Building Corporation WA Pty Ltd v Marshall [No 2]

[2022] WASC 140

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION:   BUILDING CORPORATION WA PTY LTD -v- MARSHALL [No 2] [2022] WASC 140

CORAM:   TOTTLE J

HEARD:   13-14 DECEMBER 2021

DELIVERED          :   27 APRIL 2022

FILE NO/S:   CIV 2186 of 2020

BETWEEN:   BUILDING CORPORATION WA PTY LTD

Plaintiff

AND

ARTHUR PATRICK MARSHALL

JEANETTE ELLEN MARSHALL

First Defendants

MARK FREDERICK RIETVELD

Second Defendant

RIETVELD ARCHITECTS PTY LTD

Third Defendant

MERCEDES GROUP PTY LTD

Fourth Defendant

ILIADIS & ASSOCIATES PTY LTD

Third Party

Catchwords:

Contract - Interpretation - Section 36(1) of the Copyright Act 1968 (Cth) - Whether the agreement for the production of a Design Concept Plan contained a non-exclusive licence implied as a matter of law or fact to use the Design Concept Plan to construct a home substantially in accordance with the Design Concept Plan - Turns on own facts

Legislation:

Building Services (Registration) Act 2011 (WA)
Copyright Act 1968 (Cth), s 10(1), s 32(1), s 35(6), s 36(1)

Result:

Preliminary questions answered in plaintiff's favour

Category:    B

Representation:

Counsel:

Plaintiff	:	Mr M C Hotchkin
First Defendants	:	Mr W C J Zappia & Ms A Rumble
Second Defendant	:	No appearance
Third Defendant	:	No appearance
Fourth Defendant	:	No appearance
Third Party	:	No appearance

Solicitors:

Plaintiff	:	Hotchkin Hanly
First Defendants	:	Bennett + Co
Second Defendant	:	DLA Piper Australia - Perth
Third Defendant	:	DLA Piper Australia - Perth
Fourth Defendant	:	Jackson McDonald
Third Party	:	Barry Nilsson Lawyers

Case(s) referred to in decision(s):

Beck v Montana Constructions Pty Ltd (1963) 5 FLR 298

Black Box Control Pty Ltd v Terravision Pty Ltd [2016] WASCA 219

Blair v Osborne & Tomkins [1971] 2 QB 78

BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266

Building Corporation WA Pty Ltd v Marshall [2021] WASC 242

Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410

Codelfa Constructions Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337

Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd [2006] HCA 55; (2006) 229 CLR 577

Gold Peg International Pty Ltd v Kovan Engineering (Aust) Pty Ltd [2005] FCA 1521; (2005) 225 ALR 57

Hardingham v RP Data Pty Ltd [2019] FCA 2075

Hawkins v Clayton [1988] HCA 15; (1988) 164 CLR 539

Hospital Products Ltd v United States Surgical Corp [1984] HCA 64; (1984) 156 CLR 41

JKC Australia LNG Pty Ltd v CH2M Hill Companies Ltd [No 2] [2020] WASCA 112

Khoury v Government Insurance Office of NSW [1984] HCA 55; (1984) 165 CLR 622

Pilbara Iron Ore Pty Ltd v Ammon [2020] WASCA 92

Robin Ray v Classic FM Plc (1998) 41 IPR 235

Servcorp WA Pty Ltd v Perron Investments Pty Ltd [2016] WASCA 79; (2016) 50 WAR 226

Sino Iron Pty Ltd v Mineralogy Pty Ltd [2019] WASCA 80

Stovin‑Bradford v Volpoint Properties Ltd [1971] 3 All ER 570

The Movie Network Channels Pty Ltd v Optus Vision Pty Ltd [2010] NSWCA 111

Torpey Vander Have Pty Ltd v Mass Constructions Pty Ltd [2002] NSWCA 263

Zhu v Treasurer of the State of New South Wales [2004] HCA 56; (2004) 218 CLR 530

TOTTLE J:

Introduction

1. The plaintiff builds luxury homes.  It claims the first defendants have infringed its copyright in design concept plans and related drawings (collectively the Design Concept Plan) prepared in respect of a home to be built on the first defendants' property in Perth (the Property).  The Design Concept Plan was prepared pursuant to the terms of an agreement between the plaintiff and the first defendants (the Contour and Conceptual Design Agreement).

2. The plaintiff claims the Design Concept Plan is an artistic work and it owns the copyright in it.[1] One of the defences raised by the first defendants is that, if there is copyright in the Design Concept Plan and the copyright is owned by the plaintiff, the Contour and Conceptual Design Agreement contained an implied non‑exclusive licence to use the Design Concept Plan for the purpose of building a home substantially in accordance with it which, by reason of the operation of s 36(1) of the Copyright Act 1968 (Cth), negates the possibility of any infringement.

   [1] Copyright Act 1968 (Cth), s 10(1), s 32(1) and s 35(6).

3. I ordered that the existence of the implied licence alleged by the first defendants be tried as a preliminary issue.  For that purpose it was agreed that the court should assume that the plans constituting the Design Concept Plan are original artistic works and the plaintiff is the owner of the copyright in them.  The preliminary issue was formulated as follows:

   (a)Is the Contour and Conceptual Design Agreement within a class of contracts into which a term is to be implied as a matter of law so that the first defendants are to be permitted to:

   (i)construct a building on the Property in accordance with any designs prepared pursuant to the Contour and Conceptual Design Agreement; and

   (ii)employ a builder or another architect to enable them to make copies of or otherwise reproduce any substantial part of any designs prepared pursuant to the Contour and Conceptual Design Agreement and use them for constructing a residence on the Property.

   (b)Alternatively, is a term as specified in (a) to be implied as a matter of fact?

   (c)If either (a) or (b) is answered in the affirmative:

   (i)what is the scope of the permission granted by the term?

   (ii)does the existence of such a term provide a complete defence to the infringement claims pleaded against the first defendants at pars 35, 37 ‑ 41 of the statement of claim?

4. The parties executed a document entitled 'Contour and Conceptual Design Agreement' and until trial it was common ground that the terms of the parties' agreement were recorded in that document.  At trial the plaintiff was given leave to further amend the statement of claim to plead that the agreement included an oral term expressly limiting the use to which the Design Concept Plan could be put.  As I explain later in these reasons, I have concluded there was no such oral term.

The facts

1. The following facts are derived from those agreed for the purposes of determining the preliminary issue or are otherwise not controversial.

2. The plaintiff trades under the business name 'Giorgi Architects & Builders'.  It is a building service contractor registered under the Building Services (Registration) Act 2011 (WA) and carries on business as a luxury residential home builder.

3. The first defendants are the registered proprietors of the Property.

4. In 2014, Ms Lisa Ford was employed by the plaintiff as a sales consultant.

5. The first defendants' daughter, Ms Colleen Hurst, acted as the first defendants' disclosed agent in their dealings with the plaintiff.

6. In early 2014, Ms Hurst contacted the plaintiff on behalf of the first defendants to see whether the plaintiff would be able to assist them with the design and construction of a new luxury home on the Property.

