Masterton Homes Pty Ltd & Anor v L E D Builders Pty Ltd [1996] FCA 171

CATCHWORDS

EVIDENCE - proof of particular matters - chronological tracing of provenance of plans - witnesses - credibility - adverse finding on a witness's credibility at trial, notwithstanding demeanour, because of objective factors.

EQUITY - laches, acquiescence and delay - whether 'something beyond mere delay' encouraged belief in appellants of no intent of respondent to rely on strict rights, resulting in prejudice - whether delay created disadvantage by impeding recollection of witnesses.

Copyright Act 1968: s. 115

MASTERTON HOMES PTY LIMITED, MASTERTON HOMES (NSW) PTY LIMITED v L E D BUILDERS PTY LIMITED

G 914 of 1994

LOCKHART, WILCOX and BEAZLEY JJ.

SYDNEY

20 MARCH 1996

IN THE FEDERAL COURT OF AUSTRALIA)

)

NEW SOUTH WALES DISTRICT REGISTRY) No. G 914 of 1994

)

GENERAL DIVISION )

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN: MASTERTON HOMES PTY LIMITED

First Appellant

MASTERTON HOMES (NSW) PTY LIMITED

Second Appellant

AND: L E D BUILDERS PTY LIMITED

Respondent

COURT: Lockhart, Wilcox and Beazley JJ.

DATE: 20 March 1996

PLACE: Sydney

MINUTE OF ORDER

THE COURT ORDERS THAT:

1. The appeal be dismissed.

2. The appellants pay the costs of the respondent of the appeal.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA)

)

NEW SOUTH WALES DISTRICT REGISTRY) No. G 914 of 1994

)

GENERAL DIVISION )

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN: MASTERTON HOMES PTY LIMITED

First Appellant

MASTERTON HOMES (NSW) PTY LIMITED

Second Appellant

AND: L E D BUILDERS PTY LIMITED

Respondent

COURT: Lockhart, Wilcox and Beazley JJ.

DATE: 20 March 1996

PLACE: Sydney

REASONS FOR JUDGMENT

LOCKHART J.

This appeal from the judgment of a single judge of the Court (Sheppard J.) turns on questions of fact. His Honour held that the appellants (it is unnecessary to distinguish between them) infringed the respondent's copyright in its plans of a project house by copying them to design a project house which came to compete with the respondent's house.

There was an issue at the trial of whether copyright subsisted in the respondent's drawings for what is known as the respondent's 'Essington' range of houses. However, it was conceded on the appeal that his Honour's findings that copyright did subsist in those drawings should not be disturbed.

Central to the case at the trial was the question of the credibility of the principal witness, and chief executive of the appellants, Mr W J Masterton. His Honour did not accept his evidence as credible. This finding was attacked on appeal; and the appeal was conducted on the basis that if his Honour's findings with respect to Mr Masterton's credit were not reversed the appeal must fail, except for the second issue in the case, namely: whether the respondent should be denied relief for the appellants' infringement of its copyright because of its alleged laches, acquiescence or delay. But on this issue also, his Honour found against the appellants and granted relief to the respondent. Accordingly, he made declarations that the appellants had infringed the respondent's copyright in certain drawings of the respondent's houses by making drawings and brochures for the building of project houses of the appellants. His Honour granted injunctions restraining the appellants from reproducing or authorizing the reproduction of the drawings, and from authorizing the building of any of the relevant houses of the appellants. He also made an order for delivery up by the appellants to the Registrar of the Court of all relevant sketches, drawings, diagrams and brochures.

His Honour did not proceed to consider the question of damages or account of profits; but he stood the proceeding over to a later date and gave directions for the preparation of the case with respect to the remaining issues.

His Honour also dismissed a cross claim of the respondent which was discontinued during the hearing.

The respondent filed a notice of contention asserting that his Honour's rejection of the appellants' case of laches, acquiescence or delay should be upheld on a basis additional to that found by his Honour, namely, that a defence of this kind is not available in respect of remedies under the Copyright Act 1968 ('the Act').

