City of Sydney v Streetscape Projects (Australia) Pty Ltd
[2011] NSWSC 1214
•11 October 2011
Supreme Court
New South Wales
Medium Neutral Citation: The City of Sydney v Streetscape Projects (Australia) Pty Limited & Anor [2011] NSWSC 1214 Hearing dates: 11/4/2011 - 15/4/2011, 1/8/2011 - 5/8/2011, 8/8/2011 - 12/8/2011, 15/8/2011 - 18/8/2011, 22/8/2011 - 26/8/2011, 29/8/2011 - 31/8/2011, 1/9/2011 - 2/9/2011, 5/9/2011 - 9/9/2011, 12/9/2011 - 16/9/2011, 26/9/2011 - 28/9/2011, 30/9/2011 Decision date: 11 October 2011 Jurisdiction: Equity Division - Commercial List Before: Einstein J Decision: The Plaintiff is entitled to:
1. Injunctive relief [502] - [506];
2. Damages [507] - [513]; and
3. Equitable compensation [507] - [513].
The plaintiff may elect for an account of profits [514].
Streetscape Projects (Australia) must deliver up documents and moulds to the City [515] -[543].
Catchwords: Proceedings brought by City of Sydney against Streetscape Projects (Australia) and Mr Moses Obeid in relation to "Smartpole" poles
CONTRACTS - Action for breach of contract - Contractual interpretation - Confidential information - Deeds of variation - Whether particular clauses were penalty clauses - Claim that plaintiffs suffered no loss - Distinction between liquidated damages clause and penalty clause - Damages when proof of loss is difficult - Foreign law- Presumption of identity - Principles for interpreting terms of a contract to avoid capricious consequences
EQUITY - Equitable duty - Duty of confidence - Fiduciary duty - Fiduciary duty under a commercial contract -Accessorial liability - Barnes v Addy
ADMINISTRATIVE LAW - Ultra Vires - Scope of Local Councils authority - Broad interpretation
TRADE PRACTICES CLAIM - Misleading and deceptive conduct - Section 52 Trade Practices Act - Proof of representations - Reliance on representations - Failure to take reasonable care-Section 51A Trade Practices Act - Misleading representation as to future without reasonable basis-No need to prove reliance - Appropriate relief under Section 87 (2) of Trade Practices Act - Varying the terms of a contract for misrepresentationLegislation Cited: Civil Procedure Act 2005 (NSW)
Competition and Consumer Act 2010 (Cth)
Constitution Act 1902 (NSW)
Copyright Act 1968 (Cth)
Designs Act 2003 (Cth)
Evidence Act 1995 (Cth)
Fair Trading Act 1987 (NSW)
Local Government Act 1928 (NSW)
Local Government Act 1993 (NSW)
Patents Act 1990 (Cth)
Supreme Court Act 1970 (NSW)
Trade Marks Act 1995 (Cth)
Trade Practices Act 1974 (Cth)
Trade Practices Revision Act 1986 (Cth)Cases Cited: Akron Securities v Iliffe (1997) 41 NSWLR 353
Boral Resources (QLD) Pty Ltd v Johnstone Shire Council [1990] 2 Qd R 18
Allied Westralian Finance Ltd v Wenpac Pty Ltd (1992) ATPR 46-082
Alma Spinning Co, In re; Bottomley's Case (1880) 16 Ch D 681
AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170
Argy v Blunts & Lane Cove Real Estate Pty Ltd. (1990) 26 FCR 112
ASX Operations Pty Ltd v Pont Data Aust Pty Ltd (No. 2) (1991) 27 FCR 492
Attorney-General v Great Eastern Railway Company (1880) 5 App Cas 473
Australasian Performing Right Association Ltd v Grebo Trading Co Pty Ltd (1978) 23 ACTR 30
Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99
Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199
Baden Delvaux & Lecuit v Societe Generale pour Favoriser le Development du Commerce et de l'Industrie en France SA [1993] 1 WLR 509; [1992] 4 All ER 161
Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2001] Ch 437; [2000] 4 All ER 221
Barnes v Addy (1874) LR9ChApp 244
Bevanere Pty Ltd v Lubidineuse (1985) 7 FCR 325
Birtchnell v Equity Trustees, Executors and Agency Co Ltd (1929) 42 CLR 384
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266
Briginshaw v Briginshaw (1938) 60 CLR 336
Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45
Carlton and United Breweries Pty Ltd v Tooth & Co Ltd (1986) 7 IPR 581
City of Sydney v Streetscape Projects (Australia) Pty Ltd and Anor [2011] NSWSC 831
Coco v AN Clark (Engineers) Ltd [1969] RPC 41; (1968) 1A IPR 587
Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; [1982] HCA 24
Collins Marrickville Ply Ltd v Henjo Investments Pty Ltd (1987) 72 ALR 601
Commonwealth v John Fairfax & Sons Ltd (1980) 147 CLR 39
Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373
Corrs Pavey Whiting & Byrne v Collector of Customs (Vic) (1987) 14 FCR 434
Council of the City of Sydney v Goldspar Pty Ltd & Anor (2004) 62 IPR 274
Damberg v Damberg (2001) 52 NSWLR 492
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31
Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd [1979] VR 167
Digi-Tech (Australia) Ltd v Brand [2004] NSWCA 58
Dingjan Re; Ex parte Wagner (1995) 183 CLR 323
Dundee Harbour Trustees v D & J Nicol [1915] AC 550
Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79
Elecon Australia Pty Ltd v Brevini Australia Pty Ltd (2009) 263 ALR 1; [2009] FCA 1327
Elna Australia Pty Ltd v International Computers (Australia) Pty Ltd (No 2) (1987) 16 FCR 410
F J Bloemen Pty Ltd v Council of the City of Gold Coast [1973] AC 115
Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89
Fitzgerald v Masters (1956) 95 CLR 420
Ford-Hunt v Raghbir Singh [1973] 2 All ER 700
Gardiner v Agricultural and Rural Finance Pty Ltd [2007] NSWCA 235
General Tire and Rubber Co v Firestone Tyre and Rubber Co Ltd [1975] 2 All ER 173
Gould v Vaggelas (1985) 157 CLR 215
Henjo Investments Ply Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83
Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41
Interfirm Comparison (Australia) Pty Ltd v Law Society of New South Wales (1975) 6 ALR 445
JR & EG Richards (NSW) Pty Ltd v Scone Shire Council & Anor [1995] NSWLEC 200
Kewside Pty Ltd v Warman International Ltd [1990] ASC 55-964
Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd [2008] NSWCA 5
Locke v Dunlop (1888) 39 Ch D 387
Lutheran Church of Australia South Australia District Incorporated v Farmers' Co-operative Executors and Trustees Ltd (1970) 121 CLR 628
Lynch & Standon v Brisbane City Council [1961] Qd.R. 463
Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181
McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579; [2000] HCA 65
McGrath Re; Pan Pharmaceuticals Ltd (in liq) v Australian Naturalcare Products Pty Ltd (2008) 165 FCR 230
Meters Ltd v Metropolitan Gas Meters Ltd (1911) 28 RPC 157
Michael Wilson and Partners Ltd v Nicholls [2009] NSWSC 1033
Moorgate Tobacco Co Ltd v Philip Morris Ltd (No. 2) (1984) 156 CLR 414
Munchies Management Pty Ltd v Belperio (1988) 84 ALR 700
Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449
Neilsen v Hempston Holdings Pty Ltd (1986) 65 ALR 302
Neilson v Overseas Projects Corporation of Victoria Ltd [2005] HCA 54; (2005) 223 CLR 331
Nelson v Nelson (1995) 184 CLR 538
New Zealand Netherlands Society 'Oranje' Incorporated v Kuys [1973] 2 All ER 1222
Nicholls v Michael Wilson & Partners [2010] NSWCA 222
Pacific Carriers Limited v BNP Paribas (2004) 218 CLR 451; [2004] HCA 35
Parramatta City Council v Randr Fazzolari Pty Ltd; Parramatta City Council v Mac'S Pty Ltd [2008] NSWCA 132
Pavich v Bobra Nominees Pty Ltd (1988) 84 ALR 285
Pedler v Richardson (Young J, Supreme Court of New South Wales, 16 October 1997, unreported)
Photo Production Ltd v Securicor Transport Ltd [1980] AC 827
Reading v R [1949] 2 KB 232
Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989
Reg Russell & Sons Pty Ltd v Buxton Meats Pty Ltd (1994) ATPR (Digest) 46-127
Regie Nationale des Usines Renault SA v Zhang (2002) 210 CLR 491
Review Australia Pty Ltd v Innovative Lifestyle Investments Pty Ltd & Anor [2008] FCA 74
Ringrow Pty Limited v BP Australia (2005) 224 CLR 656
Robophone Facilities Ltd v Blank [1966] 1 WLR 1428; [1963] 3 All ER 128
Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; 76 ALJR 436
Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378; [1995] 3 All ER
Smith Kline & French Laboratories (Australia) Ltd v Secretary, Department of Community Services and Health (1990) 95 ALR 87;
Smith Kline & French Laboratories (Australia) Ltd v Secretary, Department of Community Services and Health (1991) 20 IPR 643
Sutton v A J Thompson Pty Ltd (In liq) (1987) 73 ALR 233
Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177
Tenji & Anor v Henneberry & Associates Pty Ltd & Ors (2000) 98 FCR 324
Thomas Marshall (Exports) Ltd v Guinle [1979] Ch 227
Thompson v Mastertouch TV Service Pty Ltd (No 2) (1977) 15 ALR 487
Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165
Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429
Watson v Foxman (1995) 49 NSWLR 315
Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522 [2005] HCA 17
Wright v TNT Management Pty Ltd (1989) 15 NSWLR 679
Yorkshire Dale Steamship Co Ltd v Minister of War Transport [1942] AC 691
Zhu v Treasurer of the State of New South Wales (2004) 218 CLR 530Texts Cited: Fentiman R, Foreign Law in English Courts (1998) Oxford University Press
Heydon JD, Cross On Evidence, 7th Ed, LexisNexis Butterworth 2004
Meagher Gummow and Lehane's Equity: Doctrines and Remedies, LexisNexis, December 2002 (Meagher RP, Heydon JD, Leeming MJ)Category: Principal judgment Parties: The City of Sydney (Plaintiff)
Streetscape Projects (Australia) Pty Limited (First Defendant)
Moses Edward Obeid (Second Defendant)Representation: Counsel:
Mr T Jucovic QC, Mr S Climpson, Mr C Bova (Plaintiff)
Mr S Couper QC, Mr J Gooley, Mr R Higgins (Defendants)
Solicitors:
Holding Redlich (Plaintiff)
Colin Biggers & Paisley (Defendants)
File Number(s): 2009/00298673 & 2010/0085353
Judgment
The proceedings
The litigation before the Court concerns what came to be known as the Smartpole Project developed by the City of Sydney ("the City") in around 1996/1997 in preparation for the 2000 Sydney Olympic Games. Its purpose was to consolidate and refine street infrastructure (such as street lights, traffic lights, signage and banners) into a single system.
Proceedings were commenced in both this Court and the Federal Court and were eventually cross-vested to this Court. The parties agreed that evidence in one proceeding was to be evidence in the other. The Court made a formal order to this effect on 12 April 2011.
Whilst the pleadings are complex, in substance the claims and cross claims in both proceedings are concerned with disputes arising from the City and Streetscape's contractual arrangements constituted by an agreement made on about 26 August 2002 ('Licence Agreement') and varied by deeds dated 30 March 2007 ('First Deed') and 19 October 2007 ('Second Deed'), which relate to multifunction streetpoles referred to as 'Smartpoles'.
