JWH Group Pty Ltd v Kimpura Pty Ltd

[2004] WASC 39

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION:   JWH GROUP PTY LTD & ANOR -v- KIMPURA PTY LTD & ANOR [2004] WASC 39

CORAM:   PULLIN J

HEARD:   19-21 & 27 JANUARY, 3, 12, 20 & 27 FEBRUARY 2004

DELIVERED          :   17 MARCH 2004

FILE NO/S:   CIV 2188 of 2003

BETWEEN:   JWH GROUP PTY LTD

First Plaintiff

RURAL BUILDING COMPANY PTY LTD
Second Plaintiff

AND

KIMPURA PTY LTD (ACN 006 048 479)
First Defendant

J-CORP PTY LTD
Second Defendant

Catchwords:

Contract - Whether certain property the subject of the contract - Whether there was a breach of contract

Words and phrases - Meaning of "intellectual property"

Assignability of licence granted by copyright owner

Passing off - Whether goodwill in name had been established

Damages for breach of contract benefiting third party - Nominal damages only

Legislation:

Copyright Act 1968, s 35(6), s 196(3)

Result:

First plaintiff awarded nominal damages against first defendant
Claim dismissed in part

Category:    B

Representation:

Counsel:

First Plaintiff                :     Mr M H Zilko SC & Mr M S Van Brakel

Second Plaintiff            :     Mr M H Zilko SC & Mr M S Van Brakel

First Defendant             :     Mr M J McCusker QC & Mr B D Luscombe

Second Defendant         :     Mr M J McCusker QC & Mr B D Luscombe

Solicitors:

First Plaintiff                :     Clayton Utz

Second Plaintiff            :     Clayton Utz

First Defendant             :     Mallesons Stephen Jaques

Second Defendant         :     Mallesons Stephen Jaques

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

Acohs Pty Ltd v R A Bashford Consulting Pty Ltd (1997) 144 ALR 528

Bailey v The Uniting Church in Australia Property Trust (Qld) [1984] 1 Qd R 42

Banks v Transport Regulation Board (Vic) (1968) 119 CLR 222

Beck v Montana Constructions Pty Ltd [1964‑5] NSWR 229

Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337

Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64

Commonwealth v Verwayen (1990) 170 CLR 394

Conagra Inc v McCain Foods (Aust) Pty Ltd (1992) 23 IPR 193

Corin v Patton (1990) 169 CLR 540

Devefi Pty Ltd v Mateffy Perl Nagy Pty Ltd (1993) 113 ALR 225

Donut King Australia Pty Ltd v Wayne Gardner Racing Pty Ltd [2001] NSWCA 275

Federal Commissioner of Taxation v Murry (1998) 193 CLR 605

Hepples v Federal Commissioner of Taxation (No 2) (1992) 173 CLR 492

Hope v Bathurst City Council (1980) 144 CLR 1

Inland Revenue Commissioners v Muller & Co's Margarine Ltd [1901] AC 217

Lorenzo & Sons Pty Ltd v Roland Corporation (1992) 23 IPR 376

Maggbury Pty Ltd v Hafele Aust Pty Ltd (2001) 210 CLR 181

Norman v Federal Commissioner of Taxation (1963) 109 CLR 9

Pitman v Pantzer (2001) 115 FCR 361

Sega Enterprises Ltd v Galaxy Electronics Pty Ltd (1998) 39 IPR 577

Sellars v Adelaide Petroleum NL (1992-1994) 179 CLR 332

Torpey Vander Have Pty Ltd v Mass Constructions Pty Ltd (2002) 55 IPR 542

Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107

Wilson v Darling Island Stevedoring & Lighterage Co Ltd (1956) 95 CLR 43

Case(s) also cited:

A­One Accessory Imports Pty Ltd v Off Road Imports Pty Ltd (No 2) (1996) AIPC 91­228

Amalgamated Mining Services Pty Ltd v Warman International Ltd (1992) 111 ALR 269

Ampol Ltd v Matthews (1991) 4 ACSR 592

Ancher, Mortlock, Murray & Woolley Pty Ltd v Hooker Homes Pty Ltd [1971] 2 NSWLR 278

Antaios Compania Naviera SA v Salen Rederierna AB [1985] 1 AC 191

Australian Federation of Consumer Organisations v Tobacco Institute of Australia Ltd (1991) ATPR 41­079

Australian Home Loans Ltd v Phillips & Technocrat Computing Pty Ltd (1998) 40 IPR 392

Autodesk Australia Pty Ltd v Cheung (1990) AIPC 90­665

Bailey v Namol Pty Ltd (1994) 125 ALR 228

Balmit Management Pty Ltd (in liq) v Global Gaming Industries Pty Ltd [2002] FCA 1193

Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279

Beazley Homes Ltd v Arrowsmith [1978] NZLR 394

Blair v Osborne & Tompkins [1971] 1 All ER 468

Caj Amadio Constructions Pty Ltd v Kitchen (1991) 23 IPR 284

Collings Constructions Co Pty Ltd v Australian Competition & Consumer Commission (1998) 43 NSWLR 131

Columbia Pictures Industries Inc & Tri­Star Pictures Inc v Luckins (1996) 34 IPR 504

Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594

Croper v Smith (1884) 26 Ch D 700

Di Dio Nominees Pty Ltd v Brian Mark Real Estate Pty Ltd [1992] 2 VR 732

Dragut v The West Australian Conference of the Seventh Day Adventist Church, unreported; FCt SCt of WA; Library No 950523; 29 September 1995

Entwells Pty Ltd v National & General Insurance Co Ltd (1991) 6 WAR 68

Ex parte Daws; In re Moon (1886) 17 QBD 275

Express Newspapers plc v Liverpool Daily Post [1985] FSR 306

Fasold v Roberts (1997) 145 ALR 548

Flags 2000 Pty Ltd v Smith [2003] FCA 1067

Fletcher Challenge Ltd v Fletcher Challenge Pty Ltd [1981] 1 NSWLR 196

Greenfield Products Pty Ltd v Rover­Scott Bonnar Ltd (1990) 17 IPR 417

Greenwood v Martins Bank Ltd [1933] AC 51

Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641

Gruzman Pty Ltd v Percy Marks Pty Ltd (1989) 16 IPR 87

Hall Chadwick Corp Finance (WA) Pty Ltd v Axiom Properties Ltd [2002] WASC 179

Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310

Home Management Maintenance Pty Ltd v Doyle (1992) 107 FLR 225

Hoyt's Pty Ltd v Spencer (1919) 27 CLR 133

International Writing Institute Inc v Rimila Pty Ltd (1994) 30 IPR 250

K M A Corporation Pty Ltd v G & F Productions Pty Ltd (1997) 38 IPR 243

L B (Plastics) Ltd v Swish Products Ltd [1979] RPC 551

Lacy v Toole (1867) 15 LT 512

Lamb v Evans [1893] 1 Ch 218

LED Builders Pty Ltd v Eagle Homes Pty Ltd (1999) 44 IPR 24

LED Builders Pty Ltd v Masterton Homes (NSW) Pty Ltd (1994) 30 IPR 447

Lott v JBW & Friends Pty Ltd (2000) 76 SASR 105

Microsoft Corporation v Atifo Pty Ltd (1997) 38 IPR 643

Milpurrurru v Indofurn Pty Ltd (1995) AIPC 91­116

MJA Scientifics International Pty Ltd v SC Johnson & Son Pty Ltd (1998) 43 IPR 275

Murray v King (1984) 3 IPR 525

Namol Pty Ltd v A W Baulderstone Pty Ltd (1993) 27 IPR 1

National Australia Bank Ltd v Maher (No 2) [1999] 3 VR 589

New England Country Homes Pty Ltd v Moore (1998) 45 IPR 186

Nigel Watts Fashion Agencies Pty Ltd v GIO General Ltd (1994) 8 ANZ Ins Cas 61­235

Ownit Homes Pty Ltd v D & F Mancuso Investments Pty Ltd (1988) AIPC 90­488

Prior v Lansdowne Press Pty Ltd [1977] VR 65

Raben Footwear Pty Ltd v Polygram Records Inc (1997) 37 IPR 417

Robert J Zupanovich Pty Ltd v B & N Beale Nominees Pty Ltd (1995) 138 ALR 107

Roland Corporation v Lorenzo & Sons Pty Ltd (1992) AIPC 90­852

Rothwells Ltd (in liq) v Peng & Chew, unreported; SCt of WA; Library No 8315; 5 June 1990

Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 186 ALR 289

Schenker & Co (Aust) Pty Ltd v Maplas Equipment [1990] VR 834

Singh v Atombrook Ltd [1989] 1 All ER 385

Singh v Crafter, unreported; FCt SCt of WA; Library No 8434; 15 August 1990

Smith v New South Wales Bar Association (1992) 176 CLR 256

State of Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146

Stevens v Bennings (1854) 69 ER 414

Stone James v Pioneer Concrete (WA) Pty Ltd [1985] WAR 233

SW Hart & Co Pty Ltd v Edwards Hot Water Systems (1985) 159 CLR 466

TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130

Thomas Australia Wholesale Vehicle Trading Co Pty Ltd v Marac Finance Australia Ltd (1985) 3 NSWLR 452

Thomas v Sorrell (1674) 124 ER 1098

Timpar Nominees Pty Ltd v Archer [2001] WASCA 430

Tony Sadler Pty Ltd v McLeod Nominees Pty Ltd (1994) 13 WAR 323

Trenorden v Martin [1934] SASR 340

Tucker v Bentley (1996) 36 IPR 243

Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429

Vaughan v Byron Shire Council (1999) 103 LGERA 321

W M C Ltd v Westgold Resources NL (1997) 39 IPR 319

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387

Wardley Australia Ltd v Western Australia (1992) 175 CLR 514

Williams v Frayne (1937) 58 CLR 710

Wilson v Weiss Art Pty Ltd (1995) 31 IPR 423

1. PULLIN J:  J-Corp Pty Ltd ("J-Corp") is a company which is, and has been for many years, engaged in the business of constructing residential buildings in Western Australia.  Before June 2003, Mr Julian Alan Walter and a company he controlled, Julian Walter Holdings Pty Ltd, owned 50 per cent of the shares in J‑Corp.  Kimpura Pty Ltd ("Kimpura"), a company associated with Mr Leonard Walter Buckeridge, owned the other 50 per cent of J‑Corp.  Mr Walter was the Managing Director of J‑Corp and attended to the day‑to‑day affairs of that company.

2. In 2003, Mr Walter and Mr Buckeridge decided to end their business association.  On 6 June 2003, Mr Buckeridge and companies associated with him, including Kimpura and the first plaintiff, Mr Walter, and Julian Walter Holdings Pty Ltd ("Holdings"), executed a "Deed Governing Sale" ("Deed") which included provisions whereby Mr Walter and Holdings (together referred to as "Walter"), or their nominee, could, in effect, purchase parts of J‑Corp's business, including the business called Rural Building Company ("RBC").  The purchase would occur if Walter exercised an option to do so, which they did on 13 June 2003.  Walter nominated the second plaintiff ("Rural") as the purchaser.  Since settlement of the purchase, Rural has conducted the RBC business.

3. A dispute has arisen about whether certain property was or was not included in the purchase.  In particular, the dispute is about whether any goodwill associated with the  name "Urban Answers" had been created by J‑Corp before the sale, and, if so, whether that source of goodwill was to be transferred to Rural or whether it remained the property of J‑Corp, and whether J‑Corp owned "intellectual property" in an "Urban Answers" logo and designs for two houses, and, if so, whether all this property was to be transferred to Rural.

4. Some of the words in the Deed which have come into question are difficult to define - for example, "business" and "goodwill".  The ascertainment of the meaning of a contract involves deciding the meaning the document would convey to a reasonable person, having all the background knowledge which would reasonably have been available to the parties in the situation they were in at the time of the contract: see Maggbury Pty Ltd v Hafele Aust Pty Ltd (2001) 210 CLR 181 at [11].

