The High Court has held unanimously that Realestate.com.au Pty Ltd did not infringe copyright by sub-licensing photographs and floor plans of properties created by the respondents to RP Data Limited upon the completion of the sale or lease of those properties. In so finding, the High Court considered the extent to which, in the absence of a written agreement, the terms of an agreement could be inferred from the entire circumstances between the parties, including the silence of the respondents as evidencing their understanding of the agreement.

Background

Mr Hardingham is a professional photographer and the director of Real Estate Marketing Australia Pty Ltd (REMA). REMA licensed the use of photographs taken, and of floor plans of residential properties made, by Mr Hardingham to real estate agencies for use in the marketing of properties for sale or lease. This allowed the agencies to upload the photographs and floor plans to the realestate.com.au platform operated by Realestate.com.au Pty Ltd (REA). In so doing, the agencies were required to agree to REA’s terms and conditions of use which permitted REA to sub-license the photographs and floor plans to RP Data Limited (RP Data). RP Data operated a website and provided real estate marketing subscription service for agencies where the images uploaded remained available as a historical record about completed transactions.

There was neither a written agreement nor an expressed oral agreement between Hardingham and REMA and agencies setting out terms of the licence. Mr Hardingham received requests by telephone or brief emails providing details of the job. Nevertheless, Mr Hardingham knew that the agencies uploaded the photographs toREA’s website and it was necessary that they do so.

Mr Hardingham and REMA commenced proceedings in the Federal Court claiming that REA had infringed section 36 of the Copyright Act 1968 (Cth) by sub-licensing his photographs and floor plans to RP Data. Mr Hardingham conducted the proceedings on the basis that the licence which was granted by REMA to the agencies permitted them to grant a sub-licence to REA but subject to a limitation. The limitation was that the licence was used only for the purpose of marketing of properties and came to an end upon the sale or leasing of those properties and the agencies were not permitted to accept REA’s terms and conditions which included sub-licensing the photographs to RP Data.

First instance decision

Thawley J found that copyright was not infringed by REA and RP Data as uploading the images to REA was ‘central’ in achieving the marketing objective sought by the parties and it was impossible for the agencies to do so unless they agreed to its terms and conditions (at [63]).

His Honour held that Mr Hardingham and REMA had ‘authorised, consented to or permitted’ the agencies to sub‑license the photographs to REA on REA's usual terms and conditions, which included authorising REA to grant a sub‑licence to RP Data (at [12]). His Honour found that the sub‑licensing agreement was ‘inferred’ from the dealings between Mr Hardingham, REMA and the agencies and it was an implied term of the contract in order to allow business efficacy to the contract (at [63]).

Full Court appeal

Mr Hardingham and REMA appealed to the Full Court. The issues on appeal were reduced to (at [100]):

1. whether the contract between REMA and the agencies contained a licence and an implied term which authorised those agencies to agree to REA’s terms and conditions.

2. whether the use of the licence granted by REMA, allowed the perpetual use of the photographs and floor plans to RP Data.

The Full Court allowed the appeal by majority (Greenwood and Rares JJ). The majority held that there was no requirement to consider implied terms. Their Honours stated that ‘actual knowledge of the precise scope of the term’ was the only factor to consider determining whether the agencies were authorised to grant a sub licence to REA (at [13]). Jackson J dissented on the basis that the contract contained an implied term as identified by the primary judge (at [93]). His Honour’s reasoning as to the existence and content of the implied terms was acknowledged and affirmed by the High Court on appeal.

