Universal Music Australia Pty Ltd v Cooper [2004] FCA 78 (13 February 2004)

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] HCA 69; (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

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

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

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

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.

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:

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] HCA 69; (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 that the 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].

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:

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.

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.

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:

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.

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

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N1551 OF 2003

JUDGE:	TAMBERLIN J
DATE:	13 FEBRUARY 2004
PLACE:	SYDNEY

Federal Court of Australia

Universal Music Australia Pty Ltd v Cooper [2004] FCA 78 (13 February 2004)