Westmobro Pty Ltd v Mallet - [2020] WASC 415

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   WESTMOBRO PTY LTD -v- MALLET [2020] WASC 415
CORAM:   MASTER SANDERSON
HEARD:   30 SEPTEMBER 2020
DELIVERED          :   18 NOVEMBER 2020
PUBLISHED           :   18 NOVEMBER 2020
FILE NO/S:   CIV 3067 of 2019
BETWEEN:   WESTMOBRO PTY LTD
Plaintiff
AND
MARIE-HELENE MALLET
First Defendant
LIGHTHOUSE EQUITY PTY LTD
Second Defendant
DALE ALCOCK HOMES PTY LTD
Third Defendant

Catchwords:

Practice and procedure - Application to stay proceedings based on 'Anshun estoppel' - Turns on own facts

Legislation:

Copyright Act 1968 (Cth)
Corporations Act 2001 (Cth)
Rules of the Supreme Court 1971 (WA)

Result:

Action stayed

Category: B

Representation:

Counsel:

Plaintiff	:	C Chenu
First Defendant	:	GW Provan
Second Defendant	:	GW Provan
Third Defendant	:	P Monaco

Solicitors:

Plaintiff	:	Kings Park Legal
First Defendant	:	Provan Legal Pty Ltd
Second Defendant	:	Provan Legal Pty Ltd
Third Defendant	:	GV Lawyers

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

Gibbs v Kinna [1998] VSCA 52

MASTER SANDERSON:

By chamber summons filed 23 June 2020 the first and second defendants sought, in the alternative, three orders. First, it sought to have the action permanently stayed or dismissed, on the basis of what is generally known as 'Anshun estoppel' or as an abuse of process. If that application was unsuccessful, it sought to have the matter referred to the Magistrates Court – it was submitted the claim was within the jurisdiction of that court. If both of these applications failed, then the defendants sought an order for security for costs. In my view the defendants succeed in each of their three applications. Having decided to permanently stay the matter it is not strictly necessary for me to deal with each of the other applications. However, for the sake of completeness, I will say something about each application.
The plaintiff filed a statement of claim on 3 June 2020. It carries on the business of building design. At all material times the first defendant was the registered proprietor of a property in Cloverdale. The second defendant is the alter ego of the first defendant. The third defendant is a well‑known building company.
The statement of claim pleaded in or about March 2013 the plaintiff and the first defendant entered into an agreement whereby the plaintiff would carry out design services for 16 multiple dwellings to be constructed on the Cloverdale property. Particulars were provided. The agreement was said to be partly oral and partly in writing. The plaintiff claimed pursuant to the agreement it produced and provided plans, drawings and specifications to the first defendant.
Importantly the plaintiff pleads the defendants were not authorised by agreement, licence or otherwise to use the plaintiff's plan for the construction of any development. Despite that, on 18 July 2014 the City of Belmont approved a development in accordance with the plans. The third defendant was engaged to construct the development. The plaintiff says the construction was substantially in accordance with the documents. The plaintiff alleges a breach of copyright by the first and second defendants and vicariously by the third defendant. The plaintiff claims for loss and damages.
An amended statement of claim was filed on 15 September 2020. Essentially the amendment removed the claim there was an agreement between the plaintiff and the first and second defendants. It must be said that it was never entirely clear that in the original statement of claim the plaintiff was suing for breach of contract. That plea may have emerged from the unamended pars 7 and 9 of the statement of claim. But in the end the plaintiff's claim was for infringement of copyright. That claim seemed to stand independent from and not form part of a claim for breach of contract.
The matter has something of a history. On 29 November 2016 the plaintiff sued the first defendant in the Magistrates Court of Western Australia. At that stage the plaintiff was unrepresented. The initiating process had under the heading 'Description of Claim' a somewhat prolix summary of the dispute. What can be distilled from the description is as follows:
(1)in or about late 2014 the defendant the claimant to prepare architectural drawings for the proposed works on the Cloverdale property;
(2)a fee was set by agreement between the parties;
(c)it was intended a written agreement would be entered into by the parties;
(4)on payment of the fee, the first defendant would obtain the copyright to the project;
(5)although the agreement had not been signed an agreement in some way had been reached and this formed the basis of the plaintiff's claimed entitlement to an amount of $44,000.
The description also contained the following:
The claimant was also informed that the defendant had been attempting to use the drawings to engage a builder for the property.
The matter went to mediation in the Magistrates Court. The parties agreed to refer the dispute to arbitration. Mr Wellington was appointed as arbitrator. On 24 July 2019 Mr Wellington produced a final award. He introduced the award in the following way:
1.The dispute before this arbitral tribunal concerns a claim by the Claimant that the Respondent has not paid an invoice of the 1 May 2015 for work undertaken in relation to the design of units at a property of the Respondent situated at 273 Fulham Street Cloverdale (the 'Cloverdale Project').
Agreement to arbitrate
2.The Claimant's submission at Par. [19] states that on the 29 November 2016, the Claimant commenced a General Procedure Claim against the Respondent in the Magistrates Court of Western Australia. The parties agreed to refer the matter to arbitration after the matter could not be resolved at a mediation conference in the Magistrates Court.
3.The claimed contract between the Claimant and the Respondent did not have an arbitration agreement. The only way that the matter has been referred to arbitration under the Commercial Arbitration Act 2012 (the 'Act') is by agreement of the parties.
4.At the preliminary conference of the 6 February 2018 and the preliminary conference agenda ('Agenda'), numbered Item 2(b) confirmation was provided that the dispute was referred to arbitration and that the agreement to refer the matter to arbitration was made in writing as required under s 7 of the Act.
5.The Claimant and the Respondent agreed under Item 2(d), the nomination of Paul Wellington as the arbitrator (the 'Arbitrator') and for the Arbitrator to make an award on the submissions and on the documents provided by the Claimant and the Respondent. There was agreement that the arbitration was to be on the documents without a hearing and that cost of the arbitration was to be kept to a minimum.
With respect, Mr Wellington gave very detailed reasons for reaching his conclusion. He determined, in effect, there had been no contract between the parties and the first defendant was not liable to the plaintiff. In addition to considering the contract issue he also considered a claim in restitution and unjust enrichment. These claims failed. The arbitrator was asked to consider costs. Once again he gave very detailed consideration to the issues. He eventually awarded costs against the plaintiff in an amount of $17,456.60.
It was common ground between the parties that Mr Wellington did not consider whether or not there had been a breach of copyright and whether or not damages would flow from that breach. In fact, Mr Brown, the principal of the plaintiff, says that on or about 2 October 2018 he became aware buildings were being constructed on the Cloverdale property. It seems quite by chance he had driven past the property. He undertook an inspection and realised the buildings were being constructed in conformity with the plans he had drawn. He had his solicitors write to the arbitrator asking the arbitration be extended to include issues of copyright. The first defendant's solicitors refused to extend the arbitration. So the issue of a breach of copyright was not a matter Mr Wellington considered. In his final award, the arbitrator did make the following comment:
If there has been further benefits to the respondent as a result of using the claimant's drawings then consideration could be given to a claim outside of this arbitration on the basis of copyright infringement. This is not part of the agreement to arbitrate and as a result this has not been a fact of bearing on this decision.
