Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd and Anor

Introduction 1 Pursuant to notice of motion filed on 24 February 2004, the respondents/cross-claimant have moved for an order under Order 29 Rule 2 of the Federal Court Rules that certain separate questions be determined in advance of the final hearing of the proceedings commencing on 1 April 2004, and in addition an order for security for costs. In the circumstances, it was an unusual step to take, and it is necessary that I provide some detail as to the background to the application. On 5 March 2004 I dismissed the motion and indicated that I would give reasons for my decision at a later date. The following are my reasons for dismissing the application for such orders. The principal proceedings 2 The application the subject of the principal proceedings filed on 7 October 2003 by the applicant/cross-respondent ('Concrete'), seeks the following relief: 'A. A declaration that the Respondents' Threats (as contained in the letter dated 9 September 2003 and 1 October 2003 from Barrak Lawyers and further defined in the Statement of Claim) are unjustifiable within the meaning of s. 202 of the Copyright Act 1968 (Cth). B. An order restraining each of the Respondents by itself, himself and its or his servants or agents, from making any further threat in the form substantially of the Respondents' Threats. C. An order for an enquiry into the quantum of damages sustained by the Applicant by reason of the Respondents' Threats. D Interest. E Costs.' 3 The statement of claim filed in the context of that application asserts that Concrete has an implied licence to use certain plans and drawings for the development of a home unit building on property situated in Nelson Bay in the State of New South Wales, in relation to which development consent was granted by Port Stephens Council on 10 May 2000 (DA No. 16-2000-103-1). At the time of the grant of that consent, the joint owners of the land were Landmark Building Developments Pty Limited ('Landmark') and Toyama Pty Limited ('Toyama') - the development application being prepared and lodged on behalf of those owners by the first respondent ('Parramatta Design'). The second respondent ('Mr Fares') is the sole director and shareholder of Parramatta Design. On 12 December 2002, two solicitors of the Supreme Court of New South Wales were appointed trustees for the sale of the property pursuant to the Conveyancing Act 1919 (NSW), and the property was sold by those trustees on 7 August 2003 at public auction to Concrete. Completion of the sale took place on 3 October 2003, and Concrete became and remains the registered proprietor in fee simple of the property. 4 By defence and cross-claim dated 7 November 2003 and filed on 17 November 2003, the respondents/cross-claimant (ie Parramatta Design and Mr Fares) have asserted that by reason that Landmark and Toyama failed to perform their payment obligations in favour of the respondents/cross-claimant for the retainer of the respondents, or at least Mr Fares, for the design work involved in the compilation of those plans and drawings, and in particular their obligation to pay the design fees involved for the preparation thereof, there does not exist any entitlement on the part of Concrete, as the immediate successor in title to Landmark and Toyama, whether by way of implied licence or otherwise, for Concrete to use the plans and specifications in order to develop the property the subject of those plans and drawings. That is said by the respondents/cross-claimant to be at least primarily because no licence to use the plans and drawings was acquired by the trustees for sale on their appointment, or subsequently by Concrete upon completion of its purchase from the trustees for sale of the property. It appears that the development consent was granted by the relevant planning authority upon the basis of and by reference to the plans and drawings the subject of the proceedings. Applicable principles to the determination of separate questions 5 Order 29 Rules 1 and 2 of the Federal Court Rules provide as follows: '1. In this Order, question includes any question or issue in any proceeding, whether of fact or law or partly of fact and partly of law, and whether raised by pleadings, agreement of parties or otherwise. 2. The Court may make orders for - (a) The decision of any question separately from any other question, whether before, at or after any trial or further trial in the proceedings; and (b) The statement of a case and the question for decision.' 