FEDERAL COURT OF AUSTRALIA

 

LED Builders Pty Ltd v Eagle Homes Pty Ltd [1999] FCA 584

COPYRIGHT – infringement – copyright in floor plans for project homes – whether copying of a substantial part – whether houses built in accordance with floor plans which infringed applicant’s copyright also infringed that copyright – no evidence that houses built exactly in accordance with infringing floor plans or other evidence of appearance of houses – quantum of profits where houses built in accordance with infringing floor plans – whether part of building profit included – quantum of damages where no houses built in accordance with infringing floor plans –whether applicant entitled to additional damages.

 

ACCOUNT OF PROFITS – infringement of copyright in floor plans for project homes – construction of houses in accordance with infringing floor plans – proper measure of account of profits – whether respondent must account for all profits made from construction of houses in accordance with infringing floor plans – whether respondent must account only for saving made through use of infringing floor plans – whether profits should be apportioned – proper basis for apportionment – whether allowance should be made for overheads – whether construction of houses in accordance with infringing floor plans involved opportunity cost – whether overheads should be allowed on an incremental or absorption basis – whether overheads should be allocated on basis of revenue or average cost – whether applicant can be awarded additional damages where it elects for an account of profits in respect of an infringement.

Copyright Act 1968 (Cth) ss 21 (3), 115

Federal Court of Australia Act 1976 (Cth) s 51A

Eagle Homes Pty Ltd v Austec Homes Pty Ltd [1999] FCA 138, applied

Bradbury, Agnew & Co v Day (1916) 32 TLR 349, considered

Chabot v Davies [1936] 3 All ER 221, considered

LB (Plastics) Ltd v Swish Products Ltd [1979] RPC 551, referred to

Ogden Industries Pty Ltd v Kis (Australia) Pty Ltd [1982] 2 NSWLR 283, referred to

S W Hart & Co Pty Ltd v Edwards Hot Water Systems (1985) 159 CLR 466, considered

Dyason v Autodesk Inc (1990) 24 FCR 147, considered

Lend Lease Homes Pty Ltd v Warrigal Homes Pty Ltd [1970] 3 NSWR 265, applied

Ancher, Mortlock, Murray & Woolley Pty Ltd v Hooker Homes Pty Ltd [1971] 2 NSWLR 278, considered

Robert J Zupanovich Pty Ltd v B & N Beale Nominees Pty Ltd (1995) 59 FCR 49, considered

Burke and Margot Burke Ltd v Spicers Dress Designs [1936] Ch 400, considered

Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25, applied

Sheldon v Metro-Goldwyn Pictures Corp 309 US 390 (1940), applied

My Kinda Town v Soll [1982] FSR 147, considered

Potton Ltd v Yorkclose Ltd [1990] FSR 11, distinguished

Peter Pan Manufacturing Corp v Corsets Silhouette Ltd [1964] 1 WLR 96, distinguished

Siddell v Vickers (1892) 9 RPC 152, distinguished

Dart Industries Inc v Décor Corporation Pty Ltd (1993) 179 CLR 101, applied

Leplastrier & Co Ltd v Armstrong-Holland Ltd (1926) 26 SR (NSW) 585, referred to

Levin Bros v Davis Manufacturing Co 72 F (2d) 163 (8^th Cir, 1934), referred to

Tremaine v Hitchcock & Co (“The Tremolo Patent”) 90 US 518 (1874), referred to

Sheldon v Metro-Goldwyn Pictures Corp 106 F 2d 45 (2^nd Cir, 1939), applied

Warman International Ltd v Dwyer (1995) 182 CLR 544, referred to

Wilkie v Santly Bros Inc 139 F 2d 264 (1943), considered

Kettle Chip Co Pty Ltd v Apand Pty Ltd (No 2) (1998) 83 FCR 466, applied

Manfal Pty Ltd v Longuet (1986) 8 IPR 410, referred to

New England Country Homes Pty Ltd v Moore (1998) AIPC ¶91-410, referred to

Autodesk Australia Pty Ltd v Cheung (1990) 94 ALR 472, considered

Amalgamated Mining Services Pty Ltd v Warman International Ltd (1992) 111 ALR 269, considered

Columbia Pictures Industries Inc v Luckins (1996) 34 IPR 504, considered

Bailey v Namol Pty Ltd (1994) 53 FCR 102, considered

Redrow Homes Ltd v Bett Brothers Plc [1999] 1 AC 197, applied

Concrete Systems Pty Ltd v Devon Symonds Holdings Ltd (1978) 20 SASR 79, considered

International Credit Control Ltd v Axelsen [1974] 1 NZLR 695, not followed

Wellington Newspapers Ltd v Dealers Guide Ltd [1984] 2 NZLR 66, not followed

Raben Footwear Pty Ltd v Polygram Records Inc (1997) 145 ALR 1, referred to

Autodesk Inc v Yee (1996) 139 ALR 735, referred to

Cala Homes (South) Ltd v Alfred McAlpine Homes East Ltd (No 2) [1996] FSR 36, referred to

Prior v Lansdowne Press Pty Ltd (1975) 29 FLR 59, applied

Ravenscroft v Herbert & New English Library Ltd [1980] RPC 193, applied

International Writing Institute Inc v Rimila Pty Ltd (1994) 30 IPR 250, applied

Warman International Ltd v Dwyer (1992) 46 IR 250, distinguished

Beloit Canada Ltd v Valmet Oy (1995) 61 CPR (3d) 271, considered

LED BUILDERS PTY LIMITED v EAGLE HOMES PTY LIMITED

 

 

NG 817 of 1993

NG 862 of 1994

 

 

LINDGREN J

7 MAY 1999

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 817  OF 1993 NG 862  OF 1994

 

BETWEEN:	LED BUILDERS PTY LIMITED (ACN 002 351 957) Applicant
AND:	EAGLE HOMES PTY LIMITED (ACN 002 800 115) Respondent
JUDGE:	LINDGREN J
DATE OF ORDER:	7 MAY 1999
WHERE MADE:	SYDNEY

 

THE COURT ORDERS THAT:

 

(1)        The proceedings be stood over to 21 May 1999 at 9.30 am for the making of orders, including orders as to costs.

(2)        The applicant notify the respondent and the Associate to Lindgren J by 14 May 1999 if the applicant wishes to make submissions in relation to the issue raised at paras 181-184 of the Reasons for Judgment published this day.

(3)        The parties submit to the Associate to Lindgren J by 20 May 1999 agreed short minutes of the orders to be made or, if agreement has not by then been reached, short minutes of the orders for which they will respectively contend and an outline of their respective submissions in support.

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	NG 817  OF 1993 NG 862  OF 1994

 

BETWEEN:	LED BUILDERS PTY LIMITED (ACN 002 351 957) Applicant
AND:	EAGLE HOMES PTY LIMITED (ACN 002 800 115) Respondent

 

JUDGE:	LINDGREN J
DATE:	7 MAY 1999
PLACE:	SYDNEY

REASONS FOR JUDGMENT

INTRODUCTION

1                     The applicant (“LED”) sues the respondent (“Eagle”) for infringement of copyright. LED and Eagle carry on the business of building project homes, Eagle under the name “Eagle Homes” and LED under the name “Beechwood Homes”. The copyright in question is in LED’s floor plans for such homes.

2                     Both proceedings have, throughout, been heard together. There was a hearing on liability before Davies J from 4 to 8 March 1996 resulting in his Honour’s publishing Reasons for Judgment on 29 July 1996, and a further hearing before his Honour on 15 August 1996 followed by the publication of Supplementary Reasons on 27 August 1996. In conformity with the Reasons and Supplementary Reasons, his Honour made orders in each proceeding on 27 August 1996. He

·        declared that Eagle had infringed LED’s copyright in the drawings for nine floor plans for houses identified in the orders, “by the [nine] floor plans for the respondent’s houses [identified in the orders]”;

·        ordered that Eagle be restrained from infringing by reproducing either the same nine LED plans or the same nine infringing Eagle plans, or by building or authorising the building of any of the eighteen houses identified (LED’s nine and Eagle’s nine) or any house “with the same floor plan, or a substantial part thereof, [as] any of those [18] houses” or, in substance, promoting the sale of any of the eighteen houses “or any house with the same floor plan, or a substantial part thereof, as any of those houses”; and

·        directed Eagle to file and serve by 13 September 1996 affidavit evidence “setting out”, in respect of the same eighteen identified houses “or any substantial reproduction thereof”, the total number of houses built by Eagle and their location, contract price and construction cost (with respect, the terms of the direction are not entirely clear).

The question of pecuniary relief was reserved for a further hearing. It is this hearing that has now taken place before me.

BACKGROUND FACTS

3                     In the first proceeding, NG 817 of 1993, Davies J dealt with plans for two of LED’s project homes and in the second proceeding, NG 862 of 1994, he dealt with plans for three of them. Accordingly, in his original Reasons for Judgment, his Honour addressed five drawings of LED and the five drawings of Eagle which were said to infringe them. The five pairs of drawings were identified by the letters A, B, C, D and E.

4                     One of the infringing drawings the subject of the first proceeding was that for Eagle’s “Flamingo Premier”. A dispute arose in relation to the plans for four further houses in Eagle’s “Flamingo” range. This led to the supplementary hearing to which I referred and the inclusion in the orders made in proceeding NG 817 of 1993 of four further pairs of house plans (identified by the letters F, G, H and J), in addition to the original two pairs of plans (the A pair and the B pair) in that proceeding.

5                     The orders which his Honour made in the two proceedings referred to copies of the LED and Eagle drawings in question which were annexed to his orders. In each case, LED’s plan was identified by the numeral “1” while Eagle’s infringing plan was identified by the numeral “2”. Annexed to these present Reasons are copies of all nine pairs of plans, identified as they were in his Honour’s orders. They are as follows

Order made on 27 August 1996 in NG 817 of 1993

LED’S PLAN	ANNEXURE	EAGLE INFRINGING PLAN	ANNEXURE
Sussex 4 Bedroom Rumpus/  Solarium [also called “Beechwood Sussex 1992” with solarium and dining bay windows]	A1	Regal Royale (or Regal Series I)	A2
Freemont 4 Bedroom [also called “Beechwood Freemont 88” with four bedrooms]	B1	Flamingo Premier	B2
Freemont 4 Bedroom [see above]	F1	Flamingo Classic	F2
Freemont 4 Bedroom [see above]	G1	Flamingo Regular	G2
Freemont 4 Bedroom [see above] with Rear Rumpus	H1	Flamingo Deluxe	H2
Freemont 4 Bedroom [see above] with Rear Rumpus/Solarium	J1	Flamingo Royale	J2

Order made on 27 August 1996 in proceeding NG 862 of 1994

LED’S PLAN	ANNEXURE	EAGLE INFRINGING PLAN	ANNEXURE
Essington 4 Bedroom with Side Rumpus/Solarium [also called “Beechwood Essington 1991” with four bedrooms and rumpus solarium at side]	C1	Regal Supreme (or Regal Series II)	C2
Essington 5 Bedroom with Side Rumpus/Solarium [also called “Beechwood Essington 1991” with five bedrooms and rumpus/solarium]	D1	Oriole 4 Mk I	D2
Clovelly 4 Bedroom [also called “Beechwood Clovelly 1991”]	E1	Oriole 4 Mk II	E2

(References to the LED plans often include the prefix “Beechwood”, and references to the Eagle plans often include the prefix “Eagle”.)

6                     The nine pairs of house plans were not the only ones before Davies J but they are the only ones which he considered. He said in the final paragraph of his original Reasons for Judgment:

“ ... I am satisfied that LED succeeds on the question of liability with respect to the specific drawings, copies of which I have attached and that it has established that the copying was deliberate .... Counsel should be able to agree as to which of the remaining drawings in issue have breached the applicant’s copyright.” (emphasis supplied)

Agreement was not to eventuate.

7                     Pursuant to his Honour’s direction, on 13 September 1996 Eagle filed an affidavit of John Valeri (“Valeri”) of that date identifying fifty seven houses which Eagle had constructed and which, according to the affidavit, “depict[ed] the [Eagle] plans” to which Valeri referred in the affidavit. The plans to which Valeri referred were in fact the nine Eagle drawings referred to in the orders of Davies J. The fifty seven houses were listed by addresses. In summary they were as follows:

Eagle infringing plan                          Number of

Houses built

Regal Royale (or Regal Series I)                                12

Flamingo Premier                                                        7

Flamingo Classic                                                         2

Flamingo Regular                                                         3

Flamingo Deluxe                                                        10

Flamingo Royale                                                          2

Regal Supreme (or Regal Series II)                              3

Oriole 4 Mark I                                                           9

Oriole 4 Mark II                                                         9

                                                                               ___

                                                                                 57

8                     Eagle accepted that the plans for the fifty seven houses built at the addresses identified in Valeri’s affidavit were the very nine Eagle plans which Davies J had held infringed LED’s copyright in its own nine plans mentioned earlier.

9                     By the time of and during the hearing before me, Eagle conceded that in accordance with his Honour’s Reasons, more of its drawings infringed LED’s copyright in the nine LED drawings specified in Davies J’s orders. LED relies on the course of events by which this concession emerged in support of a claim by it for aggravated damages. It is convenient to sketch that course of events at this stage.

10                  On 18 August 1997, Speed & Stracey, the solicitors for LED, wrote to Castrission & Co, the solicitors for Eagle, suggesting that Valeri’s affidavit may not have listed “all the infringing houses”. They asserted that two specified display homes, in particular, should have been included. They further claimed that an election which LED had made in favour of an account of profits applied only to the fifty seven houses disclosed in the affidavit, and reserved LED’s right to elect as between damages and an account of profits in respect of any further infringements which might come to light. They also asked for confirmation that the two display homes should have been disclosed and that there were “no other houses built by Eagle Homes which infringe[d] [LED’s] copyright.”

11                  Castrission & Co replied on 3 September. They advised that Valeri had understood that “only the buildings under contract to customers were required to be disclosed”. The letter disclosed five “display homes” and advised that Valeri was not aware of any other homes which should be disclosed.

12                  The number of houses disclosed by Eagle had therefore now risen from fifty seven to sixty two.  Not being satisfied, Speed & Stracey wrote to Castrission & Co on 8 September 1997 referring to two further display homes which had been referred to in an earlier affidavit of Mr Paul Cardile (“Cardile”), a director of Eagle. The homes were in the Flamingo range and were at Lot 501 Stockdale Crescent, Abbotsbury and Lot 107 Wilson Road, Hoxton Park. After inspection of the drawings for those houses, Pasquale Romano (“Romano”), the design and purchasing manager for LED, in an affidavit sworn 11 December 1997, stated that in his opinion the display home at Abbotsbury “infringe[d] [LED’s] copyright” while that at Hoxton Park did not. From that time, LED has not pressed any claim in respect of the house at Lot 107 Wilson Road, Hoxton Park. On the other hand, on the hearing before me, Eagle has conceded that, consistently with Davies J’s reasoning, the drawings for the Abbotsbury display home infringed LED’s copyright in its floor plan for the Freemont 4 Bedroom.

13                  By serving notices to produce and other procedures, LED continued to explore the possibility that there were further instances of infringement. On Eagle’s side, by an affidavit sworn 23 September 1997 Valeri explained the course which he had followed with a view to identifying infringements. On 7 October 1997, I ordered by consent that Eagle make available to LED’s solicitors and Romano for inspection, the plans from its customer files drawn since January 1987. The inspection took place at Eagle’s office on or about 27 and 28 October 1997. Prior to the inspection LED had obtained from Construction Research of Australia (“Con Res”) a list of addresses of houses for which Eagle had obtained building approvals from local councils in New South Wales in the period January 1988 to October 1995. The Con Res list is in evidence.

14                  On 30 October, Speed & Stracey wrote to Castrission & Co enclosing a copy of the Con Res list and asserting that the list showed that Eagle had obtained building approvals for 164 houses since 1 January 1988. The letter requested that all drafting companies retained by Eagle make available for inspection all building plans drawn for Eagle from 1 January 1988 to 31 October 1995. As well, the letter asserted that three further particular houses “infringe[d] [LED’s] copyright” and should be the subject of the accounting for profits. Inspection took place of building plans produced by various councils pursuant to subpoenas issued on behalf of LED and of plans produced by Eagle’s drafters.

15                  In his affidavit sworn 11 December 1997, Romano expressed the opinion that there were at least forty six plans of houses built by Eagle which “infringe[d] [LED’s] copyright” which had not been disclosed in Valeri’s affidavit of 13 September 1996. Annexure “Q” to his affidavit was a list of the forty six houses and Exhibit “PR2” to the affidavit comprised the associated forty six plans.

16                  LED conceded that of the forty six house plans, one (number forty one) had in fact already been disclosed by Valeri as part of the original fifty seven in his affidavit of 13 September 1996, with the result that the effective number of additional infringements claimed by LED was reduced from forty six to forty five.

17                  In an affidavit sworn 18 December 1997, Valeri conceded that in accordance with Davies J’s Reasons, nine of these forty five house plans “should form part of the Judgment in these Proceedings”. This increased the number conceded from fifty seven to sixty six. In relation to the remainder (numbering thirty six), he referred to “variations” which constituted his reasons for claiming that they did not infringe. In respect of ten of these, Valeri’s annotation was “Did not proceed” indicating that construction had not proceeded. LED did not immediately accept the correctness of this annotation in all ten cases. It wished to satisfy itself on the matter and even where it became satisfied that construction had not proceeded, it claimed damages in respect of the infringement constituted by the production of the plan. In one case, his annotation was “Not built by Eagle Homes”. That house (which was built in accordance with plan number 23) was apparently built by a Mr Vidic or his company “Petmar Homes” pursuant to an agreement with Cardile.

18                  It is convenient to note here that in all cases but one, where construction proceeded LED has elected for an account of profits and in those where construction has not proceeded it has elected for damages. (In the one exceptional case, LED made no profit but a loss, with the result that it seeks damages rather than an accounting for profits in that case.)

19                  Annexed to these Reasons is a table (“the Table”) which lists all forty six house plans and accompanying statements of Eagle’s position. These include the one, number forty one, which had been included in Valeri’s original fifty seven. The remaining forty five and Eagle’s responses to LED’s claim in respect of them can be classified as follows:

(a)        “Conceded” (Eagle concedes that a house was built in accordance with its plan and that in conformity with Davies J’s Reasons that plan would be held to infringe LED’s copyright in an LED plan)

1, 2, 3, 8, 9, 11, 12, 15, 16, 17, 19, 28, 29, 30, 35, 37, 45, 46.

Total: 18

(b)        “Submit not infringe” (Eagle concedes that a house was built in accordance with its plan but it is in issue whether that plan infringes LED’s copyright in an LED plan)

4, 5, 6, 10, 18, 20, 21, 22, 25, 27, 31, 32, 34, 36, 39, 43, 44

Total: 17

(c)        “Not built [accepted by LED] submit plan not infringe” (LED accepts that no house was built in accordance with Eagle’s plan but there is an issue whether the plan itself infringes LED’s copyright in an LED plan) (A house was built in accordance with plan 23 but not by Eagle)

7, 14, 23, 24, 26, 38, 40.

Total: 7

(d)        “Not built [accepted by LED] concede plan” (LED accepts that no house was built in accordance with Eagle’s plan but Eagle concedes that in conformity with Davies J’s Reasons the Eagle plan would be held to infringe LED’s copyright in an LED plan)

13, 33, 42.

Total: 3

Grand total: 45

20                  In addition, there were the fifty seven houses disclosed in Valeri’s affidavit of 13 September 1996, the plans for all of which, Eagle conceded, infringed LED’s copyright in LED plans. In the result, Eagle conceded that seventy eight of its house plans infringed LED’s copyright, made up as follows:

Disclosed in Valeri’s affidavit                57

Category (a) above                                           18

Category (d) above                                            3

                                                                        __

                                                                        78

                                                                        ==

It was in issue whether twenty four of Eagle’s plans infringed LED’s  copyright, as follows:

Category (b) above                                          17

Category (c) above                                             7

                                                                        __

                                                                        24

                                                                        ==

 

ISSUES

21                  The parties agreed that the following issues fall for determination by me:

“I.       RESPONDENT’S LIABILITY

A.        EAGLE’S PLANS – TWO DIMENSIONAL

1.         Are any of the disputed plans from “the 46” [sic] reproductions in a material form of a substantial part of the Applicant’s drawings?  The disputed plans are the 17 in the “submit not infringe” category and the 7 in the “not built, submit plan not infringe” category.

B.         EAGLE’S HOUSES – THREE DIMENSIONAL

2.         Did his Honour Justice Davies hold that the Respondent’s houses (the 57) are versions in a three-dimensional form of a substantial part of the Applicant’s drawings?  If not, can that finding be made at this stage of the proceedings?  If so, are the 57 houses versions in a three-dimensional form of a substantial part of the applicant’s drawings?

3.         Are any of the 35 houses built (inferentially built in accordance with the Respondent’s – not the Applicant’s – drawings) versions in three- dimensional form of a substantial part of the Applicant’s drawings?

C.        APPLICANT’S ‘TRACING’ SUBMISSION

4.         The Applicant contends that the issue is whether Eagle is liable to account in respect of the 17 additional houses (built) (not conceded by Eagle to infringe) on the basis that they were derived from, and would not have come into existence but for, the infringing plans which preceded them.

5.         The respondent contends that the issue is whether Eagle is liable to account in respect of any of:

(a)       the 18 houses built where the plans are conceded to infringe (category 1); or

(b)       the 17 houses built where the plans are not conceded to infringe (category 2),

            on the basis that they were derived from, and would not have come into existence but for, the infringing plans which preceded them, whether or not the plans in category 2 are held to infringe, and whether or not the respective houses have been or will be held to be reproductions of the drawings.

II.        QUANTUM

D.        DAMAGES

6.         With respect to plans held to infringe, where there are no houses built in accordance with the plans, what is the appropriate measure of damages?

E.        CALCULATION OF ACCOUNT OF PROFITS ON INFRINGING HOUSES

7.         Whether profits can be said to be derived by Eagle on any or all of site preparation, appliances and PC items and contract variations and extras.  If so, whether the profits for which Eagle is liable to account include profits on any or all of site preparation, appliances and PC items and contract variations and extras.

8.         Has the respondent discharged the onus of establishing that an allowance should be made for overheads.

9.         If so, the applicant contends that the issue is whether that allowance should be calculated on an incremental basis or an absorption basis.  The respondent contends that the issue is whether the absorption basis is a reasonable basis of allocation.

10.       If the allowance is to be calculated on an absorption basis, then should overheads be allocated on the basis of revenue or average cost?

