Burden v ESR Group (NZ) Limited [2016] NZHC 1537 (7 July 2016)

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BETWEEN	IAN JAMES BURDEN First Plaintiff
AND	PLANTATION GROWN TIMBERS (INTERNATIONAL) LIMITED Second Plaintiff PLANTATION GROWN TIMBERS (VIETNAM) LIMITED Third Plaintiff ESR GROUP (NZ) LIMITED First Defendant MORROW MARKETING MANAGEMENT LIMITED Second Defendant CRAIG MORROW Third Defendant GALAXY HOME (VIETNAM) LIMITED Fourth Defendant CHIEF EXECUTIVE OF NEW ZEALAND CUSTOMS _{Fifth Defendant}

Hearing:	7-11, 14-16, 18, 21-24, 28 September 2015 Further submissions filed 6, 7 & 8 October 2015
Counsel:	G Hazel, S Rosanowski & R Stone for the Plaintiffs A J Pietras for the First Defendant
Judgment:	1 June 2016
_Reasons:	_{7 July 2016}

[1] In a result ruling dated 25 September 2015 I refused to allow the first defendant to amend its affirmative defence. The first defendant wanted to include a defence that the works in which the plaintiffs claim copyright are in fact owned by a third party by reason of s 21(3) of the Copyright Act 1994 (the Act).¹My reasons for this ruling now follow.

[2] The relevant rules for amendment of pleadings are to be found in rr 1.9 and 7.7 of the High Court Rules. Rule 1.9 gives the Court a broad discretion to permit the amendment of a pleading. This rule is subject to r 7.7 which prohibits any amendment of pleadings without leave of the Court after the close of pleadings date.

[3] An application to amend a pleading that is made towards the end of a trial is necessarily made well after the close of pleadings date. The principles for when an amendment will be permitted in such circumstances are well settled, and were accepted by the parties. The Court should consider: (a) whether permitting the amendment would be in the interests of justice; (b) if allowed, whether the amendment would cause significant prejudice to other parties; and (c) whether

weighed against the principle that the parties should have every opportunity to ensure the real controversy goes to trial so as to secure the just determination of the proceeding.³

works) from which a collection of furniture known as the “Irish Coast Collection” is

³Shanton Apparel Ltd v Thornton Hall Manufacturing Ltd [1989] NZCA 159; [1989] 3 NZLR 304 (CA).

[5] It was clear from the outset of the trial that the first defendant was raising an affirmative defence based upon the allegation that the Irish Coast Collection was in fact a copy of the Attic Heirlooms range of Broyhill Furniture.

[6] At a time when the plaintiffs had closed their case, and the first defendant was in the process of opening its case, the first defendant adverted for the first time to the prospect that a third party, Hillsdale Furniture (Hillsdale), had in fact commissioned the subject works. In this regard the first defendant maintained that insofar as the subject works may contain original features, rather than being copies of Broyhill furniture, those features were commissioned by Hillsdale. Therefore, copyright in those features was vested in Hillsdale under s 21(3) of the Act (the commissioning defence). When the first defendant said this, the plaintiffs interjected and asked the Court to note their concern about whether a commissioning defence was now being raised. The first defendant did not at that time request the Court to rule on whether a commissioning defence was available to it. Nor for that matter did the plaintiffs request such a ruling. Having opened its case, the first defendant went on to lead its evidence; nothing more was said about a commissioning defence until the time of closing addresses.

[7] The order of closing addresses was plaintiffs, first defendant, followed by plaintiffs’ reply. When the first defendant was making its closing address, for the first time it directly asserted a commissioning defence. Faced with a clear cut assertion of the availability of this defence, the plaintiffs strenuously objected to this being so. The closing addresses were interrupted and time was made available to hear arguments from the parties on whether the first defendant’s pleading supported a defence based upon commissioning.