Background

1. The background knowledge reasonably available to the parties when entering into the Deed, I find to be as follows.  By June 2003, J‑Corp was a large business employing several hundred people full‑time and providing work for at least 1,000 contractors.  The annual turnover of J‑Corp was measured in the hundreds of millions of dollars.  It carried on its business in the metropolitan area and across the State.  In 2003, at any one time, it had approximately 1,000 houses under construction.  J‑Corp was organised into separate businesses or divisions, each division concentrating on different customer markets.  Thus the "Oswald Homes" business division built high quality single‑ and multiple‑storey dwellings, designed for urban blocks and involving detailed specifications and a high degree of construction complexity and expensive fixtures.  The "Perceptions" business division was the division catering for mid‑level quality dwellings, designed for urban blocks.  These dwellings had an average level of specification, construction, complexity and less‑expensive building materials.  The "Impressions" business division provided a mid‑level product, mainly single‑storey, designed for urban blocks with simple construction and a lower level of specification.  The "Homestart" business division provided an entry‑level product, directed to lower income customers, especially first‑home owners, very simple construction and basic specification.  The "RBC" business division constructed dwellings designed to meet individual requirements, involving large and open‑plan rooms.  This business directed much of its attention to country‑based customers.  It provided unique designs and a high level of construction difficulty with unusual specifications.  The J‑Corp Projects business division handled industrial and non‑standard project-type work.  The J‑Corp Country business division covered construction of houses in different country areas.

2. Each business operated independently and targeted different customer markets.  Each had a general manager and accountant.  Most had their own designer or designers, although in some cases designers were shared.  Some design work was carried out by outside contractors.  Each business was accounted for separately.  In this way, the financial performance of each business division could be monitored and compared with the other business divisions.  Costs and income incurred by J‑Corp were strictly accounted to each business division.  Thus, the expenses of a division incurred in the development of particular designs and the operational costs in selling and marketing these designs, were charged to that business division.  This was possible because, in the main, design ranges did not overlap between the business divisions, except in the case of J‑Corp Country operations.  Design ranges were usually created for the sole use of a particular business division, and were used solely by that business division.  The cost of preparing the design range would be recorded as a cost of that division.  There was little competition between the businesses, as each was directed at different target customer markets.  As a part of the separate accounting, a specific code, being a single digit or letter, was assigned to the expenses incurred by each division.  In some cases, there were several divisional codes which related to one principal business of J‑Corp.  This occurred where design ranges of a business were identified separately for sales and construction reasons.  Thus, sometimes three codes would together make up the costs of one division.  Before 31 July 2003, RBC had one code "K".

3. Proposed new design ranges would be recorded in the business plan for each of the J‑Corp business divisions.  It was standard procedure for these plans to be prepared by the general managers at the commencement of each financial year.  The general manager of each business division would speak to Mr Walter and settle the business plan for the coming year.  There was usually a formal presentation of the business plan at the divisional meeting of each business division in the first quarter of the new financial year.  Mr Walter, as managing director, attended the meetings of each business division to discuss financial performance and business strategy.  A Mr Holloway was employed by J‑Corp.  He was the group business development manager for J‑Corp, and he worked as a consultant to each of the J‑Corp divisions, although he concentrated most of his energies on RBC and on the J‑Corp Country divisions in 2002 and 2003.  He was the general manager of RBC, and had been so since 1998.  He reported to Mr Walter.

4. Designs for RBC houses were proposed in business plans which Mr Holloway prepared.  Quarterly meetings of RBC were held, which were attended by Mr Holloway.  Mr Walter would also attend, along with some other members of staff, and they would agree on the strategy for the next quarter.  RBC initially targeted what was called "alternative country lifestyle".  However, over time the designs were sought by customers who lived in urban areas. 

5. So much as I have recorded above, I find to have been known to the parties to the Deed.  However, there is no evidence that Mr Buckeridge, the controller of Kimpura, had anything to do with the day‑to‑day running of the business of J‑Corp.  The findings which I make under the next heading, are findings in relation to events which have not been proved to have been known to Mr Buckeridge or Kimpura.

Urban Answers

1. As a result of the trend for customers in the city to ask for RBC designs, Mr Holloway started to think about marketing houses in the suburbs which incorporated the "lifestyle aspects" of the RBC designs.  Mr Holloway considered that it was critical to this idea to maintain the open-plan and centre‑core living space idea which had become what he called a "signature" of RBC.

2. In about mid‑2001, Mr Holloway developed the idea of designing a range of houses called "Urban Answers".  Mr Holloway hoped that this would convey the meaning to intending customers that these designs would be the "urban answer" to the designs of RBC, which, by its name and logo, was presented as a builder for country people.  In the RBC Business Plan for 2001/2002, there was a brief reference to "Urban Answers".  It contained, under the heading "Opportunities" a sentence reading:

   "Bring out a new range called Urban Answers that recognises the request for RBC city homes."

3. Mr Holloway raised the subject of an "Urban Answers" range of home designs at a meeting of RBC staff on 3 August 2001.  Sometime after the August 2001 staff meeting, Mr Holloway prepared a mission statement document, summarising the range of houses for RBC and including a reference to "Urban Answers".  The reference read:

   "Urban answers.  Pushing the rural building company philosophy into the city.  Now you no longer need a sprawling block of land to enjoy all of the benefits of Rural Building Company."

4. In the RBC Business Plan for 2002/2003, under the heading "Objectives", there was a sentence reading:

   "To create to (sic) new product ranges

   1.'RBC affordable'  A range of bush orientated type homes that are extremely cost effective to combat transportable and aggressive opposition,

   2.'Urban Answers' A range of homes that reflects the architectural differences of RBC and incorporating the accommodation value of RBC."

5. The plan also stated as an objective, that brochures and promotional material should be provided to illustrate "RBC's unique products".  At another place in this business plan it was stated that RBC should "create new material for the 'affordable' and 'Urban answers' ranges".   Another of the objectives was stated to be that there should be a "display product", namely an "Urban Answers small lot" and "an Urban answers two story (sic)".

6. At a meeting on 31 July 2002 with the staff of the RBC division, the idea of "Urban Answers" as a new product range, along with "RBC Affordables", was discussed.  A decision was made by Mr Walter and Mr Holloway that the "Urban Answers" range would be comprised of several designs which would be promoted by display homes.

7. In about July 2002, Mr Holloway arranged with J‑Corp's web designer to show "Urban Answers" on the J‑Corp website.  This became live on line in August 2002.  Two words, "Urban Answers", appeared as a small "dropdown" on the RBC website.  A click on the mouse on this dropdown took a reader to a page which read:

   "Urban Answers.  Pushing the Rural Building Company philosophy into the city.  Now you no longer need a sprawling block of land to enjoy all the benefits of Rural Building Company."

8. The page concluded with the words "View Urban Answers Range", but if a viewer clicked on this the viewer was taken to an empty page.  This is because in August 2002 there was no "Urban Answers" range. 

9. Mr Holloway also prepared an "Urban Answers Business Plan".  This proposed the establishment of a separate division.  The business name "Urban Answers" was registered on 25 July 2002 by J‑Corp.  At an RBC divisional meeting on 18 December 2002, attended by Mr Walter and Mr Holloway, the minutes record Mr Holloway saying that he "feels that Urban Answeres (sic) should be run as a separate company."

10. Then on 21 February 2003, there was another meeting involving several members of the RBC staff, which meeting was attended by Mr Walter and Mr Holloway.  Some notes were prepared at this meeting by Ms Catrina Dattilo, who was an executive assistant.  The notes of the  meeting are headed "Urban Answers", and following that heading are the words "Inaugural Divisional Meeting", and the date of Friday, 21 February 2003 appeared under that heading.  I find that there was discussion about the idea of setting up a separate division at that meeting, but I also find that there was no resolution to set up Urban Answers as a separate business division in J‑Corp.  I find that no separate division was ever set up, and no accounting codes were ever established for a separate division under the name of "Urban Answers".

1. After 21 February 2003, any action taken by Mr Holloway in relation to "Urban Answers" was directed at bringing about the establishment of a product range within the RBC division.

Preparation of designs for display houses at Southern River and Brighton

1. It is not in dispute that in early 2003, J‑Corp purchased two blocks of land, one being at Lot 146, 50 Waterview Parade, Southern River ("Southern River"), within the City of Gosnells, and the other being Lot 1019 Hampshire Drive, Brighton Beach ("Brighton"), within the Shire of Wanneroo.  Mr Holloway explains, and I find, that these were purchased by J‑Corp and the cost charged to RBC.

2. Mr Holloway instructed a Mr John Van der Struyf to prepare a plan, and design work commenced and plans or designs were produced for Southern River.  Mr Holloway, however, decided the designs were unsuitable for the block, and they were utilised in an RBC display home at Margaret River and on another block at Harvest Lakes.

3. In early May 2003, Mr Holloway provided Mr Van der Struyf with a boundary plan of the Southern River block and a sketch of the proposed floor plan.  This floor plan was worked on by Mr Van der Struyf, and he eventually produced a home design for the Southern River block.  The first version was on 21 May 2003.  Another version was dated 16 July 2003.  Work on this design was still continuing when the Deed was executed.  A further version was dated 29 July 2003. 

4. Mr Van der Struyf was not an employee of J‑Corp in 2003.  He was a "design consultant", meaning that he did his work on contract for J‑Corp and sent accounts designating RBC as the business responsible for payment for his work on the "Southern River" design.  Mr Van der Struyf was the author of, and therefore the owner of copyright in, all the versions of the "Southern River" designs.

5. In relation to the Brighton block, Mr Holloway instructed Robert Kirkovski, a J‑Corp employed designer, to prepare a design. In March 2003, Mr Holloway met with Mr Kirkovski and provided him with the boundary plan for the block. Mr Kirkovski and Mr Holloway visited the Brighton block to consider the features of the block. Mr Kirkovski prepared a plan, which a draftsman produced for him in March 2003. Between April and the date of the execution of the Deed, other versions of the design were discussed between Mr Kirkovski and Mr Holloway, and produced by Mr Kirkovski on 30 April 2003, 11 June 2003, 4 July 2003 and 25 July 2003. Mr Kirkovski was the author of these designs. Pursuant to s 35(6) of the Copyright Act 1968, J‑Corp was the owner of the copyright in the "Brighton" designs.

The Deed

1. In 2002, there was litigation between Kimpura and Walter in this Court to resolve disputes which had arisen between them.  That litigation was settled when the Deed was executed on 6 June 2003. 

2. On 13 June 2003, under cl 2.18 of the Deed, Walter exercised the option to purchase the RBC business.

3. Clause 2.18 of the Deed read:

   "… Kimpura agrees to cause the Company, at Walter's option, to sell and transfer to Walter or Walter's nominee ('RBC Purchaser') at Completion the business of the Company known as 'Rural Building Company' ('RBC Business') constituted by the following items as used by or in, or as relevant to, the RBC Business.

   (a)The business name and logo 'Rural Building Company' including contact numbers.

   (b)Goodwill attached to the business name 'Rural Building Company'.

   (c)Plant and equipment as listed in Schedule 5 to this agreement ('RBC Plant and Equipment').

   (d)Subject to clause 2.23(b), all building and construction materials …

   (e)Display homes and land as listed in Schedule 6 to this agreement ('RBC Display Homes and Land') inclusive of display furniture and land under offer for future display.

   (f)All relevant leases for RBC Display Homes and equipment.

   (g)Intellectual property in all designs, logos and advertising, historic and current.

   (h)All signage, brochures, awards and advertising materials.

   (i)All electronic or hard copy documentation and files.

   (j)All software including, without limitation, commercially available and in‑house developed software for use in construction, maintenance, marketing and any other area of or relating to the RBC Business.

   (k)Sponsorships.

   (l)All client lists and client and prospective client information including contact information concerning existing and prospective clients.

