Young v Odeon Music House Pty Ltd

10 ALR 153

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(Decision by: Bowen CJ) Court:

Judge:
Bowen CJ

Hearing date: 4-6 May
Judgment date: 21 June 1976

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Decision by:
Bowen CJ

It appears that the pirating of sound recordings has been a problem in the Australian record industry for some time. Piracy in this context refers to the reproduction by taping of music from a genuine record, making a matrix from the taped music, and then making infringing records from the matrix, and selling them.

Mr George Young and Minos Matsas & Son Societe Anonyme, the plaintiffs, instituted the present proceedings by summons issued on 26 September 1973 against Odeon Music House Pty Ltd, Odeon (Newtown) Pty Ltd, Odeon (Marrickville) Pty Ltd, Odeon (Kingsford) Pty Ltd and Gerosimos Arvanitakis and Asimina Antiomos, trading as Minion Music House, claiming an order that the defendants be restrained from infringing the copyright of the plaintiffs or either of them in the sound recordings manufactured and distributed under the labels "Odeon", "Parlophone", "Minos", "Margophone", and "Standard" by reproducing the same in the form of gramophone records, cassette tapes or cartridges, and selling them; and without the licence of the plaintiffs, selling any gramophone record, tape cassette, cartridge or other record embodying any of the said sound recordings unless they had been imported into Australia by or made in Australia by the first-named plaintiff. Consequential orders for delivery up, accounting for profits, and for damages were also sought.

Appearances were entered by the first four defendants on 10 October 1973, and the fifth and sixth defendants on 11 October 1973. Affidavits were filed and served by both sides.

The matter then remained quiescent for two years. Some small part of this delay seems to have been due to an attempt by the plaintiffs to obtain evidence from Greece, particularly on the subject of copyright. At the hearing, copyright proved not to be in issue. It was conceded that it belonged to the second plaintiff. No application for interlocutory relief by way of injunction or the keeping of accounts was made.

On 10 November 1975 the plaintiffs filed a statement of claim. In this they alleged, amongst other things, that the defendants, without licence of either of the plaintiffs, had reproduced in Australia the plaintiffs' recordings distributed under the trade marks "Odeon", "Parlophone", "Minos", "Margophone", and "Standard" and had done so in the form of gramophone records, tape cassettes and cartridges, and thereby infringed the plaintiffs' copyright, and also sold these, thereby infringing copyright.

The plaintiffs further alleged that the defendants had infringed the plaintiffs' copyright in the recordings by importing into Australia, without the licence of either plaintiff, a large number of gramophone records, tape cassettes and cartridges of the second plaintiff's manufacture for the purpose of selling them, and that they had infringed the copyright in these imported recordings by selling them.

They claimed as relief an injunction to restrain the defendants from importing any copies of the recordings, and an injunction to restrain the defendants from reproducing the recordings in the form of gramophone records, cassette tapes and cartridges and selling them. They also claimed damages for infringement, damages for conversion, an order for delivery up, and an account of profits.

A defence was filed by the first four defendants on 15 December 1975, putting in issue the above allegations, and resisting the plaintiffs' claims. The matter came on for hearing before me on 4 May, and the hearing continued on 5 and 6 May, when it was concluded.

At the commencement of the hearing the fifth and sixth defendants were dismissed from the proceedings, such dismissal to operate as a bar to further proceedings on the same cause of action. No order was made as to costs.

Counsel for the plaintiffs opened, and it became apparent that it was not intended to make any case in respect of tape cassettes or cartridges. As to records, it also became apparent that the plaintiffs' case was to be limited to records bearing "Minos" and "Margophone" labels, and that it was not intended to make any case in respect of records bearing the "Odeon", "Parlophone" or "Standard" labels.

I turn now to the facts. Minos Matsas & Son Societe Anonyme is a company incorporated in Greece which carries on there the business of manufacturing, producing and distributing gramophone records, tape cassettes and cartridges. Some of these are distributed and sold in New South Wales and elsewhere under the labels "Minos" and "Margophone". No question arises in this case as to the copyright in the music which is recorded; the only issues arising relate to the copyright in the sound recordings themselves. At the hearing it was agreed between the parties that this copyright in Australia in the sound recordings bearing the "Minos" and "Margophone" labels was owned by the second plaintiff.