Against these background facts the position of the plaintiff and the first and second defendants is clear. The first and second defendants say that it was always open to the plaintiff to raise the copyright issue in the arbitration proceedings. The way in which the claim was described in the initiating process filed in the Magistrates Court made it plain the plaintiff was aware copyright might be in issue. While it was true the first defendant rejected the possibility of the arbitration being extended to cover copyright, it was always open to the plaintiff to go back to the Magistrates Court to either have that issue added to the arbitration by agreement or pursue it independently based upon the already lodged claim. The plaintiff says at the time the arbitration agreement was entered into the plaintiff was not aware its copyright was being infringed. As soon as it became aware it sought to have the issue considered by the arbitrator. The fact it was not considered by the arbitrator was down to the recalcitrance of the first defendant. Moreover, the arbitrator specifically reserved to the plaintiff a right to proceed in relation to infringement of copyright. In all the circumstances, it was just and reasonable for the plaintiff to proceed with the arbitration based upon the alleged agreement while leaving copyright issues to be raised in this action.
It is worth noting that in the Magistrates Court claim, the plaintiff did refer to the first defendant using the drawings when seeking development approval from the local authority. Presumably that was, on the plaintiff's case, a breach of copyright. Against that it must be said as at the date that the Magistrates Court proceedings were issued the drawings had not been used for the construction of buildings on the Cloverdale property.
There was no real dispute between the parties as to the applicable principles when considering Anshun estoppel. Counsel for the first and second defendants relied on what was said by Kenny J in Gibbs v Kinna [1998] VSCA 52 [23]:
Whether or not it is unreasonable for a party asserting a cause of action in a later proceeding not to have done so in an earlier proceeding depends almost entirely on the particular circumstances. It seems, however, that there are two matters which must first be established before it can be said that the failure to raise a cause of action earlier might be said to have been unreasonable. The first is that the cause of action must be one that could have been raised in the previous proceeding. For the reasons already stated, leaving aside the Trade Practices Act claims, this much is established in the present case. Secondly, it must appear that the same or substantially the same facts will arise for consideration in the second as in the first proceeding. For the purposes of this case, I assume, as counsel for the appellants submitted, that, if the Magistrates' Court proceeding continues, there will be a good deal overlap between the evidence and the facts which fell for consideration in the Industrial Relations Court and that which falls for consideration in the Magistrates' Court. But, in my view, adopting the analysis favoured by the majority in Anshun's Case, these are necessary but not sufficient conditions for the application of the principle in Henderson v Henderson.
In my view, this action fits squarely within the two limbs of Anshun estoppel identified by his Honour. The plaintiff could have raised in the Magistrates Court proceeding a claim for breach of copyright. Indeed, on one view it did. So really, there were two strings to the plaintiff's bow. The first was the contractual agreement. The second as the copyright infringement. It is true, that the first defendant had not at that point used the plans to construct the dwellings. But the plaintiff was aware the plans were being used at least in relation to the obtaining of building approval. That should have alerted the plaintiff to there being a breach of copyright. So that issue could have been raised in previous proceedings.
The facts in this case will be virtually identical to the facts in the earlier case. At the time the arbitrator made his award construction on the Cloverdale site had commenced. It would not seem that fact informed the award. But that is of no consequence. As I said above, the plaintiff was aware the first defendant was making use of the drawings and the plaintiff believed that to be a breach of copyright. The additional fact of the building is of no significance. The facts in this case and the facts on the arbitration are substantially the same.
For these reasons I am satisfied an Anshun estoppel does apply and there should be a permanent stay of the plaintiff's claim.
Turning then to the question of damages, it is difficult to see how the plaintiff's claim, if successful, would amount to more than $75,000 (the jurisdiction of the Magistrates Court). The claim made in the Magistrates Court was for $44,000. Counsel for the first and second defendants calculated even if the plaintiff was entitled to a fee of 1.5% of the construction cost (that was the fee referred to in the Magistrates Court claim) damages would be no more than $60,000. Counsel for the plaintiff submitted that the Copyright Act 1968 (Cth) allowed for what is effectively exemplary damages. No detailed submissions were made as to why such damages should be awarded in this case. But even if they were an award of $75,000 would surely satisfy the plaintiff's entitlement.
Finally, there was the question of security for costs. The first and second defendants' application was brought under both O 25 of the Rules of the Supreme Court 1971 (WA) (RSC) and s 1335 of the Corporations Act 2001 (Cth). The evidence was that despite demand the plaintiff had not paid to the first defendant the costs awarded by the arbitrator. That being so, the provisions of O 25 r 2(g) of the RSC were engaged. Further, costs had been awarded against the plaintiff in the Magistrates Court. Those costs had not been quantified. However, the plaintiff's solicitors had written suggesting a figure for costs and had received no response. It was the first and second defendants' position that in all the circumstances an order for security ought be made.
In response the plaintiff pointed to the fact there was no evidence provided by the first and second defendants as to what costs they might incur in the proceedings. In the absence of such evidence it was suggested no 'guestimate' could be made and no order for security ought be made.
If it had proved necessary for me to determine this issue I would have ordered an amount of security of $40,000. In this court it is very rare that O 25 of the RSC is engaged. But there can be no clearer example of when the Order applies than this case. The arbitrator carefully considered the question of costs, made an award and they should have been paid. The fact they were not paid was not explained. The first and second defendants are right to be fearful any costs order which might be made against the plaintiff in these proceedings would not be met. It is true that as a rule an estimate of costs ought be provided. But as counsel for the first and second defendants submitted, this is a very straightforward matter. The first and second defendants were not seeking security that would cover their costs from start to finish. They were content to have a tranche of security provided at this stage with liberty to apply for further security. On that basis the amount of security might be less than what would be otherwise ordered but the failure to provide evidence by the first and second defendants would not be fatal to their application.
In conclusion, I should mention the position of the third defendant. They have a contractual right of indemnity against the first and second defendants in relation to the copyright in any plans used in the construction of dwellings on the Cloverdale site. To that extent they were really passive observers in the proceedings. Although they supported the first and second defendants in relation to the Anshun estoppel and remitter of the matter to the Magistrates Court, they did not provide any submissions of their own. They made no submissions in relation to the security for costs.
On publication of these reasons the parties should bring in a minute of agreed orders. The costs of this application and the action, including reserved costs, should be paid by the plaintiff. If agreement cannot be reached on that issue the parties are to provide short written submissions on the question of costs within seven days of the publication of these reasons.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
IW
Associate to Master Sanderson
18 NOVEMBER 2020