11.       Whether, and if so by how much, an apportionment should be made for the following matters:

(a)       as submitted in 2 and 3 above, no three dimensional infringements have been or should be held (as to the 57) or should be held (as to the 35) to have occurred,

(b)       even if (a) is wrong, all the activities and factors which give rise to Eagle’s profit, including, inter alia, the selling, marketing and contract supervision activities of Eagle and factors which influence purchases of project homes such as price, facades, internal and external finishes and the reputation of the builder,

(c)        whether or not (a) is wrong, the fact that copyright protects only the skill and labour of the draftperson’s expression of ideas and not the ideas themselves – and does not confer a monopoly in the presence or absence of rooms or in their general arrangement.

F.        ADDITIONAL DAMAGES

12.       Given that [LED] has, in respect of the original 57 houses, elected for an account of profits:

            (a)        is it also entitled to claim additional damages?

(b)       if additional damages are available is this an appropriate case for additional damages and what matters inform the court’s discretion in assessing them?

(c)        what is the appropriate amount of additional damages?”

REASONING

Issue 1

1.         Are any of the disputed plans from “the 46” [sic - 45] reproductions in a material form of a substantial part of the Applicant’s drawings?  The disputed plans are the 17 in the “submit not infringe” category and the 7 in the “not built, submit plan not infringe” category.

22                  As noted above, Eagle concedes that in addition to the original fifty seven plans, twenty one of the additional forty five plans infringe LED’s copyright (categories (a) and (d) above). In relation to the remaining twenty four plans (“the Disputed Plans” – categories (b) and (c) above) Eagle does not submit that Davies J’s finding of deliberate copying is not applicable; rather, it submits that, regarded objectively, none of the twenty four reproduces an LED plan or a substantial part of an LED plan.

23                  The twenty four Disputed Plans differ as between themselves and are alleged to infringe various of the nine LED plans. In view of their number, I have not annexed them to these Reasons for Judgment. Nor do I think it necessary, in order to expose my reasoning, to deal separately with the differences and similarities between each Disputed Plan and the LED plan relevant to it.

24                  The Table identifies Eagle plans from which the respective Disputed Plans were derived. Where appropriate, the Table also sets out the differences referred to in Valeri’s affidavit between a Disputed Plan and that Eagleplan. But a comparison between each Disputed Plan and an Eagle plan is not the test which the legislation requires. Rather, each Disputed Plan must be compared with the relevant LED plan in order to determine whether it reproduces the whole or a substantial part of that plan. However, the Table does give some idea of the differences between a Disputed Plan and that LED plan from which, through the Eagle plan referred to in Davies J’s orders, the Disputed Plan was ultimately derived.

25                  Each Disputed Plan was produced by the making of alterations to one or other of the nine Eagle plans (the original nine “infringing Eagle plans”) which Davies J held infringed copyright in an LED plan. Valeri said that each Disputed Plan was produced when a potential client, upon seeing an Eagle display home and its corresponding floor plan, proposed variations. Valeri agreed that the starting point in the discussion with the prospective client was an infringing Eagle plan. Eagle conceded that the Disputed Plans would not have been drawn without the infringing Eagle plans preceding them.  This derivation of the Disputed Plans from the infringing Eagle plans explains Eagle’s concession that Davies J’s finding of subjective copying is applicable to the Disputed Plans.

26                  Certain principles relating to the issue of the reproduction of the whole or a substantial part of the plans of project home were discussed in Eagle Homes Pty Ltd v Austec Homes Pty Ltd [1999] FCA 138 in which judgment was delivered on 22 February 1999. In Reasons for Judgment with which Finkelstein J and Weinberg J agreed, I said (at 91):

“In no case concerning project homes of which I am aware where there has been ... a finding of actual copying, has it been held that nonetheless the copier will not have infringed copyright unless there is in addition an extraordinarily close resemblance between his or her drawing and the copyright work. Rather, I think that the issue of sufficient objective similarity simply poses in the case of project homes, as in other cases, the usual question whether the copyright drawing can still be seen embedded in the allegedly infringing drawing, that is, whether the allegedly infringing drawing has adopted the “essential features and substance” of the copyright work: Hanfstaengl v Baines & Co [1895] AC 20 at 31 (Lord Shand) (I exclude the exact replication of a discrete unoriginal part of the copyright work discussed earlier).”

27                  Counsel for Eagle submits that Davies J fell into error in his Reasons for Judgment delivered on 29 July 1996 when he found sufficient objective similarity on the following basis:

“It will be seen from the attached drawings that, although there are some minor differences in the room sizes, the overall proportions are similar.  The windows and doors are not all in precisely the same place and there are some minor variations in the external walls.  There are also differences in the position of the laundry and the bathroom.  Sometimes the laundry and bathroom are adjacent and sometimes they are separated by a bedroom.  That is not a significant difference in the designs, however, representing, rather, a permissible variation.  There are also minor differences in cupboards and fittings. 

What stands out is that the overall positioning, orientation and design of the rooms, of the entry and of the garage are practically identical.  So also is the general relationship between the house and its environs … .

Notwithstanding the differences which exist, it appears to me that the respective drawings depict the same design, at least in substance.”

28                  According to Eagle’s submission, the commonplaceness of the ideas that are expressed in project home plans and the simplicity of those plans produce the result that a particularly close similarity is required in order for it to be found that one project home plan reproduces another. According to the submission, matters of detail take on considerable importance, otherwise the copyright owner will, in effect, have a monopoly over the ideas and concepts expressed in its plan as distinct from a monopoly in the drawing itself.

29                  However, this submission ignores the significance of a finding of subjective copying, based on evidence other than the mere similarity of plans.  Where there is such a finding, the remaining question is simply whether the copyright plan as a whole, or a substantial part of it, can be seen in the allegedly infringing plan. It is beside the point that the similarities between the two plans might not have been sufficiently strong to support an inference of subjective copying, or, to put the matter differently, might have been explicable as the product of two minds working independently of each other in the drawing of plans expressing commonplace ideas and concepts. The present issue was discussed in Eagle Homes Pty Ltd v Austec Homes Pty Ltd, cited above.

30                  Again, the fact that Eagle has made additions to an LED plan (plan 1) in producing an Eagle plan (plan 2) does not preclude a finding that plan 1 or a substantial part of it has been reproduced. The question is whether the whole or a substantial part of plan 1 has been taken into plan 2, not whether what has been taken forms a substantial part of plan 2.  Similarly, if plan 1 or a substantial part of it is still visible in plan 2 as a result of subjective copying, the drawing of plan 2 will have infringed LED’s copyright in plan 1 notwithstanding that Eagle has made design improvements. But it is otherwise if the effect of changes made by Eagle is to produce a plan so different from plan 1 that neither plan 1 nor a substantial part of it can any longer be seen in plan 2.

31                  Romano gave evidence that the “Beechwood Sussex 1992” was derived from an earlier “Beechwood Sussex” which he drew in 1987; that the 1987 plan was based on the earlier “Beechwood Park Royal”; and that this was, in turn, based on the “Beechwood Oxford” and the “Accent Homes Panorama”.  According to Romano, the “Beechwood Oxford” was derived from the “Beechwood Macquarie” which, in turn, was derived from the “Maxlin Homes Grevillea”. (Romano said that “Maxlin Homes Pty Ltd” was a “sister company” of LED and merged with LED after the “Grevillea” was developed but before the “Macquarie” was developed.)  There were family trees for other LED plans, the copyright in which was allegedly infringed by Eagle. Romano was involved in drawing at least some of the plans in the family trees as well as the current plans.

32                  Eagle does not suggest that the “Beechwood Sussex 1992” or any of its predecessors was developed in infringement of copyright or by the use of the plans of companies outside the “LED family”. However, Eagle does submit that in assessing whether a substantial part of the “Beechwood Sussex 1992” was copied by Eagle, less weight should be given to those parts of that plan which had been copied from earlier plans. This general approach was, however, rejected by the Full Court in Eagle Homes Pty Ltd v Austec Homes Pty Ltd, cited above, at paras 77 and 78.

33                  I turn now to the twenty four Disputed Plans. I have studied them and have concluded that the following Eagle plans are reproductions of the whole or a substantial part of the LED plans from which they were respectively ultimately derived:

•           plans 4, 5 and 6, which are modified versions of the Eagle “Regal Royale” which Davies J found infringed LED’s copyright in its “Beechwood Sussex 1992”;

•           plans 10, 14 and 18, which are modified versions of the Eagle “Flamingo Premier” which Davies J found infringed LED’s copyright in its “Beechwood Freemont ’88”;

•           plans 20, 21, 31 and 36, which are modified versions of the Eagle “Regal Supreme” which Davies J found infringed LED’s copyright in its “Beechwood Essington 1991 with four bedrooms”;

•           plans 24 and 27, which are modified versions of the Eagle “Oriole 4 Mark I” which Davies J found infringed LED’s copyright in its “Beechwood Essington 1991 with five bedrooms”;

•           plans 32 and 34, which are modified versions of the Eagle “Oriole 4 Mark II” which Davies J found infringed LED’s copyright in its “Beechwood Clovelly 1991”;

•           plans 38, 39 and 40, which are modified versions of the Eagle “Flamingo Classic” which Davies J found infringed LED’s copyright in its “Beechwood Freemont ’88 with four bedrooms”; and

•           plans 43 and 44, which are modified versions of the Eagle “Flamingo Deluxe” which Davies J found infringed LED’s copyright in its “Beechwood Freemont ’88 with four bedrooms and rear rumpus”.

34                  Given Davies J’s earlier finding of deliberate copying, it follows that Eagle’s making of those nineteen of the twenty four Disputed Plans infringed LED’s copyright in its plans which I have mentioned. Accordingly, the infringing Eagle plans now number ninety seven comprising the fifty seven originally disclosed in Valeri’s affidavit sworn 13 September 1996, the twenty one conceded on the hearing and these further nineteen of the twenty four Disputed Plans.

35                  As indicated earlier, I do not find it necessary, in order to expose my reasoning, to deal with the similarities and differences between each of these nineteen Disputed Plans and the LED plans from which they were respectively derived. The question is ultimately one of impression upon a close comparison of a Disputed Plan and the relevant LED plan in terms of the shapes, orientations, layout and interrelationship of rooms and other spaces and traffic flows. On some of the Disputed Plans, rooms have been added. On some, LED rooms have been omitted. Sometimes rooms have been relocated: for example, the bathroom or laundry has often been moved from one side of a bedroom to the other. There are often changes to the arrangement of bay windows or the entry. Some of these changes may be thought to be design improvements. However, in each case the Disputed Plan embodies the LED plan from which the intervening infringing Eagle plan was deliberately copied. The additions, subtractions and alterations do not persuade me that Eagle has not reproduced the relevant LED plan or a substantial part of it in each of these nineteen Disputed Plans. I will now refer to seven of them in more detail as being representative of my reasoning in respect of all nineteen.

36                  First, I will take plan 4. Eagle produced plan 4 by making alterations to the its “Regal Royale” plan (A2) which Davies J found infringed LED’s copyright in its “Beechwood Sussex 1992” (A1).  The main difference is that bedroom four and the rumpus room with its solarium are omitted from plan 4. Those rear two rooms were present in both the Beechwood Sussex 1992 and the Eagle Regal Royale the subject of his Honour’s judgment. Double bay windows are substituted in plan 4 for the solarium and are located on the outside corner of plan 4’s family room. What is left, however, is still strikingly similar to the “Beechwood Sussex 1992”. The front and most distinctive part of plan 4 is virtually identical to it in terms of layout, although there are differences of detail (for example, a walk-in wardrobe and a double bay window have been added to the master bedroom and a fixed wardrobe omitted, and alterations have been made to the patio and entry). In the rear of the house, the bathroom and laundry of the “Beechwood Sussex 1992” were between bedrooms three and four but by reason of the omission of bedroom four at the rear of the house, the bathroom of plan 4 is located in a position between bedrooms two and three and the laundry is not adjacent to the bathroom (it was not adjacent to it in the infringing Eagle Regal Royale) but is placed at the very rear of the house, separated from the bathroom by bedroom three.

37                  When Eagle’s plan 4 and LED’s “Beechwood Sussex 1992” are looked at as a whole, despite the differences mentioned, it is apparent that the LED plan is to a substantial extent embedded in plan 4. The similarities between the two are striking. The differences between plan 4 and the “Regal Royale” which was dealt with by Davies J do not persuade me to find that plan 4 does not infringe although the “generic” Regal Royale does. I therefore consider that Eagle’s plan 4 infringes LED’s copyright in its “Beechwood Sussex 1992” plan.

38                  Plan 5 is also derived from Eagle’s “Regal Royale” (A2) which Davies J found infringed LED’s copyright in its “Beechwood Sussex 1992” (A1). In terms of layout and shape of rooms, the front half of plan 5 is the same as the front half of LED’s “Beechwood Sussex 1992”. The major difference at the rear of the house is the addition of a fifth bedroom with consequential lengthening of the family room and movement of the laundry from its position adjacent to the bathroom and between bedrooms three and four to a position at the rear of the house behind bedroom five. As in the case of the “Regal Royale”, the double bay windows in the rumpus room are at the top outside corner, substituting for the solarium at the end of that room in LED’s “Beechwood Sussex 1992”. There are differences of detail (for example, the addition of a walk-in wardrobe in the master bedroom, of built in wardrobes in the other four bedrooms and of an archway between the living and dining rooms).  Like plan 4, however, plan 5 expresses the “Beechwood Sussex 1992” plan in the sense that it is recognisable as a version of that plan. It infringes LED’s copyright in that plan.

39                  In the case of plan 6, again the front half is very similar to the “Beechwood Sussex 1992” (A1) save for the re-naming of bedroom 2 as a “study” and the relocation of the door of that room and a lateral extension of the garage. Part of the additional space has been used to add a bar which looks out into the living and dining rooms.  At the rear of the house, a bedroom has been added “above” the family room and between bedroom four and the rumpus room. The rumpus room has been extended “downwards”, partly, I presume, to provide an entry to the family room. Again as with Eagle’s “Regal Royale” (A2), the double bay windows in the rumpus room are at the top outside corner rather than being a solarium at the side of the room.  As in plan 5, there are differences of detail such as the addition of fixed wardrobes in bedrooms and of a pantry in the kitchen. Yet, again as in the case of plan 5, overall plan 6 reflects the “Beechwood Sussex 1992” plan and infringes LED’s copyright in that plan.

40                  Plan 10 was derived from Eagle’s “Flamingo Premier” plan (B2) that Davies J found infringed LED’s copyright in its “Beechwood Freemont ’88” plan (B1). The main differences are the omission from the rear of the house of bedroom three and part of the family room to make the house shorter and the omission of the bar and part of the lounge room to make the house narrower. The omission of the “divider” wall between the dining and living rooms would also have an impact on the “feel” of the house. There are other differences: for example, the laundry is now wholly confined to the garage area and the kitchen bench is straightened. Overall, however, the two plans are strikingly similar. The changes are not so great that one can no longer see that plan 6 is basically the “Beechwood Freemont ’88”.  I therefore find that plan 10 infringes LED’s copyright in its “Beechwood Freemont ’88” plan.

41                  Plan 14 is also derived from the Eagle “Flamingo Premier” (B2). The major difference between plan 14 and the “Beechwood Freemont ’88” (B1) is that bedroom two has been omitted to enlarge the dining room and provide space for a bar (including a “cocktail sink”). The bar “under” the laundry adjacent to the garage in the “Beechwood Freemont ’88” has, of course, been omitted and the lounge room narrowed laterally as on plan 10. Also as on plan 10, the “divider” between the lounge and dining rooms has been omitted. Once again, however, the differences do not detract significantly from the overall striking similarity between plan 14 and the “Beechwood Freemont ’88”. I therefore find that plan 14 infringes LED’s copyright in its “Beechwood Freemont ’88” plan.

42                  Plan 18 is also derived from the Eagle’s “Flamingo Premier” (B2). The most significant difference between plan 18 and the “Beechwood Freemont ’88” (B1) is that the bar under the laundry and the garage have been omitted and the back half of what was the garage is now a work-shop while the front half is an extension of the lounge room. Again, the “divider” between the lounge and dining rooms has also been omitted. Overall, however, the plans are strikingly similar: the main change has simply been to convert the space previously dedicated to the garage to other uses. I find that plan 14 infringes LED’s copyright in its “Beechwood Freemont ’88” plan.

43                  Plan 20 was derived from the Eagle “Regal Supreme” (C2) plan which Davies J found infringed LED’s copyright in its “Beechwood Essington 1991” plan (C1). The main differences are that bedroom four on the “Beechwood Essington 1991” has been omitted and the resultant space has become part of the rumpus room, the laundry has been moved from a position above bedroom three to be adjacent to the bathroom and the solarium at the end of the rumpus room has been replaced by double bay windows at the top outside corner of the room. There are other small differences, such as the omission of the bar and the rearrangement of the entry. However, it is still apparent that plan 20 expresses the LED plan. I therefore find that plan 20 infringes LED’s copyright in its “Beechwood Essington 1991” plan.

44                  I have also compared the remaining twelve of the nineteen Disputed Plans carefully with the respective LED plans that they are said to reproduce. My approach to them is sufficiently indicated by my discussion of the seven Disputed Plans identified above.

45                  I turn now to the remaining five Disputed Plans: plans 7, 22, 23, 25 and 26. In my opinion, these plans do not reproduce LED plans or a substantial part of them and therefore do not infringe LED’s copyright.

46                  First, plan 7 was produced by the making of alterations to the Eagle “Regal Royale” (A2) which Davies J decided infringed LED’s copyright in its “Beechwood Sussex 1992” (A1). The most striking alterations are found in the rearrangement of the living areas. The entry leads directly into the middle of the house, rather than at a forty five degree angle towards a corridor outside bedroom two. The shape of the living room is quite different from that in plans A1 and A2. It has a distinctive projection at the front of the house. The garage does not protrude into the living and dining rooms as it does in plans A1 and A2. There is a new space behind the entry with a linen closet and coat closet. The layout and shape of the kitchen is also different and includes a walk-in pantry and an angle in the bench. The corridor outside bedrooms three and four and the bathroom between them in the “Beechwood Sussex 1992” now provides the only access to bedrooms two and three and the bathroom between them. The rumpus room has also been reduced in size to become little more than an extension of the family room. The “divider” between the family room and the rumpus room has been omitted. These changes are all changes to the layout of the house, not simply changes of detail. They give plan 7 an appearance so different from that of the “Beechwood Sussex 1992” that while some resonances of that plan can be detected, neither that plan nor a substantial part of it can be said to be embedded in plan 7. I therefore find that plan 7 does not infringe LED’s copyright in its “Beechwood Sussex 1992” plan.

47                  Second, plan 22 was produced by the making of alterations to the Eagle “Oriole 4 Mark I” plan (D2), which Davies J found infringed LED’s copyright in its “Beechwood Essington 1991” with five bedrooms (D1).  The front half of plan 22 is similar to the front half of the “Beechwood Essington 1991” with five bedrooms, although, as on many of the plans, there is a difference in the entries. Moreover, unlike the LED plan the master bedroom has a walk-in wardrobe, and the plan has no bar facing into the dining room. The rear halves of the two plans are completely different. On plan 22 there is no bedroom between the bathroom and laundry and the absence of the fifth bedroom makes the house shorter. There are other minor differences in the bedrooms such as the addition of built-in wardrobes and the re-positioning of windows. The family and rumpus rooms are substantially different. The family room is much “squarer” while the rumpus room is in a rear top corner of the house. While the changes are perhaps not as extensive as those on plan 7 noted above, in my view their cumulative effect is to make plan 22 so different that one can no longer see in it, the “Beechwood Essington 1991” with five bedrooms.

48                  Third, plan 23 was also ultimately derived from the “Beechwood Essington 1991” with five bedrooms (D1). However, the derivation is not apparent from a comparison of the plans. The entry is different; the master bedroom is differently arranged; the lounge room is “squarer”; there is no double garage; the dining room has been replaced by a bedroom; the kitchen seems to be larger; there is no rumpus room; there are no bedrooms across the top of the house; the family room is longer; and the laundry is accessed through the family room rather than through the corridor adjoining the other bedrooms and the bathroom. In my view the changes are such that it cannot be said that the whole or a substantial part of the “Beechwood Essington 1991” with five bedrooms is reproduced in plan 23.

49                  Fourth, plan 25 was, like plans twenty two and twenty three, derived ultimately from the “Beechwood Essington 1991” with five bedrooms (D1). It is in fact almost a mirror image of plan 22, except for the fact that the entry is different and the rumpus room does not have a solarium or double bay windows. These differences do not make it any more like the “Beechwood Essington 1991” with five bedrooms. Hence, for the reasons given in relation to plan 22, I do not consider that plan 25 contains the whole or a substantial part of that LED plan.

50                 Fifth, plan 26 was also derived ultimately from the “Beechwood Essington 1991” with five bedrooms (D1). However, the entryway has been altered; a walk-in wardrobe and an extra window have been added to the master bedroom and a fixed wardrobe has been omitted; the bar adjacent to the main bedroom’s ensuite and looking into the dining room has been omitted; the dining room has been omitted and a bedroom substituted for it; the kitchen appears to be larger and is arranged differently; there is no longer a bedroom between the bathroom and the laundry; there is no rumpus room; and there are only four bedrooms with only one of them at the rear of the house (there were two at the rear of the LED plan). These changes are such that despite some similarities, it is no longer possible to see the “Beechwood Essington 1991” with five bedrooms in Eagle plan 26.

51                  In summary, therefore, the forty five plans discovered since Davies J delivered judgment (I omit plan 41 which was one of the fifty seven plans disclosed in Valeri’s original affidavit) can now be divided in to the following four categories:

(1)        plans 1, 2, 3, 4, 5, 6, 8, 9, 10, 11, 12, 15, 16, 17, 18, 19, 20, 21, 27, 28, 29, 30, 31, 32, 34, 35, 36, 37, 39, 43, 44, 45 and 46 (33 plans) infringe LED’s copyright and houses were built in accordance with them (bold plan identifying numbers indicate fifteen of the nineteen Disputed Plans that I have found infringed LED’s copyright);

(2)        plans 13, 14, 24, 33, 38, 40 and 42 (7 plans) infringe LED’s copyright but no houses were built in accordance with them (bold plan identifying numbers indicate the other four of the nineteen disputed Plans that I have found infringed LED’s copyright);

(3)        plans 22 and 25 (2 plans) do not infringe LED’s copyright but houses were built in accordance with them (bold plan identifying numbers indicate two of the five Disputed Plans that I have found do not infringe LED’s copyright);

(4)        plans 7, 23 and 26 (3 plans) do not infringe LED’s copyright and no houses were built (at least not by Eagle) in accordance with them (bold plan identifying numbers indicate the other three of the five Disputed Plans that I have found do not infringe LED’s copyright).

