FEDERAL COURT OF AUSTRALIA

 

Council of the City of Sydney v Goldspar Pty Limited [2004] FCA 568

 

CONTRACTS – pre-contractual negotiations – contract for supply of multi-function street poles to Council – whether pre-contractual negotiations establish grounds for rectification – whether conduct in the course of pre-contractual negotiations unconscionable – whether pre-contractual conduct misleading or deceptive

TRADE – restraint of – contract for supply of multi-function street poles to Council – contractual term prohibiting use of intellectual property after termination – whether contractual term a restraint of trade – whether any restraint of trade reasonable as between the parties

COPYRIGHT – contract for supply of multi-function street poles to Council – assignment of copyright in pole designs to Council – whether manufacture and supply of poles to third parties constituted breach of copyright – whether drawings substantially reproducing copyright designs constituted breach of copyright

TRADE PRACTICES – publications claiming intellectual property in design of poles – whether publication of notice misleading or deceptive – whether representations in notice false or misleading

TRADE PRACTICES – accessory liability – misleading and deceptive claims of intellectual property in design of poles by company – whether involvement of managing director in distribution established accessory liability in circumstances of the case

Copyright Act 1968 (Cth)

Trade Practices Act 1974 (Cth), ss 52, 53, 75B

Australian Capital Territory v Munday (2000) 99 FCR 72 cited

Avtex Airservices Pty Ltd v Bartsch (1992) 107 ALR 539 considered

Bartsch v Avtex Airservices Pty Ltd (unreported,Federal Court of Australia, Gummow, French and Heerey JJ, 27 August 1993) considered

Bowler v Hilda Pty Ltd (1998) 80 FCR 191 cited

Butcher v Lachlan Elder Realty Pty Ltd (2002) 55 NSWLR 558 cited

Council of the City of Sydney v Goldspar Australia Pty Limited [2002] FCA 1064 related

Council of the City of Sydney v Goldspar Pty Limited (No 2) [2002] FCA 1268 related

Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269 referred to

Heydon v NRMA Ltd (2000)51 NSWLR 1 cited

ICT Pty Ltd v Sea Containers Ltd (1995) 39 NSWLR 640 cited

John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) ATPR 41‑249 cited

Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181 considered

Muscat v Le (2003) 204 ALR 335 cited

Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126 considered

Pukallus v Cameron (1982) 180 CLR 447 applied

Reiffel v ACN 075 839 226 Ltd [2003] FCA 194; 45 ACSR 67; 21 ACLC 469 cited

Rural Press Ltd v Australian Competition and Consumer Commission (2002) 118 FCR 236 applied

Rural Press Ltd v Australian Competition and Consumer Commission (2003) 203 ALR 217, 78 ALJR 274 applied

Sheldon v Metrokane [2004] FCA 19 cited

Tamawood Limited v Henley Arch Pty Ltd [2004] FCAFC 78 applied

Yorke v Lucas (1985) 158 CLR 661 applied

A Bates, ‘Artistic Works Industrially Applied:  Comparison of Copyright/Designs Law in Australia and New Zealand’, (1993) 17(2) UQLJ 24

SG Corones, ‘Solicitors’ Liability for Misleading Conduct’ (1998) 72 ALJ 775

JD Heydon, The Restraint of Trade Doctrine, 2^nd Edition, 1999

 

 

 

 

 

 

 

 

 

 

 

 

THE COUNCIL OF THE CITY OF SYDNEY v GOLDSPAR AUSTRALIA PTY LIMITED (ACN 002 705 991) AND DOUGLAS RAWSON-HARRIS

N 728 OF 2002

 

GYLES J

7 MAY 2004

SYDNEY

 

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 728 OF 2002

 

BETWEEN:	THE COUNCIL OF THE CITY OF SYDNEY APPLICANT
AND:	GOLDSPAR AUSTRALIA PTY LIMITED (ACN 002 705 991) FIRST RESPONDENT   DOUGLAS RAWSON-HARRIS SECOND RESPONDENT
JUDGE:	GYLES J
DATE OF ORDER:	7 MAY 2004
WHERE MADE:	SYDNEY

 

THE COURT ORDERS THAT:

 

The proceeding stand over to a date to be fixed.

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	N 728 OF 2002

 

BETWEEN:	THE COUNCIL OF THE CITY OF SYDNEY APPLICANT
AND:	GOLDSPAR AUSTRALIA PTY LIMITED (ACN 002 705 991) FIRST RESPONDENT   DOUGLAS RAWSON-HARRIS SECOND RESPONDENT

 

JUDGE:	GYLES J
DATE:	7 MAY 2004
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1                     On 11 October 2002 I answered a separate question as follows:

‘Question 1:    Whether on the true construction of the contract between the Applicant and the First Respondent dated 29 May 1998 (“the Contract”) and in the events which have happened, the owner of copyright in the drawings identified in Schedule A hereto (“the Works”), is the Applicant or the First Respondent

Answer:           (i)         As to the first item in Schedule A – not the applicant;

(ii)        As to the second item in Schedule A – as between the applicant and the respondents, the applicant;

(iii)             As to the third item in Schedule A – inappropriate to answer as a preliminary question.’

Schedule A was as follows:

‘SCHEDULE A

1.         All drawings forming part of the First Respondent’s Version 2 Non-Conforming Tender being part of Exhibit “KJW1” to the affidavit of Katherine Jane Williams sworn 19 July 2002 (“Exhibit KJW1”).

2.         All drawings forming part of the Contract being Exhibit KJW1 and known as “General Arrangements and Parts Drawings – Issue C”.

3.                 All drawings relating to the goods supplied pursuant to the Contract.’

(Council of the City of Sydney v Goldspar Pty Limited (No 2) [2002] FCA 1268) (the second judgment).  That judgment was preceded by an earlier judgment – Council of the City of Sydney v Goldspar Australia Pty Limited [2002] FCA 1064 (the first judgment).  Those judgments set out the basic facts which I will not repeat.  The proceeding has now come on for final hearing although several issues have been ‘hived off’ from this hearing following contested interlocutory applications after the commencement of the final hearing.

2                     Counsel for the Council of the City of Sydney (the Council) has submitted that I can and should revisit the answers I gave to the preliminary questions as they were given in an interlocutory decision and the fuller body of evidence now available would lead to a different result in relation to the answer to question 1(i).  In my opinion there is no occasion to do so.  Whilst technically interlocutory, the answers given were final answers to the questions.  There is no doubt that the evidence which has been led on this hearing is more extensive than previously, because of issues that were not open on the previous hearing.  That is no reason for reopening a closed issue.  To do so would detract from the utility of the procedure for determining separate questions.  This decision settles some aspects of the construction of the contract and removes some of the arguments advanced by the Council from the arena.  Council has the intellectual property in the Issue C drawings but not the Issue A (or Version 2) drawings.  Hence the significance of the Council’s claim for rectification in relation to the Version 2 drawings.

Rectification

3                     The rectification claim is as follows:

‘5.        An order that the Contract be rectified so as to express the true agreement between the parties by altering clause 10 thereof by adding the following words after the first sentence of the third paragraph “Ownership of the design in the multi-functional street pole the subject of the Request for Tender, including copyright in the drawings comprising the Suppliers’ Version 2 non-conforming tender, vests in the Council”.’

4                     The claim turns primarily upon five meetings – on 22 August 1997, 28 August 1997, 3 September 1997, 12 May 1998 and 29 May 1998.  These meetings must be put into context and there is a number of contemporaneous documents that bear upon the issue.

5                     In the first judgment I set out portions of the Request for Tender (at [3]–[5]).  I referred to what was said about the specification and drawings (at [6]) and certain parts of the Tender (at [7]–[9]) and referred to the Contract drawings (Issue C) ([10]).  I then set out certain portions of the Contract, particularly clause 10 as elaborated by definitions from clause 2 (at [11]). 

6                     It is necessary to flesh out the chronology of events which appears in the first and second judgments.  The first advertisement by the Council calling for tenders appeared in the Sydney Morning Herald on 12 June 1997.  By that time the Council had applied for a patent for the design which was put out to tender, known as the Webb design.  It appears that a significant sum of money had been expended by the Council for development of the Webb design.  The form of the definitions incorporated into clause 10 of the General Conditions of Contract which were part of the Request For Tender differed from those which appeared in the final version of the Contract and which are set out in [11] of the first judgment.  A marked up version of the alterations to clause 10 and the incorporated definitions in clause 2 is as follows:

'“Drawings” means the drawings referred to in the Supply Contract, including without limitation the Production Drawings, and any modification of such drawings notified to the Supplier by the Council and includes such other drawings as may from time to time be supplied to the Supplier by the Council, or the use of which has been permitted by the Council, for the purposes of the Supply Contract;

“Intellectual Property” means all inventions, patents, patent applications, trade marks, designs, copyright (including copyright in any computer software or hardware or any works associated with such software or hardware), technical know-how and commercially sensitive or valuable information which is provided to the Supplier by Council, or which is created in the course of or arises out of this Supply Contract and, in particular, includes all Intellectual Property in the Drawings and Specification;

…

“Product” means the goods to be supplied by the Supplier under the Supply Contract which are to be handed over to the Council or a person designated by the purchaser;

“Production Drawings” means the drawings in Appendix A and signed by the parties for the purposes of identification;

…

“Production Specification” means the specification in Appendix B and signed by the parties for the purposes of identification;

…

 “Project” means the [ ] design, supply and installation of the Product being undertaken by the Council;

“Request for Tender” means the document issued by Council requesting tenders for the supply of the Product and any subsequent addenda to which a response was made by the Supplier in the Tender, as appended to this Agreement as part of Part A and signed by the parties for the purposes of identification;

“Schedule of Rates” means any the schedule dated 8 August 1997 included in the Supply Contract which, in respect of any section or item of work to be carried out, shows the rate or respective rates of payment for the execution of that section or item of work and which may also include lump sums, other sums, quantities and prices;

…

 “Specification” means the Specification for work to be carried out as existing at the Date of Acceptance of Tender, including without limitation the Production Specification and any modification of such Specification thereafter directed or the use of which has been permitted by the Council pursuant to powers in that behalf contained in the Supply Contract;

…

10. PATENTS, COPYRIGHT AND OTHER INTELLECTUAL PROPERTY RIGHTS

The Supplier warrants that any other design, materials, documents and methods of working provided by the Supplier will not infringe any patent, registered design, trademark or name, copyright or other protected right.  The Supplier also warrants that the design of the Product and the Product will be fit for the purposes advised by Council to the Supplier as at the date of Supply of the Product. [text in bold characters inserted by hand and initialled D.R.H.]

The Supplier must pay all royalties, all fees for patent rights and all other such fees in respect of the subject matter of the Supply Contract.

The Supplier acknowledges that Council is the proprietor of all Intellectual Property provided to the Supplier prior to or in the course of this Supply Contract and that it is supplied to the Supplier for the purposes of manufacturing and delivering the Product under this Supply Agreement only.

The Supplier shall have no rights in respect of any of the Intellectual Property (which it acknowledges is the exclusive property of the Council) and the Supplier shall not use any of the Intellectual Property except for the purposes of manufacturing and supply of the Product in accordance with this Supply Contact specified in clause 5 or otherwise in accordance with this Agreement.

The Supplier hereby agrees not to acquire and waive any right, title or interest in or to any trade names, trade marks or copyrights pertaining to the Product.  The Supplier shall not place any logo or trade mark on any of the Product without the prior written consent of the Council.  The Supplier shall affix to the Product such copyright and any other notice (if any) as may be specified by the Council from time to time.’

7                     It can immediately be seen that the argument that Council would acquire the intellectual property in a tendered non-conforming design is, to say the least, a difficult argument on the original form of clause 10 and related definitions.  It is fairly clear that the clause in that form was drafted with a conforming tender in mind and would only be appropriate to pick up that situation.

8                     The first respondent, Goldspar Australia Pty Limited (Goldspar), had a substantial business of selling poles of various kinds and the second respondent, Douglas Rawson-Harris (Rawson-Harris), had been involved in the design, manufacture and sale of industrial articles for many years.  Robert Steven Matchett (Matchett), then a principal of KWA Design Group Pty Limited (KWA), introduced himself to Rawson-Harris in connection with the Request for Tender.  I am satisfied that this was at the suggestion of Steven Frank Newman (Newman), an officer of Council, notwithstanding the contrary evidence of Matchett.  Newman had worked with Matchett at KWA some time previously.  KWA described itself as a street furniture consultant.  It utilised computer assisted design (CAD), a facility which Goldspar did not have.  Goldspar and KWA collaborated in relation to production of the non-conforming drawings for submission with the Tender described as both Version 2 and Issue A.  The explanation in the Tender for submission of that version was set out in the first judgment at [8].  Version 2 was claimed to be, and in my opinion was, a significant departure from the Webb design.  There are common features because, it was said that, the overall aesthetic of the pole (which I take to mean the shape) was retained and, of course, the function is the same.  There is debate between Rawson-Harris and Matchett as to the extent to which KWA contributed to the final design result, although the basic design was that of Goldspar.  The resolution of that question has no particular significance for the case as KWA did not retain any right to intellectual property it may have had.  The Tender was submitted on 29 July 1997.

9                     On 21 August 1997 Newman, who was then responsible for the day to day administration of the design and supply of the street pole on behalf of the Council, prepared a report to the Council recommending acceptance of the Goldspar non-conforming Tender.

10                  On 22 August 1997 a meeting was held between Newman and his superior Vasilios Angelo ‘Bill’ Tsakalos (Tsakalos) from the Council, Rawson-Harris and Antony John Barnes (Barnes) (who was then a sales consultant to Goldspar and at the time of giving evidence was a consultant to Claude Outdoor) from Goldspar and Matchett from KWA.  It is common ground that Newman proposed certain modifications to the non-conforming Version 2 design that were embodied in a sketch that was tabled at the meeting.  The modifications were agreed to on the part of Goldspar and KWA. 

11                  Tsakalos gave oral evidence that at the meeting of 22 August 1997 he said that:

‘[A]s per the contract the design ownership was to be vested in Council and asked if that was understood for both conforming and non-conforming tenders, because there were two submissions that we were putting, and Mr Rawson-Harris responded that he understood that.’

The following answers were given by Tsakalos in cross-examination:

‘You say you were seeking to convey to Mr Rawson-Harris at a meeting on 22 August was [sic] that intellectual property in the design that he submitted with his non-conforming tender, would be vested in Council? --- I actually wasn’t seeking to convey that to him, I was seeking to get confirmation that he understood that to be the case because that’s how the contract documents were structured.’

12                  I do not accept that evidence.  It was not referred to in any affidavit of Tsakalos and is not supported by any other witness or any contemporaneous document including the contemporaneous handwritten notes by Newman.  I am satisfied that the annotations made by Tsakalos on Exhibit D (a copy of the Agenda for 22 August meeting) were not written during the course of that meeting.  There were no minutes of the meeting of 22 August.  It is to be noted that the form of the alleged conversation was to confirm the effect of the Conditions of Contract as to design ownership rather than to agree to a different position.  As I have said, the express terms of the contract reasonably clearly did not have the effect of vesting intellectual property in a non-conforming tender in the Council.