The first plaintiff, with his wife, carries on a business under the name of George Young Imports. He is also a director of and shareholder in a family company, Stanley Young Pty Ltd. His son, Stanley Young, manages the Melbourne office of Stanley Young Pty Ltd, while the first plaintiff manages its Sydney office.

The first plaintiff has a licence to distribute in New South Wales and elsewhere in Australia sound recordings supplied to him by the second plaintiff under the "Minos" and "Margophone" labels. He also has the right to reproduce them in Australia under certain terms and conditions. It was the practice of the first plaintiff to supply sound recordings bearing "Minos" and "Margophone" labels imported by him from the second plaintiff to Stanley Young Pty Ltd, which in turn distributed them to various retail outlets.

The four defendants are companies incorporated and carrying on business in New South Wales. Each of them is managed by Con Zahar. The business which they carry on is that of retailing, including the retail sale of sound recordings. For a period prior to April 1972 amongst the sound recordings which they sold were recordings under the "Minos" and "Margophone" labels, which were supplied to them by the first plaintiff or by Stanley Young Pty Ltd.

Towards the end of 1971 a dispute arose between the first plaintiff and the four defendants, who may, for convenience, be referred to as the Odeon Music House group. The Odeon Music House group complained of insufficient delivery or delay in delivery and at one stage sought to obtain such recordings direct from the second plaintiff from Greece. The second plaintiff refused to supply direct, and referred them to the first plaintiff, who was its distributor in Australia.

The first plaintiff then entered into negotiations with the Odeon Music House group for supply, but the parties were unable to agree on the terms, there being a difference between them particularly on the question of price. The dispute led to a break between the parties, and after April 1972 the first plaintiff refused to supply any further "Minos" or "Margophone" records to the Odeon Music House group.

After cessation of supply Mr Zahar found other means of obtaining records bearing "Minos" and "Margophone" labels. He gave evidence that he arranged with Hellenic Press Agencies and Salapatas Bros, both in Sydney and Melbourne, who were retailers to whom the first plaintiff continued to supply sound recordings, to pass some of these over to him. This appears to have been done in one of two ways. Principally it was a "swapping" arrangement. Mr Zahar, for each "Minos" or "Margophone" record supplied to him, would give in exchange an EMI record. On some occasions he was supplied with a "Minos" or a "Margophone" record, and paid cash.

Where the "swapping" arrangement was carried out no invoice was raised, but it was said that a written memorandum of the transaction was made if it was an interstate transaction. Where cash was paid an invoice was prepared. Some care was taken to keep this method of dealing from the knowledge of the first plaintiff. Hellenic Press Agencies and Salapatas Bros were said to be concerned that if the first plaintiff knew they were supplying the Odeon Music House group he might cut off supply to them. It appears that some of these recordings were obtained from a related company, Odeon House (Vic) Pty Ltd, in Melbourne, and sent to the defendants. Some were obtained directly from Hellenic Press Agencies or Salapatas Bros.

In support of Mr Zahar's evidence of this method of dealing a tender was made of some memoranda and invoices which, it was suggested, reflected these transactions. A perusal of the documents tendered, however, shows that in some cases the "purchaser" was Odeon Music House & Co (Vic) Pty Ltd, in others the first defendant and that the suppliers were a variety of companies and persons. Many of them relate to a period after the commencement of the current proceedings.

It seems that in or about April 1973 the plaintiffs had occasion to institute legal proceedings in Victoria against C Caras Pty Ltd to restrain that company from importing, reproducing and selling records bearing the "Minos" and "Margophone" labels. No formal documents in relation to these proceedings have been tendered. From some references in the oral evidence, and from the correspondence tendered, it would appear that at some time prior to 18 June 1973 the first plaintiff did obtain an injunction against C Caras Pty Ltd, restraining that company from importing, reproducing or selling records bearing those labels, and an order for delivery up of records in its possession to the first plaintiff.

At about the same time -- that is, April-May 1973 -- the first plaintiff seems to have formed the view that the defendants were selling sound recordings bearing the "Minos" and "Margophone" labels. It is not clear whether at that stage he was of the opinion that the recordings being sold were infringing copies or were genuine recordings. It was clear that he objected to the defendants selling even genuine recordings under the "Minos" or "Margophone" labels, since he had cut off supply to them.

