Was the agencies' licence and right to grant sub-licence limited to period of marketing campaign for sale or lease of property?

Realestate.com.au Pty Ltd v Hardingham; RP Data Pty Limited v Hardingham [2022] HCA 39 (14 December 2022)

Intro:

This is an appeal from the Full Federal Court of Australia.

Facts:-

Mr Hardingham is a professional photographer and the sole director of Real Estate Marketing Australia Pty Ltd ("REMA").
REMA's business has been the supply of photographs taken and floor plans made of residential properties by Mr Hardingham in an editable digital form to real estate agencies for use in the marketing of those properties for sale or lease.

Upon receipt of the photographs and floor plans the commissioning agencies used the images in their marketing in various ways such as in brochures. One of those ways was by uploading them to the realestate.com.au platform operated by Realestate.com.au Pty Ltd (”REA"). The platform of REA is used by a majority of real estate agencies in Australia. REA then provided the images to RP Data Pty Limited, which operates a website and provides a service, RP Data Professional, to which real estate agencies subscribe.

The images provided by REMA to the agencies would appear on RP Data Professional within a few days of upload. The images would remain on REA's platform and RP Data Professional after the completion of the sale or lease of the property the subject of the images. They remained as part of the historical information about completed transactions presumably for purposes such as the assessment of price for future sales.

In proceedings brought in the Federal Court, Mr Hardingham and REMA claimed that RP Data had infringed and continued to infringe the copyright in a large number of the photographs and floor plans. The claims involved a substantial number of such works. With the consent of the parties the Court ordered that questions of liability for infringement of the copyright in the works relating to twenty properties, chosen by Mr Hardingham and REMA, be heard and determined separately from and before the determination of questions ofinfringement of the copyright in other works and questions of relief.

It does not appear to have been in issue in the proceedings that the photographs and floor plans were original artistic works within the meaning of s 32(1) of the Copyright Act 1968 (Cth), or that Mr Hardingham was the author of those works and that he was the owner of the copyright in the works. It appears that Mr Hardingham granted REMA a licence to use and to sub-license the use of the works, at first informally, and then, in April 2018, by way of a formal deed of licence. It was also not in issue in the proceedings that in using the works as it did,RP Data would infringe the copyright in them if it did so without a licence referable to Mr Hardingham or REMA. Attention was necessarily directed to the terms of the licence, which it was not disputed that REMA gave to the agencies, which permitted the agencies in turn to sub-license the use of the works.

The licence issue

The agreements between REMA and the real estate agencies were not in writing. There was no express oral agreement for the grant of a licence by REMA to the agencies in terms which would enable them to license to REA. Nevertheless, Mr Hardingham and REMA knew that the agencies uploaded the images to the REA platform and that it was necessary that they do so. The primary judge found that it was central to the objective of marketing sought to be achieved by all parties.

Consistently with that mutual understanding, Mr Hardingham and REMA's case was conducted on the basis that a licence was granted by REMA to theagencies and that that licence permitted the agencies to grant a sub-licence. But they contended that the licence which the agencies had was subject to a limitation.The limitation was that the images were to be used only for the purpose of marketing the property the subject of the images for a sale or lease. Once a sale or lease of the property was completed, the licence came to an end.

A licence subject to these limitations would not have permitted the agencies to accept the terms of the licence required by REA. The written subscription agreement which REA required the agencies to enter into included a term that, in consideration of REA granting the agency the right to upload listings to its platform, the agency "grant[s] ... an irrevocable, perpetual, world-wide, royalty free licence" to do many things including to license other persons. Clearly enough a term as broad as this would have authorised REA to sub-license to RP Data on terms which included permitting RP Data to maintain the images on its RP Data Professional service after the completion of the sale or lease of the property the
subject of the images.

Decision of Primary Judge

The primary judge found that, objectively viewed, Mr Hardingham, REMA, and the agencies conducted themselves on the basis that the agencies had the right to upload the works to REA's platform in accordance with the terms and conditions required by REA. Mr Hardingham and REMA either knew or assumed that REA was permitted to make the works available after marketing campaigns had ended and the relevant sale and lease transactions had been completed.

His Honour further found that Mr Hardingham and REMA knew that the agencies had to grant REA a licence on REA's terms. They knew that there was an agreement between RP Data and REA by which RP Data was provided with the
content which had been uploaded to the REA platform and that RP Data made those works available to its subscribers.

His Honour held that the objective circumstances relating to the twenty transactions were such that it is either:-

(1) to be inferred from the conduct of the parties including their course of dealings; or

(2) to be implied into the agreements between them, in order to give business efficacy to those agreements, that
Mr Hardingham and REMA agreed that the agencies were authorised, by way of a licence, to upload the images to REA's platform and to grant to REA a licence in the form required by REA.