The parties to the litigation
The City is the plaintiff, and on its case, is a body politic having the legal capacity and powers of an individual both in and outside the state. The extent of the City's powers to contract was a live issue in the proceedings.
The first defendant, Streetscape Projects (Australia) ("Streetscape"), was incorporated on 22 June 1998 "with the specific intention of providing the city with the highest standard of support, management and implementation of the Smartpole project."
From its inception, the design, manufacture, supply and operation of the Smartpole system represented the 'core business' of Streetscape. According to its own documents, Streetscape was "conceived, incorporated and developed with the sole objective of successfully undertaking... Smartpole related tasks as contractor to [the City]."
The second defendant, Mr Moses Obeid, has since November 2003 been the sole director and secretary of Streetscape. Streetscape's' former directors include Mr Gerard Obeid, the brother of Mr Moses Obeid, who resigned as a director on 17 November 2003 and Mr Robert Matchett who resigned as a director on 18 February 2000.
Standing back from the proceedings to focus upon the real issues
It has to be said that aside from questions concerning the proper construction of the deeds entered into by the parties, the litigation was marked by the need for the Court to make findings concerning many conversations and meetings between the various witnesses. On some occasions intimate private one-on-one conversations took place between representatives of the City and representatives of Streetscape.
In that sense the Court was called upon to assess the veracity of the evidence given by the witnesses called. The evidence of each of the many witnesses called by the parties have been be carefully studied by the Court in order to determine the truthfulness of the evidence given by those witnesses. There were particularly critical witnesses under cross-examination for many days. As often occurs the Court was able to call on a number of tools in making these assessments, principally by reference to contemporaneous documents such as the innumerable e-mails, as well as focusing upon differences in the versions of facts put forward by the witnesses called.
The relief claimed by the plaintiff
The plaintiff makes a number of claims for relief in its summons and related pleadings.
Contract claims
The plaintiff claims the following relief:
(1) Judgment in the amount found to be owing in respect of the annual licence fee and unpaid royalty fees together with interest.
(2) An enquiry into the amount payable in respect of royalty payments for the period 1 April 2009 to 30 June 2009.
(3) An enquiry into the amount payable in respect of royalty payments for the period 1 July 2009 to 31 August 2009.
(4) An order that the first defendant deliver up documents required by the Second Deed of Variation and the Licence Agreement.
(5) A declaration that the plaintiff is the owner of all moulds developed or used by the first defendant or its agents in connection with the manufacture and sale of Smartpole poles pursuant to the Licence Agreement, including any moulds used in the manufacture and sale of the products listed in the Schedule annexed to the letter from Holding Redlich to Colin Biggers & Paisley dated 29 July 2009 and the poles:
(a) listed in Table 1, Table 2, Table 3, Table 4, Table 5 and Table 6 of the defendants' Commercial List Response served on or around 13 May 2010; and
(b) listed in the defendants' Statement in Answer to Interrogatories dated 9 July 2010, (the Poles).
(6) An order that the First Defendant deliver up to the Plaintiff all moulds developed or used by the First Defendant or its agents in connection with the manufacture and sale of Smartpole poles pursuant to the Licence Agreement, including any moulds used in the manufacture and sale of the products listed in the Schedule annexed to the letter from Holding Redlich to Colin Biggers & Paisley dated 29 July 2009 and the poles listed in various correspondence which were detailed in the Seventh Further Amended Summons.
(7) An order restraining the defendants from manufacturing, distributing, offering for sale or selling the Poles.
(8) An order restraining the defendants from using the intellectual property:
(a) in the Poles; and
(b) pleaded in paragraphs 87(a), 87(b) and 90 of the Fourth Further Amended Commercial List Statement.
(9) A declaration that to the extent (which is denied) the first defendant is the legal owner of the intellectual property in the Poles, it:
(a) holds that intellectual property for the benefit of, or on constructive trust for the plaintiff; and
(b) is obliged to assign legal ownership of that intellectual property to the plaintiff.
(10) A declaration that to the extent (which is denied) the first defendant is the legal owner of the intellectual property pleaded in paragraphs 87(a) and 90 of the Fourth Further Amended Commercial List Statement, it:
(a) holds that intellectual property for the benefit of, or on constructive trust for the plaintiff; and
(b) is obliged to assign legal ownership of that intellectual property to the plaintiff.
(11) An order that the first defendant do all things necessary to transfer legal ownership of the intellectual property referred to in orders 8 and 9 above to the plaintiff.
(12) Judgment in an amount calculated in accordance with clause 15.5 of the Licence Agreement or, alternatively, damages.
(13) An enquiry into the sales of products by the first defendant and the proper calculation of royalties from the period 1 April 2007 to 31 August 2009.
(14) An order that the first defendant pay to the plaintiff a sum calculated in accordance with clause 15.5 of the Licence Agreement or, alternatively damages for breach of the Licence Agreement and/or the agreements entered into between the plaintiff and the first defendant during the period 1999 to 2004 in an amount to be assessed together with interest thereon pursuant to section 100 of the Civil Procedure Act 2005 .
Equitable claim
(15) An order that the first defendant pay to the plaintiff equitable compensation or equitable damages for breach of fiduciary duty and/or breach of duty of confidence in an amount to be assessed together with interest thereon pursuant to section 100 of the Civil Procedure Act 2005 .
(16) An order that the second defendant pay to the plaintiff damages for procuring the breaches of the Licence Agreement and/or the agreements entered into between the plaintiff and the first defendant during the period 1999 to 2004 in an amount to be assessed together with interest thereon pursuant to section 100 of the Civil Procedure Act 2005 .
(17) 14A. An order that the second defendant pay to the plaintiff equitable compensation or equitable damages for breach of duty of confidence in an amount to be assessed together with interest thereon pursuant to section 100 of the Civil Procedure Act 2005.
(18) 14B. Further or in the alternative to order 14A, an order that the second defendant pay to the plaintiff equitable compensation or equitable damages for being knowingly involved in or party to the first defendant's breach of fiduciary duty and/or breach of duty of confidence in an amount to be assessed together with interest thereon pursuant to section 100 of the Civil Procedure Act 2005 .
(19) An order that an inquiry be held to determine the amount to be paid in accordance with clause 15.5 of the Licence Agreement or, alternatively to determine the nature and extent of the plaintiff's loss and damage by reason of the first defendant's breaches of the Licence Agreement and/or the agreements entered into between the plaintiff and the first defendant during the period 1999 to 2004 and the second defendant's procuring of such breaches and to assess the quantum thereof.
(20) 15. An order that an inquiry be held to determine to determine the nature and extent of the plaintiff's loss and damage by reason of the first defendant's breach of fiduciary duty and/or breach of duty of confidence and the second defendant's breach of duty of confidence and/or knowing involvement in or party to the first defendant's breach of fiduciary duty and/or breach of duty of confidence.
(21) In the alternative to the relief sought in the immediately preceding two paragraphs, and at the plaintiff's option, an order that an account be taken of the profits made by the first defendant by its breaches of the Licence Agreement and/or the agreements entered into between the plaintiff and the first defendant during the period 1999 to 2004 and an order that the first defendant and the second defendant pay to the plaintiff such profits together with interest thereon pursuant to section 100 of the Civil Procedure Act 2005 .
(22) 16A. In the alternative to the relief sought in paragraphs 13A, 14A, 14B and 15A, and at the plaintiff's option, an order that an account be taken of the profits made by the first defendant by its breach of fiduciary duty and/or breach of duty of confidence and the second defendant by his breach of duty of confidence and/or knowing involvement in or party to the first defendant's breach of fiduciary duty and/or breach of duty of confidence and an order that the first defendant and the second defendant pay to the plaintiff such profits together with interest thereon pursuant to section 100 of the Civil Procedure Act 2005 .
Relief sought in relation to S2 Poles
The plaintiff seeks the following relief :
(1) A declaration that the first defendant is not permitted to use the intellectual property in the "S2" poles including the Registered Designs (as defined in paragraph 86 of the Cross-Claim) to manufacture and sell street poles.
(2) A declaration that the first defendant holds the Registered Designs (as defined in paragraph 86 of the Cross-Claim) on trust for the plaintiff.
(3) In the alternative to the relief sought in the immediately preceding paragraph, a declaration that the first defendant is obliged to assign to the plaintiff all right, title and interest which it has in the Registered Designs (as defined in paragraph 86 of the Cross-Claim).
(4) An order that the first defendant be permanently restrained from using the intellectual property in the S2 poles including the Registered Designs (as defined in paragraph 86 of the Cross-Claim) to manufacture and sell street poles.
(5) An order that the first defendant do all things necessary to transfer the Registered Designs (as defined in paragraph 86 of the Cross-Claim) to the plaintiff.
(6) In the alternative to the relief sought in the immediately preceding paragraph, an order that the first defendant assign to the plaintiff all right, title and interest which it has in the Registered Designs (as defined in paragraph 86 of the Cross-Claim).
(7) Further in the alternative, an order pursuant to s 93(1) of the Designs Act 2003 (Cth) that registration of Australian Registered Design No. 146087 be revoked.
Relief pursuant to the Trade Practices Act
The plaintiff furthers each of the following orders :
An order pursuant to pursuant to section 87(2)(a) of the Trade Practices Act 1974 (Cth) declaring void clause 5(a) of the Second Deed of Variation, to the extent that it purports to vest Intellectual Property subsisting in "the Adepole (catalogue item 41).
Overview of the cross claims
Streetscape also makes a number of cross claims. These are set out in the Amended Cross Summons ('Cross Summons') and the Further Amended Commercial List Cross-Claim Statement ('Cross Claim') filed in the Supreme Court proceeding. The cross claim in the Federal Court proceeding is in substantially the same terms.
Cross Claim causes of action relied upon
Streetscape seeks:
(1) A declaration that in the events which have occurred the agreement for the purchase of the Intellectual Property between CofS and SPA ought to be specifically performed and an order that it be specifically performed accordingly.
(2) A declaration that in the events which have occurred the CofS holds the Intellectual Property on trust for SPA.
(3) Alternatively, a declaration that in the events which have occurred the CofS holds the Intellectual Property on trust for sale to SPA.
(4) A declaration that in the events which have occurred the Licence Agreement and Deed of Variation and Second Deed of Variation to the extent that they purport to licence the Intellectual Property and to claim royalties in respect of the use of the Intellectual Property is ultra vires the CofS and is void and of no effect, or unenforceable, and an order setting aside the Licence Agreement and Deed of Variation and Second Deed of Variation to that extent.
(5) Alternatively to 4, a declaration that in the events which have occurred, the Licence Agreement and Deed of Variation and Second Deed of Variation to the extent that they purport to licence the Intellectual Property and to claim royalties in respect of the use of the Intellectual Property outside Australia is ultra vires the CofS and is void and of no effect, or unenforceable, and an order setting aside the Licence Agreement and Deed of Variation and Second Deed of Variation to that extent.
(6) Orders pursuant to section 87 of the TP Act declaring the Licence Agreement and Deed of Variation and Second Deed of Variation to the extent that they purport to licence the Intellectual Property and to claim or entitle the CofS to royalties in respect of the use of the Intellectual Property to be ultra vires the CofS and void and varying and modifying the Licence Agreement and Deed of Variation and Second Deed of Variation by deleting, modifying and varying the provisions of the Agreement and Deeds to the extent that they purport to licence the Intellectual Property and to claim or entitle the CofS to royalties in respect of the use of the Intellectual Property and consequential orders.
