Robert J Zupanovich Pty Ltd v B & N Beale Nominees Pty Ltd
[1995] FCA 561
•3 AUGUST 1995
CATCHWORDS
COPYRIGHT - builder's plans - whether respondents' plans and buildings infringed applicant's copyright in its plans and the buildings constructed from those plans - remedies - applicant elected for account of profits - nature of the court's discretion to grant that remedy - basis upon which profits to be calculated - whether apportionment appropriate - how profits to be apportioned.
Copyright Act 1968 (Cth) s.115
Acorn Computers Ltd v. MCS Microcomputer Systems Pty Ltd (1984) 57 ALR 389
Led Builders Pty Ltd v. Masterton Homes (NSW) Pty Ltd partially reported in (1994) 54 FCR 196; fully reported at (1995) 30 IPR 447
Colbeam Palmer Ltd v. Stock Affiliates Pty Ltd (1968) 122 CLR 25
Concrete Systems Pty Ltd v. Devon Symonds Holdings Ltd (1978) 20 SASR 79
Television Broadcasts Ltd v. Tu (1990) 19 IPR 307
Z.S.Projects Pty Ltd v. G & R Investments Pty Ltd (1987) 9 NSWLR 686
Gentry Homes Pty Ltd v. Diamond Homes Pty Ltd & Ors (1993) AIPC 91-008
Warman International Ltd v. Dwyer (1995) 128 ALR 201
Chan v. Zacharia (1984) 154 CLR 178
Potton Ltd v. Yorkclose Ltd (1990) 17 FSR 11
Dart Industries Inc v. Decor Corporation Pty Ltd (1994) 179 CLR 101
My Kinda Town v. Soll [1983] RPC 15
Cartier v. Carlisle (1862) 31 Bevan 292 [54 E.R. 1151]
Sheldon v. Metro-Goldwyn Pictures Corporation 309 US 390 (1939)
Dubiner v. Cheerio Toys & Games Ltd (1966) 55 DLR 420
ROBERT J. ZUPANOVICH PTY LTD v. B & N BEALE NOMINEES PTY LTD,
BRIAN BEALE and NINA CAROL BEALE
No. WAG 34 of 1994
CARR J.
PERTH
3 AUGUST 1995
IN THE FEDERAL COURT )
OF AUSTRALIA )
WESTERN AUSTRALIA ) No. WAG 34 of 1994
DISTRICT REGISTRY )
GENERAL DIVISION )
B E T W E E N: ROBERT J. ZUPANOVICH PTY LTD
ACN 009 259 401
Applicant
and
B & N BEALE NOMINEES PTY LTD
ACN 061 725 237First Respondent
and
BRIAN BEALE
Second Respondent
and
NINA CAROL BEALE
Third Respondent
CORAM: CARR J.
PLACE: PERTH
DATE: 3 AUGUST 1995
MINUTE OF ORDERS
THE COURT ORDERS THAT:
The parties bring in a minute of orders to reflect and give effect to these reasons for judgment.
The matter be listed on a date to be fixed for the giving of interlocutory directions in respect of the taking of an account of profits.
NOTE:Settlement and entry of Orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT )
OF AUSTRALIA )
WESTERN AUSTRALIA ) No. WAG 34 of 1994
DISTRICT REGISTRY )
GENERAL DIVISION )
B E T W E E N: ROBERT J. ZUPANOVICH PTY LTD
ACN 009 259 401
Applicant
and
B & N BEALE NOMINEES PTY LTD
ACN 061 725 237First Respondent
and
BRIAN BEALE
Second Respondent
and
NINA CAROL BEALE
Third Respondent
CORAM: CARR J.
PLACE: PERTH
DATE: 3 AUGUST 1995
REASONS FOR JUDGMENT
Introduction
This is a claim for infringements of copyright. The applicant alleges that the respondents have infringed its copyright in certain plans and drawings (which I shall refer to interchangeably as either the applicant's drawings or "the Drawings") and in certain buildings constructed in accordance with the Drawings. The Drawings depict the construction of two detached dwellings (which I shall call "units") on the one lot of land. First, it is alleged that the respondents infringed the copyright in the Drawings
by making copies of them or of a substantial part of them. It is further claimed that the respondents have infringed the applicant's copyright in the Drawings and the units which the applicant has constructed in accordance with them, by the erection of two units on land owned by the first respondent B & N Beale Nominees Pty Ltd ("Beale Nominees") each of which reproduces a substantial part of the Drawings and of the units built by the applicant.
The Pleadings
In its statement of claim the applicant says that on 26 February 1993 or thereabouts the copyright in the Drawings of and relating to two units at Lot 144 Bramston Street, Spearwood, a suburb of Perth in Western Australia ("Lot 144"), and the copyright in those buildings was orally assigned to it by two draftsmen. The uncontroverted evidence was that the draftsmen carried on business in partnership under the name "Designwise". The applicant pleads that the consideration for the oral assignment was the sum of $840 paid by it to the two partners in Designwise. Next it is alleged that on 11 March 1994 there was a written assignment of the above copyrights from the partners in Designwise to the applicant and that two units were built on Lot 144 in accordance with the Drawings.
The applicant pleads that Beale Nominees was at all material times the proprietor of a piece of land which can be described as "Lot 770". Lot 770 is also in Spearwood, about 500 metres from Lot 144. Notwithstanding non-admissions and formal denials in the Defence, at the hearing it was common ground that the second respondent Mr Brian Beale and the third respondent Mrs Nina Carol Beale at all
material times carried on business as builders and were directors of Beale Nominees. The applicant was put to its proof of its allegation that Mr and Mrs Beale were responsible for the day-to-day operations and management of Beale Nominees.
The applicant then pleads the infringements which I have described above. The applicant seeks injunctive relief, an order for delivery up of infringing copies and an account of profits.
In their defence, in addition to the matters to which I have referred above, the respondents deny each and every allegation made in the statement of claim except to admit that units have been erected on Lot 770. In particular, the respondents deny that there has been any breach of copyright. The respondents allege that the plans for the units which were built on Lot 770 were designed by a firm identified as "M & M Enterprizes" (spelling as in the defence), that they were designed in consultation with Mr Beale only, that a selection of sketches and plans were supplied to M & M Enterprizes and that M & M Enterprizes formerly worked for the applicant.
In his closing address, Mr C.A. Grasso, counsel for the respondents, conceded that copyright existed in the Drawings but his clients disputed the applicant's claim that it owned that copyright. It was agreed between the parties that the issues to be tried would be whether the applicant owned the copyrights upon which it sued, whether there had been copyright infringements and if so whether the applicant was entitled to an account of profits. If those issues were decided favourably to the applicant, the parties suggested that the taking of the account be delegated to the
District Registrar. However, the applicant asked that in those circumstances I should give directions as to the procedures to be followed in taking the account and how any profit should be calculated.
The Evidence
Mr Robert John Zupanovich is the managing director of the applicant. His evidence was that since its incorporation and at all material times the applicant engaged in the business of building. Eighty per cent of its building was for "clients" and the remainder comprised developments for resale. That situation changed on 1 July 1994 and since that date the applicant has been solely a developer, retaining another company within the Zupanovich group to carry out its building work. There is a third company, Gordon Developments Pty Ltd, in the Zupanovich group which also carries on business as a developer. Mr Zupanovich said that he was the managing director of all three companies and that the applicant made available to the other two companies its copyright in any plans. Mr Zupanovich said that the applicant held the copyright to more than 150 sets of plans. These were used to assist customers in their selections and also to construct buildings from those plans or modifications of them.