7. On or about 8 April 2014, Ms Hurst signed a pre‑printed Contour Survey and Conceptual Design Agreement as the first defendants' attorney.  The document was signed on the plaintiff's behalf.  The signed document has been lost.  The pre‑printed format was as follows:

8. The sum specified as the amount the first defendants agreed to pay the plaintiff was $5,000.

9. One of the documents used by the plaintiff for the purpose of its business was a document entitled 'GIORGI EXCLUSIVE HOMES - Outline of Process' the contents of which were as follows:

   GIORGI EXCLUSIVE - Outline of Process

   1.Design Agreement

   -Fee – $5,000 credited against the building contract but not refunded if the client decides not to proceed

   -Contour Survey of the site (to remain the property of the Client in the event of failing to proceed with the design/build with Giorgi Exclusive)

   -Site Inspection

   -Design Brief

   -Design Concept Plan (including all changes)

   -3D image (externally)

   -Full Specification

   -Fixed price proposal

   -Copyright of the plans remain the property of Giorgi Exclusive

   2.Preliminary Agreement

   -Fee – 3% of the Fixed price proposal credited against the building contract but not refunded if the client decides not to proceed

   -Induction Meeting

   -Preparation of full working drawings

   -Submit plans for planning approval (development application).  This may involve amendments to the design required by the Local Authority to gain planning approval.

   -Preparation of Engineer's drawings

   -Meetings with the qualified Cabinet Interior Designer and Interior Designers

   -Introduction to Contract Administrator

   -Meetings with consultants for air conditioning, lighting, audio visual, security, smart wiring, automation

   -Full specification and revised costing based on the client's selections

   -Energy Assessment

   -Any additional work required prior to signing a contract to build

   -Submit approved plans for building permit

   -Payment of necessary insurances and fees to obtain a building permit

   -Ownership of the copyright in all plans and other documents prepared by Giorgi Exclusive under this agreement shall remain with the builder

   3.Contract Signing

   -HIA Lump Sum Building Contract

   -Contract Plans – Full Working Drawings

   -Addenda (revised specification based on the client's selections)

   -Full Letter of Quote based on the revised Costing Summary

   -Fee – 10% of Contract Price less previous payments

10. On 1 September 2014, Ms Ford sent the 'Outline of Process' to Ms Hurst under cover of an email in which she said:

    Hi Colleen

    Hopefully you received the plans I left on Saturday.  Have you had a chance to speak with your parents again?

    As we discussed last week, you are happy to proceed with the costing with no specific budget to limit the design.  The only external change to make at the moment is to the stairs to the northern riverside of the home.  The internal changes can be addressed in the next stage when the selections are made.

    I have attached a brief outline of the process to confirm what will happen from here.

    You mentioned you are away for 3 weeks from mid September.  Could you please confirm the dates?  Also, the return date for your parents.

    Kind regards

    Lisa

11. Between May and October 2014, the plaintiff provided Ms Hurst with concept plans, elevations and three‑dimensional images of a house to be constructed on the Property.  These are the plans that constitute the Design Concept Plan.

The evidence - an overview

1. The plaintiff called three witnesses, Ms Ford, Mr Claudio Giorgi, who is the plaintiff's managing director and the founder of the business, and Mr Craig Smith, a registered architect.

2. Ms Ford was called to establish that the Contour and Conceptual Design Agreement included the oral term limiting the use by the first defendants of the Design Concept Plan.  Ms Ford left the plaintiff's employment in 2015 and now lives in Queensland.  Although Ms Ford provided the plaintiff's solicitors with a brief affidavit shortly before the trial, it was apparent that she was a reluctant witness and that the plaintiff's solicitors had not been able to take a detailed proof of evidence from her.  Ms Ford gave her evidence by video link from Queensland.

3. Counsel for the first defendants described Ms Ford as a witness of truth.[2]  I agree with that assessment.

   [2] ts 187.

4. Mr Giorgi's evidence was directed to establishing the plaintiff's business model and its processes.[3]  The plaintiff contended this was relevant and admissible evidence supporting the conclusion that the purpose of the agreement was not limited to the provision of plans.[4]  The first defendants objected to much of Mr Giorgi's evidence.

   [3] Mr Giorgi's evidence‑in‑chief was constituted by his witness statement exhibit P1 supplemented by limited oral evidence.

   [4] Plaintiff's submissions for trial of preliminary issues filed 7 December 2021 [8].

5. Mr Smith was called to give opinion evidence about the contractual arrangements he would have used in his capacity as a registered architect for the provision of architectural plans of the nature provided by the plaintiff to the first defendants and for the payment of his fees.[5]  The first defendants objected to Mr Smith's evidence.

   [5] Mr Smith's evidence was contained in a report - exhibit P3.

6. A bundle of documents was accepted into evidence.[6]  The critical document was the Contour and Conceptual Design Agreement.[7]

   [6] The trial bundle broadly was exhibit P2.

   [7] Exhibit P2.1.

Relevant legal principles

Construction of contracts - general principles

1. My approach to the construction of the Contour and Conceptual Design Agreement is guided by the principles of contractual construction summarised by the Court of Appeal in Black Box Control Pty Ltd v Terravision Pty Ltd,[8] and outlined in the joint judgment of Buss P and Vaughan JA in JKC Australia LNG Pty Ltd v CH2M Hill Companies Ltd [No 2],[9] with which Beech JA agreed.

   [8] Black Box Control Pty Ltd v Terravision Pty Ltd [2016] WASCA 219.

   [9] JKC Australia LNG Pty Ltd v CH2M Hill Companies Ltd [No 2] [2020] WASCA 112 [67] ‑ [72] (Buss P & Vaughan JA), [244] (Beech JA).

2. It is necessary to deal a contention raised by the plaintiff that, in determining the commercial purpose of a contract, evidence is admissible of matters known only to one party to the contract.[10]

   [10] ts 142.8.

3. I do not accept this contention.  It is inconsistent with the general proposition that it is only evidence of objective facts known to both parties at the time of the contract or that are sufficiently notorious and relevant to the genesis of the contract, commercial objective and the market in which the contract operates, which may be used by the court.[11]

   [11] Christensen SA and Duncan WD, The Construction and Performance of Commercial Contracts (2^nd ed, 2018) [2.3.5].

4. This general proposition can be traced back (at least as far as) the statements of Mason J in Codelfa Constructions Pty Ltd v State Rail Authority of NSW,[12] in particular, to the passages in his Honour's judgment that followed the identification of 'the true rule':[13]

   Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.

   It is here that a difficulty arises with respect to the evidence of prior negotiations.  Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract.  To the extent to which they have this tendency they are admissible.

   …

   Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting.  We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract.  (emphasis added)

   [12] Codelfa Constructions Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337.

   [13] Codelfa Constructions Pty Ltd v State Rail Authority of NSW (352).

5. Further, as was argued by the first defendants, the plaintiff's contention is contradicted by the statement of principle contained in the joint judgment of five members of the High Court in Zhu v Treasurer of the State of New South Wales,[14] concerning the construction of a contract constituted by a deed poll that:[15]

   It was necessary to construe the Deed Poll so as to avoid it making commercial nonsense or working commercial inconvenience.  Its commercial purpose —  the purpose of reasonable persons in the position of TOC and the plaintiff — was relevant.  That, in turn, required attention to 'the genesis of the transaction, the background, the context, the market' in which the parties were operating, as known to both parties.  (footnotes omitted and emphasis added)

   [14] Zhu v Treasurer of the State of New South Wales [2004] HCA 56; (2004) 218 CLR 530 (Gleeson CJ, Gummow, Kirby, Callinan & Heydon JJ).

   [15] Zhu v Treasurer of the State of New South Wales [82] citing the judgment of Mason J in Codelfa Constructions Pty Ltd v State Rail Authority of NSW (351).