On 9 May 1973 he sent one Angela Kallitzi, who was employed as a shop assistant in a shop in Marrickville, to visit the premises of the defendants, and to make purchases of the offending records. Miss Kallitzi gave evidence by affidavit and in the witness-box that she did visit the premises of the first three defendants on 9 May 1973, and there in each case purchased a record. Each record which she said she purchased was tendered in evidence. Then on 11 May 1973 she went to the premises of the fourth defendant and purchased a record, which was also tendered in evidence. These records became Exhibits E, F, G and H. Exhibits E, F and G bore a "Minos" label and Ex H bore a "Margophone" label. Each was contained in a cover bearing Greek wording -- the first three in "Minos" covers and the fourth in a "Margophone" cover. Little care was taken to ensure the correct identification of each record in relation to the shop from which it had been purchased. While there is, I think, no doubt that the four records were purchased from the four shops, there is some doubt as to which record was purchased from which shop. I shall have occasion to refer to this later.

On 1 June 1973 the plaintiffs' solicitors wrote to each of the four defendants a letter stating that they acted for the plaintiffs, and that the second plaintiff had given the right to the first plaintiff to reproduce and distribute and market in Australia records under the trade mark of "Odeon", "Parlophone", "Minos", "Margophone" and "Standard". They went on to say: "We therefore write to you on behalf of Mr George Young and Minos Matsas and request that your firm discontinues the practice of selling records under any of the above-mentioned labels." They referred to the fact that recordings bearing these labels had been purchased from the shops, and threatened injunction proceedings.

At this stage the burden of the plaintiffs' complaint appears to have been the sale of recordings, regardless of whether they were genuine or not, bearing the trade mark belonging to the second plaintiff, having in mind that the first plaintiff had refused supply.

On 5 June 1973 a further letter was written by the plaintiffs' solicitors to each of the defendants, referring to the letter of 1 June 1973, and stating that they were now instructed that each defendant in addition either manufactured or had arranged the manufacture of cassettes, which cassettes were apparently prepared from records bearing the labels referred to in previous correspondence. Legal proceedings were threatened. I do not spend further time on this aspect, since, as I have indicated, the plaintiffs have not sought to tender any evidence in relation to cassettes.

On 8 June 1973 the solicitors acting for the four defendants wrote in reply to the letters of 1 and 5 June, stating that the business conducted by Odeon Music House was that of a retail seller of records. They stated: "In the usual course of such business our client purchases records from distributors or associated retail outlets and sells them to the public. Accordingly our client will only obtain such records as are available to the market at large." They went on to deny the manufacture of cassettes.

On 18 June 1973 the plaintiffs' solicitors wrote again to the defendants' solicitors. This letter contained the following paragraph: "So far as the comments with respect to the records are concerned, we are instructed that evidence is available to show that your client purchased the records from C Caras Pty Ltd of Melbourne. That company has recently been injuncted by an order of the Supreme Court of Victoria from importing, reproducing and/or selling records of the label referred to in previous correspondence and indeed that company has been further ordered to deliver up all records in its possession to our client, Mr George Young."

It should perhaps here be mentioned that although it was asserted in this letter that evidence was available of the origin of some of the records purchased by the defendants, no evidence was tendered in the proceedings before me in relation to this. Mr Zahar was cross-examined in the witness-box as to whether he had any contact with Mr Caras, or C Caras Pty Ltd of Melbourne. He stated that he had not, prior to the issue of the summons on 26 September 1973. He said that about six months after that Caras visited Sydney and saw him. He asked Caras about the legal proceedings, and Caras informed him that no injunction had been granted against him. Mr Zahar said he then purchased some Lebanese records from Caras but Caras said he had no "Minos" or "Margophone" records and Zahar at no time purchased or obtained any from him.

On 18 July 1973 the plaintiffs' solicitors wrote to the defendants' solicitors, referring to a letter from the defendants of 19 June 1973. No letter of 19 June 1973 is in evidence. The letter of 18 July 1973 does raise the question of copyright. It alleges that the defendants are in breach of the Copyright Act, that they have been given notice, and that in due course proceedings would be taken in the Supreme Court to prevent further breaches of the Act. Some two months after this -- on 26 September 1973 -- the summons in the present case was issued.

At the hearing the plaintiffs gave no evidence of any importation or reproduction of "Minos" or "Margophone" sound recordings by any of the defendants, as alleged in their statement of claim. As I have said, some evidence was given of the purchase from the defendants of four recordings under these labels, but what appeared to be suggested in the plaintiffs' conduct of the case was that these were infringing copies.