(7) Alternatively to 6, orders pursuant to section 87 of the TP Act declaring the Licence Agreement and Deed of Variation and Second Deed of Variation to the extent that they purport to licence the Intellectual Property and to claim or entitle the CofS to royalties in respect of the use of the Intellectual Property outside and not for the purposes of the City of Sydney, or, alternatively, outside Australia, to be ultra vires the CofS and void and varying and modifying the Licence Agreement and Deed of Variation and Second Deed of Variation by deleting, modifying and varying the provisions of the Agreement and Deeds to the extent that they purport to licence the Intellectual Property and to claim or entitle the CofS to royalties in respect of the use of the Intellectual Property outside and not for the purposes of the City of Sydney, or, alternatively, outside Australia, and consequential orders.
(8) Further, in the premises of the March 2007 Representations,
(a) an order pursuant to s87(2)(a) of the TP Act or s 72 of the Fair Trading Act 1987 (NSW) (the "FT Act") declaring part of the Deed of Variation dated March 2007 to be void, as it relates to the royalties payable in relation to the four S2 streetpoles.
(b) an order pursuant to s87(2)(c) of the TP Act or s 72 of the FT Act directing the CofS to refund money paid by the SPA pursuant to the Deed of Variation dated March 2007.
(9) Further, in the premises of the September 2007 Representations SPA seeks the following order:
(a) an order pursuant to s87(2)(a) of the TP Act or s 72 of the FT Act declaring part of the Second Deed of Variation dated March 2007 to be void, as it relates to the ownership of the intellectual property of the four S2 streetpoles.
(10) A declaration that the CofS has not acquired and is not entitled to, or, alternatively, to enforce or protect or exploit, any reputation in or to the name and mark SMARTPOLE in Australia or in Singapore or the United Arab Emirates or elsewhere outside Australia.
(11) An order and injunction restraining CofS from, by itself, its servants or agents or otherwise howsoever, enforcing or protecting or purporting to licence or exploit, or asserting any rights to enforce, protect or exploit, the name and mark SMARTPOLE or any reputation in or to the name and mark SMARTPOLE in Australia or in Singapore or the United Arab Emirates or elsewhere outside Australia.
(12) An order pursuant to section 88 of the Trade Marks Act, 1995 (Cth) that the registered trademarks be removed from the Register of Trade marks.
(13) An order pursuant to section 92 of the Trade Marks Act, 1995 (Cth) directing the Registrar of Trade Marks to remove the registered trade marks from the Register of Trade Marks.
(14) An order and injunction restraining CofS from, by itself, its servants, agents or otherwise howsoever, using in any way or publishing the Registered Designs, the Drawings, or the Confidential Information.
(15) An order and injunction restraining CofS from, by itself, its servants, agents or otherwise howsoever, infringing SPA's Registered Designs.
(16) An order and injunction restraining CofS from, by itself, its servants, agents or otherwise howsoever, infringing SPA's copyright by reproducing or authorising the reproduction of the Drawings or a substantial part thereof or otherwise infringing copyright in the Drawings without the licence of SPA.
(17) An order and injunction restraining the CofS, its servant and agents, from using or disclosing Confidential Information concerning SPA's method of manufacture and trade secrets permanently or for such period of time as the Court determines.
(18) An order that the CofS deliver up to SPA all documents and other records of any description in its possession, custody or power identifying or relating to the Confidential Information, and all copies of the Drawings and the Registered Designs within 7 days from the date of this order being made.
(19) Damages pursuant to section 82 of the Trade Practices Act, 1974 (Cth) or s 68 of the FT Act as claimed in paragraphs 46, 60, 67, 68 and 147 above.
(20) Damages for breach of contract as claimed in paragraphs 72 to 74 and 97 above.
(21) Damages or an account of profits for infringement of copyright, including:
(a) damages or an account of profits for infringement of copyright pursuant to s 115(2) of the Copyright Act 1968;
(b) additional damages pursuant to s 115(4) of the Copyright Act 1968; and
(c) damages for conversion pursuant to s 116 of the Copyright Act 1968, in an amount to be assessed together with interest pursuant to s 100 Civil Procedure Act 2005.
(22) Equitable compensation as sought in paragraphs117 above, or at the option of SPA, an account of profits.
(23) Such further and other enquiries and accounts as may be necessary and appropriate.
(24) Interest pursuant to section 51A of the Federal Court of Australia Act, 1976 and/or s100 Civil Procedure Act 2005 .
(25) Costs including Indemnity Costs.
Understanding the various poles the subject of this litigation
There are four main types of poles the subject of this litigation. They are:
(1) The S1;
(2) The S2;
(3) The S3; and
(4) The Adepole.
The parties were at odds as to which of these poles could be properly classified as Smartpole. It is therefore convenient to commence by describing some of the main features of a Smartpole pole.
The Smartpole was developed by the City in around 1996/1997 in preparation for the 2000 Sydney Olympic Games and in order to consolidate and refine street infrastructure (such as street lights, traffic lights, signage and banners) into one single system.
The Smartpole is a product system that uses an extruded alloy track (the Upper Extrusion) , which allows simple and secure mounting of any number of accessories at any height or face around the pole. By this means, the Smartpole reduces the number of individual poles required in a streetscape, hence being known as a "multi-function pole".
The Court accepts that the Upper Extrusion is an essential element of the Smartpole . It is cylindrical in cross section incorporating no more than four channels displaced to one-another at 90 degrees, which together with fixing components provides flexibility in vertical and radial positioning by visually unobtrusive bolting and clamping.
The Smartpole system can be scaled and adapted, at minimal cost, to suit the requirements of different street hierarchies, and in different cities. These benefits were highlighted by Streetscape on its website in response to the question "Can I make it look different?"
"Customisation is easy with Smartpole. The flexible nature of the system ensures that your Smartpole is distinctive from others and specific to your urban domain. Some simple options include custom colour schemes, personalised design features and select ing interesting luminare options. The look and feel is limited only by your imagination.
Streetscape Projects offers a full design service to customise the Smartpole to a required specification."
By reason of the Upper Extrusion, the Smartpole accommod ates various combinations of functions which include:
(1) street lighting;
(2) traffic signal lights;
(3) pedestrian signalling devices;
(4) signage, including street name and parking restrictions;
(5) CCTV cameras;
(6) banners;
(7) telecommunication devices; and
(8) other street pole furniture.
Other key visual, although not necessarily essential, elements of the Smartpole are:
(1) a lower steel pole complete with lower flange;
(2) a lower extruded ribbed cladding (or lower extrusion) with vertical grooves; and
(3) a cast transition rim (collar) which makes a visual transition between the lower extruded panels and the upper extrusion, the four recesses in the periphery of the collar aligning with the groves in the upper extrusion.
The Upper Extrusion and the visual elements referred to in the preceding paragraph are pictured below:
The importance of the Upper Extrusion is emphasised by Streetscape in its website which states as follows:
"Smartpole - The revolutionary Smartp ole System was born out of a need to consolidate and refine street infrastructure onto one single system. Developed by the City of Sydney and enhanced by Streetscape Projects for the 2000 Olympics programme, its success has generated a revolution in the way planners and designers implement traffic and lighting management in the public domain.
The key to its success is an extruded alloy track that allows secure and simple mounting of any number of accessories at any height or face around the pole. Available in 3 distinct sizes, 215, 166 and a twin track model, the system allows itself to be tailored to the client's needs and wishes most economically.
Flexibility and the ability to accommodate future services has allowed the Smartpole to be the most recognisable and useful piece of public furniture this Century." (emphasis added)
"What is a Smartpole? - The Smartpole is termed a "Multi-Function" pole and accommodates a range of accessories at any given time. Lights, traffic signals, signage, banners, CCTV cameras and a host of other services integrate seamlessly with the Smartpole system. What makes the Smartpole unique is its patented track that allows for simple installation of a broad range of accessories at any height or angle around the pole. Made from high strength extruded aluminium alloy; the track is integral to the success of the Smartpole System".
The Smartpoles ability to consolidat e existing and future street infrastructure onto a single pole has transformed the way government authorities, developers, designers and the public interact with the urban domain. Any existing services available on a street pole at present can be accommod ated onto Smartpole. Smartpole is the only multi-function pole to be acknowledged by NSW Roads and Traffic Authority and Energy Australia. The poles conform to internationally recognised standards in manufacturing and design - Australian (AS), British (BS) and American (ASHTO). The Smartpole has won recognition the world over and holds both an Australian Design Award & prestigious Chicago Athenaeum Good Design Award" (emphasis added).
On the City's case there are two predominant ranges of the Smartpo le poles known as the "S1" series of " Smartpole " poles (the S1 poles) and the "S2" series of Smartpole poles (the S2 poles). The defendant denied the S2 was a Smartpole , claiming it was a separate multi-function pole.
The S1 poles have a diameter of 215mm and range in height between 4.8m and 12.6m.
The S2 poles have a diameter of 166mm and range in height between 4.8m and 7.2m. Given that the S2 poles are smaller in diameter than the S1 poles they are more appropriate for environments such as the inner city, for example Darlinghurst and Glebe.
Both the S1 poles and the S2 poles accommodate four extruded alloy tracks as part of their Upper Extrusion.
The extrusion of the S1 pole is pictured below (redacted):
The extrusion of the S2 pole is pictured below (redacted):
A third range of the poles is known as the "S3" series of poles. The S3 pole has a diameter of 120mm and as such can only accommodate two extruded alloy tracks as part of its Upper Extrusion.
There is also another set of poles called the Adepole whose status was also a live issue in the proceedings.
Smartpole poles are installed in prominent places throughout Sydney (and other parts of Australia). Examples in Sydney include Macquarie Street, Martin Place, George Street, William Street, Taylor Square, Oxford Street and Darlinghurst Road.
The City is the owner of registered trademarks for the word SMARTPOLE in classes 6, 11 and 19. It is also the owner of an Australian and Spanish patent, which relates to the Smartpole and the copyright in the drawings which are used to manufacture the Smartpole and various Australian registered designs.
During the term of the Licence Agreement, Streetscape manufactured and sold thousands of poles to the City, other government authorities and private contractors. Some of those poles were manufactured by Streetscape under the Licence Agreement using moulds which were based on the drawings and specifications the subject of the Licence Agreement.
Evidence given by the witnesses
While some of the issues in this case were to be determined objectively from the documents or on the basis of legal argument, a large part of the case turned on the Court's assessment of the various witnesses. It is therefore appropriate to consider the witnesses at the beginning and in considerable detail.
The plaintiff's witnesses
On the whole, I formed a favourable view of the plaintiff's evidence. Even after lengthy cross-examination, the plaintiff's witnesses were shown to be honest, careful and informative. Ms Baird SC, and later Mr Couper QC, were meticulous in cross-examination, yet despite their diligence, in all, save for a very limited number of areas discussed below, the highest the cross-examination rose was a mere suggestion of impropriety. On none of the significant issues in the case, did Counsel for the defendants prove on the balance of probabilities that any plaintiff witness was lying. The greatest concern the Court had in accepting the plaintiff's evidence was an apparent desire by some witnesses to tailor their answers in order to assist the plaintiff's case. This was a factor the Court considered in the overall evidentiary case put forward by the plaintiff, but given the otherwise accurate and reliable nature of the plaintiff's witnesses, their evidence was largely accepted.
Evidence of Michael Farrelly
Mr Farrelly was the first witness to be called by the plaintiff. Due to his travel schedule, Mr Farrelly gave evidence via video link from Auckland.
Mr Farrelly is an experienced metal designer, previously working for KWA, the original designer of the Smartpole. His evidence was that in this role he had little to do with the Smartpole. However, from mid 2000 until the end of 2001 Mr Farrelly worked for Streetscape, where he was involved in the development of the Smartpole.