6. The final point to be made is that it has been established that the surrounding circumstances must have been within the actual common knowledge of the contracting parties, not their constructive knowledge.[16]

Implication of licences as a matter of law

[16] TheMovie Network Channels Pty Ltd v Optus Vision Pty Ltd [2010] NSWCA 111 [106] (MacFarlan JA), [131] (Young JA), [153] (Sackville AJA).

1. In the reasons for my decision to order a trial of the preliminary issue I summarised the principles that were relevant to the implication of a licence to use an artistic work protected by copyright.[17]  The following paragraphs substantially repeat that summary.

   [17] Building Corporation WA Pty Ltd v Marshall [2021] WASC 242 [29] ‑ [35].

2. A helpful overview of the principles was provided by Thawley J in Hardingham v RP Data Pty Limited.[18]  For present purposes it is sufficient to refer to the four principles identified by his Honour without reference to the citation of supporting authorities.  Those principles are:

   (a)Ordinary contractual principles as to the implication of terms apply.  A licence might, for example, be implied by law as a legal incident of a particular class of contract or it might be implied because it is necessary in the particular circumstances of the case to give business efficacy to the contract.

   (b)A licence of copyright will be implied only to the extent that it is necessary.

   (c)The implication is to be drawn from all of the relevant circumstances existing at the time of the agreement, including, objectively, what the parties then contemplated.  The 'purpose' for which the 'material' was to be used is determined objectively by reference to the parties' words and conduct and the circumstances in which the agreement was reached.

   (d)The onus of establishing infringement lies on the copyright owner with the result that the copyright owner bears the onus of establishing the absence of an express or implied licence.  That onus is to be discharged on the whole of the evidence.  Where a respondent in its defence to a claim of infringement raises a positive assertion that an implied licence of a certain scope exists, it is for the respondent to make good the evidentiary foundation for their defence, including the factual matrix necessary to establish the existence and scope of the licence on which they rely.

   [18] Hardingham v RP Data Pty Ltd [2019] FCA 2075 [44], [47] ‑ [50].

3. The judgment of Jacobs J in Beck v Montana Constructions Pty Ltd[19] is the seminal decision.  An architect had been commissioned to prepare sketch plans for a block of units for a client.  The architect's fees were charged in accordance with the scale then published by the Royal Australian Institute of Architects.  The architect's client later sold the land and gave the architect's plans to the purchaser, who decided to build in accordance with the plans, but not retain the architect in order to do so.  Justice Jacobs held the payment for sketch plans includes a permission or consent to use those sketch plans for the purpose for which they were brought into existence, namely, for the purpose of erecting a building in substantial accordance with them and for the purpose of preparing any necessary construction drawings.[20]  In a passage cited with approval on many occasions, Jacobs J expressed the underlying principle as follows:[21]

   [T]he engagement for reward of a person to produce material of a nature which is capable of being the subject of copyright implies a permission or consent or licence in the person making the engagement to use the material in the manner and for the purpose in which and for which it was contemplated between the parties that it would be used at the time of the engagement.  It seems to me that this must be regarded as a principle of general application.

   …

   I think it is a principle which can be found to be applied in a number of cases.  It relates to permission or consent to what must have been taken to have been within the contemplation of the parties at the times of the engagement.  After all, it must be borne in mind that it is the engagement which brings the copyright material into existence.

   When that principle is applied in the present case it seems to me to be inevitable that one should conclude that the payment for sketch plans includes a permission or consent to use those sketch plans for the purpose for which they were brought into existence, namely, for the purpose of building a building in substantial accordance with them and for the purpose of preparing any necessary drawings as part of the task of building the building.  (citations omitted and emphasis added)

   [19] Beck v Montana Constructions Pty Ltd (1963) 5 FLR 298.

   [20] Beck v Montana Constructions Pty Ltd (305).

   [21] Beck v Montana Constructions Pty Ltd (304 ‑ 305).

1. In Blair v Osborne & Tomkins,[22] an architect entered into an agreement with two clients to prepare detailed plans for the purpose of obtaining planning permission to build a pair of houses on a site consisting of the end of the clients' gardens.  The engagement was covered by conditions of engagement and scale of fees published by the Royal Institute of British Architects (RIBA) which provided, among other matters, that an engagement entered into between the architect and client might be determined at any time by either party on reasonable notice being given.  The scale of fees was tied to progressive stages of the total work.  The architect charged the full fee allowed under the scale.  Lord Denning MR (with whom Widgery and Megaw LJJ agreed) cited the principle identified by Jacobs J in Beck v Montana Constructions Pty with approval.[23]  In an earlier passage of the judgment his Lordship expressed this view:[24]

   [W]hen the owner of a building plot employs an architect to prepare plans for a house on that site, the architect impliedly promises that, in return for his fee, he will give a licence to the owner to use the plans for the building on that site.  The copyright remains in the architect, so that he can stop anyone else copying his plans, or making a house from them; but he cannot stop the owner, who employed him, from doing work on that very site in accordance with the plans.  If the owner employs a builder or another architect, the implied licence extends so as to enable them to make copies of the plans and to use them for that very building on that site: but for no other purpose.  If the owner should sell the site, the implied licence extends so as to avail the purchaser also.

   [22] Blair v Osborne & Tomkins [1971] 2 QB 78.

   [23] Blair v Osborne & Tomkins (85).

   [24] Blair v Osborne & Tomkins (85).

2. Stovin-Bradford v Volpoint Properties Ltd,[25] was another architect case, but one in which there was no implied licence found.  The plaintiff architect had agreed orally with the defendants, owners of a dilapidated factory, that in consideration of an agreed nominal fee (approximately 10% of the fee that would have been charged if the RIBA scale of fees had been applied) he would prepare drawings for the purpose of obtaining planning permission for extending and rebuilding the factory.  The architect prepared plans that incorporated a distinctive design feature.  The plaintiff rendered an invoice for his fee on which he endorsed the words '[t]he copyright of the design remains with the architect, and may not be reproduced without his prior written consent'.  Planning permission was obtained.  The plaintiff withdrew from the project.  The defendants rebuilt the factory and incorporated the distinctive feature designed by the plaintiff.  The plaintiff claimed damages for infringement of copyright.  In holding there was no implied licence in favour of the client, Lord Denning referred to the decisions in Beck v Montana Constructions Pty and Blair v Osborne and summarised the law as follows:[26]

   When an architect prepares plans at the request of a client, the copyright remains in the architect.  The client cannot reproduce those plans or any substantial part of them, either in the form of another plan or in the form of the building itself, unless he has the licence of the architect, express or implied.  There is nothing in the RIBA conditions which gives him an express licence.  But when the architect charges the full scale fee for the work so far done, that fee in the ordinary way must be taken to include permission to use the plans for the building of that very house.  That I think follows from the very structure of the RIBA conditions.  The conditions show that when the architect does the whole work right through to completion, the full fee is 6 per cent of the total cost of the building.  That fee is less at the various earlier stages as follows.  The first stage is for the architect to prepare a preliminary design sufficient to append to an application for outline planning permission.  The scale charge up to this stage is one-sixth of the full fee.  The second stage is for the architect to prepare a final design sufficient to append to an application for detailed planning permission and for approval under the building regulations.  The scale charge up to this stage is one-third of the full fee.  The third stage is for the architect to prepare working drawings and a specification sufficient to put before contractors to enable them to tender a price.  The scale charge up to this stage is two-thirds of the full fee.  The final stage is to obtain tenders and advise on them, to arrange for the contract, to supervise the work, to issue certificates, and to administer the work until the work is completed.  The remaining one-third of the full fee is then payable.

