Devefi Pty Ltd v Mateffy Perl Nagy Pty Ltd
[1993] FCA 252
•28 APRIL 1993
DEVEFI PTY LIMITED v. MATEFFY PERL NAGY PTY LIMITED
No. G707 of 1992
FED No. 252
Number of pages - 13
Copyright - Assignments
COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Northrop(1), Gummow(1) and Hill(1) JJ
CATCHWORDS
Copyright - artistic works - architects' plans - construction of express contractual licence - whether licence should be implied in favour of third party using plans to complete building - whether architect estopped from denying infringement by third party.
Assignments - contracts involving personal skill and confidence - architect and builder - whether right to performance assignable - use of architects' drawings - effect of prohibition upon assignment.
Copyright Act 1968
Beck v Montana Constructions Pty Ltd (1963) 5 FLR 298,
Helstan Securities Ltd v Hertfordshire County Council (1978) 3 All ER 262,
Blair v Osborne and Tomkins (1971) 2 QB 78,
Castlemaine Tooheys v Carlton and United Breweries Ltd (1987) 10 NSWLR 468, considered.
HEARING
SYDNEY, 26 February 1993 #DATE 8:4:1993
Counsel and solicitors Mr Ronald Sackville QC and
for the appellant: Mr S.M. Reeves
Solicitors for the Appellant: Lakos and Company.
Counsel for the Respondent: Mr D.K. Catterns QC
Solicitors for the Respondent: Swaab and Associates
ORDER
THE COURT ORDERS THAT:
(1) The appeal be dismissed.
(2) The appellant pay the costs of the respondent.
Note: Settlement and entry of orders is dealt with by Rule 36 of the Federal Court Rules.
JUDGE1
Introduction
NORTHROP, GUMMOW AND HILL JJ The appellant ("Devefi") appeals against a judgment against it for $68,000 in a copyright infringement suit. The respondent ("Mateffy") is the owner of the copyright, pursuant to the Copyright Act 1968 ("the Act"), in 27 artistic works ("the Drawings") being plans and drawings prepared for use in the construction of a building erected upon a commercial development site at 346 Pacific Highway, Lindfield, a suburb of Sydney ("the site").
Mateffy carries on business as consulting engineers and produces structural work drawings to assist building contractors to erect buildings, in particular reinforced and pre-stressed framed buildings. There was no dispute at the trial as to the subsistence and ownership of copyright, as artistic works, in the Drawings. It followed that Mateffy had the exclusive right to reproduce the drawings in a material form, in particular in a three dimensional form, and the exclusive right to authorise other persons to effect such reproductions. This is the result of the application of ss. 31, 21 and 13 of the Act. Copyright in the drawings was infringed by any person who, without the licence of Mateffy, did in Australia or authorised the doing in this country of "any act comprised in the copyright" in the Drawings. Section 36 of the Act so provided.
Devefi accepted that the construction of the building at Lindfield constituted a reproduction of the Drawings and that it authorised the construction of that building in conformity with those plans. However, the onus was upon Mateffy to establish the absence of a licence, it being the party asserting infringement pursuant to s. 36: Avel Pty Ltd v Multicoin Amusements Pty Ltd (1990) 171 CLR 88. The primary Judge (Beaumont J) held that Mateffy had discharged this onus and assessed damages as a licence fee of $53,480. This, with an allowance of interest from 1 July 1990, produced the sum of $68,000 for which judgment, with costs, was entered.
Upon the appeal, the assessment of damages was not challenged. Devefi contended that in dealing with issues of liability, his Honour had fallen into error in his assessment of the primary facts (as to which at the trial there was essentially no dispute) and had fallen into errors of law, particularly in his consideration of certain authorities. It submitted that we should now hold that the case for the absence of a licence had not been made out by Mateffy.
Conduco Properties Limited ("Conduco") was a member of the Condux group of companies, the other members of which included Conduco Limited, Condux Properties Limited and Condux Pty Limited. It was accepted at the trial that there was no relevant distinction between the members of the group and that they might sufficiently be identified simply as "Conduco". We shall adopt that course in these reasons.
Conduco owned the Lindfield site and initially sought the assistance of Mateffy for the production of a series of preliminary designs to assist in development application drawings to be prepared by Conduco's architect. On 31 January 1990, Conduco wrote to Mateffy accepting a proposal for the provision by Mateffy of structural engineering services associated with the project, for a fee of $70,000. This proposal had been formulated in a letter to Conduco of 28 November 1989. In the events that happened, the initial progress claim was met but progress claims Nos. 2 and 3, dated respectively 21 May 1990 and 18 June 1990 for $32,325 and $21,245 were never paid by Conduco. No member of the Conduco group was joined as a party to the proceeding in this Court. The action was concerned not with the recovery of any debt from Conduco, but with the recovery of damages for copyright infringement against Devefi. Condux Pty Limited is in liquidation and a proof of debt was lodged by Mateffy on 14 October 1991, after the institution of this proceeding. In order to prevent what he described in his judgment as "double satisfaction", the primary Judge accepted Mateffy's undertaking to the Court that if Devefi satisfied the judgment recovered against it, and if Mateffy received a dividend in the winding-up, it would account to Devefi for that dividend.
In the events that occurred, the building was constructed by Southern Cross Pty Limited ("Southern Cross"). Whilst Mateffy initially directed its complaints to Southern Cross as the builder, it was not joined as a party in this proceeding.
It is necessary now to refer more fully to the facts. The Contracts
It is accepted that the contract between Conduco and Mateffy adopted the April 1988 revision of the "Guideline Terms of Agreement Between Client and Consulting Engineer for Professional Services" which was prepared and published in October 1983 by the Association of Consulting Engineers Australia. Mateffy was defined therein as "the Consulting Engineer" and Condux as "the Client". In this document ("the Mateffy Agreement") various incidents of the relationship between the parties were dealt with, one of which, in Part 5, was headed "Copyright and Use of Documents".