   (m)All contracts for the preparation of plans and all contracts for construction of homes, whether or not construction has commenced as at 30 June 2003 …

   (n)Subject to clause 2.23(b), all plans, designs, sketches, specifications, calculations, applications, authorisations and the like for or relating to the RBC Building Contracts …

   (o)Subject to clause 2.23(b), construction work in progress under contracts for the construction of homes where construction has commenced as at 30 June 2003 …"

4. Schedule 6 contained a long list of RBC display homes and land, and included in that list was the Southern River property and the Brighton block or property.

5. Clause 2.19 provided that the purchase price payable by the RBC Purchaser was to be payable in cash at "Completion".  Clause 2.19 continued:

   "For the purpose of determining the RBC Purchase Price, Kimpura and Walter must cause [J‑Corp] to prepare the Estimated Completion Accounts prior to 30 June 2003.

   The RBC Purchase Price will represent the RBC Goodwill (being an apportionment to the RBC Business of the Purchased Goodwill on the sale of Walter's share in [J‑Corp] to Kimpura calculated in accordance with clause 2.19(a)), plus the value of separately identifiable RBC Business assets, as follows …"

6. Formulas were provided in that clause for the determination of the "Purchased Goodwill", which included the value of the net assets of J‑Corp as shown in the "Estimated Completion Accounts".

7. The RBC display homes and land were to be the written down values of those assets in the books of J‑Corp as at 30 June 2003, as shown in the "Estimated Completion Accounts".

8. At "Completion", which related to the sale of shares in J‑Corp, "RBC Completion" was also to take place, at which time J‑Corp was to deliver to the RBC Purchaser, a transfer of the business name form in respect of the business name RBC, transfers of the RBC display homes and land, and, by cl 2.20(b)(ii):

   "Kimpura shall cause [J‑Corp] to take all such further and other steps as may be necessary to transfer to the RBC Purchaser full possession, control and ownership of the items, assets and property referred to in clause 2.18 …"

9. The final clause I need to refer to in the Deed is cl 2.20(a), which reads:

   "Prior to RBC Completion, the RBC Purchaser shall execute, and Kimpura shall co‑operate with Walter to cause [J‑Corp] to execute, an agreement in the form set out in Schedule 11."

10. Schedule 11 contained the form of a "Deed for supply of a going concern - RBC Business" for the purpose of GST law.

Issue concerning the date of the sale and purchase of items listed in cl 2.18 of the Deed

1. It seems that there are two possible dates on which Kimpura was to cause J‑Corp to sell and transfer the property.  They are 30 June 2003, this being a date which the defendants submit is suggested by several clauses in the Deed, and the other is 31 July 2003, which was the "Completion" date.

2. The plaintiffs contend for the 31 July 2003 date, and the defendants contend for 30 June 2003 date.  The date of sale and purchase is relevant to some of the issues which arise.  For example, in deciding whether goodwill existed requires the examination of the events leading up to one or other of the dates.  I reach  my conclusion about this issue later in my reasons.

Construction of the Deed

1. Clause 2.18 of the Deed commences by stating that Kimpura agrees to cause J‑Corp to sell and transfer the  "business" of J‑Corp known as RBC.  "Business" is an ordinary English word, but it has many meanings.  One such meaning is "a commercial enterprise as a going concern": Hope v Bathurst City Council (1980) 144 CLR 1. To use the word "business" is usually to describe what a person or company does in general terms, that is, to buy and sell goods or services in an attempt to make a profit. To agree to purchase a "business" is apt to create uncertainty about what property is to be transferred. It is impossible to purchase an activity. Even the concept of "property" is a difficult one: see Meagher, Gummow and Lehane, "Equity Doctrines and Remedies", 4th Ed, 4‑010 and 4‑015.

2. Undoubtedly, to overcome the difficulty in determining just what property was sold, the parties added after the words "the business of … RBC", the words "constituted by" and then set out a list of property.  "Constitute", in its ordinary meaning, means "make up", and so the parties agreed that the business of RBC which was sold, was "made up" of the items listed in (a) to (o).  The use of the words "constituted by" means, in my opinion,  that if an item of property did not fit within the items listed in (a) to (o), then it was not property sold by J‑Corp and it was not part of the "business" being sold.  If the parties had used the word "included" instead of "constituted by", this would have allowed the purchaser to argue that some items of property not listed, were nevertheless part of the property sold.  The clause agreed upon does not permit such an argument.

3. Thus, if Rural has the right to use the name "Urban Answers", if it is entitled to be the owner of the copyright, or has the right to use the plans or designs related to the properties at Southern River and Brighton Beach and the "Urban Answers" logo, then it will have to show that such rights have been conferred as a result of the transfer of property pursuant to the provisions of sub‑par (a) to (o) of cl 2.18 of the Deed.

4. I should add that the parties both argued the case on the basis that the word "designs" in cl 2.18(g) of the Deed refers to house plans and elevations, and I so find.

The dispute about Urban Answers

1. The Business Names Act 1962 provides for the registration of business names.  It says nothing about goodwill, but if a person has registered a name, no‑one else may use the name, and so the person holding the registration may build up goodwill in the name without competition.  However, the mere registration of the business name will not mean that there is any goodwill attached to the name.  As I have mentioned, the name "Urban Answers" was registered on 25 July 2002 by J‑Corp.  Clause 2.18(a) of the Deed provided that Kimpura was to cause J‑Corp to transfer the business name "Rural Building Company" to the RBC Purchaser, but there is no reference in the Deed to the business name "Urban Answers".

2. The defendants say that J‑Corp remains, and is entitled to remain,  the registered owner of the business name "Urban Answers", and is entitled to continue using it because there was no agreement that J‑Corp should transfer it to JWH Group Pty Ltd ("JWH").  On the other hand, the plaintiffs contend that the name "Urban Answers" formed part of the "goodwill" of the RBC business, and that Kimpura was obliged to cause J‑Corp to transfer this to Rural by reason of cl 2.18(b) of the Deed.  The plaintiffs also contend that there was an "Urban Answers" logo and that the "intellectual property" in the logo "Urban Answers" was to pass to Rural under cl 2.18(g) of the Deed.

How the disputes between the parties emerged

1. Sometime after Completion, Mr Walter turned his attention again to the "Urban Answers" name.  He considered that Rural had acquired the right to use the name "Urban Answers" and the right to use the "Southern River" and "Brighton" designs under the Deed and under the Deed of Variation.  Motivated by that belief, Mr Walter caused Rural to begin construction of display homes at Southern River and Brighton, based on the "Southern River" designs of Mr Van der Struyf and the "Brighton" designs of Mr Kirkovski.  On other sites, Mr Walter caused Rural to erect signs showing that the houses under construction were the product of "Urban Answers".  In mid‑September, Mr Walter participated in an interview with a journalist from "The West Australian", who wrote an article which was published in that newspaper on 20 September 2003.  The article referred to "Urban Answers" as an off‑shoot of Rural. 

2. J‑Corp formed the view that it was entitled to use the name "Urban Answers" and to publish and reproduce the "Southern River" and "Brighton" designs.  As a result, J‑Corp then placed advertisements in the "Sunday Times" of 28 September 2003, advertising the two designs but renamed them "Metro" and "Hudson".  These were advertised under the name "Urban Answers by Perceptions".  These designs were identical to the designs prepared by Mr Kirkovski and Mr Van der Struyf for the Brighton and Southern River sites.  The "Metro" plan was identical to the "Brighton" design of 11 June 2003, and the "Hudson" design was identical to the "Southern River" design of 16 July 2003. 

3. Mr Walter saw these advertisements and recognised the designs.  On 30 September 2003, Mr Walter wrote to the general manager of the business division of J‑Corp called "Perceptions", seeking an undertaking that Perceptions should not continue to advertise the designs, whether under the name "Urban Answers" or otherwise.  On 1 October 2003, Mr Walter instructed Clayton Utz to write to Mallesons Stephen Jaques, as solicitors for the first and second defendants, seeking undertakings that they would not continue to advertise, pass off, or represent the designs as their own, whether under the name "Urban Answers" or otherwise.

4. The undertakings sought were not forthcoming, and on 3 October 2003 these proceedings were commenced.  On the same day, the plaintiffs made application for an interlocutory injunction, seeking an injunction against the first and second defendants from advertising the "Hudson" and "Metro" designs or using the name "Urban Answers".  The defendants initially resisted the application for an injunction, on the basis that the plaintiffs had no right to use "Urban Answers" or the two designs.  However, the parties then reached an agreement that there should be an order of the court restraining both parties from taking any fresh step which would result in advertising the designs or the "Urban Answers" name.   Such an order was then made by consent.  This order was extended on 8 October 2003 until 9 October 2003.  On 9 October 2003, the plaintiffs sought a continuation of the order, but modified so that the plaintiffs were themselves allowed to advertise the "Southern River" and "Brighton" designs.  I was asked to decide whether there should be such a modification, and as a result of my reasons for decision on that point on 9 October 2003, the parties then negotiated, and consent orders were then made, restraining all parties from advertising or promoting "Urban Answers", and restraining all parties from advertising, promoting, selling or offering for sale, the "Hudson", "Metro", "Southern River" and "Brighton" designs.  The order consented to also provided that the defendants were entitled to use the "Hudson" and "Metro" designs for the purposes of dealing with customer enquiries received in respect of the designs up until 9 October 2003, and provided that the defendants maintain a weekly summary identifying each customer or potential customer who had made a written telephone or other enquiry of the defendants, which was to be provided by the defendants to their solicitors on a weekly basis, pending the trial completion.  The consent order also provided the plaintiffs were entitled to place a single advertisement in the "Sunday Times" relating to the "Southern River" and "Brighton" designs; that the plaintiffs were entitled to use the designs for the purpose of dealing with customer enquiries; and that the plaintiffs should also maintain a weekly summary identifying customers who had made enquiries of the plaintiffs, with a copy of the summary to be provided by the plaintiffs to their solicitors on a weekly basis.  The consent order also provided that the plaintiffs could use the designs for the continued construction of the "Southern River" and "Brighton" display homes.

Date on which Kimpura was to cause J‑Corp to sell and transfer property to JWH

1. Clause 2.18 of the Deed provided that Kimpura would cause J‑Corp to sell and transfer the RBC business to Walters' nominee "at Completion".   The parties are agreed that Completion was on 31 July 2003.  That is the date on which Kimpura was to cause J‑Corp to "sell" and "transfer" the property of J‑Corp passing under the Deed unless specifically provided to the contrary elsewhere in the Deed.  I do not agree that because the "Estimated Completion Accounts" were prepared as at 30 June 2003, or that because other clauses, namely cl 2.18 itself, cl 2.19, cl 2.20, cl 2.20A, cl 2.21 and cl 2.23, of the Deed refer to 30 June 2003, means that the sale and transfer of the property listed was to occur on 30 June 2003.

Goodwill - "Urban Answers"

1. The plaintiffs contend that the right to use the name "Urban Answers" was to pass to Rural under cl 2.18(b) of the Deed, because it formed part of the goodwill attaching to the business name "Rural Building Company".

2. The word "goodwill" is a word which is notoriously difficult to define: Hepples v Federal Commissioner of Taxation (No 2) (1992) 173 CLR 492 at 519. In its ordinary meaning, it is an intangible, saleable asset, arising from the reputation of a business and its relation with its customers, distinct from the value of its stock: see "Macquarie Dictionary". It is necessary to take care in referring to cases which deal with the meaning of the word "goodwill". This is because the context in which the case was decided may focus on the different aspects of goodwill and whether goodwill constitutes property, whether something is a source of goodwill, or whether the case was concerned with valuation issues: see Federal Commissioner of Taxation v Murry (1998) 193 CLR 605 at [12]. Having said that, it is clear that goodwill is the attractive force which brings in custom to a business. It is the one thing which distinguishes an old established business from a new business at its first start. The goodwill of a business may emanate from many different sources: see Murry's case (supra) [17] and [24]; Inland Revenue Commissioners v Muller & Co's Margarine Ltd [1901] AC 217 at 223‑224. In this case, the issue is about whether "Urban Answers" was a source of goodwill in existence at Completion and which Kimpura was to cause J‑Corp to sell and transfer to Rural at Completion as part of the goodwill of the business of RBC. It would have been simple enough for the parties to agree to transfer the business name "Urban Answers", but no such agreement was reached. Instead, the plaintiffs are left to contend that the right to use the name "Urban Answers" is part of RBC's goodwill under cl 2.18(b) of the Deed.