Appeal to the High Court

In three separate judgments (Kiefel CJ and Gageler J, Gordon J and Edelman and Steward JJ), the High Court allowed the appeal by REA and RP Data. Kiefel CJ and Gageler J stated that prior to the agreement, Mr Hardingham knew and understood that REA and RP Data had a contractual relationship by which REA licensed the images to RP Data not only to use, but subject to terms that allowed it to keep them. Despite that knowledge, he remained silent saying nothing, nor making any objection to the use of the photographs and floor plans. The agreement and its terms were inferred from the conduct of the parties including silence (at [30]). Their Honours held that Mr Hardingham’s silence in the circumstances was consistent with an acceptance that that result could only be achieved if the agencies agreed to REA’s terms and conditions. Therefore, his silence evinced a ‘tacit understanding’ which led the agencies to believe that he accepted sub-licensing of the photographs as a commercial reality and the mutual understanding of their contractual relationships. Therefore, it was not possible to conclude that the agencies could license REA subject to the limitations contended for by the applicants (at [31]).

Gordon J referred to the general principles governing construction of contracts and emphasised that the rights and liabilities of parties under any contract, whether oral or in writing, are determined objectively (at [43]). The concern was ‘not with the real intentions of the parties, but with the outward manifestations of those intentions’ (at [43]). Her Honour stated that in the circumstances of this case where the terms of the agreement between the parties had not been articulated, they fell to be ascertained by reference to the parties’ words and conduct (at [47]). Therefore, the central question was what the parties’ words and conduct would have led a reasonable person with knowledge of the background circumstances to believe had been agreed between them (at [42]). Her Honour stated that determination of the terms of oral agreements involved two steps (at [45]):

1. The first step was to consider the evidence and find the relevant terms of the contract as a question of fact and substance, not merely of form or interpretation.

2. The second step was to ascertain the intention of parties objectively. The intention of Mr Hardingham and REMA and each agency as to the scope of the licence and the ability to grant a sub-licence was to be determined from what was said and not said, what they reasonably knew or ought reasonably to have known and from what was done (at [59]).

As to the first step, in the process of the factual finding of terms, it was necessary to consider the entire range of circumstances including the state of affairs existing at the time of the contract. Written or spoken words of the parties, and their knowledge of relevant matters at the time of the contract were required to be weighed alongside the undisputed facts or the facts which were established by surrounding objective evidence and the apparent ‘logic of events’ (at [46]). The central question was whether the parties’ conduct including silence, what they knew and their commercial expectations showed an understanding or agreement to be legally bound in some particular respect (at [47]).

As to the second step, in the circumstances of this case, a reasonable person would conclude from the conduct of the parties, including what was said and not said, that the apparent commercial aims and expectations of the parties was an understanding that the licence to use the photographs and floor plans and the authority to grant a sub‑licence for the use of them granted by Mr Hardingham and REMA to each agency extended beyond the asserted limitation. Therefore, RP Data did not infringe Mr Hardingham and REMA copyright in the photographs (at [51]).

Edelman and Steward JJ stated that ‘inferred terms’ were not a category of contract term (at [84]) and there was a ‘critical distinction’ between an implication and an inference which could not be ignored (at [85]). The process of inference as a method of legal reasoning was essential to the identification of the existence of the content of express and implied terms (at [85]). The express or implied terms of a contract arose from the communication between the parties, understood in context by drawing inferences to identify the implied content of communication (at [102]). Their Honours further stated that the proper approach to recognising implied terms was to identify (at [102] and [110]):

1. the express terms of a contract – which in the present case was identifying the express terms in REMA’s contracts with the real estate agencies; and

2. implied terms – which in the present case was identifying an implied licence term in REMA’s contracts with the real estate agencies.

Their Honours held that having regard to the circumstances of the case, a reasonable person in the position of the parties would have known that one of the main purposes of REMA providing the photographs and floor plans to the agencies was to enable the agencies to provide them to REA, and that they had to accept a term requiring them to provide a licence to REA to use the photographs ‘indefinitely’ and to provide them to RP Data (at [133]).

Therefore, the obvious implied term in the contracts between Mr Hardingham, REMA and the agencies was that the agencies have a licence to use the photographs on standard terms and conditions of the contracts between the agencies and REA which was necessary for business efficacy (at [134]). BN