6 The principles governing the circumstances in which an order will be made under Order 29 Rule 2 are, as Branson J mentioned in Reading Australia Pty Limited v Australia Mutual Provident Society [1999] FCA 718 at [8], 'relatively well established', and were summarised by her Honour as follows: '(a) the term "question" in O 29 r 1 includes any question or issue of fact or law in a proceeding. The distinction in the rule between an "issue" and a "question" is the distinction between that which, when resolved, will result in an adjudication in favour of one party or the other, being an "issue", and less decisive matters of dispute being "questions" (Landsal Pty Ltd (in liq) v REI Building Society (1993) 113 ALR 643 at 647); (b) a question can be the subject of an order for a separate decision under O 29 r 2 even though a decision on such a question will not determine any of the parties' rights (Landsal Pty Ltd (in liq) v REI Building Society at 647); (c) however, the judicial determination of a question under O 29 r 2 must involve a conclusive or final decision based on concrete and established or agreed facts for the purpose of quelling a controversy between the parties (Bass v Permanent Trustee Co Ltd [1999] HCA 9 at para 45); (d) where the preliminary question is one of mixed fact and law, it is necessary that the question can be precisely formulated and that all of the facts that are on any fairly arguable view relevant to the determination of the question are ascertainable either as facts assumed to be correct for the purposes of the preliminary determination, or as agreed facts or as facts to be judicially determined (Jacobson v Ross [1995] 1 VR 337 at 341, referring to Nissan v Attorney-General [1970] AC 179 at 242-243 per Lord Pearson; Bass v Perpetual Trustee at para 53); (e) care must be taken in utilising the procedure provided for in O 29 r 1 to avoid the determination of issues not "ripe" for separate and preliminary determination. An issue may not be "ripe" for separate and preliminary determination in this sense where it is simply one of two or more alternative ways in which an applicant frames its case and determination of the issue would leave significant other issues unresolved (CBS Productions Pty Ltd v O'Neill per Kirby P at 606); (f) factors which tend to support the making of an order under O 29 r 2 include that the separate determination of the question may - (i) contribute to the saving of time and cost by substantially narrowing the issues for trial, or even lead to disposal of the action; or (ii) contribute to the settlement of the litigation (CBS Productions Pty Ltd v O'Neill (1985) 1 NSWLR 601 per Kirby P at 607); (g) factors which tell against the making of an order under O 29 r 2 include that the separate determination of the question may - (i) give rise to significant contested factual issues both at the time of the hearing of the preliminary question and at the time of trial (GMB Research & Development Pty Ltd v The Commonwealth [1997] FCA 934); (ii) result in significant overlap between the evidence adduced on the hearing of the separate question and at trial - possibly involving the calling of the same witnesses at both stages of the hearing of the proceeding (GMB Research & Development Pty Ltd v The Commonwealth; Arnold v Attorney-General for Victoria [1995] FCA 727). This factor will be of particular significance if the Court may be required to form a view as to the credibility of witnesses who may give evidence at both stages of the hearing of the proceeding; or (iii) prolong rather than shorten the litigation (GMB Research & Development Pty Ltd v The Commonwealth).' 7 Further to this, Mansfield J in Griffiths v Northern Territory [2003] FCA 1177 stated at [5] - [7]: 'Generally, the procedure should be directed to securing determination of a question which may make a substantive hearing unnecessary, at least if the question is answered in a particular way: Blurton v Minister for Aboriginal Affairs (1991) 29 FCR 442 at 449; or if the question however answered may lead to the real prospect of informal resolution of the entire proceeding. …

The respondents'/cross-claimant's motion and submissions on the issue of separate questions 9 On the issue of separate questions, the respondents/cross-claimant sought the following orders: '1. An order that this honourable court determine as a separate question in accordance with the provisions of Order 29 Rule 2, whether or not it is a condition precedent to the success of the Applicant in these proceedings to demonstrate to the satisfaction of the Court that: (a) the terms of the Supreme Court order, dated 12 December 2002, which appoints the trustees for sale of the property known as 5 Laman Street Nelson Bay, conferred upon the trustees a licence to use and / or assign the copyright in the plans and drawings the subject of these proceedings as being property within the statutory trust for sale; and (b) the Contract for the Sale of Land dated 7 August 2003 between the trustees as Vendors and the Applicant as Purchaser assigned or otherwise operated to transfer the said license to use the copyright in the plans and drawing the subject of these proceedings. 2. If this honourable court determines the matters in paragraph 1 above in the affirmative, an order that the court then proceed to determine: (a) whether the order for appointment of the trustees for sale 'of the property known as 5 Laman Street Nelson Bay NSW and being the whole of the land contained in Folio Identifier 1/921463 vested in the trustee a license to use and/or assign the copyright in the plans and drawings the subject of these proceedings; and (b) whether the Contract itself between the trustees and the applicants effected an assignment of the said license to use the copyright. 