 

Issues 2 and 3

“2.       Did his Honour Justice Davies hold that the Respondent’s houses (the 57) are versions in a three-dimensional form of a substantial part of the Applicant’s drawings?  If not, can that finding be made at this stage of the proceedings?  If so, are the 57 houses versions in a three-dimensional form of a substantial part of the applicant’s drawings?

 

3.         Are any of the 35 houses built [categories (a) and (b) of the additional 45 earlier] (inferentially built in accordance with the Respondent’s – not the Applicant’s – drawings) versions in three-dimensional form of a substantial part of the Applicant’s drawings?”

 

52                  Prior to the Copyright Act 1911 (UK) (“the 1911 Act”), it was not an infringement of copyright to produce a three dimensional version of a two-dimensional copyright work. The 1911 Act, which was applied in Australia by the Copyright Act 1912 (Cth), provided for the first time that “copyright” meant “the sole right to produce or reproduce the [copyright] work or any substantial part thereof in any material form whatsoever” (s 1(2) - emphasis supplied). It was held that the expression “material form” was wide enough to encompass the production in three-dimensional form of a version of a two-dimensional work and vice versa: Bradbury, Agnew & Co v Day (1916) 32 TLR 349. In Chabot v Davies [1936] 3 All ER 221, Crossman J held that the copyright in a drawing of a plan and elevation of a shop front was infringed by the construction of the shopfront in that case.

53                  The development described was given explicit recognition in the definition of “reproduction” in s 48 (1) of the Copyright Act 1956 (UK) and in s 21 (3) of the Copyright Act 1968 (Cth) (“the 1968 Act”). The latter is as follows:

“21 (3) For the purposes of this Act, an artistic work shall be deemed to have been reproduced:

  (a) in the case of a work in a two-dimensional form - if a version of the work is produced in a three-dimensional form; or

  (b) in the case of a work in a three-dimensional form - if a version of the work is produced in a two-dimensional form;

and the version of the work so produced shall be deemed to be a reproduction of the work.”

54                  This provision does not appear to have altered the position under the 1911 Act as it had been judicially explained. However, the exclusive right to produce a version of a two-dimensional work in a three-dimensional form was qualified by s 71 (1) of the 1968 Act which provided as follows:

“71 (1)  For the purposes of this Act –

(a)      the making of an object of any kind that is in three dimensions does not infringe the copyright in an artistic work that is in two dimensions; ...

if the object would not appear to persons who are not experts in relation to objects of that kind to be a reproduction of the artistic work.”

55                  This provision operated by way of defence after it had been found, relevantly, that the three-dimensional object was a version of the two-dimensional copyright work or a substantial part of it: LB (Plastics) Ltd v Swish Products Ltd [1979] RPC 551 at 622; Ogden Industries Pty Ltd v Kis (Australia) Pty Ltd [1982] 2 NSWLR 283 at 289. In applying the “non-expert” test, the judge was to make a direct visual comparison between the drawing and the allegedly infringing object: LB (Plastics) at 622; Ogden Industries at 289-290; Solar Thomson Engineering Co Ltd v Barton [1977] RPC 537 at 559; S W Hart & Co Pty Ltd v Edwards Hot Water Systems (1985) 159 CLR 466 at 476 (Gibbs CJ), 487 (Wilson J).

56                  The defence provided by s 71 (1) was criticised: see, for example, S W Hart & Co Pty Ltd v Edwards Hot Water Systems, above at 475 (Gibbs CJ), 485-487 (Wilson J), but cf at 493-503 (Deane J). Section 71 was repealed by the Copyright Amendment Act 1989. The position with respect to three-dimensional infringement of a two-dimensional copyright work is now the same as it was under the 1911 Act. The question posed by the 1968 Act in the present case is simply that found in s 21 (3), that is, are the houses a version in three-dimensional form of LED’s nine plans?

57                  The word “version” is not defined in the Act and has its ordinary meaning of a special or particular form or variant of something: Dyason v Autodesk Inc (1990) 24 FCR 147 at 155, 173, 196. The Court must approach the question whether a three-dimensional work produces a version of a two-dimensional work in the same manner as if the question were one of reproduction in two dimensions, that is, one must ask whether there is a causal connection between the copyright work and the allegedly infringing work and whether there is sufficient objective similarity between the two.

58                  The question arises whether a house built “in accordance with” an infringing Eagle plan produced in a three-dimensional form a version of the copyright LED plan which the infringing Eagle plan had reproduced. If so, the house is itself a reproduction of the LED plan and Eagle will have infringed LED’s copyright in that plan: s 31(b)(i).  The Eagle house need be a version in three-dimensional form of only a substantial part, as distinct from the whole, of the LED plan: s 14 (1).

59                  I turn first to the houses built in accordance with infringing Eagle plans (Valeri’s original fifty seven houses and the thirty three additional houses in category (1) above – a total of ninety houses). LED submits that as the infringing Eagle plans reproduce the whole or a substantial part of one or other of the nine LED plans, it follows inexorably that houses built “in accordance with” those infringing Eagle plans are a version in three-dimensional form of one or other of the nine copyright LED plans or of a substantial part of it. Eagle, on the other hand, submits that there is no evidence that any houses were built exactly in accordance with the infringing Eagle plans or any other evidence that would show that the ninety houses are versions in three-dimensional form of LED’s plans. Eagle points out that in cases such as Chabot v Davies, above, Lend Lease Homes Pty Ltd v Warrigal Homes Pty Ltd [1970] 3 NSWR 265, Ancher, Mortlock, Murray & Woolley Pty Ltd v Hooker Homes Pty Ltd [1971] 2 NSWLR 278, and Robert J Zupanovich Pty Ltd v B & N Beale Nominees Pty Ltd (1995) 59 FCR 49 in which buildings were held to infringe the copyright in architectural plans, the court relied on evidence, either in photographic form or based on an inspection of the allegedly infringing building, when making a finding of three-dimensional infringement of two-dimensional works of the kind sought here by LED and that evidence of that kind is absent in the present case.

60                  In the Lend Lease Homes case, Helsham J said (at 273):

“I believe that both on the authorities and for reasons to which I shall presently refer, the proof (by admission or otherwise) that a building has been erected in accordance with a floor plan is not itself sufficient successfully to claim that the building as so erected is a reproduction in material form of the plan in which copyright exists. Proof of the copying may be necessary, but it is not in my view conclusive.”

61                  Lahore on Copyright and Designs (looseleaf) cites the Lend Lease Homes case as authority for the proposition that it is not sufficient to prove reproduction merely to show that the building was erected “in accordance with” the plans: “there must be visual resemblance” (at [34,390]). Helsham J went on to say (at 273-274):

“I consider there is adequate material before me to enable me to find a sufficient objective similarity between the floor plan of the plaintiff and the actual building erected by and for the defendants. It will be remembered that the floor plan of the plaintiff displayed the shape of the house by reference to exterior walls, the position and relative size of windows, the interior layout of rooms and doors, and the presence and position of a number of internal fitments. I know from the first defendant’s plan the similar position and relationship of the self-same features; I know from sworn evidence that the house was erected for all practical purposes in accordance with the first defendant’s plan, and I am assisted in this by a number of photographs of that house from which many of the features and their relative positions vis-à-vis the plaintiff’s plan are recognizable. Without actually visiting the house it is open to me to find that there is between it and the floor plan a similarity that could be seen and which would reveal, in accordance with the evidence, a reproduction of the features depicted on the floor plan by the actual features in situ.”(emphasis supplied)

62                  It is true that the Lend Lease Homes case was decided by reference to the 1911 Act which contained no counterpart the present s 21 (3). However, as I have said earlier, I do not consider that s 21 (3) altered the position from what it was under the 1911 Act. It remains necessary, in my view, for  there to be evidence of the appearance of the building, that is, its impact on the eye. It is only by means of some evidence of that kind that one can assess the similarity between the building and the plan. In my view, Helsham J’s comments in relation to proof that a three-dimensional object produces a version of a drawing remain relevant under the 1968 Act.

63                  A quite different impression may be gained upon viewing a three-dimensional structure from that arising from inspecting a plan. I respectfully agree with the following comment on Chabot v Davies, above,in Copinger and Skone James on Copyright (13^th ed, 1991) at 8-74:

“[In Chabot v Davies it was] held that an architect’s elevation representing a shop front was infringed by the erection of an actual shop incorporating the elevation, on the ground that the same was a reproduction of the elevation ‘in a material form.’ It is submitted that this decision is confined to cases in which the appearance of the complete building appeals to the eye as being a reproduction of what appears on the architect’s plan or elevation, and that it would not be an infringement of the copyright in a plan, such as a ground plan, to erect a building based thereon, if the resulting erection bore no resemblance to the plan except when dissected and measured. But if a completed structure appears to the eye to be a reproduction of what appears in a floor plan then it will be an infringement.” (emphasis added)

For the last proposition, the authors refer to the Lend Lease Homes case.

64                  Reference may also be made to Burke and Margot Burke Ltd v Spicers Dress Designs [1936] Ch 400. In that case Clauson J found that the making of a frock was not a reproduction of a sketch depicting a frock worn by a lady. He distinguished Bradbury, Agnew & Co v Day, above, saying (at 406):

“That case would be binding on me; but it is not that, or anything like that, of which Mrs Burke complains. She complains that the defendants have brought into being a frock which no doubt when placed in a particular position upon a lady of a particular figure might be used to produce a living picture of [the sketch] but when I look at the frock, qua frock, either spread out on a table or held up to my view, it seems quite impossible for me to hold that that frock, qua frock, is a reproduction of the sketch ... . It is not like it at all. It is on the word ‘reproduction’ that Mrs Burke has based her case. The mere fact that the general design of the frock may have been derived from what the dressmaker saw in [the sketch] does not seem to me to assist the case. What I have to consider is whether the frock reproduces [the sketch] which is a sketch of a young lady wearing a frock seen from a particular view-point. The answer seems to me to be that it does not. Accordingly, in my view, Mrs Burke’s claim fails.”

65                  In the present case, as noted earlier, Valeri annexed to his affidavit a list of fifty seven houses, their locations, the Eagle plans “relevant to them” (I use a neutral expression) and what he claimed were departures from those plans. His affidavit said that the fifty seven houses “depicted”, not the nine LED plans but the nine generic infringing Eagle plans. I do not construe the word “depicted” to signify that Mr Valeri meant that to the eye, the fifty seven houses produced in three-dimensional form even the nine generic Eagle plans. The affidavit was filed in response to Davies J’s direction, set out in full below, that Eagle file an affidavit setting out particulars of houses “in respect of” the eighteen floor plans “or any substantial reproduction thereof built by the respondent [sic]”. On any reckoning, the direction is one to file an affidavit particularising the houses built “in respect of” the eighteen floor plans or any substantial reproduction thereof! The question arises what Valeri’s affidavit signifies for present purposes.

66                  There is no sworn testimony in terms that the houses were “erected for all practical purposes in accordance with” Eagle’s plans. There is no photographic evidence or expert testimony as to the appearance of the houses. Consistently with the approach taken by Helsham J, I do not think that a concession that the houses “reproduced” the LED plans is reasonably to be derived from Valeri’s affidavit, either standing alone or read with Davies J’s direction.  Although he does not say so in terms, Valeri’s evidence probably signifies that the respective Eagle plans in evidence were given to the subcontractors who built the houses. One might also infer that it is unlikely that the subcontractors departed from the plans except in minor respects. But in the absence of any evidence whatever as to the appearance of the houses to the human eye, I am simply not in a position to find that the houses are sufficiently similar to the copyright LED plans from which the infringing Eagle plans were derived to amount to a production of a version of those LED plans or of a substantial part of them.

67                  I also do not accept LED’s submission that Davies J explicitly or implicitly found that houses built “in accordance with” the nine infringing Eagle plans considered by him necessarily infringed LED’s copyright in those plans. Given that there was apparently no evidence before his Honour of the kind mentioned above, it would be surprising for him to have intended to make such a finding.

68                  LED’s pleading was of infringement in three-dimensional as well as two-dimensional form. In his Reasons for Judgment delivered on 29 July 1996, his Honour noted (at page 2) that LED claimed that its copyright had been breached by “the making of drawings, the issuing of brochures and the building of houses” (emphasis supplied). He also said (at pages 5 to 6) that LED was “entitled to succeed if it [could] prove that Eagle’s drawings, brochures or houses reproduce a substantial part of LED’s drawings”. However, he did not separately consider the question whether the houses, as distinct from the plans, did so, and his finding (at page 21) was only that LED had succeeded “on the question of liability with respect to the specific drawings” (emphasis supplied). His Honour’s Supplementary Reasons delivered on 27 August 1996 were also limited to findings in relation to Eagle’s plans. The declaration in each proceeding was that Eagle had infringed LED’s copyright “in the drawings for the floor plans of each of [LED’s] houses … by the floor plans for [Eagle’s] houses …” (emphasis supplied).

69                  His Honour’s declaration, orders and direction made on 27 August 1996 in each proceeding were relevantly as follows:

“THE COURT DECLARES THAT:

1.         The respondent has infringed the applicant’s copyright in the drawings for the floor plans of each of the applicant’s houses shown in the table below (and annexed hereto and marked as shown respectively below) by the floor plans for the respondent’s houses shown respectively in the table below (and annexed hereto and marked as shown respectively below):

.............................................................................................................................

THE COURT ORDERS THAT:

2.         The respondent [Eagle] be restrained from, by itself its servants or agents:

            (a)        reproducing or authorising the reproduction of the whole or a substantial part of any of the drawings of the floor plans of the houses referred to in paragraph 1 above [which listed LED’s nine plans and the corresponding nine infringing Eagle plans] (whether of the applicant’s plans or the respondent’s plans listed in paragraph 1); or

            (b)        building or authorising the building of any of the houses referred to in paragraph 1 above or any house with the same floor plan, or a substantial part thereof, as any of those houses (whether of the applicant’s plans or the respondent’s plans listed in paragraph 1); or

            (c)        advertising or offering for sale or opening to the public any exhibition or display home of any of the houses referred to in paragraph 1 above or any house with the same floor plan, or a substantial part thereof, as any of those houses

in infringement of the applicant’s said copyright, save for the completion of the Regal Royale house currently being constructed under contract for Mr D Dinic and Ms A Cako at Lot 1228 Whitsunday Circuit in Hinchinbrook in the State of New South Wales and the house contracted to be constructed for Mr & Mrs Ram, Lot 4154 Christabel Pl, Cecil Hills.

3.         Within twenty eight (28) days of the giving of judgment on issues of pecuniary relief, the respondent deliver up to the applicant on oath all sketches, drawings, working drawings, master drawings, diagrams and brochures in its possession or control being reproductions of the whole or a substantial part of any of the floor plans referred to in paragraph 1 above.

.............................................................................................................................

THE COURT DIRECTS THAT:

The respondent file and serve an affidavit or affidavits by 13 September 1996 setting out in respect of the houses referred to in paragraph 1 above or any variation or substantial reproduction thereof built by the respondent (“the houses”):

(a)       the total number of houses;

(b)       the location of each of the houses;

(c)        the contract price for the construction by the respondent of each of the houses; and

(d)       the costs to the respondent of the construction of the houses.”

70                  Several observations can be made about these orders and the direction. Order 2(b) refers to the “building of any of the houses referred to in para 1”, but it must be remembered that para 1 was a declaration of infringement which referred only to “plan to plan reproduction”. Apart from the exception at the end of order 2, the orders do not refer to any house built by LED or by Eagle at any particular site. It is clear that it was intended to restrain the building of houses “with” either the nine LED plans or the nine infringing Eagle plans or “with” a substantial part of any of them “in infringement of [LED’s] said copyright” (emphasis supplied). The “said copyright” is that referred to in the declaration and is LED’s copyright in its nine plans. The qualification which I have just emphasised tells against a construction that Davies J implicitly foundthat building houses “with” or “on the basis of” or “in accordance with” any of the eighteen plans would necessarily infringe LED’s copyright. In any event, it would not be proper to decide what findings Davies J intended to make merely from the terms of that injunctive relief that his Honour granted.

71                  The direction was clearly directed towards providing LED with information on which it might decide whether or not to seek an account of profits. As noted earlier, with respect the direction could be better expressed. It was directed to identification of houses actually built by Eagle, a matter with which his Honour had not been concerned in his Reasons, which were of the kinds listed in the tables in his orders “or any substantial reproduction thereof”. As indicated earlier, I do not think that disclosure by Eagle of built houses pursuant to the direction constitutes an admission by it that the building of those houses itself constituted an infringement of the copyright in the nine LED plans referred to in his Honour’s orders. However, for reasons which appear below, the fact that there was no finding by his Honour or admission by Eagle to that effect does not signify that the direction was redundant. Therefore, the giving of the direction does not indicate an implicit finding of three-dimensional infringement.

72                  It is not necessary for me to decide whether it is too late for LED to raise the issue whether houses built by Eagle infringed LED’s copyright in its drawings. As noted earlier, LED pleaded that they did and Davies J’s Reasons for Judgment record that from the outset LED submitted that they did. But there is still no evidence of the appearance of any of the houses to the human eye on which to make such a finding, and, for the reasons given above, I would not make a finding of infringement by reproduction in three-dimensional form of LED’s plans in the absence of evidence of that kind.

Issues 4, 5, 7 and 11

“4.       The Applicant contends that the issue is whether Eagle is liable to account in respect of the 17 additional houses (built) (not conceded by Eagle to infringe) on the basis that they were derived from, and would not have come into existence but for, the infringing plans which preceded them.”

 

“5.       The respondent contends that the issue is whether Eagle is liable to account in respect of any of:

 

(a)        the 18 houses built where the plans are conceded to infringe (category [(a)]); or

 

(b)        the 17 houses built where the plans are not conceded to infringe (category [(b)]).

 

on the basis that they were derived from, and would not have come into existence but for, the infringing plans which preceded them, whether or not the plans in category [(b)] are held to infringe, and whether or not the respective houses have been or will be held to be reproductions of the drawings.”

 

“7.       Whether profits can be said to be derived by Eagle on any or all of site preparation, appliances and PC items and contract variations and extras.  If so, whether the profits for which Eagle is liable to account include profits on any or all of site preparation, appliances and PC items and contract variations and extras.”

 

“11.     Whether, and if so by how much, an apportionment should be made for the following matters:

 

(a)        as submitted in 2 and 3 above, no three dimensional infringements have been or should be held (as to the 57) or should be held (as to the 35) to have occurred,

 

(b)        even if (a) is wrong, all the activities and factors which give rise to Eagle’s profit, including, inter alia, the selling, marketing and contract supervision activities of Eagle and factors which influence purchases of project homes such as price, façades, internal and external finishes and the reputation of the builder,

 

(c)        whether or not (a) is wrong, the fact that copyright protects only the skill and labour of the draftperson’s expression of ideas and not the ideas themselves – and does not confer a monopoly in the presence or absence of rooms or in their general arrangement.”

 

73                  These issues raise questions relevant to the remedy of an account of profits in respect of houses built, excluding questions relating to the treatment of overheads. Questions relating to the treatment of overheads arise from Issues 8, 9 and 10. Questions relating to damages and additional damages are raised by Issues 6 and 12 respectively.

74                  The numbers of houses (or plans) which are referred to in Issues 4, 5 7 and 11 are now apt to mislead. Clearly, the parties have taken them from the summary of the parties’ positions reproduced at para 18 earlier. That summary preceded my findings. While it has been common ground that there are thirty five houses built in accordance with Eagle plans to which these Issues refer, the following change has now occurred:

·        Originally conceded that plans infringed (parties’ category (a) earlier): 18.

·        Now concluded that plans infringed (category (1) of my summary of findings): 33.

·        Originally submitted that plans did not infringe (parties’ category (b) earlier): 17.

·        Now concluded that plans did not infringe (category (3) of my summary of findings): 2.

 

75                 Issues 4 and 5 relate to houses built in accordance with plans. Therefore they relate respectively to the thirty three houses referred to in my category (1) and the two houses referred to in my category (3) of the summary of the results of my findings. They also relate to the fifty seven houses which were built in accordance with the apparently unaltered nine infringing Eagle plans that were before Davies J and which were disclosed in Valeri’s affidavit sworn 13 September 1996 – a total of ninety two houses.

76                 In their agreed statement of issues, the parties gave the heading “APPLICANT’S TRACING SUBMISSION” to Issues 4 and 5. The way in which Issues 4 and 5 have been formulated is not ideal. They are intended to raise, and were treated by the parties as raising, certain issues on the assumption that the actual building of the houses did not infringe LED’s copyright. The issues are whether there is nonetheless a liability to account for the whole or part of the building profit (and if part, what part) because of a causal connection between an LED plan and a house built by Eagle either in accordance with an infringing Eagle plan or even in accordance with a non-infringing Eagle plan that was derived from an intervening infringing Eagle plan. LED contends that Eagle is liable to account for the entire building profit in all cases because in all cases the house would not have come into existence but for the existence of an LED plan and an infringing Eagle plan.

77                 I find it convenient to re-formulate Issues 4, 5, 7 and 11.

A.        Must Eagle account to LED for the profits made from the construction of the ninety homes built  in accordance with infringing plans?

78                 A convenient starting point is the general proposition stated by Windeyer J in Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25 (at 42), 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”.

79                  His Honour was dealing with a claim of infringement of the plaintiff’s trade mark on painting sets sold by the defendant and was concerned to emphasise that the profits to be accounted for were not all the profits made from the selling of the painting sets but only those made from the wrongful use of the mark. The aim in taking an account is not to inflict punishment but to make the wrongdoer disgorge the profit made from the infringement: Sheldon v Metro-Goldwyn Pictures Corp 309 US 390 (1940) at 399; My Kinda Town v Soll [1982] FSR 147 at 156. In the present case, the infringement was the reproduction in two-dimensional form of the whole or a substantial part of LED’s plans. The proper inquiry then is what profit was made by Eagle from this conduct.

80                  The drawing by Eagle of the infringing plans themselves did not produce any profit. Eagle was in the business of selling houses, not of selling plans: the drawing of the plans did not create saleable stock for the benefit of Eagle. Are the profits made from the building of the houses, or some part of those profits, nonetheless to be seen as having been made by the production of the infringing plans or as being the measure of the profits made by the production of the infringing plans? If not, LED’s recovery would apparently be limited to any plan drawing fee that Eagle was saved by, or a notional licence fee in respect of, the use it made of LED’s plans.