In truth, Part 5.4 dealt with patents and trade marks. The provisions in Part 5 of importance for this litigation were as follows:
"5.1 Copyright
Copyright in all drawings, reports, specifications, bills of quantities, calculations and other documents provided by the Consulting Engineer in connection with the Project shall remain vested in the Consulting Engineer. 5.2 Client's Right to Use Documents
The Client shall have a licence to use the documents referred to in Clause 5.1 for the purpose of completing the Project; however, the Client shall not use nor make copies of such documents in connection with any work other than work comprised in the Project unless express approval is given in advance by the Consulting Engineer. 5.3 Publication of Articles
The Consulting Engineer may with the consent of the Client publish, either alone or in conjunction with others, articles, photographs and other illustrations relating to the project (sic)."
The meaning given by the parties to the term "Project" was the commercial office development at the site. The term "Project" is defined in Part 8.7 as meaning the work described in the entire contractual agreement between the parties in respect of which the Client has engaged the Consulting Engineer to provide professional services.
These professional services had been specified in the letter of 28 November 1989, to which we have referred. As consulting structural engineers for the Project, Mateffy was to do more than prepare the drawings, the copyright in which was to be vested in it. It was to provide "consultative advisory assistance to the Architect and (Conduco) at design stage" and to visit the site to review and approve the correctness of reinforcement for concreting after this had been checked by the builder, and to advise on other structural matters. Thus, although this appeal is concerned with questions of copyright infringement, and so with the use to which the Drawings were put, it would be incorrect to construe provisions in the Mateffy Agreement without regard to the circumstance that the preparation and supply of the Drawings was but part of a larger "package" of professional services to be provided to the client by its consulting engineers.
For example, Part 8.1 must be read with this wider picture in mind. Part 8.1 is headed "Transfer and Assignment". It states:
"(1) The Consulting Engineer and the Client each binds himself and his partners, successors, executors, administrators, assigns and legal representatives to the other party to this Agreement and to the partners, successors, executors, administrators, assigns and legal representatives of the other party in respect to all convenants (sic) and obligations of this Agreement.
(2) Neither the Consulting Engineer nor the Client shall assign, sublet or transfer any right or obligation under the Agreement without the written consent of the other party. Unless specifically stated to the contrary in any written consent to an assignment, no assignment shall release or discharge the assignor from any obligation under the Agreement.
(3) 'The Consulting Engineer may at any time change the structure of his practice to or from that of an incorporated company in accordance with the rules of the ACEA. In such case the present Agreement shall be deemed to have been replaced by an identical agreement between the Client and the Consulting Engineer's practice in its new form.'
(4) Except in the case of death or incapacity the consulting engineer (sic) shall give the client at least 60 days notice of intention of a Partner or Partners to leave the partnership. On receipt of such notice the client may terminate the agreement in accordance with Clause 7.1 (2) when clause 3.8 will apply. In this case the consulting engineer (sic) or his successors shall surrender all available documents necessary for continuation of the work.
(5) Nothing contained in this Clause shall prevent the Consulting Engineer from employing within this fee such persons or companies as he may deem appropriate to assist him in the performance of the Agreement."
By March 1990, Mr S.A. Mateffy, a Director of Mateffy, had heard rumours of financial instability affecting a number of builders. In the course of this month, he had a conversation with Mr Halfacree, a Director of Conduco. Mr Halfacree said that Conduco was in some financial difficulty and asked that Mateffy show a little patience. Mr Halfacree said that there was an "end buyer" for the building, so that the Project would be going ahead. The identity of the buyer was not disclosed. One of Mr Mateffy's fellow directors had a long commercial relationship with the founding director of Conduco, and it was decided to accept Mr Halfacree's assurance that Conduco would "come good with payment within a few months".
Progress claims Nos. 2 and 3, to which we have earlier referred, were issued to Conduco by Mateffy on 21 May and 18 June 1990. Shortly thereafter, on 27 June, Mateffy sent to Conduco 4 prints of each of the Drawings. One sepia was sent to Southern Cross on the same day.
In the meantime, on 15 June 1990, 3 significant contracts had been entered into affecting the development on the site. Devefi was a party to each of the 3 contracts. However, Mateffy did not know of these events and of the entry into the project of Devefi until some later, on 16 August 1990, when Mr Mateffy had another meeting with Mr Halfacree.
The first of the 3 agreements was a contract between Conduco and Devefi for the sale of the site for $2.9m. The agreement was in the form of the 1988 edition of the Agreement for Sale of Land issued by the Law Society of New South Wales and the Real Estate Institute of New South Wales. There was a number of special conditions. Special condition 40 was headed "Approvals". Clause 40 (b) was a warranty by the vendor that it had paid all moneys due to any person in connection with the preparation of "the Building Plans". That expression was earlier defined in the clause so as to include any copyright in plans, drawings, photographs and models prepared by or on behalf of the vendor for the purpose of obtaining development consent and building consent from the Ku-ring-gai Municipal Council. The term "Rights" also included any licence "to use the copyright in the Building Plans vested in the Vendor (if any)". Sub-clause 40 (c) was as follows:
"The Vendor agrees with the Purchaser that the Vendor:
(i) on and by virtue of completion of this agreement assigns absolutely all of the Vendor's right title property and interest (if any) in the Rights to the Purchaser free of all encumbrances; and
(ii) shall delivery or cause to be delivered to the Purchaser on completion the Building Plans (if any) held by it and to which the Vendor is entitled in relation to the Approvals."
The purchase by Devefi under this contract was settled on 16 July 1990. This was after the issue of progress claim No. 3, on 16 June 1990, and the sending of the plans by Mateffy to Conduco on 27 June 1990. It follows from the facts as we have earlier narrated them, that between 15 and 27 June 1990, Conduco did not make Mateffy aware of the sale and of the entry into the project of Devefi.
Before Conduco entered into the contract for the sale of the land to Devefi on 15 June 1990, it did not seek any consent of Mateffy under Part 8.1 (2) of the Mateffy contract to the assignment or transfer by Conduco of rights or obligations under that agreement. For its part, Devefi had no knowledge prior to 16 July 1990 that there was money outstanding and owed by one of the Conduco companies to Mateffy in relation to the Project. The position of Devefi in this litigation is that Conduco was not required by its contractual obligations to Mateffy to seek consent from Mateffy and that the inclusion of special condition 40 in the agreement for sale of the land, and the completion of the sale, did not breach any of those obligations to Mateffy.