Mr Zupanovich said that the applicant retained a firm comprising two draftsmen brothers, Messrs Laurence and Brenton de Pledge, "on a job by job basis" to design plans for it. He said that before Messrs de Pledge started drawing plans for the applicant (which at first he said was in 1990 and later thought was in 1991) agreement was reached between the applicant and Messrs de Pledge's firm that
copyright in all plans and drawings designed by them for the applicant were to be owned by the applicant upon payment for the individual jobs. Mr Zupanovich was rigorously cross-examined on this piece of evidence. It was put to him that he had concocted his evidence concerning this oral contract in order to help the applicant's case. Mr Zupanovich denied this and I believe him. I believe him, not only because he was not shaken in cross-examination on this or any other point but because it is totally consistent with the evidence of Mr Brenton de Pledge. Mr de Pledge said that he was quite sure that when his firm started working for the applicant there was what he described as "a verbal agreement" that copyright in plans and drawings prepared by the firm for the applicant would belong to the applicant once payment was made for them. Mr de Pledge said, in cross-examination, that this was not unusual and that "... builders do tend to ask for it [copyright] every now and again".
Mr de Pledge acknowledged that he had never been asked to sign a formal assignment of the copyright prior to March 1994. This was a reference to a deed of assignment dated 11 March 1994 between Messrs de Pledge and the applicant. That deed recites an oral agreement made between Messrs de Pledge and the applicant on 25 February 1993 to assign their right title and interest in the copyrights in the Drawings and the units on Lot 144 for the term of such respective copyrights, that the assignment was made for valuable consideration payable by the applicant to Messrs de Pledge which they had received and that the parties wished to record the oral assignment in writing. The operative part of the assignment provides that in consideration of the sum of $840 paid by the applicant to Messrs de Pledge they assign the copyrights referred to above for the term of such copyrights. There is also a warranty by Messrs de Pledge that they are the owners of the copyrights and have not granted any interest by way of licence or otherwise to any other person.
I believed Mr de Pledge's evidence. I took into account the possibility that he might be interested in retaining the applicant's custom, but he did not seem to me to be the sort of person who would be prepared to perjure himself for that purpose. Furthermore, I formed the impression that Mr Zupanovich was an astute and careful businessman. For example, he knew exactly the details of the ownership structure of the various companies in the group which I have described above. This was a group which, on his evidence, was expected to construct over 100 houses in the ensuing twelve months. Mr Zupanovich impressed me as the sort of person who would take care, when instructing draftsmen to prepare plans and drawings, to stipulate that once those plans and drawings had been paid for, the copyright in them would pass to the applicant. I believe that is precisely what happened in this case.
Mr Grasso pointed to the evidence that the applicant had never entered into any agreement concerning copyright in its previous dealings with a Mr Szyjan, an architect whom the applicant had retained on some five projects. When Mr Zupanovich was recalled and further cross-examined, this matter was put to him. Mr Zupanovich's response was that Mr Szyjan is an architect and his designs are exclusively "one-off" designs. He understood that if a drawing were to be used again then, where an architect was involved, there would have to be further negotiations. He had never had cause to use Mr Szyjan's designs more than once.
It was suggested that Mr Mrsa, a draftsman formerly retained by the applicant, had said in his evidence that in his previous dealings with Mr Zupanovich, the matter of copyright had never been discussed. My examination of the transcript does not show any such evidence as having been given by Mr Mrsa.
I accept Mr Zupanovich's explanation as to why he did not secure copyright in drawings prepared by Mr Szyjan for the various projects upon which he was engaged by the applicant.
Mr de Pledge said that he was the author of the designs in the Drawings. He described how he and his brother worked together in developing the Drawings whereupon they were passed to an employee of the partnership, Mr Stephen Paterson who "documented" them. Mr de Pledge was not cross-examined on this aspect of his evidence. It was not disputed that the Drawings and the units built from them could, as a matter of law, be the subject of copyright. Nor was there any dispute that the units on Lot 144 were built in accordance with the Drawings. There was no issue taken with the proposition that on the facts of the present matter the owner of the copyright in the Drawings owned the copyright in the buildings which comprise those two units.
On the basis of the above evidence I find that copyright in the Drawings was created when they were prepared. The authors were either Messrs de Pledge or Mr Paterson as an employee of Messrs de Pledge. In either event Messrs de Pledge became the owners of the copyright at the time when the Drawings were prepared. I find further that at the same time Messrs de Pledge were, in equity, bound by the oral agreement referred to above, to hold that copyright for the benefit of the applicant as from the time payment was made for their services; Acorn Computers Ltd v. MCS Microcomputer Systems Pty Ltd (1984) 57 ALR 389. The evidence was that an invoice was raised by them on 26 February 1993. The invoice was addressed to Mr Zupanovich but I infer that it was addressed to him as managing director of the applicant. Apart from anything else, I make this inference because the drawings themselves are endorsed "proposed units for Robert J. Zupanovich Pty Ltd". Each drawing (bar one) also carries the endorsement "this drawing is © Robert J. Zupanovich Pty Ltd". Mr de Pledge gave evidence that the applicant had paid the invoice within two months of the Drawings having been drawn. Mr Zupanovich said that the applicant paid the invoice by the end of March 1993 and I accept that evidence. The respondents conceded that if the applicant held the equitable title to the copyright in the Drawings at the time of infringement then a subsequently-acquired legal title would give it sufficient standing to maintain these proceedings. The applicant acquired that legal title by the deed of assignment dated 11 March 1994.
Mr Zupanovich said that two units were built on Lot 144 in accordance with the Drawings. The units were built for sale to prospective purchasers. Construction started in March 1993 and soon after construction started he retained real estate agents to sell the units. The agents retained were Messrs Hunter and Lavery. A Mr Tom Grljusich worked for Messrs Hunter and Lavery at their Spearwood office. Mr Zupanovich said that he had known Mr Grljusich for some 15-20 years and that Mr Grljusich was his main real estate agent. Mr Zupanovich said that he had used Mr Grljusich prior to this on approximately six or seven occasions and for "every job I did in Spearwood he was the agent". Messrs Hunter and Lavery had been the agents negotiating the sale when the applicant purchased Lot 144. Mr Zupanovich said that at the time of retaining Mr Grljusich to sell the units on Lot 144 he gave him a copy of the Drawings to assist in the selling process. Mr Zupanovich said that Mr Beale was working for Messrs Hunter and Lavery at the Spearwood office in March 1993, that he had seen Mr Beale in those offices but he did not know when Mr Beale had started working there. The applicant's units took approximately twelve weeks to build and were sold quickly thereafter, within approximately four weeks. They were sold for $250,000 to the one purchaser and the applicant made a profit of slightly over $54,000 on the transaction. Mr Zupanovich then gave evidence, which I do not think it is necessary for me to describe, about how he discovered the similarity between the two units being constructed on Lot 770 and the units which the applicant had constructed on Lot 144. There was a subsequent exchange of correspondence between the parties and also between their respective solicitors and at one stage Mr Zupanovich and Mr Beale compared their respective plans and drawings on the boot of Mr Beale's car. Mr Beale, on that occasion, explained any similarity between the plans and drawings as being coincidental and rejected the suggestion that he had infringed the applicant's copyright. During a later telephone conversation Mr Zupanovich said that Mr Beale told him that he (Mr Beale) had stood in the units at Lot 144 at a time when they were open for inspection. Mr Beale, in his evidence, denied that he said this to Mr Zupanovich and further denied either opening the units at Lot 144 for inspection or having been into those units.
