Denmay Homes P/L v Bickley Building Services P/L
[1994] FCA 233
•31 Mar 1994
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233 99
JUDGMENT No. ........ .. ....~,~,,,.
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C A T C H W O R D S
TRADE PRACTICES - misleading or deceptive conduct - in trade or commerce - whether the relevant conduct must be in the trade or commerce of the defendant.
Concrete Constructions fN.S.W.) Ptv Limited v Nelson (1990)
169 C.L.R. 594
DENMAY HOMES PTY LIMITED v
BICKLEY BUILDING SERVICES PTY LIMITED
No. NG516 of 1993
CORAM: GUMMOW J. PLACE : SYDNEY. DATE :
31 MARCH 1994. IN THE F E D E W COURT OF AUSTRALIA ) NEW SOUTH WALES DISTRICT REGISTRY ) NO. NG516 of 1993
GENERAL DIVISION 1
BETWEEN: DENMAY HOMES PTY LIMITED
Applicant
AND : BICKLEY BUILDING SERVICES PTY LIMITED
Respondent
BICKLEY BUILDING SERVICES PTY LIMITED
Cross-Claimant
BRUCE HENRY PURDY
First Cross-Respondent
EDNA PURDY
Second Cross-Respondent
CORAM: GUMMOW J. PLACE : SYDNEY. DATE : 31 MARCH 1994.
MINUTE OF ORDERS
THE COURT ORDERS THAT:
1. Paragraphs 19, 20, 28, 30 and 31 of the cross-claim be struck out.
2. Paragraphs 32 and 33 of the cross-claim be struck out, with liberty to re-plead.
IN THE FEDERAL COURT OF AUSTRALIA ) NEW SOUTH WALES DISTRICT REGISTRY ) NO. NG516 of 1993 GENERAL DIVISION 1
BETWEEN: DENMAY HOMES PTY LIMITED
Applicant
AND : BICKLEY BUILDING SERVICES PTY LIMITED
Respondent
BICKLEY BUILDING SERVICES PTY LIMITED
Cross-Claimant
BRUCE HENRY PURDY
First Cross-Respondent
EDNA PURDY
Second Cross-Respondent
CORAM: GUMMOW J. PLACE : SYDNEY. DATE : 31 MARCH 1994.
REASONS FOR JUDGMENT (EX TEMPORE1
HIS HONOUR: This matter was instituted by Application and a Statement of Claim. The motion before the Court this morning is directed to a cross-claim. The parties to the principal proceeding are Denmay Homes Pty Limited ("Denmay") and Bickley Building Services Pty Limited ("Bickley"). Bickley is a cross- claimant against Mr and Mrs Purdy. Mr and Mrs Purdy move to strike out the cross-claim against them. The application is
3. Leave be given to re-plead the paragraphs alleging contravention of S. 42 of the Fair Tradina Act 1987 (N.S.W.) to aver those facts relied upon to establish the conduct complained of took place "in trade or commerce".
Any amended cross-claim be filed and served within 14 days.
The defence to the cross-claim be filed within 14 days thereafter.
The matter be heard together with matter No. G518 of 1993, and that the evidence in one be evidence in the other.
Note: Settlement and entry of orders is dealt with in Order 36
of the Federal Court Rules.
based upon the well known principles in General Steel Industries
Inc. v Commissioner for Railwavs IN.S.W.1 (1964) 112 C.L.R. 125.
I should first outline briefly the nature of the principal proceeding.
Denmay alleges that it is a builder of houses as is Bickley. Denmay also alleges that it was the owner of copyright in certain plans, in particular those for the construction of a house known as "Grandview 38". This is one of a series of plans for a number of houses sold generally under the name "Grandview". The complaint is that there was an infringement of that copyright by reason of the building by Bickley of the house at Lot 6161, Ringtail Circuit, Blackbutt Estate, Shellharbour in New South Wales. Various relief is sought in respect of that infringement.