The witnesses called on behalf of the appellants were Mr Masterton and Mr McLain, the latter being employed by the appellants as Design Manager for the past seven or eight years, and in 1986, which is the most relevant year, being in charge of the drawing office of the appellants.

The witnesses called by the respondent whose evidence is relevant to the appeal were Mr W J Thompson, the General Manager of Beechwood Homes, which is a division of the respondent; Mr P R Haigh, who acts as a consultant for the respondent; and Mr P Romano, who is a design draftsman employed by the respondent.

The primary facts are stated in the judgment of Sheppard J. and they were not challenged on appeal (although some peripheral findings of fact were challenged, to which I shall refer later). I shall summarize them.

Both the appellants and the respondent have carried on business for many years as builders of project houses. They do this by providing their customers with a service which involves the construction on customers' land of houses designed and built in accordance with one of the range of plans available for customers to consider. From time to time there are exhibitions of houses designed and built by project builders. Indeed, the parties regularly have project houses constructed in exhibition centres or villages so that they may be inspected by potential customers, along with project houses designed and built by other companies.

From 1987 onwards the respondent marketed a range of houses under the name 'Essington'. A series of alternative designs was offered: there were houses of three, four or five bedrooms; houses which had either single or double garages; and houses which had rumpus rooms, or not.

From time to time the appellants marketed a range of houses known as 'Carisbrooke', which were in competition with the respondent's 'Essington' range of houses.

During the period when the two ranges of houses were on the market they underwent changes in design. In 1991 the appellants decided to adopt a number of features of the 'Carisbrooke' houses which gave them a distinctive appearance, particularly on the interior. These were marketed as the
appellants' 'Carisbrooke Limited Edition'. Like the earlier 'Carisbrooke' range of houses, they were claimed by the respondent to have been designed and built from plans copied from the respondent's plans.

There was no threat of litigation by the respondent in respect of any alleged infringement of copyright until after the 'Carisbrooke Limited Edition' came on to the market in 1991. Litigation was first mentioned in early 1992 in a conversation between Mr Haigh of the respondent and Mr Ainsworth, an employee of the appellants. At that time, if there had been an infringement by the appellants of the respondent's copyright, it had continued for four or five years.

Moving on from the unchallenged primary facts, there are certain findings of fact made by his Honour which both parties agreed were in error, and others were challenged by one side or the other.

The respondent, in its notice of contention, contended that the finding of the primary Judge that the appellants had access to the respondent's floor plans for the 'Essington' house at the time the respondent drew its plans should be upheld on a different basis from that assigned by his Honour. This contention relates to a finding by his Honour that there was evidence which suggested that the first house in the new
or improved 'Essington' range was not open for inspection before December 1986. Counsel for the respondent submitted that this was an erroneous finding; and that the correct finding should have been that it was open for inspection at some stage before 12 November 1986. That date is critical because it is the date written by Mr Masterton on his sketch plan on a piece of tracing paper (exhibit N1) which assumed great importance at the trial and on appeal. It was contended by the respondent that the correct basis for his Honour's finding of access by the appellants to the floor plans was that copies of the floor plans for the three-bedroom 'Essington' houses were publicly available when the 'Essington' display house was opened in late October 1986. Counsel for the appellants submitted that there was evidence which could support his Honour's finding of December 1986; but having read and heard the submissions and considered the relevant evidence, I am of the opinion that the first house in the improved 'Essington' range was open for inspection before 12 November 1986, probably in late October 1986.

This case is replete with paper: principally, plans, drawings, working drawings, sketches, diagrams, and brochures produced by one party or another. From among these, the primary Judge relied upon two exhibits (V and W) which are plans prepared by the respondent of its display houses. His Honour used these plans for the purpose of comparison with the sketch plan (exhibit N1) produced by Mr Masterton. There is conflicting evidence about these plans. The respondent contended that they were brought into existence solely for the purpose of this litigation, but were in fact derived from plans that were in existence at the times with which the issues in this case are concerned. And indeed, the better view on the evidence seems to me to be that the plans (exhibits V and W) were, as counsel for the respondent informed us, produced for the purpose of the litigation. But this does not matter.