[8] On 24 September 2015 I delivered a ruling in which I found that the first defendant’s pleading did not support it raising a defence based upon commissioning. I directed that if the first defendant wanted to pursue such a defence then as a first step it would have to apply to amend its statement of defence.⁴My reasons for so finding are set out in that ruling, which should be read together with this reasons

[9] The first defendant then applied, in the face of opposition from the plaintiffs, to amend its statement of defence to include a defence based upon commissioning. The outcome was the result ruling of 25 September 2015 in which I refused to allow that amendment.

i) copies or substantial copies of imagery and/or furniture marketed and promoted by the business Broyhill Furniture of the United States... [Dealt with in minute issued 25

ii) works owned by the business Hillsdale Furniture, run by Hillsdale Furniture LLC, of 3901 Bishop Lane, Louisville, KY 40218 the United States (Hillsdale); such ownership being by reason of commissioning, including but not limited to:

a. Hillsdale Furniture represented by at least John Elting at a meeting in Vietnam in November 2001 verbally requested the first and/or second plaintiffs to prepare and/or otherwise obtain the copyright works in the form of drawings and/or product samples for use in having furniture manufactured in Vietnam for Hillsdale, and the first and/or second plaintiffs agreeing to do so; such instructions being evident and/or confirmed by email on 23 November

b. The copyright works being prepared and/or otherwise provided for consideration, including the sale of furniture by the first and/or second plaintiffs to Hillsdale, or the business opportunity to do so; and

c. The first and/or second plaintiffs preparing or otherwise obtaining the drawings and/or samples and none of the plaintiffs enjoy the benefit of any copyright in such works.

[11] The relevant witness for the first defendant was Edwin Elting, a co-chief executive officer of Hillsdale. Mr Elting referred to the company that supplied him with Irish Coast Collection furniture as PGT. For the purposes of this ruling it

matters not which plaintiff he dealt with. When referring to his evidence I propose to use the term PGT as well.

[12] Hillsdale is a furniture company based in Louisville, Kentucky in the United States of America (USA) that sources its products from contract manufacturers in Vietnam and other Asian countries. The thrust of Mr Elting’s evidence in chief in his written brief was focussed on establishing that at a meeting in November 2002 in Vietnam, Mr Elting reached an agreement with PGT and Mr Burden that PGT would work with a local business to supply Hillsdale with products “like the Attic Heirlooms range being sold in the United States by a competitor called Broyhill

....”.⁵Mr Elting said in evidence that the designs of Broyhill’s Attic Heirlooms

furniture were not protected by copyright in North America and that Hillsdale targeted only the USA and Canadian markets. So there would have been no concerns about copying.

[13] Two areas of Mr Elting’s written brief touched on matters that a reader with prior knowledge of a commissioning defence might have recognised as addressing that topic. However, anyone who did not have such knowledge would not in my view have realised that commissioning was being addressed. Those areas were: first, when Mr Elting said he was not prepared to place bulk orders until he had seen samples, and so it was agreed that PGT would arrange for samples to be

manufactured and shipped to Hillsdale⁶; and secondly, when he said that there were

occasions when Hillsdale directed PGT to make changes to the Broyhill designs, either right from the beginning or during the manufacturing process. Mr Elting described this as occurring when Hillsdale provided sketches and written or verbal instructions to PGT to modify the Attic Heirlooms products to what Hillsdale thought would go better with its customers. He described an employee of Hillsdale, Jim Hembree, sketching the changes on yellow legal pad paper which was then

_{passed on to PGT. He described this process as happening a lot and
being ongoing.}

⁵Mr Elting said that at one of the meetings in Vietnam he gave Mr Burden a copy of a Broyhill

_{Attic Heirlooms catalogue so that PGT “knew what sort of products
Hillsdale wanted”.}

⁶I find this evidence ambiguous as it is not clear to me if Hillsdale were requesting samples as part of the process of creating original designs or whether they wanted to see examples of the manufactured products before they committed to buying them in bulk. The former meaning supports commission; the latter meaning does not.

[14] Mr Elting’s brief of evidence then dealt with specific items of the Irish Coast Collection which he described as either being derived from the Broyhill Attic Heirlooms range or, where modified, with such modifications being done at the request of Hillsdale.

[15] There was a shift in Mr Elting’s evidence when he gave oral testimony in addition to his written brief. He then said that Hillsdale did not intend for PGT to copy the Broyhill Attic Heirlooms furniture. He described the approach as being one where PGT was to take the Broyhill Attic Heirlooms concept and twist it into something similar. For the first time, Mr Elting said that Hillsdale had instructed PGT to make drawings based on Mr Hembree’s sketches with samples to follow. His reference to “samples” here suggests samples that are made as part of a design process.

[16] Mr Elting’s oral testimony regarding Hillsdale giving PGT rough sketches and directing PGT to make drawings followed by samples gives the first obvious hints in the first defendant’s evidence of commissioning.

