Masterton Homes Pty Ltd & Anor v LED Builders Pty Ltd

[1996] HCATrans 398

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S65 of 1996

B e t w e e n -

MASTERTON HOMES PTY LIMITED and MASTERTON HOMES (NSW) PTY LIMITED

Applicants

and

L.E.D. BUILDERS PTY LIMITED

Respondent

Application for special leave to appeal

DAWSON J
TOOHEY J
KIRBY J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 13 DECEMBER 1996, AT 9.28 AM

Copyright in the High Court of Australia

MR D.J. JACKSON, QC:   If the Court pleases, I appear with my learned friends, MR C.C. HODGEKISS and MR M. CHRISTIE, for the applicants. (instructed by C.R. Fieldhouse). (Mr Christie did not appear in Court)

MR B.W. WALKER, SC:   May it please your Honours, I appear with my learned friends, MR I. McN. JACKMAN and MR M.J. LEEMING, for the respondent.  (instructed by Speed and Stracey)

DAWSON J:   Yes, Mr Jackson?

MR JACKSON:   Your Honours, this application concerns the remedy of account of profits for breach of copyright.  It is contended that where the copyright owner makes an election not to institute proceedings for infringement at a time when the copyright owner is aware that the person who has infringed the copyright is carrying on business using it, the account of profits should not be in, or not be fully in respect of the period of standing by. 

TOOHEY J:   Well, “election” has a sort of circularity built into it, does it not?

MR JACKSON:   It does in a sense, your Honour, but I simply use the term to indicate that a choice is made not to institute proceedings.

TOOHEY J:   By virtue of the non‑taking of the proceedings or by virtue of some other consideration?

MR JACKSON:   Your Honour, in the present case it is really a little bit more, in fact, than the simple non‑taking of the proceedings at a time when there is knowledge of the use of the copyright and the carrying on, in effect, a business using the infringing copyright, a choice is made not to do anything at that stage, the issue having been considered.

TOOHEY J:   There seems to me to be a problem with the formulation in that way, Mr Jackson, perhaps two problems.  One is whether it accords with the authorities and the other is whether it accords with the way in which the case was conducted below which seems to have been conducted on a particular footing.

MR JACKSON:   Could I, perhaps, deal with those things.  May I deal with the second one first, and the way in which the case was conducted below?  Your Honours, at the time when the case was conducted at the trial the Court’s decision in Warman International Limited v Dwyer in 182 CLR 544, had not been given, and it is right to say that in the argument before the primary judge, it was said to the primary judge that the appropriate test was one which was set out in the decision of Bulmer which is referred to in the primary judge’s reasons. 

Your Honours, the submission that was made to the Full Court in the Federal Court was, of course, that the change in the law, we would submit, brought about by Warman International, should be applied.  May I say, also, your Honours, in relation to that if one looks at what was actually done in the argument before the primary judge, it is really apparent that the issues which he considered were issues which were of the same kind.  Now, if one looks, for example, at page 46, to put it shortly, towards the top of the page, about line 10, what his Honour is considering is:

The alternative view is that it should not commence until April 1992 when the applicant’s solicitors -

and so on.  He goes on to say that that is not the appropriate thing, the appropriate course to adopt in this case because it was his view that there was deliberate copying of the applicant’s plans.  Now, it is obvious that his Honour was considering the issue whether there should be some reduction of the period, in effect, during which there might have been an account of profits by reason of the failure to take action in the time after there was knowledge of an infringement.

TOOHEY J:   You are distinguishing there between delay as a defence and delay as going to the period of accounting?

MR JACKSON:   The latter is the only point which we are seeking to agitate.

KIRBY J:   It could not be an inflexible rule, could it?

MR JACKSON:   No, your Honour.

KIRBY J:   Your complaint is you say he did not give consideration to the rule at all, or to the principle that has been applied in the past?

MR JACKSON:   Yes, your Honour, and may I take your Honours to what we say is the appropriate approach.  I will do so very briefly by taking your Honours to what was said by five Justices of the Court in Warman 182 CLR 544. The two passages to which I wish to take your Honours are at pages 559 and 560. The first passage commences at about point 3 on page 559. There is a reference to the fact, the paragraph beginning:

Although an account of profits.....is said to be discretionary, it is granted or withheld according to settled principles.  It will be defeated by -

and then the various grounds are set out, and your Honours will see a quotation from Regal (Hastings).  Immediately following that quotation, it is said:

The conduct of the plaintiff may be such as to make it inequitable to order an account.  Thus a plaintiff may not stand by and permit the defendant to make profits and then claim entitlement to those profits.

KIRBY J:   Now the findings here contradicted that, “standing by”?  If you would like to come back to it, you continue the principle.

MR JACKSON:   May I come back to it, your Honour.  The second point of principle your Honours will see at page 561, commencing at about point 2 on the page, a quotation from Knight Bruce L.J. in Clegg v Edmondson, and immediately following that quotation:

In the case of a business it may well be inappropriate and inequitable to compel the errant fiduciary to account for the whole of the profit -

et cetera, through to the end of that sentence and down to about halfway through that paragraph.  Now, your Honours, if I could ‑ ‑ ‑

KIRBY J:   This sounds a little analogous to the cases involving interest where parties do not claim their interest immediately and come back later and I think the principle there established is that, prima facie, you get it because you have been kept out of it.

