Namol Pty Ltd v A.W. Baulderstone Pty Ltd
[1992] FCA 152
•27 MARCH 1992
Re: NAMOL PTY LIMITED and MARIA NAGY
And: A.W. BAULDERSTONE PTY LIMITED; QUINLARA PTY LIMITED and JOSEPH BAILEY
No. G558 of 1991
FED No. 152
Practice and Procedure
(1992) AIPC 90-886
(1992) 35 FCR 89
COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Davies J.(1)
CATCHWORDS
Practice and Procedure - motion to dismiss - previous Supreme Court claim and subsequent Federal Court proceedings - whether issues in the Federal Court proceedings were involved in the earlier proceedings - whether unreasonable not to raise the issues in the earlier proceeding - application of the extended principle in Henderson v. Henderson.
Copyright Act 1968 (Cth)
HEARING
SYDNEY
#DATE 27:3:1992
Counsel for the Applicants: Mr D.M.J. Bennett QC and
Mr S.J. McMillan
Solicitor for the Applicants: Mr J.W. Walker and
Mr D.K.L. Raphael
Counsel for the First Respondent: Mr M. Tobias QC and
Mr R. Vincent
Solicitor for the First Respondent: Colin Biggers and Paisley
ORDER
1. The motion be dismissed.
2. The First Respondent pay the Applicants' costs of the motion.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
This is a motion by the First Respondent to dismiss an application brought by the Applicants against it and the Second and Third Respondents. The motion relies upon the so called "extended principle" (Port of Melbourne Authority v. Anshun Pty Ltd (1981) 147 CLR 589 at 598) in Henderson v. Henderson (1843) 3 Hare 100 at 115; 67 ER 313 at 319, where Sir James Wigram V.C. said:-
"...where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case."
In Anshun's case, Gibbs C.J., Mason and Aickin JJ. said, at 602-3:-
"In this situation we would prefer to say that there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to plead a defence if, having regard to the nature of the plaintiff's claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding. In this respect, we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings e.g. expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few."
The principle was discussed again by the High Court in Chamberlain v. Deputy Commissioner of Taxation (1988) 164 CLR 502, by a Full Court of this Court in Chamberlain v. Commissioner of Taxation (1991) 28 FCR 21 at 24-26 and by the New South Wales Court of Appeal in Boles v. Esanda Finance Corporation Ltd (1989) 18 NSWLR 666.
In 1985, the First Respondent, A.W. Baulderstone Pty Ltd ("Baulderstone") was awarded the contract for stage 2 of the restoration of the Commonwealth Bank building in Martin Place, Sydney. Part of the contract involved the installation of bronze window frames. The First Applicant, Namol Pty Ltd ("Namol") was a company with experience in this field. Its directors were Laszlo Nagy and the Third Respondent, Joseph Bailey. Its shareholders were the two directors, the Second Applicant, Maria Nagy, who was Mr Nagy's wife, and Mr and Mrs Nagy's son. Baulderstone was brought into contact with Namol and, because of its perceived expertise in the field, Namol was invited to prepare submissions to tender for a sub-contract with Baulderstone for the design, manufacture and installation of the bronze window frames. Various drawings associated with the window frames were prepared by Namol between April and December 1985 and forwarded to Baulderstone by letter dated 9 January 1986. However, no contract was executed.
Meanwhile Mr Bailey had had a falling out with Mr Nagy. Mr Bailey quit his association with Namol on or about 16 December 1985 and became a director of the Second Respondent, Quinlara Pty Ltd ("Quinlara"). Baulderstone terminated its relationship with Namol on 22 January 1986 and awarded the sub-contract for the window frames to Quinlara on or about 25 March 1986.
On 29 October 1986, Namol commenced proceedings in the Equity Division of the Supreme Court of New South Wales claiming damages for breach of contract or in the alternative a sum based on a quantum meruit claim for work done. The matter was remitted to the Supreme Court's Building and Engineering List and was then referred to arbitration pursuant to Part 72 r.2(1)(r) of the Supreme Court Rules.