The main question is whether the relevant plan or plans of the respondent were copied by Mr Masterton in 1986. To determine what the relevant plans were involves some tracing of the provenance of exhibits V and W. This is not an easy task; but the likely position is that exhibit R was the plan of the respondent's three-bedroom improved 'Essington' house from which brochures or fliers were prepared by or on behalf of the respondent and made available to the public in late 1986, heralding the arrival of the improved range of 'Essington' houses. It seems exhibits V and W also derive from exhibit R.

Although the date on which exhibit R was prepared by the respondent is not certain, plainly it was drawn before late October 1986, because the plan for the improved three-bedroom 'Essington' house was available on fliers to the public who attended the exhibition of houses which included the four-bedroom improved 'Essington' house in Glenhaven in late October 1986. It appears that exhibit R was a reproduction of an early plan (exhibit WJT1 (Plan 8)) which contains a floor plan of the improved 'Essington' three-bedroom house. It is the likely position that the date '5/12/86' which appears on the floor plan (exhibit WJT1 (Plan 8)) is not the date on which the plan was created, because that was done some months earlier, but that it is the date of a supplier's pricing estimate. This is in accord with the probabilities and with the evidence of Mr Thompson.

Mr Masterton's practice was to attend the exhibition of new ranges of houses of rival companies, and to obtain fliers or brochures available there. This is normal practice for people in the project-house building industry. The respondent's case was that it is more likely than not that thus Mr Masterton had obtained a flier when the four-bedroom improved 'Essington' house was opened for inspection in late October 1986 or thereabouts, and further, that he traced exhibit N1 from it.

The drawing of the respondent's 'Essington' house on the flier, and so Mr Masterton's sketch plan, were said by the respondent to be taken by the appellants from its drawings, in particular exhibit R. It was not suggested that exhibit R itself was available to Mr Masterton; nor could it have been. By a process of tracing the provenance of the flier and exhibits V, W and N1 back to exhibit R, the respondent argued its case that the appellants had infringed its copyright.

Mr Masterton gave evidence that an improved 'Essington' display house was opened in October 1986; and he said that, if the plans of the respondent were publicly available at that time, his company would have had access to them.

In summary, the flier of the improved three-bedroom 'Essington' house was available to the public in late October 1986 at the exhibition of the new four-bedroom 'Essington' house at Glenhaven. One of the fliers was taken by Mr Masterton in accordance with his normal practice. The plan for the new improved 'Essington' three-bedroom house can be traced back to the original film of the floor plan, namely exhibit R, which itself plainly produces the floor plan exhibit WJT1 (Plan 8).

In the course of one of his findings, the primary Judge referred to the plan exhibit WJT1 (Plan 7); but this was a mistaken reference to the plan exhibit WJT1 (Plan 14) of the new improved four-bedroom 'Essington' house. The finding of his Honour was attacked by the appellants. Although his Honour's reference was mistaken, it did not in my view ultimately affect his Honour's primary findings or his conclusions.

It should be noted that the fliers which had been used in 1986 by the respondent for its new range of 'Essington' houses were not available to the respondent at the trial, and thus not in evidence.

His Honour found that, in view of the way the case had developed, the issue of whether Mr Masterton copied the respondent's plans became a 'somewhat narrow one'. His Honour said that in the end the question turned upon the view he took of Mr Masterton's evidence in relation to the sketch plan exhibit N1, which was one of a number of rough drawings produced by Mr Masterton on discovery, each on tracing paper. The tracings together became exhibit N; but as I have already observed, the particular one on which the case turned was exhibit N1. His Honour found that there was a basis for saying that part of exhibit N1 could be a tracing of part of exhibit W, and he explained this in some detail by comparing the relevant drawings.