[17] Further, when under cross-examination, for the first time Mr Elting asserted that furniture products that were manufactured for Hillsdale belonged to Hillsdale. In this regard he said that it was always “a given that what’s made for Hillsdale is Hillsdale’s”, though this was later qualified by Mr Elting acknowledging that Hillsdale “simply assumed [the Irish Coast collection] would be exclusive to [Hillsdale] in the US and Canada”.

[18] The statement “what’s made for Hillsdale is Hillsdale’s” can be understood to mean that designs commissioned by Hillsdale belong to Hillsdale.⁷Although it can also be understood to mean that it was a term of the contract for supply of this furniture that the actual furniture would not be supplied to anyone else in the United

[19] The plaintiffs had cross-examined Mr Elting regarding Hillsdale’s influence on the Irish Coast Collection⁸. For the most part their cross-examination was directed at whether the Irish Coast Collection was a copy of the Broyhill Attic Heirlooms furniture. This was not surprising since the first defendant’s pleading expressly alleged copying of the Broyhill range of furniture by the plaintiffs.

[20] The plaintiffs’ cross-examination touched on the question of the samples that Mr Elting said he had requested, as well as the basis for Hillsdale contending that it instructed PGT to make design drawings for the Irish Coast Collection, but that was as far as the cross-examination on those topics went.⁹In this regard, Mr Elting acknowledged that an invoice that Hillsdale received from PGT was for payment of samples and not for payment of design work. He also acknowledged that he did not “recollect or remember a discussion about Irish Coast being sold to other folks”. In this regard he accepted that Hillsdale and PGT may have assumed different things.

Mr Elting also said that from his point of view the Irish Coast Collection was the result of Hillsdale working with PGT to “get this collection off the ground.” So while some matters relevant to commissioning were touched upon in the cross- examination of Mr Elting they were not the focal point of the cross-examination.

[21] The first defendant submitted that the interests of justice favoured allowing it to amend its statement of defence to include commissioning. This submission rested on: (a) public interest considerations, as the claim to copyright had resulted in Customs preventing imported goods from entering New Zealand; and (b) the impropriety of allowing the plaintiffs to maintain an invalid claim to ownership of copyright. The first defendant accepted that the amendment would cause prejudice to the plaintiffs. However, it maintained that this was outweighed by the other

⁸They claimed the Irish Coast Collection was the result of original design of which they had ownership.

⁹Mr Elting acknowledged under cross-examination that Hillsdale assumed the furniture that PGT was manufacturing for Hillsdale would be exclusive to Hillsdale, certainly in the USA and Canadian markets. He also acknowledged that there were no drawings for Irish Coast furniture with Hillsdale’s name on them.

[22] The first defendant argued that the facts that would support commissioning were explored during the course of the case. In this sense the first defendant was attempting to present the amendment as something that clarified what was already in issue, rather than something that was distinctly different and new. In support of this argument the first defendant contended that it had cross-examined Mr Burden about Hillsdale’s request for samples, and that he had accepted that samples were made for the Irish Coast Collection of furniture from sketches that he had drawn. The first defendant regarded this admission as establishing the elements of the commissioning defence.

[23] The first defendant also sought to rely on evidence Mr Elting had given under cross-examination that “what’s made for Hillsdale is Hillsdale’s”.

[24] In addition, the first defendant relied on the default position in s 21(3) of the Act, which provides that in the absence of any agreement to the contrary the commissioning party owns copyright in the design work.

[25] In short, the first defendant contended that all the elements of commissioning were present, these being: (a) a request for samples; (b) samples being made; and (c) there was something of value.

[26] The plaintiffs argued that the flipside of the public interest considerations relied on by the first defendant was that there were private property rights in issue. The plaintiffs argued that if there was to be a challenge to the ownership of an individual’s private property rights, good procedure had to be followed, and there needed to be clear articulation of the basis for the challenge so that the owner of the property rights or the party that claimed to own the property rights could respond to the challenge. The plaintiffs asserted that there was a long tradition of courts not interfering with private property rights without very good reason and a good evidential basis.

[27] The plaintiffs disputed the seriousness of the impact of the Customs action in preventing the first defendant from gaining access to its imported goods on the basis

of alleged copyright infringement. In this regard the plaintiffs argued that the Customs notice was a far less serious procedure and carried less impact than, for example, an injunction.