As mentioned earlier, his Honour considered uploading the works to REA's platform to be central to the objective sought to be achieved by the parties. That objective could not have been achieved unless the agencies could grant a licence to REA on the terms and conditions it usually required.

It followed, his Honour concluded, that Mr Hardingham and REMA authorised, consented to, or permitted (which is to say licensed) the agencies to sub-license the works to REA on REA's usual terms and conditions, which would include authorising REA to grant a sub-licence to RP Data. The sub-licence to RP Data did not go beyond that which was permitted by the sub-licence granted to REA by the agencies. Copyright was not infringed.

Decision of the Full Federal Court

The majority in the Full Court (Greenwood and Rares JJ, Jackson J dissenting) allowed Mr Hardingham and REMA's appeal. Greenwood J (Rares J agreeing) considered that any inference as to the terms upon which the agencies
could grant a sub-licence to REA required actual knowledge of the precise scope of the term. This was necessary because of the gravity of the effect of REA's usual terms and conditions. Their Honours, for reasons which differed, did not consider
that the requirements for the implication of a term were satisfied.

Issue:-

Could it be inferred from the conduct of the parties, or to be implied into the agreements to give business
efficacy to them, that Mr Hardingham and REMA licenced the agencies to upload the works to REA's platform, and in so doing to grant a licence to REA in accordance with REA's standard terms and conditions?

Consideration:-

Ascertainment of terms

In a case such as this where the terms of an agreement between the parties have not been articulated, those terms must be ascertained by reference to the parties' words and conduct. The words and conduct of each party must be understood by reference to what the words and conduct would have led a reasonable person in the position of the other party to believe.The ultimate question is what reasonable people with knowledge of the background circumstances then known to both parties would be taken by their words and conduct to have agreed. In Hawkins v Clayton, in reasoning adopted by Brennan CJ, Dawson and Toohey JJ in Byrne v Australian Airlines Ltd and by Dawson and Toohey JJ in Breen v Williams, Deane J said that the first step in ascertaining what was included in the agreement is one of inference of the actual intention of the parties, taking account of the circumstances disclosed by the evidence. It is only when that first enquiry is complete that consideration might be given, in an appropriate case, to whether a term may be implied as a matter of imputed intention
.
Although Deane J in Hawkins v Clayton used the word "intention", indeed "actual intention", it must be understood as it is used in a contractual context. In Ermogenous v Greek Orthodox Community of SA Inc, it was said that the word "intention" describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened. It is not a search for the uncommunicated subjective motives or intentions of the parties. In Pacific Carriers Ltd v BNP Paribas, this Court confirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined.

The conditions necessary to ground the implication of a term are well known. Apart from being reasonable and equitable, capable of clear expression and non-contradictory of the express terms of the contract, to be implied a term must be necessary to give business efficacy to the contract (which will not be satisfied if the contract is effective without it), and it must be so obvious that "it goes without saying".
.
In Hospital Products Ltd v United States Surgical Corporation, Deane J cautioned against an over-rigid application of the criteria for the implication of a term. In particular, his Honour said, there should not be such an approach to "business efficacy" where a term otherwise satisfies the requirement that it be "so obvious that it goes without saying". In Hawkins v Clayton, his Honour said that
a term may be implied if it is "necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case". This general statement was approved in Byrne v Australian Airlines Ltd.

At this point it might be thought that there had been something of a departure from the criterion that a term be obvious. But in Hospital Products, Deane J had clearly stated obviousness to be a criterion and so too had McHugh and Gummow JJ in Byrne v Australian Airlines Ltd. If a resolution of their approach is necessary, Hely J of the Federal Court may be thought to have provided one in Yau's Entertainment Pty Ltd v Asia Television Ltd24, as Jackson J in the Full Court in the present case observed25. Hely J pointed out that it is unlikely that a term which "fails to meet the obviousness criterion would be one which is necessary for the reasonable or effective operation of the contract" (original emphasis).

Inferences and implications

At first instance the issue in this case – what the licence from REMA to the agencies authorised the agencies to agree to when sub-licensing to REA – was approached by reference to two enquiries: what may be said to be inferred from all the circumstances and what may be implied. This may be seen to reflect the approach taken by Deane J in Hawkins v Clayton. There his Honour observed
that there are limits to what may be inferred from all the circumstances, and inferences may overlap with implications. In Breen v Williams, Dawson and Toohey JJ observed that the line between an inference and an implication will not always be easy to draw.