3. Should this honourable court determine paragraphs a. and/or b. of order 2 above in the negative, then an order in accordance with the provisions of Order 29 Rule 4, that the proceedings commenced by the Applicant be dismissed and that judgement be entered for the Respondents and Cross-Claimant on their Defence and Cross-Claim. 4. Should this honourable court determine paragraphs a. and/or b. of order 2 above in the positive, then a direction or order that issues arising from any proposed sale to the date of the appointment of the trustees, by predecessors in title to the trustees, of the property 5 Laman Street Nelson Bay, to any entity not being a party to these proceedings, is an irrelevant matter for purposes of issues arising in these proceedings.' 10 For the purposes of the above orders sought, and in particular paragraph 3, it is convenient to observe here that Order 29 Rule 4 gives the court power to 'dismiss the proceeding or the whole or any part of any claim for relief in the proceeding', where the resolution of an issue arising under Order 29 'substantially disposes of the proceeding or of the whole or any part of any claim', or 'renders unnecessary any trial or further trial in the proceeding'. The substance and reality of the present application was in effect to bring the present proceedings to a conclusion in favour of the respondents, or virtually so, rather than merely to contribute to the saving and cost of the proceedings by narrowing the issues for trial. 11 In support of their application for the resolution of these separate questions, the respondents/cross-claimant provided the following written submissions under the heading of 'Nature and reasons for the separate questions': '2. In order for the applicant to succeed in the present case it must establish that it is the holder of an implied licence to use the plans and drawings for the purpose of undertaking the development. (Statement of Claim, paragraph 13). 3. The respondent contends that on brief evidence that is documentary, it can be established that the applicant could not be the assignee of any implied licence. If this position is established in the respondents' favour they are entitled to have the proceedings dismissed without the need to investigate any further issues. 4. The argument consists of the following steps: - (a) The applicant acquired the land upon which it proposes to undertake the development by a contract of sale dated 7 August 2003 from Stanislaus Anthony Carroll and Ross McDonald who were trustees for the sale of the property appointed by the Supreme Court of New South Wales. (b) Any interest the applicant holds in regard to copyright was acquired pursuant to that contract whether by its express terms or by implication. (c) The applicant cannot acquire any interests in regard to the property other than those that were vested in Mr Carroll and Mr McDonald pursuant to the orders constituting them trustees for sale. The extent of all interests they had to convey in the development (if any) are thus determined by the proper construction of the orders appointing them trustees for sale and the extent to which such orders vest the development (if any) in them. (d) The order of the Supreme Court made 12 December 2002 appointed Mr Carroll and Mr McDonald pursuant to Order 1 as: - "Stanislaus Anthony Carroll, solicitor of Level 19, 111 Elizabeth Street, Sydney, NSW and Ross McDonald, solicitor of Level 23, MLC Centre, 19 Martin Place, Sydney, NSW be appointed trustees of the property known as 5 Laman Street, Nelson Bay, NSW and being the whole of the land contained in the Folio Identifier 1/92/1463". (e) The orders proceeded to vest the property in the trustees in the following terms: - "The said land be vested in such trustees subject to any encumbrances affecting the entirety of the said land but free from encumbrances (if any) affecting any undivided share or shares therein to be held by the said trustees upon statutory trust for sale under Division 6 Part 4 of the Conveyancing Act 1919". (f) The Court by its order did not vest in the trustees anything other than the land described in the orders and in particular did not purport to vest in the trustees the business undertaking or venture that had been conducted by the joint venture constituted by Toyama and Landmark. (g) It follows from the terms of the order that no interest in an implied licence to use the plans was vested in the trustee for sale. Such interest, along with other interests in the joint venture other than real property, were retained by the venture partners (to the extent it be established that the venture held a licence from the copyright holder). 