During the course of the hearing before the arbitrator, the Honourable R.G. Reynolds QC, counsel for Namol conceded it could not succeed on the breach of contract claim and counsel for Baulderstone conceded that Namol was entitled to recover upon the quantum meruit claim. The arbitrator's task thus became one of quantifying the quantum meruit. By report of 28 April 1988, the arbitrator assessed this sum as $45,962.50, including interest. This award was entered as a judgment of the Supreme Court by order of Smart J. dated 18 May 1988, and the money was paid on 20 May 1988. Proceedings on this claim were thus brought to an end.
There had been two issues raised before the arbitrator. The first issue between the parties was whether Baulderstone had wrongly terminated its relationship with Namol on 22 January 1986. This claim was abandoned. The second claim sought compensation on the basis of quantum meruit for the work done prior to the termination of the relationship on 22 January 1986.
The principal claim made in this respect was a claim with respect to the design work which had been undertaken by Namol. The learned arbitrator proceeded on the basis that the best measure of the value of work of this kind was the time that it, in fact, took a reasonably competent and skilled person to execute it. The arbitrator, however, rejected much of the evidence given before him by Mr Nagy as to the time spent on the production of the 20 or so drawings prepared for the window frames. The arbitrator concluded:-
"I am not persuaded, however, that the value of the work is to be assessed by aggregating the full time of Mr Nagy, Mr Dowsett and two assistant draftsmen for six weeks or anything like it. That would mean something of the order of 240 x 4 hours, i.e. 960 hours. The whole of the evidence suggests that this is unrealistic. In this state of affairs I must do the best I can to arrive at a figure which has as much chance of being fair to the plaintiff as to the defendant and, bearing in mind the onus of proof, the figure I would fix is $20,000."
While those proceedings were on foot, Quinlara, under its sub-contract with Baulderstone had designed bronze window frames for the Commonwealth Bank building. Construction and installation work continued over the period involved in the restoration of the building. At some stage, it came to the knowledge of Namol and Mr Nagy that the designs prepared by Quinlara were similar to the designs which had been prepared by Namol. Plans prepared by Quinlara came into Mr Nagy's hands about a fortnight before the hearing before the arbitrator. Whether Mr Nagy knew or suspected at an earlier stage that the designs were similar to his is not disclosed by the material before the Court.
In any event, on 25 September 1990, the current proceedings were instituted in this Court by Namol and Mrs M. Nagy. Mrs Nagy is suing as the executrix of her husband's estate, Mr Nagy having died on 18 December 1989. The proceedings allege that Mr Bailey and Quinlara, at the request of or with the consent of Baulderstone, copied the drawings prepared by Namol or Mr Nagy for tendering for the sub-contract with Baulderstone. The application seeks damages for breach of the Copyright Act 1968 (Cth), including additional damages under s.115(4). It is also alleged that Mr Bailey breached a fiduciary duty owed by him to Namol and Mr Nagy, and that Baulderstone knew of and received the benefit of this breach.
The statement of claim alleges, inter alia, that between July and January 1986, Namol or Mr Nagy drew, designed or prepared and is or are the authors of architectural or workshop drawings and specifications for the windows installed in the renovation of the Commonwealth Bank building. The statement of claim alleges that Namol is or, alternatively, Mr Nagy was and Mrs Nagy now is owner of the copyright in the drawings. The statement of claim further alleges inter alia:-
"10. On or about 9 January 1986 the Third Respondent and/or the Second Respondent made or took copies of the Drawings without the knowledge or consent of the First Applicant and/or Laszlo Nagy and did so at the request or with the knowledge of the First Respondent and supplied the Drawings to the Second Respondent and together with the Second Respondent supplied the Drawings to the First Respondent as the case may be.
