FEDERAL COURT OF AUSTRALIA

Kilthistle No. 6 Pty Ltd v Austwide Homes Pty Ltd

1999 [FCA] 1073

PRACTICE AND PROCEDURE – application for separate determination of questions – copyright – proposed question whether certain works original or copied from other works – proposed question as to availability of defence under Copyright Act 1968 (Cth) s 77 – whether need for detailed factual investigations avoided – whether appropriate to separate trial of subjective and objective aspects of reproduction – whether same witnesses required to give evidence on separate question and trial of remaining issues – possible impact of appeals

WORDS AND  PHRASES – “articles”

Copyright Act 1968 (Cth) s 77

Copyright Regulations reg 17

Designs Regulations reg 11

Federal Court Rules O 29 r 2

Francis Day & Hunter Ltd v Bron [1963] Ch 587 cited

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

Eagle Homes Pty Ltd v Austec Homes Pty Ltd (1999) 43 IPR 1 referred to

Reading Australia Pty Ltd v Australian Mutual Provident Society [1999] FCA 718 cited

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

KILTHISTLE NO. 6 PTY LIMITED, AMMRAD PTY LTD t/as LLOYDS TRANSPORTABLE HOMES, BETTERLOOK HOMES PTY LTD, KILTHISTLE NO. 4 PTY LIMITED, LESLIE EDWARD MOUAT and WAYNE DONALD WALGERS v AUSTWIDE HOMES PTY LIMITED, LENCOE PTY LIMITED, MICHAEL STANLEY NEASON, JOHN AUSTIN FLEMING, PHILLIP MALCOLM ANDREA, BRADLEY JOHN WILSON, STEPHEN JAMES FILEWOOD, KERRY DAVID PASCOE, JAMES DAVID PASCOE, DIANNE MARGARET PASCOE, AUSTRALIAN SECURITIES COMMISSION, A.V. WEHL INDUSTRIES LIMITED, and AUSTRALIAN BUILDING MATERIALS LTD

NG 9 OF 1996

LEHANE J

9 AUGUST 1999

SYDNEY

THE COURT ORDERS THAT:

1.         The matter be set down at 9:00 am on 23 August 1999 for any argument on par 3 of the notice of motion of the first, third, fifth and sixth respondents filed 13 April 1999, orders on the motions put in that notice and further directions.

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

REASONS FOR JUDGMENT

1                     The first, third, fifth and sixth respondents, with the support of the fourth respondent, seek, by motion, orders under O 29 r 2 of the Federal Court Rules for the separate determination of two questions.  The first of those questions is formulated as three sub‑questions, as follows:

“(a)     whether a transportable home is an article within the meaning given in s 4 of the Designs Act 1906; and

(b)       whether a corresponding design to each of the artistic works listed in Schedule 1 to [the Notice of Motion] has been applied by the manufacture of transportable homes by or with the licence of one or more of the Applicants; and

(c)        whether by reason thereof, that [sic] the Applicants cannot succeed in their claims against the First, Third, Fifth and Sixth Respondents of infringement of each of the artistic works by the manufacture of transportable homes.”

The second question is:

“Whether the plans listed in Schedule 2 to [the notice of motion] made by Darryl Forbes‑Taber are each original artistic or literary works and not made by copying the Lloyds drawings, the ACI drawings and the Betterlook drawings referred to in paragraph 80 of the Second Further Amended Statement of Claim and accordingly, that the plans do not infringe copyright, if any, in such drawings.”

2                     The respondents applying for and supporting those orders (for simplicity I will refer to them as the “Austwide respondents”) say that each question is directed to a significant issue in the proceeding, that each is capable of a separate trial of relatively short duration and that a decision on either or both of the questions might well promote settlement, would in any event significantly narrow the issues ultimately in dispute and might make unnecessary the further participation of certain of the respondents in the proceeding.  Thus, it is said, the interests of justice – particularly the prompt and efficient disposition of the proceeding – would be promoted by the making of those orders.