[28] The plaintiffs contended that they would be significantly prejudiced by the proposed amendment. They outlined a number of prejudicial issues. First, they submitted that if the commissioning defence had been “clearly telegraphed in the pleadings” then the plaintiffs would not only have prepared Mr Burden’s evidence in order to deal with that issue, but also searched for other relevant documents that were otherwise not relevant in the proceedings as they understood them to be. They referred to an invoice for a small number of items of furniture that PGT had forwarded to Hillsdale, as being the only documentary evidence the first defendant could point to as supporting a commissioning defence. The first defendant argued that this was an invoice for the manufacturing of commissioned samples. The plaintiffs argued that if they had known of the commissioning defence, including the interpretation the first defendant sought to have the Court place on this invoice, they would have undertaken pre-trial investigations to look for more material that was relevant to proof of the elements of commissioning.

[29] Secondly, the plaintiffs submitted that they had no opportunity to examine fully whether there was any agreement regarding the disputed ownership of copyright in the Irish Coast Collection. The plaintiffs accepted that under New Zealand law, ownership would be vested in the commissioning party unless there was agreement to the contrary. They argued that the first defendant’s failure to plead commissioning as a defence denied them the opportunity pre-trial: (a) to explore whether there was an agreement to the contrary; or (b) to look for material such as email communications and records of other discussions between the plaintiffs and Hillsdale that was relevant to this issue. Further, they had no opportunity to discuss with Mr Burden, or anyone else from the plaintiffs who may have been involved, whether there was any agreement regarding copyright ownership in the samples. Here the plaintiffs pointed out that the first defendant was inviting the Court to infer that Hillsdale would own copyright in the Irish Coast Collection on the basis of a particular interpretation to be drawn from one invoice which had not been put in cross-examination to Mr Burden, or to any other witness of the plaintiffs.

[30] The plaintiffs submitted that no-one had “really questioned” Mr Elting or Mr Burden in depth about samples the plaintiffs had delivered to Hillsdale in 2003 and whether they were the same samples as set out in the one invoice that was in evidence.

[31] The plaintiffs argued that other evidence showed there were already samples of what came to be known as Irish Coast furniture in existence at the time when Hillsdale had viewed the plaintiffs’ products in Vietnam. So that, insofar as the first defendant maintained that the Irish Coast Collection resulted from samples commissioned by Hillsdale, its perception of what had occurred was not something that was immediately apparent to the plaintiffs, given the absence of anything being said about this in the statement of defence.

[32] The plaintiffs also pointed to the fact that the discussions between Hillsdale and the plaintiffs had occurred in Vietnam, and so the question was whether New Zealand copyright law could be projected onto events taking place in Vietnam.

[33] In short, the plaintiffs’ concern was that they had lost the opportunity to explore the relevant facts regarding whether any agreement could be said to have been reached, either implicitly or by conduct, as to who would own copyright in any design work, as well as arguments on the applicable law.

[34] The plaintiffs also submitted that it was telling that Mr Elting never used the word “commission” when he gave evidence, nor did he use something equivalent to the word “commission”.

[35] The plaintiffs argued that the one invoice to Hillsdale that was in evidence did not necessarily support the inference of commissioning which the first defendant invited the Court to draw. The plaintiffs submitted that all that this invoice showed was that one table and six chairs were sent to Hillsdale, which the plaintiffs contended is what you would expect if Hillsdale was interested in a long term relationship with a potential supplier. In this regard the plaintiffs drew a distinction between what the evidence showed had occurred here compared to Oraka

Technologies Ltd v Geostel Vision Ltd,¹⁰which is a leading case on commissioning. The plaintiffs’ argument was that the invoice showed payment was being sought for samples of furniture rather than for samples of design work, and so they could not be inferred to evidence a commissioning arrangement. Further, the plaintiffs submitted that Mr Elting had acknowledged in his evidence that the invoice was for samples, not for design work.

[36] In short, the plaintiffs argued that as the evidence stood, the first defendant had a weak case when it came to commissioning, which was a further factor against allowing the amendment.

[37] I was satisfied that the commissioning defence raised by the first defendant’s proposed amendment to its statement of defence was an entirely new and distinct defence. It went well beyond an amendment for the purpose of clarifying issues that were already in dispute. Indeed, I found the proposed amendment to be contradictory of one of the main planks of the first defendant’s defence, which was based on an allegation that the Irish Coast Collection was a copy of Broyhill furniture, and therefore it lacked the necessary originality to support copyright ownership.