The second of the agreements of 15 June 1990 is a building works contract, in a standard form, between Devefi as proprietor and Southern Cross as builder ("the Building Contract"). The Building Contract calls for the erection of a two level office building with basement car parking, on the site, for a contract sum of $7.4m. Possession was to be given on the day after the completion of the agreement for sale of the land. As we have indicated, settlement took place on 16 July 1990.
The third agreement of 15 June 1990 is a development management agreement between Conduco as "Development Manager" and Devefi as "Client". It recited that Devefi had requested Conduco to provide certain management, design, marketing and leasing services in connection with the development of the site. Clause 3.1 obliged Conduco to prepare such further drawings and/or specifications as were reasonably necessary to enable Southern Cross to carry out and complete the works in accordance with the building contract; such documents were to be prepared without additional cost and expense to Devefi. Conduco was to manage and coordinate the activities involved in marketing and leasing the building with a view to meeting Devefi's objective of leasing all "lettable" areas on or before the date of practical completion (cl. 9.1). A fee was to be paid to Conduco of $15,000 for each month which elapsed from the date of the agreement to the date of practical completion (cl. 17).
Events After Completion by Devefi of the Purchase
19. On 6 July 1990, 10 days after settlement of the purchase, Mr Halfacree, on behalf of Conduco, wrote to Mr Mateffy a letter which might have alerted him to the changing position with the legal structure of the development for the site. Mr Halfacree referred to the retention by Conduco of its role "with our Client (the owner) and the Builder (Southern Cross Constructions) in their exact current form and condition". Mr Halfacree proposed that the outstanding sum of $53,480 for work already done by Mateffy be paid by 5 instalments each of $10,000 in the first week of each of September, October, November and December 1990 and January 1991, with the final payment for February of $3,480. He said:
"Should the Company's position and either of the above roles change in any way, we would need to review the payments and the system proposed."
On 7 August 1990, Mr Mateffy replied by letter stating that the proposal of payment was acceptable to Mateffy and that Mateffy had every intention of cooperating "to ease your burden".
Then on 16 August 1990 there took place the meeting to which we have earlier referred. Mr Halfacree came to see Mr Mateffy. He told him Conduco was going into liquidation, but not to worry about the outstanding debt. There was to be a new owner of the Project, Devefi, which was a Hong Kong based company. Devefi would engage Conduco as management consultants to supervise the Project. Conduco would look after Mateffy by so organising matters that moneys coming from the construction draw-down would be used to pay the moneys still owing to Mateffy.
In the period before and after 16 August 1990, there was a number of inspections of the site by representatives of Mateffy. On 10 July 1990, Mateffy had written to Conduco confirming that its fees for the construction phase of the Project would be $10,500. In this letter, Mr Mateffy said that during the construction phase his firm would provide "the usual site visits to review and approve the correctness of" structural matters which were relevant to their commission. The letter requested progress payments "periodically in proportion to work completed". This letter was received by Conduco on 12 July 1990, but no reply is in evidence. Nor does it appear to have been discussed at the meeting on 16 August.
However, site inspections were conducted on 13 and 18 July, 22, 24, 28, 30 August, and 4, 6 and 7 September 1990. Southern Cross was in possession of the site, pursuant to the Building Contract, and after 16 August Mateffy appreciated that Southern Cross was working for Devefi, the new purchaser. It was apparent to Mateffy that substantial work was going on in the construction of the building in conformity with its plans. By 10 September, the building work had proceeded, such that the shoring along the boundaries had been largely completed, some footings had been cast, and formwork had been commenced for one of the basement slabs.
On 10 September 1990, events took a fresh turn. The solicitors for Mateffy wrote to Southern Cross complaining that delay had been encountered in the payments of amounts due to their client as a result of a change in the ownership of the property and the liquidation of the previous owner/developer. The solicitors stated that notwithstanding those delays the project was proceeding with the use of Mateffy's plans and specifications although no assignment had been authorised. The solicitors said that their client would permit a short extension of time to resolve what it understood were negotiations between the interested parties to deal, amongst other things, with the costs and fees due to Mateffy. The letter continued:
"(Should) no satisfactory resolution be achieved within the next seven (7) days our client will have no alternative but to demand the return of all plans, drawings and specifications held by you together with all copies thereof . . . It is imperative that our client's position not be taken lightly as it will not countenance such position to be eroded any further."
The solicitors for Southern Cross replied on 14 September stating that the plans and specifications in question had been provided to Devefi by Conduco, and suggesting that the matter be taken up with either the new project managers or with Devefi. On 18 September, solicitors responded on behalf of Devefi. They said that Devefi had "duly acquired" from Conduco all the relevant and necessary rights to the engineering plans with respect to the project, pursuant to "a certain Agreement dated 15 June, 1990"; the agreement contained a warranty by Conduco that the documents were its absolute property and were unencumbered. It was said that in those circumstances Mateffy "has no right to revoke the licence for our client and its builder to utilise the said documents with respect to the relevant Project". Reference was made in support to the decisions in Ng v Clyde Securities Limited (1976) 1 NSWLR 443 and Gruzman Pty Ltd v Percy Marks Pty Ltd (1989) 16 IPR 87.
On 20 September 1990, the solicitors for Mateffy responded seeking a copy of the alleged agreement dated 15 June, and re-emphasising that Mateffy had not been paid for the plans and specifications.
On 25 September, Mr Mateffy had a conversation with Mr Irwin of Southern Cross. Mr Irwin asked whether Mateffy would continue to provide consulting services to the Project. Mr Mateffy said that it would and that the fee was $14,000 to cover supervision from the commencement of the construction and to cover amendments to the drawings which had been made. (In early September, Mateffy had given to Southern Cross advice for the variation of the approved drawings; adjustments and variations of this sort were normal practice as the construction of a project proceeded.) Mr Mateffy told Mr Irwin that accounts would be rendered to Southern Cross and Mateffy would look to Southern Cross for payment. He said that Mateffy reserved "all our proprietary rights in our plans and specifications that you and Devefi hold". This arrangement was confirmed by letter from Mateffy to Southern Cross dated 26 September 1990. The letter stated:
"We hereby confirm our offer to provide you with the usual construction phase consulting services for the Project in consideration of the lump sum of fourteen thousand dollars ($14,000.00). This sum includes our supervisory services provided to you from the commencement of the construction to date, and our fee for and the amendments already carried out to the drawings as required by construction conditions.