13                  On 25 August 1997 Council passed the following resolution in relation to the Tender:

‘ITEM 3.      REPORT ON TENDER 9733  MULTI-FUNCTIONAL STREET POLES (SO6-03234)

 

Moved by Councillor Greiner, seconded by Councillor Tsang –

That arising from consideration of a report by the Project Manager Industrial Design to the extraordinary meeting of Council on 25 August 1997 on Tender No 9733 – Multi Functional Street Poles, and in order that the City of Sydney secure the supply and installation of purpose designed multi-functional street light poles and luminaries, it be resolved that –

(A)         Council enter into a contract for the supply of the Alternative street pole design with Goldspar Australia for the George Street Project, subject to the supplier meeting Council’s required level of lighting and subject further to the following requirements being addressed:

(i)        adequate banner lighting;

(ii)       agreement with Council on finishes and colour;

(iii)      adequate ability of the design to cope with removal of elements;

(iv)      maximum scratch resistance and ability for removal of graffiti and posters;

(v)       facility to add full range of additional elements including pedestrian lighting, information panels, statutory labelling (gas, water, hydrants) and kerbside controls;

(vi)      stability of the pole from an engineering perspective;

(vii)     adequate length of structural pole within the outer pole to cater for heavier loads suspended by catenary wire, should that become necessary;

(viii)    adequate provision for heavier banners including liquid crystal displays with optical fibres;

(ix)      adequate provision for video surveillance cameras should they be required;

(x)       adequate ability for maintenance and replacement of light bulbs;

(B)         authority be delegated to the General Manager to enter into pole supply arrangements for other projects, as required, and with rates of supply consistent with the submitted tender;

(C)         authority be delegated to the General Manager to negotiate alternative funding arrangements for installation, maintenance of poles and energy provision for street lighting;

(D)         subject to cost considerations the General Manager pursue and progress further street lighting throughout the City;

(E)         regular progress reports on threshold issues be submitted to the Chairman of the Projects and Public Spaces Committee and the Lord Mayor; and to Council as necessary.

Carried.’

14                  On 26 August Goldspar wrote to the Council as follows:

 ‘Firstly, 1 [sic] would like to thank you and Steven for your support during the tender process and for the commitment which is now being made to Goldspar for the Sydney Multi Function Street Pole project.  I’m sure you can see the level of importance this project has for Goldspar and our team and you should be confident in our ability to satisfy all of Sydneys [sic] design, production and installation requirements.

1.0       REPORT TO COUNCIL

The next step is for Goldspar to prepare a report which responds to the following issues highlighted prior to and from the council meeting 25 Aug 97.

1.1              POLE DIAMETER Redesign the range of poles such that the upper pole diameter is approximately 220mm.

1.2       MINOR ACCESSORY CONNECTING SYSTEM

Redesign the system for connecting the minor accessories to the pole, [sic] The minor accessories include:

2.1              Street signs

2.2              Banner poles

2.3              Pedestrian light

2.4              Banner lighting

It is desirable for this system to not require drilling of the upper pole for the attachment of the minor accessories.

1.3       ENGINEERING ANALYSIS

Undertake engineering analysis of the revised pole design, the results of which will be as follows

1.3.1        Confirmation of the structural integrity of the range of poles and compliance with all relevant Australian Standards.

1.3.2        Confirmation of the style of catenary structure (cross street banner & light) that can be accommodated by the range of poles.

1.3.3        Confirmation of the size and weight of the LED Active Display that can be mounted to the range of poles.

1.3.4        Confirmation of the structural integrity of the minor accessory mounting system, [sic]

1.4       FINISHES

Provide comparative analysis against various criteria for a range of finish options including those being proposed for the Sydney Street Pole, [sic]

The range of finishes will include; 25, 40 and 60 micron thick anodising, and galvanising.  The analysis criteria will be hardness, scratch resistance, vandal resistance etc.

The above redevelopment and Council report can be progressed immediately as discussed.  I think a meeting should be set-up ASAP where the above issues are discussed in detail and the revised designs progressed.  Additionally, the parameters and assumptions under which Taylor Thomson Whitting (TTW) analysed the Goldspar Tender can be tabled and the appropriateness of those parameters clarified.  At that point the engineer can be briefed on the calculations which are required for the Council report.

On another matter, and as discussed Goldspar have already committed a great deal of resource, time and money in the preparation and submission of the Goldspar Tender, [sic] Additionally, we are very excited about progressing the development process with Council’s involvement.  However, as a sign of your commitment to Goldspar and prior to sign off of the appropriate contract, payment of the following fees would enable Goldspar to progress with the redesign and Council report immediately.

1.      Preparation of pre-production drawings                 $82,250.00

            (with tender) and full production drawings

2.      Preparation of structural analysis                             $5,000.00

         TOTAL                                                                    $87,250.00

 

Bill, again thank you for your support and 1 [sic] look forward to progressing the design and getting some very elegant Multi function poles onto George Street as fast as possible, [sic]’

15                  On 27 August Newman had a discussion with a solicitor Chris Shaw from Dunhill Madden Butler who was acting for Council in relation to the patent application for the Webb design.  Newman’s contemporaneous note was as follows:

 ‘Chris Shaw

Question of “substantiallity” [sic] ie. is it or is it not a substantial change from the as specified design.

Everything. (page 2) tendered is Council property, assuming substantially as per spec. (& page 9)

GSP alternative – principle of plug on upper section aluminium extrusion or tube sleeve onto structural base/inner core is as per Melbourne, & as per Camden.

1                    Is it GSP patented system?

2                    Or is it a principle generally employed by others also

–        If (2) then other tenderers could be invited to submit prices after Council agreement.

–        Or could ask for prices based on SN development (the external extrusion with integral tracks on 4 sides is included in provisional application)

*Perhaps Ian Dryden could clarify precedence to Goldspar proposal.’

16                  Ian Dryden was a designer who worked with Melbourne City Council, to which Goldspar had previously supplied poles.  GSP is obviously Goldspar.  SN is obviously Steven Newman.  It is to be noted that page 2 of the General Conditions of Contract included in the Tender documents contained the definitions of ‘Drawings’ and ‘Intellectual Property’, and that clause 10 headed ‘Patents, Copyright and other Intellectual Property Rights’ commenced on page 9.  It is clear enough that Newman and Shaw were considering the way in which that clause would operate in relation to the Goldspar non-conforming tender.  It is also clear enough that Council officers were then contemplating inviting other tenders in due course for the supply of similar poles.

17                  On 28 August 1997 there was another conversation between Newman and Shaw, Newman’s contemporaneous note of which was as follows:

 ‘Chris Shaw

–     Purchase of i.e. payment for design i.e. production plugs does not ensure design ownership by Council. (Not specific as to what payment is for).

–     Ownership of tooling as detailed in set-up is specific & does reinforce Council design ownership.’

18                  That conversation would have occurred before the meeting at 5.30 pm that day.  Newman claimed that he could not remember raising design ownership or the effect of his discussions with Shaw with Tsakalos before the meeting.  It is likely that he did.

19                  The agenda for the meeting on 28 August had, as the first item:

‘1.        Financial

(a)     Preproduction Fees

(i)           Design/Drafting

(ii)         Tooling’

Other major headings were:

‘2.     Structural

3.            Connection Details

4.            Materials & Finishes

5.            Other items

6.            Next Meeting – To Be Announced’

20                  On 28 August 1997 Council wrote to Goldspar as follows:

‘Thank you for your tender on the above project.  Council has resolved to proceed with the Alternative tender option submitted by Goldspar subject to satisfactory resolution of the design, production and installation issues described below.

Technical data including engineers reports, performance testing reports and detail fabrication drawings are required for a “sign-off” prior to proceeding to any production or fabrication.  These details must be provided within the conditions and financial parameters of your tender submission and be provided within a program which meets supply requirements for the George Street project.

The following is a summary of the key areas requiring further information or development and is intended as a broad outline for progressing work.

1.         FINANCIAL

 

            (i)         Set Up

            Subject to satisfactory resolution and sign-off of the following details Council will pay those costs identified as pre-production costs associated with design work and drafting.  These are as follows.

                   Preparation of production drawings                            $82,250

                   Structural Analysis                                                        $  5,000

                   Sub Total                                                                      $87,250

            Following satisfactory fabrication of tooling equipment and approval of production samples Council will pay the remainder of pre-production costs identified in your tender being:

                   Initial production and assembly                                    $24,500

                   Production Data Samples                                             $28,655

                   Preparation of Technical catelogue [sic]                      $  3,500

                                                                                  Sub Total      $56,655

                                                                                          Total    $143,905

            (ii)        Supply Tender

            Ordering, supply and payment arrangements will be as per the tender documents and confirmed prior to fabrication.

2          ENGINEERING

            …

3          CONNECTION DETAILS/SYSTEMS

            …

4          MATERIALS & FINISHES

            …

I thank you for your tender submission and I look forward to the exciting contribution that Goldspar and KWA will make to the transformation of the public domain in the City of Sydney.’

            The letter was signed by Tsakalos. 

21                  That letter was tabled at a meeting which took place at 5.30 pm that evening with Rawson-Harris, Barnes, Matchett, Tsakalos and Newman in attendance.  It is to be noted that the topic of design ownership and intellectual property was not referred to in the report by Newman to Council, the resolution of Council which accepted the non-conforming tender or the letter of 28 August 1997 signed by Tsakalos and in particular there is no reference in any of them to the conversation alleged by Tsakalos to have occurred at the meeting of 22 August.

22                  There is a sharp conflict as to what was said concerning design ownership at the meeting of 28 August.  According to Tsakalos in his affidavit, the conversation was as follows:

Tsakalos:               ‘Intellectual property is vested in the Council pursuant to the contract.’

Rawson-Harris:     ‘I understand that the intellectual property is vested in Council.  How can I market it outside of Sydney?’

Tsakalos:               ‘Council will have to tender the right to manufacture the Smartpoles under licence based upon some type of royalty or licence fee arrangement for each pole.’

Rawson-Harris:     ‘Yes, I have a light pole designed specifically for Melbourne and in Melbourne where the poles are used elsewhere a royalty is paid back to Melbourne.’

23                  Rawson-Harris’ account is as follows:

Tsakalos:               ‘Council has wasted approximately $240,000.00 on the Barry Webb Design and it would be difficult for Council to agree to further documentation costs as a result of Council now wanting to use Goldspar’s design.  Council would like to own your design as we’re not going to use the Barry Webb Design.  We’re going to replace all the poles throughout Sydney CBD.’

Rawson-Harris:     ‘That shouldn’t be a problem as long as Goldspar makes all the poles the Council requires, as we have a deal like we have with Melbourne City Council whereby we make poles for other people using their design and we pay a royalty to them.  This will help Council recover some of the money you guys have wasted on the Barry Webb Design.’

Tsakalos:               ‘That could be possible.  I will have to talk it over with Council.’

Rawson-Harris:     ‘Fine.  I will wait for you to come back to me.’

24                  Barnes gave evidence consistent with that of Rawson-Harris.

25                  Newman gave evidence in his first affidavit that Rawson-Harris said words to the following effect:

‘“I feel that the product has a much larger market that I would like to be involved in and I would like to produce the street pole for sale to those other markets on a royalty arrangement a lot like we do with Melbourne Council, where a royalty is paid to Melbourne Council.”

In response, Bill Tsakalos said words to the following effect:

‘“That may be possible and, if so, Council would consider it.”’

26                  Newman made handwritten notes during the course of the meeting including the following entry:

‘DRH

DESIGN OWNERSHIP, ROYALTY AGREEMENT, AS PER MELB. COUNCIL.  CAN BE AGREED TO, TO ENCOURAGE DESIGN TO SPREAD BEYOND CBD.’

This was noted at the end of topics consistent with those listed under the agenda item ‘Financial’ and before those listed under the heading ‘Structural’.

27                  The minutes of the meeting which were prepared by him were rather different in effect including the following under the heading ‘2.0 Financial’:

‘2.3      Design ownership by Council is understood.  DRH suggested that as per their arrangement with Melbourne CC, the design could be supplied (with SCC agreement) to other councils with a royalty to be paid per pole to SCC.’ (emphasis added)

28                  Newman’s oral evidence included the following:

‘You say, do you, that that statement that you attribute to Mr Rawson-Harris just came out of left field almost at the end of the meeting?---Yes, I do.  That is that intellectual property was not part of that overall discussion.  When I say overall discussion I mean it wasn’t I don’t believe an agenda item within what was happening at that meeting.

Leave aside whether or not it was an agenda item.  You say that Mr Rawson-Harris just toward the end of the meeting tossed in this reference to the product having a larger market, do you?---Yes.

And that until he said that the issue of intellectual property hadn’t come up?---That’s right.

To the extent the issue of intellectual property came up you say it was Mr Rawson-Harris who was raising it, do you?---Yes.’

29                  Matchett’s evidence about this meeting was confused and contradictory, and adversely affected my opinion of his credit.  I am satisfied that his real recollection is encapsulated in the following evidence given by Matchett during cross-examination:

‘Let me start again.  Do you remember Mr Rawson-Harris saying, “That shouldn’t be a problem as long as Goldspar makes all the poles the Council requires”?  --- I do remember that.

And you remember Mr Rawson-Harris saying to Mr Tsakalos, “And we have a deal like we have with Melbourne City Council whereby we make poles for other people using their design”?  Do you remember that?  --- Yes and ---

“And we pay them a royalty”?  --- Yes.

You remember that?  --- Yes.

And you remember Mr Rawson-Harris saying, “This will help Council recover some of the money you guys have wasted on the Barry Webb design”?  --- I remember him saying that that would help Council recover some of the money they’ve spent.

On the Barry Webb design, is that right?  --- There was discussion about the Barry Webb design.  Whether it was specifically then I can’t remember.

You accept, do you, that Mr Rawson-Harris said, “This will help Council recover some of the money they have spent”?  --- They have spent, yes.

Do you remember Mr Tsakalos saying in relation to that matter, “That that could be possible, I’d have to talk it over with Council”?  --- I’m not – I can’t remember the words, that exactly but it wouldn’t surprise me if he said that.

Do you remember Mr Rawson-Harris saying on this topic, “Fine, I’ll wait for you to come back to me” and when I say saying saying that to Mr Tsakalos?  --- Not specifically.

But that wouldn’t surprise you if he’d also said that?  --- No, not at all.

Let me just ask you this.  Is that all you recall of the matter of design ownership at the meeting of 28 August?  --- I remember coming out of – I do remember something else and I remember coming out of the meeting - - -

I want to just focus your attention on what you recall being said in the meeting.  Is there anything else you recall being said in relation to design ownership in the meeting?  --- No.’

30                  It will be seen that Rawson-Harris’ account is broadly corroborated by Barnes’ and Matchett’s oral evidence and Newman’s contemporaneous notes.

31                  At the meeting on 28 August a further meeting was scheduled for 3 September.  The minutes of the meeting of 28 August were forwarded by facsimile transmission by Newman to Goldspar on 1 September.  After the minutes of the meeting of 28 August had been circulated, Tsakalos informed Newman that they should be revised, and gave him a marked up revision. 

32                  The meeting of 3 September was held at midday.  Those in attendance were Rawson-Harris and Barnes from Goldspar, Matchett and Turner from KWA and Tsakalos, Newman and Chris Proctor from the Council.  The first entry in Newman’s handwritten note of the meeting was:

            FORMALLY

‘DRH TO  CONFIRM ACCEPTANCE OF COS/BT LETTER’

The word ‘formally’ was clearly added later.