Mr Zupanovich then gave evidence that he had compared the two sets of plans and drawings, had walked onto the site at Lot 770 and through the rooms of the two units during the course of construction in early January 1994 and had observed the completed units on Lot 770 from outside. He gave his opinion that the units on Lot 770 had been constructed exactly in accordance with the applicant's plans and drawings except that each of the units on Lot 770 had an extra bedroom and that in lieu of the carports shown on the drawings for those units, garages had been constructed. Various differences between the two sets of plans were put to Mr Zupanovich and he acknowledged most of these. It was also put to him that certain items such as doors were standard and that there were certain standard requirements of the local authority and those responsible for authorising the issue of strata plans. Again, generally speaking, Mr Zupanovich acknowledged this.
The applicant called an architect, Mr Pavlo Szyjan to give expert evidence. His report was admitted into evidence. Mr Szyjan conducted a very detailed comparison of the Drawings (i.e. the plans and drawings used to construct the units on Lot 144) on the one hand and the plans and drawings used for the construction of the units on Lot 770. First Mr Szyjan looked at Plan Form which he described as a comparison of the relationship between each functional space (living rooms, bedrooms, kitchens and the like) and the circulation passage in the respective units. Mr Szyjan's conclusions were that in respect of Unit 1, of the fifteen functional spaces evaluated, thirteen maintained an identical relationship. By relationship, Mr Szyjan explained, he meant their location with respect to other rooms in the units. In respect of Unit 2, on each of the respective lots Mr Szyjan concluded that of the fourteen spaces evaluated, twelve maintained identical relationships. I followed Mr Szyjan's evidence carefully when he described these relationships meticulously in respect of each unit and I accept and agree with both his description and his conclusions in respect of the Plan Form.
Next Mr Szyjan dealt with the construction drawings. His conclusion in relation to Unit 1 was that after evaluating 48 spatial dimensions (by which Mr Szyjan said he meant the distance between one wall and another in a room) 30 spatial dimensions were identical. In relation to Unit 2, out of 41 spatial dimensions evaluated, 26 were identical. Mr Szyjan said that in respect of both units there were many other spatial dimensions with a difference of between three and four per cent. Mr Szyjan said that in his experience he would expect the majority of such spatial dimensions to be dissimilar although between ten and fifteen per cent would be standard. Once again, Mr Szyjan, in the witness box, took the Court on a very effective guided tour of the construction drawings and an overlay which he had prepared. The overlay superimposed the drawings prepared for the respondents on the drawings prepared for the applicant. The information was also presented in tabular form in respect of the two sets of units. I was very much impressed by the marked similarity between the two sets of drawings which this exercise and the report disclosed.
Mr Szyjan then gave evidence of his evaluation of the roofing of the two sets of units. His conclusion was that Unit 1 showed a 70% similarity and Unit 2 a 65% similarity. He explained the differences as being caused principally by the additional bedroom in each of Beale Nominees' units and certain other changes in Unit 2 on Lot 770.
Finally, in his report Mr Szyjan referred to the site plan and gave his opinion that both units maintained almost identical placement on the land. Mr Szyjan's overall conclusion was that the drawings which had been prepared for the construction of the units on Lot 144 had been copied when the drawings were prepared for the units constructed on Lot 770. His report contained this conclusion:
"I conclude that without question, the Beale units display no level of coincidence or chance for reproduction from the Zupanovich units in that an average of 80% or more similarities were confirmed with measurements, spatial relationship and overlay procedure".
There was one further, very significant piece of evidence given by Mr Szyjan. It related to the kitchen depicted on the drawings for each of the four units. It was common ground that the applicant's units were constructed first and thus the applicant's plans and drawings (to which I have referred as "the Drawings") were the first to be prepared. On the applicant's plans and drawings in relation to each of the kitchens there appeared a notation in relation to the type of kitchen sink to be installed. This read "1372 SS DB inset sink". This, so I was told by Mr Szyjan, describes a stainless steel sink being 1372 mm in length inset with a double basin. Mr Szyjan said that this was a mistake because such a sink did not exist. Mr Szyjan explained that there are different-sized sinks. The bench provided in the kitchens depicted in the Drawings was 600 mm in width. A sink 1372 mm in length would be for a 450 mm wide bench. Mr Szyjan acknowledged that one could fit a 1372 mm long sink into a 600 mm wide bench but that it would involve "a lot of messy cutting".
He further explained why it was a mistake to specify a 1372 mm sink for this space. On recall to the witness stand, Mr Zupanovich added to this matter. Mr Zupanovich said that there was such a thing as a 1372 mm long sink but that it was wood-backed in that it had a wooden bottom which sat proud (above) the bench by about 30 mm. An inset sink would sit proud of the bench by only 5 mm. The 1372 mm inset sink was designed for a 450 mm wide bench.
I inferred from the evidence of Messrs Szyjan and Zupanovich that a mistake had been made by the draftsman of the Drawings. The significance of this is that the mistake was repeated identically on the drawings prepared for the respondents. I was not impressed by the efforts of Mr Beale or Mr Zec Mrsa, a partner in the firm which drafted the respondents' drawings, to explain how the same sink was specified in those drawings and I reject both their explanations. Mr Beale contradicted himself by saying (at page 117 of the transcript) that the 1372 mm sink could be bought as a standard model when he had earlier all but conceded that it would need to be specially made. Mr Beale was unable to name a manufacturer which carried this type of sink as a standard model. His evidence on this and other points was most unconvincing. Mr Mrsa said that the measurement "... would have been picked up from the nearest catalogue I would have had sitting on my desk at the time". No such catalogue was produced and no evidence was given of the availability of a 1372 mm sink as a standard model. This is perhaps a small matter but is particularly consistent with the draftsman of the respondents' drawings having copied the Drawings.
Mr Beale gave evidence that he had been a building contractor for approximately 15 years during which he had been engaged predominantly in renovations and government work for local councils and the like. In the last three or four years he had constructed two sets of two units, being those constructed on Lot 770 and one other set previously. The other set had been constructed in about 1993. Mr Beale said that in about 1992 there was a building slump and he obtained a "real estate sales certificate" and started work part-time with Messrs Hunter and Lavery. In November 1993 he (by which I took him to mean Beale Nominees) purchased Lot 770 for $80,000. Mr Beale said that he had met Mr Zupanovich in the course of his work as a salesman with Messrs Hunter and Lavery. He said that he had spoken very briefly to Mr Zupanovich and had told him what he (Mr Beale) was going to build on Lot 770, namely two four-bedroom homes.
Mr Beale said that he obtained plans which he described as "mud sketches" from his father who had been a builder for forty years. He took those mud sketches to M & M Enterprizez (that firm's spelling) to have them developed into working drawings. Mr Beale said that he spoke to Mr Zec Mrsa for this purpose. He went to see Mr Mrsa three or four times. Mr Mrsa did the drawings and he (Mr Beale) took them to the local council.