In the defence the existence of copyright in Denmay is not
admitted. There is a denial of infringement. Bickley also
contends that whilst Bickley undertook construction of the house
suspecting that there was involved commission of any act at Lot 6161 it was not aware and had no reasonable grounds for constituting infringement. Reliance thus is placed upon sub-S.
115(3) of the Co~vriaht Act 1968. Bickley also alleges that Mr and Mrs Purdy approached Denmay to build a house on a lot they had purchased, being No. 5259 Bandicoot Drive, Blackbutt Estate, but says that Denmay declined to undertake that commission for the stated reason that it did not build in the relevant area.
In the cross-claim, Bickley, after referring to the pleadings in the principal proceeding, refers to an approach allegedly made by Mr and Mrs Purdy for the construction of a house by Bickley at Lot 5259 according to sketches, plans and designs to be supplied by Mr and Mrs Purdy. It is said that the plans for construction were produced without any material contribution by Bickley and that its only participation in the design and development process before construction and duringthe course of construction was to advise Mr and Mrs Purdy in respect of dimensions, windows and brickwork. This advice is said to have been given by Bickley on the footing of the existing design provided by Mr and Mrs Purdy and of plans drawn up by an architect engaged by them.
In the cross-claim Bickley relies upon four causes of
action. The first is in contract, the second alleges misleading
or deceptive conduct in trade or commerce within the meaning of S. 42 of the Fair Tradina Act 1987 (N.S.W.) ("the Fair Trading Act"), the third is a complaint based in negligence, and the fourth founds upon the contribution provisions in S. 5 of the Law Reform /Miscellaneous Provisions) Act 1946 (N.S.W.).
I turn first to the negligence claim. This appears in paras. 30 and 31 of the cross-claim. It is alleged that Mr and Mrs Purdy procured Bickley to utilise the sketches, plans and designs in circumstances where they owed to the builder a duty of care to ensure that these materials were fit to be used by the builder in constructing the house at Lot 5259 Bandicoot Drive and that there was a duty to ensure that there was no breach of any person's copyright and a duty to advise Bickley of any actual or potential adverse rights, interests or claims. There is said to have been a breach of that duty in submitting the plans as described. The duty is said to have been breached by reason of encouragement by M r and Mns Purdy to Bickley to make further use of them and in failing to advise of the design of the applicant described, as I have said, as "Grandview 38".
As to the negligence claim, I am clearly of the view that paras. 30 and 31 should be struck out. In that regard it is appropriate to refer to what was said by Lord Templeman in the House of Lords, in a not dissimilar situation, in CBS Sonas Ltd v Amstrad Consumer Electronics PLC [l9881 A.C. 1013 at 1059-1060. That litigation it will be recalled was concerned with home taping and related problems which have arisen in the
administration of the copyright law. His Lordship said:
"Finally B.P.I. submit that Amstrad committed the tort of negligence, that Amstrad owes to all owners of copyright a duty to take care not to cause or permit purchasers to infringe copyright or alternatively that Amstrad owes a duty to take care not to facilitate by the sale of their models or by their advertisement the infringement of copyright. My Lords, it is always easy to draft a proposition which is tailor-made to produce the desired result.
Since v Merton Borouah Council [l9781 A.C. 728 put the floodgates on the jar, a fashionable plaintiff alleges negligence. The pleading assumes that we are all neigh- bours now, Pharisees and Samaritans alike, that foreseeability is a reflection of hindsight and that for every mischance in an accident-prone world someone solvent must be
liable in damages. "
His Lordship then continued:
"In the present proceedings damages and an injunction for negligence are sought against Amstrad for a breach of statutory duty which Amstrad did not commit and in which Amstrad did not participate. The rights of B.P.I. are to be found in the Act of 1956 and nowhere else. Under and by virtue of that Act Amstrad owed a duty not to infringe copyright and not to authorise an infringement of copyright. They did not owe a duty to prevent or discourage or warn against infringement."
In similar vein, although in a different setting, are the observations of their Lordships in the Privy Council on appeal from New Zealand in Downsview Nominees Limited v First City Cor~oration Limited [l9931 1 N.Z.L.R. at 513 at 522-526, where the authorities there referred to included m.