His Honour did not accept Mr Masterton's evidence that the appellants' 'Carisbrooke' range of houses was developed from an earlier range known as the 'Bovis' range. His Honour found Mr Masterton to be 'an astute and canny business man'. He said he was forced to make corrections to his evidence. He found that Mr Masterton's initial claim that the sketch exhibit N1 was a freehand drawing was untenable, taking into account Mr Masterton's own contrary evidence that it must have been traced from another plan. His Honour said it became obvious that Mr Masterton's claim that the plan was derived from the 'Bovis' home could not be sustained. And his Honour found that Mr Masterton's evidence was not honest or reliable. He did not reach this conclusion based on Mr Masterton's demeanour. He found that objective factors in the evidence persuaded him that, notwithstanding his views of Mr Masterton as a witness in the box (his demeanour), he nevertheless should find adversely to him.

His Honour found that objective factors militated against the acceptance of Mr Masterton's evidence; he stated seven reasons for this conclusion, namely:

(a) substantial similarities between exhibits N1 and W;

(b) Mr Masterton could have had a plan such as exhibit W available to him at the time he traced exhibit N1;

(d) this in turn forced him to concede that as the plan was drawn to scale, it must have been traced from another scaled plan;

(e) it was difficult to accept that a person of Mr Masterton's experience would not have recongized all along that the sketch plan exhibit N1 was a tracing rather than a freehand sketch, so leading his Honour reluctantly to conclude that Mr Masterton's evidence that it was a freehand sketch was deliberately false;

(f) Mr Masterton asserted that exhibit N1 came from the 'Bovis' range of houses, which his Honour said could not be correct; and

(g) Mr Masterton was unable to suggest what other plan could have been traced notwithstanding the lapse of time between 12 November 1986, when exhibit N1 was drawn, and the end of March 1994, when Mr Masterton gave evidence. His Honour found it difficult to understand why, with the aid of the access to documents which Mr Masterton had had in order to prepare his case, he found himself in this difficulty, unless in fact he did trace the sketch plan from a plan such as exhibit W.

His Honour said that he relied on these matters cumulatively and that, taken together, they led to the conclusion that the only credible explanation for the similarities between exhibits N1 and W was deliberate copying, or tracing, by Mr Masterton. Accordingly, his Honour found that the case of the respondent of infringement had been made out.

Before turning directly to the question of Mr Masterton's credit, it is necessary to compare the relevant plans.

Although there are several plans of the parties which may be compared, as argument proceeded before us it became clear that the most reliable comparison was between exhibit R (the respondent's plan) and exhibit N1 (Mr Masterton's sketch plan). The submissions of the parties (both written and oral) deal with this matter in some detail; and the primary Judge considered this question in depth. I do not propose to dwell on the subject at length. There are obvious similarities and dissimilarities; but overall I am satisfied that the conclusion of the primary Judge that there are substantial similarities between the two relevant drawings is correct and should not be disturbed.

I turn to the question of the primary Judge's findings with respect to Mr Masterton's credit. The written and oral submissions of the parties also deal at length with this question. The key issue on the question of Mr Masterton's credit was whether he could satisfactorily explain exhibit N1 ('the butter paper sketch'). Initially, in his evidence, Mr Masterton claimed that exhibit N1 was a freehand sketch drawn by himself, but not to scale. In fact, it is almost an exact tracing of exhibit W (which is the reversal, left to right, of exhibit WJT1, plan 7, also exhibit A), and the reverse side of the original plan, exhibit R, of which exhibit WJT1, plan 8, exhibit A, is a copy. Also, exhibit N1 is drawn almost precisely to the 1:100 scale of exhibit W and exhibit R. There is a distinct similarity between exhibits N1 and R, and the evidence does not disclose any acceptable rational explanation for this similarity.

It has not been established that the primary Judge erred in reaching the conclusion unfavourable to Mr Masterton's credit on this question. No error of principle has been demonstrated. In particular, it has not been established that his Honour took a view, on the question of credit, which was inconsistent with the facts plainly established by the evidence, or which was so 'glaringly improbable' as to require intervention by this Court on appeal: Abalos v Australian Postal Commission (1990) 171 CLR 167 at 178; and Devries v Australian National Railways Commission (1993) 177 CLR 472 at 479. The primary Judge's finding of deliberate copying by the appellants must be upheld.