At the close of the plaintiffs' case the defendants moved for judgment under the Supreme Court Rules Pt 34, r 8. After some argument, however, this motion was withdrawn, and the defendants entered upon their evidence.

At the close of all the evidence it became apparent that if I were to be able to give any decision on what had emerged as the matters in dispute between the parties the statement of claim would need to be amended. Counsel for the plaintiffs, in the course of his address, applied for leave to amend the statement of claim by adding new par 8 A in the following terms:--

8 A. Further the defendants and each of them by themselves their servants or agents have infringed the plaintiffs' copyright by selling infringing copies of the said recordings.

He also sought to add two further prayers in the following terms:--

(h)

(i)

An injunction to restrain the defendants and each of them or their servants or agents or otherwise from dealing in recordings which are infringing copies.

(ii)

An order requiring the defendants to deliver up to the plaintiffs all infringing copies of the said recordings.

The defendants did not oppose the addition of the two further prayers, but did oppose the addition of the new par 8 A. I indicated I was prepared to give leave to the plaintiffs to make the amendments they sought and to give leave to the defendants to amend their statement of defence if they so desired. I asked the defendants whether they sought an adjournment. Counsel for the defendants indicated that they preferred that the matter proceed, and that they would not be able to obtain evidence additional to that which had already been given even if they had an adjournment. In the result I ordered that the plaintiffs have leave to amend the statement of claim as requested; that the defendants have leave to amend the statement of defence, and that the plaintiffs pay the defendants' costs of and occasioned by the amendment. I indicated that any further question regarding costs which the parties might wish to argue in relation to the course which the proceedings had taken might be argued, if necessary, after publication of my reasons for judgment.

The issues to be determined as they finally emerged were:--

(1)

whether the first plaintiff was a proper party to the proceedings;

(2)

whether the records Exs E, F, G and H, purchased from the various defendants, were infringing copies;

(3)

whether there was infringement by any of the defendants of the copyright of the second plaintiff within the meaning of s 103 of the Copyright Act; and

(4)

whether there was conversion by any of the defendants within the meaning of s 116 of the Copyright Act.

Before dealing with these issues it is convenient to make some observations about copyright in sound recordings.

For the purpose of these proceedings the relevant copyright in sound recordings is the exclusive right to make a record embodying the recording: s 85(a). Such copyright is infringed by a person who, not being the owner of the copyright, and without the licence of the owner, does in Australia or authorizes the doing in Australia of any act comprised in the copyright: s 101(1). Such copyright is also infringed by a person who, in Australia, and without the licence of the owner sells an article where, to his knowledge, the making of the article constituted an infringement of the copyright or, in the case of an imported article, would, if the article had been made in Australia by the importer, have constituted an infringement of the copyright: s 103(1). The owner of the copyright may bring an action for infringement: s 115(1). The owner is entitled in respect of any infringing copy to the rights and remedies, by way of an action for conversion or detention, to which he would be entitled if he were the owner of the copy or plate and had been the owner of the copy or plate since the time when it was made: s 115(1).

Part V Div 3 of the Copyright Act deals with proceedings where copyright is subject to an exclusive licence. Except as against the owner of the copyright, an exclusive licensee has the same rights of action as he would have, and is entitled to the same remedies as he would be entitled to by virtue of s 115 if the licence had been an assignment, and those rights and remedies are concurrent with the rights and remedies of the owner of the copyright under that section. Likewise, an exclusive licensee has the same rights of action and is entitled to the same remedies as the owner would be entitled to by virtue of s 116 if the licence had been an assignment: s 119.

Where an action is brought by the owner of the copyright or by the exclusive licensee, and the action, in so far as it is brought under s 115, relates in whole or in part to an infringement in respect of which the owner and licensee have concurrent rights of action, the owner or licensee, as the case may be, is not entitled to proceed with the action unless the other party is joined as a plaintiff or added as a defendant. The Act also contains provisions for dealing with damages where one only of the owner and exclusive licensee are joined in the proceedings, and the same in relation to the account of profits and damages for infringement.

"Exclusive licence" is defined in s 10 as follows: "'exclusive licence' means a licence in writing, signed by or on behalf of the owner or prospective owner of copyright, authorising the licensee, to the exclusion of all other persons, to do an act that, by virtue of this Act the owner of the copyright would, but for the licence, have the exclusive right to do, and 'exclusive licensee' has a corresponding meaning."