81                  Before I turn to this question, it may be noted that there are three possibilities as to the influence of the infringing Eagle plans. First, it is possible that Eagle would have earned building profits even if it had not used the infringing plans because the customers would have chosen another Eagle plan. Second, it is possible that Eagle would not have earned any of the building profits because, absent the infringing plans, the customers would not have contracted with Eagle at all. Third, it is possible that the floor plan was only one of several reasons why the customers decided to contract with Eagle.

82                  In Potton Ltd v Yorkclose Ltd [1990] FSR 11 the defendant conceded that the building of the houses themselves as well as the drawing of the plans for them infringed the plaintiff’s copyright in its drawings for a house of a certain style. On the basis of this concession Millett J held (at 18) that the defendant was liable to disgorge all net profits, after “due allowances”, made from the construction of the houses and that the plaintiffs were entitled to be put in the same position as if they had built the houses. His Lordship relied on Peter Pan Manufacturing Corp v Corsets Silhouette Ltd [1964] 1 WLR 96. Like Potton v Yorkclose, that was a case in which the manufacturing of the article sold was itself wrongful, in that case by reason of the use of patterns and information in breach of an obligation of confidence. The plaintiff was held entitled to the whole of the profits made from the manufacturing and selling of the goods, not just some part of them attributable to the use of the patterns and information. As I have said above, in the present case the building of the houses itself has not been shown to have infringed LED’s copyright in its plans. In Peter Pan, Pennycuick J distinguished Siddell v Vickers (1892) 9 RPC 152, an infringement of patent case, in which the Court of Appeal had held applicable the measure of the saving to the defendants by the use of the patented invention. In the course of argument, the Court of Appeal had said:

“[t]he true test of comparison seems to be with what the Defendants were likely to use, looking at all the circumstances of the case” (at 162).

83                 But Pennycuick J explained that Siddell v Vickerswas a case in which

“the defendants could have manufactured the product in question by other means, but were able to manufacture more economically by making use of a particular appliance which they were not entitled to use”. (at 109)

 

84                  It is noteworthy that even if LED had proved that the building of the houses infringed LED’s copyright, it would not necessarily follow that LED would be entitled to all the net profits made by Eagle upon the sale of those houses. In Robert J Zupanovich Pty Ltd v B & N Beale Nominees Pty Ltd, above, Carr J found that the building of home units by the respondents infringed the applicant’s copyright in the applicant’s drawings and in its home units constructed in accordance with them, but considered that it might nonetheless be appropriate to award the applicant only a proportion of the profits made from the construction of the units. His Honour differed from the conclusion of Millett J in Potton Ltd v Yorkclose Ltd, above, that there should not be an inquiry as to what part, if any, of the profits was attributable to the design. His Honour also distinguished the Pater Pan case on the basis that the case before him was not one in which the infringer could not have constructed the buildings without using the copyright owner’s drawings or the buildings built by the copyright owner from them.

85                  Any approach to the remedy of an account of profits assumes that the infringer has made some use of the infringing work, in the present case, the infringing Eagle plans. While the Zupanovich case is distinguishable from the present one because of the finding there that the construction of the home units itself infringed, with respect it seems to me that the test applied by Carr J in that case is, with necessary modification, applicable here: what is the amount of profit (realised and unrealised), if any, derived by the infringer in reproducing LED’s plans or a substantial part of them and, in particular, to what extent, if at all, did that reproduction contribute to the building profits.

86                  Even where the building of a house infringes the copyright in a floor plan, this does not signify that every element of the house infringes. For example, the façades, room ceiling heights and the internal “finishes” do not infringe. Yet these are also important elements of the house.

87                  In my view, a distinction is to be drawn between cases in which the infringement is in respect of the essential feature of a product that generates the profit and other cases. For example, in Dart Industries Inc v Décor Corporation Pty Ltd (1993) 179 CLR 101 (“Dart v Décor”), the defendant manufactured canisters with a distinctive press button seal. The seal was held to infringe the plaintiff’s patent, although the canister itself did not. The High Court agreed with the trial judge, King J, and the Full Court of the Supreme Court of South Australia, that the plaintiff was entitled to the profits made on the sale of the item as a whole, with no apportionment for the profit made on account of the non-infringing canister. The majority (Mason CJ, Deane, Dawson and Toohey JJ) said (at 120-1):

“In considering whether the profits for which an account was ordered should include those arising from the manufacture and sale of the canisters as well as the press button seals which were fitted to them, the trial judge correctly identified the problem when he said [(1990) 20 IPR, at p 152]:

‘The basic legal principle is that the relevant profits are those accruing to the defendants from their use and exercise of the plaintiff's patented invention. Where the defendants’ products are, as here, composites of the invention and other features the determination of such a question is one of fact.’

In answering the question which he posed, King J found that ‘sales of press button canisters are for present purposes attributable to use of the patented invention’ and for that reason directed that the profits for which Decor and Rian had to account included the profits from the containers to which the press button seals were fitted [ibid, at p 154].

 

The Full Court identified the same question in somewhat different terms [(1991) 33 FCR, at p 407]:

‘The respondent cannot gainsay that it is only entitled to the profits obtained by the infringement. If, for example, a patented brake is wrongfully used in the construction of a motor car, the patentee is not entitled to the entire profits earned by sales of the motor car. He must accept an appropriate apportionment. But the question is how that principle shall be applied to a situation where the patent relates to the essential feature of a single item ... it seems to us that it was open to the judge to find, and he correctly found, that what characterised the infringing product was the press button lid, without which this particular container would never have been produced at all.’

The questions posed by the trial judge and the Full Court concerning the apportionment of a total profit both accurately reflect the correct principle which was expressed in this Court by Windeyer J in Colbeam Palmer Ltd v Stock Affiliates Pty Ltd as follows [(1968) 122 CLR, at pp 42-43]:

‘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. ...

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.’

 

It is true that there is some divergence between King J and the Full Court in relation to whether, in the circumstances of this case, primary emphasis should be placed on reason for sale or reason for production. Nonetheless, the overall approach of both accurately reflects the application of the correct general principle in the resolution of what is ultimately a question of fact.”

88                  In my view, having regard to the evidence which I consider below, the drawings of the floor plans were not the essential features of the project homes built in accordance with them. Unlike the press button seal in Dart v Décor, they were not a physical part of the houses, but, more importantly, were only one of several “selling features”. But evidence was not led from any particular purchaser or purchasers that he, she or they would, or would probably, not have purchased an Eagle project home, and therefore not been a source of profit for Eagle, if the infringing plan not been offered. (Like the High Court in Dart v Décor, I do not think it necessary to decide whether the “reason for sale” or “reason for production” should be emphasised.)

89                  I think the present case relevantly similar to Sheldon v Metro-Goldwyn Pictures Corp,above in which the defendant copied the plaintiff’s play (a literary work) when writing the script (another literary work) for its film. The making of the film itself was not an infringement of the copyright in the play, even though the film could not have been made exactly as it was without infringement of the plaintiff’s copyright in his play, at least unless the defendant had written the same film script fortuitously and without subjective copying. Yet a similar film could have been made without infringement and might have achieved the same level of profit. In the respects just mentioned, the play, film script and film are relevantly and respectively similar to the nine LED floor plans, the ninety infringing Eagle plans and the houses built by Eagle in accordance with those plans. Section 25 (b) of the Copyright Act (US) awarded to a copyright owner “all the profits which the infringer shall have made from [the] infringement”. I do not understand this provision to give a remedy different from the “account of profits” referred to in s 115 (2) of the 1968 Act.

90                  The Supreme Court held that the plaintiff was entitled to only a proportion of the profits from the film which made allowance for the fact that the film’s popularity, and hence profitability, was due not only to the script for it, but also to such factors as its production, direction, identity of its “motion picture stars”, scenic arrangement, music and advertising. The Court affirmed a judgment of the Circuit Court of Appeals which had reversed a decree awarding the whole of the net profits to the plaintiffs and, instead, awarded them only 20 percent of those net profits.

91                  Similarly, Eagle could not have built the very ninety homes that it built in accordance with the infringing Eagle plans without using them, unless it had, fortuitously and without subjective copying, itself drawn the same plans. However, as I have said above and will explain below, the evidence does not establish that the particular clients would not have dealt with Eagle were it not for the infringing Eagle plans. Rather, that evidence has dealt more generally with the factors that are influential in a person’s choice of one project home rather than another. Nor does the evidence suggest that what was taken from LED’s copyright plans made construction less expensive than Eagle would otherwise have found it to be (cf Siddell v Vickers, above). In my view, the profit attributable to Eagle’s infringement of LED’s copyright is that proportion of Eagle’s building profit that fairly reflects the extent to which the infringing Eagle floor plan as opposed to other factors induced customers to contract with Eagle rather than not to do so. Obviously that proportion cannot be arrived at by precise calculation. The Court must do its best to ensure that Eagle disgorges no more and no less than the profit it made from its wrongdoing. In making that assessment, I agree, with respect, with Slade J in My Kinda Town Ltd v Soll, above, at 158-159 that the onus should not be regarded, at least in the first instance, as falling on either party; that the matter should be approached broadly rather than as an attempt at “mathematical exactness”; and that the Court should aim “to achieve a fair apportionment, so that neither party will have what justly belongs to the other”.

92                  I therefore reject LED’s submission that it is necessarily entitled to all profits made by Eagle through its construction of houses in accordance with the ninety infringing Eagle plans. I note that, in conformity with LED’s submission, if Eagle had, in infringement of copyright, reproduced LED’s floor plans and another company’s façades, Eagle would be obliged to account for all its profits twice, that is, to both copyright owners, because the houses could not have been built as they were without infringement of the copyright of both.

93                  On the other hand, contrary to Eagle’s submission, I do not think that the true measure of Eagle’s profits attributable to its wrongdoing is limited to the amount that it saved by using LED’s plans. The plans are not like a patented appliance used in the manufacture of standard products more efficiently and less expensively than they might otherwise have been made. In such a case the profit to be accounted for is the amount saved by the use of the machine (cf Sidell v Vickers, above). In such a case, the making of the sale is in no way attributable to the machinery: the customer is not interested in the process of manufacture or the machinery used in it, but is concerned only with the quality and price of the end product. In the present case, however, the evidence referred to below shows that the floor plans were, at least in part, causative of the clients’ decisions to engage Eagle. Part of the building profits is therefore attributable to the infringing Eagle plans since there was a real chance that the clients might not have contracted with Eagle at all if it had not offered those plans. It is possible, of course, that they would have contracted with Eagle for the building of a different house, but on the evidence referred to below I accept that the showing of the infringing Eagle plans significantly increased the chance that the clients would contract with Eagle rather than contract with another project home builder or not purchase a project home at all.

94                  In referring to the influence of the “floor plan”, I am referring to the infringing drawing itself, not the physical arrangement of rooms and layout, a distinction sought to be drawn by Eagle. The evidence of Valeri is that in the case of the houses under consideration there were two plans. First, there were the “generic plans” which were found by Davies J to infringe and which were used by Eagle at the outset in its dealing with prospective customers. Second, there were the “customised plans” drawn for the particular customers which were the result of modifications made by Eagle to the generic plans in accordance with the customers’ requests. If the client was not satisfied with the customised plan, again he or she might have gone away, whether or not to another project home builder. As noted earlier, the fifty seven houses originally disclosed by Valeri were apparently built in accordance with the nine generic plans and most, if not all, of the further thirty three houses were built in accordance with plans that were “customised” to various extents.

B.        Is LED entitled to an account of profits made from the construction of the two houses built in accordance with non-infringing Eagle plans which were derived from, and would not have come into existence but for, the infringing Eagle plans which preceded them?

95                  The evidence of Valeri is that even in respect of houses built in accordance with the two plans which I have held did not infringe LED’s copyright (plans 22 and 25 – my category (3) earlier), the customer was shown one of the generic infringing Eagle plans which was altered in accordance with the customer’s requirements to create the non-infringing customised plan. Accordingly, the two non-infringing plans were “derived from” LED plans through the intervening infringing generic Eagle plans.  The non-infringing plans according to which houses twenty two and twenty five were built would not have come into existence without the subjective copying and sufficient objective similarity found by Davies J in respect of the generic plan (in both cases the “Oriole 4 Mark I”) but because of the changes made, customised plans 22 and 25 themselves lacked that sufficient objective similarity.

96                  Can part of the profit from the building of these houses properly be seen in these circumstances as attributable to the use made of the generic infringing Eagle plan? If so, in arriving at the proportion in question, one would have to make allowance for the fact that the profit was also made because Eagle altered the generic infringing Eagle plan to meet the customers’ requirements to such an extent indeed that the LED plan was no longer recognisable in the customised plans. One would therefore expect the proportion of profits for which Eagle would be accountable to be less than that for which it would have to account in the case of the ninety houses built in accordance with plans which themselves infringed LED’s copyright.

97                  I think that Eagle is not liable to account in the circumstances described, that is, in respect of plans 22 and 25. The reason is that in my view the building profits are not properly regarded as having been made from the infringement. Eagle’s position in respect of plans 22 and 25 is in substance the same as if it had shown the client the copyright LED plan itself (the Beechwood Essington 1991 with five bedrooms), taken the client’s instructions as to modifications desired, then copied directly from that plan but by reason of the modifications produced the non-infringing customised plans according to which the houses were built. In the circumstances hypothesised, there would have been no intervening infringing Eagle plan, that is, no infringement of LED’s copyright at any stage. I do not think a different result is required merely because Eagle showed the clients an infringing Eagle plan rather than the copyright LED plan “on the way” to the drawing of the customised non-infringing Eagle plans.

C         Is any part of the building profits attributable to site preparation, appliances, PC items, contract variations and extras, and, if so, is Eagle liable to account for part of those profits?

98                  Like Issues 8, 9 and 10 relating to the treatment of overheads, this question goes to the calculation of the building profits made by the infringement. When a project home is built, the customer will pay Eagle an amount which will include charges for the preparation of the site, appliances, prime cost items, variations to the building contract and “extras”. The inclusion of these charges makes Eagle’s profit on the project as a whole greater than it would otherwise be. But site preparation would be necessary no matter what kind of house was to be built and the other charges mentioned are not inherent in the chosen floor plan.

99                  Eagle refers to the following passage from the judgment of Millett J in Potton Ltd v Yorkclose Ltd, above at 19:

“Generally speaking, … the profits ought not in my view to be apportioned by reference to evidence of or speculation about the motives of real or hypothetical purchasers or the relative attractions to such purchasers of different aspects of the work. A better guide is likely to be provided by ordinary accounting principles whereby, in the absence of some special reason to the contrary, the profits of a single project are attributed to different parts or aspects of the project in the same proportions as the costs and expenses are attributed to them. It should, however, also be borne in mind that, as Slade J said in My Kinda Town Limited v Soll ... , what is required on an inquiry of this kind is not mathematical exactness but a reasonable approximation.” (emphasis supplied)

100               On its face and as applied to the ninety floor plans with which I am presently concerned, this passage suggests that LED should receive that proportion of Eagle’s net building profits that corresponds to the proportion of Eagle’s “costs” attributable to the infringing “part” or “aspect” of the project – the drawing of the floor plans. According to this approach, the profit attributable to the elements mentioned in the question is included but because their cost is also taken into account in arriving at the proportion attributable to the production of the infringing Eagle plans, that proportion is reduced commensurately. The inclusion of the charges made by Eagle to its customer for those items in the calculation of Eagle’s building profit might work for or against one party or the other depending on the relationship between the amounts charged for the items and their cost to Eagle, or, more accurately, between two proportions: on the one hand, the proportion between Eagle’s charges for those items and its charge for the entire project, and, on the other hand, the proportion between the cost to Eagle of those items and the cost to it of the entire project.

101               With respect, I have difficulty with this approach as applied to plans or drawings according to which something is built or manufactured. In particular, it seems to me that the persuasive influence of floor plans shown to prospective customers is not sufficiently recognised in the “attribution of profits according to actual costs” formula.

102               Moreover, a copier’s cost of drawing can be expected to be less than what it would be if he or she had drawn his or her own plan without copying. Accordingly, application of the formula described, based as it is on the cost to the infringer of generating the profit, would still allow some profit from the wrongdoing to be kept and not accounted for.

103               Again, the formula would give rise to difficulty in the case of several project homes built in accordance with the one plan. The evidence is that a draftsperson will usually charge a fixed fee for producing a floor plan for a project home rather than seek a royalty. For that reason, the cost attributable to the plan in the case of any one project home built in accordance with it will depend upon the total number of project homes built in accordance with it: the greater the number, the less the amount attributable to the plan in respect of each house. It is no answer to this objection to say that over all the houses the copyright owner will be compensated because the copyright owner, not the copyright infringer, is entitled to the additional profit arising from the infringer’s economies of scale. I note that there is no evidence that a particular amount was treated as the cost of producing the floor plan in the calculation of the cost or price of any of the project homes, at least unless variations were made to the generic plans.

104               Finally, as mentioned earlier, even if it were possible to determine satisfactorily that part of the cost of producing any particular project home that was represented by the cost of producing its floor plan, the formula discussed would not reflect adequately the profit attributable to the plan. The evidence referred to below is to the effect that the floor plan is a significant factor in a customer’s decision to choose a particular project home and a particular project home builder. To award LED simply a proportion of building profit based on the formula would not, in my view, adequately reflect the profit truly made by the reproduction of LED’s floor plans.

105               It seems to me that the profit made on site preparation, appliances, PC items, contract variations and extras should be included because the “pulling power of the floor plans” led directly enough to Eagle’s making of a profit on those elements. In the case of the “variations” and “extras”, it is fortuitous that they are so classified: they might easily have formed part of the original contract and hence given rise to a higher price in, and greater profit from, the original contract.

106               I propose, as I said above, to determine the extent to which the floor plan was influential in a customer’s choice of project home and project home builder and award a proportion of Eagle’s profits on the entire project including the profits made on those elements of the project referred to as “site preparation, appliances, PC items, contract variations and extras”. Eagle would not have made these profits, or any profit, from the particular project if the customer had not chosen to contract with Eagle.

 

D.        What is the proportion of the building profits appropriately attributed to the drawing of the floor plans?

107               The role played by the infringing Eagle floor plans in generating profits was in inducing people to deal with Eagle and in saving Eagle some drawing costs. Both LED and Eagle led extensive evidence from expert architects, management and sales staff of the extent to which the floor plan of a project home is decisive or influential for potential purchasers. I have read and considered all of this evidence but will not attempt to canvas every point made. Rather, I will attempt to set out what I consider to be the salient points made by each witness. Their qualifications to express the opinions they gave were not in dispute. I will deal first with the witnesses called by Eagle (in all the following accounts I have generally, for purposes of brevity, omitted such introductory words as “He said that”).

108               Eagle called Alexander Smith (“Smith”) as an expert architect. His evidence was that there are many factors which contribute to the success of a project home, only one of which is the floor plan. Display homes are popular because they give the public an opportunity to see the external appearance, especially the façade, the internal colours and finishes and the internal volume and spaces, which may be varied by the use of raked ceilings or low dividing walls.  In his experience, perhaps fifty per cent of clients are not able to read floor plans. A client may choose one project home over another simply because of the way in which the display home is furnished or because of the quality of its finishes rather than its floor plan.  Façades are particularly important because they help distinguish between project home builders and are generally the first aspect of a home that a visitor to a display village will see.  Façades differ by the use of different brick colours, face bricks as opposed to a rendered brick finish, the use of posts with verandahs, the different treatment of the gable end of a roof such as the use of a timber lattice, roof treatments such as the use of secondary roofs to break up the roof form, entry porches, different window and door styles, the use of decorative fascia boards and the use of different colours. The style of a façade is not a function of the floor plan. Many floor plans look similar because of site constraints (most sites for project homes are between 12.2 and 15.24 metres wide), the need to keep down costs (for example, by placing wet areas such as the kitchen, bathrooms and laundry near one another), local council and other controls and common accommodation needs (for example the use of “open plan” living/dining areas). Smith concluded:

“Whilst a floor plan is an important factor in a home, there are other important factors which define the home and which are reasons for the saleability of the home.  These other important factors include the exterior appearance of the house and the interior finishes and materials.”

109               Eagle also called Martyn David Chapman (“Chapman”) as an expert architect. For him, the appearance of a home, particularly as manifest in its façade, is a very important factor for potential project home buyers.  At a display village it is the outside appearance which will or will not entice a prospective purchaser to enter.  At this stage the person is usually not aware of the planning arrangement. In his experience project home buyers are particularly concerned with the appearance of a house. He said:

“[t]his concern is not limited to the overall appearance but also to matters of detail, for example: such as the style, type and colour of windows, entrance doors and other detailed aspects such as the roof shape and pitch, whether the roof has gables or hips or a combination of both, colour and design of roof tiles, the architectural ‘style’, type, colour and texture of the bricks, use of other materials to give accent such as timber, tiles, or stone, and the proportion, size and location of window openings.”

110               Philip Allen Dine (“Dine”), a sales consultant for Eagle, gave evidence that in his opinion the external appearance of a house is a critical factor in its saleability. The quality and level of finish and the “standard inclusions” are of critical importance in the project home market.  Many potential purchasers will not even bother entering a display home because of its external appearance.  While a picture of the floor plan is often displayed at the entrance, many potential purchasers will walk by without looking at it. Potential purchasers have often made to him such comments as:

“We are looking for a brick veneer home.”

or

“We do not like that appearance as it is.”

111               A project home cannot be sold unless people come “through the front door” and exterior appearance is the critical factor which determines whether they will do so. Many potential project home buyers do not know that project homes can come in a variety of styles of external and internal appearance.  Even where they do know this, the overwhelming majority of people in the market to buy a project home want to see what their future home will look like, particularly from the outside, before they will commit to a purchase. Dine has never been able to make a sale where the purchaser has been content with the layout of the house but not with its exterior appearance.  Potential purchasers are not able to visualise from an architectural plan what the house will look like.  That is one reason why display centres are so popular.  On the other hand, the fact that many homes which are similarly priced are similar in layout reduces the significance of the floor plan. Purchasers are particularly interested in the quality of the materials and workmanship which Eagle offers and in the standard inclusions offered by it and a significant element in Eagle’s success is its favourable reputation as a reliable builder of quality and “value for money” project homes.