3. As is said in Murry's case (supra) at [12], the existence of goodwill "depends upon proof that the business generates and is likely to generate earnings from the use of the identifiable assets, location, people, efficiency, systems, processes and techniques of the business".  It is therefore necessary for the plaintiffs to establish that as at the date of proposed sale and transfer (ie 31 July 2003), the division of J‑Corp known as RBC, was attracting custom by the use of the name "Urban Answers": see Murry's case and the reference to "attracting custom", "attract custom", "custom is drawn" [26] and "sources of earnings" [29]. 

4. The plaintiffs contend that it is not necessary to prove that the business generated earnings from the name "Urban Answers", because of the decision in Conagra Inc v McCain Foods (Aust) Pty Ltd (1992) 23 IPR 193. That was a passing-off action, and it was held not to be necessary in the proof of reputation, to show that business was carried on in Australia: see 233, 263 and 269. However, what is plain is that the reputation in the case was dependent upon business being carried on by the plaintiff, even though not in Australia. The reputation was the reputation of a business conducted in the United States, but the court held that the reputation of that business extended beyond the United States to Australia, by reason of the effects of modern mass communication. In my opinion, that case does not assist the plaintiffs. The plaintiffs must still prove that business was generated by the use of the name "Urban Answers", thereby developing reputation and goodwill for RBC.

1. It is to that factual issue which I now turn.

Did "Urban Answers" attract custom to RBC?

1. Evidence was led by the plaintiffs to show what either Mr Walter, the managing director, or Mr Holloway, the business development manager of J‑Corp and the general manager of the RBC division of J‑Corp, intended to do with the name "Urban Answers" in 2001, 2002 and 2003.  It is clear, and I find, that Mr Holloway came up with the idea of using the name "Urban Answers" in order to market RBC products.  Originally, RBC was set up to market products to country people, but soon the RBC division found that persons living in the metropolitan area liked the RBC designs, and Mr Holloway felt that it was somewhat confusing to market RBC products to urbanites.  In addition, as I found earlier in these reasons, he came up with the idea that certain designs which might be marketed by RBC would be described as the "urban answer" to RBC designs.  There was talk of including a range of products within the RBC division, and there was also talk about setting up a separate division known as "Urban Answers", that is, a division which would operate with different staff as a separate business unit. 

2. The findings I have just made do not answer the question about whether or not the right to use the name "Urban Answers" was part of the goodwill which was to pass under the Deed.  What the plaintiffs have to demonstrate and prove, is that the name "Urban Answers" attracted custom to RBC, and was likely to continue to do so. 

3. The first point to note is that the plaintiffs do not contend that any product, that is, any house, was built by RBC for a customer who believed that it was an "Urban Answers" product, or a product built by a sub‑division of RBC called "Urban Answers".  The plaintiffs' case is that the name "Urban Answers" became known to a section of the public because of advertising or information provided to the public by RBC.  In particular, the plaintiffs claim that a section of the public became acquainted with the name "Urban Answers" by reason of the RBC website and by reason of brochures published by RBC.  I will deal first with the brochures.

4. Mr Holloway identified brochures for the following building products (that is house designs with distinctive features which were marketed under a name).  They were:

   •Durack

   •Garden View

   •Cape View

   •Hill View

   •Shannon

   •Forrest View

   •Meadow View

   •Meadow View Cottage

   •Brookfield Loft

   •Bushland Retreat

5. These brochures had information on them about different product lines of RBC, but none referred to a product line or a division of RBC called "Urban Answers".  Mr Holloway said that these were all brochures printed earlier in the life of RBC, that is 2001 or earlier, but he also added that these brochures continued to be used by RBC, and were used until RBC ran out of stock.

6. Counsel for the defendants also took Mr Holloway to four current brochures prepared after February 2003, which Mr Holloway said were current in the sense that they related to four existing display homes.  They were:

   •Skillion Heritage

   •Wonnerup Farmhouse Heritage

   •Pavilions Heritage

   •Skillion

   None of these brochures referred to "Urban Answers".  They referred to a "City Solutions" range of products.

7. Five other brochures were also produced by Mr Holloway, relating to:

   •The Farmhouse  

   •The Shed  

   •The Two‑storey Retreat                  

   •The Sundowner

   •The Stockman

   Each of these brochures had a reference to a range of products, or as described on the brochure "designs", to typify a style "by the approach of the floor plan design or our attitude to outcomes".  For example, the "The Two‑storey Retreat" range was said to be "one of the most exciting ranges of new designs in  many years.  It allows the home to capture the visual environment from the front and rear of your home."  On each of these five brochures, within the list of products or designs, there was a short passage referring to "Urban Answers".  It read:

   "Urban Answers pushes The Rural Building Company philosophy into the city.  Now you no longer need a sprawling block of land to enjoy all of the benefits of The Rural Building Company."

   All of these five brochures were produced before February 2003.  What also emerged from the evidence was that although the brochures said that they were designs for "Urban Answers", no such designs existed at, or before, February 2003.  Instead of continuing to use "Urban Answers" on newly‑printed brochures, brochures printed after February 2003 were designed by an advertising agency called "Linc", and all of these new brochures referred not to an "Urban Answers" line of product or designs, but to "City Solutions".  I have referred to four of those brochures above.

8. In the first half of 2003, Mr Holloway, on behalf of J‑Corp, gave instructions to designers to draw plans for "Southern River" and "Brighton", which were to be charged to the RBC division and which Mr Holloway said was to be a range for "Urban Answers" (even though new brochures for other products he was having prepared, referred to "City Solutions" and not "Urban Answers").

9. From all of this, I find that the brochures referring to a range of designs known as "Urban Answers" were printed before February 2003, but there was no range of designs available if a customer had asked for one.  There was no admissible evidence led that these brochures were distributed to the public.  I find that many brochures (identified above) were published without any reference to the "Urban Answers" range of designs.  I find that at least four brochures were prepared as new brochures after February 2003 and before 30 June 2003, and which contained a reference to a "City Solutions" range of products.  There was no admissible evidence about distribution of any of these brochures to the public.  Even if they had been distributed, no goodwill developed in the name "Urban Answers" because there were no designs to show customers, and so no custom or revenue was earned by J‑Corp by the use of the name "Urban Answers".

10. I now turn to the website evidence.  First, it is clear that there was no separate website for "Urban Answers" before 17 July 2003.  The evidence revealed (at Exhibit 3/59) that on 18 July 2003, Mr Holloway was informed that a domain name " was registered on 17 July 2005.  I do not know whether that date was a typographical error.  Perhaps it does not matter, because there is no evidence that a website for "Urban Answers" was ever available for public search before 31 July 2003.

11. What then of RBC's website?  The evidence is, and I find,  that "Urban Answers" appeared as a dropdown page in, and after, August 2002, and it said that RBC was offering a range of designs called "Urban Answers".  In fact, no such range was made known to the public before 31 July 2003, and the website revealed no range.  There was no evidence about the number of hits at this website, and there was no evidence led to show that any customer, or potential customer, ever referred to "Urban Answers".

12. As a result, I find that the name "Urban Answers" attracted no custom to J‑Corp or the RBC division before 31 July 2003.  The plaintiffs have not proved that "Urban Answers" generated any earnings for J‑Corp before 31 July 2003.  I find that the name was not therefore part of the "goodwill attached to the business name [RBC]" which was to be transferred to Rural.

Did J‑Corp have intellectual property in the "Urban Answers" logo?

1. Clause 2.18(g) provided that Kimpura was to cause J-Corp to transfer to Rural "intellectual property in … logos".

2. The word "logo" is an abbreviation of "logogram" or "logotype": "Shorter Oxford English Dictionary Vol 1" (5th Ed).  A "logogram" is a

   "symbol or device designed to represent in simple graphic form an object, concept, or attitude; an organisation's emblem or bade, a logotype."

   See also Donut King Australia Pty Ltd v Wayne Gardner Racing Pty Ltd [2001] NSWCA 275 at [32]. A logo for "Urban Answers" was prepared by Linc, a contractor to J‑Corp. It was a logo with a red background, the words "Urban Answers" appearing in it, and with a small semi‑abstract house motif in the top left‑hand corner of the logo. It is reproduced at the bottom of p 2 of Exhibit 10/1. The owner of the copyright is therefore not J‑Corp. I find that Linc was the owner of the copyright.

3. For the reasons I give in dealing with the "Southern River" design, a licence to publish or reproduce an artistic work in which copyright resides in the author, may be implied from conduct.  In this case, Linc knew that it was preparing a logo for use by J‑Corp in its business.  Out of the circumstances, there was an implied licence authorising J‑Corp to use the logo for that purpose.  The licence was therefore a licence to J‑Corp to publish the logo.  For the reasons also given below, I consider that the phrase "intellectual property", where used in cl 2.18(g) of the Deed, included the licence to publish the "Urban Answers" logo.

4. In my opinion, the licence was assignable for the reasons given below in relation to the copyright in the "Southern River" design.

"Hudson" design and the "Southern River" design

1. I have already found that Mr Van der Struyf was the author and owner of the "Southern River" designs.

2. In the 28 September 2003 and 5 October 2003 editions of the "Sunday Times", the defendant J‑Corp placed advertisements offering to build a house in accordance with a floor-plan design set out in the advertisement which was called the "Hudson" design.  This was identical to the "Southern River" design of 16 July 2003.  In short, I find that the "Hudson" design was a copy of the "Southern River" design.

"Southern River" design - rights conferred on J‑Corp by Mr Van der Struyf - whether assignable by J‑Corp

1. A licence to publish or reproduce an artistic work in which copyright resides in the author, may be implied from conduct (Lorenzo & Sons Pty Ltd v Roland Corporation (1992) 23 IPR 376 at 380‑382) or by business efficacy (Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337). An architect or designer who is the author of a plan or design commissioned by a client, grants an implied licence to reproduce the plans in a material form. The implied licence is a licence granting permission to use the plan or design for the purpose for which they were brought into existence.

2. In the case of plans commissioned by J‑Corp (which was known by Mr Van der Struyf to be a project builder), I find that the implied licence was a licence to publish the plans and to reproduce them in a material form.  In other words, J‑Corp had a non‑exclusive contractual licence to advertise the plans, build display homes, copy the designs in contract documents, and construct houses on customers' land in accordance with them: Beck v Montana Constructions Pty Ltd [1964‑5] NSWR 229 at 235; Torpey Vander Have Pty Ltd v Mass Constructions Pty Ltd (2002) 55 IPR 542. This contractual licence is not an "exclusive licence" within the meaning of the Copyright Act 1968, because it has not been shown to have been in writing: see s 10.

3. So much was not disputed by the defendants.  What is disputed, however, is the plaintiffs' claim that J‑Corp was also free to assign or transfer its rights to publish the Southern River design (that is advertise it) and to reproduce it in material form on customers' properties, to another entity.  That raises a legal issue.  The legal position is as follows:

   (a)In the absence of any provision in a contract prohibiting assignment, the benefit of a contract is assignable:  Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 26.

   (b)However, the benefit of the performance of a contract involving personal skill and confidence cannot be assigned: Devefi Pty Ltd v Mateffy Perl Nagy Pty Ltd (1993) 113 ALR 225 at 234.