In my view, the effect of this provision is that the licence must be exclusive of all other persons, including the grantor of the licence, and this must appear from the writing. The words "all other persons", are apt to cover the grantor as well as others.

Section 119 of the Act conferring rights upon the exclusive licensee as if the licence had been an assignment tends to support this interpretation. Furthermore, in the cases dealing with exclusive and non-exclusive licences and assignments of copyright, I find nothing which would suggest that would not be so.

The nature of the rights conferred by copyright are such that it has not been unusual for the courts to treat as an assignment a grant described by the parties as a licence but which by its terms expressly or by necessary implication is a grant exclusive of all persons including the grantor (see British Actors Film Co Ltd v Glover [1918] 1 KB 299; Messager v British Broadcasting Co Ltd [1929] AC 151 ; [1928] All ER Rep 272; Withers v Nethersole [1948] 1 All ER 400 Jonathan Cape Ltd v Consolidated Press Ltd [1954] 1 WLR 1313 ; [1954] 3 All ER 253). Where the effect of the document is to make the grantee an assignee or the equivalent of an assignee of all or some of the rights comprised in copyright, it is understandable that he should be regarded as entitled to sue, if necessary, on his own. He may be said to have proprietary rights to protect. A licensee has merely permission to do something which would otherwise be a breach of the owner's proprietary rights.

Section 19(9) of the Copyright Act 1956 (UK) from which the definition in our Act appears to have been copied, refers to a licence "authorising the licensee, to the exclusion of all other persons, including the grantor of the licence". The draftsman of our Act appears to have omitted the words "including the grantor" quite deliberately. However, it would seem to me, this was done because those words were considered to be otiose, rather than because it was intended to give to our Act a different operation.

I turn now to the issues for decision:--

(1) Whether the first plaintiff was a proper party to the proceedings

The defendants submitted that the plaintiff should not be a party to the proceedings and was not entitled to any relief. The argument submitted was that the first plaintiff was not an exclusive licensee.

I do not see why a non-exclusive licensee is not a proper plaintiff in proceedings for breach of copyright provided he joins the owner of the copyright (see Halsbury's Laws of England 4th ed, vol 9, par 880). However, as the matter has been argued on the basis that to have a right to the orders sought the first plaintiff must show he is an exclusive licensee, I will deal with this question.

In evidence are two licences in writing. The first of these, between the first and second plaintiff, was entered into in or about August 1971, and operated for a period of three years commencing on 1 August 1971. The second agreement between the first and second plaintiffs was dated 22 May 1974, and operated from 1 August 1974 for three years to 31 July 1977. It was suggested in the oral evidence that there had been a previous licence of a similar character running from about April 1970 up to the time of the 1971 agreement. However, no written licence relating to that period was in evidence. The two licences tendered are in the Greek language; in each case there was also tendered an English translation. The question here is whether the licence of August 1971 is an exclusive licence, or not. The terms of the grant of the licence are contained in cl 2, which is in the following form: MINOS grants to the distributor the right to reproduce on records, to put into circulation and to trade its above-mentioned repertories solely in Australia, being expressly forbidden to the distributor to export directly or indirectly the records so produced to any other country outside Australia, hereinafter called 'the area', for which the agreement is valid."

This wording I regard as being of itself insufficient to make the first plaintiff an exclusive licensee. The word "solely", which is used in the clause, appears to refer to the restriction of the licensee to the Australian area, and not to the nature of the licence itself. However, there are other provisions which carry the matter somewhat further. Clause 10 provides that the distributor is obliged to keep stores for clients throughout "the area", and to supply them constantly with records. It goes on to say that if there be some areas in Australia where the records of the company will not be put into circulation and the stores will not be supplied with such records then the second plaintiff is entitled to cover this "gap" by a direct shipment of records from Greece. In one sense cl 10 cuts down the exclusivity of the licence to the first plaintiff, in that upon the contingency which is referred to -- that is, the occurence of a "gap" in stocks in a particular portion of "the area" -- the second plaintiff may supply to the extent required to fill the gap. I do not consider that this contingent right of supply renders the licence non-exclusive for the purposes of the Copyright Act. On the contrary, cl 10, by indicating a carefully restricted right of supply reserved to the second plaintiff, suggests to my mind that, apart from that, there is no general right in the second plaintiff to supply in Australia and that, apart from the contingency of the grantor's having to supply a "gap", the licence of the first plaintiff is exclusive. It also suggests, to my mind, that it would be contrary to the intention revealed by the words used in the licence agreement that the second plaintiff, although it could not itself defeat the agreement by making supply, could do so by granting licences to other distributors and supplying recordings to them. In other words, although the agreement is not expressly stated to be an exclusive licence, its terms are such that by necessary implication the court is required to construe it as an exclusive licence. In my opinion, the first plaintiff is a proper party to the proceedings.