The proceedings

3                     The first three applicants commenced these proceedings by an application filed on 5 January 1996, together with a statement of claim, by which relief was sought against the first two respondents only.  Protracted, and in some respects complex, interlocutory proceedings have occupied the very substantial intervening period.  It is necessary to mention, at present, only two aspects of the interlocutory steps.  One is that the solicitors who had appeared for the second, eighth, ninth and tenth respondents (known as the “Carindale respondents”) filed on 24 June 1998 a notice that they had ceased to act for those respondents, who have taken no active part in subsequent interlocutory steps (nor has the seventh respondent actively participated in them).  The other is that the applicants filed on 25 September 1998, in accordance with directions which I had made, their current pleading, the second further amended statement of claim.  The Austwide respondents have filed defences to the second further amended statement of claim, so that the issues between the applicants and the Austwide respondents are now reasonably clearly defined.

4                     Principally, the case concerns copyright in plans of transportable homes.  A transportable home is, broadly, a house which is constructed on premises of a builder, in such a way that it can be readily be divided into (usually two) sections.  It is then transported, in those sections, to the land on which it is to be erected, or placed.  There it is placed on footings, which are (or have been) prepared for it; the sections are joined; and connections are made to services, for instance electricity, water and drainage.  The first applicant claims that it owns the copyright in a number of plans of transportable homes and in certain specifications and other related documents (claimed to be literary works).  Its claimed chain of title is, in relation to some of those plans and other documents, rather long and complicated, in the case of others rather less so.  The fourth applicant claims to be the owner of the copyright in a plan for a transportable home created by one of its employees and in certain other documents, relating to the detailed construction of certain transportable homes, said to have been created by another of its employees.  The second applicant claims to be a licensee of the copyright of the first and fourth applicant in each of those plans and other documents (to which I shall refer as the “Kilthistle plans and specifications”).

5                     The applicants claim that the first respondent, Austwide, has made, or authorised the making of, plans for transportable homes and other documents which constitute reproductions of the whole or a substantial part of various of the Kilthistle plans and specifications; that is said to have been done without the licence of any of the applicants and to constitute infringements of copyright.  Austwide is said also to have constructed or authorised the construction, without authority, of a number of transportable homes, each of those homes being, it is said, a reproduction in a material form of the whole or a substantial part of one of the Kilthistle plans.  That also is said to have involved infringement of copyright.  The third, fourth, fifth, sixth and seventh respondents are said to have authorised, directed or procured the acts of Austwide and to have participated in a common design with it; they also, it is said, have infringed copyright.  Similar claims are made against the Austwide respondents in relation to the copyright, of which the third applicant is said to be the owner, in certain other plans of transportable homes (the “Betterlook plans”).

6                     A discrete series of claims is made against the first, third and fourth respondents (but not the other Austwide respondents) in relation to what are described as the Forbes‑Taber Plans and the Forbes‑Taber Homes.  In summary it is said that in or about December 1995 (after the first respondent, Austwide, was notified of the first three applicants’ claims against it) the fourth respondent, Mr Fleming, on behalf of Austwide, commissioned the making of a series of plans for transportable homes to be drawn by Mr Darryl Forbes‑Taber.  Mr Forbes‑Taber is said to have prepared a series of plans; each is said to have reproduced the whole or a substantial part of one of the Kilthistle plans or Betterlook plans; each was said to have been made without the authority of the applicants and, accordingly, to have infringed copyright.  Austwide is then said to have constructed, or authorised the construction of, transportable homes based on the Forbes‑Taber plans (the Forbers‑Taber Homes); that also is said to have constituted infringement of copyright in the relevant Kilthistle plans and Betterlook plans.

7                     It is sufficient to say of the claims against the Carindale respondents that they are similar to those made against the Austwide respondents; and there are claims against all respondents based upon alleged infringements, or involvement in alleged infringements, of s 52 and s 53 of the Trade Practices Act 1974 (Cth).

8                     It is unnecessary to consider in detail the defences filed by the Austwide respondents.  It is a sufficient summary to say that virtually all elements of each cause of action are in issue including, in the case of the copyright claims, subsistence and ownership of copyright (including substantially all the pleaded links in the chains of title) as well as matters going to the question of reproduction in a material form.  An order has been made to the effect that questions of liability are to be determined separately from, and before, questions of pecuniary relief.  It is evident, however, that if there is to be a full trial of all matters going to liability presently in issue between the parties that trial will occupy several weeks and will involve a large number of questions of fact and law.