All accounts will be rendered to Southern Cross Properties Pty Limited for our services and we will look to you for all payments due. This offer is of course subject to our reserving all proprietary rights in respect of our plans and specifications as held by you and Devefi Pty Limited and the satisfactory resolution of this aspect of our services."
In due course, Southern Cross paid the $14,000 pursuant to this arrangement with Mateffy.
The present proceeding against Devefi was commenced by Mateffy on 11 February 1991.
The Trial
28. The primary Judge made 4 central findings. He held that (a) Devefi was not entitled to the benefit of the express contractual licence granted by cl. 5.2 of the Mateffy Agreement, (b) no contractual licence should be implied in favour of Devefi, of the character considered by Jacobs J in Beck v Montana Constructions Pty Ltd (1963) 5 FLR 298, (c) no licence should be implied in favour of Devefi by reason of the conduct of Mateffy in the period between the transmission of the Drawings on 27 June 1990 and the writing of the letter to Southern Cross on 26 September 1990, and (d) Mateffy was not estopped from now claiming that there had been an infringement by Devefi. On the appeal, all of these 4 holdings were put in issue. We will consider them in the above order. Copyright Licences
There was no dispute as to some of the basic principles in this field. Sub-section 13 (2) of the Act vested in Mateffy the exclusive right to authorise others to do any of the acts comprised in the bundle of exclusive rights created by s. 31. Accordingly, the dealing with the copyright by Conduco in its agreement for sale with Devefi, would, unless done with the consent of Mateffy, be an infringement; see W.E.A. International Inc. v Hanimex Corporation Ltd (1987) 17 FCR 274 at 286. (It may also have been a breach of contract, namely the Mateffy Agreement.)
It was accepted that the activities of Southern Cross, in using the Drawings to erect the building, required permission of the copyright holder to avoid infringement by Southern Cross itself. However, counsel for Mateffy accepted that a permission by his client to the developer to "use" the plans for the Project would encompass an authorisation for the developer to engage a builder to perform the work. No charge of infringement is made against Southern Cross, which is not a party. But the tri-partite relationship between copyright owner, developer and builder is to be borne in mind in construing the contractual arrangements which were made between Mateffy and Conduco, Conduco and Devefi, and Devefi and Southern Cross.
Where intangible rights and interests, the subject of a purported licence or assignment, are created by statute, the statute itself may so constitute them as to be inalienable, whether by consensual dealing or by what otherwise would be operation of law. Examples are provided by the former s. 249 of the Social Security Act 1947 and by s. 125 of the Veterans' Entitlements Act 1986. These sections are in like terms. They state that, subject to qualifications not presently relevant, a pension, allowance or benefit under the statute shall be "absolutely inalienable, whether by way of, or in consequence of, sale, assignment, charge, execution, bankruptcy or otherwise".
The copyright legislation is to the opposite effect. Sub-section 196 (1) of the Act provides:
"Copyright is personal property and, subject to this section, is transmissible by assignment, by will and by devolution by operation of law."
Sub-sections (2) and (3) deal with assignment.
Division 3 of Part V (ss. 117-125) contains provisions which confer a special position upon exclusive licensees in relation to proceedings for infringement. The term "exclusive licence" is defined in sub-s. 10 (1). It is settled that the Act contemplates licences falling short of such exclusive licences. This is confirmed by the specific reference in sub-s. 196 (4) to licences, a provision which is directed not merely to exclusive licences. This sub-section modifies what would otherwise be the general law as to the assignment of the burden rather than the benefit of licences. It states:
"196 (4) A licence granted in respect of a copyright by the owner of the copyright binds every successor in title to the interest in the copyright of the grantor of the licence to the same extent as the licence was binding on the grantor."
The issues in the present litigation concern not the binding of a successor in title to Mateffy, but the alleged assignment of the benefit of the licence by Conduco in favour of Devefi.
When speaking of another form of statutory right, Barwick CJ pointed out that whilst a mere licence does not create any interest in the property to which it relates, nevertheless it does make an action lawful which without it would have been unlawful: Banks v Transport Regulation Board (Victoria) (1968) 119 CLR 222 at 230-1.
The concept of "licence" in this field is not limited to contractual licences. A permission or consent to the user in question may be implied from the conduct of the copyright owner. This was the legal basis with which the primary Judge dealt with holding (c). The authorities in the High Court and this Court are collected and discussed most recently by the Full Court in Lorenzo and Sons Pty Ltd v Roland Corporation (1992) AIPC 90-904 at 38,553-4; 23 IPR 376 at 380-2. It then becomes a question as to whether in the circumstances of a particular case the Court may properly infer from the evidence the existence of consent to what otherwise would be an infringement of copyright. We will return to this issue after consideration of the other licence issues. We begin with the question whether Devefi had the benefit of the express contractual licence to Conduco (holding (a)). Assignment of the Benefit of Contractual Licences
The nature and contractual effect of the purported assignment by Conduco to Devefi of its rights to use the Drawings for the Project is to be assessed in the light of propositions of some complexity. They are as follows:
(1) As a general proposition, the benefit of the performance of a contract involving personal skill and confidence cannot be assigned, any more than such a contract may be made the subject of an order for specific performance: Bruce v Tyley (1916) 21 CLR 277, (a contract to remove kitchen refuse from a military camp in war-time); Jones and Goodhart, "Specific Performance", 1986, p. 136; cf. Posner v Scott-Lewis (1987) Ch 25. However, what may be called the "fruits of performance" stand in a different situation. They may be assignable. Thus, copyright in a literary or artistic work itself may be licensed or assigned, and the right of an author to royalties may be dealt with by the author. However, contracts between authors and publishers have been held to be of a personal nature on both sides, so that the benefit of performance is not assignable by either party without the consent of the other: Stevens v Benning (1855) 6 De G.M. and G. 223, 43 ER 1218;
Griffith v Tower Publishing Co. Ltd (1897) 1 Ch 21; Laddie, Prescott and Vitoria, "The Modern Law of Copyright", 1980, para. 10.99.