33                  The typed version of the minutes of that meeting which was circulated included the following items:

‘1.1      Goldspar to formally confirm acceptance and agreement with letter (SFLET079.DOC, attached) tabled 28/8/97 by BT, which outlines basis of engagement of Goldspar pending design refinement.  This should also include item 2.1, 2.2 & 2.3 below.

…

2.0       Financial

2.1              DRH advised 28/8/97 that Goldspar accepts the payment program for set-up costs as outlined.

2.2              DRH advised 28/8/97 that exact contract quantities and pole types is not seen as critical issue.  Goldspar understand it to be the basis of a possible on-going supply relationship and their tendered prices reflect this.

2.3              DRH advised 28/8/97 that design ownership is vested in Council.  DRH suggested that as per their arrangement with Melbourne CC, the design could be supplied (with SCC agreement) to other councils with a royalty to be paid per pole to SCC.’

34                  Tsakalos gave no evidence as to what occurred at the meeting of 3 September in his first affidavit.  In an affidavit sworn on the day he was called to give evidence he said:

‘At the meeting of 3 September 1997, referred to by me in paragraph 6 of My Previous Affidavit, I said to Mr Rawson-Harris words to the following effect:

“Please confirm in writing your understanding and acceptance of my letter of 28 August 1997.  Also include the basis of your engagement to refine the design relating to the payments, the quantities and the intellectual property being vested in the Council, as discussed at our meeting of 28 August 1997”.

Mr Rawson-Harris then said words to me to the following effect:

“I understand what is required and I will respond in writing”.’

He maintained that evidence in cross-examination.

35                  Neither Proctor from the Council nor Turner from KWA gave evidence.

36                  Matchett agreed that Tsakalos or Newman had requested that Goldspar formally confirm the letter of 28 August only.  This is consistent with Newman’s note of the meeting.

37                  Rawson-Harris denied that there was any discussion of the ownership of intellectual property at the meeting of 3 September and did not recollect the minutes of the 28 August meeting being available by the 3 September meeting.  He was incorrect as to the latter.

38                  The difference between the form of paragraph 2.3 of the minutes of 3 September and the minutes of the meeting of 28 August was drafted by Tsakalos.  The better view of the evidence of Newman was that the items under 2.0 and the last sentence of 1.1 did not reflect anything that was expressly said at the meeting of 3 September, and that the purpose of inserting them was to effect the revision of the minutes of the meeting of 28 August which Tsakalos required in order to obtain a formal acceptance of that position.

39                  Rawson-Harris went overseas on 4 September not to return until 22 September.  I have no doubt that this would have been communicated to the Council officers at the meeting of 3 September if not before.  At the meeting of 3 September the next meeting was scheduled for 9 September, to follow a meeting between the parties and the Roads and Traffic Authority (RTA).

40                  Those meetings took place on 9 September, but apparently no minutes were taken of the meeting which followed the meeting with the RTA.  Barnes attended for Goldspar.  I am satisfied that his evidence that he was effectively acting as manager of Goldspar in relation to this project in the absence of Rawson-Harris is correct, notwithstanding backing and filling by Rawson-Harris.

41                  It is not clear when a copy of the minutes of the meeting of 3 September was given to Goldspar.  Newman claimed to have either faxed them prior to the meeting of 9 September or to have handed them over at that meeting.  It is not likely that they were received prior to the departure of Rawson-Harris.

42                  On or shortly prior to 18 September, Newman spoke to Barnes about providing a letter in accordance with the minutes of the meeting of 3 September.  Barnes provided a letter to the Council on 18 September, the substance of which was:

‘This letter is to serve as acceptance of your letter to us Dated August 28 and discussed in our meeting of the same date.  Particular reference is paid to the following points extracted from your letter of that date;

“DRH advised 28/8/97 that Goldspar accepts the payment program for set-up costs as outlined.

DRH advised 28/8/97 that exact contract quantities and pole types is not seen as a critical issue.  Goldspar understand it to be the basis of a possible on-going supply relationship and their tendered prices reflect this.

DRH advised 28/8/97 that design ownership is vested in Council.  DRH suggested that as per their arrangement with Melbourne CC, the design could be supplied (with SCC agreement) to other councils with a royalty to be paid per pole to SCC.”

DRH is Douglas Rawson-Harris, Managing Director of Goldspar Australia Pty Ltd.

The other issue is the completion of the necessary reports to be given to council to enable the agreed sum of $87,250 to be paid to Goldspar.  The RTA report, Engineering brief and preliminary feedback, 1:1 mock-up and the extrusion profile, is due to be complete by Monday September 8 and we can look at this issue once you are satisfied with that report.’

43                  The affidavit evidence of Barnes was as follows:

‘In or about 18 September 1997 Douglas Rawson-Harris was overseas.  I had a phone conversation with Steve Newman of the Council in which words including words to the following effect were said:-

SN:      “Tony, I need a letter from Goldspar accepting our letter of the 28^th of August 1997 in relation to the Council’s acceptance of Goldspar’s non conforming tender.  I also want you to refer to items 2.1, 2.2 and 2.3 in the Minutes of the Meeting of September 3^rd.”

 

AB:       “Not a problem.  I will get it done today.”

 

Following that conversation, I prepared a letter as Steve had requested.  A copy of that letter is annexure “D” to his affidavit of 31 July 2002.  At the time, I was focused on progressing the drawings of Goldspar’s multi-functional street pole so that manufacturing of the poles could commence at the earliest possible date.  With Doug away this was not easy.  As a result, when Steve made his request, I did not ask myself whether or not what he wanted me to put in the letter was accurate.  I just assumed that if it was in the minutes of Goldspar’s meetings with the Council it would be accurate. In preparing to make this affidavit I have read over the minutes of 28 August 1997 and 3 September 1997, and they certainly do not match my recollection of those meetings.  All that was said about ownership of the design for the multi-functional street pole at the 28 August 1997 meeting is set out in paragraph 5 of my affidavit above.  I do not recall anything being said on that topic at the 3 September 1997 meeting.  Accordingly, the content of my letter of 18 September 1997 was wrong, and I wrote it in the mistaken belief, without checking, that the meeting minutes were accurate.  I certainly did not intend or believe that in repeating the items from the minutes sent to me by Steve Newman I was giving away Goldspar’s ownership of the design to the pole.’

44                  Barnes was subject to a searching cross-examination on this evidence.  This gained some support for the proposition that the topics dealt with in the enumerated paragraphs of paragraph 2.0 of the minutes of 3 September were actually mentioned at that meeting.  In my view he was confused on this topic.  Barnes maintained his position that Rawson-Harris had responded to the issue of design ownership on 28 August by saying:

‘That won’t be a problem providing we get to manufacture all the poles and we can then do a licensing agreement as we do with Melbourne Council.’

Barnes also maintained his position that he had simply drafted the letter of 18 September at the request of Newman and had done so without very much thought at all.  He said that he could not recall discussing the letter with Rawson-Harris whilst he was overseas or on his return beyond an overall general report that he had sent a letter to the Council regarding acceptance of the contract.  He assumed that he had just filed the copy letter away.

45                  It was suggested to Barnes that he had underplayed the significance of the letter, which was of importance in the contractual setting because Goldspar was anxious to secure the contract and the payments that went with it.  It was suggested that Barnes put a great deal of thought into preparing the letter, particularly as he was acting as the manager of Goldspar in relation to that contract in the absence of Rawson-Harris.  Barnes gave evidence that Rawson-Harris never upbraided him for writing the letter or told him that he should not have written it.  Rawson-Harris did not agree.

46                  The detailed pole design had not been agreed upon by 18 September.  In a letter of 17 September from Barnes to Newman reference was made to a sign off of the pole extrusion design ‘on Monday next week’.  At that stage it was hoped to manufacture and deliver some poles before the Christmas holidays.  A problem with obtaining supply of aluminium from Capral was flagged.  The letter went on:

‘On the other matter regarding the payment required for the dies to be made, we require a cheque for the sum of $13,000.00 to have this done.  I also ask if it would be possible at the same time, to receive say 50% of the previously agreed to sum of $87,250.00’.

 

47                  Rawson-Harris returned from overseas on 22 September.

48                  There was considerable interplay between Goldspar, KWA and the Council as to detailed design development in September and October, particularly as to the upper pole extrusion.

49                  On 8 October 1997 Rawson-Harris wrote to Tsakalos as follows:

‘As you know, enormous effort has gone into the SCC Multi Function Street Pole Project from both yourselves and the Goldspar team.  We have had to face many hurdles in getting the project going and I believe we have reached the point where we are ready for your sign-off on the project.  I have detailed below, the major points.

Goldspar has, as requested:

1.               Addressed all issues raised by the SCC resolution.

2.               Covered all additional issues,

3.               Made and continue to make every effort to comply with the deadlines set for installation of the poles commencing December 1997.

4.               Put into place arrangements for the timely delivery of poles as per you [sic] letter of Sept 23.

Based on the above and your verbal agreement, I would like now to be able to arrange for the final sign-off and accompanying payment to proceed, and follow up with the necessary contractual meetings.

If you can arrange for the SCC to raise the paperwork, we will respond with the corresponding invoice so this matter can be finalised.’

50                  The response, signed by Newman, was as follows:

‘In response to your letter of Wednesday 8 October, City Projects has processed our paper work so that an Order N# can be provided (expected early next week) to allow Goldspar to invoice to the value of $76,937.50 being allowance for design preparation ($87,250 x 75%) and the remainder of the tooling ($24,500 - $13,000).

As briefly discussed there are items still to be adequately adressed [sic] to fully satisfy City Projects [sic] requirements.  Please refer to the accompanying general list.

1          Any items to be adressed [sic] from our letter of 28/08/97 and the minutes of the meeting of that same date.

2                    Sign-off letters from RTA and EA (at least in-principle sign-offs and if necessary with qualifications).

3                    Assessment of our request for alternative wind load conditions (as per my fax GSP0810f.doc 8/10/97) and inclusion within an all encompassing report from the structural engineers which includes all the design parameters.

4          All these items are to be included with all those adressed [sic] in the RTA Issues document and those in the City of Sydney Issues Document resulting in an all encompassing report.’

 

51                  It is a fair inference that Rawson-Harris reviewed the contractual position including the letter of 18 September and the minutes to which it referred prior to writing the letter of 8 October.

52                  In my view there was no discussion at the 3 September meeting which formed the basis for the disputed portion of the minutes.  I accept the evidence of Barnes that he did not give proper attention to the form of the letter of 18 September, but, rather, followed Newman’s suggestion.  On the other hand, I am satisfied that Rawson‑Harris would have read both the minutes and the letter of 18 September on his return from overseas and elected to leave things as they were as he was anxious to tie up the contract and the interim payments.

53                  A purchase order bearing date 9 October 1997 from Council to Goldspar was for one ‘Multi-Function Street Poles – Production, Drawings and Toolings’ at a unit price of $76,937.50, for delivery by 14 October 1997.  On the same day an invoice was raised by Goldspar to the Council for ‘Set up cost (part payment) $76,937.50’.  Newman approved that invoice for payment on 10 October 1997.  The Purchasing Officer also approved payment of that invoice and the purchase order was receipted on 14 October 1997 by the Projects Officer.

54                  According to Rawson-Harris the process of altering the non-conforming tender drawings to accommodate variations was largely completed by around mid-October 1997, although various minor amendments continued to be made for some time.  It was then necessary to prepare assembly drawings, which are also referred to as specifications.

55                  On 3 November 1997 a solicitor at Dunhill Madden Butler who was advising the Council wrote to Sue Puckeridge, the Director of Legal and Secretariat for the Council, enclosing a clean and marked up copy of the Supply Contract, General Conditions of Contract, showing amendments he had made.  There were no amendments proposed to clause 10 nor with the relevant definitions in clause 2.  The letter included the following paragraphs:

 ‘We have included as attachments to the Contract, the Request for Tender, the Addendums, the Tender and certain key correspondence.  This has been to show the development of the use of the alternative non conforming design.  Ordinarily these changes would be made to the primary contract, but, as we discussed, the changes to the document cannot be significant because of Council’s legislative requirements.

In respect of the design issue which we discussed, we have amended slightly clause 31 to include an acknowledgement by Goldspar that it provided the design in the Tender and that it may still need to be finalised after execution of the Contract.  In this regard, we note we have been sent a copy of the specification that was included in the Request for Tender, but presume that the specification, at least where it refers to the drawings and design to be manufactured, has to change to accomodate [sic] the new design.

We discussed with Steve Neuman [sic] that the best approach was to put pressure on Goldspar to finalise the design on the basis that this was the fastest course to both parties being happy to enter into the final version of the Supply Contract.  We would, again, have simply included some design development obligations as part of finalisation of any ordinary Contract, but as this is not possible, all effort should be made to finalise the design as far as possible prior to execution of the Supply Contract, within the constraints of the programming and ordering of materials.

This therefore requires, we assume, at least significant amendment of Section 2 of the Tender Specification to describe the new design.  The definition of “Specification” in the Supply Contract, is that it means the specification existing as at the date of acceptance of tender, which assists in the use of an amended specification.  We suggest the amendments be clearly marked on the Tender Specification as it is to be included as an attachment to the Supply Contract with the parts excluded struck through.  We can assist to review this document after it is prepared if you wish.

…

As regards finalisation of the formal document, we note that clause 6.2 requires this to be within 28 days of acceptance of tender.  As this does not appear to have yet occurred (there were conditional acceptances on 28 August 1997 and 10 October 1997), we think it worthwhile that a formal acceptance of tender letter be sent enclosing the consolidated Schedule of Rates and amended Specification.  We attach an appropriate draft of this letter to be engrossed on Council’s letterhead.  You will note that it again identifies Goldspar as having provided the design.’ (emphasis added)

56                  By letter bearing date 10 November 1997 signed by Newman the Council gave formal notice that it accepted the alternative tender option submitted by Goldspar in its Tender received by Council on 29 July 1997, subject to the changes to the design and schedule of prices which had occurred since that time.  It proposed that the parties proceed to execute a formal instrument of agreement.  The letter noted that the specification was subject to finalisation of certain design aspects.  That letter was actually conveyed to Goldspar by a facsimile of 14 November 1997 from Newman to Rawson-Harris and Barnes.  After confirming commitment to finalisation of the contract and raising some particular matters, the facsimile ended:

‘There are of course some items that we will need to address in terms of variations to the contract, and in due course these can be considered.’

 

57                  By invoice dated 25 November 1997, Goldspar sought payment of $25,317.  A letter of 8 December 1997 from Newman to Rawson-Harris deals with it in the following way:

‘As per our discussions late last week in regard to your invoice 25/11/97 ref:2974 $25,317.00.

The amount due has been carefully considered but must be paid according to the following (with reference to our letters of 28/8 and 10/10)

Tendered amount for Set Up                       $143,905.00

Less amounts already paid                                                              $89,937.50

Less Production Datum Samples                                                    $28,655.00

(still to be constructed)

Less 25% of Structural Analysis                                                        $1,250.00

(catenary details still to be updated)

Less 25% of technical catalogue manual                                             $875.00

(labelling, application limitations,

installation sequence, hole drilling guide,

etc, to be included)

Total due for payment                                 $23,187.50’

A Council purchase order was raised for the sum of $23,187.50 which was receipted on 10 December 1997.

58                  In about mid January 1998 Goldspar manufactured a one-off pole and later in February 1998 a small production run of poles with some accessories was manufactured.  Goldspar started delivering poles to companies that were doing construction work for the Council in February 1998. 