The thrust of Mr Farrelly's evidence was that at the request of Mr Matchett of Streetscape, the witness designed the S2 Smartpole. Mr Farrelly described the S2 as a scaled down version of the S1, but with all the important features of the original pole. The purpose of his evidence was to show that, contrary to the defendants' case, the S2 was not substantially different to the S1.
Ms Baird's cross-examination focused on two areas:
(1) Mr Farrelly's motive for giving this evidence; and
(2) An inaccuracy in the timeline of design.
Motive
In cross-examination Ms Baird elicited from the witness that Mr Matchett, a friend of the witness, had now left Streetscape and worked for a company called Hubb. Hubb are the new manufacturers of the Smartpole on behalf of the City of Sydney. Ms Baird suggested to the witness that it is in his interests that the Court finds that Streetscape does not own the intellectual property in the S2 and this was his motivation for giving evidence. This suggestion was vigorously denied by the witness and while legitimately put to the witness, proved ultimately baseless.
Timeline
Secondly, Ms Baird took the Court at length through all the documents in Exhibit # D1. She did this in response to paragraph 7 of Mr Farrelly's affidavit in which he deposed that he commenced designing the S2 from mid 2001.
From Exhibit # D1 Ms Baird successfully proved that the S2 was actually designed 6 months earlier. Mr Farrelly admitted he must have made a mistake in his dairy. From this, the Court can conclude that Mr Farrelly designed the pole 6 months earlier than he thought, but in my view this doesn't turn on the substantive issue in his affidavit, that is whether the S2 is simply a smaller version of the S1.
Looking at Mr Farrelly's evidence as a whole, the Court viewed him as a good witness and the cross-examination did not significantly dent his credibility. His evidence that the S2 was designed using the confidential information provided to Streetscape by the City is accepted.
Evidence of Kylie McRae
Secondly, the plaintiff called Ms McRae, an accountant formerly employed by Deloitte to audit Streetscape for the purposes of calculating unpaid royalties owed to the City.
Ms McRae gave evidence on two key areas:
(1) The process she followed to audit Streetscape; and
(2) The conversations that led up to the two deeds of variation.
The audit
Ms McRae gave evidence about the differences in access provided to the auditors in respect of the first and second audit. Her evidence was that in the first audit Streetscape provided her team free access to all the necessary business records, but in the second audit these records were not forthcoming.
The cross-examination focused on the method Ms McRae used to categorise the poles in respect of which royalties were payable and also her communication with Ms Hobbs from the City and how this influenced the audit.
Mr Couper's suggestion throughout was that Ms Hobbs was very eager to maximise royalties payable and disregarded any explanation for why royalties weren't due by Streetscape. Mr Couper suggested that Ms McRae relied too heavily on Ms Hobbs and was not really independent. Mr Couper highlighted the extensive collaboration between Ms McRae and Ms Hobbs, particularly in reference to an internal audit report (MFI #D5). Counsel suggested that this collaboration distorted Ms McRae's independence.
Conversations leading up to the deeds of variation
Ms McRae also denied Mr Obeid's version of events leading up to the deeds of variations. Her evidence refuted any suggestion there was an oral agreement and stated that such an agreement would be contrary to the probity requirements of the City.
The witness was subject to significant cross-examination on this point. In cross-examination, Mr Couper highlighted some apparent inconsistencies or prima facie implausibility in certain parts of the witness's explanation for why the conversations deposed by Mr Obeid could not have taken place. In my view, the cross-examination rose no higher than a suggestion that her answers were implausible. The following section is illustrative:
Q. What I'm trying to understand is this, if Streetscape, under contract, was the sole supplier of Smartpoles to the city, where, if anywhere, was the absence of probity in a city representative saying to Streetscape, "This is what we anticipate the dollar value of future supply to be"?
HIS HONOUR
Q. Do you want that question put again?
A. I think so, yep.
MR COUPER
Q. I'll take it in stages. Streetscape, you knew, was the sole supplier of Smartpoles to the city, correct?
A. Correct.
Q. You knew it had a contract to supply them?
A. Correct.
Q. You knew that if the city was going to buy them they'd buy them from Streetscape?
A. Correct.
Q. It's a pretty obvious proposition, isn't it, that Streetscape would be interested to know what sort of orders it might expect in the future, pursuant to its contract?
...
Q. Let me ask you this question, Ms Hobbs (as said). Where is the absence of probity in the city informing Streetscape what dollar value of orders it might be receiving in the future?
A. Because I believe that it was referring to future orders and the agreement was ending.
Q. Which event was ending?
A. The licence agreement.
Q. You didn't think for a moment the supply agreement was ending, did you?
A. No.
Q. The orders being discussed were patently orders under the supply agreement and not the licence agreement, correct?
A. I don't recall.
Q. If there were orders they must have been under the supply agreement, correct?
A. Correct.
Q. And not the licence agreement, correct?
A. Correct.
Q. The imminent end of the licence agreement would be irrelevant to the future orders under the supply agreement, correct?
A. Correct.
Q. I'll ask you my question again, what was the absence of probity in the city informing Streetscape what dollar value of orders they might expect in the future under the supply agreement?
A. Only that I don't believe it was relevant to those discussions because we were talking about past events at these meetings, not future ones.
Q. So are you saying that it would have been improper for Ms Hobbs to have talked about future orders under the supply agreement because it would have been irrelevant to discussions about the licence agreement, is that what you're saying?
A. That's correct.
Q. Did you genuinely hold that view?
A. Yes.
Q. Just explain to me how it would be improper to talk about future orders under the supply agreement because you regarded that topic as being irrelevant?
A. I'm sorry, you'll have to rephrase the question. I don't understand what you're asking.
Q. I'll try again. You just told me, as I understand it, and correct me if I'm wrong, that it would have been improper for Ms Hobbs to talk about future orders under the supply agreement at this meeting because that topic was irrelevant, is that right?
A. Yes.
Q. You adhere to that position?
A. Yes. And I believe that the $6 million in orders was talking about orders that might be coming Streetscape's way.
My overall assessment of Ms McRae is that she was a well-prepared and careful witness who gave accurate evidence. There was some suggestion that she was too close to Ms Hobbs and this influenced her evidence. It was clear from her conduct under cross-examination that she was "in the camp" of the plaintiff, but the Court did not view this as impacting in any material sense the veracity of her evidence.
Evidence of Steven Newman
Mr Newman was one of the City's principal witnesses. He is an industrial designer and was employed by the City as a project manager for the specific purpose of overseeing the development of the Smartpole.
Mr Newman gave detailed evidence concerning the development of the Smartpole and his role in managing the project. His evidence formed the evidentiary basis for a large part of the plaintiff's case and consequently he was a very important witness.
The cross-examination ventured over a day and a half and properly delved into a large number of important areas. It was apparent that some of Mr Newman's evidence in cross-examination was influenced by his view of what was in the interests of the plaintiff's case. At certain points Mr Newman sought to pre-empt the point being made by counsel and answer the way he thought would be best for the plaintiff. Importantly, despite this observation it does not follow that Mr Newman is to be disbelieved. Indeed, throughout the duration of the cross-examination, Mr Couper was unable to significantly undermine the apparent honesty of Mr Newman on any of the key issues. I formed the view that Mr Newman gave a generally truthful and accurate account.
The most blatant example of Mr Newman's attempts to assist the City, concerned Mr Newman's definition of a Smartpole. The witness provided no clear answer as to what are the essential characteristics of a Smartpole and constantly changed his answer until he was left with a definition so broad that in his view anything with a track could be deemed a Smartpole:
Q. I think perhaps you and I are having a problem about the definition of "essential", Mr Newman. What I'm trying to find out from you is what you regard as being the essential features of a Smartpole. What must a pole have in order to be a Smartpole in your view. That's what I'm trying to find out?
A. Then I would say you could even delete the internal square steel section. If it has an exterior extruded sleeve with tracks, four tracks to be specific, it is following the City of Sydney Smartpole design.
Q. Let's deal with - we can take that in stages. Does that mean then, in your view the shape or the configuration of the internal supporting system is not relevant to whether a pole is or is not a Smartpole, is that what you say?
A. Yes, I would say that.
Q. Let me understand what you say is relevant to a pole being a Smartpole. Four external tracks, is that right?
A. Yes.
Q. So, for example, if there were two external tracks you would not regard the pole as being a Smartpole, correct?
A. I have made comments in my affidavits in regard to a design which probably only had two tracks but those tracks were exact copies of the Smartpole tracks. So, yes, as long as it had a track that copied the Smartpole track I would regard it as part of the Smartpole family.
Q. We'll try and tie down "essential" again, if we may. We'll leave the number of a moment. External tracks, in your view does the dimension of the track matter as to whether the pole is or is not a Smartpole?
A. Yes it does.
Q. So what dimension of track is required for the pole to be a Smartpole?
A. It just needs to follow the form of the City of Sydney Smartpole which, therefore, allows all the brackets that have been designed for it to utilise that track.
Q. Perhaps I should break it down. My question might not have been as clear as it should have been. Let's take two different elements, shape and size. Let us deal firstly with the shape of the track. Does the shape of the track matter as to whether the pole is or is not, in your view, a Smartpole?
A. Yes.
Q. Then - we may come to a drawing to do this, if it's of assistance. What shape of track is required for a pole to be a Smartpole?
A. It's basically the internal dimensions of that track, being the width across the face and the internal dimensions that therefore allow the brackets to work within it.
Q. Perhaps I could approach it in this way. We'll come to drawings in due course.
A. Yes.
Q. I'll take you to a drawing if you wish. You're familiar with, and indeed you speak about, drawings which have been described as the 4930 issue C drawings?
A. Yes I am.
Q. And those drawings contain a cross-section of the upper extrusion of a pole?
A. Yes.
Q. Which show both shape and dimension of the tracks, correct?
A. Yes.
Q. Are you saying that for a pole to be a Smartpole the tracks must have the shape and dimension - or shape and size of the tracks shown in the 4930 issue C drawings?
A. Yes I am.
Q. So if, for example, the track had the same configuration but was smaller, that would not be a Smartpole, correct?
A. I could see that you could start to infringe upon the Smartpole rights by scaling everything down of the Smartpole to be of a more miniature size and I would assume that that would cause the city some concern.
Q. I'm not so much asking about the city's concern, I'm trying to establish from you what you regard as being the features which are the essential characteristics of a Smartpole, because you refer to Smartpoles and form the view that certain poles are or are not Smartpoles throughout your affidavit. What I'm trying to find out from you is by what criteria you make that decision. So, can I ask you again, in your view if the external track had the same shape as the shape shown in the 4930 issue C drawings but was smaller, would you regard that as being a Smartpole?
A. Yes.
Q. If the track - if you had a pole with four external tracks but of a different shape to the shape shown in the 4939 issue C drawings, would you regard that pole as a Smartpole?
A. I may.
Q. You may? What are the parameters within which you may describe a pole, having a different track shape, as a Smartpole?
A. If it was trying to fulfil the same - similar functions in the same market, meaning multi-function street poles.
Q. Is the diameter of the pole itself relevant to the question, is the pole a Smartpole, in your view?
A. No.
Q. So, for example, if you had a pole with a diameter of, say, 400 millimetres, a very large pole which had four tracks, would you regard that as a Smartpole?
A. Yes.
Q. Why?
A. Because it's capable of all the similar things that the Smartpole does.
Q. Are we at this stage - and please tell me if I'm wrong about this, in your view any pole which has four tracks, perhaps of whatever shape or dimension, capable of being used to hold brackets to hold up lights, traffic lights, signs is properly regarded as a Smartpole?
A. Yes.
Q. So it really doesn't matter what size the pole is, what shape the tracks are or, indeed, what the internal structural mechanism is, any pole which fulfils the function of having brackets affixed to four sides to hold up signs and the like is a Smartpole. Is that your view?
