought, material must then be put to the Court to justify the stay. The mere fact that a 21 day period has been granted automatically is not a bar to the Court then looking at the whole matter afresh. Where special leave to the High Court is required, that is similar in nature to a 21 day stay and in substance what happened here was a 21 day stay was in fact given but because of the uncertainty of whether the 21 days would be sufficient to enable the application for special leave to appeal to be heard, the 21 day period was given to enable the Autodesk interests to file an application for special leave to appeal. Then the stay was to continue until such time as the High Court could hear that application. If leave to appeal was given, then the matter was at large, as it were, for the Autodesk interests to apply to the Court for a stay pending the hearing and determination of the appeal. Presumably that application could have come before the High Court or before this Court but each is a separate application to be dealt with on the material before the Court in support of the motion for the stay. I propose to approach this matter on that basis namely on the material before the Court now. At the same time I have regard to what was said by Hill J. both on the question of the law to be applied and the findings of fact but on the facts, the Court, as presently constituted, is in a better position to express a view on the facts both as to what occurred at the trial and on the evidence before the Court now because two further affidavits have been filed than Hill J. was. The Court, as presently constituted, was the Court which heard the action.

11. It is quite clear that the general principle is that an appeal from a judgment does not operate as a stay of the judgment which has been made. This is not questioned. It is made very clear by what Dawson J. said in Commissioner of Taxation v. Myer Emporium Limited [1986] HCA 13; (1986) 60 ALJR 300, in a passage appearing at p 301:-

"Section 77U of the Judiciary Act 1903 (Cth) provides
that when an appeal has been instituted, the High Court
may order a stay of all or any proceedings in the judgment
appealed from and O.70 r.12(1) of the High Court Rules
provides that unless the Court or a Justice otherwise
orders, neither an application for special leave nor an
appeal shall operate as a stay of proceedings. See also
Judiciary Act, s.15.

12. Order 70 r.12 was amended on 5 December 1985 and in its new form is the counterpart of similar rules in other jurisdictions. It is well established by authority that the discretion which it confers to order a stay of proceedings is only to be exercised where special circumstances exist which justify departure from the ordinary rule that a successful litigant is entitled to the fruits of his litigation pending the determination of any appeal. See, e.g. The Annot Lyle (1886) 11 PD 114 at 116; Scarborough v. Lew's Junction Stores Pty Ltd (1963) VR 129 at 130. Special circumstances justifying a stay will exist where it is necessary to prevent the appeal, if successful, from being nugatory. See Wilson v. Church (No. 2) (1879) 12 ChD 454 at 458; Klinker Knitting Mills Pty Ltd v. L'Union Fire Accident and General Insurance Co. Ltd. (1937) VLR 142. Generally that will occur when, because of the respondent's financial state, there is no reasonable prospect of recovering moneys paid pursuant to the judgment at first instance. However, special circumstances are not limited to that situation and will, I think, exist where for whatever reason, there is a real risk that it will not be possible for a successful appellant to be restored substantially to his former position if the judgment against him is executed. See McBride v. Sandland (No. 2) [1918] HCA 59; (1918) 25 CLR 369 at 375."

13. In the present case the issue between the parties which is being litigated is the issue of liability and whether an injunction should be granted. Damages have not been considered at all, but that does not detract from the issue here as to what should be done as far as the appeal is concerned. In his reasons for judgment Hill J. set out six factors which he took into account in relation to the question of whether to exercise his discretion in favour of the Kelly interests or the Autodesk interests. I set out those six factors. After referring to the successful party retaining the fruits of the judgment and that these fruits may be rendered nugatory if the appeal fails and the financial position of the Kelly interests, His Honour said:-

"In my view it is appropriate to take into account as
well the following matters in exercising my discretion.
First, that the market for the product is finite in the
sense earlier explained which at least confines the
ultimate amount of damage. Second, that the respondents
have been restrained from carrying on their business for a
considerable period of time and that that injunction has
effectively destroyed the business of the respondents or
certainly stopped the respondents from developing a
business and presumably contributed to some extent to
their present financial position. Third, that the future
market available to the respondents is declining and there
is a possibility that that market could have substantially
disappeared by the time an appeal is heard and decided in
the High Court if leave were to be granted. Fourth, the
two undertakings proffered by the respondents ensure that
the calculation of damage will be possible. Fifth, the
difficulties of computing damages in the event that the
applicants succeed with their appeal should be taken into
account. Sixth, the difficulties of computing damages
under the undertaking for damages should the application
not obtain special leave or fail in an appeal to the High
Court if leave be granted is a relevant matter. These
last two matters are but two sides of the one coin and
rather balance each other. They come about because of the
great discrepancy in price between the respondents'
product purchased alone and the applicants' product which
is sold together with the applicants' software."

14. On a reading of these factors, it would appear that most of them would tend to support the refusal to grant a stay. One of them seems to be directed to an issue which is not relevant, namely, what is described as the fifth point, the difficulties of computing damages in the event that the applicants succeed with their appeal should be taken into account. On its face this appears to be directed to the question of damages in the action itself, not as to damages in relation to any undertaking given and if, in fact, it does refer to that, it is difficult to see how that is relevant.