   (c)However, a contractual licence relating to the "fruits of performance" stand in a different position.  They may be assignable.  Thus, copyright in an artistic work may be licensed or assigned: Devefi Pty Ltd (supra) at 234.  In some cases, 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: Devefi Pty Ltd (supra) 234.  If, however, the subject‑matter of the contractual licence deals only with intangible rights and the contract involves no personal content, then the licence may be assignable: Devefi Pty Ltd (supra) 235.  If the owner of copyright in a building design licenses the owner of a property to reproduce the design in a material form on that property but the licence is an inseparable part of a broader transaction requiring the performance of other personal services by the author, then the licence will not be assignable: Devefi Pty Ltd (supra) 235.

4. All that Mr Van der Struyf had to do was to prepare the designs.  On the evidence before me, his role was concluded once he delivered a drawing in a form which satisfied J‑Corp.  The process of settling on the final form involved making amendments to the drawing, but once J‑Corp received a design it was satisfied with, then Mr Van der Struyf submitted a bill and he was paid.  Unlike the engineers in Devefi's case, Mr Van der Struyf was not involved in visiting the site and overseeing the construction of any building constructed in accordance with the designs.  Thus, the arrangement between Mr Van der Struyf and J‑Corp involved no personal services.

5. As a result, I find that the licence was assignable by J‑Corp.

6. That leads into the next issue, which is whether the parties to the Deed by its terms agreed that Kimpura should cause J‑Corp to transfer (that is assign) the licence to Rural.  That depends upon whether or not J‑Corp's licensed rights in relation to the "Southern River" designs are "intellectual property" within the  meaning of cl 2.18(g) of the Deed.  The defendants submit that those licensed rights do not fall within the description of "intellectual property".

The meaning of "intellectual property"

1. The phrase "intellectual property" is a phrase best avoided if precision is required.  In ordinary meaning, the term at least includes patents, copyright, and trademarks, but its boundaries extend beyond those things, as indicated by the use of "etc" in the "Macquarie Dictionary", which defines the phrase as follows:

   "The rights of creative workers in literary, artistic, industrial and scientific fields which can be protected either by copyright or trademarks, patents, etc."

2. In "Free Software, Free Society: The Selected Essays of Richard M Stallman" (ed J Gay) (ISBN 1‑882114‑98‑1), the author says:

   "According to Professor Mark Lemley of the University of Texas Law School, the widespread use of (sic) term 'intellectual property' is a recent fad, arising from the 1967 founding of the of the World Intellectual Property Organization.  (See footnote 123 in his March 1997 book review, in the Texas Law Review, of Romantic Authorship and the Rhetoric of Property by James Boyle.)  WIPO represents the interests of the holders of copyrights, patents and trademarks, and lobbies governments to increase their power. …"

3. The author also says:

   "'Intellectual property' is … an unwise generalization.  The term is a catch‑all that lumps together several disparate legal systems, including copyright, patents, trademarks, and others, which have very little in common.  These systems of law originated separately, cover different activities, operate in different ways, and raise different public policy issues. …

   To give clear information and encourage clear thinking, never speak or write about 'intellectual property'; instead, present the topic as copyright, patents, or whichever specific law you are discussing."

4. The authors of the service "The Law of Intellectual Property: Copyright, Designs and Confidential Information" (1994), S Ricketson and C Creswell, say in the introduction to that work at [1.0] and [1.5] that:

   "[1.0]… Traditionally, the term 'intellectual property' was used to refer to the rights conferred on authors of literary, musical and artistic works through the grant of a copyright.  More recently, it has been used compendiously to describe a wide range of disparate rights, including some more customarily known as 'industrial property' rights, such as patents for inventions, industrial designs and trade marks.  Thus, Art 2(viii) of the Convention Establishing the World Intellectual Property Organisation (of which Australia has been a member since its inception) (Adopted at Stockholm, 14 July 1967) defines 'intellectual property' as including the rights relating to:

   •literary, artistic and scientific works

   •performances of performing artists, phonograms and broadcasts

   •inventions in all fields of human endeavour

   •scientific discoveries

   •industrial designs

   •trade marks, services marks and commercial names and designations

   •protection against unfair competition

   and all other rights resulting from intellectual activity in the industrial, scientific, literary or artistic fields.

   [1.5]As explained in [1.0], the present volume deals mainly with those topics which would traditionally have been termed 'intellectual property'.  Nevertheless, it is important to note the wide scope of that term now, as well as the fact that Australian intellectual property law does not cover all the rights mentioned in the WIPO list, in any event.  The approach of our law‑makers, both legislative and judicial, has been more piecemeal and there has been no general recognition that protection should be accorded, in the wide terms of the last mentioned residual category, to 'all other rights resulting from intellectual activity in the industrial, scientific, literary or artistic fields'. …"

5. I note that in Ricketson and Creswell (supra), the authors deal with the subject of contractual and implied licences (see 14.435 and 14.475), therefore indicating that they regard such licences as falling within the description "intellectual property".  Counsel for the parties informed me that their research has not found any case discussing the meaning of the phrase "intellectual property".

6. In my opinion, parties in the position of these contracting parties (who were represented by solicitors) would have meant by using the phrase "intellectual property", not only copyright but also contractual or implied licences which granted permission to do acts comprised in copyright.  Although a mere licence by a property owner does not create any estate or interest in the property to which it relates - it only makes lawful which without it would be unlawful (Banks v Transport Regulation Board (Vic) (1968) 119 CLR 222 at 230) - nevertheless the right to do the acts which the copyright owner has, must have been intended by the parties to the Deed to be covered by the phrase "intellectual property". The breadth of meaning of the word "property" is discussed in Bailey v The Uniting Church in Australia Property Trust (Qld) [1984] 1 Qd R 42 at 58. The parties would surely have intended the phrase to refer to designs which related to land which was to be transferred. As noted above, the "Southern River" land was to be transferred to Rural under the Deed. I have found that the "Southern River" licence was assignable, and that also supports my conclusion that the licence is "intellectual property".

7. There was also an issue about whether the licence, if it was "intellectual property", was "used by or in, or as relevant to," the RBC business.  For reasons given below, I consider that it was so relevant.  In my opinion, therefore, Kimpura was obliged to cause J‑Corp to transfer to Rural, the rights J‑Corp had, by licence from Mr Van der Struyf, in relation to the "Southern River" designs.

1. However, those rights, even when transferred, would not confer any right on Rural to sue for breach of copyright owned by Mr Van der Struyf, at least not without joining the copyright owner: see Sega Enterprises Ltd v Galaxy Electronics Pty Ltd (1998) 39 IPR 577.

The "Brighton" design

1. I have already found that Mr Kirkovski was the author of this design. He was an employee of J‑Corp at the time, and therefore J‑Corp became the owner of the copyright: see s 35(6) Copyright Act 1968.  I find that the expression "intellectual property" includes a reference to copyright in the "Brighton" design.

2. The only argument which the defendants advanced to resist the claim by the plaintiffs that copyright in the "Brighton" design was to be transferred to Rural pursuant to the Deed, is that this intellectual property was not "used by or in, or as relevant to," the RBC business - those words being words appearing in cl 2.18 of the Deed.  I consider that this copyright was "used by or in, or as relevant to," the RBC business, for the reasons I give below.

"Metro" design and "Brighton" design

1. J‑Corp authorised the publication of what it called the "Metro" design in its advertisements in the "Sunday Times" of 28 September and 9 October 2003.  This "Metro" plan was identical to the "Brighton" design dated 30 April 2003, and this advertisement would have been a breach of copyright if the copyright had been transferred to Rural by J‑Corp. 

Did J‑Corp assign the copyright in the "Brighton" design?

1. Section 196(3) of the Copyright Act 1968 requires the assignment of copyright to be in writing.  The defendants deny that Kimpura was obliged to cause J‑Corp to assign (or as the Deed said, "transfer") the "Brighton" design, and for most of the trial that seemed to be the only issue.  The plaintiffs, however, made a belated attempt to prove that, despite the defendants' denial, there had been an assignment of copyright in writing by J‑Corp.  I granted the plaintiffs leave to re‑open to prove the document executed between J‑Corp and Rural, which is undated but stamped on 24 September 2003 ("Deed of Supply").  The Deed of Supply was the document which was required under cl 2.20(a) of the Deed.

2. The Deed of Supply contains a recital which reads:

   "Pursuant to the terms of the Deed … [Walter] has exercised [his] option to purchase the RBC Business and, as a consequence, the Vendor will transfer the RBC Business to the Purchaser in accordance with the terms of the Deed … and the terms of this deed."  (I have added the underlining for emphasis).

3. There are only two operative provisions in the Deed of Supply.  They are contained in cl 2, and they read:

   "2.1   Supply of a going concern

   The Vendor and the Purchaser agree that the supply of the RBC Business by the Vendor under and in connection with this deed and/or any related transaction document constitutes the supply of a going concern by the Vendor for the purposes of the GST law.

   2.2Registration

   The Purchaser covenants with the Vendor that the Purchaser is registered under the GST law as at the date of this deed and will do all things necessary to ensure that the Purchaser will remain so registered until the time of completion.  If for any reason the Purchaser ceases to be registered under the GST law prior to completion, the Purchaser will immediately notify the Vendor."  (I have underlined relevant words for emphasis).

4. In my opinion, this Deed of Supply contemplates that J‑Corp will, in other transactions, effect a transfer of the property referred in cl 2.18 of the Deed.  The Deed of Supply merely records for tax purposes that the sale and any "related transaction document" constituted the supply of a going concern for the purposes of the GST law.

5. In my opinion, the Deed of Supply does not, as the plaintiffs contend, constitute a written assignment of copyright in the "Brighton" design.  The Deed of Supply simply records that if, along with other property, the "Brighton" design is transferred to Rural, that it will be part of the supply of a going concern by J‑Corp for the purposes of the GST law.

Were the "Brighton" and "Southern River" designs "used by or in, or as relevant to," the RBC business?

1. Clause 2.18 of the Deed listed the items of property which constituted the RBC business, but also required that those items of property be "used by or in, or as relevant to," the RBC business.  The defendants argued that the "Brighton" and "Southern River" designs were so different in general design from the usual range of RBC designs, that even if J‑Corp's rights in those designs were "intellectual property", those rights were not "used by or in, or as relevant to," the RBC business.

2. In support of this argument, the defendants called an architect, a Mr Wellington, who expressed an opinion that there were differences between the "design elements" of the RBC range and the Hudson and Metro plans.  For example, Mr Wellington expressed the opinion that the RBC range was "sculptural" and that their designs "break out of the strictures of a rectangle and 'expand' either in width or length" and that "rustic materials" were used, whereas the Hudson and Metro designs involved a style whereby "the form of the building is distinguished by a front elevation that is the visual identifier, while the remaining elevations are 'anonymous' and that the materials "create an appearance of a machined surface, with clean smooth lines" which "could be described" as "creating an urban image" and that the use of machined surfaces paid "homage to the city environment".

3. I do not say that this is all of Mr Wellington's evidence, which ran to several volumes, but it is a sample of it.  I was not at all persuaded, taking into account all Mr Wellington's evidence, that there was any definable difference in the general range of RBC designs and the "Southern River" and "Brighton" designs.

4. In any event, the fact that the "Brighton" and "Southern River" designs were designs called for by Mr Holloway in his capacity as general manager of the RBC division of J‑Corp, the fact that costs associated with these designs were coded and charged to the RBC division and the fact that these designs related to properties which were part of the RBC business, establish, and I find, that the copyright in the "Brighton" design and the licence rights in relation to the "Southern River" design, were "used by or in, or [were] relevant to," the RBC business.

5. The result is that Kimpura was contractually bound to cause J‑Corp to assign copyright in the "Brighton" design to Rural, and to assign the licence in relation to the "Southern River" design to Rural.