...
12. Prior to the resignation of the Third Respondent, the Third Respondent had conducted negotiations with the First Respondent in connection with the proposed sub-contract referred to in paragraph 4 hereof. In breach of his fiduciary obligations and statutory obligations under the Companies (NSW) Code to the First Applicant, the Third Respondent caused or procured or assisted in procuring the proposed sub-contract for the installation of the windows to be given not to the First Applicant but to the Second Respondent and appropriated to the Respondents the Drawings, and the copyright of the First Applicant and/or of Laszlo Nagy therein and the benefit thereof and of proposed sub-contract to the Respondents and performed other wrongful acts to the detriment of the First Applicant and Laszlo Nagy.
13. The First Respondent knew or ought to have known of the breach of fiduciary and other duty and of other wrongful acts by the Third Respondent and received the benefit of the work of the First Applicant and/or Laszlo Nagy and the copyright in the Drawings and are liable as participants in the breaches of fiduciary and other duty by the Third Respondent.
14. The Second Respondent manufactured and installed the windows purportedly pursuant to the contract referred to above in accordance with, or by the adaption of, the Drawings prepared by the First Applicant and/or Laszlo Nagy and in which copyright was owned by the First Applicant and/or Laszlo Nagy."
Issues raised in the statement of claim in the present proceedings were adverted to to a limited extent in the proceedings before the arbitrator. Before the liability to pay a quantum meruit had been conceded, counsel for Namol claimed that Baulderstone and Quinlara had used the Namol drawings. Counsel did so with a view apparently to showing that Baulderstone had obtained a benefit from the design work and was therefore bound to pay a quantum meruit. The arbitrator appears to have thought that it was unnecessary for that matter to be proved as the work was done at the request of Baulderstone and there was an implied promise to pay for it. In the event, liability to pay a quantum meruit was conceded. The arbitrator did not, in the calculation of that quantum meruit, refer to or take into account any benefit that Baulderstone may have derived from the use of the drawings.
At most, it can be said that the question of Quinlara's use of the Namol drawings was the subject of some evidence before the arbitrator. The following are isolated examples of questions and answers asked:-
"Q. Is there something very similar to that Namol drawing with the Quinlara drawing 100/3/1E?---
A. They are the same drawing only with a slight rearrangement.
Q. Does the Quinlara drawing use your extrusions and designs?---Yes. ...
Q. Were you involved in the assessment of the price payable by your company to Quinlara in the Quinlara sub-contract?
MR MACONACHIE: I object to that. ARBITRATOR: I allow it. WITNESS: Only to the extent of calculating a $20,000 valuation of work. MR WALES: You went through the same process as you did in court today: you made an assessment of the value of the work of Namol in the sense fo working out a proper figure by which to reduce from the Quinlara sub-contract?--- A. That is correct.
...
Q. Are you able to say - the answer is yes or no - whether the windows actually built by Quinlara for the W1 window embodied the proposals contained in the Namol drawing? (Objected to; allowed)
A: To be honest, I can't answer the question yes or no because I don't know the Quinlara shop drawing to this detail, but if it helps you, the product that has been manufactured by Quinlara is made out of composite extrusion sections in lieu of plate.
Q. But beyond that you cannot be specific?--- No.
...
Q. Is that drawing substantially identical to Namol's W1 drawing that you were looking at a short time ago? (Objected to; allowed) A. I would have to compare them to be able to comment. There are a lot of differences between these two drawings."
However, the arbitrator on several occasions put his view that this line of questioning was unlikely to assist him. The arbitrator interposed, for example:-
"You are not claiming for the parts Quinlara used. I would have thought your case was: we were asked to do work in circumstances in which an implication arose that that work would be paid for whatever happened. It does not matter whether Quinlara used them or not."