59                  On 24 February 1998 Goldspar wrote to the Council a letter signed by Rawson-Harris as follows:

‘Further to our meetings regarding the requested design and development variation for the Multi Function Street Pole (MFSP), the following letter and attached spreadsheet clearly states the justification for the variation.

Following are the key points:

1.      Goldspar submitted 2 designs for the CoS, MFSP tender (Versions 1 & 2).  Version 1 was a conforming tender and version 2 was a non conforming tender.

2.      Goldspar were given an “in principle” approval to progress with the design development and production of the Version 2 design submission for the CoS MFSP.

3.      Goldspar agreed to develop the design and obtain approvals from RTA, EA, Telstra, Optus and CoS (the relevant parties).  Goldspar made an allowance of $15,000.00 to complete this task and were prepared to pay for this work from revenue generated from the production of the MFSP.

The estimate of $15,000.00 was based on the assumption that many of the design principles and details developed for the CoS tendered design had been accepted by the relevant parties in the pre tender process and could be used by Goldspar in order to achieve the final approvals.  This was not the case and the MFSP has been completely redesigned from the ground up.  It has taken five months of solid work to get the agreement of the relevant parties, a lot longer than any of us anticipated I’m sure.

4.      The only elements retained from the CoS tendered design are, a broad reference to the overall look of the pole and the “concept” of a shared pole.

5.      The cost to Goldspar to achieve the CoS requirement of developing the design and obtaining support for the MFSP from the relevant parties is $162,373.96 up to the end of Dec.  This figure includes the allocated $15,000.00.

6.      Goldspar cannot recover this cost from the production revenue of the poles and therefore must request this amount, less the $15,000.00 allowance, being a total of $147,374 as a variation from CoS. (Refer to the spreadsheet attached for additional detail).’

60                  On 31 March 1998 Goldspar issued an invoice to the Council, the substance of which was as follows:

 ‘Design and development variations for the Smart Pole.

Quantity    Description                                        Unit Price $     Total price $

      1           Design development variation              214,000.00        214,000.00       1          Design development for accessories

                   not in tender                                            34,750.00          34,750.00

                                                                                Total               $248,750.00’

It was accompanied by a letter from Barnes to Newman in the following form:

‘Further to our meetings and discussions regarding the additional costs incurred by Goldspar in excess of those allowed for in our tender submission, following are details of the development cost variations Goldspar are claiming.

This package of information is a result of our last discussion with yourself and Bill Tsakalos.  This information renders all previous letters and invoices obsolete.

The attached spreadsheets show the following:

1.                  A summary of the allowances made by Goldspar in the tender submission and the variations being requested.

2.         A detailed breakdown of the variations requested.

            This spreadsheet itemises each task undertaken by Goldspar in addition to that which was allowed in the tender submission.

            Goldspar agreed to develop the design and obtain approval from RTA, EA and CoS for the Smart Pole under the assumption that the majority of the work required to complete this task had been substantially completed.  Goldspar therefore made an allowance of 15K for this task.

Steve, I hope this format is clear and provides you with the information you require in order to resolve this issue quickly.  Obviously, this is a cloud which is hanging over what is otherwise a very exciting and stimulating project.’

61                  Newman’s note of a conversation with Sue Puckeridge and a representative of Dunhill Madden Butler on 14 April included:

‘Do we have a contract?

Yes  that which existed & issued with tender.

…(?Scope for “design” element – legal to determine)’

62                  On 17 April 1998 Issue ‘C’ drawings were finalised and provided by KWA to Newman on behalf of Council. 

63                  On 29 April 1998 Tracey, Brunstrom & Hammond Pty Ltd, which had been engaged by Council, made a submission to Terry Daly of the Council concerning a review of contracts and risks in relation to the Smartpoles procurement.  It addressed a number of issues, many of which focussed upon the lack of any finalised contract.  One of the issues raised was:

‘Are there any other options available for procuring the poles?  What are the implications on design copyright (currently owned by Goldspar) if we decide to plan alternative procurement strategies?’ 

Whilst this is not an admission by Council of the fact asserted, it highlighted the currency of the issue at a critical time. 

64                  That is confirmed by a memorandum of 5 May 1998 from David Von Schill, who at the time was administering the contract for the Council, to Newman (with copies to Tsakalos and Daly) which commenced as follows:

‘Before any further monies are expended with Goldspar there has to be put in place an accountable system for claiming not only progress claims against supplied product but for the claiming of variations.

This is in total agreement to Sue Puckeridge [sic] desire to put CoS in the negotiation seat to ensure that a contract is signed and that CoS maintains the copyright for the poles.’ (emphasis added)

That memorandum had followed a memorandum of 4 May from Newman to Von Schill, copies to Tsakalos and Daly, concerning the Goldspar request for payment of invoices. 

65                  A meeting was arranged for 12 May 1998 to endeavour to settle the contractual issues.  At 11.55 am on that day Matchett from KWA sent a facsimile to Rawson-Harris in the following terms: 

 ‘Just a couple of points regarding your meeting with CoS regarding the contract:

1.                  CoS must agree to pay the “agreed” development variation today (The “agreed” amount to be negotiated between CoS and Goldspar).

2.                  CoS must agree to pay the pole production monies that are due.

3.                  CoS cannot withhold these payments subject to signing of the contract.

4.                  Goldspars’ [sic] minimum position with regard to the intellectual property clause in the contract should be something like:

“Goldspar and CoS own the intellectual property jointly.

Therefore Goldspar can supply the Smartpole against other contracts while paying CoS a royalty (the amount of the royalty to be negotiated)

AND

CoS cannot retender the Smartpole contract using the Smartpole design which is owned jointly by CoS and Goldspar”

Doug, I am sure there are other clauses within the contract which will require detailed attention prior to signing.  I would be happy to review these with you in detail at your convenience.’

66                  Matchett claims that on a number of occasions between August 1997 and May 1998 he said words to the following effect to Rawson-Harris:

‘Doug, do not sign the contract as it stands.  Modify the intellectual property clause and definition.  If you sign it as it is all the work that we are doing now will be owned by the City.’

 

I am not satisfied that this was so, although I do not doubt that the topic of intellectual property was discussed between Matchett and Rawson-Harris.

67                  Newman made handwritten notes in relation to the meeting of 12 May 1998.  Newman’s notes commence with the initials BT, SP, DVS and SN on one side and DRH and TB on the other.  The first three items of those notes are as follows:

‘1.        SP to give overview on clauses to be inserted.

2.         agree the contract.

3.         Intel.  Property Design Rights

            – GOLDSPAR letter of Sept 18 stands.’

In all there were nine numbered points on the first page.  The notes on the following two pages are not in such an orderly form.  Newman’s evidence was that the part of the notes which I have quoted were taken during a meeting with Sue Puckeridge and others prior to the meeting with the Goldspar representatives.  Newman did not recall the question of intellectual property being raised at the meeting with Goldspar’s representatives.

68                  In his second affidavit, Barnes gave the following evidence:

 ‘In May 1998, I was present at two meetings at Sydney Council.  I recall a meeting on 12 May 1998, attended by me and Doug Rawson-Harris from Goldspar and representatives of Sydney Council including Steve Newman, Bill Tsakalos, and Sue Puckeridge.  This meeting discussed Goldspar’s claims for its costs relating to the changes to the design of the version 2 tender.  Goldspar sought payment from Sydney Council.  Sydney Council wanted Goldspar to make their claims as a variation to the tender, on the variation forms, which had been drafted by David Von Schill.  I recall at this meeting a representative from Council saying words to the effect that:

“Because of the Local Government Act we can’t change the tendered price in the Contract but we can make the changes by way of variations”

 

I have read the affidavit of Stephen Frank Newman dated 31 July 2002.  Paragraph 12 of his affidavit refers to the meeting on 12 May 1998 which I attended.  I do not recall any reference to a letter from Goldspar dated 18 September being raised in my presence.  However, I place the conversation which I recall in paragraph 10 of my previous affidavit at this meeting.  I annex hereto and marked “F” a diary entry which is dated 12 May 1998.  The entry records notes I took at this meeting.’

69                  Paragraph 10 of his first affidavit was:

‘Some time after this, there was a further meeting between Goldspar and the Council at which the question of ownership of intellectual property in Goldspar’s multi-functional street pole was raised.  Doug and I attended on behalf of Goldspar.  I can no longer recall who was present on behalf of the Council.  However, I remember that words to the following effect were said about ownership of intellectual property:

Council rep:      “We need to finalise out [sic] position on ownership of the intellectual property in the design of the multi-functional street pole.”

 

DRH:                “There is no way Goldspar will assign its intellectual property rights in that design to the Council.”’

 

70                  The diary note of Barnes indicated that he and Rawson-Harris were present or to be present for Goldspar and that Tsakalos, Von Schill and Newman were present or to be present for the Council.  The note made was:

‘BT: - 2 areas – Contract – Sue Puckeridge.  Legal. Dept:  Agreed in principle on sheet.  Fees: -’

This diary note is to an extent equivocal because, although Sue Puckeridge is not shown by initials as an attender, her name is mentioned. 

71                  A typewritten document described as minutes of that meeting (but which may have been an agenda) which contained a list of amendments to the contract did not refer to the question of intellectual property, although there were references to design obligations.  I think it likely that there was reference to intellectual property at the meeting, but cannot be satisfied that it was as recalled by Barnes.

72                  On 13 May 1998 Dunhill Madden Butler forwarded to the Council a clean and marked up copy of the Conditions of Contract.  This was the draft which made the critical alterations and additions to the definitions in clause 2.  There were also changes to clause 10, namely the addition of the warranty in the first clause and the omission of some words in the second last clause.  Clause 22.6 dealing with acknowledgment of payment by supplier was also inserted. 

73                  After the draft was produced Goldspar instructed a solicitor to act for it.  The solicitor corresponded with the Council concerning the draft which had been provided and other commercial issues.  One of the points raised by him was:

‘The last line in paragraph 10 has been deleted.  This warranty was not required in the original tender.  The design of the product is a matter for Council.’

74                  On 29 May 1998 a further version of the Conditions of Contract was initialled by Rawson-Harris.  It contained the amended clauses 2 and 10.  The words ‘as at the date of supply of the Product’ were written at the end of the first paragraph of clause 10 and initialled by him.  His solicitor was present at that meeting. His evidence was:

‘My only recollection of the discussion between the persons present at the meeting I attended concerning clause 10 of the proposed contract is that it related to the Council’s requirement that Goldspar warrant the fitness for purpose of Goldspar’s multi-function poles.

I believe that I was at that time aware of the terms of the third to fifth paragraphs of clause 10.  To the best of my recollection, it was my understanding of those paragraphs:

(a)       that they were directed to ensuring the protection of the Council’s rights in respect of designs and drawings provided by the Council to Goldspar;

(b)       that they did not affect Goldspar’s ownership of any intellectual property in its own designs and drawings including the Rawson-Harris non-conforming tender design.’

75                  It is not possible to be confident as to the precise content of each of the disputed conversations.  Tsakalos, Matchett, Rawson-Harris and Barnes were each heavily affected by self-interest, which will become more clearly apparent as events unfold.  There were features of the evidence of each which were not satisfactory.  Newman was less affected by self-interest, but he was affected by positions taken at the time – influenced by Tsakalos – and by his prior association with Matchett.  The lapse of time and the complicated course of events make accurate recollection difficult in any event.  I cannot simply adopt any one witness as wholly reliable on all aspects.  As usual, contemporaneous internal documents are illuminating, although inter party documents must be viewed with suspicion.  I am satisfied that all parties were consciously playing something of a game of poker about the project generally and intellectual property in particular from submission of the non-conforming tender on.  Council had the imperative of completing the works by the commencement of the 2000 Olympic Games.  That was always going to be tight.  It had spent a significant sum on development of the Webb design and had applied for a patent for it.  The strategy was to let a contract with a relatively small commitment as to numbers of poles to be taken on the part of Council, with the bait of larger orders in the future.  The Council would hold the whip hand because of that, combined with its ownership of the Webb design.  It could always call competitive tenders for the later orders.  The submission of an alternative design which was recognised to be superior to the Webb design was a complication so far as further contracts were concerned as well as for any external exploitation.  The application for the patent shows that Council was alive to that latter possibility, and it was undoubtedly discussed at the meeting of 28 August.  The discussions between Newman and Shaw before that meeting show a consciousness of the issue.  I am satisfied that all of the relevant Council officers were well aware of the issue and its ramifications at all times and were conscious that the Conditions of Contract were not satisfactory.

76                  On the other hand, it was inherently unlikely that a tenderer which supplied its own non-conforming design would agree to assign intellectual property in that design for all time and all purposes to the Council in return for a contract to supply a small guaranteed number of poles.  I have held that the Conditions of Contract put out to tender did not so provide, even though a non-conforming tender was contemplated.

77                  I am not satisfied that any oral representation or promise as alleged by Council was made on behalf of Goldspar as to intellectual property in the Version 2 drawings.  It was clear from the meeting of 22 August 1997 on that there would be modifications to those drawings and that was confirmed by all that happened in the ensuing weeks.  I am satisfied that such discussion as there was about intellectual property from then on related expressly or impliedly to the final product.

78                  The internal Council documents show that the legal necessity to call tenders for significant contracts was regarded as a complicating factor.  In the first place there could not be any significant disconformity between the tender and the contract.  The necessity for design development was a particular problem in this regard.  In the second place, any further orders not covered by the tendered contract would have to go to another tender, with the consequent expense and delay.  Further, the incumbent, having tooled up, would have an advantage over other tenderers.  Even more fundamentally, if the incumbent owned the intellectual property in the design, there could be no re-tendering for the same poles.  It was thus important that Council acquire the intellectual property in the design of the poles to be installed for the purposes of further supply of poles for its own use beyond the guaranteed number.  It was equally important for Goldspar that it did not give away an important card.  Its first objective was to secure the balance of the Council orders.  This became even more important once it was appreciated that Newman (himself an industrial designer) was to insist on further modifications and that the task of completing design and then production drawings and specifications together with tooling up would involve expense which could not possibly be recouped from the initial order of poles. 

79                  Council’s legal advice was that it should not commit to the contract until the design and other preliminaries had been finally resolved.  This led to issues as to quantum and timing of payment for the preliminaries including design development, although Council did not dispute the principle that payment would need to be made.  It is not necessary for the purposes of this judgment to do more than note that a substantial sum was paid by Council to Goldspar for design development and documentation not anticipated at the time of the tender.

80                  It was in that setting that the crucial alterations to the draft contract were produced on the day after the meeting of 12 May 1998.  Neither the drafter from Dunhill Madden Butler nor Sue Puckeridge from Council was called to give evidence.  It cannot be suggested that they did not correctly carry out their instructions as to the effect of the commercial arrangements.  They obviously did so in a manner which would be least likely to provoke an argument that the contract differed from the tender.    It is clear enough that the amendments were intended to relate and did relate to the situation that was current in May 1998, by which time the design and production drawings had been developed and documented at the expense of Council.  This made the original Issue A drawings obsolete for those purposes, as had been obvious from 22 August 1997 when modifications were proposed and accepted.  The Council’s concentration had been upon intellectual property in the final pole.