Breach of contract - "Urban Answers" logo

1. I have above held that Kimpura agreed to cause J‑Corp to transfer or assign to Rural, the contractual licence it had to use and publish the "Urban Answers" logo.  If it did not, then Kimpura will have breached its contract, and it will be liable for damages for breach of contract.  The evidence of Mr Walter is that Kimpura did not cause J‑Corp to transfer the licence.  Indeed, Kimpura, by defending the case, contends that it was not obliged to transfer intellectual property in the logo.  I find that Kimpura was so obliged, and so I hold that it breached the contractual promise it made to the first plaintiff.  Its only liability for breach of contract is to the first plaintiff.  Kimpura will not be liable to Rural, the second plaintiff, because Rural was not a party to the Deed.

2. The object of damages for breach of contract is to put the plaintiff in the position it would have been if the contract had been performed: see Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64. If the contract had been performed, Kimpura would have caused J‑Corp to assign or transfer the licence to publish the "Urban Answers" logo to Rural. However, even if the "Urban Answers" logo had been transferred to Rural, Rural could not have sued J‑Corp for J‑Corp's action in publishing an "Urban Answers" logo. The owner of the copyright - Linc - could have sued, but not its licensee or assignee of the licence. The only right Rural had was to do acts which would have been a breach of copyright but for the assigned licence.

3. The consequence is that Kimpura, having failed to cause J‑Corp to transfer the licence to publish the logo, is liable to the first plaintiff for nominal damages, which I fix at $1.  The reasons for reaching that conclusion are set out in detail under the next heading.  JWH is also entitled to relief directed towards causing Kimpura to fulfil its promise to cause J‑Corp to transfer the logo.

4. Even if that conclusion is wrong and by some means Rural could sue for any substantial copying of the "Urban Answers" logo, there was no such copying.

5. The "Urban Answers" logo is on a red background.  The logo J‑Corp published in the "Sunday Times" is on a brown background.  The "Urban Answers" logo has a small stylised house in a black rectangle in the upper left‑hand corner.  The defendants' logo has no such element.  If regard is had to the shape and type of letters used in the words, then the words "Urban Answers" in the "Urban Answers" logo are words in upper case in white and black, and both words are the same size.  The defendants' logo has the word "urban" in lower case and the word "answers" in upper case; the two words are different in size, and those words are all in white and have had added to them the words "by Perceptions".  In short, apart from the use of the words "Urban Answers", there is no similarity between the two logos.

6. Further, I find that the defendants did not set out to copy the "Urban Answers" logo.

7. I have found that the name "Urban Answers" was not the source of any goodwill and therefore not to be transferred to JWH.  I have also found that Kimpura is obliged to cause J‑Corp to transfer or assign the licence to publish the "Urban Answers" logo prepared by Linc, to Rural.  That raises a question about whether there is any inconsistency in the result, which leaves J‑Corp as the registered owner of the business name "Urban Answers" and JWH with the right to publish the "Urban Answers" logo.  It leaves the parties with a problem, but there is no inconsistency in my findings.  The same problem can arise when one party is the registered owner of a business name and another the holder of a registered trademark involving that name: see Dwyer & Dufty: "Patents, Trademarks and Related Rights", 48,035.  It is a problem which lawyers must watch out for when preparing contracts.

8. The consequence of J‑Corp remaining as the registered owner of the business name, and JWH having the right under licence to publish the "Urban Answers" logo, is that J‑Corp has the right to carry on business using the name "Urban Answers" but not to use the "Urban Answers" logo designed by Linc, whereas JWH may publish the "Urban Answers" logo but not carry on business using the name "Urban Answers".  In the circumstances, the plaintiffs' victory in proving that Rural has a right to the assignment of the Linc designed "Urban Answers" logo may be a hollow victory, but that is not the consequence of my judgment but a consequence of the contract agreed to by the parties.

"Brighton" -  Damages for breach of contract

1. I have found that the plaintiffs have established that copyright in the "Brighton" design should have been transferred to Rural.  I find that has not happened, and so Kimpura has breached the contract by failing to cause J‑Corp to transfer the copyright.

2. I repeat that damages for breach of contract are awarded to put the plaintiff in the position it would have been if the contract had been performed.

3. If the contract had been performed, copyright to the "Brighton" design would have been transferred to Rural, and Rural would therefore have been in a position to sue J‑Corp for damages for breach of copyright.  The first plaintiff has the right to complain about Kimpura's breach of contractual promise to it.  All that the first plaintiff can complain about is that Kimpura has not caused J‑Corp to transfer the copyright to Rural.  The damages that Rural may have been able to recover had Kimpura fulfilled its promise, does not avail the first plaintiff.  In my opinion, the first plaintiff is only entitled to nominal damages: see Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 at 118. I fix nominal damages at $1.

4. The plaintiffs argue that s 11 of the Property Law Act 1969 allows Rural, even though not a party to the contract, to sue for damages and to recover damages which would be calculated by reference to the damages for breach of copyright which would have been recoverable by it if Kimpura had fulfilled its promise and caused J‑Corp to transfer copyright in the "Brighton" design to Rural. In my opinion, that argument cannot succeed. Section 11 cannot be relied upon unless each party named as a party to the contract is joined as a party to the action: see s 11(2)(b) Property Law Act.  Not all of the parties to the Deed have been  joined as parties to the action.

5. The plaintiffs also argue that the Trident case (supra) is authority which will allow Rural to recover damages for breach of the Deed, even though not a party to the Deed.  In the Trident case, McNiece was held entitled to sue for indemnity under an insurance policy, even though not a party to it.  However, the reasons that the Judges of the High Court gave for reaching that conclusion differed.  Although Mason CJ and Wilson J made statements about the unjustness of the privity and consideration rules, they concluded their reasons by stating that the "limited question" they had to decide was whether the "old rules" applied to a policy of insurance and then held that McNiece could succeed in its claim under the policy (123).  Toohey J reached the same decision, and made it clear in his reasons that his decision was confined to the case of a claim under an insurance policy (172).  Deane J decided the case by holding that the contractual terms in the policy benefiting the insured, were held on trust for contractors and sub‑contractors, including McNiece (149).  Gaudron J held that McNiece should succeed by applying principles of unjust enrichment, and Brennan and Dawson JJ, dissenting in the result, said that the case was not an appropriate occasion for the High Court to overturn well‑established doctrine.

6. As a result, it is not possible to point to the result in Trident as authority which can be relied on by this Court to hold that Rural is entitled to sue Kimpura for damages.  The only way I could allow that outcome would be to be persuaded by reference to one or other of the different approaches which have sometimes been used to avoid the consequences of the application of the privity and consideration rules.

7. As a single Judge, I cannot take the course taken by Mason CJ and Dawson and Toohey JJ, which was to decide to ignore the doctrine of privity.  To do so would be to ignore binding High Court authority, namely Wilson v Darling Island Stevedoring & Lighterage Co Ltd (1956) 95 CLR 43. Senior counsel for the plaintiffs referred me to Pitman v Pantzer (2001) 115 FCR 361 at [59]-[62]. Beaumont J, in those paragraphs, referred to the ways in which the privity doctrine may be "evaded" by the application of other rules of law that may give a cause of action to a third party or which may have the effect of making the third party a party to the contract. He referred to the various devices which are discussed in detail in Trident's case.  Beaumont J, in that case, held that a non‑party was entitled to insist upon performance of a promise in a contract based on the trust doctrine.  He referred to Deane J's reasons in Trident at 147, where he said that a requirement of an intention to create a trust will be prima facie satisfied if the terms of the contract expressly or impliedly manifest an intention to create a trust as the joint intention of both promisor and promisee.  In this case, it is my view that no such intention is manifested.  The intention of the parties was that Kimpura should cause J‑Corp to transfer the business to the nominee of Walter.  That was the method whereby the unknown nominee was to gain its entitlement.  In my opinion, it was not the intention of the contracting parties that the unknown nominee should have rights to sue Kimpura if Kimpura did not do what it had promised to do.  The intention of the parties would surely have been that if Kimpura did not keep its promise, then the first plaintiff could seek a decree of specific performance.

8. In any event, I should note that in this pleadingless case, there was no step taken by the plaintiffs by any means to identify as an issue a claim that the first plaintiff held the benefit of promises made to it by Kimpura, on trust for the unspecified nominee of Walter.

9. The result is, in my opinion, that Rural has no claim against Kimpura for breach of contract, and the first plaintiff is left with its nominal damages against Kimpura and a right to a remedy which will require Kimpura to fulfil its promise to cause J‑Corp to transfer the copyright in the "Brighton" design to Rural.

"Southern River" - Damages for breach of contract

1. I hold that Kimpura was contractually bound to cause J‑Corp to transfer the "Southern River" design to Rural.  Kimpura has not caused J‑Corp to do so.  For the same reasons which I have given in relation to the "Urban Answers" logo and the "Brighton" design, Kimpura is liable to the first plaintiff for nominal damages, which I fix at $1. 

Trade Practices Act claim

1. When J‑Corp published its advertisements on 25 September 2003 and 5 October 2003, it represented, by implication, that it had authority to publish and reproduce in a material form, the "Southern River" and the "Brighton" designs.  J‑Corp did have the right to publish and reproduce the two designs.  It held a contractual licence from Mr Van Der Struyf, permitting it to publish the "Southern River" design, and it owned the copyright in the "Brighton" design.  Accordingly, there was no deceptive and misleading conduct in contravention of the Trade Practices Act.  The fact that Kimpura was obliged to cause J‑Corp to assign the licence and assign the copyright, does not avail the plaintiffs in their claims under the Trade Practices Act.

2. As a result, there has been no contravention by J‑Corp of the Trade Practices Act.

Passing off

1. The plaintiffs contend that by using the name "Urban Answers" in the two "Sunday Times" advertisements and by publishing the two designs, J‑Corp was passing off its business as a business of Rural.  I find that there was no passing off, because the action for damages for passing off requires a plaintiff to establish that either its goods or business have goodwill or reputation.  I have found that the plaintiffs have not established that there was any goodwill or reputation attached to the name "Urban Answers" and there has been no transfer of the rights to the two designs to Rural.

Estoppel

1. At the end of the trial, and after the plaintiffs were granted leave to re‑open, the defendants were permitted to raise a defence of estoppel to the claim for breach of contract and breach of copyright and to re‑open to lead further evidence in support of that defence.  I have found against the plaintiffs on the breach of copyright claim, so the defence only relates to the claim by the first plaintiff for damages for breach of contract on the part of Kimpura, insofar as it failed to cause J‑Corp to transfer the copyright in the "Brighton" design, the licence relating to  the "Southern River" design, and the "Urban Answers" logo, to Rural.  Again, there was no pleading in relation to this issue.  In the defendants' closing outline of submissions, it is submitted that:

   "The plaintiffs and their advisers specified the business name transfer forms that were to be completed (at settlement).  They did not specify that the business name 'Urban Answers' be transferred.  The 'Urban Answers Southern River' design and the 'Urban Answers Brighton' design were part of the 'Urban Answers' concept developed by J‑Corp.  The failure of the plaintiffs to specify the transfer of the business name 'Urban Answers' in the Deed Governing Sale; their failure to include the business name 'Urban Answers' in the names to be transferred in the completion checklist; and their failure to raise at all the transfer of the business name 'Urban Answers' before Completion, at Completion or immediately after Completion, induced the defendants to believe, and they did believe, that 'Urban Answers', the 'Urban Answers Southern River' design and the 'Urban Answers Brighton' design were not part of the assets to be transferred from the second defendant to the second plaintiff."

1. The submissions do not spell out any detriment which was suffered.  If estoppel is to be advanced as a defence, then it is necessary to demonstrate the detriment that the defendants would suffer if the plaintiffs were allowed to enforce their rights: see Commonwealth v Verwayen (1990) 170 CLR 394 at 409.

2. If the plaintiffs had shown that J‑Corp breached copyright, then I assume that J‑Corp's claim would be that it acted to its detriment in advertising the two designs, thereby exposing itself to a claim for damages for publishing the two designs.  However, that issue does not arise because I have found that J‑Corp did not commit a breach of copyright.  Kimpura possibly claims that it suffered detriment by exposing itself to a claim by JWH for damages for breach of contract because of Kimpura's failure to cause J‑Corp to transfer the copyright in the "Brighton" design and to assign the licence in the "Southern River" design.