MR JACKSON:   Because of being kept out of your money?

KIRBY J:   Yes.

MR JACKSON:   If I could just say if one goes to what was done by the Full Court in this case, your Honours will see that at page 76.  Could I just pause to say - and perhaps it is better to say it at this point in answer to your Honour Justice Kirby - when one is speaking of being kept out of the money in the interest class of case, of course, that is really quite different from the present case because one of the findings that his Honour made was that in respect of the period that we would say there should not be an account of profits ordered, the profits were not profits taken from the respondent because it was an area in which they were not competing.

KIRBY J:   Yes, but you made a profit out of their design.

MR JACKSON:   Undoubtedly, we made a profit, but the award of the account of profit is itself discretionary.  If one is talking about - and I am saying that in response to what your Honour said in the analogy of interest, that it is not a true analogy because for much of the period the profits were not profits taken from them.  Undoubtedly, they were profits made by virtue of the infringement of the copyright.  It may have been an appropriate case for damages, but an account of profits is a different thing.

KIRBY J:   I agree it is not an exact analogy, but there is a similarity there.

TOOHEY J:   I am sorry, Mr Jackson, to interrupt again.  Could I just ask you this:  the trial judge did not have Warman before him because it had not been handed down.  The Court of Appeal did.  Are you suggesting that there was - I notice your argument speaks of the Court of Appeal misapplying the principle in Warman.  Is that the argument so far as Warman is concerned?

MR JACKSON:   We put it that way to cover, if I could put it this way, three possibilities and the reason why I put it, your Honour, in that global way is because what was said by the Full Court appears in the sentence at page 76, line 15, which is, with respect to their Honours, no doubt all encompassing but not especially illuminating as to the precise view they took.

TOOHEY J:   Did Warman cast any doubt upon Bulmer v Bollinger?

MR JACKSON:   Not directly, your Honour.  What it does do is to direct attention to the fact that the delay on the part of the person who is the claimant for the equitable relief is itself a factor, and a factor of considerable significance.  Now, that argument as your Honours will see at page 75 was put to the Full Court.  What the Full Court said was at the top of the next page where they really said two things.  The first commences at line 6:

Although there was substantial delay.....the findings of his Honour on the facts with respect to this defence have not been shown to be erroneous.

Well, they were not attacked, your Honour, the basic findings of the fact.  The second thing is what appears in the sentence commencing at line 15.  Now, your Honours, no doubt what their Honours say there is the disposition of their argument, but, with respect, it does not touch upon, it does not set out any reason at all for not taking into account, in our submission, the fact that there had been very considerable delay, and if I could just demonstrate what that ‑ ‑ ‑

KIRBY J:   This looks awfully like a suggested misapplication of a principle settled by a recent decision of the Court rather than an attack on principle or a suggestion of a new principle or a nuance of old principles. 

MR JACKSON:   Your Honour, could I put it this way:  we would seek to say a number of things, I suppose, in response to that.  The first thing we would say is that in relation to cases of this kind our learned friends seek to make the point, for example, that we are seeking to say that Warman has the effect of making the area non‑discretionary and, your Honours, what we would seek to say is that it does raise an important point, namely, that infringements of copyright will frequently be found to have been, for example, intentional rather than innocent.  It should not be the law that delay is relevant only when the infringement is innocent.  That is an important point.

TOOHEY J:   The question of law, as you formulate it, in your summary does eliminate the area of discretion, does it not?  I mean, the question as formulated is whether an applicant who knowingly delays can lay the claim entitlement to profits.  Surely the answer to that, framed in that stark way, must be yes.  I mean, there are qualifications, no doubt, but when the question is put that way I would hardly see that there can be any answer other than an affirmative answer.

MR JACKSON:   Your Honour, I suppose the way in which it is framed uses the term “claim” but if one treats it as meaning successfully, “successfully claim” ‑ ‑ ‑

TOOHEY J:   No, but my point is that, as framed, the question does not seem to admit of any area of discretion.  It seem to treat knowledge, as it were, as a barrier to the recovery of damages.

MR JACKSON:   Well, your Honour, if one looks at Part IV, of course, and the reasons supporting that, what we would say in paragraphs 13 and 14, when and to what extent does deliberate delay affect the entitlement, and then, paragraph 14, the judgment appears not to give effect to Warman, and, your Honour, Warman, of course, itself makes it clear that it remains

discretionary but the way in which it arises in the particular case, your Honours, is where the view adopted by the Full Court does not seem to take into account what the Court said in Warman in any substantive way and there are no reasons given for it.  Your Honours, those, I think, are our submissions.

DAWSON J:   Thank you, Mr Jackson.  We need not trouble you, Mr Walker.

Notwithstanding anything which was said in Warman International Limited v Dwyer, the ordering of an account of profits remains discretionary.  The exercise of the discretion in this case turned upon its particular facts and this application does not raise any point of principle which would attract special leave to appeal.  Special leave is accordingly refused.

MR WALKER:   We seek costs, may it please your Honour.

DAWSON J:   Mr Jackson.

MR JACKSON:   I have nothing to say.

DAWSON J:   Is refused with costs.

AT 9.43 AM THE MATTER WAS CONCLUDED