Mr Beale acknowledged that he had seen the applicant's drawings at Messrs Hunter and Lavery. He said that Mr Tom Grljusich had shown him the applicant's drawings and had told him that they would be ideal for Lot 770. Mr Beale said that he had not been into the applicant's units; as he put it, he "did not go anywhere near them".
Mr Beale explained that the carports on Lot 770 were positioned where they were because there were only two places where the carports could be put, otherwise the units could not be sold. He said that he always likes to keep the main bedroom away from the other bedrooms and that the same configuration could be seen in thousands of houses. Other differences to which Mr Beale referred between Beale Nominees' Unit 1 and the applicant's Unit 1 were as follows:
.the Beale Nominees unit had a hip roof with a 22° pitch and no Dutch gables;
.there were no side lights by the front door as the unit was constructed although these were shown on the drawings prepared by M & M Enterprizez;
.in the interior, Tudor-style arches had been constructed instead of door frames as shown on the drawings prepared by M & M Enterprizez;
.a completely different oven (a wall oven) was installed in the kitchen;
.a lot of the window sizes were completely different;
.the sliding door into the family room was ten bricks wide compared to the 7½ bricks wide equivalent in the applicant's unit;
.there was a bay window in the main bedroom;
.the front of the house was "completely different";
.the carport was enclosed and had a height of twenty-eight courses compared to the applicant's twenty-five courses of brickwork in an unenclosed carport;
.in the laundry there were bigger doors on the linen cupboard and a much larger trough in a different location;
.in the kitchen there was a breakfast bar underneath an island cupboard;
.in the hallway there was an angle at one point just below the second bedroom, in the corridor;
.the walk-in wardrobe in the main bedroom was of a different size;
.in bedrooms 3 and 4 there were corner windows;
.there was an extra bedroom;
.the right hand side was completely different; and
.the laundry and toilets were in different positions.
Mr Beale outlined the following as being differences between Unit 2 in his company's development and Unit 2 as constructed by the applicant:
.22° roof pitch;
. enclosed carport;
.no side lights near the front door;
.870 mm doors instead of 820 as shown on the drawings;
.the bay window in the main bedroom;
.window in different position in the en suite bathroom to the main bedroom;
.different lay-out in the bathroom;
.a double island in the kitchen with a breakfast bar;
.the breakfast bar in the kitchen was curved;
.different window sizes except for the standard size windows in bedrooms 2 and 3;
.an open lounge room instead of walls; and
.the front and the whole of the back area of Unit 2 was completely different.
In cross-examination I found Mr Beale to be most unimpressive. His attitude was one of almost constant bluster. He was evasive and extremely aggressive. He spoke very loudly indeed and quite often would not give a straight answer to even the simplest of questions. At times Mr Beale appeared almost irrational in his behaviour in the witness box. At other times he endeavoured to offer explanations which were most unconvincing. I have already referred to his attempt to explain the specification of a 1372 mm sink as being extremely unconvincing.
When Mr Beale was first asked in cross-examination whether he had tried to sell the applicant's units he was most evasive. He then said that he had never tried to sell those units but was unable to explain how his draft witness statement filed in Court stated "... in fact I was trying to sell his units ...". I decided that Mr Beale was not a witness of truth and that I would not accept any of his evidence unless it was corroborated either by documentation or other credible evidence.
Mr F.R. Lavery was called to give evidence to the effect that according to his firm's records Mr Beale had never opened the applicant's units for inspection by prospective customers. This was intended to rebut Mr Zupanovich's evidence that Mr Beale had told Mr Zupanovich that he had done this. I accept that on Mr Lavery's evidence the probability is that Mr Beale did not open the applicant's units for inspection by prospective purchasers but from what I saw of Mr Beale in the witness box I formed the opinion that Mr Beale was quite capable of having told Mr Zupanovich that he had done so, if it served his purposes or if he thought it served his purposes.
Mr Zec Mrsa was called by the respondents and gave evidence as to how the respondents' drawings were prepared. A close examination of Mr Mrsa's evidence reveals that he did not actually say that he personally prepared those drawings. On the face of his evidence the implication is that Mr Mrsa drew them and his name appears on the drawings as the person who drew them. Mr Mrsa denied having copied the applicant's drawings. The case was conducted on the basis that Mr Mrsa had personally drawn the respondents' drawings and I shall decide it on that basis.
However there was one piece of evidence which puzzled me. It was Exhibit 7. Exhibit 7 was a fax from the second respondents addressed "To Darren Miller". On its face it seems that it was sent not from their fax number but from the fax of Messrs Hunter and Lavery at 15:26 on 29 July 1993. Mr Mrsa said that this fax stipulated where Mr Beale wanted the carports placed on Lot 770. He said "... that was obviously our starting point and we had to work from that". It was part of the respondents' case that the carports on Lot 770, in practical terms, had to be located where they were eventually built and that consequently it was inevitable that there would be so much similarity between the two sets of drawings. There were two things which puzzled me about Exhibit 7. First, that it was dated 29 July 1993. Mr Beale's evidence was that he (obviously referring to Beale Nominees - see the copy Certificate of Title, Exhibit C) purchased Lot 770 in November 1993. It may be that Mr Beale was making some design enquiries before the purchase but there was no other evidence to that effect. Secondly, as mentioned above, the fax is addressed to "Darren Miller". There was evidence that Mr Mrsa had a Mr Miller as a partner. Mr Miller did not give evidence and there was no evidence as to his role in this matter nor indeed whether he had any role in the matter. Before leaving Exhibit 7 I should note that it specifically refers to Lot 770, gives a freehand outline of its shape and rather than "stipulating" where the carports are to be located there are question marks at both points. Finally it carries the notation "3 or 4 bedroom 2 bath and family 2 WC's" (underlining on the original).
I must say that Mr Mrsa gave his evidence in a calm and straight forward manner which was in stark contrast to that of Mr Beale. Just as Sheppard J. in Led Builders Pty Ltd v. Masterton Homes (NSW) Pty Ltd (partially reported on the question of relief in (1994) 54 FCR 196; fully reported in (1995) 30 IPR 447) described Mr Masterton in that case as being certainly not an evasive witness, so I would describe Mr Mrsa in this case. Again there was nothing in Mr Mrsa's demeanour to suggest that he was dishonest or lacking in integrity (to quote Sheppard J's words in that case describing Mr Masterton further). However, like Sheppard J. with Mr Masterton, I have had difficulty resolving the matter of Mr Mrsa's evidence.
Nevertheless, I have concluded that the objective factors in this matter justify and require me not to accept Mr Mrsa's evidence and I find that in the preparation of the respondents' drawings there was substantial copying of the Drawings. I have come to this conclusion for the following reasons, in summary:
.there were so many things that were identical on the two sets of drawings as explained in Mr Szyjan's report (Exhibit J) and his oral evidence;
.there were many other things that were very similar in the two sets of drawings;
.Mr Beale had access to the Drawings at his place of part-time employment and was in a position to provide them to Mr Mrsa or his partner for tracing;
.Mr Mrsa could not be regarded as a disinterested witness;
.Mr Mrsa's explanation about the reference to the 1372 mm inset sink was unconvincing;
.similarly Mr Mrsa's explanation as to why side lights had been shown on his drawings when he had been instructed not to provide side lights was equally unconvincing; and
.there was a degree of inconsistency between what Mr Beale said he had given Mr Mrsa by way of written instructions for preparing the drawings and what Mr Mrsa said he had been given. Mr Beale said that he had given Mr Mrsa "... at least a dozen different bloody sketches". Mr Mrsa said that he was given only two.