   Such are the scale fees for new buildings.  If work is done on existing buildings, as in the present case, the scale charge may be increased.  The RIBA conditions make it clear that either party, architect or client, can withdraw at any time on reasonable notice.

   It seems to me that the scale charges for partial services are so fixed that they contain a 'built-in' compensation for the use of the designs and drawings right through till the completion of the work.  Take, for instance, a new building which is estimated to cost £100,000.  The full fee is 6 per cent of the cost, ie £6,000.  In return for that fee the architect has not only to prepare the plans.  He has much to do in the construction of the building.  He has to supervise the work and issue certificates right through to the end.  Suppose now that the architect withdraws after preparing the working drawings and specification, but before tenders are invited.  The scale charge up to that stage is two-thirds of the full fee of £6,000, ie £4,000.  I cannot believe that, after getting £4,000, the architect can say to the client: 'I withdraw from the work and you are not to use my plans or drawings at all.  I will get an injunction to stop you.'  Can it really be supposed that the client is to go off to another architect, and get him to work out another set of plans and drawings all over again, and pay him another £4,000 for the self‑same building?  Surely not.  The client is entitled to say: 'I have paid you £4,000 for the plans and drawings.  That must include the right to use them for the construction of the buildings.'  I have taken an illustration where the architect withdraws from the engagement; but it must be the same if the client does so.  Each is equally entitled.  I have taken it at the third stage, but it must be the same at the second and third stages.  The scale fee at each stage is based on a percentage of the total cost.  It includes a licence to use the designs or plans for the purpose of the building.

   [25] Stovin‑Bradford v Volpoint Properties Ltd [1971] 3 All ER 570.

   [26] Stovin‑Bradford v Volpoint Properties Ltd (574 ‑ 575).

3. Ultimately Lord Denning held that a licence was not to be implied because the architect had charged only a nominal fee and it could not have been the intention of the parties for the client to be licensed to use the plans without paying anything for them.[27]

   [27] Stovin‑Bradford v Volpoint Properties Ltd (575).

4. In his judgment Salmond LJ stated the issue in Stovin‑Bradford v Volpoint Properties Ltd as follows:[28]

   This appeal raises a short point: what terms should be implied into this contract?  It is trite law that it is permissible to imply a term into a contract only if such a term is necessary to give the contract ordinary business efficacy.  It is plain that some term must be implied into this contract for that purpose.  Since the architect admittedly owned the copyright in his drawings, it was necessarily an implied term of the contract that the architect licensed the owners to make use of the drawings for the purpose of obtaining planning permission; otherwise the whole purpose of the contract would have been stultified.  The learned judge in a very clear and careful judgment came to the conclusion that it was unnecessary to imply any other term into the contract in order to give it business efficacy.  I entirely agree with him.

   Relying on Blair v Alan S Tomkins and Frank Osborne (trading as Osborne and Tomkins (a firm)), which was decided more than three months after the learned judge had delivered judgment in the present case, counsel for the owners contends that, by implication the contract conferred on the owners a much wider licence.  He contends that Blair v Osborne and Tomkins lays down the general proposition of law that whenever an architect is engaged to prepare drawings for the purpose of obtaining planning permission the owners by necessary implication have a licence conferred on them to use the drawings not only for that purpose, but for any purpose they please, and, in particular, for the purpose of subsequently erecting the building should planning permission be granted.  In my judgment, Blair v Osborne and Tomkins is not an authority for any such proposition.  It may be that some of the passages cited from that case could be read as supporting counsel's contention.  If they do, then in my respectful view, they go further than was necessary for the decision.

   For my part, I do not think that much, if any help can be derived from the clause in the RIBA conditions of engagement which provides that an engagement between the architect and his client may be terminated at any time by either party on reasonable notice.  In the present case the contract, which was only to provide drawings for planning permission purposes, had expired before the dispute arose.  If the architect had been engaged for the whole project, there would have clearly been an implied licence to use his drawings for erecting the building.  If the engagement had been terminated by either party before the building had been completed the licence would almost certainly still have operated; but the reasonable fee to be paid for the services rendered prior to the termination, if not laid down by the scale, would have had to be decided by the courts or an arbitrator in the absence of agreement between the parties.

   Whether any term is to be implied in a contract for the purpose of giving it ordinary business efficacy, and, if so, what term, must in each case depend on the contents of the contract itself and the particular circumstances surrounding it.  It is, in my view, impossible to lay down any more specific proposition of general application in this field, because there are rarely two cases exactly alike.  (footnotes omitted and emphasis added)

   [28] Stovin‑Bradford v Volpoint Properties Ltd (576 ‑ 577).

5. In Gold Peg International Pty Ltd v Kovan Engineering (Aust) Pty Ltd,[29] Crennan J cited with approval a passage from the judgment of Lightman J in Robin Ray v Classic FM Plc,[30] in which his Lordship set out the general principles governing the respective rights of contractor and client in the copyright in a work commissioned by the client.  His Lordship addressed the circumstance where it might be necessary to imply some grant of rights in respect of a copyright work by either the grant of a licence or assignment of copyright and said that if necessity required only the grant of a licence:[31]

   (8)[T]he ambit of the licence must be the minimum which is required to secure to the client the entitlement which the parties to the contract must have intended to confer upon him.  The amount of the purchase price which the client under the contract has obliged himself to pay, may be relevant to the ambit of the licence.  Thus in Stovin-Bradford v Volpoint Properties Ltd [1971] 1 Ch 1007, where the client agreed to pay only a nominal fee to his architect for the preparation of plans, he was held to have a licence to use the plans for no purpose beyond the anticipated application for planning permission. By contrast in Blair v Osborne & Tompkins [1971] 21 QB 78, where the client was charged the full RIBA scale fee, his licence was held to extend to using the plans for the building itself. Guidance as to the approach to be adopted is provided in a passage in the judgment of Jacobs J in Beck v Montana Constructions Pty[1964‑5] NSWR 229 at 235 cited with approval by Widgery LJ in Blair v Obsorne & Tompkins, above, at 87:

   '… it seems to me that the principle involved is this; that the engagement for reward of a person to produce material of a nature which is capable of being the subject of copyright implies a permission, or consent, or licence in the person giving the engagement to use the material in the manner and for the purpose in which and for which it was contemplated between the parties that it would be used at the time of the engagement.'

   (9)the licence accordingly is to be limited to what is in the joint contemplation of the parties at the date of the contract, and does not extend to enable the client to take advantage of as new unexpected profitable opportunity:  consider Meikle v Maufe [1941] 3 All ER 144.

   [29] Gold Peg International Pty Ltd v Kovan Engineering (Aust) Pty Ltd [2005] FCA 1521; (2005) 225 ALR 57.

   [30] Robin Ray v Classic FM Plc (1998) 41 IPR 235, 247 ‑ 249.

   [31] Gold Peg International Pty Ltd v Kovan Engineering (Aust) Pty Ltd [83].

6. In Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd,[32] Kirby and Crennan JJ (with whose reasons Gummow ACJ relevantly agreed) cited Beck v Montana Constructions Pty and Blair v Osborne with approval, and stated the principles as follows:[33]

   The principles established by a series of cases concerning implied licences to use architectural drawings and plans were not in contest.  Problems have frequently arisen in circumstances where the commissioner of architectural drawings and plans, a property owner (or a successor in title), wishes to assert an implied licence to use them in the absence of any express permission to do so.  A non-exclusive licence to use architectural plans and drawings may be oral or implied by conduct, or may be implied, by law, to a particular class of contracts, reflecting a concern that otherwise rights conferred under such contracts may be undermined, or may be implied, more narrowly, as necessary to give business efficacy to a specific agreement between the parties.  A term which might ordinarily be implied, by law, to a particular class of contracts may be excluded by express provision or if it is inconsistent with the terms of the contract.  In some instances more than one of the bases for implication may apply.  (emphasis added)

   [32] Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd [2006] HCA 55; (2006) 229 CLR 577.

