Centrestage Management Pty Ltd v Riedle

• Jurisdiction: Australia Federal only
• Judgment Date: 20 June 2008
• Neutral Citation: [2008] FCA 938
• Court: Federal Court

FEDERAL COURT OF AUSTRALIA

Centrestage Management Pty Ltd v Riedle [2008] FCA 938

COPYRIGHT – computer programs – contract for supply – implied licence in purchaser to use program without thereby infringing vendor’s copyright – whether implied term that purchaser have access to source code.

CONTRACT – implied terms – terms implied by law in contracts of a particular type independently of parties’ actual or presumed intention – terms implied to give business efficacy to a particular contract – contract for supply of computer program – implied licence in purchaser to use program without thereby infringing vendor’s copyright – whether implied term that purchaser have access to source code

Copyright Act 1968 (Cth) ss 10, 21(5), 31, 35(6), 47AB, 47D, 47E

De Garis v Neville Jeffress Pidler Pty Ltd(1990) 18 IPR 292 referred to

Beck v Montana Constructions Pty Ltd [1964‑5] NSWLR 229 considered

Pacific Software Technology Ltd v Perry Group Ltd [2004] 1 NZLR 164 cited

Computer Edge Pty Ltd v Apple Computer Inc(1986) 161 CLR 171 referred to

Data Access Corporation v Powerflex Services Pty Ltd(1999) 202 CLR 1 referred to

Codelfa Constructions Pty Ltd v State Rail Authority (NSW)(1982) 149 CLR 337 applied

Liverpool City Council v Irwin[1977] AC 239 applied

Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd[1986] AC 80 cited

Byrne v Australian Airlines Ltd(1995) 185 CLR 410 applied

Scally v Southern Health and Social Services Board[1992] 1 AC 294 referred to

Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd(2006) 229 CLR 577 distinguished

Avel v Multicoin Amusements Pty Ltd(1991) 171 CLR 88 distinguished

TSB Retail Systems Pty Ltd v 3Fold Resources Pty Ltd (No 3)(2007) 72 IPR 492 distinguished

Stevens v Brodribb Sawmilling Co Pty Ltd(1986) 160 CLR 16 applied

Roy Morgan Research Centre Pty v Commissioner of State Revenue (Victoria) 37 ATR 528 referred to

Chitty on Contracts, General Principles 29^th ed (2004)

CENTRESTAGE MANAGEMENT PTY LTD v TONY RIEDLE

VID 706 of 2007

SUNDBERG J

20 JUNE 2008

MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 706 of 2007

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN: CENTRESTAGE MANAGEMENT PTY LTD Appellant

AND: TONY RIEDLE Respondent

JUDGE:	SUNDBERG J
DATE OF ORDER:	20 JUNE 2008
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1. The appeal be dismissed.

2. The appellant pay the respondent’s costs of the appeal.

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

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 706 of 2007

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN: CENTRESTAGE MANAGEMENT PTY LTD Appellant

AND: TONY RIEDLE Respondent

JUDGE:	SUNDBERG J
DATE:	20 JUNE 2008
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

BACKGROUND

1 The appellant was incorporated on 18 November 2003. It provides administration and computer consultancy services. Its directors are David Roberts and Conni Paglianiti. In 2000 Mr Roberts, as an employee of Advanced Administration Services Pty Ltd (AAS), wrote a computer program for the Salvation Army for its home collection services. The program was written in Visual Basic. In 2002 Mr Roberts upgraded the program, again in Visual Basic and still as an employee of AAS. AAS went into administration on 21 November 2003 and was later wound up.

2 In late 2003 the Salvation Army told Mr Roberts it was contemplating a further upgrade of its home collection program. Mr Roberts was unable to do the upgrade himself, partly because at that time he was in full time employment with Eastern Ocean Pty Ltd. Mr Roberts discussed the upgrade with the respondent, a computer programmer. It was agreed that the respondent would prepare a proposal for the project to be given by the appellant to the Salvation Army. It was later agreed that the respondent would provide the updated program in three stages. The program would be written by the respondent in the .NET language. He would be paid by the appellant $19,800 for the first stage, a sum to be determined later for the second stage, and $13,200 for the third stage. The appellant’s contract with the Salvation Army provided for payment to the appellant of a sum greater than that payable by the appellant to the respondent. The appellant gave the respondent a copy of the 2002 version of the program to enable him to update it.