The approach taken by Deane J should not distract attention from the full enquiry as to the rights and liabilities of the parties, which in the first place has regard to their words and conduct – here their conduct in particular – taking account of all the circumstances in which they took place. In focusing attention on the distinction between an inference and an implication his Honour should not be
understood to be limiting that enquiry. His Honour himself said that it was necessary to have regard to the "circumstances disclosed by the evidence". His Honour's discussion of the enquiries there undertaken should be understood as referable to the facts of that case.

The principal question for the Court in Hawkins v Clayton was whether and to what extent a firm of solicitors was obliged to bring to the attention of an executor of a will, and those who may be taken to have had an interest under it, the existence of the will and its contents following the death of the testatrix, who had left the executed will in the custody of the firm.

As to the first enquiry, Deane J observed that it was "obviously" in the contemplation of both the testatrix and the firm that the will might remain in the firm's custody at the time of her death. That being so, his Honour found that one might infer a term by which the firm assumed continuing responsibility for its safe custody. His Honour described as "[c]loser to the borderline between inference and
imputation" a further term that the firm was authorised to communicate the contents of the will to the executor and others having an interest under it when the testatrix died, but appears to have considered it to have been open to draw such an inference.

On the other hand, whether it was a term of the agreement between the firm and the testatrix that when she died the firm was under an obligation to take any positive steps to locate some or all of the persons named in the will, in his Honour's view, was an enquiry beyond the stage of inclusion of terms by inference. His Honour said "[i]t simply cannot be inferred or assumed as a matter of actual fact that the testatrix ever directed her mind to that question or that, if she did, there was any actual joint intention of herself and [the solicitor] which can be expressed as a contractual term". His Honour concluded that a term such as this would have to be implied. But it is to be noted that there was little else in the surrounding circumstances and the dealings of the parties in that case which could be said to have informed their mutual understanding.

The present case

Mr Hardingham and REMA bear the onus of establishing infringement of copyright. Their case for infringement depended upon the scope of the licence given to the agencies, and the sub-licence which the agencies could grant to REA being limited in the way contended for.

Mr Hardingham, REMA, and the agencies dealt with each other in the context of an industry where residential properties were marketed for sale or lease in a particular way. How things were done to achieve this objective forms part of the circumstances in which their conduct is to be considered. This is not to equate what was understood to occur, and the reasons for it, with an industry practice akin to a custom or usage, from which a term might be implied. Rather it is relevant to the question of what might be considered to be the mutual understanding on which they dealt.

Most agencies in Australia conducted their marketing using the REA platform. This was well known. Mr Hardingham, REMA, and the agencies knew that REA uploaded photographs and floor plans of a property to be marketed to its platform and that it then maintained them there after the completion of the sale or lease as available to its subscribers as historical transactions. REA had done so since the platform came into existence in 2003 and over the course of the dealings between the parties. This is hardly consistent with the licence to be given by the agencies to REA being limited in the way contended for.

Within a few days of REA uploading the images they appeared on RP Data's service and remained there post sale or lease. This too must have been apparent to Mr Hardingham and REMA. And prior to their entry into the relevant transactions, Mr Hardingham and REMA understood that RP Data had a contractual relationship with REA by which REA licensed it not only to use the data but in
terms which allowed RP Data to keep the data in its service.

Although Mr Hardingham and REMA may be taken to have understoodwhat had transpired between the agencies, REA, and RP Data in relation to the transactions in question, they said nothing. They made no objection. No question \ of estoppel on the part of Mr Hardingham and REMA has been raised in the proceedings but that is not to say that their silence has no relevance to what may
be taken as conveyed to the agencies. An agreement and its terms may be inferred from the acts and conduct of the parties, including the absence of their words. In light of surrounding circumstances that absence may evidence a tacit understanding

Here, that tacit understanding may be understood to have been evident to the agencies in light of what was taken to be part of the mutual understanding on which the parties conducted their contractual relationships.

The silence of Mr Hardingham and REMA when they well knew what REA and RP Data did with the images, and for how long they continued to use them, is consistent with an acceptance of what was necessary to achieve the intended marketing. Both Mr Hardingham and REMA and the agencies appreciated that it could only be achieved if the agencies submitted to REA's terms to upload the images to its platform. The agencies were no doubt led to believe by the conduct of Mr Hardingham and REMA that they knew and accepted that as a commercial reality. In these circumstances it is not possible to conclude that it was intended that the agencies could only license REA on the basis of the limitation contended for.

In these circumstances no question as to whether a term needs to be implied in the sub-licence to REA arises.

Conclusion and orders

The appeals should be allowed.