[38] I was satisfied that the first defendant had only alluded to a potential commissioning defence in its opening address. I was also satisfied that the first time the first defendant sought to rely on a commissioning defence was in its closing address. Before then there was nothing to give the plaintiffs clear notice that they might face an affirmative defence of this type. So, any pre-trial investigations that they might have explored, and evidence that they might have led at trial on this topic was understandably not addressed by them.

[39] The first plaintiff, Ian Burden, contended that he is the original designer of the Irish Coast Collection. He is also a director and shareholder in the second and

_{third plaintiffs. Mr Burden was the witness on whose
testimony the plaintiffs}

¹⁰Oraka Technologies Ltd v Geostel Vision Ltd [2010] NZCA 232, (2010) 9 NZBLC 103,010.

strongly relied to prove their case. The focus of Mr Burden’s evidence was on proving that the Irish Coast Collection was his original work and rebutting the first defendant’s expressly pleaded assertion that either Mr Burden or the other plaintiffs had copied those works from Broyhill’s Attic Heirlooms furniture. Because the commissioning defence was never in issue pre-trial, at the time the plaintiffs prepared their evidence they would not have addressed issues that would be relevant to commissioning. So that at trial none of the plaintiffs’ witnesses addressed commissioning by Hillsdale.

[40] Mr Burden was never directly or explicitly cross-examined by the first defendant on anything that touched on the idea that the Irish Coast Collection was something that either he or the other plaintiffs had designed as a commissioned work for Hillsdale.¹¹Indeed, the focus of the first defendant’s cross-examination of Mr Burden was on suggesting that he had copied the Irish Coast Collection from Broyhill, which is the antithesis of creating an original design under commission for

[41] Counsel for the first defendant argued that he had touched on the subject of commissioning when he cross-examined Mr Burden, insofar as he questioned Mr Burden about whether, when he was having discussions about supplying furniture to Hillsdale, he was asked to supply samples. I acknowledge that Mr Burden did accept under cross-examination that he was requested to supply Hillsdale with samples of the Irish Coast Collection. However, he said this in the context where he understood he was facing an allegation of copying Broyhill’s furniture. Thus, he had no notice, and therefore no opportunity, to comment on the basis on which Hillsdale sought those samples in terms of a commissioning defence. Given that I consider the provision of samples can be understood to have more than one meaning in the context of what was happening in early 2003, Mr Burden’s acceptance that such were provided does not advance matters very far for the first defendant.

[42] I found the little evidence that Mr Elting gave in relation to commissioning to be somewhat troubling. Mr Elting had said in his evidence that he had been in the

furniture trade for over twenty years. Under cross-examination he said that “it was always a given that ...what’s made for Hillsdale is Hillsdale’s”. The first defendant relied upon this statement to support its argument that there was already evidence to prove that copyright in any original Irish Coast designs had vested in Hillsdale by commissioning and that the amendment it sought was simply to bring its pleading

into line with existing evidence.¹²Such vesting having occurred either by agreement

[43] However, Mr Elting had also acknowledged under cross-examination that insofar as he assumed the Irish Coast Collection would be exclusive to Hillsdale, that related to the “US and Canada.” He also acknowledged separately under cross- examination that furniture like that made by Broyhill (being reproduced heritage style designs) was not “copyrightable” in the USA. I gained the impression from him that USA copyright law did not extend to general production furniture that displayed “old world” heritage style designs. Another witness from the USA, Mr Dergins (a former designer of Broyhill’s furniture), confirmed that Broyhill had not sought to register a USA design patent for the Broyhill range, which was consistent with furniture of that type not being subject to intellectual property law protections in the USA.

[44] The designs of the Irish Coast Collection were also evocations of old world heritage style designs, which suggested to me that those designs might be treated in the same manner as the Broyhill designs when it came to protection under USA copyright law. But if this were so, it would be hard to square this state of affairs with the first defendant’s argument that Mr Elting’s assertion “what’s made for Hillsdale is Hillsdale’s” went to prove that Hillsdale had acquired ownership of any copyright in the Irish Coast designs by commissioning. So, the interpretation that the first defendant wanted the Court to place on this aspect of Mr Elting’s evidence was at

_{odds with the impression I had gained from his other evidence, that
furniture like the}

¹²This involved understanding the statement as a reference to copyright in the design vesting in Hillsdale as well as ownership of the actual items of furniture. For if the statement were not read to include copyright ownership, it is hard to see what relevance it might have to the question of commissioning.