It is possible, but I think unlikely, that Mr Mrsa had forgotten that Mr Beale had given him the applicant's drawings to copy. I say this because Mr Mrsa said that Mr Beale had telephoned him and said that Mr Zupanovich had taken out a suit for copyright and asked Mr Mrsa for his file back. Mr Mrsa gave the file back to Mr Beale at that stage.
Finally, Mr Alan Beale (the second respondent's father) was called to give evidence. Mr Beale Senior said that at his son's request he had prepared two sketches [Exhibits 4A and 4B] depicting two units as being suitable for Lot 770. Mr Beale (Junior) said that he had given those sketches to Mr Mrsa.
Mr Beale Senior also had a tendency to be evasive. I am prepared to accept that two sketches which Mr Beale Senior identified may have accompanied his son's instructions to M & M Enterprizez (that firm's spelling). I have examined those sketches and in my opinion they are substantially different to the drawings prepared by that firm. I do not consider that to be very surprising because it was M & M Enterprizez's task to develop drawings from those sketches. However, the striking identical elements and similarity between the applicant's drawings and those prepared for the respondents convinces me that the respondents' drawings were prepared by copying substantial parts of the applicant's drawings. Mr Beale Senior said that he was not surprised by the similarity between the applicant's set of drawings and the respondent's set of drawings.
Whether there were infringements of copyright
In Led Builders [(1995) 30 IPR at pp.450-453] Sheppard J. reviewed a number of the authorities relevant to the approach which a court should take when determining whether or not copyright subsists in architects' or builders' plans and, if so, whether or not there has been an infringement by reproduction or copying. The former matter is no longer in issue here, having been conceded, eventually, by the respondents. The authorities included Ancher, Mortlock, Murray & Woolley Pty Ltd v. Hooker Homes Pty Ltd [1971] 2 NSWLR 278, Beazley Homes Ltd v. Arrowsmith [1978] 1 NZLR 394; Lend Lease Homes Pty Ltd v. Warrigal Homes Pty Ltd [1970] 3 NSWR 265 and Beck v. Montana Constructions Pty Ltd [1964-5] NSWR 229. I do not propose to rehearse those case in these reasons but to incorporate by reference here the passages which Sheppard J. set out in his reasons in Led Builders. His Honour noted (at p.454) that:
"... where there are two similar plans, it will often be difficult to determine whether or not, upon a simple comparison of the two, one is a reproduction or copy of the other or at least of a substantial part of it..."
Mr Grasso submitted that the evidence showed that these units were of a standard type for the area. The standard procedure would be to divide the block in two and have a frontage on both streets. It would be very likely (and the evidence supports this submission) that the main bedroom would be at the front, that there would be an en-suite bathroom for the main bedroom and that the main bedroom would be separated from the other bedrooms. With the exception of the proposition that it was inevitable that each unit would have a frontage to a different street, there was not much dispute between the parties on those matters. Mr Grasso also pointed to the fact that door sizes were standard and that there was a minimum area required for such rooms as the storeroom.
Even accepting all those submissions, as I do on the basis of the evidence adduced, I do not accept that the inevitable result is the degree of identicality and similarity which exists between the two sets of drawings. When one places one set of drawings over the other in respect of each unit and when one compares the relative positioning of the rooms in each of the sets of units and looks at the identical measurements and the frequent similar positioning of appliances and the like there is, in my view, only one conclusion. My conclusion is that in the preparation of the respondents' drawings, a substantial part of the applicant's drawings was copied. I have referred earlier to the fact that Mr Beale had access to those drawings. I have not overlooked the differences and in particular the differences between Unit 2 in
each development. Nevertheless, just as the fourth bedroom was easily added to the sketch plan forming Exhibit 4B, so, in my view, was it easily done for the draftsman to work from the applicant's drawings and add an extra bedroom to each of the respondents' units. I was favourably impressed by Mr Syjan's evidence and his report. He approached the task of comparing the two sets of drawings in a most careful, scientific and professional manner which was of considerable assistance to me. I accept his evidence (including his report). I have also come to the conclusion to which he came and I agree with the reasoning for that conclusion. Mr Syjan was not shaken in cross-examination. In fact he was not very seriously cross-examined about his conclusions and the respondents did not call an independent expert witness to challenge Mr Syjan's evidence.
There was another matter which on its own was of a minor nature. I refer to the sidelights to the front doors of the units. Mr Beale pointed out that his units, as constructed, did not have such side lights. Mr Beale's evidence was that he told Mr Mrsa not to include side lights in his units. Nevertheless the respondents' drawings show side lights on either side of the front door in both units. These are identical to the side lights shown in the applicant's drawings. Mr Mrsa's explanation was that he disregarded Mr Beale's instructions in relation to the side lights as "basically our way of subtly trying to influence him" to add side lights. I do not accept that as a satisfactory explanation for the inclusion of side lights in the respondents' drawings. It is more consistent with the copying of that feature from the applicant's drawings on to the respondents' drawings and I find that is what took place. It should be remembered that Mr Zupanovich drew Mr Beale's attention to the applicant's claim for breach of copyright at a very early stage of construction of Beale Nominees' units. The evidence was that the stage reached was when the footings were being poured. Photographs of the two sets of units as built show that the omission of the side lights contributes to a cosmetic difference in the elevation comparison between the applicant's units and the Beale Nominees units. It is quite possible that this change was made, not for reasons of security as Mr Beale claimed, but in order to camouflage the copying which I have held took place. Nevertheless, it is not necessary for me to make a finding on that point. I do note, however, that on the respondents' drawings there are certain obvious changes manually drawn on to them. Mr Beale made particular mention of the resultant differences between the units which he constructed and the units depicted in the applicant's drawings and the two units built on Lot 144. I have referred to this evidence earlier in these reasons for judgment. Finally, I refer to Exhibit H2. Exhibit H2 is a letter dated 26 November 1993 written by Mr Beale to Mr Zupanovich in reply to a letter dated 24 November 1993 (Exhibit H1) from the applicant. This was at a time when the Beale Nominees' units were still under construction. In its letter the applicant draws Mr Beale's attention to the similarity of the duplex development on Lot 770 to one of the applicant's developments, expresses concern that an infringement of copyright may have occurred and asks for a copy of Mr Beale's plans of the development on Lot 770. In Mr Beale's letter there is no denial of any infringement. Omitting formal parts, that letter reads simply:
"I will meet you on site at any time to suit yourself to discuss the plans. I would also like you to bring your plans in question so that I can site (sic) them as well."
It is doubtless a small matter, but my assessment of Mr Beale is that he would normally respond to a false accusation of wrongdoing with a very strong denial.
In Copinger and Skone James on Copyright (11 ed) the learned authors say, at paragraph 408:
"... there is no infringement unless it is established that the defendant has produced a work which both closely resembles the plaintiff's work and has been produced by a direct or indirect use of those features of the plaintiff's work in which copyright subsists".
I have had regard to the evidence concerning the differences between the respondents' drawings and the Drawings and the differences between the respondents' drawings and the two units constructed on Lot 770. I have also examined the photographs of the two sets of units. In my view, the differences between, on the one hand, the two units constructed on Lot 770 and, on the other hand, the Drawings and the units built on Lot 144 are not sufficient to preclude the building of the former to amount to an infringement of the applicant's copyright in the Drawings and those units as built. The units built on Lot 770 reproduce substantial parts of the units built on Lot 144. There were even fewer differences between the Drawings and the drawings prepared for the respondents.