A. Could you repeat it?
Q. Yes. I think, and correct me if I'm wrong about this, we've reached the stage where you say the diameter of the pole doesn't matter, correct?
A. Yes, I said that.
Q. The internal structural mechanism, that is, hollow square section, hollow circular section or anything else doesn't matter, correct?
A. Yes.
Q. Size of the track doesn't matter?
A. Yes.
Q. Shape of the track doesn't matter?
A. Yes.
Q. Indeed, four tracks as opposed to two might not matter, is that right?
A. Yes.
Q. So that the only criterion by which you judge a Smartpole is if it is a pole with a track or tracks to which one can affix a bracket which might hold up a traffic light or a street light or a sign, correct?
A. Yes.
Q. And is that the way you have approached the question of what is or is not a Smartpole in your affidavits?
A. No. In my affidavit we were specifically looking at poles that were very much the same as the city's design
This was not an impressive definition and as such I approached the evidence of Mr Newman with a degree of caution because of his evident desire to mould his answer's to fit the plaintiff's case. However, assessing his evidence in light of the other plaintiff witnesses and in comparison to the defendants', despite the witnesses' motivation, his evidence was shown to be truthful. Mr Couper's cross-examination was unable to persuade the Court that Mr Newman had fabricated any evidence, on any of the key issues in the case.
Evidence of Trent Scrivener
Mr Scrivener was the project engineer for Woollahra Council tasked to deliver infrastructure projects. He had some control over the tender process for Smartpoles in Woollahra Council.
Mr Scrivener's credibility was questioned because it was suggested that he disseminated confidential tender documents. He said he sought permission from his manager to do this. In my view, not much turned on this issue.
The key reason for the plaintiff calling Mr Scrivener was because of Exhibit # P7. This was a folder, which on Mr Scrivener's evidence, was received by Woollahra Council from Streetscape Australia as part of their tender. The documents in the folder make mention of Streetscape's international projects, including projects in the UAE. The inference sought to be drawn by the plaintiff was that Streetscape Australia and International are one entity and represented this in their tenders.
Mr Couper's cross-examination on this matter was effective. The defendants created significant doubt as to whether this folder was received as part of the tender application. This doubt turned on the fact that Mr Scrivener received all the materials from the document registry at the Council and didn't see the tender as it arrived. It was therefore possible that the registry combined the tender with the Streetscape International folder which was received at a different time. Another important point raised was that the folder wasn't listed in the contents of the tender bundle itself.
While I accept counsel raised doubt in cross-examination as to whether the folder was part of the tender, stepping back from the cross-examination and considering the issue as a whole, as a matter of logic and probability the document must have been part of the tender. There was no conceivable alternate explanation for how the council got the folder other than as part of the tender. Mr Couper's theory was purely speculative. In my view, on the balance of probabilities the folder was part of the tender.
It is important to note this was not the only evidence put forward by the plaintiff that Streetscape Australia and Streetscape International were one entity. The Court's view of Mr Scrivener's evidence formed just one part in its overall consideration of whether Streetscape Australia and International were two separate entities or rather one.
Evidence of Robyn Hobbs
Ms Hobbs was until very recently the Executive Manager of the City, Community and Cultural Services Division. She was the primary point of contact for Streetscape in its dealings with the City. In this respect, Ms Hobbs was a key witness in these proceedings.
The case put forward by the City is heavily reliant on the evidence of Ms Hobbs and in particular what representations she made to the City at the time of entering into the two deeds of variation. Therefore, if the Court accepts her as a witness of truth, a large part of plaintiff's case succeeds and the defendants' misleading and deceptive claims, as well as other aspects of their case, fall away.
In deference to the lengthy submissions put by both parties on the issue of Ms Hobbs' credit, it is appropriate that the Court makes a clear finding in this regard. I accept Ms Hobbs as a witness of truth. Except in a small number of areas which are discussed below, the contemporaneous documentary evidence wholly supported her account. In challenging Ms Hobbs' evidence, the highest Mr Couper's assertions rose was suggestions of impropriety. On the essential issues which Ms Hobbs gave evidence, she was not shown to be lying.
While Ms Hobbs was a witness of truth, her demeanour in the witness box indicated that she was intent on being an advocate for the City's case. Ms Hobbs frequently provided non-responsive or overly lengthy explanations in an attempt to assist the plaintiff. Importantly, despite the underlying motivations for Ms Hobbs giving evidence, her evidence was supported by the contemporaneous documents and was consistent with the other evidence in the case.
It is not necessary or possible to recount the totality of Ms Hobbs' evidence, however to illustrate the reasons for this finding, it is appropriate to address some of the key examples cited by the defendants as reasons why the Court should make an adverse credit finding against Ms Hobbs.
Mr Couper's cross-examination was broad, but focused on six key propositions. They were:
(1) Ms Hobbs cannot be believed;
(2) Mr Obeid always owned the intellectual property in the S2 poles;
(3) Ms Hobbs made representations to Mr Obeid that the City would sell the intellectual property in smart poles to him and this induced him to enter into the deeds of variation;
(4) The City did not always strictly follow probity requirements and these requirements would not have prevented a sale of the intellectual property to Mr Obeid;
(5) The contracts were terminated for political reasons and everything else was an excuse; and
(6) The CEO of the City was not misled personally when she signed the deeds of variation.
The first important question concerning Ms Hobbs' credit related to her delay in addressing Streetscape International's alleged breaches of the City's intellectual property rights. Ms Hobbs was notified of these alleged breaches in mid 2008 but did not raise the issue with Mr Obeid until 3 December 2008, some six months later. It was suggested by Mr Couper that the Dubai poles issue was not really a concern and that the City used it as an excuse to stop using Mr Obeid's company and replace it with Mr Matchett's. Mr Couper also asked the witness why she didn't confirm whether Mr Obeid told people in the City about Streetscape International. It was suggested that this was because the whole issue was nothing but an excuse. Ultimately, these objections to Ms Hobbs evidence were suggestions and assertions of oddity, they rose no higher.
Other questions raised by Mr Couper concerned the "bridge climb precedent" and probity. The bridge climb precedent refers to the City of Sydney awarding the rights to conduct bridge climbs to a company without the need for a tender because of the significant amount of money that the company invested to get bridge climb tours operating. Mr Obeid repeatedly requested the same treatment in acquiring the intellectual property in the smart poles without a tender. Ms Hobbs emphatically denied she ever made representations to Mr Obeid that he could purchase the intellectual property in the Smartpoles without a tender.
This line of questioning continued, with Mr Couper referring the Court to Clause 3.3 of the Licence Agreement which details the conditions on which the City may extend Streetscape's license beyond the original three-year term. Mr Couper indicated that the extension conditions were not met, yet the City chose to extend the license. The point made was that this decision was made without a tender. In other words, a commercial decision was made against proper probity protocols. Mr Couper questioned why, in these circumstances, Ms Hobbs was so resolute that the intellectual property in the Smartpoles could not be sold without a tender. This raised some doubt in the Court's mind as to the veracity of Ms Hobbs' evidence but again was not sufficient to displace its truth.
Mr Couper also questioned Ms Hobbs as to whether Streetscape was bullied into giving up its legitimate rights to the S2 pole because the City would not do business with it unless it did and why Ms Hobbs met alone with Mr Obeid at the Sheraton on the Park. I accept that it was peculiar that Ms Hobbs and Mr Obeid met at a hotel and not at Town Hall and that no contemporaneous notes were taken but rather a solicitor recorded the meeting post the event. However, despite the apparent oddity, nothing more was able to be made of the issue.
The two other areas of focus were on whether the no dispute requirement in the tender was a pressure clause and whether the Adepole was used as a bargaining chip. The suggestion sought to be made was that Mr Obeid's concessions in the two deeds of variations do not reflect the true state of ownership in the S2 pole. It was suggested that Streetscape was forced to make these concessions for commercial reasons. Ultimately these were just suggestions and do not significantly affect the real issues in the case.
Mr Jucovic's re-examination was short and focused on:
(1) The no dispute "pressure" clause being completely reasonable given the history of litigation concerning smartpoles and the need for an ongoing relationship between the City and whoever won the tender;
(2) The confidential value of the IP and how the upper limit meant that by law a sale could only take place through a tender (s55 Local Government Act);
(3) The apparent links between the license and supply agreement; and
(4) The express clarity of the requirement for probity in the sale of any IP in correspondence between the parties
Without repeating the findings above, after lengthy cross-examination by competent counsel, it is not surprising that some inconsistencies or oddities arise. These oddities were not sufficient for the Court to make a finding other than Ms Hobbs is a witness of truth.
Evidence of Garry Harding
Mr Harding was the Director of Community Services at the City of Sydney and Robyn Hobbs' boss. Mr Harding had the overall responsibility for negotiations with Streetscape. Mr Harding was a good, honest witness. He was direct, confident and displayed a good knowledge of the issues.
The first area of cross-examination explored by Mr Couper concerned notes taken by Mr Harding of important meetings. Mr Couper sort to make the point that in most of the earlier meetings Mr Harding made notes, however in the overwhelming majority of conversations deposed to in Mr Harding's most recent affidavit, there were no notes. The inference was that these latest conversations were simply made up to close a perceived gap in the plaintiff's case, namely the fact that the decision maker was never made aware of the apparently misleading statements by Streetscape.
The second area of cross-examination was in relation to the ownership of the Adepole. It is an area of substantial importance. In the First Deed of Variation the Adepole was marked TBD (to be determined), however in the second, the rights were signed over to Streetscape. Mr Couper suggested that the only reason the City claimed any rights over the Adepole was to use it as a bargaining chip so that they could secure rights over the low impact pole. Mr Harding denied this version, stating their decision to relinquish claim over the Adepole was made on the basis of representations by Streetscape only. Mr Couper questioned this evidence, suggesting the City did not relinquish their rights on the basis of representations made by Streetscape but rather conducted investigations and relinquished their rights based on these investigations.
Mr Harding was a careful witness whose evidence was accepted by the Court in most areas. Importantly, his evidence was not accepted in relation to the City's reliance on representations made by Streetscape as to the nature of the Adepole. The reasons for this finding are discussed in more detail later in the judgment.
Evidence of Lynette Nicholson
Currently Ms Nicholson is special counsel at Holding Redlich and has worked closely with the City of Sydney over most of the course of the negotiations with Streetscape, particularly while employed at Thomas Playford.
Ms Nicholson was cross-examined in respect of a number of areas, particularly in relation to the Adepole. She was perceived as a witness of truth who took her obligations to the Court seriously. Her account was consistent with other witnesses for the plaintiff.
Evidence of Michael Royle
Mr Royle was first introduced to Streetscape in 2000, when Interium Designs, a company that he worked for, were engaged by Streetscape to work with it on the First Fleet Park Project. Since that time the witness has had business dealings with Streetscape and its employees. Mr Royle gave detailed evidence of the establishment of Streetscape International and its apparent links to Streetscape Australia. In particular Mr Royle gave evidence of introducing Mr Al Mohammed to Gerard Obeid, which on Mr Royle's evidence prompted Streetscape Australia to expand into the UAE.
Mr Couper's cross-examination sought to challenge Mr Royle's knowledge of the links between Streetscape Australia and Streetscape International. In particular Mr Couper emphasised that Mr Royle had no material dealings with Streetscape between 2003 and 2006 and could not have known if they were associated.
The witnesses' recall of conversations with Mr Gerard Obeid was also challenged and it was put to Mr Royle that conversations that he gave evidence of, did not occur but were rather the product of assumption:
Q. Can I suggest this to you, that Gerard Obeid was not at the meeting where you presented your product to John McLeod, what do you say to that?