112               Richard Lapinski (“Lapinski”), a real estate agent with “The Professionals”, who have been, since May 1997, the exclusive selling agent for Eagle, said that, in his opinion, the exterior appearance of a house is a critical factor in its saleability. If the exterior is not to the liking of a potential purchaser, he or she will in most cases not consider buying even though the internal layout may meet his or her requirements. Often he has driven customers to a house for an inspection but has been told before the customer has even passed through the front door that the house is not to the customer’s liking.  For this reason, the façade and front appearance are at least as important as the internal layout in selling a house.  Similarly, at display villages customers will not enter a display home unless the outside of the home is to their liking.  About 60 per cent of potential purchasers do not know that any particular project home can be built with any one of several different façades.  Like Dine, Lapinski said that if a customer is not satisfied with the external appearance of a house, he or she will not purchase even though satisfied with the internal layout. Potential purchasers have difficulty in visualising different external styles: rather, they need to see them.

113               Finally, Lawrence Wayne Scutts (“Scutts”), an Eagle sales consultant, gave evidence that the external appearance and the quality and level of inclusions offered in a project home are critical factors in its saleability. Price is the matter of greatest concern to potential purchasers and, generally speaking, Eagle builds houses at very competitive prices while offering a high level of quality inclusions “as standard”.  For example, Eagle includes “as standard”: treated maple wood timber skirting and architraves; gloss paint or stain finish to skirting and architraves; overhead cupboards in the kitchen; built-in wardrobes in three out of four bedrooms (as opposed to one bedroom for most competitors’ products in the same price range); and roof eaves.  Most of Eagle’s competitors do not include these as standard features and this is a reason why Eagle has been successful. A significant element in Eagle’s success has been its good reputation as a builder of quality and “value for money” project homes. Many potential purchasers who have visited the display village at which he works have told him this.  Like Dine and Lapinski, Scutts said that many potential purchasers will not inspect a display home at all because they do not like its external appearance.  Although the floor plan is displayed at the entrance gate to a home, many potential purchasers walk past without even looking at it.  Hence, although the floor plan is important, a project home cannot be sold unless people like its external appearance sufficiently to “come through the front door”.  For these reasons, he concluded that:

“the primary factor in the purchasing decision of people buying a project home is attributable to price and the level of inclusions in it and the appearance of the front of the house.  The layout is secondary to these considerations”.

114               In support of Eagle’s contention that the façade is an important aspect of a project home, Valeri swore an affidavit to which he exhibited an album of photographs of project homes built in accordance with some of the LED plans in question and houses built in accordance with the Eagle plans which have been held to infringe those LED plans.  For example, the photographs include two of the front of an LED “Sussex” and two of the front of an Eagle “Regal Royale”.  Although the plan for the “Regal Royale” has been found to be a reproduction of a substantial part of that for the “Sussex”, the façades of the two are quite dissimilar.  The Eagle home uses different brick colours, gables, roof lines, verandah posts, windows and garage doors to create a different appearance from that of the LED home, despite the fact that the rooms, at least at the front of the house, appear to be in the same position.  A similar level of dissimilarity is apparent between the homes in the other photographs in the album.  Valeri also exhibited to his affidavit publications directed at project home buyers which contain pictures of project homes and diagrams of their floor plans.  He pointed to certain plans in those publications which he said were similar to the Eagle plans which have been found to infringe LED’s copyright.  It is true that the plans to which he points do bear a strong degree of similarity to the plans in suit although there are also some differences.  It is also notable, however, that the publications also contain floor plans for project homes which are quite different from any of the floor plans in evidence that are offered by LED or Eagle.

115               In cross-examination, several of Eagle’s witnesses agreed that most major project home builders have well-presented display homes that are kept in a good state of repair, offer a range of façades, offer high quality finishes, are concerned to have a reputation for reliability, offer competitive prices and employ competent sales staff. They also accepted that LED and Eagle conformed to this pattern. However, they did not accept that it followed that the floor plan was the decisive factor in a customer’s decision to choose one project home builder in preference to another. They agreed only that the floor plan was one factor, albeit an important factor, that operated on the customer’s mind.

116               In cross-examination, Smith reiterated that the floor plans offered by project home builders are also often similar and said that potential purchasers are influenced by many considerations, particularly when they visit a display home. Counsel for LED drew Smith’s attention to an affidavit he swore in other proceedings in which he referred to matters such site and cost constraints and stated:

“Of these items I do not see why any one of them should cause one house design to look like a copy of another. There are many ways to plan a home…”

117               LED submits that this earlier affidavit evidence is inconsistent with Smith’s present evidence. I do not agree. Plans may be generally “similar” without possessing the degree of similarity necessary to raise an inference that one is “a copy of another”. Smith also said in cross-examination that the fact that a project home builder offers a range of façades illustrates the importance of the façade rather than its unimportance in influencing a prospective customer’s decision.

118               Scutts said in cross-examination that

“many of the floor plans between one builder and another are very, very close in design, and style, and often façade. In regard to my particular area, the significant difference between one sale succeeding and one failing is price.”

 

He added later that he would be “most certain in saying that 90 per cent of the sales that [he makes] are geared to the price not the floor plan”.

119               Dine, on the other hand, eventually conceded that “when it comes down to selecting between the houses offered by the competitors in the market and the various houses that are possible for consideration by a customer after the customer has rejected the ones that [are not suitable] ... the significant difference between the houses available” are the differences in floor plans and façades. Chapman also agreed that the important considerations which determine “what project home would be suitable to a client” were “considerations which related to the floor plan”.

120               Lapinski agreed in cross-examination that “the façades offered by Eagle and [LED] are … substantially the same contemporary, traditional, federation and the like”, although he added that “sometimes the roof lines are different”. Dine said that although there are differences between the façades offered by project home builders, the ranges of façades offered by them are “similar”. Chapman, on the other hand, said that the façades he had seen were “quite different in the sizing of windows, the gable treatment and other detailed elements”. It seems to me that the effect of this evidence is that while project home builders offer similar ranges of classes of façade, within any one class the façades on offer from builders will be different, so that, for example, although two project home builders may offer a “Federation” class of façade, the particular Federation façades actually offered by the two will not be identical and will in fact be significantly different. I accept this is so. The conclusion is borne out by project builders’ advertising material that is in evidence.

121               I turn now to the witnesses called by LED.  Laszlo Peter Kollar (“Kollar”) was called by LED as an expert architect. He said that a floor plan is the best two-dimensional representation of a house:

“It is on the plan and on the plan alone that the horizontal extension of any space can be clearly and directly represented.   This is of vital interest to anyone intending to occupy the spaces, since the adequacy of the space is characterized, first and foremost, by the dimensions of its horizontal area, the vertical height being assumed to be typical and adequate.  

It is by the plan and by the plan alone that the relation of the rooms in the house to the surrounding environment can be understood.  Relation to the street, to north, south, east and west, to neighbours, to the natural features of the land can be best assessed from the plan.  Even more crucial is the information about the relationship of the internal spaces, rooms, to each other, since they all serve a different purpose and affect the physical, mental, even spiritual well being of the occupants.   This inter-relationship is clearly legible on the plan and on the plan alone: here the questions of privacy, outlook, orientation, noise, circulation, flow of life, security, openness, and so on, will be endlessly examined and compared by the future occupants.”

122               The importance of the floor plan was well recognised by project home builders, who commonly marketed their homes by means of an attractive brochure featuring predominantly a photographic image and the floor plan.  Although potential purchasers may be able to conceive of what it would be like to live in a home by walking through a display home, the experience of doing so is “inaccurate, fleeting, unclear and untrustworthy, especially if several homes are inspected by the purchasers in succession”.   It is for this reason that project home builders provide copies of the floor plan that can be taken away to be studied, compared and referred to at leisure. The number of different floor plans offered by project home builders is evidence of the importance of the floor plan to prospective purchasers.

123               Kollar contradicted evidence given by Valeri that the plans of many low cost project homes are similar as a consequence of price and site limitations: that is, the cost to build and the size and other physical features of the block of land.  According to Kollar, although such constraints exist, there remain unlimited potential variations. Similarities may well result from copying rather than from price and site limitations.

124               Finally, Kollar addressed the question of the importance of the façade (that is, the external vertical appearance) of a project home to a prospective purchaser. The façade is dictated solely by the client’s taste. Different types of façade are available for each floor plan produced by the major project home builders. This interchangeability rendered façades a non-essential element of a project home as a whole.

125               Gerald Rene Rihs (“Rihs”) was also called as an expert architect for LED. He gave evidence that the design of any house or other building is generated by the floor plan and the internal and external appearance of a house is, to a large extent, dependent on the floor plan.  Like Kollar, Rihs noted that the brochures distributed by project home builders emphasise floor plans. The comments of most visitors to display home villages observed by Rihs related to the relationship of the separate living areas (usually the living/dining/kitchen/breakfast/ master bedroom areas) to each other.  He said:

“Whilst other factors form part of the decision of a purchaser to eventually choose one project home over another, it is in my opinion the floor plan which is the most important factor which a potential purchaser considers when purchasing a project home”.

126               Like Kollar, Rihs addressed the possible reasons for the similarity of project home floor plans. Cost and site limitations have an impact but so do “social conditions” and local council and other regulations.  He was aware of instances of builders copying other builders’ plans. As for the external appearance of a project home, the choice of façade is a matter of personal taste. Many different façades could be applied to a single floor plan without any need for adjustment to the floor plan.  From this interchangeability Rihs concluded that the façade is not an essential characteristic of a project home.  He conceded that if the outside of a project home in a display village was not to the liking of a potential client, that client might not go inside to inspect the plan.  However, a purchaser will ultimately live inside the house and the relationships between rooms and between rooms and the outside environment are more influential than the façade. 

127               William James Thompson (“Thompson”), the General Manager of LED, also gave evidence that the floor plan has the greatest influence on the decision to purchase. Brochures distributed by project home builders and publications such as the “Project Home Buyers Guide” feature floor plans prominently.  Some advertisements contain a description of all or part of the floor plan as well as the diagrammatic representation of it.  Thompson conceded that the façade may be an important consideration for a purchaser but noted that a façade was a matter of personal preference, and that Eagle and LED both offered a range of façades with similar names; for example, “Colonial”, “Federation”, “Victoriana” and “Traditional”. It is common in the project home industry for builders to vary house plans to suit particular clients’ needs or preferences, although such variations preserve almost the whole of the original floor plan, differing from it in only minor respects. 

128               John Joseph Carson (“Carson”), a director and the chief executive officer of LED (South Coast) Pty Ltd and LED (North Coast) Pty Ltd and former Construction Manager, Sydney of Masterton Homes (NSW) Pty Ltd, said that in his experience project home builders only manage the construction of project homes they sell. That is, they do not construct the homes.  Rather, the building work is sub-contracted out and the construction materials are purchased from suppliers.  Carson is not aware of a project home building company that operates in any other way. For this reason the construction of project homes is “largely administrative” and the essential tasks are to obtain council approvals and to organise sub-contractors and materials.  Carson disputed Valeri’s statement that the plans of many low cost project homes are similar as a consequence of price and site limitations. Rather, similarities are often due to copying. Purchasers will often choose a project home before purchasing a block of land and even if clients like a particular project home which will not fit on their land, the dimensions of the house can be varied so that it does fit. If a project home builder does not offer a range of project home plans, it will not be as successful as one that does so. The project home building industry is “price competitive”; if a client likes a particular floor plan, that plan rather than price will determine whether there is a sale; and part of the skill involved in designing a floor plan is to create something unique which appeals to buyers and represents good value for money. 

129               Romano, the Design and Purchasing Manager of LED, said that the time taken and skill required to design a floor plan is considerably greater than that for a façade.  When designing a new project home, he does not consider the façade until the floor plan is “about 95% finalised”.  He may then alter the floor plan slightly in order to suit a particular façade. A floor plan will affect the appearance of the façade, although certain parts of the façade, such as the colour of the bricks, the colour of the tiles, gables, fascias, type of verandah posts and the like, are simply decorative items which are chosen by the purchaser according to his or her taste.  Although factors such as the builder’s reputation, the façades offered and the price are important for prospective purchasers, most project home companies are similar in these respects and they differentiate themselves by creating unique and appealing floor plans. In particular, the success of LED’s project homes depended primarily on its floor plans and whether or not they represented good value for the price of the home. In his experience “a house is selected by a potential purchaser for its floor plan and the potential purchaser pays considerable regard to it”. The dimensions of a site do not significantly limit the range of floor plans available, particularly as the size of a house can be increased or decreased. Customers will usually consider the house they want to buy in conjunction with the purchase of a suitable block of land, rather than choose the land first. Eagle and LED offered similar façades, including “Colonial”, “Federation”, “Traditional” and “Victorian” façades.

130               Philip Haigh (“Haigh”), LED’s Director of Sales, said that in his experience it is the floor plan of a project home more than any other feature that determines the success of the home. The most significant aspects of the floor plan are the kitchen, the dining room, the lounge room and the master bedroom. When potential clients first see a project home, they are most concerned with the floor plan. This concern is demonstrated by comments which he often heard, such as:

“I like (do not like) the location (shape) of that (those) room(s)”

and

“Where will I be able to put my furniture?”

131               Most project home builders charge prices based on similar amounts per square metre, have experienced, competent sales staff, offer a similar range of façades for their floor plans, and offer a similar range of inclusions. Haigh provided a comparison of the standard inclusions offered by Eagle and LED. The comparison shows that the inclusions are, indeed, very similar: examples are bathroom fittings, wardrobes, kitchen fittings, doors and electrical fittings. For the reasons mentioned, most project home companies try to differentiate their products by designing unique and appealing floor plans and it is important for a project home building company to offer a range of plans from which prospective clients can choose.  In response to Valeri’s evidence that floor plans of low cost project homes are often similar because of price and site limitations, Haigh said that successful project home builders often offer a range of different floor plans; that customers rarely purchase their land before choosing a project home; and that a floor plan can be altered by increasing or decreasing the width of rooms or by adding a room. Almost all prospective clients are aware that project home builders offer a range of façades for each floor plan and they spend little time looking at the outside of the house.  Rather, they spend most of their time inside considering the floor plan; that is, the shape of the rooms, how the rooms relate to each other, how they relate to the outside environment, where the person can put his or her furniture, and how a floor plan compares to other floor plans the person has seen. Prospective purchasers often indicated to him, when asking for a price, that they had not thought about façades. LED had not, to his knowledge, ever lost a sale because the prospective client did not like the outside appearance of a home even though he or she liked the floor plan.

132               In his cross-examination of Kollar and Rihs, senior counsel for Eagle sought to have them acknowledge a distinction between the drawing of the floor plan on the one hand, and the floor plan in the sense of the actual position of walls, door, windows and the like in the physical house on the other. Both witnesses considered the distinction somewhat artificial. Kollar said:

“the distinctions are very difficult to draw. One is the representation of the other. My drawing here represents the real thing at the lower scale, at the smaller scale, and of course, they are not same materials and so on and so forth but the two talk about the same thing”.

133               Rihs said:

“the floor plan which you can see, is three dimensions, is the same floor plan that what [sic] has been drawn. It is just its practical and physical interpretation”.

134               I also think that the distinction is not of great significance when one is assessing the influence of an infringing Eagle plan which was in fact produced to a prospective customer. Obviously a house, or a display home, will “resemble” the floor plan: the horizontal cross section of the house will be a representation on a larger scale of the floor plan. Similarly, the floor plan will convey to prospective customers, on a smaller scale and in general terms, the layout and proportions of the rooms in the physical house to be built.

135               I accept, however, Eagle’s submission that the floor plan is not the sole or even the predominant factor in a customer’s choice of one project home or one project home builder in preference to another. All the factors mentioned in the evidence referred to above will assume importance to different extents as between customers. To take one example, while there may not be a great difference between the prices offered by different project home builders, it was not suggested, and it is difficult to accept, that prices are so similar that price ceases to be a consideration. Some of the evidence, such as that of Scutts, was to the contrary. It is not hard to imagine that even variations of a couple of thousand dollars may be decisive in some cases. Similarly, although project home builders offer a range of façades with the same or similar generic names, I accept that there are significant differences between those actually offered by various project home builders and that the exterior appearance of a house is of considerable importance to the customer. Again, the evidence shows that a project home builder’s reputation for “quality of finishes” and for “reliability” is an important influence.

136               Notwithstanding all this, I do think that the floor plan is an important, if not one of the most important single factors influencing a prospective purchaser of a project home. While floor plans for project homes within the same price range will, for various reasons, have some similarities, I think it clear that one may be more appealing than another. Indeed, Davies J found in his Reasons for Decision of 29 July 1996 that LED’s designs were more successful in the market than Eagle’s and that this was a motive for Eagle’s copying of LED’s plans.

137               A further factor to be taken into account in any assessment of the proportion of profits attributable to the infringing Eagle plans is that the customers who chose such plans may have chosen the non-infringing Eagle plans available if the infringing ones had not been offered. I do not think that the infringing plans were so essential in the decision–making process that all those customers necessarily would have contracted with another builder in preference to choosing another non-infringing Eagle plan. I take into account the fact that as a result of whatever circumstances, prospective customers are, ex hypothesi, interested in purchasing a project home from someone and are in conversation with Eagle’s salespersons. Whether because of considerations of their own convenience or because of the salesmanship of Eagle’s staff, they may well have had an underlying predisposition in favour of contracting with Eagle.

138               Doing the best that I can, in my view a fair assessment of the proportion of net building profits attributable to the infringing Eagle floor plans is 35 per cent. That is, I think that Eagle’s chance of selling project homes was increased by reason of the infringement to the extent that 35 per cent of the customers who contracted with Eagle for a house to be built in accordance with an infringing Eagle plan would not have contracted with Eagle at all were it not for that infringement.

139               I have arrived at the percentage of 35 per cent as a result of a process of assessment and evaluation of all the evidence, much of which I have referred to in summary form earlier. It seems appropriate to note that in my assessment a percentage less than 20 per cent would unjustifiably treat the floor plan as insignificant, that a percentage exceeding 50 per cent would unjustifiably treat it as more influential than all other factors combined and that in arriving at the figure of 35 per cent I have resolved any doubt in favour of LED.

Issues 8, 9 and 10

8.         Has the respondent discharged the onus of establishing that an allowance should be made for overheads.

 

9.         If so, the applicant contends that the issue is whether that allowance should be calculated on an incremental basis or an absorption basis.  The respondent contends that the issue is whether the absorption basis is a reasonable basis of allocation.

 

10.       If the allowance is to be calculated on an absorption basis, then should overheads be allocated on the basis of revenue or average cost?

140               Before turning to these issues, I find it necessary to discuss at some length the notion of the profit which Eagle made on the building and sale of its project homes.

141               The parties are agreed that the gross profit made by Eagle on the fifty seven houses built in accordance with plans originally disclosed by Valeri in his affidavit of 13 September 1996 was $1,150,753 – an average gross profit of $20,189 per house. The gross profit figure represents the revenue to Eagle from the construction of the houses on the customers’ land minus direct construction costs.

142               The parties are also agreed that the gross profit made by Eagle on the twenty three houses built in accordance with plans 1, 2, 3, 4, 5, 6, 10, 11, 12, 18, 20, 21, 27, 31, 32, 34, 35, 36, 37, 43, 44, 45 and 46 is $481,599: an average gross profit of $20,939 per house.  This gross profit figure was calculated in the same way.

143               The parties are in dispute as to the gross profit made on the sale of the six display homes. They were built by Eagle in accordance with generic infringing Eagle plans. Eagle contends that part of the profit should be attributed to the land, that is, Eagle’s land, as distinct from the houses themselves and should be excluded from the profits for which Eagle is accountable. Trevor John Vella (“Vella”), an expert accountant called by Eagle, said that it should be assumed that Eagle was generating profit on building the display homes on its own land at the same rate as that at which it was generating profit from building project homes on its clients’ land.

144               Vella’s approach can best be explained by an example. In respect of the display home built in accordance with plan 8, the land was bought by Eagle in June 1993 for $82,332, the house was built by Eagle at a cost of $77,525, and the evidence suggests that the house and land were sold in December 1993 for $215,000 although the accounts for both LED and Eagle treated it as having been sold in 1994. It was not disputed that the average rate of that gross profit in 1994 was 19.64 per cent, that is, the gross profit expressed as a percentage of the revenue from building in that year was 19.64 per cent.  Of course, there was no allocation of an identified part of the sale price of $215,000 to the house or to the land. But if the building profit is 19.64 per cent of the revenue from building the house, $77,525 must be 80.36 per cent (100 per cent-19.64 per cent) of that revenue. The deemed selling price of the house alone can thus be calculated to be $96,472, giving a building profit of $18,947.

145               LED disputes this approach. It does not submit that if Eagle establishes distinctly the profit it made on building the house as distinct from the profit it made on selling the land, the former and not the latter should be accounted for. But it submits that Eagle has not established these matters with the result that it should be required to account for the whole profit made on the sale of the house and land.

146               LED points out that, using Vella’s methodology, the proceeds from the sale of the land as distinct from the house would be ($215,000) – ([$77,525 + $18,947] = $96,472) = $118,527, giving a notional appreciation of $118,527 minus the cost of purchasing the land of $82,332, that is, of $36,195. This represents a 44 per cent increase in the value of the land over a period of only six months between the purchase of the land and the sale of house and land.  LED submits that this level of appreciation is unrealistic.  It also submits that Eagle’s approach ignores, first, the fact that Eagle would reasonably expect a greater return from the building of a display home because it will have risked its own capital and, second, the fact that people will pay more for a completed house into which they can move immediately as against one to be built in the future.  It submits that in the absence of an appropriate method for determining the amount of gross profit attributable to the building and sale of the display home itself, the total gross profit realised on the sale of house and land together should be accounted for: that is, the sale price of $215,000 minus the cost price of the land of $82,332 and the cost of building the house of $77,525, giving a gross profit of $55,143 as the amount to be accounted for. On this approach, the profit component ($55,143) of the revenue attributable to the construction of the house ($55,143 + $77,525 = $132,668) would be 41.6 per cent and the appreciation in the value of the house would be 71 per cent.

147               Eagle submits that just as an appreciation of 44 per cent in the value of the land over a period of only six months may be suggested by LED to be unrealistic, an appreciation in the value of the house of 71 per cent in respect of, apparently, a slightly shorter period (the house would have been built a little after the land was purchased) is similarly unrealistic, particularly given the fact that the display home’s value would have depreciated as a result of the fact that many people had walked through it.  It also submits that there is no evidence to support the assertion that Eagle would expect a greater return by risking its own capital. 