On the present appeal, the respondent submitted that a licence by an engineer or architect of artistic copyright in plans for use by a developer or builder was insusceptible of assignment. It will be necessary to return to this submission, which is of prime importance for the proper construction to be given to Parts 5 and 8 of the Mateffy Agreement and the characterisation of that contract as a whole.
(2) The benefits provided under a contract of personal services, which
would otherwise not be assignable, may be assigned if (and to the extent to which) upon its proper construction the contract expressly or impliedly contemplates such an assignment; the authorities are discussed by the New Zealand Court of Appeal in C.B. Peacocke Land Co. Ltd v Hamilton Milk Producers Co. Ltd
(1963) NZLR 576 at 582-3. That case concerned a contract for the supply of milk for consumption in a particular town and the parties were defined as including their respective "assigns". In the present case, there is an issue whether cl. 8.1 of the Mateffy contract was to like effect.
(3) The subject matter of a contractual licence may be intangible rights which are not of a description which, under the general law or by reason of statute, is treated as unassignable. Nevertheless, the licence may contain an express provision which is said to bar assignment of the licence of those rights. The nature and operation of such a provision will vary according to its terms and from case to case. The possibilities include the following:
(a) The obligation of the licensor may, on its proper construction, be limited to an obligation in favour of the licensee, so that "the limitation is not so much imposed on the obligee's right of alienation as upon the obligor's duty to perform"; "neither public policy nor consistency requires that (the chose in action) be enforceable against the promisor except in accordance with the terms on which his promise was made": Sacks v Neptune Meter Co. 258 NYS 254 at 262 (1932), discussed in Allcock, "Restrictions on the Assignment of Contractual Rights", (1983) 42 CLJ 328 at 338-9. To similar effect is the observation by Croom-Johnson J in Helstan Secur-ities Ltd v Hertfordshire County Council (1978) 3 All ER 262 at 265-6: "There are certain kinds of choses in action which, for one reason or another, are not assignable, and there is no reason why the parties to an agreement may not contract to give its subject-matter the quality of unassignability. In these circumstances, one has to look at the clause itself."
Speaking of that decision (and with particular reference to assignments of debts) Professor Goode, "Inalienable Rights?"
(1979) 42 MLR 553, has said:
"Now in so far as the case decided that the assignment was ineffective as between the plaintiffs and the defendant it is unexceptionable. If A, when contracting to pay money to B, makes it clear that his undertaking to B is of a personal character and that payment will be made to B alone, there is no reason why he should be compelled to accept a variation of the contract by being required to pay B's assignee, C. Though the payment of money to one party rather than another may not seem a particular hardship, the debtor may have perfectly good commercial reasons for stipulating that he will not recognise the title of an assignee of the debt. In the first place, a debtor who overlooks receipt of a notice of assignment (a not uncommon event in a busy office) and pays the assignor does not get a good discharge and can be compelled to pay a second time, to the assignee. So it is understandable that the debtor may wish to safeguard himself against the consequences of a slip of this kind. Secondly, an assignment to some extent restricts the efficacy of mutual dealings between the debtor and the assignor in that the debtor cannot set up against the assignee equities arising after receipt by him of notice of assignment. Again, it is natural that the debtor should want to avoid being fettered in his ability to set up defences against the assignee." See also, Goode, "Legal Problems of Credit and Security", 2nd ed., 1988, pp 123-4. So, for example, the terms of an option agreement may show that it was intended to be open to acceptance only by the offeree personally: Carter v Hyde
(1923) 33 CLR 115 at 120-1, 125, 130-2; Wilson v Commissioner of Probate Duties (Vic.) (1978) 78 ATC 4278 at 4282 (affd. 79 ATC 4580). The current state of English authority as to the effectiveness of express prohibitions against assignment is discussed by Wallace QC "Assignment of Rights to Sue for Breach of Construction Contracts" (1993) 109 LQR 82 at 85-88. Even if ineffective between the obligor or promisor and assignor, an assignment may have effect between the assignor and the assignee in various ways: Allcock supra at 330-1, 335-6. If the obligor or promisor, after the purported assignment, performs the contract in favour of the assignor, the assignor may hold the fruits of such performance upon trust for the assignee, by analogy to the treatment in equity of contracts to assign after-acquired property. Where the assignment was for value received by the assignor from the assignee, the contract may be taken to contain an implied warranty as to title by the assignor, sounding in damages. It is unnecessary in this litigation to consider the effect of such principles upon the relations between Conduco and Devefi pursuant to cl. 40 of their contract for the sale of the site.
(Covenants against assignment of leases of land gave rise to a distinct body of authority. Such a covenant ran with the land and an assignment in breach of it was not void and was effectual to vest the term in the assignee notwithstanding the fact that the lessor might treat the assignment as a cause of forfeiture: "Halsbury's Laws of England", 1st ed., 1911, Vol. 18, pp 575-6, Old Grovebury Manor Farm Ltd v W. Seymour Plant Sales and Hire Ltd (1979) 1 WLR 1397 at
1400. Another distinct body of principle deals with restraints upon alienation of land; see Hall v Busst (1960) 104 CLR 206 at 217-8, 224-5, 245-6.)
(b) Upon their proper construction, the terms of the prohibition may operate not to circumscribe the nature of the obligation, but as a promise by the assignor to the obligor or promisor not to assign the benefit of the contract, or to assign it only if certain procedures are followed, such as the giving of consent by the promisor. A purported assignment will be a breach of such a promise. It will be a question of construction whether the prohibition is contravened not only by an assignment but also by a declaration of trust by the licensee; a declaration of trust by the licensee in favour of X differs in character from an assignment to X: In re Turcan (1888) 40 Ch D 5 at 10-11; Williams v Commissioner of Inland Revenue (1965) NZLR 395 at 401.