A. He was in the room.
Q. And, if we look at paragraph 36 of your first affidavit, I'd suggest to you that Mr Obeid did not say the words which you ascribe to him?
A. That's how I remember it.
Q. Tell me, going to paragraph 43 of your most recent affidavit, how you came to recall the additional words at that same meeting which you've set out in paragraph 43?
A. Because they're in the email of 8 October - sorry, 8 November, referred to in paragraph 44.
Q. Is your recollection of the words spoken in paragraph 43 of your most recent affidavit based entirely on the email referred to in paragraph 44?
A. Correct.
Q. Let us look then at the email, which is behind tab 23 of exhibit MTSR2. Do you agree that the email says nothing whatever about Gerard Obeid being needed for a Streetscape International project in Qatar?
A. He said he would return to Dubai in ten days and apparently Streetscape Dubai had just been awarded a major contract, that's how I recollect it.
Q. Did you, in your affidavit, put two and two together and make the assumption that Mr Obeid's return to Dubai must have had something to do with that contract?
A. Correct.
Q. He certainly didn't say to you he was needed for that project, did he?
A. I can't remember.
Q. What you have included in your affidavit at paragraph 43, as part of the conversation, that is, "And I am needed for that project" is simply speculation on your part, Mr Royle, correct?
A. I don't know.
The Court had difficulty in assessing the veracity of Mr Royle's evidence. In significant areas his recall was either patchy or flawed. Evidence given by the witness on important conversations was not altogether coherent or consistent. For this reason, the Court cannot accept the evidence of Mr Royle in its entirety. His recall on important issues was not sufficient or reliable. His evidence was not of assistance to the Court.
Evidence of Robert Matchett
Mr Matchett held various roles throughout the development of the Smartpole. Originally Mr Matchett was a director of KWA, he was then employed by Streetscape and now works for the defendants' competitor Hubb. The Court generally accepted him as an honest witness who exhibited a good recollection of the entirety of events in question. However, at certain points I was concerned with the plausibility of the witnesses' explanations. Ultimately, not strictly being in either camp, Mr Matchett was an informative witness whose evidence supported the City's case at certain points and in others contradicted it.
One very important aspect of Mr Matchett's evidence was his explanation of the wholly oral terms in the Hubb supply agreement. This oral term permitted Hubb to sell Smartpoles to private developers without paying royalties to the City. These representations were not made in writing, but were wholly oral and recorded in the minutes of the meeting in which they were made (Exhibit # D13). The relevant cross examination was as follows:
Q. Now, is this the agreement which you say gives HUB the right to sell smartpoles to private developers within the boundaries of the City of Sydney?
A. This is the contract under which I made that statement, yes.
Q. I take it you're familiar with this contract?
A. I have read it.
Q. Could you perhaps assist me and point out the provision or provisions of that contract which give HUB the right to sell Smartpoles to private developers within the City of Sydney?
A. I can't point to it specifically. What I can tell you is it was discussed in - like, without going through it and finding it specifically, what I can tell you is that it has been discussed in numerous meetings with the City of Sydney and a specific procedure has been adopted which allows us to provide Smartpoles to developers in the City.
Q. Let me take this in stages, if I may; have you ever performed the exercise of looking through this contract to ascertain for yourself whether any part of it gives HUB the right to sell Smartpoles to the City - to private developers in the boundaries of the City of Sydney?
A. I haven't had to question what the City officers and HUB discussed in our meetings.
Q. Well is the answer to my question then no, you've never read the document to see if it actually contains the rights to let HUB sell Smartpoles to--
A. No, I haven't checked this document in that regard.
Q. So then do you say that you've worked on an assumption that conversations with officers of the City meant that HUB was entitled to sell Smartpoles to private developers?
A. Minuted meetings.
Q. Minutes meetings. With whom and when?
A. The one I - I can't recall a date or time. I can produce the minutes if necessary, but it was with Ian Rudgley, Allan Saxby, Paul Gowan. That's all I can recall - and myself and Anton Beardmore from HUB.
This evidence was very surprising in light of the plaintiff's case that officers of the City could have not made oral representations to Mr Obeid, because such representations would be contrary to probity requirements. This assertion seems to be contradicted by Mr Matchett's evidence.
Another significant area of cross-examination focused on the extent to which the design specifications and other confidential information were distributed by Streetscape to interested parties. Mr Matchett's evidence was that much of this information was freely sent out without any confidentiality conditions, as indicated in Exhibit # D7. In re-examination Mr Jucovic asked questions about the standard procedures for quotes and Mr Matchett explained that it was standard procedure for such quotes to require confidentiality undertakings. Despite this explanation, it was clear from Mr Matchett's evidence that a number of apparently confidential documents were freely distributed to interested parties. This seemed to support the defendants' case that the designs were not confidential to the extent that the City maintains.
A further interesting area of cross-examination related to the Adepole issue. Contrary to other plaintiff witnesses, Mr Matchett unequivocally stated that Streetscape notified the City of Sydney about the Adepole:
Q. Do you recall that the City of Adelaide then asked you to get from the City of Sydney, some assurance that the City of Sydney owned the intellectual property rights in what would be the Adepole?
A. Yeah I do recall.
Q. And you communicated to the City of Sydney, the fact that Streetscape wished to sell a Smartpole variant called the Adepole to the City of Adelaide, correct?
A. I communicated to whom?
Q. The City of Sydney?
A. Yes.
Q. And you sought from the City of Sydney some form of assurance of indemnity which you were to give the City of Adelaide to say Sydney stands behind the ownership of these poles?
A. Yes I do recall that.
Q. Now amongst those communications you had were communications with Mr Vladeta of the City?
A. If he was there then yes.
Q. In any event, you made it clear to the City of Sydney's representatives that Streetscape wanted to sell the Adepole to Adelaide and it was being impeded because of this issue about ownership of the rights in the Smartpole. Correct?
A. It was being impeded because Doug was making certain assertions about ownership.
Q. When you say 'Doug' you mean Doug Rawson-Harris of Goldspar?
A. I do.
Q. And he was making assertions that Goldspar owned the rights?
A. Correct.
Q. And what you made clear to the City of Sydney representatives was that your dealings with Adelaide about being able to sell Smartpoles to Adelaide were being held up while that issue was up in the air, correct?
A. I communicated the message that Doug was sending to Adelaide. I communicated that Adelaide was nervous but wanted to progress with Streetscape and I asked the City to provide something to Adelaide that would give them the confidence to progress, yes.
Q. Amongst those communications, you made it plain to the City of Sydney's representatives that the pole Streetscape wanted to sell to Adelaide was a Smartpole or a number of Smartpoles?
A. That's right.
Q. And that was the reason why Adelaide was looking to the City of Sydney?
A. That's right. Everyone knew it was a Smartpole, just dressed up.
Q. And it's the case is it not that you referred to the pole in your dealings with City of Sydney as the Adepole?
A. Correct.
The Court considered this evidence important, because it supports the defendants' case that the City was not misled by the defendants as to the nature of the Adepole, but rather the City understood that the Adepole was a Smartpole and made a conscious decision not to pursue royalties in the second deed of variation.
The final important area of cross examination related to Mr Matchett's evidence concerning the link between Streetscape Australia and Streetscape International. In Mr Matchett's affidavits, he was resolute that the entities are the same. Under cross-examination, this evidence was seriously challenged:
Q. Can I ask you to take up your first affidavit Mr Matchett, the affidavit sworn on 19 May, the affidavit behind tab 45 in the Court book? Can you come please to page 7 of that affidavit, page 729 of the Court book? Can I take you to paragraph 45 of that affidavit? When do you say that Gerard Obeid informed you that he had secured a contract for the supply of Smartpoles for the development of Dubai Marina?
A. I can't recall the date. It was during the time that he was travelling to the Middle East on a regular basis.
Q. See, Mr Obeid never told you that did he?
A. He did tell me that.
Q. Do you say you ever saw any document recording or referring to such a contract?
A. No, I don't say that.
Q. Come to paragraph 46 if you would? It's right to say isn't it that you do not know what material Joshua Abood took to Dubai, correct?
A. I can't recall specific instances, dates of him walking out of the office with various things in his hand. What I can recall is him being given various pieces of information, various tools so that he could use those to promote the Smartpole in the UAE. They included the digital presentation, the brochure, various pieces of information and collateral, promotional collateral.
Q. When you come to paragraph 47 of your affidavit what do you mean when you say, "I also observed another Streetscape employee, Adam Smith, leave the Streetscape office in Australia with these types of materials". What does that mean?
A. He -Adam went and stayed in Dubai for one or two or three periods, I can't recall how many and he would take with him again information that described the Smartpole system.
Q. Did you look inside his briefcase before he went, is that what you're saying?
A. No, that's not what I'm saying.
Q. Is it fair to say you've got no real idea what documents Mr Smith took to Dubai?
A. It's fair to say that it was a small office, we all knew what each other was doing and I was aware that he was going over there. So having someone take pieces of material to assist the activity that was going on in the UAE was a normal thing to do. It was cheaper and more reliable than putting them in a package and sending them to wherever he was going to work.
Q. Is the extent of your actual knowledge this Mr Matchett, that you knew that Mr Smith was taking something to Dubai to assist him in promoting Smartpoles?
A. I don't believe Adam ever promoted the Smartpoles directly, I believe Adam went there to provide technical support to the activity that was going on there I--
Q. What did you mean - finish Mr Matchett?
A. --don't believe Adam ever went to promote the Smartpole.
Q. What did you mean in paragraph 47 of your affidavit when you said, "When he was leaving for a trip to Dubai to promote the Smartpole"?
A. Well that's probably not completely accurate - well it's not accurate. I don't believe he went there to promote Smartpole. I believe - he may have attended meetings with Gerard and Josh and provided technical backup, so if that's promoting then--
Q. Go on, finish your answer?
A. That's finished.
Q. Are these your words in the affidavit which you swore to Mr Matchett?
A. Yes, they are.
Q. So you swore using your own words that Mr Smith was leaving for a trip to Dubai to promote the Smartpole, correct?
A. Well to clarify he wasn't directly responsible for promoting the Smartpole, that was Gerard and Joshua took on that responsibility. Adam went to Dubai in order to provide technical supports. So if he went to meetings and answered technical questions as part of presentations then that's a form of promotion.
Q. Are you saying that you don't know what if any involvement Mr Smith had in promotion so you're speculating, is that what's going on?
A. I am speculating about his role in regard to promotion.
Q. Just explain how that speculation led you to swear the positive statement that he was leaving for a trip to Dubai to promote the Smartpole Mr Matchett?
A. My view at that time was that all trips they were all - before I left Streetscape all of the trips were in the early phase of Streetscape's activity in the UAE and the great majority of the activity that was undertaken in the UAE at that time was for promotional purposes in order to attempt to secure contracts.
(1) invoices recording sales by Streetscape Projects of S1 and S2 poles after 1 September 2009 [Exhibit P20 - being documents produced in answer to Notice to Produce for records of sales of S2 poles and Adepoles as and from 1 September 2009 (as defined in orders made 14 December 2009). See sales for example, behind Tab 2 (S1 pole), Tab 13 (S1 pole), Tab 14 (S2 pole), Tab 18 (S2 pole), Tab 32 (S2 pole) and Tab 36 (S1 pole)]; and
(2) evidence given by McLeod that Streetscape Projects has continued to use S2 moulds for making poles and is using those moulds to manufacture and supply poles and that the invoices in P20 are sales of S1 and S2 poles by Streetscape Projects post expiry of Licence Agreement [T McLeod 13/9/11:44:20-27. Also see T McLeod 13/9/11:48:44-51:13].