3. I turn to the evidence in relation to the estoppel issue.  It is clear that the plaintiffs, at settlement, thought nothing about "Urban Answers", about the two designs, or about the "Urban Answers" logo.  Kimpura did not have any knowledge about them.  Later, however, towards the end of August, Mr Walter did remember "Urban Answers" and gave instructions for a request to be made of J‑Corp that the business name "Urban Answers" be transferred to Rural.  Mr Walter did this because he regarded "Urban Answers" to be part of the RBC business.  Thus, at the end of August or in early September 2003, a member of staff for the plaintiffs sent a note to Andrew Teo, who was the officer of the defendants handling settlement issues.  The note enclosed various forms to be signed by J‑Corp, to effect the transfer of business names, and one of them was a form to effect the transfer of "Urban Answers" to Rural.  So by this request, the defendants became aware that the plaintiffs were asserting that "Urban Answers" was part of the business to be transferred.

4. Mr Ambrose is the managing director of J‑Corp, and he said that at about the same time - late August - he was given a folder which contained examples of work carried out by the Visualisation Factory, which was a division of J‑Corp.  Some time later, but by early September, he reviewed the portfolio and noted the elevations of two homes described as "Urban Answers Southern River" and "Urban Answers Brighton".  Mr Ambrose had not heard or seen any reference to "Urban Answers" before this.  The elevations of the homes appealed to him.  He decided to test the market for these homes by having J‑Corp advertise them.  Before doing so, Mr Ambrose decided to seek advice from his solicitors.  On 17 September 2003, he attended a meeting with his solicitors.  Mr Teo was in attendance.  Mr Ambrose, in his statement of evidence, said that Mr Teo reported at the meeting that he (Mr Teo) had received in early September, the request that J‑Corp transfer  the "Urban Answers" business name.  Mr Teo said at the meeting that this request would be refused, based on his understanding of the contract, which was that the only business name to be transferred was the business name "Rural Building Company".

5. Mr Ambrose then said in his evidence‑in‑chief:

   "On the basis of the information set out above, it was my belief that the homes described in the TVF portfolio as 'Urban Answers Southern River' and 'Urban Answers Brighton' were the property of J‑Corp.  Had I believed the business name 'Urban Answers' was not the property of J‑Corp, I would not have contemplated testing the market in respect of the 'Urban Answers Southern River' and 'Urban Answers Brighton' homes."

6. I find that the failure by the plaintiffs to ask for the assignment of the copyright in "Brighton" and the assignment of the licence in the "Southern River" designs, did not give rise to any implied representation by the plaintiffs that the rights in relation to those designs were not assets to be transferred.

7. That evidence establishes, and I find, that Mr Ambrose was not induced to advertise by anything said, done or not done by the plaintiffs.  He was induced to place the advertisements in the "Sunday Times"  because of what Mr Teo said.  I find that Mr Ambrose knew full well after the 17 September 2003 meeting that the plaintiffs were claiming to be entitled to the name "Urban Answers", and that Mr Ambrose knew that "Urban Answers" was associated, or connected, with the "Southern River" and "Brighton" designs.

8. J‑Corp acted to advertise entirely as a result of legal advice it obtained.  J‑Corp's decision to advertise and Kimpura's decision, in effect, not to cause J‑Corp to transfer the copyright and the licence, was a deliberate decision made upon legal advice and based upon an incorrect view of the contract.  The estoppel defence therefore fails.

Provisional assessment of damages

1. I have found that the first plaintiff is only entitled to nominal damages as a result of Kimpura's failure to cause J‑Corp to transfer the licence in relation to the "Southern River" design, its failure to assign the copyright in the "Brighton" design, and its failure to assign the licence in the "Urban Answers" logo, to Rural.  However, in case that conclusion is subsequently found to be an error, I will proceed to make a provisional assessment of damages as claimed by the plaintiffs.

2. The plaintiffs rely upon the past experience in J‑Corp, which is that throughout its divisions about 5 per cent of those persons making telephone or written enquiry or contact with J‑Corp's divisions, showing an interest in a design which has been advertised, would enter into a contract to purchase a home. 

3. What happened in this case was that J‑Corp advertised in the "Sunday Times", the "Hudson" and the "Metro" designs on 28 September 2003.  On 3 October 2003, the plaintiffs commenced these proceedings.  On 5 October 2003, J‑Corp placed another advertisement for its "Hudson" and "Metro" designs.  On 9 October 2003, the plaintiffs brought on their application for an injunction to restrain J‑Corp from further advertising.  The parties conferred and eventually reached an agreement that neither the plaintiffs nor the defendants should further advertise the "Hudson", "Metro", "Southern River", or "Brighton" designs.  It is important to note that the application which was then pending was an application by the plaintiffs for an injunction restraining the defendants from further advertising.  The plaintiffs, however, consented to an order in terms that in relation to the "Southern River" and "Brighton" designs:

   "Until trial or further order, the parties, whether by their officers, servants, agents or otherwise, be restrained and an injunction is hereby granted restraining them from advertising, promoting, selling or offering for sale, distributing or supplying any product or service under or by reference to or using in trade or commerce in any way the Designs …"

4. There was a condition which allowed the defendants to deal with customer enquiries about the "Hudson" and "Metro" designs, provided the defendants maintained a weekly summary, identifying each customer or potential customer who made written, telephone or other enquiry of the defendants or their agents.  The consent orders allowed the plaintiffs to continue using the designs for the construction of the "Southern River" and  "Brighton" display homes.

5. The decision by the plaintiffs to not sell or supply any product by reference to the "Southern River" or "Brighton" designs, was a restraint voluntarily imposed.  No such order could have been made against the plaintiffs in the proceedings by the Court, because the Court was being asked by the plaintiffs only to grant an injunction against the defendants.

6. The plaintiffs have, nevertheless, proved that up until the injunction which prevented further dealings with the public, 122 telephone responses were received by J‑Corp as a result of its advertisements in the "Sunday Times".  The plaintiffs, therefore, claim they lost the opportunity to convert these contacts, at the rate which experience had shown was likely, into six contracts.  The defendants contend that the plaintiffs have been given, or will now be given, details of the 122 telephone contacts and that they have not therefore lost any sales.  In my opinion, it is unlikely that a significant proportion of persons calling in October 2003 would, if contacted five or six months later, sign a contract.  This point is merely a contingency to be taken into account in the final assessment of damages.

7. Based on the evidence that experience within J‑Corp showed that there was a conversion of about 5 per cent of enquiries into contracts, I am satisfied, on the balance of probabilities, that the consequence of J‑Corp's advertisements, was the loss of Rural's opportunity to enter into contracts with members of the public.  Loss of opportunity is compensable in damages: see Sellars v Adelaide Petroleum NL (1992-1994) 179 CLR 332 at 348 and 355. Once it has been proved on the balance of probabilities that some loss has been suffered, then in the evaluation of hypotheses or possibilities in arriving at the damages suffered, the balance of probabilities has no part to play in that process of evaluation: see Sellars v Adelaide Petroleum NL (supra).  Difficulties of estimating loss in money, will not result in the defeat of an award of damages: see Sellars (supra) at 349.

8. I then move to the assessment of damages, taking into account the various hypotheses or possibilities and reductions which must arise from the uncertainty of future events.   I must first begin this process by dealing with an issue raised by the defendants, namely, whether, as they contended, the loss should be calculated by reference to the anticipated net profit that the plaintiffs were likely to make over a 12‑month period on all of the houses they constructed (which the defendants contended would be at the most 2 per cent and probably zero), or whether, as the plaintiffs contended, the correct approach should be to allow the gross profit on each of the sales on the basis that the plaintiffs' overheads, which would reduce gross profit to net profit, were more or less fixed and would not increase if six more contracts had to be performed.  In Acohs Pty Ltd v R A Bashford Consulting Pty Ltd (1997) 144 ALR 528 at 536, the claim was based upon lost "profitable" contracts. It is doubtless correct to make the assessment on the basis of the net profit lost, taking into account all costs of construction and all overheads, if overheads varied, in accordance with the number of contracts. However, if overheads were fixed and additional contracts could generate a gross profit calculated by taking the cost of construction of a house from the sale price to the public, then that gross profit is the loss, without taking into account the fixed overheads which would not increase as a result of the extra sales. The evidence is that about 5 per cent of all calls converted into contracts, based on the experience at J‑Corp, which would mean that 122 callers would convert into about six contracts. Mr Smelter, the accountant for the plaintiffs, gave evidence, and I accept his evidence, and find, that the overheads of the plaintiffs would not, apart from minor adjustments, increase if six more contracts had to be performed. Mr Smelter's evidence was entirely uncontradicted. He calculated the gross profit lost by estimating sale prices for the houses to be built, based on the "Southern River" and "Brighton" designs, and deducting an estimated cost of construction. The plaintiffs have allowed for the minor increases in overheads and deducted those amounts from the gross profits, along with some other items which the plaintiffs conceded had to be deducted from the gross profit figure.

9. What then is the gross profit the plaintiffs say Rural would have made in relation to six contracts to build for customers the "Southern River" and "Brighton" designs?  The plaintiffs led evidence to establish this by taking the results of all of the houses constructed, both by J‑Corp and by the plaintiffs, from December 2002 to 30 November 2003.  What it reveals is that, in relation to each house, there was a considerable variation in dollar terms in relation to the gross profit, or as it was called by Mr Smelter "the acceptance margin", depending upon the house being constructed.  The sale price of houses varied from less than $70,000 to a figure of more than $300,000.  The cost of construction, or "acceptance cost" as Mr Smelter called it, ranged from figures less than $50,000 to figures which exceeded $240,000.  Mr Smelter added up all of the data and produced an average gross profit of $31,710.  The plaintiffs conceded, as a result of Mr Smelter's evidence, that his calculations did not take into account sales commission, which would have to be deducted, or what was called an "erosion" cost, which was a cost made up of thefts of materials from site and errors of construction which could not be recouped from customers.  Taking those deductions into account, the plaintiffs arrived at an average loss of gross profit per house of $22,440.

10. The assessment of damages is made more difficult because there has been as yet no sale of a "Southern River" or "Brighton" designed home, and no calculation of the cost of construction has therefore been carried out.  Nevertheless, this difficulty will not deter the Court from making an award of damages.  It is an aspect to be taken into account in calculating damages. 

11. In my opinion, the material produced by Mr Smelter shows that Rural, in its four months of operation, is continuing to operate on a gross profit margin which is similar to the gross profit margin which was earned in the J‑Corp division.  However, to allow for contingencies, and aspects which I have discussed above, I would allow the gross profit at $15,000.  The loss of six sales at $15,000 would produce a loss of $90,000. 

12. I provisionally assess damages, whether it be for breach of copyright or breach of contract in relation to the "Brighton" design dated 11 June 2003, in the sum of $45,000.  I provisionally assess damages for breach of contract in relation to the "Southern River" design in the sum of $45,000. 

What was Kimpura obliged to do as a result of its promise to cause J‑Corp to transfer property?

1. Kimpura was obliged to "cause" J‑Corp to sell and transfer to JWH, the items of property which I have found were the subject of the Deed.  It may be necessary, for the purposes of moulding relief, to determine what it was that Kimpura had to do to cause this to happen.

2. I have held that the Deed provided that Kimpura was to cause J‑Corp to transfer copyright in the "Brighton" design. Copyright is personal property and transmissible by assignment: see s 196(1) of the Copyright Act. However, an assignment of copyright has no effect unless it is in writing, signed by, or on behalf of, the assignor: see s 196(3) of the Copyright Act.  Thus, Kimpura was obliged to cause J‑Corp to execute a document assigning copyright in the "Brighton" design to JWH.  Kimpura has not caused this to happen.