(2) Whether the records Exhibits E, F, G and H, purchased from the various defendants, were infringing copies

The evidence as to whether the recordings purchased from the defendants were infringing copies was not particularly cogent. Mr George Young himself gave evidence to the effect that genuine records would have on them a mechanically engraved matrix number, and that records which did not have this were infringing copies. Exhibits G and H had on them mechanically engraved matrix number; Exhibits E and F did not. Mr Stanley Young also gave evidence that, so far as records of the second plaintiff distributed in Australia were concerned, they would invariably have on them a mechanically engraved matrix number. However, in cross-examination he explained that this was so not only in respect of records pressed in Greece and imported into Australia but also in respect of records pressed in Australia from a matrix sent from Greece to Australia. On being questioned further, he conceded that on occasion a record might be pressed in Australia by the first plaintiff or Stanley Young Pty Ltd by a matrix produced locally from a record from which a master tape was made; from there a stamper was made and the record was produced. It seems that where this procedure was followed, the record produced and distributed in Australia by the first plaintiff would not bear an engraved matrix number. He explained the circumstances in which this would occur as follows:--

Q.--What is it that determines, in relation to the records you produce here, whether or not these records bear a matrix number in the form of that on exhibit D? A.--Speed. If any record we feel there is great need for it to be pressed urgently, where we cannot wait for the master to come from Greece; or if any record is being pirated, or if any record is being illegally imported, it is essential that we circulate ourselves as quickly as possible. Under those circumstances we will have it done here, taken from a record.

Giving evidence as to Exs E, F, G and H, Mr Stanley Young expressed the opinion that Exs E and F were infringing copies and that Exs G and H were genuine recordings. It is necessary to assess the effect of his evidence that Exs E and F were infringing copies. These were copies which bore hand-engraved catalogue numbers with "A" and "B" indicating the different sides of the records. They did not have the mechanically engraved matrix number, and so were clearly not recordings pressed by the second plaintiff in Greece. Mr Stanley Young was strongly of opinion that they were not records reproduced in Australia under the exceptional circumstances which he had outlined as occasionally causing the first plaintiff to reproduce records in Australia. Looking at the records, he called attention to the lack of pliability in them, the poor standard of the label, the different run-off line which causes the automatic pick-up to lift, and differences in the cover.

Mr Stanley Young had been in the business since 1948. It was his practice to make spot checks of consignments from Greece. He would visit the factory when records were being reproduced in Australia for the first plaintiff, and, in general, he was familiar with what records had in fact been reproduced in Australia and those which had not. He was positive that recordings Exs E and F had not been reproduced in Australia for the first plaintiff.

In cross-examination he did concede that he had been away overseas in May, July, August and December in 1972, and in 1973, and, when pressed, said that to be absolutely certain they had not been reproduced for the plaintiff he would wish to refer to the factory records covering the period he was away. I was impressed by Mr Stanley Young's testimony in general. I think he would have been aware of the position had Exs "E" and "F" been records produced in Australia for the first plaintiff, notwithstanding his overseas visits.

Mr Zahar, for the defendant, was not able to identify these particular records as coming from any particular source of supply so far as he was concerned. He dealt in a very large number of records, and it was not his custom to check either for matrix number or otherwise for genuineness. He considered that he was dealing with reputable retailers in his "swapping" or purchase procedures which he had outlined, whereby he obtained "Minos" and "Margophone" records, notwithstanding the first plaintiff would not supply him direct. It is possible, of course, that in following these "swapping" or purchasing procedures, Zahar could have picked up a record which was an infringement of copyright.

Deciding the matter on the balance of probabilities, I have come to the conclusion that Exs E and F were infringing copies. Exhibits G and H were not infringing copies.