That leaves the question of laches, acquiescence or delay. His Honour, the primary Judge, found that this defence could not succeed. He noted that the first formal intimation to the appellants that the respondent was likely to sue was made by letter of 6 April 1992, written to it by the respondent's then solicitors. This was followed by correspondence between the solicitors for the parties, concluding with a letter of 5 June 1992 from the respondent's solicitors informing the appellants' solicitors that it was the respondent's intention to proceed against the appellants for breach of copyright. In fact, proceedings were not instituted until 3 August 1993. Thus, there was an interval of 16 months between the threat of legal proceedings and the institution of them. There was an interval of over five years between knowledge on the part of the respondent of the breach and any threat of legal proceedings, and an interval of almost seven years between knowledge of the infringement and the institution of this proceeding. Also, the statement of claim which was originally filed sought relief only in respect of a reproduction which involved plans of the 'Carisbrooke Limited Edition' range of houses. Infringement was not claimed in respect of the plans for the 'Carisbrook' range until the statement of claim was amended on the first day of the hearing, namely, 21 March 1994, although there was no objection to the amendment. His Honour found that the considerable delay in commencing the proceeding was understandable 'for commercial reasons'. The price of the Masterton 'Carisbrooke' house in 1987 was about $10,000 more than the price of the respondent's 'Essington' house, so that the 'Carisbrooke' house did not compete directly with the 'Essington' house. Legal advice was given to the respondent in 1987 that 'success could not be guaranteed', because in this market of project houses a difference in price of even $5,000 is very considerable.

His Honour applied the principles stated by Goff L.J. in H P Bulmer Limited v J Bollinger SA [1978] RPC 79 at 136, namely:

'... the true test whether equitable relief should be withheld in the case of a continuing legal wrong on the ground of delay by the plaintiff in enforcing his rights is that the facts must be such that the owner of the legal right has done something beyond mere delay to encourage the wrongdoer to believe that he does not intend to rely on his strict rights, and the wrongdoer must have acted to his prejudice in that belief; that is to say the case approximates to what would totally destroy his right.'

His Honour asked whether the respondent had done something beyond mere delay to encourage the appellants to believe that it did not intend to rely on its strict legal rights. If that is established, his Honour said, he also had to be satisfied that the appellants acted to their prejudice upon that belief. He noted that there was no evidence led by the appellants that they believed that the respondent would not rely on its legal rights. The appellants' case was conducted throughout on the basis that they were not in breach of copyright, not only because of the dissimilarities which they claimed existed between the two designs, but because of their assertion that they had done no wrong. According to the appellants' case, they copied nothing.

His Honour noted also that there was no evidence led by the appellants that they had acted to their prejudice, in a belief that the respondent would not rely on its legal rights. Indeed, there was no evidence of such a belief for the reasons his Honour stated.

His Honour found that in these circumstances the defence of laches or of delay could not succeed; nor could the appellants rely on the defence of acquiescence, because the evidence which his Honour accepted of Mr Haigh and Mr King established that the respondent did not acquiesce in the infringement. The simple fact that no complaint was made when the respondent knew of the infringement in 1986-87 did not warrant the conclusion that there was acquiescence on the respondent's part.

His Honour also dealt with the further contention of counsel for the appellants that the respondent's delay put the appellants at a disadvantage because its witnesses, particularly Mr Masterton, would not have had as clear a recollection of events as they would have had in earlier years. His Honour said he had some sympathy 'with the thrust of this submission', but did not think it could succeed. He relied on Orr v Ford (1989) 167 CLR 316 where although Wilson, Toohey and Gaudron JJ. said at 330 that where entitlement depended on factual matters which were fairly open to dispute they saw no reason why prejudice occasioned by the loss of evidence as a result of delay on the part of the claimant might not be raised in answer to the claim, they also said at 330 that '[t]he issue is not whether evidence may have been lost but whether evidence which may have cast a different complexion on the matter has been lost'. His Honour was not persuaded that any evidence of this kind had been lost. Accordingly, the substantial delay of the respondent in commencing the proceeding did not provide the appellants with a defence.