15. These facts are all taken into account but in addition to these it has been urged upon the Court today that because of the duplicity of the Kelly interests in trying to conceal their names when they first entered upon the selling of the Auto-Key device they are persons whose trust cannot be relied upon in relation to any undertaking which they give in relation to keeping records of any sales that take place pending the hearing of the High Court appeal. That submission, in my opinion, is based upon a lack of understanding of what the real issue was at that time. Then Mr Kelly had received legal advice that what he was doing was quite lawful. He also believed that there would be a reaction from Autodesk. In order to see if the market could be satisfied the Kellys interests took extraordinary and extreme steps to conceal their identity. In the course of the judgment which was given at the trial those factors were referred to, but it is also noted that at the trial they were not really in issue, they were not disputed, they were accepted, and could not be used to discredit Mr and Mrs Dyason or Mr Kelly. In the circumstances the fact of that duplicity at that time, in my opinion, cannot be used against Mr Kelly or Mr and Mrs Dyason in relation to any undertaking they are prepared to give in relation to the keeping of records of any sales of the Auto-Key device.

16. There is no doubt that Autodesk has the financial capacity to pay any damages that might be suffered by the Kelly interests if the injunctions are to be continued pending the appeal to the High Court and the appeal fails, but as against that Mr Kelly, who had just started the business of selling Auto-Key devices, would be deprived of his business activity, an activity which of necessity is going to diminish as time goes by because of changes to the method by which Autodesk is protecting its computer programme. Although there might be that deprivation of the market and any loss could possibly be covered by the undertaking as to damages, in my opinion in a case of this kind where a Full Court has said that what Mr Kelly was doing was perfectly lawful, the Court should not be astute to find in favour of the unsuccessful party to continue an injunction that does deprive a person from performing what at the present time is a lawful activity. This is made quite clear by a passage referred to counsel for the Kelly interests as appearing in Polino v. Gray (1879) 12 ChD 438, per James LJ. at pp 445-6:-

"I had when the case was before us on the former
occasion some misgiving which has led to this further
argument today, and I am not yet entirely free from
misgiving, not so much as to whether it is right or wrong
to make an order in the present case, but as to whether
the making such an order may not be a dangerous precedent
and likely to lead to great mischief. What I have been
afraid of is that it may be said to be a precedent for
holding that if any one applies for an injunction and
obtains it the injunction ought to be kept up as long as
he can keep the litigation alive. If, however, it is
distinctly understood that, as stated by the Master of the
Rolls, the granting such an injunction pending an appeal
is a thing to be done only under very special and
exceptional circumstances, then probably the danger that I
have been afraid of will not exist. Certainly, having
regard to the cases cited today, I cannot adhere to my
doubt as to the existence of the jurisdiction."

17. It is also put that as far as the Kelly interests are concerned they are persons who have no real assets and that if in due course the Autodesk interests succeed on the appeal any undertakings as to any damages that might be recovered from the Kelly interests would be limited and could not be enforced in any event. There is always a risk for a person making a claim for damages. This arises not because of the nature of the financial position of the person being sued but because not only rich people commit breaches of the law. It arises from the fact of the financial position of the persons concerned and if what they are doing at the moment is lawful the fact that in due course it is found to be unlawful and damages are awarded, the fact that damages cannot be enforced or executed in my opinion is not a sufficient purpose in a case of this kind to justify the continuation of an injunction. It can be said, I think, with some truth that the real issue here between the parties is the right of the Kelly interests to sell or offer for sale the Auto-Key device. Although damages are of importance they take a secondary role in the real issue between the parties. And it must be remembered that in reality the Autodesk interests are the plaintiffs.

18. In all the circumstances of this case it seems to me that this is not a case where the injunction should continue pending the hearing and determination of the High Court appeal. This is a case where the Full Court judgment should be given its full effect subject to one matter which I will deal with in a moment, pending the hearing and determination of the High Court judgment. Accordingly, upon the Dyasons and Mr Kelly through their counsel giving the undertaking in a form similar to that set out in the affidavit of Mr Kelly, sworn 23 November 1990, to keep a true and full record of all sales of Auto-Key devices pending the final determination of these proceedings by the High Court of Australia the Court will refuse the first order sought by the motion brought on behalf of the Autodesk interests.

19. The question of the taxing of the costs comes into a slightly different category. If the costs are taxed and they are, in fact, paid by the Autodesk interests to the Kelly interests and if in due course the appeal to the High Court succeeds and those orders for costs are set aside, it may well be that difficulties could arise in recovering the amount of those costs from the Kelly interests. So I propose for the moment not to make any final order on the question of the taxation of costs but to allow the taxation of costs to proceed, but to make it clear that the Autodesk interests are at liberty to renew the application to this Court by motion for an order that the amount of costs so taxed be not paid, or that the whole of that amount be not paid.

20. So the orders to be made today are:-

1. That upon the undertakings being given by counsel
on behalf of Mr and Mrs Dyason and Mr Kelly, as indicated,
the order sought in paragraph 1, of the notice of motion
dated 26 November 1990, is refused.
2. That the order sought in paragraph 2 of that notice
be refused at present, but that Autodesk Inc. and Autodesk
Australia Pty. Limited, have leave to move the Court on
notice for orders in relation to the payment of the amount
of costs so taxed.
3. The Autodesk interests pay the costs of this
motion.