In each particular case of breach, it will be necessary to determine whether (i) the promisor has merely an action in damages against the assignor, or (ii) the promisor has the election between claiming damages and terminating the contract with the assignor, thereby severing at the root the source of the rights otherwise acquired by the assignee, or
(iii) the term is neither a warranty nor a condition corresponding with the above formulation in (i) and (ii), but a term which stands somewhere between a condition and a warranty so that it is capable of operating, according to the gravity of the breach, as either a condition or a warranty; see Ankar Pty Ltd v National Westminster Finance
(Australia) Ltd (1987) 162 CLR 549 at 561-2. Where there is an exercise by the promisor of a right of termination, then the circumstances of the case may be such as to attract equitable intervention to relieve against forfeiture, a point made by Professor Goode (42 MLR at 557). In Hodder and Tolley Ltd v Cornes (1923) NZLR 876, Salmond J considered a mail contract which prohibited the contractor from assigning any moneys due thereunder without the consent of the Postmaster General, and made forfeiture of moneys due under the contract the penalty for breach of the prohibition. His Honour held that a purported assignment was a good equitable assignment, and that the Crown had not chosen to exercise its right of forfeiture of moneys due under the contract. Salmond J (at 879) referred by way of analogy to the position with covenants against assignments of leases. His Honour held that the true result of the assignment in breach of the contract was not that the assignment was inoperative, but that the moneys assigned became forfeitable to the Crown in accordance with the express provisions of the contract. See also Anning v Anning (1907) 4 CLR 1049 at 1067.
What then is the appropriate characterisation of para. (2) of Part 8.1 of the Mateffy contract as it applies to the licence to use the Drawings, the copyright in which was vested in Mateffy?
Express Licence
38. The appellant submitted that upon its proper construction, cl. 5.2 of the Mateffy Agreement, in conferring on "the Client" the right to use the documents for the purpose of completing "the Project", conferred the right on Conduco to assign the licence to a successor in title for that purpose. Then it was submitted that cl. 8.1 was ineffective to prevent Conduco from assigning the benefit of the licence because nothing in cl. 8.1 cut down the provisions of the "code" found in cl. 5.
In our view, these submissions should not be accepted.
The Mateffy Agreement, taken as a whole, provides for the rendering of complex professional services in which, as in many such relationships, personal trust and confidence in the exercise of specialised skills ordinarily would be of great importance to the client; the identity of the client, whose retainer is accepted, would be of considerable importance to the provider of the services. In general, a court of equity would be most reluctant to grant injunctive relief which might have the effect indirectly of specifically enforcing a contract between builder and owner: Graham H. Roberts Pty Ltd v Maurbeth Investments Pty Ltd (1974) 1 NSWLR 93 at 108. It is then hardly to be supposed that such relief would be given to enforce the supply of services by a consulting engineer to such a project.
If that be so, the contract between Mateffy and Conduco, taken as a whole, was for the provision by Mateffy of services which were of a personal nature and as such the benefit of it, in whole or part, would not ordinarily be treated as assignable by the party to whom the services were to be provided.
It may well be that these personal elements are not present in transactions which are but the bare bones of a licence to use, for reward, an artistic work in which the licensor owns the copyright. But, as we have indicated, more is involved here, in the same way as more than a dealing in copyright is involved in a contract between an author and a publisher.
In our view, Parts 5 and 8 of the Mateffy Agreement are to be construed, prima facie, from the position that assignment of the benefit of the agreement is to be permitted only to the extent to which express provision is made; see C.B. Peacocke Land Co. Ltd v Hamilton Milk Producers Co. Ltd supra. Thus, the present is not a case where the Court is dealing with no more than a contractual licence of intangible rights which ordinarily are treated as freely assignable. Certainly, the Act, as we have indicated, contemplates the free assignment and licensing of copyrights. But the licence of the Drawings given by Mateffy to Conduco was, in our view, an inseverable part of a broader transaction to which there applied the inhibition against the assignment of benefits of contracts involving personal skill or confidence.
We turn then further to consider Parts 5 and 8 of the Mateffy Agreement. The relevant text is set out earlier in these reasons.
Part 5 does not deal at all with the question of assignment by "the Client". The first half of cl. 5.2 confers the licence "to use" the documents "for the purpose of completing the Project". The phrase "to use" in our view would embrace the giving of authorisation by the Client to the builder working on the Project under a contract with the Client, to use the plans for that purpose. As we have said, this right of authorisation is a constituent element in the artistic copyright; by cl. 5.2 it has been licensed to Conduco as the Client.
The second half of cl. 5.2 is introduced by the word "however". The affirmative grant in the opening passage of cl. 5.2 ordinarily would carry with it an implied negative forbidding the Client from otherwise using the documents or making copies of them. The second half of the clause contains a conditional relaxation upon what otherwise would be this general restraint. If express approval is given in advance by the Consulting Engineer (i.e. Mateffy), the Client may use and make copies of the documents in connection with work other than that comprised in the Project. But in all its operations and qualifications, cl. 5.2 must be read subject to the primary provision in cl. 5.1. This states that the copyright shall remain vested in the Consulting Engineer.
We turn then to Part 8. The terms used in cl. 8.1 are apt to deal with subcontracting and novation. The reference to obligations as well as rights indicates this. Of course, any novation would require joinder of all 3 parties and in that sense the provision is strictly unnecessary. The width of the language used is such as also to include assignments of the benefit of contractual rights. Paragraph (2) thereof is directed to the whole range of activities with which the contract is concerned, not merely the copyright licence. It requires the written consent of the other party to either party assigning, subletting or transferring any right or obligation under the agreement.
It was suggested that the term "sublet" was apt to describe what was involved in the use of the plans by a builder under an arrangement with the Client, so that there was some clash between cl. 5.2 and cl. 8.1. However, the reference to "subletting" in standard English construction contracts is accepted as a reference to the subcontracting of obligations under the contract: Hudson on Building and Engineering Contracts, 10th ed., p 734; Wallace on Building and Civil Engineering Standard Forms p 309. These passages have recently been collected and approved by Staughton LJ in St Martin Property Corporation Limited v Sir Robert McAlpine and Sons Ltd; Linden Gardens Trust Limited v Lenesta Sludge Disposals Limited (13/2/92, pp 22-23 of the print; the case is unreported, save for the brief account (1992) 57 BLR 57, but is discussed by Wallace QC in his article, supra).