81                  It is far from clear that Goldspar had expressly orally agreed that Council would have all of the intellectual property for all time and all purposes in the ultimate design, enabling Council to cut Goldspar out of further Sydney work and export the design elsewhere without any Goldspar participation.  However, Goldspar had sent and not corrected the letter of 18 September 1997 and had the opportunity of considering the terms of the proposed contract and sought legal advice about it.  It does not seek rectification.  It is bound by the contract on its true construction.

82                  In my opinion there is no basis for concluding that the contract should be rectified in the manner claimed. It was the result of arm’s length negotiation over many months with the Council having the benefit of internal and external legal advice which focussed on the issue of intellectual property at least as early as August 1997.  No mistake in carrying the bargain into the contract as alleged has been identified or established.  The evidence does not even approach that required for rectification (Pukallus v Cameron (1982) 180 CLR 447). 

Related causes of action

83                  For the same reasons, the argument that Goldspar took advantage of the Council by pre-contract representations as to the Version 2 drawings such as to be unconscionable, to give rise to an estoppel or to breach s 52 of the Trade Practices Act 1974 (Cth) must fail.  I am not satisfied that any such representations were made.  Further, Council had most of the cards in the game of poker, and played them consciously and with the benefit of comprehensive legal advice.  I also reject the argument that there is any implied or inferred term of the contract which includes Issue A drawings within the purview of clause 10.  Such a term would be inconsistent with the meaning of the clause as I have construed it. 

84                  I reject the argument that the 18 September 1997 letter from Goldspar to Council was an assignment of copyright in the Issue A drawings to Council.  It was not framed as such.  It is not what might be called a conveyancing instrument and does not purport to be a contract or agreement to assign copyright.

Restraint of trade

85                  It is submitted for Goldspar that if clause 10 of the Conditions of Contract is to be construed in the manner sought by the Council, then it is an invalid restraint upon trade.  Reference is made to the relief sought by the applicant to enforce that clause being a restraint of indefinite duration and unlimited in geographical operation and circumstance.  Furthermore, it is submitted that the clause is (and the orders sought to enforce it are) not restricted to use of confidential information – it is not alleged or proved that the Issue C drawings contain any information that was confidential and there was no confidentiality once the poles were erected.  It is submitted that the applicant has neither pleaded nor proved reasonableness, and that, in any event, the clause is not reasonable in the requisite sense.  The restraint operates against the background of the Copyright Act 1968 (Cth) and the law with respect to breach of confidence, which are all that is reasonably required to protect the Council’s legitimate interests.

86                  It was submitted for Council that the effect of the clause was to vest copyright (and other intellectual property) in the drawings in it and so was not a restraint of trade subject to the doctrine.  The clause gives Council the right to the information in the drawings.  It was submitted that if it was a relevant restraint, then it was reasonable.  Goldspar was paid a large consideration in return for this obligation, amongst other obligations.  The clause was part of the bargain and the rights in question arose out of that bargain.  In any event, s 4(3) of the Restraints of Trade Act 1976 (NSW) would permit an appropriate order to be moulded effectively limited to obligations co-extensive with copyright.  Goldspar in reply submits that the Council did not plead the New South Wales Restraints of Trade Act.

87                  As the discussion in chapter 3 of JD Heydon, The Restraint of Trade Doctrine, 2^nd Edition, 1999, illustrates, the question as to what contractual provisions are regarded as restraints of trade is far from settled.  The subsequent analyses by the Full Court in Australian Capital Territory v Munday (2000) 99 FCR 72, the New South Wales Court of Appeal in ICT Pty Ltd v Sea Containers Ltd (1995) 39 NSWLR 640 at 669–674 and the High Court in Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126 and Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181 provide no universal answer.  In Peters (WA) Ltd v Petersville Ltd the High Court was critical of a number of the tests suggested in Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269 but did not propose any single test (see the summaries in Maggbury by Gleeson CJ, Gummow and Hayne JJ at [55] and Callinan J at [95]).  In Maggbury itself, Gleeson CJ, Gummow and Hayne JJ appeared to indicate that licences to use intellectual property would not be caught by the doctrine (at [54]).  Neither Kirby J (at [64]–[73]) nor Callinan J (at [90]–[96]) would have applied the doctrine to a covenant not to use information provided by an inventor to a potential backer although unrestrained as to time, place or circumstance.  Callinan J held that as he was constrained to apply the doctrine, the restraint was reasonable and enforceable (at [97]). 

88                  According to Heydon it has been held reasonable to take a covenant restricting the vendor of technical intellectual property falling short of a trade secret from competition with the buyer, referring to Bakers Aid, A Davison of M Raubvogel Colne v Hussmann Food Service Co 730 F Supp 1209 (USDC, EDNY 1990).  In relation to licensees of patents and exclusive licences, Heydon says (at page 193):

‘RESTRAINTS ON LICENSEES OF A PATENT

Licensees of patents often agree to use only that patent in their business, (Jones v Lees (1856) 1 H & N 189; Re the Brownie Wireless Co of Great Britain Ltd (1920) 45 TLR 584), or not to compete with the licensor except by using the patent, (Standard Fireproofing Co v St Louis Expanded Metal Fire-Proofing Co 76 SW 1008 (SC Mo, 1903); Mouchel v William Cubitt & Co (1907) 24 RPC 194; Bonda v Wagenmaker [1960] NSWR 40), or to pay the licensor compensation if production of goods under the licence exceeds a certain level (Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd (1953) 71 RPC 1; [1954] 2 All ER 28; [1955] 2 All ER 657).  These agreements are usually held valid, provided their scope is not too wide to protect the licensor’s interests (Bonda v Wagenmaker [1960] NSWR 40) and they do not last too long:  a limitation to the period of the licence will be valid (Mouchel v Willaim Cubitt & Co (1907) 24 RPC 194; cf Henschke v Moore 101 A 308 (SC Pa, 1917)).

EXCLUSIVE LICENCES

The grant of an indefinite exclusive licence to use a computer system in a city has been held reasonable where the licensee had wholly financed the development of the system (Avtex Airservices Pty Ltd v Bartsch (1992) 107 ALR 539 at 569–70 (Fed C of A)).

            A covenant taken restricting competition after the expiry of a licence to use a trade secret has been upheld (Tank Lining Corp v Dunlop Industrial Ltd (1982) 40 OR (2d) 219).’

89                  Avtex Airservices Pty Ltd v Bartsch (1992) 107 ALR 539, to which Heydon referred, went on appeal but the judgment was unfortunately not reported (Bartsch v Avtex Airservices Pty Ltd (unreported,Federal Court of Australia, Gummow, French and Heerey JJ, 27 August 1993).  It is perhaps the closest decision to the present circumstances.  The case concerned a computerised system for teaching flying known as the ACE system.  It was developed by one Bartsch and interests connected with him by arrangement with Avtex Aviation which effectively financed the venture.  Bartsch, who had expertise in teaching flying theory, enlisted the aid of a computer expert in the development.  Bartsch proposed to franchise the system.  It was held that Avtex was entitled to an indefinite exclusive licence to exploit the system in the Sydney area.  Bartsch’s interests had purported to grant a licence to use the system to a third party in the Sydney area.  It was held that Avtex was entitled to restrain such an appointment.  That gave rise to a question as to whether the contract so construed was in restraint of trade.  At first instance Hill J said at 559–560:

 ‘In the present case, there is little dispute that the development of the “system” was wholly financed by Avtex.  The parties could, if they were so minded, have agreed that the “system”, by which I mean the industrial property rights therein, was to be owned by the applicants, but with a licence to the respondents to grant rights of user to others outside Sydney.  The parties did not purport to adopt this commercial solution, but impliedly left the industrial property rights to fall where they would under the general law.  They agreed to exploit these rights by permitting the fifth respondent to license others for reward outside the Sydney area (subject to the payment of a “royalty”) and permitting the use of those rights in Sydney by the first applicant or its successor.  In these circumstances, the legitimate interests of the applicant were the right to use in Sydney and for its own business purposes the industrial property rights the development of which it had wholly paid for.  It was, in my view, entitled to protect the goodwill of the business which it was developing against the competition of others in the Sydney area and the restraint implicit in that protection was no more than was adequate for that purpose.

In one sense it can be argued that there was no relevant restraint as the fifth respondent had not given up any right or freedom which it might formerly have had:  cf Esso Petroleum at 298 per Lord Reid, at 309 per Lord Morris, at 316–17 per Lord Hodson and at 335 per Lord Wilberforce.  But whether or not such an analysis is now acceptable after Rocca Bros and Queensland Co-operative Milling Association v Pamag Pty Ltd (1973) 133 CLR 260; 1 ALR 47 or is confined to the special case of leases need not be here considered.  For accepting that there is here a relevant restraint of trade, the protection given under the restraint is no more than is reasonably necessary to protect the legitimate interests of Avtex and its successor and does not infringe any relevant public interest.  It is thus not unreasonable.’

90                  On appeal Gummow, French and Heerey JJ noted that at the date of the contract Bartsch and his interests did not have any existing right to trade in relation to the ACE system which was to be developed in the future with finance provided by Avtex.  It was submitted on behalf of Avtex that that fact was sufficient to dispose of any question of restraint of trade based upon the decision of the House of Lords in Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269.  After referring to authority and indicating that they would prefer not to consider whether Esso was confined to the special case of leases, the Court went on to say (at 31):

 ‘However, the primary Judge went on to find that the relevant restraint was no more than was reasonably necessary to protect the legitimate interests of Avtex and its successor, and did not infringe any relevant public interest.  It followed that the restraint was not unreasonable in terms of the restraint of trade doctrine.

As we have earlier observed, it is Avtex which was financing the development of the ACE system.  As such, it might be thought that Avtex was to be treated as the “owner” of that system.  In the event, the contract, which was negotiated between the parties with a view to the protection of their individual positions, put Avtex in the position of a licensee.  The restraint was reasonable for the purpose of protection of the goodwill of the business which was being developed with the finance from Avtex.  We agree with his Honour’s conclusion upon this issue (107 ALR at 559).

In reaching that conclusion, we have taken into account the appellants’ submission that the emphasis upon the financing of the development of the ACE system by Avtex should be diminished by the consideration that the contractual arrangements did not involve the vesting in Avtex of the copyrights in various materials used for the ACE system.  The absence of such arrangements does not, in our view, militate against the conclusion in favour of the reasonableness of the restraint which was obtained by Avtex as part of the contractual arrangements.

This conclusion makes it unnecessary to consider any question of severance under s.4 of the Restraints of Trade Act 1976 (NSW) – a matter which, in any event, was not raised at the trial.’

That was a case of a licence of intellectual property rather than an out and out disposition of it.

91                  I have held as a matter of contract as between the parties that clause 10 vests copyright in the Issue C drawings in the Council.  It is now clear enough that the only other potential author, KWA or those associated with it, is not the owner of any copyright in any relevant drawings.  As Council is not the author, there may be a need for a formal assignment of copyright to perfect the contractual obligations.  That is not relevant in this proceeding between these parties.

92                  In my opinion that part of clause 10 which prohibits use of any of the Intellectual Property except for the purposes of manufacturing and supply of the pole in accordance with the contract is part of and ancillary to the vesting of the exclusive property in the copyright in the Council.  As such it is either not caught by the restraint of trade doctrine at all or, if it is, then it is reasonable as between the parties.  It was negotiated over a long period with the benefit of legal advice on both sides.  It is a conventional part of such a transaction.  The agreement as to the vesting of copyright would require permanent protection along the lines of clause 10 to be effective.  To do otherwise would derogate from the grant.  Goldspar have not, in my opinion, established that to give effect to the clause would be against the public interest.  Copyright, and other recognised forms of intellectual property, are properly regarded as intangible property and it is not against the public interest that there should be free dealing in those property interests.  Clause 10 is not an invalid restraint of trade.  If clause 10 were considered in purely contractual terms there would be much to be said for Goldspar’s argument, particularly as the poles are effectively in the public domain.

Other documents

93                  By reason of the definition of ‘Intellectual Property’, clause 10 applies to each defined topic:

‘which is created in the course of or arises out of this Supply Contract’.

The definition of ‘Drawings’ includes drawings:

‘the use of which has been permitted by the Council, for the purposes of the Supply Contract’.

94                  The contract was not executed until a complete set of drawings and a specification were completed.  There may be a debate about drawings created after 22 August 1997 and before the completion of Issue C which it is unnecessary to resolve as, for practical purposes, the Issue C drawings and the Issue F specification are the relevant documents in relation to the particular issues which arise in this case.

Other events

95                  Prior to dealing with other causes of action it is necessary to say something more about the chronology of events.

96                  Between February 1998 and June 1999 Goldspar manufactured 527 poles for Council pursuant to the contract.

97                  On 13 May 1998 Matchett introduced Rawson-Harris to Paul Obeid and Moses Obeid and on 15 May 1998 the Obeids made Rawson-Harris an offer effectively to purchase the benefit of the Council contract, which was refused.

98                  In July 1998 Streetscape Pty Ltd (Streetscape) was formed with the directors being Matchett and Peter Harrison from KWA and Moses Obeid.  Matchett was the Managing Director.  From then on Streetscape sought to obtain pole business from the Council.  It supplied some pole accessories in late 1998.

99                  In September 1998 Goldspar applied for registration of the design of six types of brackets used on the pole.  Registration took place in February 1999.

100               In November 1998 disputes arose between Council and Goldspar concerning the contract which were settled by expert determination by Mr John Morrisey between  15 January 1999 and 3 May 1999.  Proceedings in the Supreme Court of New South Wales followed.

101               In December 1998 KWA commenced proceedings in the District Court of New South Wales against Goldspar claiming monies alleged to be due for work done in connection with the Council contract.  As a result of negotiations between Council and Goldspar arising out of the expert determination, those parties agreed as follows:

 ‘7.   (b)      Goldspar,

(i)            shall forthwith sign such documents as Council requires to allow Council to take over the defence of the claim made against Goldspar by KWA Design Group Pty Ltd contained in District Court Claim No. 009156 (“the KWA Claim”);

(ii)          shall provide such assistance as Council requires, including providing all documents, to allow Council to take over the defence of the KWA Claim;

(iii)        acknowledges that Council shall be entitled to keep confidential all communications and including the amount of settlement of the KWA Claim and that Council may retain ownership of any documents provided to it by KWA Design Group Pty Ltd;

(iv)        shall provide to Council the latest version of the Installation Procedures and Loading Parameters Manual containing the requirements of Council as set out in Council’s letter to Goldspar dated 24 August 1998, copy attached, within 21 days of today’s date;

(v)          shall continue to update the drawings and ongoing revisions in respect of all fabricated and manufactured parts relating to the supply of Smartpoles under the contract between Council and Goldspar.’

102               Council received a power of attorney from Goldspar for that purpose.  The documents listed to be executed were:

‘SCHEDULE 2

DOCUMENTS TO BE EXECUTED

1.         Any Notice of change of solicitor in the District Court of New South Wales at Sydney Proceedings statement of liquidated claim number 009156/98 between KWA Design Group Pty Ltd (ACN 066 523 608) as the Plaintiff and Goldspar Australia Pty Ltd (ACN 002 705 991) as the Defendant (“the Legal Proceedings”).