The appellants also relied upon Warman International Limited v Dwyer (1995) 69 ALJR 362 (this judgment was published after the date of judgment of the primary Judge in this case), where their Honours said at 368:

'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. ...

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

Counsel for the appellants argued that the appellants continued to construct houses and invest resources on this basis over the period of substantial delay.

The equitable defences of laches, acquiescence and delay are essentially discretionary. Although there was substantial delay on the part of the respondent in bringing this proceeding, the findings of his Honour on the facts with respect to this defence have not been shown to be erroneous. I see no reason to disturb them. Nor do I think there is substance in the alternative contention of counsel for the appellants that delay and acquiescence on the part of the respondent should reduce any account of profits.

Finally, in these circumstances it is not necessary to consider whether laches, acquiescence or delay is a defence available to a respondent in proceedings for infringement of copyright under s. 115 of the Copyright Act 1968, a provision which relates to an account of profits for infringement of copyright.

I would dismiss the appeal with costs.

I certify that this and the preceding eighteen (18) pages are a true copy of the reasons for judgment herein of the Honourable Justice Lockhart.

Associate

Dated: 20 March 1996

IN THE FEDERAL COURT OF AUSTRALIA )

) No. NG.914 of 1994

NEW SOUTH WALES DISTRICT REGISTRY )

)

GENERAL DIVISION )

ON APPEAL FROM A JUDGE

OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN: MASTERTON HOMES PTY LIMITED

First Appellant

MASTERTON HOMES (NSW) PTY LIMITED

Second Appellant

AND: L E D BUILDERS PTY LIMITED

Respondent

CORAM: LOCKHART, WILCOX and BEAZLEY JJ

PLACE: SYDNEY

DATE: 20 MARCH 1996

REASONS FOR JUDGMENT

WILCOX J: I have read a draft of the reasons for judgment of Lockhart J. As his Honour says, the major issue argued before us (infringement of copyright) turns on questions of fact. The conclusions of fact stated by Lockhart J emerged fairly clearly during the course of the argument before us. Reconsideration of the evidence, and the submissions on appeal, does not affect my view that those conclusions are correct.

I also agree with Lockhart J in relation to the issue of laches, acquiescence and delay.

I agree that the appeal should be dismissed with costs.

I certify that this page is a true copy of the reasons

for judgment herein of the Honourable Justice Wilcox.

Associate:

Dated: 20 March 1996

IN THE FEDERAL COURT OF AUSTRALIA )

) No. G 914 of 1994

NEW SOUTH WALES )

DISTRICT REGISTRY )

)

GENERAL DIVISION )

On appeal from a judge of the Federal Court of Australia

BETWEEN: MASTERTON HOMES PTY LIMITED

First Appellant

MASTERTON HOMES (NSW) PTY LIMITED

Second Appellant

AND: LED BUILDERS PTY LIMITED

Respondent

CORAM: LOCKHART, WILCOX AND BEAZLEY JJ

PLACE: SYDNEY

DATE: 20 March 1996

REASONS FOR JUDGMENT

BEAZLEY J: I agree with the reasons for judgment of his Honour Justice Lockhart.

I certify that this page

is a true copy of the

Reasons for Judgment of

the Honourable Justice Beazley.

Associate:

Dated: 20 March 1996

Counsel for the Appellants : Mr D F Jackson QC

Mr C C Hodgekiss

Mr M Christie

Solicitors for the Appellants : C R Fieldhouse

Counsel for the Respondent : Mr B W Walker SC

Mr I M Jackman

Mr M J Leeming

Solicitors for the Respondent : Speed and Stracey

Date of Hearing : 12 & 13 September 1995

Date of Judgment : 20 March 1996

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