In any event, it follows, in our view, that given the nature of the bundle of rights licensed to the Client by cl. 5.2, the engagement of the builder by the Client is directly and immediately encompassed by the primary grant of the right to "use" the documents, and that it is not appropriate to describe the operation of cl. 5.2 as involving a sub-licence to the builder. Rather, there is a licence of the "authorisation right" which is an integral part of the Consulting Engineer's copyright. On the other hand, what cl. 5.2 does not do is to licence this bundle of rights not only to the Client but to any successor in title or assignee of the Client.
Returning to cl. 8.1, it is true that in para. (1) there is an express reference to "assigns". But this should be read as identifying those assigns who take pursuant to a transaction of the kind permitted under para. (2) or by other operation of law. It should not be read as including those whose title rests upon a transaction effected by a party in breach of para. (2).
When the nature of the contract for provision of professional services is appreciated and para. (2) of cl. 8.1 is read with cl. 5.2, the result is that the licence thereby conferred upon the Client may be assigned by the Client only with the written consent of the Consulting Engineer. There was no subject matter to which the purported assignment to Devefi of the copyright licence could attach. This is not a case of the kind considered above, in which the assignment, albeit in breach of contract, is effective to pass an interest to the assignee which binds the obligor.
It follows that the case for the existence of an express grant now enjoyed by Devefi fails. We turn to holding (b).
Licence Implied by Law
53. Devefi submitted that, as a matter of law, that there was implied into the Mateffy Agreement the right of Conduco to assign the licence to a party such as Devefi which was its successor in title in ownership of the site and which utilised the artistic works to complete "the Project".
In Sterling Engineering Co. Ltd v Patchett (1955) AC 534 at 547, Lord Reid said:
"There are cases where it has been said that the employer's right to inventions made by an employee in the course of his employment arises from a implied term in the contract of employment. Strictly speaking, I think that an implied term is something which, in the circumstances of a particular case, the law may read into the contract if the parties are silent and it would be reasonable to do so: it is something over and above the ordinary incidents of the particular type of contract. If it were necessary in this case to find an implied term in that sense I should be in some difficulty. But the phrase 'implied term' can be used to denote a term inherent in the nature of the contract which the law will imply in every case unless the parties agree to vary or exclude it. I think that it has probably been used in that sense in the cases founded on by the respondent, and I am of opinion that it is only in that sense that the appellants' right in this case can be said to arise from an implied term."
Devefi contends that the relevant implied term is of this latter description. It relies upon various cases, in particular upon the judgment of Jacobs J in Beck v Montana Constructions Pty Ltd supra which was followed in Blair v Osborne and Tomkins (1971) 2 QB 78, and in Ng v Clyde Securities Ltd supra.
In Beck, the plaintiff architects had been employed to prepare plans of a building which their clients had proposed to construct on certain land. The clients then sold the land with the plans to a purchaser, and the purchaser's architects prepared further plans which substantially reproduced the plans of the plaintiffs. In an action for infringement, it was held that in the circumstances of the case the plaintiffs had given to their clients implied permission or consent to the use of the plans for the construction of a building on the land, whether by the original clients or by the purchasers from them. It is apparent from the report, as counsel for the respondent emphasised before us, that there was nothing in the express contractual arrangements between the plaintiffs and their clients which directly dealt with the subject. In that respect, it was to adopt the term used by the primary Judge in the present case, an "open contract".
Likewise, in Blair, the express conditions in the written contract did "not give any guidance" on the question of licence ((1971) 2 QB at 84). The third case, Ng, was decided on the footing that it was common ground that the law was as stated in the two earlier cases.
In Castlemaine Tooheys Ltd v Carlton and United Breweries Ltd (1987) 10 NSWLR 468 at 487, Hope JA referred to contracts between master and servant, for the sale of goods, for the provision of work and materials, and between landlord and tenant as typical classes of contract in which terms will be implied by law. However, his Honour added that the classes of contracts in which the law will imply such terms are not closed. For example, his Honour pointed to cases where the particular implied term had become so much a part of common practice that the courts imported it into all transactions of that type as a matter of course. He also (at 487-490) considered authorities which suggested that such a term might also be implied where the nature of the contract itself implicitly required it as a matter of necessity. The sense of "necessity" is conveyed by Holmes's phrase "The felt necessities of the time", and indicates something required in accordance with current standards of what ought to be the case, rather than anything more absolute: Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 261 per Priestley JA.
Counsel for the respondent disputed whether the term which was implied in Beck and the cases following it answered these criteria. There was no evidence that any particular implied term had become part of common practice, nor was it "necessary" that such a provision be read into the Mateffy Agreement.
There is, in our view, much to be said for these submissions. However, it is unnecessary to decide the point. This is because, as is also explained by Hope JA in Castlemaine Tooheys (at 490-493), a term otherwise implied by law may be excluded both by an express provision and also if it is inconsistent with the terms of the contract. The parties may have expressly dealt with the area covered by the implied term, but in a manner at variance with it. In Gruzman Pty Ltd v Percy Marks Pty Ltd, supra at 89, where an application for interlocutory injunction was refused, McLelland J said:
"When an architect contracts with a building owner to produce plans for the purpose of their being used to carry out construction work at a particular site, there arises, subject to any contractual provision to the contrary, an implied licence from the architect for the use of the plans for that purpose."
(Emphasis supplied)
In deciding whether the implied term is excluded, in some cases at least regard may be had to the matrix of facts in which the transaction took place. We accept that in a case such as the present, that matrix included the circumstance that the decision in Beck had stood in Australia for 25 years when the April 1988 revision was made of the standard set of terms used here. As we have indicated, the decision had been followed by various courts. It also had been referred to with apparent approval in leading texts, for example in "Copinger and Skone James on Copyright", 12th ed., 1980, para. 259; Laddie, Prescott and Vitoria, "The Modern Law of Copyright", 1980, para. 10.76; and Lahore, "Copyright", 1977, paras. 946-948.