2.                  Any Notice of grounds of defence in the Legal Proceedings.

3.                  Any document required in any interlocutory proceedings in the Legal Proceedings.

4.                  Any affidavit or Notice in the Legal Proceedings.

5.                  Any Notice of discontinuance in the Legal Proceedings.

6.                  Any other document required for the conduct of the Legal Proceedings.

7.                  Any other document required for the resolution of the Legal Proceedings.’

103               Council then negotiated a settlement with KWA and purported to enter into a deed made on 17 March 1999 between KWA and Goldspar, the deed being executed on behalf of Goldspar by an officer of Council purportedly pursuant to the power of attorney.  It included the following clauses:

‘1.        PAYMENT TO KWA

1.1              In consideration of settlement of the Proceedings and the execution of this Deed, KWA will receive the sum of $40,000.00 within 2 days of the date of execution of this Deed in full and final settlement of KWA’s claims in the proceedings.

1.2              KWA will receive the sum of $20,000.00, further to the amount stated in clause 1.1, within 2 days of the later of the date of execution of this Deed and the provision by KWA to Council of the final updated drawings (Issue D) with respect to the Smart Pole.  The scope of works to be accommodated is set out in Annexure B, as attached.

…

3.         RELEASE BY KWA

            In consideration and upon receipt of payments to be made by Council to KWA in accordance with this Deed, KWA agrees to discontinue proceedings and fully release and hold Council harmless from all claims, demands, suits or proceedings it has or may have or would be entitled to bring arising out of the matters the subject of the Contract and the Proceedings.

…

5.                  GENERAL

(a)        This Deed shall bind Goldspar and KWA and their successors and assigns.

…

6.                  INTELLECTUAL PROPERTY

Without limiting the remainder of this Deed, KWA expressly acknowledges that upon receipt of the payments as outlined in clause 1.1 of this deed all right, title and interest in the intellectual property in the Smart Pole, including the accessories, designed and/or documented pursuant to the Contract (including without limitation design, patent, and/or copyright) has as from the date of this deed passed from KWA under the Contract and KWA recognises that the Council of the City of Sydney is the owner of that intellectual property.’

104               A proposal from KWA to Council dated 12 March 1999 was an addendum to the deed and included the following: 

‘Further to our discussions and as an addendum to the attached Deed following is clarification of KWA’s role in this project and outputs, timescales and fee estimates as required by the CoS.

It should be noted that this project is critical to the success of the next tender.  The drawings produced from this project will be used for the manufacture of the next set of Smartpoles to be supplied to the City.  All due care should be taken at this time.  Should these drawings not be accurate the result could be another round of variation negotiations.

…

KWA undertakes to maintain all information relating to the nature and objectives of this project and the associated intellectual property, in the strictest commercial confidence.

Work could begin on this project immediately from your authority to proceed and it is expected to take no longer than 2–3 weeks to complete.

Bill, thankyou for approaching KWA for assistance with this project and I hope the above is acceptable.  Please do not hesitate to call and discuss any details.’

105               It is not surprising that counsel for Goldspar cross examined to suggest that the Council had deliberately misused the power of attorney to improve its own position vis a vis intellectual property in the poles.

106               Documents produced by Goldspar show that from at least July 1999 it was asserting to third parties that it had design rights in the poles supplied to Sydney City Council.  Brochures produced by Goldspar dealing with multi-function street poles are in evidence.

107               Council called tenders for the further supply of Smartpoles to be submitted by 12 July.  By letter of 5 October 1999 Council advised Goldspar as follows:

‘Council considered the evaluation of the above tender at its meeting on 1 October 1999.

Based on the report of the Evaluation Committee, the Council resolved to reject all tenders and to negotiate upon a number of concerns which have emerged during the evaluation process.  The Council has resolved to include your company in these negotiations if all issues relating to the ownership of intellectual property are resolved to the satisfaction of the General Manager.  Once those negotiations are progressed to a stage where the offers are clear, the General Manager will report back to Council at a meeting on 8 or 9 November 1999.  This letter does not imply that the negotiations will result in an award in favour of any one of the tenderers.

In Part 2 of the Tender Forms, your company identified a number of contractual provisions which it was not willing to accept.  One of these conditions dealt with ownership of intellectual property in the Smartpole.

Item 1 of Part 2 states:  “Goldspar does not acknowledge that Council is the proprietor of all Intellectual Property.  Goldspar is in dispute over Council’s alleged ownership of all Intellectual Property.”

The City is the owner of all intellectual property in the Smartpole and has consistently maintained this position.  The City is not willing to compromise upon this issue.

The City wishes to give your company an opportunity to confirm whether or not Goldspar is willing to enter into, and be bound by, a contract in the form tendered.  If so, does the withdrawal of your objections to clause 10 impact on any or all of the prices tendered?

Unless this issue can be resolved by 5.00 pm on Tuesday, 12 October 1999 the General Manager is not in a position to negotiate with you further in relation to the contract for which tenders were originally sought on 12 July.

We await hearing from you.’

108               The successful tenderers were Streetscape and another company.  Streetscape commenced supplying poles to Council in the latter part of 1999 or the early part of 2000.

109               A Notice was prepared by Griffith Hack on the instructions of Rawson-Harris in the following terms:

‘NOTICE TO MANUFACTURERS OF

LIGHTING POLES AND COMPONENTS

OF LIGHTING POLES

 

We act for Goldspar Australia Pty Ltd, and are instructed to prepare this notice to all who may be concerned in tendering for and manufacturing lighting pole systems and components for such systems and especially systems relating to a system known as the “Smart Pole” system.  This system has been adopted by the City of Sydney pursuant to our client’s innovative designs.

The designs in question were authored by Mr Douglas Rawson-Harris who is Managing Director of Goldspar Australia Pty Ltd and made the original works (including various drawings and specifications).  Our client owns the copyright in all such drawings and is the owner of registered designs of major components.  Under the Designs Act, our client has been granted a monopoly and the exclusive right to license the manufacture of such major components.

It has come to our client’s attention that reproductions of its copyright works and adaptations of those works have occurred and have been reproduced and published to potential contractors without the consent or licence of our client.  As a copyright owner, our client claims those drawings are an infringement of our client’s copyright rights.  Those drawings may include engineering drawings which erroneously claim copyright by KWA.  That company was contracted by our client to draw up in proper engineering form the copyright works owned by our client.  Further reproductions and adaptations with an erroneous claim to copyright ownership by the City of Sydney may also have been issued.

The purpose of this Notice is that our client will vigorously pursue appropriate legal action against any infringement of its copyright rights resulting from unauthorised reproductions or adaptations and will enforce its registered design rights in respect of the manufacture or sale or supply of products covered by its registered designs.

Should any clarification be required of the exact nature of our client’s copyright drawings or particulars of its registered designs, interested persons are invited to contact our client directly, namely,

            Mr Douglas Rawson-Harris

            Goldspar Australia Pty Ltd

            2/81 Bassett Street

            MONA VALE  NSW  2103

            Tel:  9997 1211

            Fax: 9997 3533

John Terry

Partner’

This was provided by Goldspar to third parties from at least November 1999 to October 2002.

110               On 22 November 1999 Council wrote to Goldspar as follows:

‘SALE OF SMARTPOLES™ TO DEVELOPERS WITHIN THE CBD AREA

It has been brought to my attention that Goldspar may have been requested to supply Smartpole™ Multifunction Streetpoles to the developer of King Street Wharf project.

I have no record of any permission being sought by Goldspar from the City to manufacture and sell these poles for this development.  I remind you that in the absence of the City’s permission to use its intellectual property, you have no rights to manufacture the Smartpole™ outside of your current contract with the City.

Having said this, however, one of the City’s major aims is to beautify and upgrade the City in time for the Olympics.  Accordingly, it is willing to permit you to use its intellectual property for the purposes of supplying the Smartpole™ multifunction streetpoles to those developers within the Central Sydney area who are required by the conditions of consent for their development to install the Smartpoles™.  The City will not require Goldspar (or for that matter any other supplier) to pay a royalty to the City for the use of the City’s intellectual property in the Smartpole™.

Please note that this concession applies only in respect of developments which are due to be completed prior to the Olympics, and only to the supply of Smartpoles™ within the Central Sydney area of the City’s local government area.  To this end, please confirm that Goldspar has not taken any actions to supply Smartpoles™ outside the parameters of this letter.’

111               On 10 March 2000 Council forwarded a notice of termination of contract to Goldspar.  On 22 March 2000 Goldspar forwarded a notice of termination of contract to Council.

112               In December 2000 Project Architecture Pty Ltd was formed by Tsakalos and Proctor.  Proctor left the employ of the Council at that time.  Tsakalos resigned from the employ of the Council in June 2001.  In the second half of 2001 Project Architecture was engaged by Streetscape to assist in negotiations with Adelaide City Council for the supply of poles.  Tsakalos attended presentations with Matchett and Obeid.  Goldspar was a competitor for the Adelaide Council business.

113               Documents produced by Goldspar show that from April 2001 onwards it was quoting for the supply of street poles to various parties including a Spanish organisation and South Sydney City Council.  It had engaged Bonacci Rickard (NSW) Pty Ltd engineers to provide structural certification.  It is not clear which, if any, quotes were successful.

114               It is also clear enough from the evidence of Barnes, from the same documents and from documents produced by Claude Outdoor, that from about November 2001 up to August 2002 Goldspar had sold a number of poles manufactured for the purposes of the Council contract to Claude Outdoor, which had arranged for the supply and installation to councils and developers at various places in Perth, Adelaide and Sydney.  It continued to do so after August 2002.  The Claude poles were sold under the name ‘Identilite’.

115               The same sources demonstrate that Goldspar and Claude Outdoor were negotiating in relation to the manufacture of multi-function poles during 2002, with negotiations quite advanced by August 2002, at which time Streetscape and the Council intervened.

116               On 14 December 2001, a letter was sent by Willoughby Council to Streetscape regarding Goldspar’s contract with Willoughby Council and on 8 April 2002, a letter was sent by Goldspar to Willoughby Council asserting ownership of copyright in Smartpole and attaching the Griffith Hack Notice.

117               On 19 July 2002 this proceeding was commenced seeking final and interlocutory relief and interim orders were made by consent on 25 July 2002.

118               A set of drawings known as ‘A1 Drawings’ (including drawings LP14, LP16 and LP17) with dates between 24 July 2002 and 5 August 2002 were prepared by Kennovations Pty Ltd at the request of Goldspar and bear the statement ‘Copyright Goldspar Australia Pty Limited’.  They were provided to Enity Group Pty Ltd trading as Claude Outdoor.  It is clear enough from the evidence of Barnes and from the documents produced by Kennovations and Goldspar that Goldspar provided at least some of the drawings prepared for the Council contract to Kennovations which were to be used and were used in the preparation of the A1 drawings.

119               On 1 August 2002 Matchett travelled to Adelaide and noticed 14 identical street poles which had been installed in or about Adelaide.  He took photographs of them.  He gave affidavit evidence that the poles were identical with the street poles supplied by Streetscape to the Council pursuant to the second tender.  He expressed the opinion that they had been recently installed.

120               In October 2002 Matchett caused photographs to be taken of poles at various sites in Sydney which he said were identical with those supplied by Streetscape to the Council.  The signs attached to the poles bore the name ‘Claude Outdoor’.

121               On 8 August 2002 Goldspar wrote to Claude Outdoor as follows:

‘RE:  Your Order for Identilite Pole [TM]

This is to confirm to you that the Identilite Pole [TM] is an [sic] entirely different to the pole which Goldspar Australia P/L designed to be used in the City of Sydney and which the Council calls the Smart Pole.

We understand that Mr. Bob Matchett of Streetscape P/L has threatened your company and your customer the Stockland Group with legal proceedings if you purchase the Identilite Pole [TM] from Goldspar.  The Identilite Pole [TM] is a unique and separate design based upon plans, drawings and engineering specifically created by us to meet your purposes and requirements.

In those circumstances Streetscape P/L should not have any legitimate claim against you or your customer.   We are happy to provide you and your client the Stockland Group with an indemnity against any claim which Streetscape might attempt to bring against you in which they allege that the Identilite Pole [TM] is based upon the Smart Pole.’

122               A letter of 29 August 2002 was provided to the Enity Group Pty Ltd in the following terms:

‘MULTIFUNCTION POLES

In consideration for your placing an order for Multifunction poles (“products”), we agree to indemnify you and keep you indemnified from and against any liabilities or loss arising from and all costs, charges and expenses incurred by the products infringing intellectual property owned by any third parties.

Without limiting the foregoing we will indemnify you and your clients (on a fully indemnify basis) for all legal costs associated with any legal proceedings, or threatened legal proceedings, by a third party which alleges ownership of intellectual property which is infringed by the products.

This indemnity applies despite the term of any contract or agreement in relation to the manufacture or supply of the products.

Signed for and on behalf of:

GOLDSPAR PTY LIMITED

by an officer of the company authorised to bind the company

Douglas Rawson-Harris

Managing Director.’

123               On 13 September 2002 Council requested Goldspar to deliver up all tooling, jigs, dies and fixtures manufactured or created by Goldspar for the purpose of manufacturing and supplying multi-function street poles to Council pursuant to the contract.

124               Some of these events will need to be considered in more detail when the causes of action are being examined.

Further pleaded issues

125               The issues of breach of contract and infringement are intertwined.  I will not deal with alleged breach of contract or infringement of copyright in relation to the Issue A drawings, as I have held that clause 10 does not cover them.  The pleaded issues are as follows:

Breach of contract

126               The further amended application seeks, inter alia:

‘5A.     A declaration that the First Respondent has breached the Contract by engaging in the conduct referred to in paragraphs 24, 25, 25A, 25D, 25E, 25F and 27 to 29 of the Further Amended Statement of Claim.

…

16.       An order that the First Respondent and the Second Respondent pay to the Applicant:

            (a)        Damages for breach of contract;’

127               The nominated paragraphs of the further amended statement of claim are as follows, with the applicable defence set out below each paragraph:

‘24.      On or about 24 June 2002 Goldspar supplied to Claude Outdoor multi-functional street poles which have been installed near Adelaide Airport.

Particulars

(a)     Photographs of the street poles comprise exhibit “RSM 11” to the affidavit of Robert Matchett sworn 9 October 2002 and filed in these proceedings (the “Second Matchett affidavit”).

 

(b)     Paragraph 8 of the affidavit of Antony Barnes sworn 11 October 2002 and filed in these proceedings (the “Barnes affidavit”).’

‘24.      In answer to paragraph 24 of the further amended statement of claim:

 

(a)    Goldspar admits the matters alleged; and

 

(b)    Mr Rawson-Harris does not plead to the paragraph as it makes no allegation of fact against him.’

‘25.      On or about 24 June 2002 Goldspar supplied to Claude Outdoor multi-functional street poles which have been installed on King Georges Road, Wiley Park and in Williams Street, Earlwood.

Particulars

(a)     Photographs of the street poles comprise exhibit “RSM 12” to the Second Matchett affidavit.

 

(b)     Paragraph 9 of the Barnes affidavit.’

 

‘25.      In answer to paragraph 25 of the further amended statement of claim:

 

(a)     Goldspar admits the maters alleged; and

 

(b)     Mr Rawson-Harris does not plead to the paragraph as it makes no allegation of fact against him.’

‘25A.   In or about July 2002, Goldspar authorised the drafting of certain drawings “”Goldspar Drawings”).

 

Particulars

 

Drawings labelled LP14, LP16, LP17, C111, C114 and C161 being part of Exhibits “LNG1” and “LNG” to the affidavit of Lance Noel Green sworn 11 July 2003 (“First Green Affidavit”).’