148               In my view, Vella’s approach provides a fair basis for apportioning the profit realised upon sale, as between house and land.  While it is true that Eagle may be able to charge more where the purchaser is able to move into the home immediately, it should also be recognised that the home would have depreciated by virtue of the fact that it had been used as a display home.  Therefore, I do not think it inappropriate to use the average gross profit derived by Eagle on non-display homes as a guide for calculating the gross profit realised by it on the sale of display homes.  Although the result is that the value of the land must be taken to have risen greatly over a short period, this may not be unrealistic: for example, it may be that the area was undeveloped when the land was purchased but housed a community by the time the land was sold.  Of course, this is speculation; however, I think it more realistic to say that the land appreciated by 44 per cent in the six month period than that Eagle was able to obtain a gross profit on the building of display homes more than double that which it was able to obtain on non-display homes. 

149               Adopting Vella’s approach and the years of construction and construction costs in his affidavit, the gross profit on the six display homes is $130,466 made up as follows:

Plan number	Year	Construction cost	Average gross profit Per project home for the year	Gross profit
8	1994	$77,524	19.64%	$18,947
9	1994	$108,740	19.64%	$26,576
16	1992	$73,055	22.66%	$21,377
17	1993	$97,954	24.86%	$32,408
28	1994	$68,988	19.64%	$16,861
29	1995	$60,872	19.02%	$14,297
			Total	$130,466

150               In respect of the three plans for houses for which the construction costs and sale prices are not available (plans 15, 19 and 30), the parties agree that it is appropriate to apply a notional gross profit margin calculated by applying the average gross profit percentage to Eagle’s average cost to build project homes for the years in which those houses were built.  On this basis, the gross profit in respect of those three houses is $74,701. 

151               The house built in accordance with plan 39 was built at a loss.  Therefore, LED claims damages rather than an account of profits in respect of that plan. LED’s claim for damages is discussed below under the heading “Issue 6”.

152               The total gross profit for the 32 of the 45 further plans in respect of which LED claims an account of profits is therefore $686,766, giving a grand total of $1,837,519 for all eighty nine houses in respect of which LED claims an account of profits, made up as follows:

Agreed gross profit on the fifty seven houses originally

disclosed in Valeri’s affidavit (para 141 above)                                         $1,150,753

Agreed gross profit on twenty three further houses

(para 142 earlier)                                                                                        $481,599

Gross profit on six display homes (para 149 above)                                     $130,466

Gross profit on three further houses for which construction

costs and sale prices are not available (para 150 above)                                 $74,701

                                                                                                                _________

                                                                                                                $1,837,519

                                                                                                                ========

153               If I were to apportion the building profits at this stage using the figure of 35 per cent which I have found to be a reasonable apportionment, I would come to a figure of $643,131.65 (35 per cent of $1,837,519). However, as issues 8, 9 and 10 indicate, Eagle claims that the gross profit figure should be reduced to take into account some of the overheads which it incurred in making those profits. LED, on the other hand, submits that no overheads should be taken into account because Eagle has not shown that the production of those gross profits involved any opportunity cost.

154               LED points to the evidence of Valeri given during cross-examination to the effect that between 1990 and 1993 Eagle could have built an extra one or two houses per month and that between 1994 and 1996 it could have built an extra five houses per month as establishing that Eagle had surplus capacity during the relevant period. It submits that it follows that Eagle did not forego any opportunity by building the houses in accordance with the infringing plans and that the general overheads incurred by Eagle during that period would have been incurred in any event.

155               In Dart v Décor, the respondent (“Décor” – there was a second respondent, Rian Tooling Industries Pty Ltd, but I will refer only to Décor) claimed that the profits for which it was liable to account should be reduced to reflect its general overheads. The appellant (“Dart”) submitted that only the costs directly attributable to the manufacture and sale of the infringing products should be deducted, “[o]therwise, the defendant would be able to deduct expenditure which it would have incurred in any event” (at 113). It relied on a statement by Harvey CJ in Eq in Leplastrier & Co Ltd v Armstrong-Holland Ltd (1926) 26 SR (NSW) 585 at 593 that “the test which is to be applied is that the only expenses which can be deducted are those which were solely referable to the manufacture of the [infringing articles]”. In a joint judgment, Mason CJ, Deane, Dawson and Toohey JJ said (at 113-115):

“Not only does Dart rely on the passage cited from the judgment of Harvey CJ in Eq but it maintains that the same principle is to be seen in the judgment of Windeyer J in Colbeam Palmer Ltd v Stock Affiliates Pty Ltd. That was a case of infringement of a trade mark in which Windeyer J ordered an account of profits. In doing so, he directed that the cost of selling and delivering the infringing articles be taken into account. But he added [(1968) 122 CLR, at p 39]:

‘This will include any costs directly attributable to such sales and deliveries. But it should not, I think, include any part of the general overhead costs, managerial expenses and so forth of the defendant's business, as it seems that all these would have been incurred in any event in the ordinary course of its business in which as it was put in evidence the painting sets were a “side line”.’

The explanation of the direction given by Windeyer J is that mentioned by him, namely, that the infringing articles were a side line. There appears to have been unused capacity in the defendant’s business in the form of overheads which would have been incurred whether or not the infringing articles had been sold and delivered. The sale and delivery of the infringing articles took up that surplus capacity or some of it, and none of the overhead costs was attributable to the infringing activities because those costs would have been incurred in any event.

 

But there was no evidence in this case that Decor or Rian had unused or surplus capacity. There was evidence that the infringing canisters were an integral part of one consistent product range produced, marketed and sold according to a common system. From this it might be inferred that, had those companies not been engaged in the manufacture and marketing of the infringing press button seal canisters, their capacity for those activities would have been taken up in the manufacture and marketing of alternative products.

Thus the cost of manufacturing and marketing the press button seal canisters may have included the cost of forgoing the profit from the manufacture and marketing of alternative products. The latter cost is called an opportunity cost. ‘Opportunity cost’ can be defined as ‘the value of the alternative foregone by adopting a particular strategy or employing resources in a specific manner ... As used in economics, the opportunity cost of any designated alternative is the greatest net benefit lost by taking an alternative.’ [Kohler’s Dictionary for Accountants, 6th ed (1983), pp 362-363]. The practical reality of this concept was recognized in Schnadig Corp v Gaines Manufacturing Co Inc [(1980) 620 F 2d 1166, at p 1175], where the Court stated: ‘The alternative available uses of the facilities devoted to the infringement must be considered, and these too will vary.’

In calculating an account of profits, the defendant may not deduct the opportunity cost, that is, the profit forgone on the alternative products. But there would be real inequity if a defendant were denied a deduction for the opportunity cost as well as being denied a deduction for the cost of the overheads which sustained the capacity that would have been utilized by an alternative product and that was in fact utilized by the infringing product. If both were denied, the defendant would be in a worse position than if it had made no use of the patented invention. The purpose of an account of profits is not to punish the defendant but to prevent its unjust enrichment.

Where the defendant has forgone the opportunity to manufacture and sell alternative products it will ordinarily be appropriate to attribute to the infringing product a proportion of those general overheads which would have sustained the opportunity. On the other hand, if no opportunity was forgone, and the overheads involved were costs which would have been incurred in any event, then it would not be appropriate to attribute the overheads to the infringing product. Otherwise the defendant would be in a better position than it would have been in if it had not infringed. It is not relevant that the product could not have been manufactured and sold without these overheads. Nor is it relevant that absorption method accounting would attribute a proportion of the overheads to the infringing product. The equitable principle of an account of profits is not to compensate the plaintiff, nor to fix a fair price for the     infringing product, but to prevent the unjust enrichment of the defendant.

Of course, further possibilities may in some cases be open on the evidence. Overhead costs might have been increased by the manufacture and sale of the infringing product, or overhead costs might have been reduced had the infringing product not been produced. In either case it may be appropriate to attribute the difference in overhead costs to the infringing product.”

156               Their Honours concluded (at 119-120) that the respondents were at liberty to show that various categories of overhead were attributable to the obtaining of the relevant profit and to show how and in what proportion they should be allocated. They said (at 119):

“ ..., the Court must consider such questions as whether the overheads in any particular category were increased by the manufacture or sale of the product, whether they represent costs which would have been reduced or would have been incurred in any event, and whether they were surplus capacity or would, in the absence of the infringing product, have been used in the manufacture or sale of other products. Dealing with the last of these questions may require the use of the concept of opportunity cost. If any of the categories are to be brought into account, the proportion to be allocated to the infringing product must be determined and it is here that approximation rather than precision may be necessary. But such an approach has long been accepted.”

157               The authors of the joint judgment did not hold that either an incremental approach or an absorption approach should be applied in every case. Rather, the choice depends on the facts of the particular case. For example, if the infringing product was a small side line added to the integral part of the infringer’s business and the general overheads would have been incurred to sustain that core business in any event, an incremental approach would be appropriate in respect of the side line: that is, only those overheads which were increased or decreased according to increases or decreases in the infringing manufacture of the side line products should be taken into account: see, for example, Levin Bros v Davis Manufacturing Co 72 F (2d) 163 (8^th Cir, 1934) at 165-166. On the other hand, if the infringing articles were produced in the course of the infringer’s core business and the infringer would, in the absence of the infringing products, have produced other articles (that is, if the production of the infringing articles involved an “opportunity cost”), it would seem appropriate to apply the absorption method: that is, to allocate a percentage of general overheads (such as rent, electricity and wages) to the infringing items: see, for example, Tremaine v Hitchcock & Co (“The Tremolo Patent”) 90 US 518 (1874); Sheldon v Metro-Goldwyn Pictures Corp 106 F 2d 45 (2^nd Cir, 1939), affirmed 309 US 390 (1940). (LED submits that in Sheldon an incremental approach was taken but I do not agree: the passage at 106F 2d 54 suggests that a proportion of general fixed overheads was to be deducted and if it were otherwise the apportionment described at 106F 2d 52-53 would have been unnecessary.)

158               If some fixed overheads contributed to the manufacture and sale of the infringing items while others did not, the infringer should be allowed a deduction for only those that played some part in the manufacture and sale of the infringing items. For example, if the infringer leased two factories, only one of which was used in the manufacture of the infringing items, it seems that the costs of leasing the other factory and of providing electricity and other services to it should not be taken into account.

159               In the view of the fifth member of the Court in Dart v Décor, McHugh J, any part of the general overheads that assisted in deriving gross revenue from the infringing product is a deductible expense; the absorption method of cost accounting rather than the incremental (or marginal) method is the appropriate method of accounting for general overheads in a case of infringement; the defendant/infringer bears the onus of showing which overheads assisted in the production or sale of the infringing product and of providing a fair basis (such as, sales ratio) for allocating overheads; and “side line” activities should not be treated as an exceptional case in which an allowance for general overheads is necessarily impermissible. His Honour described the two accounting methods as follows (at 126, citations omitted);

“To determine the cost of a particular product, cost accountants use the incremental method of accounting and the absorption method of accounting. ‘Incremental (or marginal) cost’ has been defined as ‘the change in aggregate cost that accompanies the addition or subtraction of a unit of output’. The incremental method is generally used for setting short term prices and for one-time tactical decisions. It focuses on the marginal difference in costs (or revenues) as a result of adding a unit of production. In contrast, the ‘absorption (or average or full costing)’ method allocates all fixed costs between the products of the business.”

160               The present case raises considerations in relation to “opportunity cost” different from those in Dart v Décor. In that case the infringers manufactured a product and then tried to sell it: they did not manufacture only to meet orders already placed with them. Such a manufacturer’s production is dependent, not directly upon demand, but directly upon the capacity of its machines and its employees and its estimate of demand. If the machines and employees are not operating to their full potential the manufacturer may be said to have surplus capacity. It seems to me that the authors of the joint judgment in Dart v Décor  were saying that if such a surplus capacity was taken up, in whole or in part, by the manufacture of an infringing “side line” product, it should not necessarily be inferred that the infringer would have exploited that surplus capacity if it had not made the infringing side line product; rather, the surplus capacity was to be treated as surplus capacity for present purposes, notwithstanding that it was in fact exploited in the manufacture of the side line. Accordingly, the infringer would be entitled to deduct only those overheads that were increased by the production of the infringing side line items, that is, those overheads that would not have been incurred in any event.

161               In the present case, except in the case of display homes (which were obviously going to be limited in number), Eagle did not build a house until a customer contracted with it. Valeri’s evidence was that Eagle always tried to “maximise sales” and to that end its sales staff were remunerated to a substantial extent on a commission basis. He said that if the sales staff were told to stop selling, he would expect them to be upset because of the (low) level of that part of their remuneration that was not dependent on sales (“retainer” as distinct from “commission”).  He said that to his knowledge a customer had never been told that Eagle was too busy to take any more orders. Valeri agreed that if Eagle received an “extra order” a month it would build an extra house a month and if it received an extra three orders a month it would build an extra three houses a month. He said that Eagle could handle an additional five houses a month but not an additional fifty

162               It is important to emphasise that Eagle does not itself employ the tradespersons who build the project homes and does not own building machinery, plant or equipment (“other than a couple of brick saws”). Eagle has sales, administrative and clerical staff but contracts out architectural drafting, site preparation and all aspects of the building work, such as carpentry, plumbing and electrical work. According to Valeri, if it needs employees, it contacts “a local employment agency or college or something like that”. Of course, Eagle has office equipment such as photocopying and facsimile machines. While Valeri’s evidence may suggest “surplus capacity” in the sense that Eagle could have built more houses, such a conclusion would ignore the fact that Eagle did not build a house until it had an order. I do not think it possible to say that Eagle had a relevant surplus capacity.

163               In any event, the concept of surplus capacity is relevant only in so far as it bears upon the issue of opportunity cost. That is, the existence of surplus capacity may give rise to an inference (but no more than an inference) that the infringer would not have found an alternative to the infringing product, whereas a lack of surplus capacity will give rise to the opposite inference: Dart v Décor at 113-114. In my view, Eagle did incur an opportunity cost by offering the infringing Eagle plans. Valeri agreed in cross examination that “there was never a time when Eagle did not seek to develop a new plan if it saw an opening in the market for it”. I do not think that Valeri’s evidence can be interpreted as meaning that Eagle had developed all the plans it could develop and that if it had not offered the infringing plans no other non-infringing plans would have taken their place. Obviously, there is a limit to the number of plans a project home builder will offer at any one time. For one thing, it would be impractical to build 100 display homes to promote 100 different plans. I infer from Valeri’s evidence that if Eagle had not produced and offered the nine generic infringing Eagle plans it would, in order to “maximise sales”, have produced and offered other plans in their place, perhaps adopting some “ideas” and “concepts” from the nine successful LED copyright plans without reproducing them. In fact, Valeri gave evidence that part of Eagle’s response to the commencement of the present proceedings was, in 1995, to develop a new range of project home plans.

164               I also consider that the infringing plans were not a side line in Eagle’s business activity but were “an integral part of one consistent product range produced, marketed and sold according to a common system” (Dart v Décor at 113). Between 1991 and 1996, Eagle sold 581 homes. I have held that eighty seven of them were built at a profit in accordance with infringing Eagle plans (it appears that the other two of the eighty nine houses built at a profit in accordance with infringing Eagle plans were built in 1997).

165               I therefore think that Eagle did incur an opportunity cost in offering the infringing plans and accordingly is entitled to an allowance for general overheads on an absorption basis.

166               LED submits that, despite the foregoing, Eagle is disentitled to such an allowance by reason of its flagrant conduct. It refers to O 39 r 7 of the Federal Court Rules which provides that “[i]n taking an account under a judgment or order, all just allowances shall be made”. It also refers to cases such as Timber Engineering Co Pty Ltd v Anderson [1980] 2 NSWLR 488, United States Surgical Corp v Hospital Products International Pty Ltd [1983] 2 NSWLR 157 at 242-243 and Australian Postal Corporation v Lutak (1991) 21 NSWLR 584 at 596, which, it says, demonstrate that no allowance for overheads will be made in the case of a fraudulent breach of fiduciary duty. In support, it refers to the matters on which it relies in support if its claim for additional damages discussed below.

167               While I decide below that LED is entitled to some additional damages, I do not accept the present submission. The purpose of an account of profits for infringement of copyright or other intellectual property is, as noted earlier, not to punish, but to prevent unjust enrichment by compelling the infringer to disgorge the profit actually made.As the High Court held in Warman International Ltd v Dwyer (1995) 182 CLR 544 at 557, “the liability of a fiduciary to account differs from that of an infringer in an intellectual property case”. The conduct of a defendant is simply irrelevant in assessing the profit it actually made from its infringement. The cases referred to by LED, on the other hand, all related to questions of “just allowances” to a wrongdoing trustee or fiduciary for his or her personal effort: see also Phipps v Boardman [1965] Ch 992 at 1020-1021 (Lord Denning MR).

168               Having concluded that Eagle is entitled to a deduction for overheads on the absorption basis, I turn to the question of the basis of allocation, that is, how the proportion of overheads allocable to any one house is to be determined. The joint judgment in Dart v Décor states (at 118):

“the onus is on the infringer to provide a reasonably acceptable basis for allocation. This may be the basis of allocation typically used by a manufacturer in that industry.”

169               In his first affidavit filed 13 March 1997, Vella provided two potential bases of allocation: “revenue” and “average cost”. According to his revenue basis, the proportion that Eagle’s overheads in the year in which the infringement occurred bore to its total revenue for that year should be applied to the revenue generated by each house built in that year in accordance with an infringing Eagle plan, to determine that part of the year’s overheads attributable to that house. According to Vella’s average cost basis, on the other hand, the part of the year’s overheads attributable to such a house is simply Eagle’s total overheads for the relevant year divided by the number of houses built in that year.

170               In Sheldon v Metro-Goldwyn Pictures Corp, above, the Circuit Court of Appeals for the Second Circuit affirmed the Master’s decision to apportion on a third basis, namely, the “cost of production” (in that case the cost of making films) rather than either “revenue” or “average cost”. Delivering the opinion of the Court, Learned Hand J said (at 52-53):

“to make a perfect allocation one would have to examine what part of the time of all the employees whose pay went into the ‘overhead’, was given to each picture; and so of the other expenses. That was obviously impossible. It is on the whole more likely that a given picture required that proportion of the general services represented by its cost of production, than that each picture shared those services equally. The last is a very remote possibility indeed; the first is more likely to conform to the facts, if we could know them. The master’s solution appears to us as nearly right as was practically possible.”

171               In Wilkie v Santly Bros Inc 139 F 2d 264 (1943), on the other hand, the Circuit Court of Appeals for the Second Circuit applied the “average cost” basis. In that case the defendant had published a song which infringed the plaintiff’s copyright. The infringing song was by far the best seller of the forty seven songs published by the infringer in the year in question. To apportion on the basis of the number of copies of the particular song sold would have allocated an unduly large percentage of the overheads to each infringement. Chase J, who delivered the opinion of the Court, said (at 265):

“it was fair to treat the [indirect overhead] as of equal assistance to the publication of each [song], since in the aggregate they all required it, and to divide it accordingly. Surely this fixed overhead was not of more assistance to the publication of the infringing song because the sales of it were comparatively large. Nor was the part these expenses played in the publication of the [defendant’s] other songs any less by reason of the smaller demand and consequently smaller sales of them.”

172               In both of these cases, the Court applied the method it thought most appropriate in the circumstances, invoking the proposition that “[t]here isn’t any hard and fast rule except that in an accounting for profits by an infringer they must be determined as fairly and as accurately as the circumstances of the case will permit”: Wilkie v Santly Bros Inc, above,at 265.

173               In the present case, Eagle contends for the revenue basis of apportionment, while LED supports the average cost approach. There is a difference in result although it is not great. According to the expert accountant called by LED, Deborah Anne Cartwright (“Cartwright”), the net profit on the 57 houses disclosed in Valeri’s affidavit of 13 September 1996 is $680,909 if overheads are attributed to houses on the revenue basis and $719,608 if they are attributed on the average cost basis, a difference of only $38,699. The amount of $38,699 is 5.68 per cent of $680,909 and 5.38 per cent of $719,608 – on any reckoning a small percentage, which, Cartwright says, could be expected also to indicate the extent of difference in the case of the additional thirty two houses that were profitably constructed in accordance with infringing Eagle plans.

174               LED submits, in conformity with a suggestion made in evidence by Cartwright, that the difference may be accounted for by the fact that Eagle has not disclosed all revenue attributable to the fixed overheads, in particular, revenue from the construction of display and “spec” homes for associated entities, the construction of Eagle offices and the construction of a home for Mr and Mrs Cardile themselves, none of which work was charged or paid for. It submits that a notional revenue should be attributed to these items because Eagle’s overheads contributed to the construction of them as well as to the construction of the revenue-producing houses. However, in his report of 4 February 1998, Vella appears ultimately, and as a result of instructions, to have taken most if not all of these matters into account in recalculating the total revenue for each year in question. The only outstanding dispute apparent from Cartwright’s final report of 9 March 1998 is in respect of revenue attributable to the sale of the land component of display homes, which Cartwright was in fact able to calculate and took into account in arriving at the figure of $680,909 referred to above.

175               Eagle relies on Cartwright’s comment in the report annexed to her affidavit of 8 August 1997 that “where … products vary considerably in direct cost, time to produce and selling price” it is inappropriate to apply the average cost method. Rather, she says, the revenue basis should be applied because “those products which took less time, and hence less overhead to produce, would carry a lesser share of the overhead since they generally sell for a lower price”. Cartwright said in that report that since “the range of products offered by Eagle Homes are relatively similar in nature, direct costs, time to produce, and selling price … either method of allocating overheads would be appropriate”. Eagle submits that the direct costs and selling price do in fact vary and that the revenue basis is therefore appropriate. According to the evidence before me, the direct costs range from approximately $53,100 to $108,700 per house, while the selling prices range from $63,500 to $122,800 per house. I accept that there may be more work required in respect of a house with a higher selling price. For example, the house may have taken longer to construct and involved both a higher cost to build and more supervision by Eagle staff. I therefore think that the revenue basis, which as I have said produces a difference but not a great difference, should be applied in the allocation of overheads.

176               Finally, LED contends that certain particular overheads should not be taken into account.

177               First, LED submits that imputed salaries for the two directors of Eagle, Mr and Mrs Cardile, should be ignored. Eagle in fact paid salaries to Mr and Mrs Cardile during the period 1991 to 1996. However, Eagle points to a report by a Mr Bruce Dell (“Dell”) of Dell Consulting Pty Ltd which purports to set out a “fair remuneration” for the Cardiles during that period. Eagle submits that the actual salaries and superannuation should be ignored and that a fair remuneration should be taken into account instead. The figures are as follows:

178               I agree with LED that the principle that “the plaintiff must take the business of the infringer as it is” applies (Dart v Décor at 133 per McHugh J). While in that case McHugh J was seeking to make the point that the plaintiff cannot claim that the defendant could have made a greater profit by using its resources more efficiently, it is similarly the case that the infringer cannot claim overheads which were not in fact incurred but might reasonably have been incurred.