   [33] Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd [59].

7. Justices Kirby and Crennan referred to Lord Denning's approval of Beck in Blair v Osborne and, citing Stovin-Bradford v Volpoint Properties Ltd as authority, added that an implied licence to use an architect's plans for building on the site for which the plans were prepared might not arise if the architect has charged a nominal fee only to prepare drawings for the limited purpose of obtaining a planning permission.[34]

   [34] Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd [72] ‑ [73].

8. In Torpey Vander Have Pty Ltd v Mass Constructions Pty Ltd,[35] Spiegelman CJ explained the nature of terms implied by law by reference to the observations of McHugh and Gummow JJ in Byrne v Australian Airlines Ltd,[36] as follows:

   [35] Torpey Vander Have Pty Ltd v Mass Constructions Pty Ltd [2002] NSWCA 263 [16] ‑ [17].

   [36] Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410, 449.

   It is convenient to refer to terms which are generally implied in all contracts of a particular kind as terms implied by law, although nothing turns on that particular characterisation.  As McHugh and Gummow JJ said in Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 449; 131 ALR 422 at 449:

   However, the more modern and better view is that these rules of construction are not rules of law so much as terms implied, in the sense of attributed to the contractual intent of the parties, unless the contrary appears on a proper construction of their bargain.  There is force in the suggestion that what now would be classified as terms implied by law in particular classes of case had their origin as implications based on the intention of the parties, but thereafter became so much a part of the common understanding as to be imported into all transactions of the particular description.  [Footnote omitted]

   Their Honours went on to observe at CLR 450; ALR 450:

   Many of the terms now said to be implied by law in various categories of case reflect the concern of the courts that, unless such a term be implied, the enjoyment of the rights conferred by the contract would or could be rendered nugatory, worthless, or, perhaps, be seriously undermined.  Hence, the reference in the decisions to 'necessity'.  [Footnote omitted]

Implication of licences as a matter of fact

1. The criteria for the implication of terms as a matter of fact were summarised by the Court of Appeal in Pilbara Iron Ore Pty Ltd v Ammon[37] as follows:[38]

   [37] Pilbara Iron Ore Pty Ltd v Ammon [2020] WASCA 92.

   [38] Pilbara Iron Ore Pty Ltd v Ammon [91] ‑ [92] (Buss P, Murphy & Vaughan JJA).

   The cumulative (but related) criteria for the implication of terms in fact (to give business efficacy to the contract) in a wholly written contract such as the JVA were set out by the Privy Council in BP Refinery.[39]  The implied term must be:

   1.Reasonable and equitable.

   2.Necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it.

   3.So obvious that it 'goes without saying'.

   4.Capable of clear expression.

   5.Consistent with, and not contradict, any express term of the contract.

   On the other hand, the BP Refinery criteria are not rigidly applied in informal contracts, ie, where the parties have never attempted to reduce their contract to complete written form.[40]  It has been said that, in relation to informal contracts, the true question is whether the implication of the particular term is necessary for the reasonable or effective operation of the contract in the circumstances of the case.[41]

   [39] BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266, 283; see also Codelfa Construction Pty Ltd v State Rail Authority (NSW) (347); Khoury v Government Insurance Office of NSW [1984] HCA 55; (1984) 165 CLR 622, 636; ServcorpWA Pty Ltd v Perron Investments Pty Ltd [2016] WASCA 79; (2016) 50 WAR 226[72]; Sino IronPty Ltd v Mineralogy Pty Ltd [2019] WASCA 80 [254].

   [40] Hospital Products Ltd v United States Surgical Corp [1984] HCA 64; (1984) 156 CLR 41, 121; Hawkins v Clayton [1988] HCA 15; (1988) 164 CLR 539, 572 ‑ 573; Byrne v Australian Airlines Ltd (422), (441 ‑ 442).

   [41] Byrne v Australian Airlines Ltd (422), (442); Hawkins v Clayton (573).

An overview of the opposing arguments

1. The plaintiff's primary contentions were to the following effect:

   (a)The Contour and Conceptual Design Agreement is not to be characterised as an agreement for the provision of architectural plans.  Rather it was an integral element of a proposed building contract between a builder and a proposed homeowner for the design and construction of a home, created for the purpose only of negotiating a building contract - that was its purpose.

   (b)If the purpose of the Contour and Conceptual Design Agreement had been the preparation of architectural plans it was a 'commercial mystery' why the single page document was used rather than a 'normal architect's fee agreement'.

   (c)Mr Smith's evidence established what an architect would normally charge for the provision of architectural plans.

   (d)Mr Giorgi's evidence demonstrated that the cost of preparing the Design Concept Plan exceeded the $5,000 fee charged for it and thus the purpose of the Contour and Conceptual Design Agreement could not reasonably have been for the provision of plans alone.

   (e)The first defendants admit that the plaintiff's business is that of 'luxury residential home builder' and that they approached the plaintiff, through Ms Hurst, to assist them with the design and construction of a new luxury home and not simply the design of a home.

   (f)The express terms of the Contour and Conceptual Design Agreement demonstrated the connection between the plans and the construction of a home, that is, demonstrated that the purpose of the agreement was not limited to the preparation of architectural plans.

   (g)The inclusion in the Contour and Conceptual Design Agreement of the statement that 'COPYRIGHT OF DESIGNS WILL REMAIN THE PROPERTY' of the plaintiff was inconsistent with the grant of a licence to use the designs.

   (h)If, contrary to the plaintiff's primary position, a licence to use the Design Concept Plan is to be implied as a matter of law, the licence was limited to making copies of the plans and to use them for constructing that 'very building' on the property.

   (i)In answer to the first defendants' case that a term conferring a licence on them to use the Design Concept Plan should be implied as a matter of fact, the plaintiff says that the term was neither reasonable nor equitable given the fee charged did not cover the cost of preparing the plans and that cost was to be recovered as part of the building contract price.  Further, the term was not necessary to give business efficacy to the Contour and Conceptual Design Agreement having regard to what the plaintiff contended was its purpose.

1. The first defendants' primary contentions were as follows:

   (a)The conditions for the implication of a licence identified by Jacobs J in Beck are satisfied by the facts of this case.

   (b)The purpose of the Contour and Conceptual Design Agreement is a critical factor in determining whether a term should be implied as a matter of law or fact.  The purpose was 'to assist the [first defendants] with the design and construction of a luxury home on the Property'.[42]

   (c)The first defendants contended '[t]he manifest objective intention of the parties [was] that the decision as to whether to further engage Giorgi [to build the home] would be made by [them], in their discretion, upon receipt of the "full specification and fixed priced proposal".  The absence of an implied licence would render illusory that manifest objective intention'.[43]

   (d)The statement in the Contour and Conceptual Design Agreement that copyright would remain with the plaintiff was not inconsistent with the grant of a licence - the first defendants do not contend that there was an assignment of copyright.

   (e)The fee of $5,000 was the commercial price agreed between the parties contracting at arms‑length.  There is no objective standard against which it can be assessed as being nominal.  Further, even if the fee was considered nominal, that would not be sufficient to negate the existence of a licence.  Work performed for a nominal fee will still give rise to an implied licence to use the work for the purpose for which it was procured.