3 The respondent provided the first stage of the upgrade and was paid for it. The second stage did not proceed, as it was deferred pending the Salvation Army buying GPS equipment for its collection trucks. The third stage was not completed.

4 On 7 November 2005 Mr Roberts told the respondent by email that he had to “look at the home collections database for the Salvos”, and asked the respondent to send him “the project files”. The respondent did not reply to the request, and on 22 November Ms Paglianiti asked him whether she could pick up the “home collections database” from his home. He replied on the same day that “we need to resolve payment for IP and Report Design work already undertaken first”.

5 On 7 December 2005 the respondent received a letter from the appellant’s solicitors requesting a copy of the source code for the program. The solicitors claimed that the respondent had no intellectual property rights in the source code. The respondent did not supply the source code, and in February 2006 the appellant brought proceedings in the Federal Magistrates Court claiming, inter alia, that the respondent’s refusal to hand over the source code was a breach of his contract of employment with the appellant. The appellant sought

· an injunction restraining the respondent from copying, using or disclosing the updated home collection program and its source code (the materials)

· an order that the respondent deliver up the materials to the appellant

· a declaration that the appellant is the proprietor of the copyright in the materials

· damages for breach of contract.

6 The respondent cross claimed for

· a declaration that he owned the copyright in the updated program

· an injunction restraining the appellant from reproducing the source code in the program

· an order that the appellant pay him $6,600 for work done on the third stage of the project.

7 The Magistrate dismissed the application, and on the cross claim granted the injunction and ordered the payment of $275 for work done on the third stage of the project.

8 The Magistrate rejected the appellant’s claim that the respondent was its employee, dismissed its claim that it was an implied term of their contract that the appellant was entitled to delivery up of the source code, and its claim that it was the proprietor of the copyright in the updated program.

ISSUES ON APPEAL

9 Three issues call for decision. The parties are agreed as to the formulation of two of the issues. The first is whether the Magistrate erred in holding that the respondent was an independent contractor rather than an employee of the appellant. The second is whether, on the basis that the respondent owned the copyright in the updated program, her Honour erred in concluding that while it was an implied term of the relationship between the parties that the appellant had a licence to use the “application”, the licence did not extend to the right to access and use the source code. The parties did not agree upon the formulation of the third issue. The appellant contended that it was whether the Magistrate had failed to deal with the question whether, if “version 3” of the program was an adaptation of “version 2”, so that the respondent was not the owner of the copyright in “version 3”, he was obliged to deliver up the source code regardless of who was the owner. The respondent said the question was whether, having found that the appellant was not the owner of the copyright in “version 2”, the Magistrate was correct in concluding that the respondent was not obliged to deliver up the source code. It will be necessary later to identify the true issue that was before the Magistrate. The expressions “version 1”, “version 2” and “version 3” are respectively references to Mr Roberts’ initial program (2002), his update (2002) and the respondent’s update.

EMPLOYEE OR INDEPENDENT CONTRACTOR

10 A computer program is a literary work for the purposes of the Copyright Act 1968 (Cth) (the Act). Section 35(2) provides:

Subject to this section, the author of a literary … work is the owner of any copyright subsisting in the work by virtue of this Part.

Sub‑section (6) provides:

Where a literary … work … is made by the author in pursuance of the terms of his or her employment by another person under a contract of service …, that other person is the owner of any copyright subsisting in the work by virtue of this Part.

It was that sub‑section which gave rise to the first issue: whether the respondent was an employee of the appellant or an independent contractor when he wrote the program.

11 The parties were basically in agreement as to the law to be applied in answering this question. In Stevens v Brodribb Sawmilling Co Pty Ltd(1986) 160 CLR 16 at 24 Mason J said:

A prominent factor in determining the nature of the relationship between a person who engages another to perform work and the person so engaged is the degree of control which the former can exercise over the latter …. But the existence of control, whilst significant, is not the sole criterion by which to gauge whether a relationship is one of employment. The approach of this Court has been to regard it merely as one of a...