Conclusion on Infringements
For the above reasons I find that there was an infringement of the applicant's copyrights in the Drawings when Mr Beale, acting as a partner in the building partnership between himself and his wife, arranged for and thus authorised the respondents' drawings to be prepared by M & M Enterprizez by making copies of substantial parts of the Drawings. In my view, Mr and Mrs Beale are thereby legally responsible to the applicant for such infringement. Furthermore, I find that the same building partnership of Mr and Mrs Beale built the two units on Lot 770 for Beale Nominees by arrangement with and at the request of Beale Nominees. I find that the building of those two units reproduced a substantial part of the units built by the applicant and substantially reproduce the Drawings in a three-dimensional form: s.21(3)(a) of the Copyright Act 1968 (Cth). By virtue of such building, in my opinion, all three respondents have infringed the applicant's copyrights in the Drawings and the units constructed on Lot 144.
Remedies
Mr Grasso submitted that if the Court finds infringements of copyright in this matter, it has a discretion whether to award damages or to order an account of profits. He submitted that an account of profits was to prevent the unjust enrichment of the respondents, but that what the applicant was trying to do was to effect an unjust enrichment for itself. The applicant conceded that it had not lost any money by the infringements and that it was not in competition with the respondents. Mr Grasso submitted that "the causal nexus" between the infringements and the generation by the respondents of profits was missing. Both Mr de Pledge and Mr Szyjan had agreed that purchasers would be attracted by the front elevations of his client's units which, so it was submitted, were different to those of the applicant's units.
Mr Grasso submitted that the evidence showed that there was not much
difference between small villa developments of the types shown in, for example, the newspaper cutting which became Exhibit 5 and the units depicted in other exhibits. If an account of profits were ordered then, so he submitted, it would be necessary to work out how much of the breach of copyright helped to sell Beale Nominees' units. For that proposition Mr Grasso relied on the decision of Windeyer J. in Colbeam Palmer Ltd v. Stock Affiliates Pty Ltd (1968) 122 CLR 25 at p.42. In that case Windeyer J. distinguished between such profit as was attributable to the wrongful use of a trade mark and the profit made by the sale of goods bearing that trade mark on the basis that a "trade mark is in its nature something apart and distinct from the goods in relation to which it is to be used ...".
Mr R. Griffiths, counsel for the applicant, sought to distinguish Colbeam Palmer. His submission was that the units (constructed by the applicants) themselves constituted one of the applicant's copyrights and thus the construction and sale by the respondents of Beale Nominees' units could not be regarded or treated as something capable of being separated from the infringement of copyright. Nor, so Mr Griffiths submitted, could there be any apportionment of the profit to distinguish between profit derived from infringement of copyright in the units on Lot 144 and other causes, except that the value of the fourth bedroom in each of the two units on Lot 770 would be taken into consideration in the account of profits. I refer to this point later in these reasons.
Section 115 of the Copyright Act provides as follows:
(1)Subject to this Act, ("the Act") the owner of a copyright may bring an action for an infringement of the copyright.
(2)Subject to this Act, the relief that a court may grant in an action for an infringement of copyright includes an injunction (subject to such terms, if any, as the court thinks fit) and either damages or an account of profits.
(3)Where, in an action for infringement of copyright, it is established that an infringement was committed but it is also established that, at the time of the infringement, the defendant was not aware, and had no reasonable grounds for suspecting, that the act constituting the infringement was an infringement of the copyright, the plaintiff is not entitled under this section to any damages against the defendant in respect of the infringement, but is entitled to an account of profits in respect of the infringement whether any other relief is granted under this section or not.
(4)Where, in an action under this section:
(a)an infringement of copyright is established; and
(b)the court is satisfied that it is proper to do so, having regard to:
(i)the flagrancy of the infringement;
(ii)any benefit shown to have accrued to the defendant by reason of the infringement; and
(iii)all other relevant matters;
the court may, in assessing damages for the infringement, award such additional damages as it considers appropriate in the circumstances."
Mr Griffiths conceded that there was no doubt that a court had a discretion whether to award damages or to order an account of profits. He submitted that there was doubt only over the questions whether the applicant must elect which of the two alternative remedies it seeks and if, having made such an election, the applicant is bound to it, so that the court's discretion is only to decide whether or not to award the applicant what it has elected to pursue.
Quite properly, Mr Griffiths drew my attention to the decision of Legoe J. in Concrete Systems Pty Ltd v. Devon Symonds Holdings Ltd (1978) 20 SASR 79 where at p.84 his Honour said:
"In my opinion the statute now removes that option from the plaintiff and places a discretion upon the Court to grant which of the alternative relief under sub-s.(2) may appear appropriate to the Court at the trial of the action."
Mr Griffiths then referred to Television Broadcasts Ltd v. Tu (1990) 19 IPR 307 where, at p.320, O'Loughlin J. left the matter open. His Honour noted that if the applicants were entitled to make an election as to the proper form of relief, they had not done so. Then his Honour observed that if the form of relief was that which the Court, in its discretion, deems most appropriate (citing Concrete Systems Pty Ltd) then he had no hesitation in concluding that an award for damages was the appropriate remedy because an account of profits would not pay sufficient attention to the losses that the applicants had suffered as a result of the infringement. Next Mr Griffiths referred me to Z.S.Projects Pty Ltd v. G & R Investments Pty Ltd (1987) 9 NSWLR 686, which was an application for a summary judgment. The only reference to this point in that case was at p.689 where Needham J. referred to the fact that there had at that stage been no election by the plaintiff as to which of the remedies it sought and therefore it was still claiming damages and an account of profits. His Honour made no comment as to the appropriateness of the plaintiff maintaining that stance at the same time as applying for summary judgment. Finally, Mr Griffiths referred me to the decision of Beazley J. in Gentry Homes Pty Ltd v. Diamond Homes Pty Ltd & Ors (1993) AIPC 91-008. In that case the applicant had originally sought an account of profits. The first respondents admitted liability and claimed it had made no profit. During the course of the hearing there was an adjournment, on the applicant's application, because certain financial documents were only produced at the last minute. At the same time, the applicant's counsel applied for leave to amend the
statement of claim, to claim damages. Later that afternoon the applicant withdrew its application to amend. The hearing was adjourned to the next day and then adjourned again with directions given for the making of any application to amend. When granting leave to amend Beazley J. held that the provisions of s.115 required the applicant to make an election and her Honour directed that such election should be made prior to the (resumed) hearing. On resumption, counsel for the applicant advised that it had elected to continue to pursue the claim for an account of profits. On the facts found in that matter it transpired that the respondent had made a loss in the construction of the relevant building and accordingly her Honour held that no order (for account of profits) could be made.
In Led Builders Sheppard J. [(1994) 54 FCR 196 at pp.196-199; (1995) 30 IPR 447 at pp.466-468] dealt with a situation in which the applicant had not at that stage elected for an account of profits or damages. His Honour reached the conclusion that the remedies of injunction and account of profits were discretionary but that a successful applicant was entitled to damages. His Honour applied the principles in Colbeam Palmer and observed:
"I would not suggest that the presence of the word `may', especially in sub-sec 115(2), means that the Court in an ordinary case ought not to give the remedies there provided for if a case for them has been made out. But I do think it right to take the view that the remedies of injunction and an account of profits being equitable remedies and thus discretionary were intended to be applied in cases for infringement of copyright in the way that they have been applied over the years both under the general law and under statute law such as the intellectual property statutes to which I have referred."