9                     That sufficiently sets the context in which the present motion arises.  I shall deal first with the question relating to the Forbes‑Taber plans.

The Forbes‑Taber plans

10                  The substance of the proposed separate question is whether the Forbes‑Taber plans “are each original artistic or literary works” and not made by copying any of the Kilthistle plans or the Betterlook plans so that, accordingly, the Forbes‑Taber plans do not infringe copyright in any of the Kilthistle plans or the Betterlook plans.

11                  The Austwide respondents admit, on the pleadings, that the fourth respondent, Mr Fleming (then a director of Austwide), on behalf of Austwide, commissioned the making of a series of plans drawn by Mr Forbes‑Taber and that Mr Forbes‑Taber made the Forbes‑Taber plans pursuant to the commission.  They admit that this was done without the licence of any of the applicants; they say, of course, that no licence was required.  The second further amended statement of claim proceeds to make two allegations, each of which is denied.  One is that each of the Forbes‑Taber plans reproduces the whole or a substantial part of a specified Kilthistle or Betterlook plan.  That allegation is made in par 80.  Paragraph 81 then says:

“Forbes‑Taber, in making the Forbes‑Taber plans, referred to in paragraph 80, copied the [Kilthistle plans and the Betterlook plans] referred to in paragraph 80.”

12                  Senior counsel for Mr Fleming, whose arguments were adopted by counsel for the other Austwide respondents, made it clear that the question was intended to raise the issues arising from par 81 rather than the broader issue of reproduction raised by par 80.  The proposed question, accordingly, is concerned with the subjective element of the notion of “reproduction”, that is, actual use of the copyright work or “some causal connection between the plaintiffs’ and the defendants’ work” (Francis Day & Hunter Ltd v Bron [1963] Ch 587 at 614; S W Hart & Co Pty Ltd v Edwards Hot Water Systems (1985) 159 CLR 466 at 472; Eagle Homes Pty Ltd v Austec Homes Pty Ltd (1999) 43 IPR 1 at 5).  It is not concerned – directly, at any rate – with the objective aspect of reproduction, that is, similarity to the copyright work.

13                  The Austwide respondents submitted that the “copying” question, in relation to the Forbes‑Taber plans, was a distinct and readily separable issue which, if decided separately, would substantially limit the issues remaining to be dealt with and, more significantly, if the question were decided in favour of the Austwide respondents, would be likely to promote settlement because, the primary question relating to the continuing conduct of the Austwide respondents having been dealt with (because, it was said, Austwide no longer constructs houses in accordance with the Kilthistle plans and specifications), what would remain would be largely, at least, a claim for pecuniary relief which would be readily capable of settlement.  Because of the way in which the separate question was framed, it was said, and in the light of the applicants’ claims as pleaded and particularised, there would be little overlap between the evidence on the separate question and that in relation to the remaining issues; and there was no serious prospect that a view formed as to the credit of any witness giving evidence in relation to the separate question would cause embarrassment if the judge who determined the separate question also determined the remaining issues.  Positively, it was said that the scope of the evidence relevant to the separate question would be quite limited: the allegation was that Mr Forbes‑Taber had, in drawing his six plans, copied six identified plans in which the applicants claimed copyright.  Thus, the only relevant comparison would be one between Mr Forbes‑Taber’s six plans and the six plans of the applicants.  And a finding that there was no copying would finally dispose of the issues relating to the Forbes‑Taber plans and the Forbes‑Taber homes in favour of the Austwide respondents.  There would, in other words, be no need to consider evidence about the Forbes‑Taber homes, or any separate plans for those homes.