The approach taken by streetscape projects in relation to injunctions
Streetscape appears to attempt to justify continuing to manufacture and sell Smartpoles by reason of its claims under paragraph 4 of the Commercial List Response to the effect that:
(1) Streetscape Projects is the owner of the Intellectual Property subsisting in all or some of the S1 poles set out in Tables 1 and 2;
(2) Streetscape Projects is the owner of the Intellectual Property subsisting in all or some of the S2 poles set out in Tables 3 and 4;
(3) Streetscape Projects is the owner of the Intellectual Property subsisting in all or some of the S1 and S2 poles set out in Table 5 (which are described as being part of the "Adepole Range"; and
(4) Streetscape Projects is the owner of the Intellectual Property subsisting in all or some of the S3 poles set out in Tables 6.
The Court has rejected the defendants' claim and ruled that the intellectual property in the S1, S2 and S3 extrusions vests in the City by reason of the Licence Agreement or agreements predating this agreement.
The Court accepts that the continued distribution of Smartpoles after 1 September 2009 is in breach of clause 7.2 of the Licence Agreement. It is also in breach of the pre-licence agreements which contain independent and co-ordinate rights concerning Streetscape's use of the Intellectual Property (as pleaded in paragraph 80A of the sixth further amended commercial list statement). The continued distribution of Smartpoles is also in breach of the fiduciary duty and/or duty of confidence (as pleaded in paragraphs 80C-80D the sixth further amended commercial list statement).
The further finding is that unless retrained, Streetscape will continue to use the intellectual property subsisting in the Smartpoles to carry on its business in breach of the abovementioned obligations. The appropriate order should reflect the Court's finding that Streetscape should be restrained from using the City's intellectual property in the S1, S2 and S3 extrusions and any other intellectual property owned by the City without their consent. This restraint will not be enforceable so far as Streetscape makes use of the extrusions and other property for the purpose of dealing with Adepoles within the boundaries of the City of Adelaide and for that council.
Damages
The findings are as follows :
(1) The City, in addition to injunctions, is entitled to damages for the breaches of agreement/breach of equitable duties.
(2) The appropriate orders to be made against Streetscape Projects and Moses Obeid are orders to pay damages and/or equitable compensation in relation to Streetscape Projects' distribution of " Smartpole " poles and the other poles which the City owns after 1 September 2009.
(3) Streetscape Projects was prohibited from using the Intellectual Property after 1 September 2009 without the prior written consent of the City. The City was entitled to an injunction restraining Streetscape Projects from using the Intellectual Property without its consent.
(4) The price for that consent would have been royalties. Clause 15.5 of the Licence Agreement evidences the appropriate measure of those royalties and the price for the City's consent to use the Intellectual Property.
(5) The equitable duties owed by Streetscape Projects and Moses Obeid to the City required that they obtain the authority of the City before using the property of the City to manufacture and sell Smartpole poles in the UAE or Singapore. The consent of the City would not have been forthcoming without an undertaking to pay royalties and licence fees. The Licence Agreement contemplates the measure of those royalties and fees in clause 15.5 which evidences the amounts that would be payable as the price for that consent.
(6) This is in conformity with the particulars of the City's claim. Paragraph 42A of the Commercial List Statement particularises the loss for breach of equitable duty (pleaded in paragraph 40) as "loss of opportunity to obtain royalties and other fees from Streetscape International in respect of the use of Intellectual Property and the Confidential Information" (emphasis added). Paragraph 39 of the Commercial List Statement pleads that the business of Streetscape International was derived from Streetscape Projects and was carried on for and on behalf of Streetscape Projects. Accordingly, the loss is the loss of royalties and licence fees from Streetscape Projects itself.
The table below sets out an analysis of the sales records produced by Streetscape and contained in Exhibit # P20.
Tab No. in Exhibit P20
Smartpole Product
Customer
Amount
1
Three types of Smartpoles and accessories
City of Ryde
$ 40,352.95
2
Smartpole S1B 9.6m and accessories
Energy Australia
$ 54,916.40
3
Smartpole S1B 9.6m and accessories
AYZ Landscapes
$ 24,118.60
5
Smartpole poles S1A (12m) and S1B (12m and 9.6m)
Bovis Lend Lease
$ 345,827.00
6
Smartpoles S1A (12m) and S1B (12m and 9.6m)
Bovis Lend Lease
$ 345,827.00
7
Smartpoles S2 (4.5m) and accessories
City of Ryde
$ 15,955.50
8
Smartpole Standing No. 7
PM Electric
$ 1,650.00
9
Smartpoles and all accessories and spare poles
PowerServe
$ 154,087.45
10
Smartpoles and all accessories and spare poles
PowerServe
$ 37,488.55
11
S2 external GPO Boxes
City of Ryde
$ 1,848.00
12
Removal of Smartpole
Roads and Traffic Authority
$ 3,590.40
13
Smartpoles and all accessories and spare poles
PowerServe
$ 29,678.00
14
Smartpoles and accessories
Billbergia Developments Pty Ltd
$ 96,954.00
15
Smartpole S1A poles
Ford Civil Contracting Pty Ltd
$ 11,495.00
16
Smartpoles and installation
Heyday Group Pty Ltd
$ 5,108.40
17
Maintenance and assembly of replacement pole
Roads & Traffic Authority
$ 10,920.00
18
Smartpoles S2 poles and accessories and installation
Heyday Group Pty Ltd
$ 15,325.20
19
Smartpole S2 poles and accessories and installation
Heyday Group Pty Ltd
$ 20,433.60
20
Credit note for the above sale
21
Smartpole S1A (9.6m) poles
Ford Civil Contracting Pty Ltd
$ 2,420.00
22
Smartpole accessories
Darwin Waterfront Corporation
$ 5,086.40
23
"Little India" Multifunction poles and accessories
Technolite (Singapore) Pte Ltd
$ 233,024.86
24
"Little India" Multifunction poles and accessories
Technolite (Singapore) Pte Ltd
$ 231,835.83
25
"Little India" Multifunction poles and accessories
Technolite (Singapore) Pte Ltd
$ 123,711.34
26
"Little India" Multifunction poles and accessories
Technolite (Singapore) Pte Ltd
$ 693,992.70
27
Smartpole accessories and sign assembly
Technolite (Singapore) Pte Ltd
$ 1,413.58
28
Passenger Information Display pole
Roads and Traffic Authority of NSW
$ 62,601.00
29
Smartpole accessories and foundation
Total Communications Infrastructure
$ 6,952.00
30
Smartpole S2 poles and accessories
GW Building Pty Ltd
$ 4,909.30
31
Two types of multifunction poles and accessories
Macquarie University
$ 59,188.00
32
Smartpole S2 poles accessories
Rexel Australia
$ 15,394.50
33
Removal and repair of pole and accessories
City of Ryde
$ 5,467.00
34
Smartpole S1 and S2 poles and accessories
Bovis Lend Lease
$ 39,400.46
35
Two types of multifunction poles and accessories
Macquarie University
$ 59,188.00
36
Two types of Smartpoles and accessories
Gillmore Electrical Services Pty Ltd
$ 110,343.36
37
MFP and accessories
Hender Lee Electrical Contractors Pty Ltd
$ 245,847.80
38
MFP poles and accessories
Hender Lee Electrical Contractors Pty Ltd
$ 243,863.40
39
Two types of RTA poles and accessories
Port Macquarie-Hastings Counsel
$ 4,177.80
40
Adepole and accessories
Adelaide City Council
$ 14,659.70
Total sales
$ 3,379,053.08
[No. 26: The Invoice for this distribution at Exhibit P20: Tab 26 was issued in USD in the amount of $569,500.00. Using the invoice at Exhibit P20: Tab 25, which was issued on the same date in both AUD ($123,711.34) and USD ($150,750.00), a conversion rate of USD$1 = AUD$1.2186 can be calculated by dividing 150,750 by 213,711.34. This conversion rate was then applied to the amount in the invoice at Exhibit P20: Tab 26 to yield the figure of AUD$693,992.70.
No. 27: The Invoice for this distribution at Exhibit P20: Tab 27, which was issued on the same date in both USD in the amount of $1,160.00. Using the invoice at Exhibit P20: Tab 25, which was issued in both AUD ($123,711.34) and USD ($150,750.00), a conversion rate of USD$1 = AUD$1.2186 can be calculated by dividing 150,750 by 213,711.34. This conversion rate was then applied to the amount in the invoice at Exhibit P20: Tab 27 to yield the figure of AUD$1,413.58]
The damages for either breach of clause 7.2 Licence Agreement, breach of the terms of the pre-licence agreements or breach of equitable duties is calculated by applying the rate provided in clause 15.5 to the total sales of poles owned by the City following the expiry of the Licence Agreement. That amount is $3,364, 393.38 ($3,379,053.08 - $14,659.70 for sales of Adepoles in Adelaide). Royalties is 10% of that amount or $336, 439.34 plus any applicable license fee.
Under section 68 Supreme Court Act , where the Court has power to grant an injunction against any breach of contract or the continuance of any wrongful act, it may award damages to the party injured in addition to the injunction. That section enables the Court to address the issue of losses caused to the City by reason of Streetscape's breaches that are not completely addressed by the order for injunctive relief [See, for example, Ford-Hunt v Raghbir Singh [1973] 2 All ER 700 where equitable damages were awarded in addition to a decree for specific performance to a purchaser of land to compensate him for the losses occasioned by the vendor's delay in completing the contract]. The Court accepts that is a further basis on which damages of 10% of the abovementioned total ought to be ordered.
Maggbury v Hafele
The City have submitted and the Court accepts that City is entitled to relief by way of injunction and damages regardless of whether or not the Intellectual Property is "confidential" apart from the Licence Agreement. In this regard, even if the Intellectual Property was in the public arena (which is claimed by Streetscape and is denied) or some of the Intellectual Property was legally "owned" by Streetscape before the Licence Agreement (which is claimed by Streetscape and is denied) the City is still entitled to relief.
The High Court authority for this proposition is Maggbury Pty Limited & Hafele Australia Pty Limited (2001) 210 CLR 181.
The position in Maggbury Pty Limited was as follows:
(1) Maggbury entered into a confidentiality agreement with Hafele under which it was contemplated that there would be later discussions about the commercial exploitation of inventions and related know how concerning a folding ironing board. The agreement provided that Hafele would treat the information as "private and confidential" and would not at any time thereafter use it for any purpose without Maggbury's consent and that it would "forever observe the obligations of confidence" set out in the agreement.
(2) No agreement was made between the parties for the commercial exploitation of ironing boards. However, Hafele commenced manufacturing the ironing board in Germany. By that time, the invention had been publicly disclosed by Maggbury at trade fairs in Australia and by publication of an application under the Patent Co-Operation Treaty.
(3) Maggbury sued Hafele to enforce the confidentiality agreement. The trial judge found that Hafele had used information provided by Maggbury under the agreements and granted an injunction restraining them from manufacturing or distributing the ironing board.
(4) The Queensland Court of Appeal upheld an appeal by Hafele, concluding that the confidentiality agreement was unenforceable because it had no time limit.
(5) It also held that no injunction should be granted under general law because the information had been made public and that an injunction, if granted, would have to be confined in its operations to information not publicly available.
(6) On appeal from the Queensland Court of Appeal, the High Court considered two issues. First, whether the confidentiality agreement was enforceable notwithstanding the public disclosure of the information and, second, whether the provisions of the agreement were invalid as being a restraint of trade.