Broyhill furniture and the Irish Coast Collection was not “copyrightable” in the

[45] It is difficult to see how Hillsdale could have expected copyright in the designs of the Irish Coast Collection to belong to it when Mr Elting understood that this type of furniture was not “copyrightable” in the USA and that Hillsdale was purchasing the furniture for sale in North American markets.¹⁴Thus, at the time Hillsdale entered into the contract with the plaintiffs to purchase the samples of the Irish Coast Collection, I find it hard to see how Hillsdale could have expected that it would have copyright ownership of those design samples.¹⁵The trouble is that these contradictory aspects of Mr Elting’s evidence were never examined properly during the trial.

[46] The failure of the first defendant to give proper notice of a commissioning defence meant that the plaintiffs had no proper opportunity to ponder, let alone realise, the existence of contradictions in Mr Elting’s evidence that would require carefully prepared cross-examination to explore properly. Moreover, as the Court also had no notice of the commissioning defence at the time Mr Elting gave his evidence, it failed to recognise the need to clarify this aspect of his evidence, and so no questions of this nature were asked pursuant to s 100 of the Evidence Act 2006.

[47] Furthermore, in the USA when a copyrightable design is commissioned the default position is that copyright remains with the original owner. The author of Intellectual Property in New Zealand states that:¹⁶

[I]n the United States, intellectual property in a work produced by an independent contractor vests not in the commissioner of the work as it does in New Zealand, but in the independent contractor.

¹⁴I can understand a contract for the sale of furniture that specified the sale would be exclusively to Hillsdale in the United States, but that is something different from the idea that Hillsdale would acquire copyright ownership of the underlying designs.

¹⁵Indeed, the better view of Mr Elting’s statement that “what’s made for Hillsdale is Hillsdale’s”

may be that he was saying Hillsdale expected the furniture it ordered from a manufacturer to be sold exclusively to it in the North American market, rather than sold to others in that market as well.

¹⁶See Susy Frankel Intellectual Property In New Zealand (2nd ed, LexisNexis, Wellington, 2011)

at 65-66 citing 17 USC § 201 in contrast to s 21of the Copyright Act (NZ); see also 17 USC §

101 which defines “a work made for hire” as this term is used in 17 USC § 201.

This suggests that, in the absence of an express agreement (of which there was none), someone in Mr Elting’s position is likely to have approached any contract involving the commissioning of originally designed furniture samples on the basis that ownership of the copyright in those samples remained with the original designer. This is another reason why I find Mr Elting’s evidence that “what’s made for Hillsdale is Hillsdale’s” to require further exploration before it could be accepted.

[48] Mr Elting acknowledged under cross-examination that there was no extrinsic evidence that showed the design of Irish Coast furniture being attributed to Hillsdale, and that Hillsdale paid for samples and not for design work; all of which told against Hillsdale acquiring ownership of copyright in the designs of Irish Coast furniture.

[49] In short, there was much about Mr Elting’s evidence, insofar as it could pertain to a commissioning defence, that required further exploration by a well- prepared cross-examiner. Further, whilst I had reservations about Mr Elting’s evidence on this topic, until I had seen the seemingly contradictory aspects challenged by cross-examination, it would have been procedurally unfair for me to rely upon those reservations as a basis for rejecting his evidence. Thus, as matters stood the state of the evidence relating to commissioning was too rudimentary for me to conclude that a pleading amendment would simply bring the pleading in line with the way the first defendant’s case had been fully developed at trial.

[50] Insofar as the first defendant wanted me to accept Mr Elting’s evidence as proof that copyright ownership of the Irish Coast Collection vested in Hillsdale, the first defendant could point to no independent evidence to support that view, other than the invoice that accompanied the samples sent to Hillsdale in 2003, which I have already found was capable of being viewed in more than one light. Thus there was nothing that independently supported a commissioning defence being available to the first defendant.

[51] The contradiction in Mr Elting’s oral testimony, coupled with the absence of any other evidence that would verify his assertions that what was made for Hillsdale belonged to Hillsdale (insofar as that statement can be understood to include copyright ownership) led me to reject this aspect of his evidence.