14                  Unfortunately, I am not convinced that the matter is quite so simple.  The allegation in par 81 of the second further amended statement of claim is of copying by Mr Forbes‑Taber.  He, in making his plans, is said to have copied the applicants’ plans.  But no claim of infringement is made against Mr Forbes‑Taber.  What is meant precisely, in those circumstances, by an allegation that Mr Forbes‑Taber copied the applicants’ plans may, in due course, require further elaboration; but I do not think it is at all clear that a finding that that claim was not made out would necessarily lead to a conclusion that the preparation of the Forbes‑Taber plans and their use in constructing transportable homes did not involve infringement on the part of Austwide or other Austwide respondents.  In other words, within par 80 of the second further amended statement of claim, “reproduction”, in both its subjective and objective aspect, might be established on the part of Austwide independently of the allegation in par 80.  The facts of Eagle Homes provide perhaps, an indication (though not an example) of a way in which that might be so: much might depend, for example, on the precise nature of the instructions given by Mr Fleming to Mr Forbes‑Taber when his plans were commissioned.  It would follow that, if a separate trial of the question propounded were ordered, the need to investigate homes and their plans would not necessarily be avoided, however the question were answered.

15                  Additionally, however, I do not accept that it is appropriate to separate the trial of the two aspects, the subjective and the objective, of reproduction.  The particular submission of the Austwide respondents, on this aspect of the case, was that evidence of the prior art, while relevant to the question of objective similarity, was not relevant to the question of copying, so that a good deal of detailed, particularly expert, evidence would not be required if the copying question were decided in favour of the Austwide respondents.  Certainly, Eagle Homes demonstrates that, once copying is established, the objective similarity hurdle is not very high; and that it may, therefore, be useful and appropriate to decide questions of copying before turning to objective similarity.  But much will depend, in any given case, on the way in which copying can be proved, or is sought to be proved.  The author of an infringing plan may admit copying or may be proved to have had a copyright plan on the drawing board when preparing the allegedly infringing plan; or, as in Eagle Homes, the allegedly infringing plans may be shown to have incorporated particular and striking features of the copyright plans not present in what the author of the allegedly infringing plans claimed to have been the source material for those plans.  On the other hand, it may be possible to establish copying only by inference from objective similarity and in some such cases a “specially close similarity” might be required: Eagle Homes at 21.  In a case of that kind there is an obvious overlap between the two elements of reproduction, and I do not see why evidence about prior art would not be equally relevant to the subjective as to the objective element: an inference of copying might be made much more readily where a feature of the copyright plan appearing in the allegedly infringing plan was an original or unusual feature than where it was one which might be found, for instance, in numerous plans of transportable homes or, possibly, houses of other kinds such as project homes.

16                  How the applicants will seek to prove copying in this case is, so far as the material before me goes, a matter of speculation.  Substantially all that is known is that there is no admission: both copying and reproduction are alleged and both are denied.  It follows, I think, that I must accept the submission of senior counsel for the applicants that expert evidence may well be relevant; that the experts involved are likely to be those who would be called in relation to other issues; and that there is therefore at least a great deal to be said for the proposition that it is more convenient that they be called once only and, particularly, that matters of credit, and relative weight, should be considered in the light of their evidence as a whole.

17                  Then there is the question of Mr Fleming’s evidence.  Plainly, his evidence will be important on the question of copying and senior counsel for the applicants made it clear that his credit will be in issue.  Mr Fleming is also said to have authorised, and to have been a participant in a common design in relation to, the earlier infringements.  Although I accept that Mr Fleming’s involvement with Austwide, as pleaded, before December 1995 was relatively short and that the particulars of his involvement, given in the second further amended statement of claim, rely largely on his own affidavit evidence (of his limited involvement), nevertheless, if the question of copying were tried separately, it is likely that views would be expressed, in the reasons for the answer to the question, on his credit; and in circumstances where his conduct would be in issue in any trial of the remaining issues.

18                  There are two other matters.  One concerns the submission that a decision on the separate question might substantially eliminate questions about injunctive relief (and additional damages); the other relates to the possible impact of appeals.  As to the former, although the argument appeared to proceed on a common assumption that the only plans still used by the Austwide respondents, in relation to which the first, second and fourth applicants claim copyright, are the Forbes‑Taber plans, that in fact, as I understand it, is not admitted.  So far as the pleadings go, there is an allegation that the respondents threaten and will continue to engage in all the infringing conduct alleged against them unless restrained.  That is denied in relation to the (pre‑December 1995) Kilthistle plans; but Austwide admits that it will continue to do what it is alleged to have done (though it denies infringement) in relation to both the Forbes‑Taber plans and the Betterlook plans.  To suggest in those circumstances that a decision of the proposed separate question, favourable to the Austwide respondents, would eliminate questions of injunctive relief is, at best, speculative.