(7) Gleeson CJ, Gummow and Hayne JJ held that the first question is to be determined by reference to the construction of the agreement , not by reference to whether confidentiality had been lost by reason of the information being put into the public domain. In this regard, their Honours drew a distinction between circumstances where the relationship between the parties was contractual rather than equitable, as was the case before the High Court [ Maggbury P/L v Hafele Australia P/L [2001] 210 CLR at 201 line 46-49]. Their Honours found that, where the relationship is contractual, the first question is one of construction of the agreements, the relevant enquiry being:
"What then is the effect, upon their proper construction, of the contractual restraints in question here?" [ Maggbury P/L v Hafele Australia P/L [2001] 210 CLR at 201 line 51-52].
(8) Their Honours found that, on a proper construction of the agreement, the use of the information by Hafele was in breach notwithstanding that the information was in the public arena and that an injunction would follow.
(9) However, their Honours then went on to consider whether the contractual terms survived the restraint of trade doctrine, concluding on the facts that it did not.
Plaintiff's entitlement to elect
It is trite to observe that the plaintiff has an entitlement to elect after the reasons for judgment are handed down to seek an account of profits in the alternative to equitable compensation.
The plaintiff's claims in relation to delivery up of the "Smartpole" intellectual property
The City claims delivery up of the Smartpole intellectual property by Streetscape. The delivery up falls into two categories:
(1) delivery up of documents required to be delivered up pursuant to the Licence Agreement as varied; and
(2) delivery up of moulds required to make the component parts of the " Smartpole " poles.
The delivery up of documents is dealt with below. The delivery up of moulds is dealt with in turn.
The parties' positions on delivery up of moulds
The City seeks orders requiring Streetscape to deliver up all documents it possesses containing the City's intellectual property.
Streetscape resists delivery up of documents other than the documents returned to the City in July 2009 (which comprised in the main the Product Manual and Specification Drawings annexed to the Licence Agreement) on the basis that it is entitled to all Improvements to the Smartpole under clause 5(c) in the Second Deed of Variation.
Streetscape also contends that it is entitled to all documents relating to the poles which Streetscape claims, in paragraph 4 of its Commercial List Response, belong to it.
The City disputes the claims made by Streetscape in paragraph 4 of its Commercial List Response and claims all documents containing the "Intellectual Property" in those poles referred to in paragraph 4 should be delivered up, being the drawings referred to in paragraphs 87 and 92 of the Commercial List Statement.
The Licence Agreement
Streetscape was obliged under the Licence Agreement to give delivery up in two tranches. The delivery up regime is set out in the Second Deed of Variation and the Licence Agreement. Under the transitional provisions of the Second Variation Deed, Streetscape was obliged to give certain delivery up of intellectual property prior to the expiry of the Licence Agreement. Under the provisions of the Licence Agreement Streetscape was to give further delivery up following the expiry of the Licence Agreement.
It was a term of the Second Variation Deed that the City and Streetscape would implement the Transition Plan set out in Schedule 1 to the Second Variation Deed.
The Transition Plan provided that:
(1) Six months prior to the expiry of the Licence Agreement, Streetscape Projects would deliver to the City of Sydney a current product list and a reconciliation of items as between the product list and the City of Sydney's Intellectual Property consistent with Schedule 2 to the First Deed of Variation ( Item 1 );
(2) Streetscape Projects would, at that time, provide a list of all documents it held relating solely to the City's Intellectual Property, such as manuals or specifications. Where specifications are held by third parties, such as manufacturers, Streetscape Projects was to provide all contact details for those third parties and provide each of those parties with an authority to deal with the City of Sydney in substitution for Streetscape Projects as from termination of the Licence ( Item 2); and
(3) three months prior to expiry of the Licence Agreement, Streetscape Projects was to deliver to the City of Sydney's solicitors, to be held for security pending expiry, the documents and details referred to in the preceding paragraphs together with all relevant underlying specifications etc (sic) referred to in the list of items outlined above ( Item 3 ).
Clause 15.4 of the Licence Agreement provided that Streetscape Projects was required, following termination of the Licence Agreement, or expiry of the Licence Period to:
(1) deliver to the City all documents containing intellectual property, product manuals and the specification whether or not provided by the City, together with all documents containing any confidential information; and
(2) promptly deliver to the City a list of the names and addresses of customers of Streetscape Projects in relation to the "Smartpole" poles.
Events of 2009 - Conduct of Streetscape in breach of Licence Agreement
On 1 March 2009, in breach of the Second Variation Deed, Streetscape did not deliver up the items specified in Items 1 and 2 of the Transition Plan.
On 1 June 2009, in breach of the Second Variation Deed, Streetscape did not deliver up the items specified in Item 3 of the Transition Plan.
Further, in breach of clause 15.4 of the Licence Agreement, Streetscape has failed to deliver up any drawings referred to in the Schedule enclosed with the letter from Holding Redlich to Colin Biggers & Paisley dated 16 September 2009:
(1) relating to the development, refinement or improvement of the " Smartpole " poles during the course of the Licence Agreement; and
(2) relating to products numbered 110-137, 206-249, 305-309, 314-315, 318-320, 405-406, 480-410, 413, 501-502, 510-513, 515-517 and 519.
Streetscape has also failed to deliver up drawings held by over 35 specialised sub-contractors of Streetscape who assisted in the manufacturing of components of the Smartpoles.
Streetscape has failed to deliver up:
(1) the drawings referred to in paragraphs 87 and 92 of the Commercial List Statement and any developments, refinements or improvements to those drawings and any other drawings which were used in the manufacture and sale of the products referred to in Tables 1-6 of paragraph 4 of the Commercial List Response ( Tables 1-6 );
(2) the products referred to in the schedule under the heading "Explanation 1" to the Statement in Answer to Interrogatories sworn 9 July 2010 ( Additional Table ); and
(3) the products referred to under the heading "Explanation 2" and "Explanation 3" in the Statement in answer to interrogatories sworn 9 July 2010 ( Designs ).
Each of the following matters relied upon by the City in this regard are made out :
(1) Streetscape Projects' discovery in the proceedings contains numerous documents containing the "Smartpole" intellectual property belonging to the City;
(2) McLeod's evidence that he formed his own view of what Streetscape Projects was obliged to deliver up without regard to the proper construction of the Licence Agreement;
(3) McLeod's evidence that Streetscape Projects' has not delivered up drawings containing the City's " Smartpole " intellectual property if the poles were sold to an entity other than the City, despite the fact that such drawings relate to " Smartpole " poles featuring the S1 upper pole extrusion, S2 upper pole extrusion and S3 upper pole extrusion.
(4) McLeod's evidence that Streetscape Projects has copies of the Product Manual and Specification in native format, that is, electronic format;
(5) McLeod's evidence that Streetscape Projects has not delivered up the hard or soft copy master file of revisions of any drawings containing the City's intellectual property in the " Smartpole " pole; and
(6) the fact that Hayman Industries Pty Limited, a contractor of Streetscape Projects, has possession of numerous drawings of the " Smartpole " poles containing the City's intellectual property, including an updated version of the 6400 Issue C Drawings , which it produced under subpoena.
Relief sought in relation to delivery up
It is plain on the above facts that Streetscape has to date failed to deliver up the documents containing the City's intellectual property that it is obliged to deliver up under the provisions of clause 15.4 of the Licence Agreement and the Second Variation Deed.
It follows that the City has made good its claims to delivery up of the documents identified above, except in relation to the Adepole.
The City has proved an entitlement to orders requiring Streetscape to fulfil its obligations and deliver up all documents, whether in hard copy or electronic form, held by it containing the City's intellectual property. Streetscape may retain any documents that contain designs specifically used in the Adepole.
Delivery up of moulds
Smartpoles have a number of different sized upper pole extrusions, being the S1 extrusion, S2 extrusion and S3 extrusion. The poles which feature these extrusions are variously described by the defendants as the S1 pole, the S2 pole and the S3 pole. The "Adepole" poles also use the S1 extrusion, the S2 extrusion and the S3 extrusion.
Moulds enable manufacturers of street poles to produce street poles which conform to the dimensional and form requirements specified in the relevant drawings on a mass scale. Having the possession and use of the relevant moulds necessary to produce the various components, including the upper pole extrusion, comprising the Smartpole ( Moulds) is therefore fundamental to the overall process of manufacturing the Smartpole and an important element of the City's intellectual property.
Pursuant to clause 8.2(b) of the Licence Agreement, Streetscape acknowledged and agreed that the City was the proprietor of all moulds for the Smartpoles and would deliver up the moulds on request.
Streetscape currently retains possession of the Moulds. Being moulds applicable to Smartpoles, the City is the proprietor of the Moulds under the terms of clause 8 of the Licence Agreement. As proprietor, the City has power under clause 8 of the Licence Agreement to require Streetscape to deliver up all these Moulds it has in its possession.
On 29 July 2009, the City exercised this power by sending a letter to Streetscape requesting it to deliver up of the Moulds on 1 September 2009.
In breach of clause 8 of the Licence Agreement, Streetscape refused to deliver up all or any moulds in respect of the Smartpoles and accessories.
The City relies on the following facts to establish Streetscape' breach of its obligation under clause 8 of the Licence Agreement:
(1) on 2 October 2009, Streetscape Projects contended that the City had no proprietorship in the Moulds and that it was not "practicable" for Streetscape Projects to return the moulds in a period of less than four months from 2 October 2009;
(2) on 11 December 2009, the City became aware for the first time that Streetscape Projects was continuing to use Moulds (and the Intellectual Property) relating to the S2 poles in the manufacture and sale of street poles, notwithstanding the expiry of the Licence Agreement on 31 August 2009.
(3) on 14 December 2009, Streetscape Projects gave undertakings to the Court that it would provide to the City letters of authority directed to manufacturers of the " Smartpole " poles who retained Moulds relating to the S1 Poles ;
(4) on or about 24 May 2010, when McLeod 3 was served on the City, the City became aware for the first time that, notwithstanding the undertakings referred to in the preceding subparagraph, Streetscape Projects continued to use Moulds (and the Intellectual Property) relating to:
(a) the S1 poles;
(b) the S2 poles;
(c) the S3 poles; and
(d) the Adepole poles.
The Court accepts that on the above facts and the proper construction of the Licence Agreement, the City is entitled to delivery up of the Moulds.
The Court accepts that the City is similarly entitled to restrain Streetscape from using the Moulds.
As per the Court's previous orders, Streetscape is entitled to retain any moulds that they own in the Adepole because they were vested in Streetscape by the second deed of variation.
Corrigendum
The following amendments have been made to the judgment:
Paragraph
Remove
Replace with
30
Confidential diagram
redacted
31
Confidential diagram
redacted
41
"McLeod"
Matchett
43
"McLeod"
Matchett
57
"they way"
"the way"
Heading to 60
"Scrivner"
Scrivener
60 - 65
"Scrivner" (throughout)
Scrivener
74
"License Agreement"
Licence Agreement
87
"gave of evidence of"
gave evidence of
136
"effect"
affect
158
"by of other witnesses"
by other witnesses
158
"accepted,"
accepted.
177
"he was at meeting"
he was at the meeting
269
"do not apply"
does not apply
272
"fluctuation" / "their"
effluxion / its
274
"principle"
principal
279
"13 October"
19-Oct
292
"Project Groups"
Projects Group
333
"the City's representations"
Streetscape's representations
357(8)
"should reject"
rejects
357(8)
"should also reject"
rejects
358
"In mid-2008"
in mid-2008
469
"provided to by"
provided by
478
"used"
use
489
"to defendant"
to the defendant
489
"House of Lord's"
House of Lords
489
""wide and loose sense."
"wide and loose sense."
511
"The defendants have submitted"
The City has submitted
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Decision last updated: 13 October 2011
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