 

‘25A    In answer to paragraph 25A of the further amended statement of claim:

 

(a)     Goldspar:

 

(i)            admits it authorised the drafting of drawings labelledLP14, LP16; and LP17; and

 

(ii)         does not otherwise admit the matters alleged; and

 

(b)     Mr Rawson-Harris does not plead to the paragraph as it makes no allegation of fact against him.’

‘25E.   The drafting of the Goldspar Drawings was done without the knowledge or consent of the Council.’

‘25E    In answer to paragraph 25E of the further amended statement of claim:

 

(a)     Goldspar does not admit the matters alleged; and

 

(b)     Mr Rawson-Harris does not plead to the paragraph as it makes no allegation of fact against him.’

‘25F.   In or about October 2002, Goldspar supplied to Claude Outdoor multi-functional street poles which have been installed in Mount Druitt.

Particulars

 

(a)     Affidavit of Anthony [sic] John Barnes sworn 17 October 2002;

 

(b)     Paragraph 17 of the affidavit of Lance Noel Green sworn 3 October 2003.’

‘25F.   In answer to paragraph 25F of the further amended statement of claim:

 

(a)     Goldspar admits the matters alleged; and

 

(b)     Mr Rawson-Harris does not plead to the paragraph as it makes no allegation of fact against him.’

 

 

‘27.      The use or incorporation of parts of information in the Issue C Drawings referred to in paragraph 26 above by Goldspar was done without the knowledge or consent of the Council.’

‘27.      In answer to paragraph 27 of the further amended statement of claim:

 

(a)     Goldspar repeats its answer in paragraph 26(a) above and otherwise does not admit the matters alleged; and

 

(b)     Mr Rawson-Harris does not plead to the paragraph as it makes no allegation of fact against him.’

‘28.      Goldspar provided the Production Specification Issue F to South Sydney City Council without the knowledge or consent of the Council.

Particulars

The document comprises part of exhibit “SJW1” in these proceedings.’

 

‘28.      In answer to paragraph 28 of the further amended statement of claim:

 

            (a)        Goldspar:

 

(i)           denies the matters alleged;

 

(ii)        says that the only entity to which it has supplied Production Specification Issue F is the Council; and

 

Particulars

 

Production Specification Issue F was supplied by

Mr Antony Barnes of Goldspar to Tracy [sic] Brunston [sic] &

Hammond, the Council’s project manager.

 

(iii)            further says that the Council rejected Production Specification Issue F; and

 

Particulars

 

The Council returned Production Specification Issue F to Goldspar by mail.

 

(b)    Mr Rawson-Harris does not plead to the paragraph as it makes no allegation of fact against him.’

‘29.      The provision of the Production Specification Issue F by Goldspar to South Sydney City Council was in breach of the General Conditions of Contract.

Particulars

Clause 10 and the definition of “Production Drawings” in clause 2.’

 

‘29.      In answer to paragraph 29 of the further amended statement of claim:

 

(a)     Goldspar denies the matters alleged; and

 

(aa)   further or in the alternative Goldspar relies upon the matters pleaded in paragraphs 11 to 22 of the further amended cross-claim and says that since 22 March 2000 Goldspar has by reason of those matters been discharged from further compliance with any obligations under the General Conditions of Contract; and

 

(b)     Mr Rawson-Harris does not plead to the paragraph as it makes no allegation of fact against him.’

Infringement of copyright

128               The further amended application seeks, inter alia:

‘6.        A declaration that the First Respondent has infringed the Applicant’s copyright in the drawings identified in Schedule A hereto (“the Works”).’

Schedule A provides as follows:

‘SCHEDULE A

1.         All drawings forming part of the First Respondent’s Version 2 Non Conforming Tender, a copy of which is behind Tab (B) of Exhibit “KJW1” to the affidavit of Katherine Jane Williams sworn 19 July 2002 (“Exhibit KJW1”).

2.         All drawings forming part of the Contract being Exhibit KJW1 and known as “General Arrangements and Parts Drawings – Issue C”.

3.         All drawings relating to the goods supplied pursuant to the Contract.’

The further amended application continues as follows:

‘7.        A declaration that the Second Respondent has infringed the Applicant’s copyright in the Works.

…

10.       An order that the First Respondent and the Second Respondent and each of them, whether by themselves, their servants, agents or otherwise howsoever, be restrained from manufacturing or marketing multi function poles which substantially reproduce the Works.

11.       An order that the First Respondent and the Second Respondent and each of them, whether by themselves, the servants, agents or otherwise howsoever, be restrained from infringing the Applicant’s copyright in the Works by reproducing or authorising the reproduction of the Works or a substantial part thereof without the licence of the Plaintiff.

…

16.       An order that the First respondent and the Second Respondent pay to the Applicant:

            …

(c)     Damages for infringement of copyright pursuant to Section 115(2) of the Copyright Act 1968;

(d)     Additional damages pursuant to Section 115(4) of the Copyright Act 1968.

17.       In the alternative to the relief sought in paragraph 16(c) and (d), and at the Applicant’s election, an order that an account of profits be taken of the profits made by the First and Second respondents for infringement of copyright.’

129               The relevant paragraphs of the further amended statement of claim are as follows with the applicable defence set out below each paragraph:

‘35.      The Council is the owner of the copyright in the Issue C Drawings.’

‘35.      In answer to paragraph 35 of the further amended statement of claim, the respondents repeat paragraph 21 above as the answer of both of them to this allegation.’

‘36.      Goldspar has, without the licence of the Council, reproduced parts of the Issue C Drawings and has thereby infringed the Council’s copyright therein.

Particulars

The Council refers to paragraphs 24, 25, 25A to 25F and 26 above.’

 

‘36.      In answer to paragraph 36 of the further amended statement of claim:

 

            (a)        Goldspar:

 

(i)                 says that it has not reproduced parts of the Issue C drawings as alleged;

 

(ii)              says further that if, which is denied, the Council is the owner of copyright in the Issue C drawings and even if which is denied, Goldspar has reproduced parts of the Issue C drawings as alleged, such act could not be an infringement of copyright as alleged because:

 

(A)        a corresponding design, within the meaning of section 74 of the Copyright Act 1968, has been applied industrially in Australia by or with the licence of the Council by the manufacture by Goldspar of multi-functional street poles in accordance with the Issue C drawings at the request of the Council;

 

Particulars

 

Affidavit of Douglas Rawson-Harris sworn 15 August 2002 paragraph 39.

 

(B)          the multi-functional street poles manufactured by Goldspar for the Council to which the corresponding design has been so applied were sold by Goldspar to the council;

 

(C)          the corresponding design has not been registered under the Designs Act 1906;

 

(D)         by reason of the operation of section 77(2) of the Copyright Act 1968, it is not an infringement of copyright in the Issue C drawings to reproduce the drawings on or after the day on which the multi-functional street poles were first sold, by applying that, or any other, corresponding design to an article; and

 

(b)       Mr Rawson-Harris does not plead to the paragraph as it makes no allegation of fact against him.’

‘37.      Further, Goldspar has, without the licence of the Council, reproduced drawings numbered 4930 / 211, 4930 / 234 224 and 4930 / 206, being part of the Issue C Drawings, and has thereby infringed the Council’s copyright.

Particulars

Goldspar brochure contained within Exhibit “C” in these proceedings.’

 

‘37.      In answer to paragraph 37 of the further amended statement of claim:

 

(a)     Goldspar denies the matters alleged; and

 

(b)     Mr Rawson-Harris does not plead to the paragraph as it makes no allegation of fact against him.’

‘38.      The Council has suffered loss and damage by reason of Goldspar’s infringement of the Council’s copyright.

Particulars

(a)     The royalty the Council would have received from its authorised licensee, Streetscape.

 

(b)     The Council is unable to provide full particulars of its loss and damage until after discovery is given by Goldspar of all instances of infringement by it.  The Council claims damages in respect of all infringements by Goldspar.’

 

‘38.      In answer to paragraph 38 of the further amended statement of claim:

 

(a)     Goldspar denies the matters alleged; and

 

(b)     Mr Rawson-Harris does not plead to the paragraph as it makes no allegation of fact against him.’

‘39.      Further, Goldspar has wrongfully made profits by reason of the said infringements which it would be unconscionable for it to retain.’

‘39.      In answer to paragraph 39 of the further amended statement of claim:

 

(a)     Goldspar denies the matters alleged; and

 

(aa)   further or in the alternative Goldspar relies upon the matters pleaded in paragraphs 11 to 22 of the further amended cross-claim and says that by reason of those matters the Council has unclean hands and is thereby disentitled to equitable relief; and

 

(b)     Mr Rawson-Harris does not plead to the paragraph as it makes no allegation of fact against him.’

 

 

‘40.      Goldspar threatens to continue to infringe, and unless restrained will infringe, the said copyright.

Particulars

Letter dated 4 September 2002 from Goldspar to Enity Group Pty Ltd.’

‘40.      In answer to paragraph 40 of the further amended statement of claim:

 

(a)     Goldspar denies the matters alleged; and

 

(b)     Mr Rawson-Harris does not plead to the paragraph as it makes no allegation of fact against him.’

‘51.      The conduct referred to in paragraphs 24 and 25 above was authorised or alternatively, directed and procured by Rawson-Harris without the licence of the Council.

Particulars

(a)     Rawson-Harris is the Managing Director of and a shareholder in Goldspar.

 

(b)     The press clipping in the Multi-Function Brochure refers to Rawson-Harris as Goldspar’s founder and designer.

 

(c)     The brochure being “RSM5” to the First Matchett affidavit refers to Rawson-Harris using his years in architecture, tool making and engineering to create a product that makes other street lighting poles obsolete.

 

(d)     Rawson-Harris informed South Sydney Council in his letter dated 4 September 2002 that it is not an infringement of copyright in the Issue C Drawings for Goldspar to manufacture street poles in accordance with those drawings.

 

(e)     Rawson-Harris signed a letter dated 28 August 2002 to South Sydney Council agreeing to Goldspar indemnifying South Sydney Council against any liability or loss arising in connection with Multi-Function Poles supplied to south Sydney Council from Goldspar infringing intellectual property rights own [sic] by any third parties.’

 

‘51.      In answer to paragraph 51 of the further amended statement of claim:

 

(a)        Goldspar does not plead to the paragraph as it makes no allegation of fact against Goldspar; and

 

(b)        Mr Rawson-Harris admits the matters alleged.’

 

‘52.      By reason of the allegation in paragraph 51 above, Rawson-Harris also infringed the Council’s copyright.’

‘52.      In answer to paragraph 52 of the further amended statement of claim:

 

(a)        Goldspar does not plead to the paragraph as it makes no allegation of fact against Goldspar; and

 

(b)        Mr Rawson-Harris denies the matters alleged and pleads as his own answer to these allegations the matters pleaded in paragraph 36(a)(ii) above.’

‘53.      Further, or alternatively, by reason of the matters pleaded in paragraph 51, Rawson-Harris is liable to the Council as a joint tortfeasor with Goldspar for the infringement of copyright pleaded in paragraphs 36 and 37 above.’

‘53.      In answer to paragraph 53 of the further amended statement of claim:

 

(a)        Goldspar does not plead to the paragraph as it makes no allegation of fact against Goldspar; and

 

(b)        Mr Rawson-Harris denies the matters alleged and pleads as his own answer to these allegations the matters pleaded in paragraph 36(a)(ii) above.’

‘54.      The Council has suffered loss and damage as a consequence of Rawson-Harris’ infringement of copyright.

Particulars

The Council repeats the particulars to paragraph 38 above.’

 

‘54.      In answer to paragraph 54 of the further amended statement of claim:

 

(a)        Goldspar does not plead to the paragraph as it makes no allegation of fact against Goldspar; and

 

(b)        Mr Rawson-Harris denies the matters alleged and pleads as his own answer to these allegations the matters pleaded in paragraph 36(a)(ii) above.’

‘55.      Rawson-Harris aided, abetted, counselled or procured or was directly or indirectly, knowingly concerned in or a party to, the contraventions of the Act referred to in paragraphs 41 to 49 above.

Particulars

The Council refers to paragraph 51 above.’

 

‘55.      In answer to paragraph 55 of the further amended statement of claim:

 

(a)        Goldspar does not plead to the paragraph as it makes no allegation of fact against Goldspar; and

 

(b)        Mr Rawson-Harris denies the matters alleged.’

‘56.      The Council has suffered loss and damage as a consequence or [sic] Rawson-Harris’ conduct referred to in paragraph 55 above.’

‘56.      In answer to paragraph 56 of the further amended statement of claim:

 

(a)        Goldspar does not plead to the paragraph as it makes no allegation of fact against Goldspar; and

 

(b)        Mr Rawson-Harris denies the matters alleged.’

130               All of the conduct alleged to be in breach of contract took place well after the contract had come to an end.  I have held that clause 10 is effective to vest the beneficial interest in copyright in the Issue C drawings in the Council, and, construed as such, is not an invalid restraint of trade.  If it were to be construed simply as a contractual clause with continuing operation after the contract has come to an end, then, in my opinion, the arguments of and the authorities referred to by counsel for Goldspar set out when considering the issue of restraint of trade would compel a conclusion that it was invalid restraint of trade as not being reasonable between the parties and as being contrary to the public interest in the free availability of goods and services.  These contractual claims for breach of clause 10 fail except insofar as that clause supports the claim for infringement of copyright.  Certain other contractual claims in relation to poles have been deferred.

131               I should deal with the issue raised by paragraphs 28 and 29 of the further amended statement of claim.  Production Specification Issue F was produced from the custody of South Sydney City Council in conjunction with documents relating to poles emanating from Goldspar.  Goldspar was negotiating with South Sydney City Council concerning the supply of poles.  The inference that Specification Issue F was supplied by Goldspar to South Sydney City Council is irresistible, although there is no evidence that this took place during the currency of the contract.  The specification is plainly caught by clause 10 of the contract.  Goldspar would have had no implied authority to distribute it in the circumstances that it did.  To do so was a clear breach of contract if clause 10 is construed to survive the termination of the contract.  For the reasons already discussed, if clause 10 is construed so as to catch these facts, then it is an invalid restraint of trade.  Specification Issue F is not a necessary element in granting or protecting copyright or other recognised intellectual property.  There is no evidence that Specification Issue F was confidential at the time of distribution to South Sydney Council even if confidential information is regarded as intellectual property.

Dies etc

132               By clause 32 of the General Conditions of Contract Goldspar agreed that Council would have ownership of all tooling, jigs, dies and fixtures manufactured or created by Goldspar for the purposes of manufacturing and supplying the multi-functional street poles pursuant to the Contract.  With minor exceptions Goldspar has not delivered up any tooling etc.  This is claimed to be in breach of contract and relief is sought.

133               Goldspar claims that it has no such items.  The only items examined closely in the evidence were the dies utilised by Capral Ltd to manufacture components.  Rawson-Harris gave evidence that aluminium extruders, including Capral, claim to own the solid part of any die with the client ‘owning’ the air space which the metal to be extruded fills, and will never deliver up any such die to the client.  There is no evidence to the contrary.  In my view no breach of clause 32 has been established and, in any event, there are no articles of the relevant description which are in the possession of Goldspar.

Breach of copyright

134               It is to be noted that the first respondent admits for the purposes of the proceedings only that:

 ‘For the purposes of the proceedings only the first respondent admits that copyright subsists in each of the drawings known as the “Issue C” drawings being the drawings copies of which appear under Tab F, pages 288–389 of Volume 2 of the “Judge’s Copy Documents”.’