19                  As to the other matter, questions about copying are notoriously difficult.  It is not unlikely that the parties which were unsuccessful on the separate question would wish to appeal.  An appeal would lie, of course, only with leave; and on the application for leave the Court would, no doubt, have to consider, among other things, whether it was more convenient to hear an appeal in relation to separate questions, leaving the trial of other matters to take place separately (and presumably later) or, on the other hand, to defer any appeal until the issues between the parties had been fully determined at first instance.  In neither case is it easy to see how the making of the order sought by the present motion would promote the expeditious determination of the issues between the parties.  I shall comment further on this matter when considering the other proposed separate question.

20                  Undoubtedly the identification of questions appropriate to be determined separately can narrow issues, promote settlement and assist in the efficient administration of justice.  But there are numerous cautionary examples of the unfortunate effects of the separation of issues where it is not appropriate; and authority indicates that caution is indeed necessary (see the summary in the judgment of Branson J in Reading Australia Pty Ltd v Australian Mutual Provident Society [1999] FCA 718).  For the reasons I have given I am not persuaded that it is appropriate to order a separate trial of the issues raised by par 81 of the second further amended statement of claim.

Transportable homes: “articles”?

21                  The proposed question arises from the Austwide respondents’ reliance on the defence in s 77(2) of the Copyright Act 1968 (Cth).  Subsections (1) and (2) of s 77 provide as follows:

“77(1)This section applies where:

(a)        copyright subsists in an artistic work (other than a building or a model of a building, or a work of artistic craftsmanship) whether made before the commencement of this section or otherwise;

(b)        a corresponding design is applied industrially, whether in Australia or elsewhere, by or with the licence of the owner of the copyright in the work in the place where the industrial application happens;

(c)        at any time on or after the commencement of this section, articles to which the corresponding design has been so applied (in this section called “articles made to the corresponding design”) are sold, let for hire or offered or exposed for sale or hire, whether in Australia or elsewhere; and

(d)        at that time, the corresponding design is not registrable under the Designs Act 1906, or has not been registered under that Act.

      (2)It is not an infringement of the copyright in the artistic work to reproduce the work, on or after the day on which articles made to the corresponding design are first so sold, let for hire or offered or exposed for sale or hire, by applying that, or any other, corresponding design to an article.”

It is not disputed that if the Austwide respondents were to succeed, in substance, on this aspect of their motion, the question as proposed would require amendment.  It is not useful to ask in general terms whether a transportable home is an article; what matters, in relation to each of the plans copyright in which is alleged to have been infringed, is whether at least one house, to which a design corresponding to the plan has been applied industrially, by or with the licence of the owner of the copyright in the plan, and has been sold, let for hire or offered or exposed for sale or hire, is an “article”.  Secondly, it is not useful to know merely whether a corresponding design has been applied to such a house; it is also important to know whether it has been applied “industrially”.  Subsection 77(4) of the Copyright Act provides that the regulations may specify the circumstances in which a design is to be taken to be applied industrially.  Regulation 17 of the Copyright Regulations (which may itself in this case give rise to questions of fact and law of some complexity) is as follows:

“17(1)For the purposes of section 77 of the Act, a design is taken to be applied industrially if it is applied:

(a)        to more than 50 articles; or

(b)       to one or more articles (other than hand-made articles) manufactured in lengths or pieces.

      (2)For the purposes of paragraph (1) (a), any 2 or more articles:

(a)        that are of the same general character; and

(b)        that are intended for use together; and

(c)        to which the same design, or substantially the same design, is applied;

are taken to constitute a single article.

(3)       For the purposes of this regulation, a design is taken to be applied to an article if:

(a)        the design is applied to the article by a process (whether a process of printing, embossing or otherwise); or

(b)        the design is reproduced on or in the article in the course of the production of the article.”

There are no admissions about any of these matters; and the form of the question as proposed tends to obscure the extent of the factual inquiry which would be necessary to decide a question framed so as to be useful.