   [42] First defendants' submissions for trial of preliminary issues filed 2 December 2021 [55].

   [43] First defendants' submissions for trial of preliminary issues filed 2 December 2021 [68].

Analysis and disposition

No oral term

The plaintiff's pleaded case

1. The plaintiff pleaded the agreement with the first defendants as follows:[44]

   [44] Plaintiff's statement of claim filed 1 December 2020.

   11.In or about 2014, the Marshalls, through their daughter, Colleen Hurst, acting as agent for the Marshalls, contacted Giorgi to see whether Giorgi would be able to assist the Marshalls with the design and construction with a new luxury home at the Property.

   Particulars

   Emails exchanged between Lisa Ford and Colleen Hurst dated:

   (a)1 April 2014;

   (b)3 April 2014;

   (c)16 April 2014;

   (d)17 April 2014; and

   (e)6 May 2014.

   Discussions between Lisa Ford and Colleen Hurst in early-2014 at which time Ms Ford discussed with Ms Hurst:

   (a)the staged nature of the design process leading from a concept design agreement to a preparation of plans agreement and then a building contract; and

   (b)that copyright in the plans remained with Giorgi and the plans could not be taken to another builder.

   12.On or about 8 April 2014, the Marshalls entered into a Conceptual Design Agreement with Giorgi for the design and construction of a luxury residential dwelling at the Property [Contour and Conceptual Design Agreement].

   Particulars

   The [Contour and Conceptual Design Agreement] was a partly written and partly oral Conceptual Design Agreement.  Insofar as the [Contour and Conceptual Design Agreement] was written it comprised a written [Contour and Conceptual Design Agreement] executed by the Marshalls and Giorgi on or about 8 April 2014 as may be inferred from an email exchange between Renay and Lisa Ford, both of Giorgi Homes dated 8 April 2014.  Insofar as the [Contour and Conceptual Design Agreement] was oral it comprised the discussions as particularised at paragraph 11(a) and (b) above.

   13.The [Contour and Conceptual Design Agreement] contained express terms that:

   (a)Giorgi would perform the following work:

   (i)       site inspection;

   (ii)      site survey;

   (iii)     design concept plan;

   (iv)     3D image; and

   (v)      full specification and fixed price proposal,

   (b)copyright of the designs would remain the property of Giorgi;

   (c)the Design fee would be credited against the building contract; and

   (d)the plans produced pursuant to the [Contour and Conceptual Design Agreement] could not be taken to and used by another builder.

2. In its reply the plaintiff denied that a licence could be implied into the Contour and Conceptual Design Agreement because:[45]

   [45] Plaintiff's amended reply to the substituted defence of the first defendants dated 20 August 2021 filed on 9 December 2021 [2].

   (c)the terms of the implied non-exclusive licence alleged by the First Defendants are inconsistent with the express terms of the [Contour and Conceptual Design Agreement];

   Particulars

   By the express terms of the [Contour and Conceptual Design Agreement]:

   (i)copyright in any designs remained the property of the Plaintiff;

   (ii)the fee paid pursuant to the [Contour and Conceptual Design Agreement] would be credited against the building contract price.

   (d)the design fee of $5,000 (incl. GST) paid by the First Defendants to the Plaintiff pursuant to the [Contour and Conceptual Design Agreement] on or about 2 April 2014 was a nominal fee and the amount charged by the Plaintiff did not reflect the actual price to prepare the Giorgi Design or the true value of the Giorgi Design;

   Particulars

   Expert Report of Mr Craig Smith dated 13 October 2021 paragraphs [1.11] ‑ [1.14].

   (e)entry into the [Contour and Conceptual Design Agreement] was the first part of a staged and co-operative process between the First Defendants and the Plaintiff where the parties would work together to:

   (i)agree a design, as pleaded at paragraph 16 of the Statement of Claim;

   (ii)agree a fixed price proposal to construct a residence on the Property, as pleaded at paragraph 23 of the Statement of Claim;

   (iii)proceed to enter into a preparation of plans agreement to allow working drawings to be prepared for the purposes of obtaining development approval and a building permit;

   (iv)enter into a fixed price construction contract for construction of a residence on the Property.

   Particulars

   Discussions between Lisa Ford and Colleen Hurst in early-2014 at which time Ms Ford discussed with Ms Hurst:

   (a)the staged nature of the design process leading from a concept design agreement to a preparation of plans agreement and then a building contract; and

   (b)that copyright in the plans remained with Giorgi and the plans could not be taken to another builder.

Ms Ford's evidence

1. Ms Ford had a general recollection of the way she discharged her duties as one of the plaintiff's sales consultants but had no recollection of the details of her dealings with Ms Hurst other than that she recalled that the budget for the home was $5 million because it was 'so significant'.[46]

   [46] ts 128.

2. In answer to questions intended to elicit evidence about her 'usual practice', Ms Ford emphasised that the plaintiff's clients were sophisticated.  Her evidence was to the effect that she dealt with each client in a manner that was 'bespoke'.  She said that clients did not come to the plaintiff for it to design a home but to build a home and the design was the first part of it.[47]

   [47] ts 123 ‑ 129.

3. Ms Ford's evidence-in-chief about discussions with prospective clients about copyright was as follows:[48]

   So the – so the topic that we're talking about is your usual practice when you're dealing with a client and the particular circumstances and what you tell them, if anything, when you produce the concept design agreement, either filled in by you or to be filled in.  Do you – is there any discussion about why you're doing that with them?---Again, I'm going on just how I would normally do my business, and, yes, absolutely.

   Yes? - - - You would never, ever just give a form - fling a form at someone and say, you know, "Fill this in, and we will do a concept design agreement."  I mean, as - you know, again, you're dealing with people that are going to be spending a lot of money.  You're going to spend time with them.  You're building trust with them.  You want to know [what] they're doing, and they want to know what you're doing.  So the conversations are very, very different, depending on the people and what they're wanting to do.

   Yes?---But there's definitely discussion about the form.  You know, it's a document.  It's a legal – well, I presume it's a legal document; therefore, they're signing a form.  They're not just going to sign the form without knowing or understanding, you hope – understanding what that means.

   And so if you had those discussions with someone, what would you say to them about that document in order for them to understand it?---My limited knowledge of what the word copyright means is that copyright belongs to someone.  And so if you have a form in front of you, and it says the copyright remains with the business, that's what it says, and, you know, a layman's understanding of that is the copyright belongs to the business at this stage in the process. 

   Right.  And was that part of any discussion that you had with people generally speaking?  Did you ever discuss copyright as part of that process?---It's part of the form.  So you definitely need to be going through it, yes.

   Okay.  And when you talked about copyright, did you say what they could or could not do with those plans? - - -  It - I don't remember the Marshalls and I don't remember other specific clients, but, you know, I think just myself not having any legal knowledge, but most people know what copyright means, and if it belongs to someone, that means you can't just go and do whatever you want to do with it. 

   …

   Was there anything else you discussed normally when you provided the form? - - -  With any client, I don't believe that there would have been an enormous amount of time, a – it's the one page document, and it doesn't have that much on it, and it's in all fairly clear terms that most people can understand.  I wouldn't think you need to be a lawyer to read it and I think, okay, I know what that means.  So you don't need to spend a lot of time on it.  People understand and accept - well, that's what I would think.  If they didn't want to sign it, I mean, they don't sign it and we don't do a concept design agreement and then we don't do a concept design for them.