135               Although there has been no formal assignment of that copyright, Council has the beneficial ownership of it and as between these parties equity would regard as done what ought to be done.  I will deal with these claims on that footing.  There are two limbs to the claim of infringement of copyright in those drawings.  The first relates to poles or parts of poles and the second relates to drawings and documents.  Paragraph 36 of the defence is pleaded to both (leaving aside the brochure for now).  It is to be noted that certain claims in relation to poles have been deferred.

136               Deciding whether there has been infringement of copyright by poles or parts of poles would be no easy matter in the circumstances of this case.  As between these parties Council has the intellectual property in the Webb design, Goldspar has the copyright in the Issue A drawings and Council has the copyright in Issue C drawings.  There would be significant similarities between a pole constructed in accordance with Issue A drawings and a pole constructed in accordance with Issue C drawings because one is developed from the other.  Furthermore, there would be similarities between both such poles and a pole constructed in accordance with the Webb design because the function to be performed is the same and the overall shape is similar.

137               The difficulty which the Council faces in relation to the poles or parts of poles sold or offered for sale by Goldspar to Claude Outdoor and others is that, even if that constituted reproduction of all or some of the Issue C drawings, Council cannot establish that the articles were manufactured without the licence of the Council.  The central pole, as such, without fittings is not an infringement of copyright in the Issue C drawings even if manufactured or modified after the contract came to an end. There seems little doubt that the additional integers which were supplied and which do accord with the Issue C drawings were manufactured whilst the contract was on foot for the purposes of the contract, which contemplated future orders.  It cannot be said that the manufacture of those articles in those circumstances is without the licence of the Council.  There can be no retrospective withdrawal of the authorisation.  That finding is fatal to any claim for infringement pursuant to either s 36 or s 38 of the Copyright Act 1968.

138               Counsel for the Council has argued that combining the central pole supplied to Claude Outdoor (which does not infringe) with the existing fittings or parts from stock which were admittedly made in accordance with the Issue C drawings was to make a new pole which (by reason of the incorporation of the parts) did reproduce a substantial part of the Issue C drawings without the licence of the Council.  No authority was cited to support that argument.  Even if correct and within the pleadings, proof would be required that Goldspar had assembled the finished product prior to sale and supplied it in that form to establish primary infringement.  That has not been established.

139               That makes it unnecessary to consider the somewhat adventurous defence pursuant to s 77 of the Copyright Act 1968 based upon Goldspar’s own manufacture and sale of articles to the Council pursuant to the contract.  The issues involved in the overlap between copyright and designs have recently been discussed and the authorities reviewed in Muscat v Le (2003) 204 ALR 335 and Sheldon v Metrokane [2004] FCA 19 (see also A Bates, ‘Artistic Works Industrially Applied:  Comparison of Copyright/Designs Law in Australia and New Zealand’, (1993) 17(2) UQLJ 247).  It is also to be noted that because of the express terms of s 77(2), that defence has no application to drawing to drawing infringement which topic remains to be considered (Muscat v Le (2003) 204 ALR 335 at [57]).

140               It is conceded by Goldspar that it authorised the making of certain drawings which reproduce substantial parts of the Issue C drawings, namely 4930/29 and 4930/12, but it submits that no other case of infringement has been established as particularised in the further amended statement of claim.  It is submitted for the Council that analysis of Exhibit J and Exhibit Z, together with the cross-examination of Barnes and the evidence of the experts, amply establishes the particularised breaches.  The principles to be applied have recently been reviewed by the Full Court in Tamawood Limited v Henley Arch Pty Ltd [2004] FCAFC 78 (particularly per Wilcox and Lindgren JJ at [43]–[56]) in a very similar context and do not require restating.

141               I am satisfied by the evidence of the expert Lance Green, taken together with a comparison of the drawings in question, the objective sequence of events and the cross-examination of Barnes that each of the allegations in 25A, 25B, 25C, 25D and 25E of the further amended statement of claim is established.  Such variations between drawings as are cited by the expert John Brown are not of sufficient significance to detract from a conclusion as to substantial reproduction.

142               The conduct alleged to found the accessorial liability of Rawson-Harris was that alleged in paragraphs 24 and 25 of the further amended statement of claim which related to poles, not drawing to drawing infringement.  As I have found that there was no such infringement there can be no accessory liability.

Registered designs

143               The designs were registered by Goldspar without the knowledge or consent of the Council during the currency of the contract.  They are plainly based upon the Issue C drawings and the development work under the contract related to them.  Registration was a clear breach of clause 10 and the implied terms of the contract.  They represent intellectual property of the Council.  They are held by Goldspar on constructive trust for the Council which is entitled to the relief sought.

Sections 52 and s 53 of the Trade Practices Act

144               I am satisfied that the representations alleged in paragraphs 41(a), (b), (c), (d) and (e) were made by the Griffith Hack Notice.  I am satisfied that Goldspar authorised, adopted and published that notice from at least November 1999 to October 2002.  Rawson-Harris accepted as much.  I am satisfied that representations (a), (d) and (e) were misleading and deceptive in the light of my findings as to the effect of the contract.  The representations were not framed as matters of opinion. 

145               It will often be the case that assertions made either by an agent or the party concerned will be understood as a claim or allegation amounting only to an opinion genuinely held or held on reasonable grounds.  There is considerable debate about the circumstances under which an agent may be found to have made a misleading statement when acting for a client (cf, for example, John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) ATPR 41‑249; Bowler v Hilda Pty Ltd (1998) 80 FCR 191; Butcher v Lachlan Elder Realty Pty Ltd (2002) 55 NSWLR 558 at [41]–[52]; Heydon v NRMA Ltd (2000)51 NSWLR 1per Malcolm AJA at [307] and McPherson AJA at [428]–[433]; Reiffel v ACN 075 839 226 Ltd [2003] FCA 194; 45 ACSR 67; 21 ACLC 469 at [24]–[32] and SG Corones, ‘Solicitors’ Liability for Misleading Conduct’ (1998) 72 ALJ 775).  The nature of the Griffith Hack Notice, starting with the description of it as a ‘Notice’, the unequivocal nature of the statements made in it, the lack of an express or implied disclaimer and the fact that it is directed to the world at large by a firm of lawyers does not enable the representations made in it to be considered only as expressions of opinion.

146               I am not satisfied that representations (b) and (c) were misleading or deceptive.  In my opinion there is a sufficient substratum of fact to justify the essence of those claims.  A certain amount of exaggeration is to be expected.  Rawson-Harris was the author of the Issue A drawings upon which the tender was won.  The later contributions by Newman were not fundamental.  Matchett was always a subcontractor and I am not satisfied that he contributed significant design input.

147               I would not base any finding upon the letter dated 14 December 2001 from Willoughby City Council to Streetscape Projects (Aust) Pty Ltd. Whilst a business record, the statements in it are a very brief hearsay summary of a conversation.  There is always a question of judgment as to the actual representation which is made based upon the actual words said.  As the authorities to which I have referred show, there is often a fine line as to the nature of that representation.

148               In my opinion the letter of 8 April 2002 from Goldspar to Willoughby Council does not support the pleaded representation based upon it.  The express terms of the letter acknowledge that there is a difference of opinion as to ‘who is the rightful owner of the Intellectual Property of the pole known by CoS as the Smartpole’.  Any reasonable reader would understand what follows to be the position taken by Goldspar on that contested issue.  There is no unequivocal representation as pleaded.

149               The brochure Exhibit RSM 5 clearly makes the representation that Goldspar designed the poles installed by the Council.  I do not regard that as misleading or deceptive for the reasons already given.  It is not so clear that the brochure represents that Goldspar owned the design.  No express statement to that effect is made.  However, I am satisfied that that representation was made.  The article was referred to as ‘the Goldspar Multi-Function Street Pole’.  There is reference to a number of customers other than the Council.  A significant purpose of the brochure was to promote the purchase of ‘the Goldspar Multi-Function Street Pole’ which was claimed to be identical with those designed by it and installed by the Council.  The representation was unequivocal in the sense I have discussed, and is not framed as an opinion or a contested claim.  In view of my findings it was misleading and deceptive.

150               In my opinion use of the photographs of poles supplied by Goldspar to Council in Exhibit RSM 5 do not amount to a representation that either its multi-functional street poles or the company have the sponsorship or approval of the Council within the meaning of s 53(c) or (a) of the Trade Practices Act.  The same can be said of the use of the photographs as such in the Multi-Function Brochure.

151               I am satisfied that the representations pleaded in paragraph 46 are made in the Multi-Function Brochure.  Representations (a), (b) and (c) are virtually express.  Representations (d) and (e) are clearly implied.  As with the other brochure, the whole point was to promote the purchase of multi-function poles by reference to poles installed in Sydney pursuant to the Council contract.  The representations were unequivocal, not framed as opinion.  I am satisfied that all of those representations were misleading or deceptive.  Representations (a), (b) and (c) are false.  Representations (d) and (e) are falsified by my findings as to the effect of the contract.

Rawson-Harris

152               Rawson-Harris is alleged to have aided, abetted, counselled or procured or to have been, directly or indirectly, knowingly concerned in or a party to, the contraventions of the Trade Practices Act by Goldspar by reason of the operation of s 75B of that Act.  He undoubtedly bears full responsibility for the distribution of the Griffith Hack Notice.  He accepted as much in cross-examination.  I am also satisfied that he approved and authorised the content of each of the brochures and the distribution of each of the brochures which I have found to be in breach of the Act.

153               It is submitted on his behalf that to be knowingly involved in contravention of s 52 requires knowledge not only of the conduct in question but also that it was misleading (Yorke v Lucas (1985) 158 CLR 661 at 670).  It is submitted that Rawson-Harris honestly and reasonably believed at all times up to delivery of the first judgment in August 2002 that Goldspar owned the copyright in all relevant drawings including Issue C.

154               It is as well to bear in mind the facts in Yorke v Lucas.  The vendor of a business misrepresented the turnover.  The misrepresentations were innocently passed on to the purchaser by the managing director of the corporate agent.  The corporate agent was found to have innocently breached s 52.  The case was an attempt to fit the managing director with personal responsibility although he did not know that the representation as to the takings of the business was false.

155               The Full Court has recently reviewed the relevant authorities as to accessory liability in Rural Press Ltd v Australian Competition and Consumer Commission (2002) 118 FCR 236 at [154]–[160] in a manner which received the approval of the High Court on appeal (Rural Press Ltd v Australian Competition and Consumer Commission (2003) 203 ALR 217, 78 ALJR 274 at [2] and [47]–[48]).  It is necessary that Rawson-Harris be found to have had knowledge of the essential facts and circumstances constituting the contravention, and be relevantly associated with it, but it is not necessary that he appreciated that the conduct was unlawful in the respect alleged.

156               There is no doubt that he knew all of the essential facts and circumstances.  He was a direct participant in them.  Is it necessary that he knew that the claims were misleading or deceptive?  It would follow from my findings that the critical issue is the meaning of clause 10 of the General Conditions of Contract as it stood on 29 May 1998.  That form had not been proposed until 13 May 1998.  It follows from my findings that any statement as to design ownership by Goldspar prior to 13 May 1998 would not have been misleading or deceptive.  However, all of the statements in issue were made after 29 May 1998.  I have found that the statements in breach of s 52 were unequivocal and would not be understood as merely an opinion on a contested issue. 

157               I find that Rawson-Harris at least understood at the time the statements were made that the issue of ownership of the intellectual property in the design of the poles supplied to the Council was in contest.  In my opinion that finding is sufficient to implicate Rawson-Harris in breach of s 52 pursuant to s 75B.  It is difficult to accept the evidence of Rawson-Harris that he did not appreciate that there was an issue about ownership of the design rights until the receipt of correspondence from Council in October or November 1999.  The memorandum of Matchett on 12 May 1998 drew the issue to his attention immediately prior to the crucial meeting.  In the relevant respect the terms of the contract were clearly altered in the draft contract which followed that meeting.  Rawson-Harris retained a solicitor to examine the contract.  I am satisfied that all parties had intellectual property rights in mind both in August/September 1997 and May 1998.  I do not accept that Rawson-Harris first became aware of the Goldspar letter of 18 September 1997 during the course of the Morrisey expert determination.  Even if that evidence were accepted, it would establish knowledge of that letter in early 1999.  That makes it difficult to deny knowledge of the existence of a problem thereafter.  It is also apparent that the July 1999 request for tender by the Council asserted intellectual property in the poles to be supplied and that the response by Goldspar expressly raised the issue.  The letter of 18 September 1997 was relied upon by Goldspar in litigation in the New South Wales Supreme Court in 2000.  That letter was not disavowed until well after this case was commenced.

158               Rawson-Harris agreed that the Griffith Hack Notice had been sent out from at least November 1999, when, on any view, he had knowledge of a dispute, until October 2002.  It is not quite so clear during what period the brochures were circulated.  However, I am satisfied that Rawson-Harris was conscious at all times from May 1998 onwards that any claim which Goldspar asserted to design rights in the Smartpole would be contested by Council.  That being the case he consciously took a variety of steps to assert intellectual property (including registering the designs) knowing of that contest and of the risk that Goldspar might not succeed in that contest.  No informed observer such as Rawson-Harris could read the final form of clause 10 with the related definitions and not appreciate that Goldspar’s claim to ownership of the final design was very dubious.  He knew that an unequivocal statement as to Goldspar’s ownership of the final design was misleading or deceptive.  In my opinion he knew all that it was necessary to know to involve him in accessory liability pursuant to s 75B regardless of his belief as to whether Goldspar would prevail in any contest.

Cross claim

159               Goldspar has not pursued its cross claim for breach of s 52.  The balance of the cross claim has been deferred.

Summary

160               (1)        The prior decision on construction of the contract is not reopened.

(2)        The claim for rectification fails.

(3)       Related claims relying upon representations as to copyright in relation to Issue A drawings or express, implied or inferred terms of the contract in relation to Issue A drawings fail.

(4)        The breach of contract claims fail.

(5)       The claims of infringement of copyright by reproduction of Issue C drawings by poles or parts of poles fail.

(6)        The claims of infringement of copyright by reproduction by drawings succeed.

(7)        The claim of accessory liability for breach of copyright against Rawson-Harris fails.

(8)        Some claims of breach of s 52 of the Trade Practices Act fail and some succeed.

(9)        The claims for breach of s 53 fail.

(10)     The claim for accessory liability against Rawson-Harris in relation to the breaches of s 52 succeeds.

(11)      Relief and costs have not been decided.

(12)      The ‘hived off’ issues remain to be heard.

161               The proceeding will stand over to enable the parties to consider these reasons and to bring in draft short minutes of order to give effect to them jointly or severally.  The short minutes of order should include orders and directions concerning the remaining issues in the case and should deal with costs.  The parties should also bring to my attention any pleaded issue which has not been dealt with.

I certify that the preceding one hundred and sixty-one (161) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles.

Associate:

Dated:              7 May 2004

Counsel for the Applicant:	RJ Ellicott QC; DB Studdy
Solicitor for the Applicant:	PricewaterhouseCoopers Legal
Counsel for the Respondents:	JV Nicholas SC; DAC Robertson
Solicitor for the Respondents:	Michael Osborne & Associates
Dates of Hearing:	7–10, 20–24, 27–29 October, 21 November 2003
Date of Judgment:	7 May 2004