22                  Senior counsel for Mr Fleming foreshadowed an argument, based on reg 11 of the Designs Regulations, to the effect that a plan, just as much as a house, was an “article” so that, presumably, if the applicants have applied industrially a design, corresponding to a plan in which they claim copyright, to an article of any kind (for example, a transportable home) which has been sold or let on hire, s 77(2) of the Copyright Act provides a defence to the Austwide respondents if they have applied the corresponding design to an article of some other kind (for example, a plan).  Senior counsel accepted, however, that that ingenious argument, unsupported, as he conceded, by any authority, was not raised by the question proposed or any alternative version of it for which the Austwide respondents contended.

23                  The particular advantage which, it was admitted, would follow from determining the “article” question separately was that, if it were determined favourably to the Austwide respondents, the question whether houses constructed by the Austwide respondents were reproductions of copyright plans in a material form would disappear, so that a great deal of evidence about individual houses, which would otherwise have to be led, would not be required.  Up to a point, that is true.  There are at least two qualifications.  One is that a decision on the question would not eliminate claims that copyright was infringed by the drawing of plans, based on, for example, the Forbes‑Taber plans, in accordance with which individual houses were constructed; one might not need photographs or inspections of houses, but one probably would not avoid a need to deal with a number of individual plans.  Secondly, as senior counsel accepted, on the present state of the authorities, if ultimately there were an account of profits, profits referable to the construction and sale of particular houses might have to be taken into account even though the construction of any house did not amount to reproduction, in a material form, of any of the copyright works: LED Builders Pty Ltd v Eagle Homes Pty Ltd [1999] FCA 584.  Additionally, it seems reasonably clear that there is likely to be overlapping of witnesses: some at least of those who would give evidence as to the processes involved in constructing the transportable homes would also give evidence on other aspects of the case; and, again, it is by no means impossible that questions of credit would arise.

24                  Finally, the effect of the appellate process must again be borne in mind.  If, whatever decision were reached at first instance on the separate question, leave to appeal were granted and the Austwide respondents were successful on the appeal, then, no doubt, the scope of the ultimate trial would to some extent be reduced: but not, I should think, for the reasons I have already given, to an extent sufficient to justify the inevitable delay in reaching a final determination of the disputes between the parties.  If, on the other hand, the Austwide respondents were unsuccessful on the question at first instance or, if there were an appeal, on appeal, then there would be no saving of time or expense in relation to the trial; the trial would, however, once again be significantly delayed.  Let it be assumed, on the other hand, that the Austwide respondents succeeded, at first instance, on the separate question and that either the applicants did not seek leave to appeal or were refused leave.  In that case, presumably, the trial on questions going to liability would proceed on the footing that the answer given was correct, so that, contrary to what one might suppose to be the likely position if the separate question had not already been determined, there would be no evidence concerning individual houses and, of course, no alternative finding made to guard against the possibility that the answer to the separate question might ultimately be held to be wrong.  But the substance of the separate question might then be raised on appeal, with the possibility that a further trial might be required in which, after all, evidence about the individual houses might need to be led.

25                  It is, of course, easy to assume the worst (though it is not unknown in practice that the worst, or something like it, happens) and to ignore, for example, the prospect that at some stage in the process the parties would reach a settlement.  What is important, however, in my view, is that the considerations to which I have referred indicate that the benefits said to be likely to flow from separating the proposed question are, again, no more than speculative and that it is no more likely that advantage would ensue than disadvantage.  It follows, in my view, that it is not appropriate to make the order sought.

Conclusion

26                  It follows that the motion of the first, third, fifth and sixth respondents should be dismissed so far as it seeks orders for the separate determination of the two proposed questions.  The notice of motion included also an application for an order striking out, or summarily dismissing, the claims of the applicants in relation to the Forbes‑Taber plans and the Forbes‑Taber homes.  The Austwide respondents did not press that application at the hearing; it was not in the end made clear, however, whether it was abandoned.  If the Austwide respondents wish to press the application, they should have the opportunity to say so, and I shall hear any submissions that the parties may wish to make on that matter, and on costs.  The only order which I make now is that the matter be set down at 9:00 am on 23 August 1999 for argument on those matters, the making of orders on the motion and the making of directions for the future conduct of the proceeding.  As to the last of those matters, it is plainly desirable that steps be taken to ensure that the matter is ready for hearing as promptly as is possible.

Associate:

Dated:              9 August 1999