In my opinion, the claim made in the proceedings in the Supreme Court concerned a different matter from that involved in these proceedings. There is a common element for certain facts are common to both sets of proceedings. But even though the award in the Supreme Court proceedings assessed a value which Baulderstone had to pay for the work done in the preparation of the drawings for the window frames, that award and the payment thereof did not confer upon Baulderstone a licence to use the drawings prepared by Mr Nagy and Namol. Payment for the work done in the preparation of the drawings is one thing. Breach of any copyright subsisting in the drawings is a different matter.
Mr M. Tobias QC, with whom Mr R. Vincent appeared for Baulderstone, submitted that, as the use by Quinlara of the Nagy and Namol drawings was the subject of evidence in the Supreme Court proceedings determined by the award of the arbitrator and the judgment of Smart J., it was unreasonable for Namol not to have raised in the course of and for determination in those proceedings the allegation which it now makes in these current proceedings. Mr Tobias submitted that it was unreasonable that the two legal proceedings should be carried on when all the matters in dispute could have been disposed of by claims added to the Supreme Court proceedings.
Mr Tobias particularly relied upon the remarks of Samuels J.A., with whom Priestly and Meagher JJ.A. agreed in Boles v. Esanda Finance Corporation Ltd, where his Honour at 673, after referring to Anshun's case said:-
"Such an estoppel therefore depends upon the exercise of a broad discretion since the question of whether a litigant's conduct was unreasonable can scarcely be determined in any other way."
However, the submission of Mr Tobias reads the reference to a "broad discretion" out of context. The essence of the extended principle is that, if a matter becomes the subject of litigation, the parties ought to bring before the Court in that litigation all issues which they wish to raise within the ambit of that matter. Thus, in Henderson's case, the Vice Chancellor said that, "The Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter that might have been brought forward as part of the subject in contest". In Anshun's case, Gibbs C.J., Mason and Aickin JJ. at 602 referred to a matter "so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it."
An illustration given in Anshun's case of the application of the extended principle was that of conflicting judgments. As Dawson J. said in Chamberlain's case, at 512, when speaking of Anshun's case:-
"The question was whether the plaintiff ought to have been allowed to pursue that cause of action having regard to the fact that the right asserted could and should have been raised in the earlier action in which judgment had been entered. To have allowed it to do so may have resulted in contradictory judgments which ought not be permitted save in special circumstances."
The judgment of the Full Court in Chamberlain's case is likewise against the view that the application of the extended principle depends upon the exercise of a broad discretion. Rather, the question is whether an issue sought to be raised in second proceedings so concerned the matter litigated in the first proceeding that it ought to have been raised and dealt with in those proceedings. The extended principle, like the principles of res judicata and issue estoppel, prevents the re-agitation or re-litigation of matters which have already been the subject of litigation between the parties. The principle precludes the subsequent raising of issues which ought to have been raised in earlier proceedings if they were to be raised at all.
In the present case, the subject matter of the proceedings in the Supreme Court was a different subject matter from the proceedings in this Court. The Supreme Court proceedings sought recompense for work done until the termination of the relationship between Namol and Baulderstone. All matters on which Namol wished to rely in relation to that claim were put. The present proceedings claim breach of copyright, principally during a period subsequent to the termination of the dealings between Namol and Baulderstone, and also seek damages for breach of confidence and for breach of a fiduciary relationship. It is true that these claims could have been brought in the Supreme Court proceedings had the claim made in the Supreme Court proceedings been amended and had other parties been joined. But the claim was not part of the lis before the Supreme Court and the arbitrator. Any judgment in these present proceedings would not be "conflicting" with the award of the arbitrator and the order of the Supreme Court, in the sense described in Anshun's case at 604, viz. "appear to declare rights which are inconsistent in respect of the same transaction."
The issue is not whether Namol might reasonably have brought the present claim in the Supreme Court proceedings. The present claims do not deal with and were not involved in the matters which were determined by the arbitrator and the Supreme Court.
It follows that the motion should be dismissed with costs.
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