In Led Builders the applicant had neither been required to elect before trial or before any finding of infringement was made, whether it sought damages or an account of profits nor had it made any such election. In Gentry, infringement was not in issue at the hearing. Concrete Systems was a decision on an application for an interim injunction. The plaintiff, in its writ also sought an inquiry as to damages and additional damages under s.115(4) of the Act. Legoe J's observation, which I have set out above, was not strictly essential for the purposes of deciding the issue before his Honour. Accordingly in the apparent absence of any binding authority on the point I propose to venture some short comments on what I consider to be the legal position. They are as follows:
There may well be situations in which the interests of justice require an applicant to elect before trial whether it claims damages or an account of profits. Much will depend upon the particular circumstances including, for example, whether there is any issue over infringement. The circumstances of the infringement may well have a bearing not only on the court's discretion whether to order an account of profits but also on whether damages are an available remedy [see s.115(3)] and the amount of damages [see s.115(4)]. One can easily envisage circumstances where it would be unfair to put an applicant to such an election before the respondent's evidence had been tested and factual findings made. Similarly one can easily think of other situations where it might be appropriate to require such an election.
There are no such problems here. The applicant has elected for an account of profits and does not wish to change that election.
I respectfully agree with Sheppard J's observation in Led Builders concerning the discretion to order an account of profits and also with his Honour's conclusion [(1994) 54 FCR 196 at p.197; (1995) 30 IPR 447 at p.466] that so far as damages are concerned, there can not be any room for the exercise of a discretion. If damages are claimed and proved then, subject to s.115(3), an applicant is entitled to those damages. As the High Court noted in Warman International Ltd v. Dwyer (1995) 128 ALR 201 at p.210:
"Although an account of profits, like other equitable remedies, is said to be discretionary, it is granted or withheld according to settled principles. It will be defeated by equitable defences such as estoppel, laches, acquiescence and delay."
At the same page the High Court acknowledged that the liability to account for a personal benefit gained by reason of fiduciary position, opportunity or knowledge will not arise in circumstances where it would be unconscientious to assert it or where there was no possible conflict between personal interest and fiduciary duty (citing Chan v. Zacharia (1984) 154 CLR 178 at pp.204-5).
I have come to the conclusion that the applicant should be granted an order for an account of profits. In my view no circumstances have been established to justify withholding that relief as a matter of discretion. None of the traditional equitable defences were pleaded or established. Furthermore, for reasons relating to apportionment of profits to which I return below, I do not consider that it would be unconscientious to order an account of profits. I was asked to give directions concerning the manner in which the profits are to be calculated upon the taking of the account. That was on the assumption that I would delegate that function. I do not propose so to delegate, but it may be helpful if I give my views on how the profits
should be calculated when the account is taken.
The applicant argued that it was entitled to an account of the whole of Beale Nominees' profit less only some allowance for the provision of a fourth bedroom in the infringing units. The respondents submitted that the profit to be accounted for was only that caused by the infringement.
In Warman v. Dwyer the High Court said (at p.208) of the remedy of account:
"The remedy is ancient and notoriously difficult in practice and it gives rise to a liability, even in a case of a fiduciary, which is personal. In the context of patent infringement, the purpose of ordering an account is not to punish the defendant, but to prevent the defendant's unjust enrichment."
In that case the High Court was dealing with a case which it described as "... a clear case of a fiduciary breaching his obligations." The extent of the liability of a fiduciary in that situation is particularly severe. Strict and rigorous standards have been applied to ensure that fiduciaries do not expose themselves to a conflict of interest and duty. Even in that situation the High Court observed at pp.211-212:
"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 of his conduct of the business or his exploitation of the principal's goodwill over an indefinite period of time. In such a case, it may be appropriate to allow the fiduciary a proportion of the profits, depending upon the particular circumstances. That may well be the case when it appears that a significant proportion of an increase in profits has been generated by the skill, efforts, property and resources of the fiduciary, the capital which he has introduced and the risks he has taken, so long as they are not risks to which the principal's property has been exposed. Then it may be said that the relevant proportion of the increased profits is not the product or consequence of the plaintiff's property but the product of the fiduciary's skill, efforts, property and resources. This is not to say that the liability of a fiduciary to account should be governed by the doctrine of unjust enrichment, though that doctrine may well have a
useful part to play; it is simply to say that the stringent rules requiring the fiduciary to account for profits can be carried to extremes and that in cases outside the realm of specific assets, the liability of the fiduciary should not be transformed into a vehicle for the unjust enrichment of the plaintiff.
It is for the defendant to establish that it is inequitable to order an account of the entire profits. If the defendant does not establish that that would be so, then the defendant must bear the consequences of mingling the profits attributable to the defendant's breach of fiduciary duty and the profits attributable to those earned by the defendant's efforts and investment, in the same way that a trustee of a mixed fund bears the onus of distinguishing what is his own.
Whether it is appropriate to allow an errant fiduciary a proportion of profits or to make an allowance in respect of skill, expertise and other expenses is a matter of judgment which will depend on the facts of the given case."
Mr Griffiths referred me to Potton Ltd v. Yorkclose Ltd for two propositions. The first was that upon the taking of an account of profits, unrealised profits may be taken into account. I accept that proposition, although that was not the real issue before the Court in that case (see p.16).
The second proposition was that I should follow Millett J's refusal in Potton to order an inquiry into the source of the profits with a view to determining what part, if any, was attributable to the design. His Honour regarded the submission in favour of apportionment as being "misconceived" because there was a distinction to be drawn between infringement by using the drawings and infringement by building the houses themselves in that case. I accept that there are two infringements which are to some extent distinct but with all due respect to Millett J, I differ from the conclusion to which his Honour came in that case. I do not think that the distinction compels the conclusion that there can be no apportionment in the present matter. In this case, Mr Griffiths has already acknowledged that some adjustment needs to be made in respect of the fourth bedroom in the respondents' units. The applicant's units contain only three bedrooms. Mr Griffiths relied upon the High Court of Australia's decision in Dart Industries Inc v. Decor Corporation Pty Ltd (1994) 179 CLR 101 as authority requiring a direction that the taking of the accounts in this matter should be accompanied by a direction that all of the profits made by the respondent should be paid over to the applicant. However, at p.111 in the reasons for judgment of Mason CJ, Deane, Dawson and Toohey JJ. in that case there appears the following passage:
"... an account of profits retains its equitable characteristics in that a defendant is made to account for, and is then stripped of, profits which it has dishonestly made by the infringement and which it would be unconscionable for it to retain. An account of profits is confined to profits actually made, its purpose being not to punish the defendant but to prevent its unjust enrichment. The ordinary requirement of the principles of unjust enrichment that regard be had to matters of substance rather than technical form is applicable."
In Dart Industries the High Court applied the principles in Colbeam Palmer and at p.121 quoted the following passages from pp.42-43 of Windeyer J's reasons for decision in that case:
"The true rule, I consider, is that a person who wrongly uses another man's industrial property - patent, copyright, trade mark - is accountable for any profits which he makes which are attributable to his use of the property which was not his ... [emphasis added]
If one man makes profits by the use or sale of some thing, and that whole thing came into existence by reason of his wrongful use of another man's property in a patent, design or copyright, the difficulty disappears and the case is then, generally speaking, simple. In such a case the infringer must account for all the profits which he thus made."