I turn now to consider the contract claim. This appears in paras. 19, 20 and 28. It is alleged that Bickley entered into a contract with Mr and Mrs Purdy for the construction of a three storey brick veneer tiled roof dwelling at Lot 5259 in accordance with the plans to which I have referred. It is then said that there was an implied term of the contract that those plans sketches and designs supplied by Mr and Mrs Purdy would be fit for use by Bickley without any adverse claim or right of, or liability or interest in any other person and that Bickley would not be in breach of copyright in using the said plans. Paragraph 28 is the allegation of breach.
It is to be noted that the complaint by Denmay against Bickley in the Statement of Claim does not concern any activities related to Lot 5259. The cause of action against the builder is for infringement by reason of the activities on Lot 6161. The complaint made by Mr and Mrs Purdy's counsel focuses upon the circumstance that what is being said in substance on this branch of the cross-claim against them is that by reason of a term in a contract directed to the performance of activities in one lot there has been breach by reference to activities on Lot 6161. The point of the submission essentially is that the implied term would be directed to the particular contract in question, involving Lot 5259, not Lot 6161, the root of the litigation in this matter.
In the contract for Lot 5259 there may have been a term builder would be fit for use by the builder on that particular
implied by law that the designs supplied by the client to the
site without any adverse claim by any other party alleging breach of copyright. This term would have protected the builder against invasion of quiet possession of the site whilst the building activities were in progress.
I refer generally to Niblett Limited v Confectioners' Materials ComDanv Limited [l9211 3 K.B. 387 at 395, 403. There was breach of an implied warranty of quiet possession of goods under a contract of sale because the goods carried an infringing trade mark. What was said there as to the general law position lying behind the sale of goods legislation would be, I expect, applicable here. It may also be that such a contract would be implied, not as a matter of law, but in accordance with the other body of principles considered in BP Refinerv (Western~ortl Pty
- Ltd v Hastincrs Shire Council (1977) 52 A.L.J.R. 20, and in numerous subsequent decisions of the High Court. However, as the pleading now stands, I see no ground on either footing for implying a term which would have the width relied upon here to extend from activities outside Lot 5259 and to embrace activities on Lot 6161. Accordingly, I would strike out the contractual claims in paras. 19, 20 and 28.
There remains the complaint of contravention of S. 42 of the
Fair Trading Act. The particular formulation of the conduct is
found in paras. 21 and 22. It is said that before entering into
the contract for the building on Lot 5259, Mr and Mrs Purdy represented to Bickley in trade or commerce:
1. That the sketches, designs and plans were solely originating with them or their architect.
2. That these sketches, designs and plans were fit for use by Bickley without any adverse claim of right or liability to any other person, or any interest in any other person.
3. That Bickley would not be in breach of copyright in using the plans.
Further, in para. 22 there is a complaint that Mr and Mrs Purdy did not disclose to Bickley that the sketches, designs and plans for the house were subject to copyright of any other person. Nor, it is said, was there a disclosure that they were adapted, copied from or based upon, in any way, the design or work of another person or that they had any similarity to the designs of Denmay.
It is said that these activities were not in trade or commerce within the meaning of the section. Certainly, on the face of the pleadings, Bickley was engaging in these activities in the course of its business of constructing houses for profit. By letter dated 31 March 1994, particulars also were given which assert that M r and Mrs Purdy were traders in properties, and that they had, in effect, embarked on this particular project for the dominant purpose of investment and re-sale.