Counsel for Mateffy submitted, and we accept, that rather than have an "open contract" on the point, and thus inviting the application of Beck, the standard terms which were used by the parties contained in cl. 5.2 and cl. 8.1 specific provisions dealing with the ambit of the licence and with the terms on which an assignment might be effected. Any term which otherwise might be implied by law was superseded or supplanted. A party such as Devefi must stand or fall by bringing itself within the terms of those express provisions.
We turn to holding (c).
Licence Implied from Conduct
62. The primary Judge considered this submission in two steps. He looked first at the conduct of Mateffy in the period from the issue of the Drawings on 27 June 1990 up to the meeting of 16 August 1990. The second period was between 16 August 1990 and the making of the arrangement with Southern Cross evidenced in the letter dated 26 September 1990.
As to the first period, the primary Judge pointed out that until 16 August 1990 Mateffy did not know that Devefi had acquired the site. He went on:
"Until then, (Mateffy) believed, quite reasonably, that it could look only to the Condux/Conduco group for its fees and that the group needed time to pay. There was no reason for (Mateffy) then to address the question whether it should grant a licence or any other rights to (Devefi). At this stage, that matter did not arise for (Mateffy's) consideration."
In relation to the later period, his Honour said that it was difficult to accept that a licence should be implied for the first time from the actions of Mateffy between 16 August 1990 and 10 September 1990 when Mateffy had made it explicit that it wished to reserve its rights. His Honour continued:
"It is true that, in the three weeks or so between 16 August and 10 September, (Mateffy) carried out site inspections. But, at that stage, the original retainer of (Mateffy) by Conduco and the Condux group remained on foot - it was not superseded until the later agreement with Southern Cross: see the letter dated 26 September in which (Mateffy) also reserved its rights for present purposes. So long as the original retainer remained on foot and there was uncertainty about the financial capacity of Condux and the Conduco group, it would not be appropriate to impute to (Mateffy) any intention to give up any of its contractual rights and, in particular, the restriction in cl. 8.1 (2) of the retainer on assignment without (Mateffy's) written consent. In this context, it will be recalled that at the meeting on 16 August, Mr Halfacree assured Mr Mateffy that the debt to
(Mateffy) would be paid. Yet, from Mr Mateffy's perspective, the overall position must have appeared to be uncertain. In such an uncertain climate, it is difficult to attribute to
(Mateffy) an intention to forego any of its legal rights in the absence of any apparent benefit or advantage.
It may be accepted that when the deal with Southern Cross, as evidenced in the letter dated 26 September 1990, was made, a benefit was promised to (Mateffy). But in that letter,
(Mateffy) expressly reserved its rights."
On the appeal, counsel for Devefi submitted that the reference in the correspondence, to which we have referred in detail earlier in these reasons, to the reservation by Mateffy of its proprietary rights in respect of its plans and specifications, should be understood in a limited sense. This was as merely affirming the ownership of copyright rather than referring to the actions and rights which Mateffy may have had by reason of the use thereof for the Project without payment. On a fair reading of the correspondence, Devefi's submission should not be accepted.
Certainly, the letter of 26 September 1990, to a lawyer, is not felicitously expressed. Nevertheless, the reference in the last paragraph to the "satisfactory resolution of this aspect of our services", following upon the "reservation" of "all proprietary rights in respect of our plans and specifications as held by (Southern Cross) and (Devefi)", was a further reiteration of a theme taken up in the preceding correspondence which had commenced on 10 September 1990. The correspondence had commenced with a complaint as to delay in payment of the amounts due to Mateffy.
Counsel for Devefi also stressed the importance of the site inspections up to 7 September 1990. However, this conduct is better characterised as a reasonable and temporary participation in the Project, under the assurances as to payment which had been given by Mr Halfacree at the meeting of 16 August. It would be, in our view, taking matters altogether too far to infer from this conduct, or any of the other events in this period, the grant to Devefi of a gratuitous, irrevocable licence to complete the Project. Further, any consent which might be inferred from Mateffy's conduct before 10 September to continued use of the Drawings by Southern Cross under its arrangements with Mateffy, came to an end on that date. Mateffy's solicitors were now saying that their clients would not countenance their position to be eroded any further and if no satisfactory resolution was achieved within the next seven days they would demand the return of the drawings.
From 26 September, a new arrangement was made with Southern Cross. This involved payment for the provision of additional consulting services. There is nothing in this inconsistent, as Devefi now would have it, with the reservation by Mateffy of all its rights which flowed from the use in the past by Conduco of the Drawings, nor with the reservation of its copyright rights in relation to any continuing and further use of those drawings. It is true that Mateffy plainly had from Mr Halfacree hope of payment pursuant to the assurances given on 16 August. But it is taking too great a step to infer from what happened on 26 September and thereafter that consent, contractual or otherwise, was given by Mateffy to what otherwise would be continuing infringement by Devefi of its proprietary rights in the Drawings.
It follows that the appeal fails also in the attack upon the third of the licence issues decided by the primary Judge. Estoppel
The primary Judge rejected the submission that the conduct of Mateffy contributed to an assumption on the part of Devefi that Mateffy would not enforce its legal rights in respect of the use of the Drawings. Upon the appeal, counsel for Devefi conceded that if the appellant failed to make good its submissions as to the implication of a licence from the conduct of Mateffy, then it must, a fortiori, fail in the estoppel claim.
The estoppel claim would, as the respondent pointed out, be more difficult to maintain. It would be necessary for Devefi to show that the assumption had been induced by Mateffy and had been adopted by Devefi as the basis of action or inaction by Devefi such that Mateffy would be guilty of unjust and oppressive conduct if, by claiming damages for infringement in this proceeding, Mateffy were to be permitted to depart from the assumption: Verwayen v The Commonwealth (1990) 170 CLR 394 at 413, 444.
The primary Judge held that the estoppel ground had not been made out. We agree. Conclusion
The appeal should be dismissed, with costs.
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