In the present matter what Beale Nominees sold comprised the land upon which the units were constructed and any improvements, including the units. The fact
that the applicant's drawings and buildings were substantially copied does not, in my view, preclude an apportionment. This is not a case where the copyright infringers could not have constructed the buildings without the use of the Drawings or the units built by the applicant from the Drawings. For that reason, it is in my view distinguishable from, for example, Peter Pan Manufacturing Corporation v. Corsets Silhouette Ltd [1963] 3 All E.R. 402.
As Slade J. said in My Kinda Town v. Soll (1982) 8 FSR 147 at p.149:
"As I understand the relevant principles, the object of ordering an account in cases such as the present is to deprive the defendants of the profits which they have improperly made by wrongful acts committed in breach of the plaintiffs' rights and to transfer such profits to the plaintiffs."
And at p.156
"The purpose of ordering an account of profits in favour of a successful plaintiff in a passing off case is not to inflict punishment on the defendant. It is to prevent an unjust enrichment of the defendant by compelling him to surrender those profits, or those parts of the profits, actually made by him which were improperly made and nothing beyond this."
Similarly in Cartier v. Carlisle (1862) 31 Bevan 292 at p.298 [54 E.R. 1151 at p.1153] Sir John Romilly M.R. observed:
"... equity will restrain the further use of the trade mark by the person imitating it, and will make him account for such advantage, if any, as he may have derived from its user." [emphasis added]
The Supreme Court of the United States of America has held that a copyright infringer was not to be penalised in the taking of an account by giving to the copyright proprietor profits which were not attributable to the infringement: Sheldon v. Metro-
Goldwyn Pictures Corporation 309 US 390 (1939) at pp.398-399 [84 L ed 825 at p.830]; see also the Canadian decision of Dubiner v. Cheerio Toys & Games Ltd (1966) 55 DLR 420 at p.435.
As Mr Lionel Bently points out in "Accounting for Profits Gained by Infringement of Copyright: When does it End?" [1991] 1 EIPR 5, the remedy of account has two principal characteristics. First, it is restitutionary, taking away from the infringer anything which he has gained and returning it to the owner of the copyright. Secondly it is an equitable remedy. Accordingly, in my view the taking of the account should be directed to the ascertainment of the amount of profit (realised and unrealised), if any, derived by Beale Nominees in building its units and the extent to which the substantial reproduction of the Drawings and the applicant's units contributed to the generation of that profit. There may well be problems of causation to be resolved by the calling of appropriate evidence. Slade J. in My Kinda Town (which, as the above passages indicate, was a passing-off case) referred, at p.156, to these difficulties in the context of some decisions relating to infringement of patents and observed:
"... they do illustrate that the Court will not order an account of profits in a wider form than it regards as equitable, that, if it considers it necessary in the interests of justice, it will direct an apportionment and that it will not necessarily be deterred from so doing by the practical difficulties to which such an apportionment may give rise."
I believe it would be unconscionable for the applicant to receive judgment for a sum which did not appropriately represent that proportion of Beale Nominees' profit which is fairly attributable to the infringement of the applicant's copyright. In
other words, to the extent that such infringement caused profit to be made then, in my opinion, it should be ordered to disgorge that profit. Problems of causation and proof are adjusted by placing the onus on the respondents (see the passage from Warman v. Dwyer set out above).
If upon the taking of the account in this matter the respondents are unable to establish that the whole of the profit (if any) made by Beale Nominees was not attributable to the infringement of the copyright in the Drawings and the applicant's buildings then the result will be an order that they pay all of those profits to the applicant. To the extent that the respondents are able to establish that factors other than such infringement caused such profit then they will only have to account for a lesser amount. The relevant comparison would appear to be between the profits which Beale Nominees would have made if it had not used the Drawings and the profits which they did in fact make. That is my provisional view but the matter will have to be decided in the course of taking the account of the profits. If that view is correct then as Millett J. observed in Potton Ltd "in practice this will come to the cost of commissioning similar drawings from another source."
For much the same reasons as Windeyer J. in Colbeam Palmer decided to conduct the hearing of the account of profits, so in this case I do not propose to delegate that task to the District Registrar but to relist the matter, if necessary, for that purpose at a later date.
Conclusions
I summarise my conclusions as follows:
The applicant has established its ownership of the copyright in the Drawings and the buildings on Lot 144.
All of the respondents have infringed those copyrights by:
(a)causing a substantial part of the Drawings to be copied;
(b)causing the units on Lot 770 to be built thereby reproducing in substantial part both the Drawings and the buildings on Lot 144.
The applicant is entitled to an account of any profits, whether realised or unrealised, made by the respondents and properly attributable to the abovementioned infringements.
Directions will be given in respect of interlocutory steps to be taken before the taking of the account of profits.
There will be orders accordingly.
The parties should bring into Court a minute of orders to reflect and give effect to these reasons for judgment. If agreement cannot be reached on the terms of such orders, then the matter may be relisted for the purpose of hearing submissions about the precise terms of the orders and settling them. Traditionally, an account was not ordered unless accompanied by an injunction but there are exceptions. Some of the authorities are discussed in Mr Bently's article referred to above. It may be that an injunction is no longer pressed. If necessary I will hear the parties further on that aspect. I will also hear the parties on the question of costs.
Postscript
I would add one postscript. Had the applicant claimed damages, my provisional view is that I would probably have awarded damages amounting to the likely fee which the applicant could have obtained for permitting the use of the drawings. In cross-examination, Mr Zupanovich said that, as an example, the applicant could charge $2,000. He said that the applicant would probably charge another company in the Zupanovich group about $1,000 for the use of the Drawings. On the evidence, again on a provisional basis, I doubt whether the likely fee charged to an unrelated entity would have been much more than about $1,000. In reaching that provisional assessment I have had regard to the drafting fees charged by Designwise and M & M Enterprizez respectively and the fact that there does not appear to be much in the Drawings that is so distinguishable from similar designs as to command a substantial premium for their use. However, bearing in mind such of the factors referred to in s.115(4)(b) of the Act as have been the subject of evidence to date (and that evidence was far from complete for such a purpose) yet again on a provisional basis, I would have been inclined to award a further $1,500 by way of additional damages. The fact is that the applicant has elected not to claim damages but an account of profits, if any. I mention this only because it may enable the parties to resolve the matter. My impression is that a round-table conference between Mr Zupanovich (senior), Mr Beale (senior) and their respective sons might well result in a speedy, and possibly even amicable, resolution. If not, the account of profits will be taken and it should go without saying that nothing in this postscript will have any bearing on the result of that account. The result will depend on such further evidence as the parties see fit to adduce.
I certify that this and the preceding forty-five (45) pages are a true copy of the Reasons for Judgment of Justice Carr.
Associate:
Date: 3 August, 1995
Counsel for the Applicant: Mr R. Griffiths
Solicitors for the Applicant: Rodney Griffiths & Co
Counsel for the Respondent: Mr C.A. Grasso
Solicitors for the Respondent: Millsteed Grasso
Date of Hearing: 3,4,5 July 1965
Date of Judgment: 3 August 1995
0
2
0