[52] In circumstances where the idea of commissioning was raised late in the day and the plaintiffs had no proper opportunity to challenge Mr Elting’s evidence through lack of opportunity to: (a) investigate commissioning at the pre-trial stage; (b) to address commissioning in their own evidence; or (c) to prepare to cross- examine Mr Elting on this topic, I was not prepared to accept from him the idea that Hillsdale and the plaintiffs would have dealt with each other on the basis of a common understanding that any copyright ownership in the Irish Coast Collection went to Hillsdale.

[53] In addition to its reliance on Mr Elting’s evidence that designs made for Hillsdale belonged to Hillsdale, the first defendant appeared to assume that the default position in s 21(3) of the Act (copyright ownership going to Hillsdale as the commissioning party) would apply here. For the Court to reach this view, necessarily involved the Court also being satisfied that the parties had reached no agreement to the contrary. However, in terms of procedural fairness, no such finding could be made when the plaintiffs had been given no opportunity to address this question.

[54] Further, once Mr Elting’s evidence was put to the side (for the reasons given earlier), there was no evidence one way or the other about whether the parties had reached an agreement on ownership of the copyright of commissioned work. In terms of s 21(3), the absence of such evidence could not be relied upon to support a finding that there was no agreement (express or implied) to the contrary of the default position. Such absence was equally consistent with the topic not having been addressed earlier, which was understandable given it was not raised by the first defendant at the proper time.

[55] It followed that the first defendant could not properly establish on the basis of the available evidence that the default position in s 21(3) was factually applicable to

¹⁷See Paul Sumpter Intellectual Property: Law Principles in Practice (2nd ed, CCH New Zealand Ltd, Auckland, 2013) at 47 where the author cites Noah v Shuba [1991] FSR 14 as a case where the Court was prepared to imply a term in an employment contract excluding the operation of the statutory rule vesting copyright in an employer.

[56] Finally, the legal effect of s 21(3) is to remove copyright ownership from an original author or designer of commissioned work. Here the parties to the subject contract were foreign to New Zealand and the contract was formed outside New Zealand. The plaintiffs had queried whether in such circumstances s 21(3) was applicable. There is a developing body of law on the topic of whether the choice of law of first ownership should be the country of the author or works’ origin, or the

country where enforcement of the copyright is sought.¹⁸Neither party was able to

[57] Looked at overall, I considered that there were too many loose ends to the first defendant’s attempt to raise commissioning as a defence so late in the trial, and these could not be dealt with in a way that avoided significant prejudice for the plaintiffs. If the amendment had been allowed the case would essentially have had to start again, if the parties were to have a fair opportunity to deal with the issues raised by the proposed defence. It was too late for that.

[58] Mr Burden resides between Australia and Vietnam. He left New Zealand after giving his evidence. Other witnesses for the plaintiffs reside in Vietnam. Once they had given their evidence they returned to Vietnam. So the plaintiffs’ witnesses were not readily available for recall. Mr Elting, who resides in the USA, would have had to be recalled. As the witnesses were not based in New Zealand, recalling them could not be easily done. It would have entailed the hearing being adjourned to allow time for their evidence to be prepared as well as the possibility of them returning to New Zealand or giving evidence via audio visual link. The inconvenience and expense of recalling overseas witnesses and a delayed hearing would have been highly prejudicial to the plaintiffs.

[59] I was satisfied, therefore, that the interests of justice strongly favoured refusing to allow the amendment, and that to do otherwise would: (a) cause

_{significant prejudice to the plaintiffs and significantly delay the
resolution of this}

¹⁸See: Philip Wood and Paul Apathy “Copyright Ownership: Not so Simple When You Go Abroad” [2003] NZIPJ 203; Frankel, above n 16,at ch 2; and Goldstein and Hugenholtz International Copyright: Principles, Law and Practice (3rd ed, Oxford University Press, New York, 2013) at ch 4.

proceeding. I was also satisfied that the proposed commissioning defence was so new and distinct that it lay outside the bounds of the existing controversy. Finally, I was satisfied that the apparent case for this defence was weak. Hence my decision to refuse to allow the amendment of the first defendant’s pleading.

High Court of New Zealand Decisions

Burden v ESR Group (NZ) Limited [2016] NZHC 1537 (7 July 2016)