   [48] ts 123 ‑ 124.

4. In cross-examination Ms Ford agreed with the proposition put to her that when she spoke with clients about copyright, she simply referred the clients to the note on the form about copyright.[49]

   [49] ts 130.

5. In cross-examination Ms Ford said she could not remember how or why she used the Outline of Process document.[50]  Ms Ford, however, described a three‑stage process as follows:[51]

   Yes, it's three - it's a three-stage process to signing the contract to build the house.  So the first design agreement is the concept design agreement, which is – was the document – the four-page document that you – that we talked about earlier.  The preliminary is – agreement is a stage in the process which is common to lots of builders called PPA, Preparation of Plans Agreement, and then the last is the signing of the contract, which is basically when everything is sort of ready to go, you know, at the end (indistinct) permitting to build.

   [50] ts 130.

   [51] ts 128.

6. Ms Ford's evidence was to the effect that when she sent Ms Hurst the Outline of Process document, she did so to confirm conversations with Ms Hurst that had taken place earlier.  Her evidence was to the effect that she was not providing information to Ms Hurst for the first time when she sent the Outline of Process document to Ms Hurst on 1 September 2014.[52]  She said:[53]

   There's no way in the world we would have started doing any design until the concept design agreement was signed, and that was signed after discussions about process.  People don't enter into the process with Giorgi and begin the process unless they're accepting what's going to happen, and, as I said earlier, people don't come to us, or didn't come to Giorgi, rather, to design a home.  It was to build a home.

Disposition

[52] ts 132.

[53] ts 133.

1. In my judgment Ms Ford's evidence does not establish that it was an express oral term of the Contour and Conceptual Design Agreement that the plans produced by the plaintiff could not be taken to and used by another builder.  There was no suggestion in Ms Ford's evidence that she made a statement to that effect to Ms Hurst in the conversations she had with her.  I accept Ms Ford's evidence in cross‑examination that it was her practice to do no more than refer clients to the note on the printed Contour and Conceptual Design Agreement about copyright.  Having regard to her evidence generally I think it is unlikely that Ms Ford would have volunteered a statement to the effect that the plans could not be taken and used by another builder.  Such a remark strikes a discordant note.  It hints at contention at a stage in the process when Ms Ford was concerned to foster a positive relationship with clients.

2. Ms Ford's evidence does satisfy me, however, that before Ms Hurst signed the pre‑printed Contour and Conceptual Design Agreement document, Ms Ford had discussed with her that there were three steps in the process of retaining the plaintiff to build a home.  Those three steps were the steps described by Ms Ford in her evidence - entry into a concept design agreement, entry into an agreement for the preparation of plans and entry into a building contract.  I am satisfied that at the time the parties entered into the Contour and Conceptual Design Agreement it was within their common actual knowledge that, as described by Ms Ford, there were three steps to the process of engaging the plaintiff to build a home.  I make a finding to that effect.

3. As Ms Ford said in her evidence, an aspect of her role was to build trust with prospective clients.  Explaining the three steps in the process of retaining the plaintiff to build a home before entering into a Contour and Concept Design Agreement is consistent with building trust.  While Ms Ford had no recollection of dealing with Ms Hurst and, while she dealt with each client in a 'bespoke' way, I infer that she provided the explanation of the three‑stage process to Ms Hurst in the manner she described dealing with prospective clients generally.

No implication of a licence as a matter of law

Mr Giorgi's evidence

1. Relevantly, Mr Giorgi's evidence to which objection was taken concerned:  the plaintiff's business model, Mr Giorgi's assessment of the market within which the plaintiff operated, the plaintiff's approach to dealing with clients, its in‑house design and construction process, its staff training, the basis on which the 'design fee' of $5,000 was set, its cost structure, and the manner in which its sales consultants were remunerated.[54]  It was not in dispute that the evidence related to matters known only to the plaintiff.

   [54] Exhibit P1 [11], [28], [30], [33] ‑ [39], [46].

2. I admitted the evidence of Mr Giorgi over objection from the first defendants but on the basis that the first defendants would be free to contend that the court could make no use of the evidence for the purposes of construing the contract.[55]

   [55] ts 156 ‑ 157.

3. Consistent with the established principles which I have discussed at [23] ‑ [26], Mr Giorgi's evidence cannot be used for the purposes of construing the contract and I have not had regard to it.

Mr Smith's evidence

1. Mr Smith is a senior and experienced architect.  He was asked to express opinions on the following matters:[56]

   [56] Exhibit P3.

   10.If you had been retained by the Marshalls in 2014 as an independent architect to perform the work described in the [Contour and Conceptual Design Agreement]:

   (a)what would you have charged the Marshalls to arrive at the final design dated 23 October 2014 (see Tab 10);

   (b)when answering question 10(a), please:

   (i)assume that the design was developed over time in the phases which correspond to the various versions of the Giorgi Design enclosed with this brief;

   (ii)describe the work required and the amount of time you consider necessary to develop the various versions as well as the total time you consider necessary to have developed the design from start to finish;

   (iii)explain the basis on which you would have charged your fees, whether by hourly rate or otherwise and whether by reference to a relevant scale of fees used in the architectural profession in 2014;

   (iv)express an opinion as to whether the fees you would have charged were average or standard fees for the work performed, or not.  Insofar as your fees may have been significantly higher or lower than industry standards or averages, please express an opinion as to what you would consider to be an average or standard fee for the work, if performed in 2014;

   (v)take into account, if necessary, the initial budget for the Marshall residence, of $5,000,000.

2. For the purposes of expressing his opinions Mr Smith was provided with copies of the plans that had been prepared by the plaintiff and provided to the first defendants in the period between May and October 2014, that is the plans constituting the Design Concept Plan.  Mr Smith prepared a report addressing the questions asked of him.[57]  Counsel for the plaintiff explained that the purpose of Mr Smith's evidence was to show what it would have cost in the market if a registered architect had performed the design work undertaken by the plaintiff, which would  assist the court in determining objectively whether the $5,000 fee could be described as nominal.[58]

   [57] Exhibit P3.

   [58] ts 170.

3. Mr Smith's evidence was to the effect that the plans produced by the plaintiff corresponded in broad terms to the sketch plans that he would have prepared and for which he would have charged a fee of between $54,000 and $59,000 inclusive of GST depending on whether fees were charged on a percentage of the budget of $5 million or on a time cost basis.[59]

   [59] Exhibit P3 [1.4] and [2.4].

4. The first defendants objected to Mr Smith's evidence on the same basis that they objected to Mr Giorgi's evidence, that is, that it was not admissible for the purposes of establishing the purpose of the agreement.[60]  I admitted Mr Smith's evidence but on the basis that the first defendants would be free to contend that the court could make no use of the evidence for the purposes of construing the contract.[61]  It was not contended that it was known to the first defendants' that the $5,000 fee paid by them was less than the fee that would have been charged by an architect or that it was a nominal fee.  In my judgment, Mr Smith's evidence of these matters cannot be used for the purposes of construing the Contour and Conceptual Design Agreement and I have not had regard to it.

   [60] ts 177.

   [61] ts 177.

5. In any event, that a fee of $5,000 would be regarded as nominal if charged by an architect for work of the nature that the plaintiff was required to complete under the agreement does not assist in determining the preliminary issues.  As Mr Smith explained in his report the service offered by an architect to a client is qualitatively different from the service offered by a design and construct builder.  Mr Smith expressed the point in this way:[62]

   1.5The process in an independent architectural commission differs from that offered by Giorgi where, beyond their initial $5,000 fee, the architectural fees are included in the cost of construction, along with engineering and other consultant fees.  Giorgi also list some fee exceptions in the Sales Addenda, such as unpredictable issues and assessing the structural stability of the boundary walls.