179               Second, LED submits that the superannuation contributions of $90,796, $139,228 and $374,164 made between 1992 and 1994 on account of Mr and Mrs Cardile should be ignored. According to Cartwright, “contributions of this level are generally made for tax planning purposes and do not contribute to, nor benefit, the project homes business”. Valeri agreed that he did not see those expenses as being “directly attributable to the business of building houses of the company”. Eagle, on the other hand, submits that the question is not whether the superannuation payments are too high but whether the remuneration package as a whole is above the market level.

180               I do not accept Eagle’s submission that the superannuation payments made by Eagle should be seen as part of a salary package. The payments appear to be unrelated to any “salary package”: they appear suddenly in 1992 when the directors’ salaries increased rather than decreased as might have been expected if salary and superannuation were complementary elements of a single package. The superannuation payments then rise sharply over the next two years while the directors’ salaries also rise. They then disappear in 1995 and do not appear in 1996 while the directors’ salaries decrease. The payments are so irregular that I do not see a basis for inferring that they form part of a salary package and therefore part of the cost of the construction of the houses. For these reasons I do not think they can be taken into account as part of the overheads relevant to the building of the houses.

181               Would an attribution to overheads pro rata according to revenue still allow Eagle to retain some of the profits made by its infringements? In Kettle Chip Co Pty Ltd v Apand Pty Ltd (No 2) (1998) 83 FCR 466 (“Kettle Chip”), decided since the conclusion of the hearing of the present proceedings, Burchett J stated, after referring to passages from Dart v Décor, above, as follows (at 471):

“ ... the ground of the allowance of these overheads (the question only arises in the case of fixed overheads, since there is no dispute that the appropriate amount of variable overheads must be allowed) involves a matching of the contribution made by the particular overheads to the manufacture of the infringing product with the contribution that the same overheads would have made to the manufacture of the alternative. The logic is that, since the infringing product did not cause any increase in these fixed overheads, no part of it is an expense except upon the opportunity cost principle, which allows it only because the manufacture of the infringing product has involved the forgoing of the opportunity to recoup this expenditure.”

182               In that case, there was evidence that if the respondent had not passed off its potato chips for those manufactured by the respondent, it would have sold a different brand of its own chips, the sales of which were “at an average rate of about 23 per cent of that achieved by” the applicant’s brand.

183               His Honour thought that sales of the respondent’s alternative might have improved to 30 per cent. Consistently with the passage set out above, his Honour concluded that in these circumstances the amount of fixed overheads to be deducted was 30 per cent of the overheads attributable to the infringing product. Another way of expressing his Honour’s conclusion is to say that if the respondent were not required to account for so much of the fixed costs recouped by the infringing brand of chip as would not have been recouped by the alternative brand of potato chip (70 per cent), then to that extent the respondent would not be required to account for the whole of the profit derived from the infringement.

184               The issue of allowance of a percentage of fixed overheads on the basis identified by his Honour was not argued before me. If LED wishes to raise the matter it should notify my Associate accordingly. Nothing in these Reasons for Judgment is intended to detract from its right to apply for leave to make submissions on the issue.

Issue 6

6.         With respect to plans held to infringe, where there are no houses built in accordance with the plans, what is the appropriate measure of damages?

 

185               This issue relates to the seven plans in my category 2 earlier, that is, plans 13, 14, 24, 33, 38, 40 and 42, in accordance with which no houses were built and to plan 39 (in my category 1), in accordance with which a house was built but sold at a loss rather than a profit to Eagle.

186               LED submits that one applicable measure of damages may be the loss of profit it suffered as a result of the infringement, in this case the loss of sales which LED would have made to the customers who in fact dealt with Eagle: cf Allibert SA v O’Connor [1982] FSR 317 at 319-320; Colombia Pictures Industries v Robinson [1988] FSR 531 at 536. In the two cases just cited, it was concluded on the evidence that if the infringer’s goods had not been sold the plaintiff’s goods would have been. Accordingly, if the infringer sold 10,000 items, the copyright owner was entitled to the amount of profit it would have made if it had sold 10,000 of its own items. In the present case the reason why Eagle did not make a profit was that in the first seven cases the customers did not proceed at all and in the remaining case (plan 39) Eagle’s costs exceeded the sale price. I do not that think that the “foregone profit on notional sales by LED” is an appropriate measure of damages. It has simply not been shown that in the absence of the infringement, these customers probably would have contracted with LED to its profit. In other words, I am not persuaded the infringement caused LED to miss out on a profit it would otherwise have made: cf Manfal Pty Ltd v Longuet (1986) 8 IPR 410 (Qld/Thomas J) at 422; New England Country Homes Pty Ltd v Moore (1998) AIPC ¶91-410 (FCA/Burchett J) at 37,257.

187               An alternative approach to assessing damages contended for by LED is to apply a “notional licence fee” approach, that is, to determine the amount LED would have charged Eagle to use its plans in the ways in which Eagle did use them: see Inverugie Investments Ltd v Hackett [1995] 1 WLR 713 at 717-718; New England Country Homes Pty Ltd v Moore, above, at 37,257 and the cases there cited. LED submits that an appropriate licence fee is 6 per cent of the average construction contract price for houses built in accordance with the class of LED plan in question during the year in which the particular infringing Eagle plan was drawn. Eagle agrees that the notional licence fee approach is appropriate. However, it submits that the appropriate fee lies somewhere between 1 and 2 per cent of Eagle’s construction cost.

188               I note that Thompson, the General Manager of LED, gave evidence that unlike Eagle, LED has not in fact licensed another company to use its floor plans in the Sydney region (in which LED operates) because most of its own sales occur in that region and LED wishes to “retain all the profits from building a house in the Sydney region rather than sharing those profits with a licensee”. In Autodesk Australia Pty Ltd v Cheung (1990) 94 ALR 472 at 474-477, Amalgamated Mining Services Pty Ltd v Warman International Ltd (1992) 111 ALR 269 at 286 and Columbia Pictures Industries Inc v Luckins (1996) 34 IPR 504 at 509-510, it was considered that while a notional licence fee approach offered guidance, it was not straightforwardly applicable in cases such as the present one, where the copyright owner would not have granted a licence or where the infringer would not have taken one. However, in the absence of a more appropriate measure of damages and in the light of Eagle’s acceptance of the notional licence fee approach, I think it appropriate in the first instance to determine what the amount of damages assessed on that basis would be and then to review that amount in the light of all the circumstances and of the fact that the damages are at large.

189               The evidence in relation to the appropriate amount of licence fee is not entirely satisfactory. LED points out that Vella, the expert accountant called by Eagle, applied a notional licence fee of 5 per cent of construction contract price in some of his calculations and said in evidence that this percentage had been given to him by “someone on behalf of Eagle”. Eagle submits in response that Vella’s use of 5 per cent of construction contract price does not constitute an admission by Eagle and that the percentage figure is unreliable as Vella cannot remember who gave it to him and it is inconsistent with other evidence to which I refer to below. I agree.

190               There is in evidence a practice note issued by the Royal Australian Institute of Architects that suggests that for the design of a residential home costing between $70,000 and $100,000, an architect might charge a fee of between 14 and 16 per cent of construction cost. However, LED concedes that the work to be undertaken by an architect in designing an individual residential home is very different from the work done by a person, usually a draftsperson, in designing a project home. I therefore do not derive much assistance from this document.

191               Thompson gave evidence that in 1988, LED granted to a company called “Juelle Pty Ltd” (“Juelle”) a licence to use some of its designs in building houses in the Central and Mid-North Coast regions of New South Wales. The agreement was apparently oral until 28 February 1994 when a written agreement was entered into. The fee was originally 5.5 per cent of gross income and rose to 6 per cent in 1993. However, the fee included a sales commission payable to Molotap Pty Ltd, a company of which Haigh, the sales director of LED, was the “principal” and a director. Thompson said that, excluding this commission, the fee was 3.25 per cent in 1988 rising to 3.5 per cent in 1993. He also said that the licence fee would have been higher if the “principal” of Juelle had not been a friend of Larry King, a director of LED.

192               Eagle points out that the agreement with Juelle was a franchise agreement which provided to the franchisee other benefits including use of the franchise name (“Beechwood Homes”), territorial exclusivity, training for Juelle’s staff, access to LED’s “procedures, business methods, forms, policies and promotional programmes”, and a marketing and advertising service only half the cost of which was to be met by Juelle. Eagle also submits that although LED may have sought to charge more to someone who was not a “friend”, there is no evidence that such an “arm’s length” party would have agreed to pay a higher fee.

193               There is also in evidence a confidential exhibit containing a number of a agreements which LED submits were “arm’s length” transactions between designers and builders in which a commission of 6 per cent of “contract price” was charged. Eagle points out that, as in the case of the agreement with Juelle, these agreements were not merely licences to use floor plans. They included, for example terms by which the licensor was to “obtain approvals from local government authorities” to “assist [the] owner of [the] building site to arrange [a] housing loan where necessary” and to advertise the plans at its (the licensor’s) expense. Therefore these agreements do not establish that a licence fee in the order of 6 per cent of contract price is appropriate.

194               Kollar, an expert architect called by LED, gave evidence that as a rule of thumb, an architect’s fee to design a house, prepare the plans and “take the matter to building approval stage with the local council” would be between 3 and 5 per cent of the total building cost. For preparing a sketch plan, however, he said that a much lower fee of “1 to 1½ per cent maybe 2 if it’s a very small complex building” would be charged and that the amount would probably be 1 per cent.

195               Smith, one of the expert architects called by Eagle, gave evidence that the architect’s fee “for the full service” (including contract administration) for a house costing between $100,000 and $200,000 to build would be between 10 and 15 per cent of construction cost. He said that the fee for making schematic drawings alone would be between 10 and 15 per cent of that fee (that is, between 1 and 2.25 per cent of construction cost).

196               In the present case, Eagle took LED’s “sketch plans” or “schematic design”. The fee charged by an architect for preparing such drawings is not necessarily commensurate with the licence fee that would be charged by the owner of the copyright in such drawings already in existence and being used by the copyright owner in its own business, as is the case here. A premium may be demanded and paid in the latter class of case because the plan has already proved to be popular. On the other hand, the ongoing competition from the copyright owner itself would reduce the value of the licence to the licensee. Moreover, where several houses are built based on the same schematic drawings, it is unlikely that the architect would receive a full fee in respect of each building. However, I think this a better guide than the agreements to which LED points in support of its claim for a licence fee of 6 per cent of contract price. Considering all of this evidence, I think a reasonable licence fee according to the project home industry for the use of LED’s plans to be 2 per cent of construction cost.

197                I can now turn to the individual plans. Plan 39 was a customised Flamingo Classic plan drawn in 1992. It was the only Flamingo Classic built in 1992 and was built at a cost of $74,849. Damages assessed in respect of plan 39 at 2 per cent of $74,849, would be $1,496.98.

198               As there were no houses built in accordance with the remaining seven customised plans, there is no evidence of the cost of construction of a house in accordance with them. The parties seem to have proceeded on the basis that the average cost of construction of a house built in accordance with the relevant type of generic infringing Eagle plan during the year in question should be adopted. This approach seems reasonable.

199               Plan 13 was a customised Flamingo Premier plan drawn in 1993. Only one Flamingo Premier was built in 1993. It was one of the original fifty seven – a house built at Lot 269 Swan Circuit, Hinchinbrook. Its construction cost was $76,662. Damages assessed in respect of plan 13 at 2 per cent of $76,662 would be $1,533.24.

200               Plan 14 was a customised Flamingo Premier plan drawn in 1994. Three of the original fifty seven houses were Flamingo Premier houses built in 1994. Their average construction cost was $77,498. Damages assessed in respect of plan 14 at 2 per cent of $77,498 would be $1,549.96.

201               Plan 24 was a customised Oriole 4 Mk I plan drawn in 1995. Seven Oriole 4 Mk I houses were referred to in evidence as having been built by Eagle in 1995 (six of the original fifty seven plus the house built in accordance with plan 22 of the further forty six plans). Their average construction cost was $69,487. Damages assessed in respect of plan 24 at 2 per cent of $69,487 would be $1,389.74.

202               Plan 33 was a customised Oriole 4 Mk II plan drawn in 1994. Three Oriole 4 Mk II houses were referred to in evidence as having been built by Eagle in 1994 (two of the original fifty seven plus the house built in accordance with plan 34 of the further forty six plans). Their average construction cost was $68,816. Damages assessed in respect of plan 33 at 2 per cent of $68,816 would be $1,376.32.

203               Plan 38 was a customised Flamingo Classic plan drawn in 1993. Two Flamingo Classic houses were built in 1993 (one of the original fifty seven and the house built in accordance with plan 39 of the further forty six plans). The average construction cost of these houses was $74,331. Damages assessed in respect of plan 38 at 2 per cent of $74,331 would be $1,486.62.

204               Like plan 38, plan 40 was also a customised Flamingo Classic plan drawn in 1993. Damages assessed in respect of plan 40 on the same basis would also be $1,486.62.

205               Plan 42 was a customised Flamingo Regular plan drawn in 1992. There were no Flamingo Regular houses built in 1992. There were, however, two Flamingo Regular houses built in 1995 as well as one in 1994. The average construction cost in respect of these three houses was $69,714. Damages assessed in respect of plan 42 at 2 per cent of $69,714, would be $1,394.28.

206               The above assessments would give a damages total of $11,713.76. But this figure does not, in my view, adequately reflect the facts that LED and Eagle were in competition in the same market, that the LED plans were notably successful and that LED would not, in fact, have granted a licence to Eagle.  Assuming, contrary to the evidence, that LED would have been prepared to grant Eagle licences at all, in my opinion it would have insisted that Eagle pay a greater sum. For its part, faced with that insistence, Eagle would have contemplated making gross building profits of some $160,000 under the licenses (8 x $20,000 being the approximate average gross profit made on project homes built in accordance with infringing Eagle plans as discussed earlier). Eagle would have understood that its chance of making those profits would be greater by the use of the LED copyright plans in question than without them. For that improved chance I think that Eagle would have been willing to pay more than $11,713.76.

207               I assess LED’s damages in the sum of $20,000.

Issue 12

 

12.       Given that LED has, in respect of the original 57 houses, elected for an account of profits:

 

(a)               is it also entitled to claim additional damages?

 

(b)               if additional damages are available is this an appropriate case for additional damages and what matters inform the court’s discretion in assessing them?

 

(c)                what is the appropriate amount of additional damages?

208               It will be recalled that LED elected for an account of profits in respect of the fifty seven plans disclosed by Mr Valeri in his affidavit of 13 September 1996 as well as in respect of thirty four of the forty five plans disclosed subsequently. It claims damages in relation to the remaining eleven plans disclosed subsequently. LED also claims additional damages.

209               Additional damages are provided for in s 115 (4) of the 1968 Act. Section 115 provides as follows:

“(1)     Subject to this 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.” (emphasis supplied)

The parties are in dispute as to whether, in relation to the ninety one plans in respect of which LED has claimed as account of profits, the Court has power to award it additional damages.

210               Eagle submits that s 115 draws a clear distinction between damages and an account of profits. It relies on the concluding words of s 115 (4) emphasised above.   It points to the facts that an account of profits is an alternative remedy to damages (s 115 (2)) and that an account of profits may be awarded in respect of an “innocent” infringement while damages may not be (s 115 (3)).  In these circumstances, it submits, it is impossible to read the reference in s 115 (4) to the Court’s awarding of additional damages “in assessing damagesfor infringement” as including its awarding of additional damages “in ordering an account of profits”. Moreover, s 115 is a statutory codification, and to some extent modification, of common law and equitable remedies. While additional (or exemplary) damages are available at common law, “there is much to be said for the … view … that ‘equity and penalty are strangers’”: Bailey v Namol Pty Ltd (1994) 53 FCR 102 (FC) at 113.

211               The present issue was recently considered by the House of Lords in Redrow Homes Ltd v Bett Brothers Plc [1999] 1 AC 197. The sections of the Copyright, Designs and Patents Act 1988 (UK) (“the UK Act”) under consideration in that case provide as follows:

“96  (1)  An infringement of copyright is actionable by the copyright owner.

(2)  In an action for infringement of copyright all such relief by way of damages, injunctions, accounts or otherwise is available to the plaintiff as is available in respect of the infringement of any other property right.

(3)  This section has effect subject to the following provisions of this Chapter.

97  (1)  Where in an action for infringement of copyright it is shown that at the time of the infringement the defendant did not know, and had no reason to believe, that copyright subsisted in the work to which the action relates, the plaintiff is not entitled to damages against him, but without prejudice to any other remedy.

(2)  The court may in an action for infringement of copyright having regard to all the circumstances, and in particular to -

(a)    the flagrancy of the infringement, and

(b)    any benefit accruing to the defendant by reason of the infringement,

award such additional damages as the justice of the case may require.”

212               These provision do not distinguish between damages and an account of profits as clearly as s 115 of the Act does. Subsection 97 (2) does not, as did its predecessor s 17 (3) of the Copyright Act 1956 (UK) and as does the Australian provision, confer upon the court power to award additional damages “in assessing damages for infringement”. Nevertheless, the House of Lords held that additional damages were not available where an account of profits was claimed. Lord Jauncey of Tullichettle considered that such a result was dictated by the expression “additional damages” itself. He said (at 207):

“The words ‘additional damages’ without further explanation or qualification immediately provoke the question ‘additional to what?’ The natural and ordinary meaning is additional to other damages already assessed, or as the respondent put it succinctly ‘more of the same.’”

Lord Clyde also considered that “additional damages” were apt to refer to “an addition to an award of damages” rather than damages additional to any form of relief whatever that may be available (at 208). It is worth noting that his Lordship thought that the result had been even clearer under s 17 (3) of the Copyright Act 1956 (UK) which, as noted above, had contained the words “in assessing damages for infringement” as does s 115 (4) of the 1968 Act.

213               In Concrete Systems Pty Ltd v Devon Symonds Holdings Ltd (1978) 20 SASR 79, Legoe J said (at 84-85) that s 115 (4) of the 1968 Act is

“not directed in its terms purely to compensatory damages and it therefore appears that the English decisions on exemplary damages and on a somewhat differently cast section under the Copyright Act 1956 (UK) are not appropriate”.

214               With respect, as I have said earlier, it seems to me that the distinction between damages and an account of profits is clearly drawn in s 115 and in my view the expression “in assessing damages for the infringement” is intended to refer only to compensatory damages. I also note that Legoe J’s decision was interlocutory and hence he was not called upon to assess damages: rather, his Honour was putting forward the adequacy of a monetary remedy in cases of copyright infringement as a reason for refusing an interlocutory injunction. LED also refers to Aitken v Neville Jeffress Pidler Pty Ltd (1991) 33 FCR 418 (Gummow J) at 423 as providing some support for the proposition that additional damages may be awarded where an account of profits is claimed. However, with respect, in my view that case does not provide any assistance in resolving the present question.

215               In International Credit Control Ltd v Axelsen [1974] 1 NZLR 695, Mahon J accepted that additional damages could be awarded when an account of profits was taken, although he concluded that such an award was not warranted on the facts. The relevant provision of the New Zealand Act, like s 115 (4) of the Act, referred to an award of “additional damages” “in assessing damages for the infringement”. However, his Honour did not deal with the present issue. Rather, he appears simply to have assumed, no doubt in the absence of any submission to the contrary, that additional damages were available. Similarly in Wellington Newspapers Ltd v Dealers Guide Ltd [1984] 2 NZLR 66, the New Zealand Court of Appeal assumed without discussion that additional damages could be awarded where an account of profits was sought: at 70 (McMullin J), 73 (Somers J), 78 (Greig J). In that case what was said was only by way of obiter dicta, as the plaintiff in fact claimed and was awarded compensatory damages and the real issue was whether additional damages could be exemplary or punitive in nature.

216               It is true, as LED submits, that the 1968 Act has “objectives other than compensation” including “an element of penalty”: Raben Footwear Pty Ltd v Polygram Records Inc (1997) 145 ALR 1 (FCA/FC) at 6 per Burchett J, with whom Lehane J agreed; Autodesk Inc v Yee (1996) 139 ALR 735 (FCA/Burchett J) at 738-739. In the former case, Burchett J referred with apparent approval to the statement by Laddie J in Cala Homes (South) Ltd v Alfred McAlpine Homes East Ltd (No 2) [1996] FSR 36 at 43 that additional damages are “a head of relief independent of and not dependent upon whatever form of financial relief the plaintiffs seek”. Laddie J had held that additional damages were available where an account of profits was claimed. However, his decision was expressly overruled by the House of Lords in Redrow Homes Ltd v Bett Brothers Plc, above,at 207.

217               I also do not think that in the Raben Footwear case Burchett J was in any way adverting to the issue presently before me. The words from the Cala Homes case were relied on in support of the proposition that additional damages need not be limited where the award of compensatory damages is small, that is, the amount of additional damages is independent of the amount of compensatory damages. In the Raben Footwear case the Full Court upheld the trial Judge’s award of $275 compensatory damages and $15,000 additional damages, saying that the trial judge had a broad discretion in awarding additional damages and that “[a]lthough ... the amount [the trial judge] adopted was at the upper limit of the range that was available to him”, it was not beyond that range: at 7. 

218               I think that in referring to the award of “additional damages” “in assessing damages for [an] infringement”, s 115 (4), does not permit an award of additional damages where an account of profits is sought. While additional damages may be obtained where only nominal damages are sought under s 115 (2) with substantial conversion damages being sought under s 116 (Polygram Pty Ltd v Golden Editions Pty Ltd (1997) 148 ALR 4 (FCA/Lockhart J)), I do not think that the word “damages” in s 115 (4) can be read as including a reference to profits required to be accounted for, when it clearly cannot be so read in s 115 (2) or (3). Nothing in the Second Reading Speech for the 1968 Act or in the Spicer Committee Report of 1959, which led to the passing of that Act, suggests otherwise. The only example given in the Spicer Committee Report confirms, if anything, my conclusion. That Report states (at para 309), that additional damages:

“may be particularly useful in the case of the performing right where the event has occurred and the loss is difficult to assess in precise money terms.” (emphasis supplied)

219               The words emphasised are a reference to the assessment of the copyright owner’s loss as the foundation for an award of compensatory damages.