3. I have held that the rights conferred by the contractual licences relating to the "Urban Answers" logo and the "Southern River" design, are assignable.  How may they be assigned?  The chose in action in each case is a legal chose in action.  A legal chose in action may be assigned by:

   (a)a statutory assignment under s 20 of the Property Law Act 1969, or

   (b)an equitable assignment.

4. If (a), then there must be compliance with s 20 of the Property Law Act 1969, and that means there must be an absolute assignment in writing by J‑Corp. 

5. Alternatively, Kimpura could have caused J‑Corp to assign the contractual licences by equitable assignment.  In effect, that means that J‑Corp must have signed a document recording the assignment: see Corin v Patton (1990) 169 CLR 540 and Meagher Gummow and Lehane, 6‑100 and 6‑110.

6. Kimpura has not caused this to happen.

Relief claimed and to be granted

1. I dismiss the plaintiffs' claims for an order requiring J‑Corp to transfer the business name "Urban Answers" to the plaintiffs, as sought in par 3 of the indorsement.  I dismiss the plaintiffs' claim for an injunction requiring the defendants to withdraw a trademark application which J‑Corp has made in relation to the name "Urban Answers" (providing the trademark is not a copy of the Linc designed "Urban Answers" logo).  I dismiss the plaintiffs' claim for declaratory relief in relation to the "Urban Answers" name.

2. I will make declarations that Kimpura is bound under cl 2.18 of the Deed to cause J‑Corp to assign to Rural, the copyright in the "Brighton" design, the licence in relation to the "Southern River" design, and the licence in relation to the "Urban Answers" logo.  I will hear the parties as to whether a decree of specific performance should be made, or is necessary, requiring Kimpura to cause J‑Corp to transfer these assets to Rural.

3. I award nominal damages to the first plaintiff against Kimpura in the sum of $3.00.  

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION: JWH GROUP PTY LTD & ANOR -v- KIMPURA PTY LTD & ANOR [2004] WASC 39 (S)

CORAM:   PULLIN J

HEARD:   19-21 & 27 JANUARY, 3, 12, 20, 27 FEBRUARY & 8 APRIL 2004

DELIVERED          :   17 MARCH 2004

SUPPLEMENTARY

DECISION              :8 APRIL 2004

FILE NO/S:   CIV 2188 of 2003

BETWEEN:   JWH GROUP PTY LTD

First Plaintiff

RURAL BUILDING COMPANY PTY LTD
Second Plaintiff

AND

KIMPURA PTY LTD (ACN 006 048 479)
First Defendant

J-CORP PTY LTD
Second Defendant

Catchwords:

Practice and procedure - Costs - Special costs order - Plaintiff partially successful - Plaintiff awarded nominal damages - Turns on own facts

Legislation:

Nil

Result:

Costs order made in favour of plaintiffs

Category:    B

Representation:

Counsel:

First Plaintiff                :     Mr M H Zilko SC & Mr M S Van Brakel

Second Plaintiff            :     Mr M H Zilko SC & Mr M S Van Brakel

First Defendant             :     Mr M J McCusker QC & Ms B J Murray

Second Defendant         :     Mr M J McCusker QC & Ms B J Murray

Solicitors:

First Plaintiff                :     Clayton Utz

Second Plaintiff            :     Clayton Utz

First Defendant             :     Mallesons Stephen Jaques

Second Defendant         :     Mallesons Stephen Jaques

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

Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261

Hughes v Western Australian Cricket Association Inc (1986) ATPR 40‑748

JWH Group Pty Ltd v Kimpura Pty Ltd [2004] WASC 39

LMI Australasia Pty Ltd v Baulderstone Hornibrook (No 2) [2002] NSWSC 72

Madden v McConnell [2001] NSWSC 1051

Mok v Minister for Immigration, Local Government & Ethnic Affairs (No 2) (1993) 47 FCR 81

Oshlack v Richmond River Council (1998) 193 CLR 72

Permanent Building Society v Wheeler (No 2) (1993) 10 WAR 569

Phillips Fox (a firm) v Westgold Resources NL [2000] WASCA 85

Rosniak v Government Insurance Office (1997) 41 NSWLR 608

Case(s) also cited:

Alltrans Express Ltd v CVA Holdings Ltd [1984] 1 WLR 394; [1984] 1 All ER 685

Anglo­Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873

Australian Trade Commission v Disktravel [2000] FCA 62

Calderbank v Calderbank [1975] 3 All ER 333

Cretazzo v Lombardi (1975) 13 SASR 4

Esther Investments Pty Ltd v Markalinga Pty Ltd (1992) 8 WAR 400

Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S)

McDade v Minister for Immigration and Multicultural Affairs [2000] FCA 809

NRMA Ltd v Morgan (No 3) [1999] NSWSC 768

Re Elgindata Ltd (No 2) [1992] 1 WLR 1207; [1993] 1 All ER 232

Schmidt v Gilmour [1988] WAR 219

1. PULLIN J:  When I delivered my reasons for decision (JWH Group Pty Ltd v Kimpura Pty Ltd [2004] WASC 39), I reserved for later consideration the terms of judgment.  The terms of judgment have now been agreed, save for the question of costs.  The plaintiffs seek an order for costs of the action and seek a special costs order.  The defendants oppose that and instead seek an order that the plaintiffs pay the defendants' costs of the action and similarly seek a special costs order.

1. The law and principles which apply are as follows.  The Court has the power to award costs by reason of s 37 of the Supreme Court Act and O 66 r 1 of the Rules of the Supreme Court, which provide between them that the costs of and incidental to all proceedings shall be in the discretion of the Court.  Order 66 r 2(a) provides:

   "In the absence of any special order, where the statement of claim contains more than one cause of action and the plaintiff succeeds on one or more causes of action and the defendant succeeds on another or others, costs shall be allowed to the plaintiff on the cause or causes of action on which he succeeds and to the defendant on that or those on which he succeeds, in the same manner as if separate actions had been brought."

2. Although that is the prima facie position, the Court retains a discretion and will look at the realities of the case and attempt to do substantial justice of the case: see Permanent Building Society v Wheeler (No 2) (1993) 10 WAR 569 at 574. As was said by Owen J in Phillips Fox (a firm) v Westgold Resources NL [2000] WASCA 85 at [28]:

   "Where a party has succeeded on some issues and failed on others it is a legitimate exercise of the discretion as to costs to make an overall percentage deduction from the costs that would otherwise be awarded.  This is especially so where it would be difficult to compartmentalise the costs from issue to issue.  There are practical and pragmatic reasons to deal with costs in this way rather than attempt to award the costs of one issue to party 'A' and the costs of another issue to party 'B'."

3. However, where a litigant succeeds on only a portion of its claim, the circumstances may produce the result that not only should a party be deprived of costs on an issue but there may also be an order that the other parties' costs of that issue be paid: see Hughes v Western Australian Cricket Association Inc (1986) ATPR 40‑748; Madden v McConnell [2001] NSWSC 1051; LMI Australasia Pty Ltd v Baulderstone Hornibrook (No 2) [2002] NSWSC 72.

4. Where there is a mixed outcome, the apportionment of costs is very much a matter of impression and broad evaluation.  The defendants have produced a schedule showing the precise time spent on issues and then set out, in percentage terms, what proportion this was to the total trial.  However, as was said in Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261, mathematical precision is illusory.

5. A suggestion was made by Keely J in Mok v Minister for Immigration, Local Government & Ethnic Affairs (No 2) (1993) 47 FCR 81 that the power to order a successful litigant to pay the costs of an issue raised and lost ought to be exercised only where the raising of the issue was unreasonable. I accept what Mason P said in Rosniak v Government Insurance Office (1997) 41 NSWLR 608, namely that no such principle exists as a fixed proposition of law.

6. I also agree with Anderson J's comment in Permanent Building Society v Wheeler (No 2) (supra) that if an issue is raised unreasonably, that fact will raise considerations relevant to the exercise of the discretion.  See also Oshlack v Richmond River Council (1998) 193 CLR 72 at [70]. The matter remains within the Court's discretion. The defendants point out that a plaintiff who recovers only nominal damages will not necessarily be regarded as a successful defendant: see Oshlack v Richmond River Council (supra).

7. I now turn to the facts in this case.  The defendants point out that the plaintiffs failed on the issues relating to the Trade Practices Act causes of action, the Copyright Act cause of action, and the passing off causes of action.  This, however, is not the way to examine the outcome or to identify the issues.  As Toohey J said in the Hughes case, the reference to success or failure on issues is not a reference to precise issues in the technical pleading sense but rather a reference to any disputed question of fact.  I would go further and say that the reference is to "areas" of disputed questions of fact.

8. In this case, there were a number of major areas of disputed fact.  The first was whether any goodwill had developed in relation to the name Urban Answers.  The second was about the ownership of copyright and the right to use the Southern River design.  The third area related to the Brighton design, where similar issues were raised.  The fourth area was the claim for damages generally, but mainly in relation to the Southern River and Brighton designs.  The fifth and catch-all area, but more limited so far as evidence was concerned, included issues about the proper construction of the contract between JWH and Kimpura and the claim relating to the Urban Answers logo.

9. The evidence and the facts were crafted by the plaintiffs into various causes of action, including breach of contract, breach of copyright, trade practice, and passing off.  The plaintiffs sought relief which had the four objectives of gaining for one or other of the plaintiffs the right to, first, the name Urban Answers; secondly, the Southern River design; thirdly, the Brighton design; and, fourthly, the Urban Answers logo.

10. The defendants resisted all claims for relief and put all the areas of fact into issue.  The defendants submit that the case wholly failed against the second defendant, but in fact the declarations which I will make were resisted by both defendants.  The declarations will bind all parties to the litigation.

11. The plaintiffs have succeeded in gaining relief that will result in the first defendant meeting its contractual obligations to the first plaintiff to cause the second defendant to transfer the right to use the Brighton design, the Southern River design, and the Urban Answers logo, to the second plaintiff.  The plaintiffs failed to gain any relief in relation to the name Urban Answers.

12. On a broad analysis, the plaintiffs succeeded in two of the major areas of disputed fact; that is, in relation to the Southern River and Brighton designs.  They partly succeeded on construction issues.  They succeeded on the issue relating to the logo.  The plaintiffs failed on the major area of disputed fact relating to Urban Answers, and although they gained an award of damages, they were nominal in amount, and they failed to recover the substantial damages which took up the time in evidence.

13. Overall, my evaluation is that about half the trial was taken up on issues on which the plaintiffs failed.  Nevertheless, it is correct to describe the plaintiffs as the successful party.  They succeeded in gaining relief in relation to three of the four areas of claimed relief, that is relating to the two designs and the logo, albeit it was not precisely the relief that they hoped for.

14. In my opinion, taking all these factors into account, the plaintiffs should be deprived of some costs but should not be ordered to pay any costs.  I would therefore order that the defendants pay one‑half of the plaintiffs' taxed costs. 

15. There will be a certificate for second counsel and a certificate for the transcript of the proceedings.  There will also be an order removing the limit in item 13 of the Supreme Court scale of costs, and although I think that would cover the costs of preparing the tender bundle, I will make an order, as the plaintiffs seek, that the plaintiffs be entitled to their reasonable costs of preparing the tender bundle.

16. In relation to par 6 of the minute proffered by the plaintiffs, the plaintiffs concede that they must pay the defendants' costs of the application to amend the indorsement of claim and to reopen the plaintiffs' case.  The only remaining issue is whether or not the costs of 12, 20 and 27 February 2004, or some or all of those days, should be included.  In my opinion, all three days followed from the applications to amend (or the stated intention to amend) the indorsement and reopen, and so I would make an order in terms of par 6, which will read:

    "The plaintiffs do pay the defendants' costs of the plaintiffs' application to amend their indorsement of claim and reopen their case, including the costs of the hearing on 12, 20 and 27 February 2004."