(3) Whether there was infringement by any of the defendants of the copyright of the second plaintiff within the meaning of s 103 of the Copyright Act

Counsel for the plaintiff abandoned any claim that Exs G and H were infringing copies; he pressed the claim that Exs E and F were infringing copies and submitted that they had been sold in breach of s 103.

It becomes material to consider which defendant supplied which record. Miss Kallitzi at the time she swore her affidavit on 29 October 1973 -- just under six months after she had made the purchases -- was sure that the records were correctly identified as set forth in her affidavit; that is, that Ex G was purchased from the first defendant, Ex E from the second defendant, Ex F from the third defendant and Ex H from the fourth defendant.

When she was in the witness-box her recollection had faded considerably. She was then in the position of being unable to identify which record had been purchased at which shop. However, she stated that after she had purchased the records she handed them over to Mr George Young, who considered them during the afternoon and handed them back to her at the end of the afternoon, together with the invoices, and that she took them to the solicitor Mr Vass, together with the respective invoices. Mr Vass, the solicitor who took from her the instructions for her affidavit, stated that although the records and their covers were handed over to him there were no invoices with them. I have come to the conclusion that on the balance of probabilities the records were correctly identified by Miss Kallitzi when she swore her affidavit in October 1973.

It follows that on 9 May 1973 the second and third defendants each sold an infringing copy. However, it is a requirement of s 103 that for such a sale to constitute infringement it must be made in circumstances where, to the knowledge of the seller, the making of the article constituted an infringement of the copyright or, in the case of an imported article, would, if the article had been made in Australia by the importer, have constituted an infringement. The plaintiffs bear the burden of proving knowledge in the defendants (Copinger and Skone James on Copyright 10th ed, par 476). They have failed to discharge this burden. Mr Zahar denied having such knowledge and explained his mode of dealing, from which it appeared unlikely he would gain that knowledge.

In cases under s 103 a plaintiff sometimes, as a step in proving knowledge, gives evidence of having warned, or given notice to, the defendant of the infringement or possible infringement of which he complains (cf Cooper v Whittingham (1880) 15 Ch D 501; Van Dusen v Kritz [1936] 2 KB 177). In this case prior to the purchase on 9 May 1973 no warning or notice of any kind had been given to any of the defendants. I have come to the conclusion that, so far as the evidence before me goes, the second and third defendant did not know and had no reason to suppose that they were selling infringing copies on 9 May 1973.

A warning, of course, was given in June 1973, when the plaintiffs' solicitors wrote to the defendants and their solicitors. But no purchase of any infringing copy was made after that date, notwithstanding Mr Stanley Young thereafter kept some check on the defendants' shops, and made at least one further purchase.

I have come to the conclusion that there has been no infringement by any of the defendants within the meaning of s 103(1).

(4) Whether there was conversion by any of the defendants within the meaning of s 116 of the Copyright Act

The abandonment by counsel for the plaintiffs of any claim that Exs G and H, sold by the first and fourth defendants, were infringing copies means that the plaintiffs have failed to establish against those defendants any case under s 116. As to the second and third defendants, it would appear that by selling Exs E and F they have respectively converted those records which, by virtue of the section, are to be treated as if they were the property of the owner of the copyright at the time of the sale. It is not an essential part of the plaintiffs' case under s 116 to prove knowledge in the defendant (WEA Records Ltd v Benson King (Sales) Ltd [1974] 3 All ER 81). However, it is a defence to a claim for damages under s 116 if it is established that at the time of the conversion where the articles converted were infringing copies, the defendant believed, and had reasonable grounds for believing, that they were not infringing copies. It appears to me, having regard to the course of events disclosed here, the second and third defendants, having adopted a procedure of "swapping" records with, or purchasing records from, respectable retail outlets being supplied by the first plaintiff, had grounds for believing that the records which they would obtain from these outlets would be the genuine article, and would not be infringing copies. I conclude that the plaintiffs have not made out a claim for damages under s 116.

So far as relief by way of injunction or delivery up is concerned, it does not appear from the evidence that any of the defendants is in possession of any infringing copies or that there is any threat that any of them proposes to sell any infringing copies. I do not see, in the evidence before me, any basis on which I should grant an injunction or make any order for delivery up of infringing copies.

The order which I make is that the proceedings be dismissed. I also propose, subject to any argument the parties may wish to advance, to order that the plaintiffs pay the defendants' costs. Exhibits may be handed out.