   1.6The deliverables in the design process also vary between an independent architectural commission and a design and construct project of the type offered by Giorgi.  The timing of drawings, schedules and costings varies because the independent architect is preparing documents for a tender or negotiated contract, whereas Giorgi requires a priced proposition agreed, prior to completion of the contract documents.

   [62] Exhibit P3 [1.5] ‑ [1.6].

1. The first defendants raised a further objection to Mr Smith's evidence which was to the effect that Mr Smith considered matters that had occurred after the formation of the agreement for the purposes of forming his opinions.  The first defendants contended that this involved using post‑contractual conduct to construe the agreement and that Mr Smith had failed to engage with the question of what needed to be done to prepare the Design Concept Plan rather than what was actually done.[63]  In broad terms, the effect of Mr Smith's evidence was that on completion of final sketch plans he would have been able to retain a quantity surveyor to prepare the costings required for a fixed price proposal.[64]  In other words, in his evidence Mr Smith equated the preparation of the plans required to provide a full specification and fixed price proposal with the preparation of the final sketch plans that an architect would prepare.  If it had been otherwise possible to use Mr Smith's evidence for the purpose of construing the Contour and Conceptual Design Agreement, the first defendants' further objection to Mr Smith's evidence is a matter that would go to the weight to be attached to Mr Smith's evidence rather than its admissibility.[65]

The aim of the Contour and Conceptual Design Agreement

[63] ts 169 ‑ 172.

[64] Exhibit P3 [1.11].

[65] ts 173.

1. As is clear from the authorities a licence to use an artistic work is implied to avoid the aim or purpose of the agreement between the parties being stultified or undermined thus, in effect, depriving the putative licensee of the benefit of the bargain.[66] Whether a licence is implied will depend on the contractual obligations and the circumstances surrounding the contract,[67] and the ambit of the licence will be the minimum required to secure to the client the entitlement which the parties must have intended to confer.[68]

   [66] Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd [59]; Stovin‑Bradford v Volpoint Properties Ltd (576).

   [67] Stovin‑Bradford v Volpoint Properties Ltd (577).

   [68] Gold Peg International Pty Ltd v Kovan Engineering (Aust) Pty Ltd [83].

2. In this case the aim of the Contour and Conceptual Design Agreement can be ascertained from its express terms read in the light of the circumstances in which the agreement was made.  The basic circumstances are limited and uncomplicated.  The plaintiff is a builder of luxury homes and the first defendants wanted an expensive - inferentially luxurious - home built on their property.  The first defendants approached the plaintiff to design and build a home not merely to design a home.  An important circumstance is that the plaintiff was not in business as an architect or a home designer, it was a builder of luxury homes.

3. It is clear from the terms of the Contour Survey and Conceptual Design Agreement that its terms were not intended to govern the entire process of designing a home and the preparation of all the plans required to build a home.  The agreement governed the initial stages of a process only: the gathering of information by the plaintiff by means of a site inspection, site survey and the provision of information by the first defendants as to their interests that might be relevant to the design.  Using the information so gathered, the plaintiff agreed to prepare a Design Concept Plan, an external '3D image' and a full specification and fixed price proposal.

4. The immediate aim or purpose of agreement was the preparation of a full specification and fixed price proposal by reference to which the first defendants could decide whether they wished to retain the plaintiff to build a home in accordance with the proposal and the Design Concept Plan.

5. It may be accepted that the first defendants first contacted the plaintiff to see whether it would be able to assist them with the design and construction of a luxury home on the Property.  That said, the first defendants' formulation of the purpose of the Contour and Conceptual Design Agreement as being to assist the first defendants with the design and construction of a luxury home on the Property is expressed at a level of generality that has insufficient regard to the express terms of the agreement and it does not reflect the commercial reality that the plaintiff was a builder not a design consultant.  The aim of the agreement was not to enable the first defendants to build a home in accordance with the Design Concept Plan.  There is nothing in the Contour and Conceptual Design Agreement that specifies the nature of the Design Concept Plan or the detail to be included in it.  The obligation to prepare the Design Concept Plan is expressed in such abbreviated terms that a reasonable person in the position of the parties would not understand that the plaintiff was required to prepare plans which could be used by the first defendants to build a home.

6. It follows that the Contour and Conceptual Design Agreement is not stultified or undermined by denying the first defendants a licence to use the Design Concept Plan, because the construction of a home in accordance with the Design Concept Plan was not the contractual benefit the parties contemplated would be conferred by it.

7. The conclusions I have expressed in the preceding paragraphs are based on the express terms of the Contour and Conceptual Design Agreement read in the circumstances to which I have referred.  It is unnecessary to rely on Ms Ford's evidence that she explained to Ms Hurst that there were three stages in the process of engaging the plaintiff to build a home to conclude that the aim of the agreement was limited to the preparation of a full specification and fixed price proposal.  If regard is had to Ms Ford's evidence, however, it reinforces my view that the object of the Contour and Conceptual Design Agreement was not to assist the first defendants as contended by them or to prepare plans which the first defendants could use to build a home on the Property and that the Contour and Conceptual Design Agreement governed only the first stage of a process that might lead to the construction of a home on the first defendants' property.

8. In my respectful view it is both unnecessary and unhelpful to attempt to bring this case within 'the nominal fee therefore no licence' line of authority because every case must be determined on its own facts.  Although there may be some overlap in the required work, the engagement of an architect to prepare plans for the construction of a house and the engagement of a builder to prepare a concept design for the purposes of preparing a specification and pricing proposal, are not sufficiently analogous for the principles that govern the former to be applied to the latter.  One can readily appreciate why the implication of a licence is required in the architect's retainer to avoid the contractual aim being stultified, but the same considerations do not apply to the engagement of a builder for the more limited purpose of preparing a concept design, specification and pricing proposal.

9. Moreover, and perhaps this view is no more than a distillation of the points made above, a reasonable person reading the Contour and Conceptual Design Agreement would not understand that, if the property owner did not accept the pricing proposal, they would be at liberty to employ another builder to build a home in accordance with the Design Concept Plan.

10. The matters to which I have referred are sufficient to resolve the first issue in the plaintiff's favour but I would add that, in my view, the inclusion in the Contour and Conceptual Design Agreement of the words 'Copyright of Designs will remain the property of Giorgi Exclusive Homes design fee to be credited against Building Contract', is sufficient to negate the licence.  A reasonable person reading these words would not draw a distinction between an assignment of copyright and a licence of copyright.  Rather a reasonable person would understand them to mean that the Contour and Conceptual Design Agreement did not confer a right to use the Design Concept Plan to build a house unless and until they executed a building contract.  This point is reinforced when the position in respect of the design is compared with the position in relation to the site survey which is to remain the property of the client in the event that they do not proceed to a building contract.

No implication of a licence as a matter of fact

1. It follows from the conclusion I have reached as to the aim or purpose of the Contour and Conceptual Design Agreement that the implication of a licence is not necessary to lend business efficacy to the Contour and Conceptual Design Agreement.

Conclusion

1. My answer to the questions formulated for the purpose of resolving the preliminary issue are:

   (a)No.

   (b)No.

   (c)Unnecessary to answer.

2. I will hear the parties as to the orders to be made and as to costs.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

RC

Associate to the Honourable Justice Tottle

27 APRIL 2022