220               LED submits that according to the view which I have suggested is correct, in a case where there have been multiple infringements, say the production of 100 infringing books, a plaintiff who elects for an account in respect of all of the books cannot be awarded any additional damages, whereas a plaintiff who elects for an account in respect of 99 of the books and damages in respect of the remaining one will, if the circumstances of the case warrant it, be able to recover additional damages in respect of the one book. In the present case, the result is similar, albeit it cannot be said that LED has used an artificial device to achieve it: there are obvious reasons why LED has elected for damages in respect of the plans in accordance with which no houses were built and the plan in accordance with which a loss-making house was built.

221               Does the point made by LED suggest that the construction which I have favoured above leads to an arbitrary or capricious result and that the legislation should therefore be construed otherwise? I think not. The result would be arbitrary or capricious only if the plaintiff, by virtue of the device, were able to obtain the same or substantially the same additional damages in respect of the one infringement as he or she would have been awarded had he or she claimed damages and additional damages in respect of all the infringements. In such circumstances, a plaintiff could benefit by the use of the “device”. However, I think it possible and necessary for a court to deal with a claim for additional damages in respect of one infringement putting to one side other infringements in respect of which an account of profits has been claimed. For example, in assessing the flagrancy of an infringement, a court would obviously take a less favourable view of one hundred infringements than a single infringement. If the plaintiff claimed an account of profits in respect of ninety-nine infringements and damages in respect of one, the court would, in effect, treat the plaintiff as having adopted the infringer’s conduct as its own in respect of the ninety-nine infringements and disregard them in considering the amount of any additional damages to be awarded in respect of the remaining one. This is not obviously unjust: the copyright owner is taken to know, when electing between an account of profits and damages, that an election of the latter will carry with it, whereas an election of the former will not, the possibility of an award of additional damages.

222               In the present case, I have assessed damages of $20,000 in respect of eight infringements. LED submits that additional damages should also be awarded having regard to the flagrancy of the infringements, the benefit that has accrued to Eagle by reason of the infringements, attempts by Eagle to render itself “judgment proof” and the fact that Eagle’s conduct has “hindered the efficient and orderly resolution” of the proceedings. It submits that the flagrancy is established by: the scale of the infringements; the maintenance by Eagle of a cross-claim against LED which was discontinued on the last day of the hearing before Davies J; the fact that Eagle took LED’s most successful designs; and the intentional, deliberate and deceitful nature of Eagle’s conduct as found by Davies J. In relation to the benefit accruing to Eagle, LED notes that Valeri conceded that there may still be some plans which infringe LED’s copyright which have not been disclosed by Eagle.

223               In relation to the “scale of the infringements”, it must be remembered that the five plans which I have held did not infringe LED’s copyright and the eighty nine infringements in respect of which LED claimed an account of profits are not to be taken into account in the present context. I do not think that the remaining eight infringements, by themselves, establish flagrancy in the sense of a “calculated disregard of the plaintiff’s rights, or cynical pursuit of benefit” (Prior v Lansdowne Press Pty Ltd (1975) 29 FLR 59 (VIC/Gowans J) at 65) or “scandalous conduct, deceit and such like [including] deliberate and calculated copyright infringements”: Ravenscroft v Herbert & New English Library Ltd [1980] RPC 193 at 208.

224               Davies J’s finding in relation to copying was that Mr Cardile did not ask his draftspersons to copy LED’s plans; rather, he gave them instructions to change existing Eagle plans in such a way that they were brought into line with Eagle’s plans. He also found that the LED plans that were copied were “successful in the market and had won several awards, whilst Eagle’s plans were not so successful”. As Lockhart J pointed out in International Writing Institute Inc v Rimila Pty Ltd (1994) 30 IPR 250 at 255:

“Plainly, flagrancy is not established by proof of mere knowledge of copying. If it were, then every instance of infringement under s 37 and s 38 [of the 1968 Act] would attract additional damages because knowledge of copying or of infringement is an essential element of any act of secondary infringement under those sections.”

225               Eagle’s conduct is not, in my view, as obviously deserving of censure as was the infringers’ conduct in, for example, Autodesk Australia Pty Ltd v Cheung, above, and Columbia Pictures Industries Inc v Luckins, above, where the infringers knew that what they were doing was an infringement of the applicants’ copyright, yet persisted over a considerable period of time. As was noted in Eagle Homes Pty Ltd v Austec Homes Pty Ltd, above, the distinction between taking an architectural idea and copying the expression of that idea is a fine one. In this case I have concluded that the differences between certain of Eagle’s customised plans and the nine copyright plans of LED are sufficient to preclude a finding of infringement.

226               On the other hand, Mr Cardile was clearly attempting to gain a commercial advantage by copying LED’s most successful designs and the Court should mark its disapproval of that conduct: Bailey v Namol Pty Ltd, above, at 113-114. I therefore think that a modest award of additional damages is warranted. In reaching this conclusion, I place little reliance on Eagle’s conduct in relation to this litigation: that is, the attempt to render itself “judgment proof”, the abandoned cross-claim and the suggested hindering of LED’s attempts to discover all of the infringing plans and the profits made by the construction of houses in accordance with them. Eagle disclosed the fifty seven houses built in accordance with the nine generic infringing Eagle plans. The delay in its disclosure of the further forty five plans arose out of some uncertainty on its part as to whether Davies J’s direction required it to disclose plans which departed from the nine generic plans, display homes and customised plans in accordance with which no house was built. I also do not think that, given the thoroughness of the inquiries made by LED and Eagle, it is likely that there are many, if any, further infringements which have not been discovered.

227               In assessing the compensatory damages of $20,000 in respect of the eight plans previously mentioned, I award additional damages of a further $20,000.

Interest

228               LED submits that it is entitled to interest on the amount of damages and on the amount of profits awarded to it for the period between the dates when the respective causes of action in respect of the infringements arose and the date as of which judgment is entered.   In its submissions, LED relies expressly on s 51A of the Federal Court of Australia Act 1976 and implicitly on the general law.  It claims interest at the rates set out in Schedule J of the Rules of the Supreme Court of New South Wales. Eagle accepts that interest is payable at those rates in respect of the award of damages but submits that proceedings claiming an account of profits are not “proceedings for recovery of any money” within s 51A.  Implicitly, Eagle also submits that LED is not entitled under general law principles to interest on profits.

229               In Kettle Chip, above, which was decided after the present case was argued, Burchett J held (at 481-482) that both the general law and s 51A provide a basis for an order for interest in respect of profits.  More precisely, in relation to the general law his Honour held that interest should ordinarily be included in an account of profits because, if it were not, the infringer would escape without accounting for the whole of the profit made from the wrongdoing.  His Honour referred to the statement by McHugh and Gummow JJ in their joint judgment in Commonwealth v SCI Operations Pty Ltd  (1998) 192 CLR 285 at 316 that “[a]n account of profits would carry interest” (their Honours referred to Warman International Ltd v Dwyer  (1995) 182 CLR 544 at 570). 

230               In relation to s 51A(1), Burchett J held that a proceeding which includes a claim for an account of profits is within the expression “any proceedings for the recovery of any money” in the section.  Accordingly, his Honour held that in such a case there is an entitlement under s 51A(1) to an order for interest “upon application, unless good cause is shown to the contrary”.

231               With respect, I think that Burchett J was not clearly wrong and I follow him accordingly.

232               Eagle submits that there is “good cause ... to the contrary” in the present case. It relies on the judgment of Derrington J in Warman International Ltd v Dwyer (1992) 46 IR 250.  After referring to the fact that interest on the profits to be awarded in that case would amount to some $200,000, his Honour said this (at 261):

“However, it is obvious from the financial statements that most if not all of the profits were ploughed back into the businesses. This has contributed to the profits by way of the provision of additional stock and the reduction of interest of [sic – on] borrowings. Either way the plaintiff has had its benefit in the form of enlarged profit in which it will share, and it cannot receive this twice. A fairly nominal allowance of $10,000 should be allowed for the extent to which this investment has built up the stock, which is the property of the defendants even though it is used in the business.”

233               The reasoning of Derrington J would apply in the circumstances of the present case if the evidence showed that the profit made by Eagle had been “ploughed back into the business” and contributed to the very amount of profit for which it was already being required to account to LED in any event.  His Honour was directing his comments against double counting. But I do not think that the evidence supports an inference that most, if not all, of the profits derived by Eagle were ploughed back into its business to create a greater amount of profit for which it is already being required to account to LED.  It is mere speculation what use Eagle made of its profits.  I conclude that LED is entitled to have included in the order in its favour interest on the amount of profit for which Eagle would otherwise be required to account to it.  In the exercise of my discretion, I decide that the rate of interest will be that prescribed under the Rules of the Supreme Court of New South Wales: see Namol Pty Ltd v AW Baulderstone Pty Ltd (No 2) (1993) 47 FCR 388 at 389; Alec Finlayson Pty Ltd v Armidale City Council (unreported, FCA/Burchett J, 6 March 1998); Nagy v Masters Dairy Ltd (1997) 150 ALR 301 at 317; and Kettle Chip, above, at 150. 

234               LED submits that the interest should be compound rather than simple.  Section 51A (2) (i) of the Federal Court of Australia Act 1976 provides that s 51A (1) does not authorise “the giving of interest upon interest”.  Accordingly, in so far as LED must rely on s 51A, the interest must be simple, not compound. But the applicable general law principles are not inhibited by any such limitation. Compound interest may be awarded as part of common law damages under the principle in Hungerfords v Walker (1989) 171 CLR 125.

235               LED seeks to support its claim for compound interest by reference to the fact that compound interest may be awarded on an account of profits where there has been a breach of trust; see the discussion in Southern Cross Pty Ltd (in liq) v Ewing (1987) 11 ACLR 818 and Hagan v Waterhouse (1992) 34 NSWLR 308 at 391-393.  LED refers to Beloit Canada Ltd v Valmet Oy (1995) 61 CPR (3d) 271 at 287-288, in which the Canadian Federal Court of Appeal allowed compound interest on an account of profits in a patent infringement action, saying that “in normal circumstances an award of only simple interest requires some explanation” (at 287). Eagle has made no submissions in opposition to LED’s submission that interest should be compound. For these reasons, I think that the interest to be awarded should be compound rather than simple.

CONCLUSION

236               As noted earlier, the parties should, without disputation, now be able to calculate the amount of the profits to be accounted for (subject to any application by LED for leave to make submissions on the issue mentioned at paras 181-184).

237               Since the above Reasons for Judgment were written, a Full Court has, on 23 April 1999, dismissed an appeal from the decision of Burchett J in the Kettle Chip case, above (see Apand Pty Ltd v Kettle Chip Co Pty Ltd [1999] FCA 483). Nothing said by their Honours requires me to alter what I have written, although I note that there are observations, particularly in the Reasons of Emmett J at [135]-[139] relevant to the issue referred to in the preceding paragraph.

238               Subject to the matter just mentioned, there will be a direction that the parties bring in short minutes of orders directed to giving effect to these Reasons.

I certify that the preceding two hundred and thirty eight (238) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren

Associate:

Dated:              7 May 1999

Counsel for the Applicant:	Mr P L G Brereton and Mr M J Leeming
Solicitor for the Applicant:	Speed & Stracey
Counsel for the Respondent:	Mr D K Catterns QC and Mr R Alkadamani
Solicitor for the Respondent:	Castrission & Co
Date of hearing:	3-6, 9-13 February, 14 April 1998
Date of last written submission:	17 April 1998
Date of Judgment:	7 May 1999

No	Client	Job Address	Eagle Type	Status	Variations according to Mr Valeri’s affidavit	Cost to build	Payments received
1	Mr & Mrs Wray	Lot 8215 Kanangra Court Wattle Grove	Regal Royale	Conceded		$86,275	$104,015
2	Mr & Mrs Clay	Lot 54 Bennelong Place Narellan	Regal Royale	Conceded		$76,615	$98,487
3	Mr & Mrs Lowry	Lot 13 Mendi Place Glenfield	Regal Royale	Conceded		$80,285	$103,435
4	Mr Barnett & Ms Buckpitt	Lot 266 Swan Circuit Hinchinbrook	Regal Royale	Submit not infringe	1. No Victoriana facade 2. Baywindow to bedroom 1 3. 3 bedrooms only 4. No rumpus 5. No gables to roof line 6. Width of double garage extended 7. Double bay windows to family room	$70,115	$91,190
5	Mr & Mrs D’Agostino	Lot 1 Greenvalley Road Greenvalley	Regal Royal	Submit not infringe	1. Archway from living to dining room 2. Different walk in robe layout 3. Different ensuite layout 4. 5 bedrooms 5. Built in robe to bedroom 2. Double and on opposite wall 6. Bathroom in different location 7. Bedroom 3 in different location and double built in robe and on opposite wall 8. Bedroom 4 in different location double built in robe and on opposite wall 9. Laundry in different location 10. Double built in robe to bedroom 5 11. Access to bedroom 5 via hallway 12. Length of family room extended 13. Balustrades between family and rumpus 14. Bi fold doors from kitchen to dining 15. Bi fold doors from living to kitchen	$95,898	$124,992
6	Mr & Mrs Alden	Lot 1236 Arbington Crescent Glen Alpine	Regal Royale	Submit not infringe	1. Triple garage 2. Tiles to patio 3. Double built in robe added to bedroom 1 4. Study added 5. Bedroom 2 in different position 6. Double built in robe to bedroom 2 and located on opposite wall 7. Bathroom in different location 8. Bedroom 3 in different position 9. Double built in robe to bedroom 3 and on different wall 10. Double built in robe to bedroom 4 and located on opposite wall 11. Window to bedroom 4 located on rear wall 12. Rumpus room different 13. Bi fold doors between family room and rumpus 14. Access internal from garage to living room	$96,002	$117,610
7	Mr & Mrs Selakovic	Lot 15 Ridge Square Leppington	Regal Royale	Not built [accepted by LED] submit plan not infringe	1. Altered entry 2. Living room extended in two directions 3. Altered kitchen layout 4. Altered rumpus	n/a	n/a
8	Eagle Homes (display home)	Lot 5163 Australis Avenue Wattle Grove	Regal Royale	Conceded		$77,524	$96,472 (Note 1)
9	Eagle Homes (display home)	Lot 1016 Edinburgh Circuit Cecil Hills	Regal Royale	Conceded		$108,740	$135,316 (Note 2)
10	Mr & Mrs Luna	Lot 5009 Copperfield Drive Ambervale	Flamingo Premier	Submit not infringe	1. Only has 3 bedrooms 2. Planter box to entry different 3. Different kitchen bench layout 4. Length of family room different 5. Location of linen closet different	$59,893	$82,561
11	Mr & Mrs S & J Smith	Lot 1310 Hinchinbrook Drive Hoxton Park	Flamingo Premier	Conceded		$67,615	$87,775
12	Mr & Mrs Ulic	Lot 106 Wilson Road Hoxton Park	Flamingo Premier	Conceded		$68,865	$93,304
13	Young & Gardner	Lot 5010 Tramway Drive Currans Hill	Flamingo Premier	Not built [accepted by LED] concede plan		n/a	n/a
14	Coleman & Hatzikiriakos	Lot 3027 Charles Babbage Avenue Currans Hill	Flamingo Premier	Not built [accepted by LED] submit plan not infringe	1. Replace bedroom 3 with bar 2. End bedroom extended	n/a	n/a
15	Mr & Mrs Kola	Lot 2252 Rooney Place Abbotsbury	Flamingo Premier	Conceded		Figures not available	Figures not available
16	Eagle Homes (display home)	Lot 501 Stockdale Crescent Abbotsbury	Flamingo Premier	Conceded		$73,055	$94,432 (Note 1)
17	Eagle homes (display home)	Lot 6017 Channel Place Narellan	Flamingo Premier	Conceded		$97,954	$130,362 (Note 1)
18	Mr & Mrs McPherson	Lot 21 Arina Road Bargo	Flamingo Premier	Submit not infringe	1. No double garage 2. Width of lounge extended into garage 3. Convert balance of garage into workshop room with access from kitchen	$88,132	$106,951
19	Mr & Mrs Cohen	Lot 66 Thuroong Place Cranebrook	Flamingo Premier	Conceded		Figures not available	Figures not available
20	Mr & Mrs Butorac	Lot 108 Emu Avenue Hinchinbrook	Regal Supreme	Submit not infringe	Regal Supreme with bedroom 4 deleted	$72,191	$86,415
21	Mr & Mrs McNeill	Lot 137 Cordalia Crescent Greenvalley	Regal Supreme	Submit not infringe	Regal Supreme with reversal of bedroom 2 and bathroom and altered rumpus	$81,565	$102,666
22	Mr & Mrs Pedrosa	Lot 2095 Henry Street Cecil Hills	Oriole 4 Mk 1	Submit not infringe	1. Has rumpus with solarium 2. Width of family room extended with splayed corner	$70,236	$90,640
23	Mr & Mrs Mills	Lot 4 Cnr Susan and Duncan Streets Vincentia	Oriole 4 Mk 1	Not built [accepted by LED] submit plan not infringe	1. Replace dining room with bedroom 2 2. Reversal of bedroom 3 and laundry 3. Extension of family room into bedroom 4	n/a	n/a
24	Mr Toplicescu	Lot 51 Greenlands Estate Prestons	Oriole 4 Mk 1	Not built [accepted by LED] submit plan not infringe	No significant differences from Oriole 4 Mk 1	n/a	n/a
25	Mr & Mrs Todeo	Lot 1815 Godwit Close Hinchinbrook	Oriole 4 Mk 1	Submit not infringe	1. Planter box to entry in different location 2. Has rumpus room 3. Width of family room extended with splayed corner	$73,415	$96,900
26	Mr Sii & Ms Wong	Lot 2110 Mandarin Way Glenwood Park	Oriole 4 Mk 1	Not built [accepted by LED] submit plan not infringe	1. Replace dining room with bedroom 2. Extension of family room into bedroom 4 3. Altered kitchen	n/a	n/a
27	Mr Festa	Lot 2613 Narryna Place Glen Alpine	Oriole 4 Mk 1	Submit not infringe	1. Has rumpus room with double bay windows	$86,635	$104,260
28	Eagle homes (display home)	Lot 2 Rooty Hill Road North Rooty Hill	Oriole 4 Mk 1	Conceded		$68,988	$85,849 (Note 1)
29	Eagle homes (display home)	Lot 129 Holdsworth Drive Mount Annan	Oriole 4 Mk II	Conceded		$60,872	$75,169 (Note 1)
30	Not noted	Lot 6001 Alcock Avenue Casula	Oriole 4 Mk II	Conceded		Figures not available	Figures not available
31	Mr & Mrs Deguara	Lot 1637 Wimbledon Court Wattlegrove	Regal Deluxe	Submit not infringe	Regal Supreme with laundry moved and altered kitchen	$79,264	$96,255
32	Mr & Mrs Micallef	Lot 29 Woolgoolga Avenue Hoxton Park	Oriole 4 Mk II	Submit not infringe	1. 1½ garages 2. Planter box in different location 3. No entry wall 4. 3 bedrooms only 5. Length of family room extended 6. Single built in robe to bedroom 2 and located under eaves 7. Single built in robe to bedroom 3 and located under eaves 8. Window to bedroom 3 located on rear wall	$73,701	$89,480
33	Mr & Mrs Porter	Lot 112 Valerie Avenue Baulkham Hills	Oriole 4 Mk II	Not built [accepted by LED] concede plan		n/a	n/a
34	Mr Borg & Mrs Camilleri	Lot 7126 Currans Hill Drive Currans Hill	Oriole 4 Mk II	Submit not infringe	1. 3 bedrooms only 2. No planter box to entry 3. Dwarf wall to entry 4. Walk in linen cupboard to living room 5. Walk in pantry to kitchen 6. Different bathroom layout (all in one) 7. Length of family room extended	$70,603	$88,530
35	Mr & Mrs Carpenter	Lot 4 Kittyhawk Crescent Raby	Oriole 4 Mk II	Conceded		$72,298	$88,417
36	Mr Fascioli	Lot 21 Skyfarmer Place Raby	Regal Deluxe Supreme	Submit not infringe	Regal Supreme with laundry moved and shifted kitchen	$75,830	$93,535
37	Mr & Mrs Kumar	Lot 1927 Centaurus Drive Hinchinbrook	Oriole 4 Mk II	Conceded		$73,075	$88,407
38	Mr & Mrs Healey	Lot 14 Cassidy Street Denham Court	Flamingo Classic	Not built [accepted by LED] submit plan not infringe	1. Garage shifted forward 2. Addition of bedroom 5 and rear rumpus	n/a	n/a
39	Mr Kenny & Mrs Street	Lot 9 Plain Tree Drive Narellan	Flamingo Classic	Submit not infringe	1. Triple garage 2. Front verandah from lounge room to first garage 3. Larger laundry in garage with shower and WC 4. Second family room to rear 5. Fifth bedroom to rear 6. Extended width of bedroom 1 7. Bathroom extended under eaves 8. Square set opening from lounge to rumpus	$74,849	$68,000
40	Mr & Mrs Smullen	Lot 5432 Jarra Crescent Glenmore Park	Flamingo Classic	Not built [accepted by LED] submit plan not infringe	1. Addition of bedroom 5 2. Extended laundry	n/a	n/a
41	Mr & Mrs Smith	Lot 119 Elder Way Elder Way	Flamingo Regular	One of 57 disclosed in Valeri’s affidavit of 13 September 1996
42	Mr & Mrs Cox	Lot 38 Doris Street Picnic Point	Flamingo Regular	Not built [accepted by LED] concede plan		n/a	n/a
43	Mr & Mrs Sant	Lot 832 Abbington Crescent Glen Alpine	Flamingo Deluxe	Submit not infringe	1. Width of bedroom 1 extended under eaves 2. Walk in robe width extended 3. Entry area different 4. Lounge room extended in width 5. Laundry larger and located in different position 6. Pantry for kitchen located in laundry 7. WC room located in garage	$102,857	$122,842
44	Mr & Mrs El Moussa	Lot 1627 Cisticola Street Hinchinbrook	Flamingo Deluxe	Submit not infringe	1. Bedroom 1 extended under eaves 2. Layout of bathroom different 3. No built in robe to bedrooms 2 or 3 4. Length of bedroom 4 extended 5. Double door linen closet 6. Rumpus room located behind family room 7. Planter box between family room and rumpus room	$77,002	$107,620
45	Mr & Mrs Meredith	Lot 8046 Elder Way Mt Annan	Flamingo Deluxe	Conceded		$81,012	$109,355
46	Mr Sauchella & Mrs Garvis	Lot 315 Central Park Drive Bow Bowing	Flamingo Deluxe	Conceded		$79,263	$108,488