It is, in my view, arguably not essential that the activities constituting the trade or commerce for the purpose of S. 42 be the activities of the party against whom the contraven- tion is asserted. There certainly is authority which perhaps suggests that the contrary is so. I refer to what was said by Hill J. in m V Blunts and Lane Cove Real Estate Ptv Limited, (1990) 26 F.C.R. 112 at 128-129. On the other hand, in the subsequent decision in the High Court, Concrete Constructions 1N.S.W.) Ptv Limited v Nelson (1990) 169 C.L.R. 594, the matter was discussed by Toohey J. The observations made by his Honour are important in appreciating that for which this case is authority. Whilst agreeing in the result on the appeal, his Honour said, at 613:
"The present appeal proceeded on the assumption, tacit if not express, that the conduct said to have been misleading or deceptive must have been conduct in the trade or commerce of the appellant. No doubt, in most cases the focus will be on the nature of the defendant's business but the section is not so limited. It does not, in terms, refer to the trade or commerce of the particular corporation. It seems unlikely, given the nature of the activities with which Pt V, Div. 1 of the act is concerned, that it should be necessary to consider closely the character of a corpora- tion's business and in particular to determine whether or not the conduct relied upon by an applicant or plaintiff can fairly be said to be in the trade or commerce of that corporation. Notions of ultra vires can hardly have a part to play in this area of the law. The position of the expression 'in trade or commerce' in S. 52(1), and indeed in other sections of Pt V, Div. 1 suggests that it is trade or commerce in general terms wlth which the statute is concerned."
Accordingly, I would not strike out the paragraphs asserting the claim of contravention of S. 42 of the Fair Trading Act even if they had not been supplemented by the further particulars to which I referred. The further particulars would, in my view, place the matter beyond doubt at this interlocutory stage. However, leave should be given to amend if thought fit the cross- claim to include as substantive allegations what are given only as particulars in the letter of 31 March 1994.
There remain paras. 32 and 33. These are in the following
terms :
32. If, contrary to the Cross Claimant's contentions it committed any infringement of copyright as alleged causing damage to the Applicant or by reason of which the Cross Claimant is liable to the Applicant on any account whatsoever, then the Cross Claimant asserts that the First and Second Cross Respondents are persons who would, if sued, have been liable as joint tortfeasors in respect of the same damage.
33. To the extent that the Cross Claimant is found liable to the Applicant, which liability is denied, the Cross Claimant says the First Cross Respondent and/or the Second Cross Respondent are joint tortfeasors with the Cross Claimant pursuant to the provisions of Section 5 of the Law Reform (Miscellaneous Provisions) Act 1946.
I assume that reliance is placed upon the New South Wales statute of 1946 on the footing that is it picked up in this Court under the provisions of S. 79 of the Judiciary Act 1903. That however, is not made clear. Nor was it made clear in the exchanges between the bench and counsel today what is the basis of liability which is said to attract the operation of the statute.
Although I understand it is within the intention of the pleader, it is not clear that what is being spoken of here includes on the one hand a liability for infringement of copyright by Bickley by reason of the failure of its defence on the main claim, and on the other hand, the copyright infringement by Mr and Mrs Purdy alleged in the cross-claim.
Paragraphs 32 and 33 should be struck out, but with leave to re-plead; paras. 19, 20, 28, 30 and 31 of the cross-claim are struck out. Leave is also given to re-plead the paragraphs alleging contravention of S. 42 of the Fair Trading Act to aver those facts relied upon to establish the conduct complained of took place "in trade or commerce". Any amended cross-claim should be filed and served within 14 days. The defence to the cross-claim should be filed within 14 days thereafter. I also direct that this matter be heard together with matter No. G518 of 1993, and that the evidence in one be evidence in the other. The directions as to the filing of affidavits in matter No. G518 apply mutatis mutandis to matter No. 6516.
I certify that this and the preceding ten (10) pages are a true copy of the reasons
for judgment of the Honourable Mr Justice
Gummow.
Associate:
Date: / 9 7 +
Solicitor for the aoplicant:
Mr G.J. Vardas.
Counsel and solicitors for the resoondent/cross-claimant: Mr B.A.M. Connell instructed by Colin Biggers & Paisley.
Counsel and solicitors for the 1st and 2nd cross-res~ondents:
MS S.J. Goddard instructed by Taylor Szekely Kelso.
Date of hearing: 31 March 1994. Date of judgment: 31 March 1994.
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