5. It follows from the above premises that the trustees had no title to any implied licence to convey to the applicant and the applicant thereby gained no implied licence. 6. It could not be contended that there is any estoppel or that there was any representation to which either the respondents, joint venturers, or trustees were partly concerning the plans, in light of Special Condition 7 of the Contract of Sale. 7. The case is on all fours with the decision of the New South Wales Court of Appeal in Torbey Vander Have Pty Limited v Mass Constructions Pty Limited (2002) 55 IPR 542 per Spiegleman CJ at paragraph 30 - 32, per Young CJ in Eq paragraph 83 to 98 and Foster AJA paragraphs 131 - 132. 12 Subsequently in oral submissions presented at the hearing of the application, senior counsel for the respondents/cross-claimant, asserted that the adoption of such a course by the Court would 'bring about a substantial saving… to the parties and the use of court time'. Although it was accepted that a heavy onus lay on the respondents/cross-claimant in seeking the determination of these questions in advance of the final hearing already fixed, it was further submitted by him that the Court ought not to be deterred in principle from determining a separate question if a succinct legal question can be resolved within a narrow compass and which will dispose of the litigation, or substantially. If the Court was minded to determine the present notice of motion, there would be avoided the need for, to cite senior counsel's precise submission: '… a factual inquiry as to whether, and if so, the terms upon which the joint venturers were licensed to use the plans and designs. These arrangements were made orally and it is expected that witnesses will be called on each side and that there will be a necessity for cross-examination and findings on credit.' 13 It may be seen from the submissions of the respondents/cross-claimant that they have interpreted Concrete's statement of claim, and in particular paragraph 13 thereof, as being solely concerned with the question of whether or not an implied licence to use plans and designs for the construction of a building on realty is capable of being transferred by a vendor to a purchaser of that realty, in circumstances where the payment of fees for architectural services relating to that construction remains outstanding to the prosecutor of the proceedings. This, it submits, is akin to the situation in Torbey Vander Have, where the NSW Court of Appeal unanimously held, in the context of a mortgagee exercising its powers of sale, that '[w]hether or not a mortgagee had a right to use the plans depends on whether or not the licence fell within the property subject of the mortgage' (per Spigelman CJ at [32]). 14 Although senior counsel for the respondents/cross-claimant invited me to draw an inference that the architectural plans the subject of the Torbey Vander Have dispute formed part of the a development application notwithstanding that the report makes no direct reference to any such circumstance, I do not think that it is open to me, on my reading of the report case, so to do. The submissions of Concrete on the issue of separate questions 15 The principal thrust of Concrete's contention in these proceedings is that it has an implied licence to use the plans and drawings for the purpose of undertaking development of the property (see Statement of Claim, paragraph 13) in accordance with the approval given to those plans and drawing by the local Council pursuant to its town planning and building powers and authorities conferred by statute. In his oral submissions at the hearing of the motion, senior counsel for Concrete submitted the respondents/cross-claimant had not appreciated the significance of that: '…my learned friend says well, you must have got your licence from the statutory trustees for sale. That is a possibility but a more likely possibility is that we got it directly from him because he not only gave… a licence to his client, but because it was used in a development application with his knowledge he gave it to anybody who would own the land, we submit, for as long as the development consent enured, existed and subsisted. … What we have said is we had an implied licence in our statement of claim. My learned friends say "well you must mean from the statutory trustees for sale". Well, we may have one on that view of the matter, but a better view may very well be that we got it directly from him.' 16 In the context of that proposition (which was also raised in paragraph 9 of Concrete's written submissions), my attention was drawn by Concrete to the judgment of Else-Mitchell J in Ryde Municipal Council v The Royal Ryde Homes and another (1970) 91 W.N. 440. In discussing the nature or incidents of a development consent, his Honour stated (at 443) as follows: 'It must not be overlooked that a consent to the development of land under a prescribed planning scheme is not personal to the applicant but enures for the benefit of subsequent owners and occupiers, and in some respects a consent is equivalent to a document of title.' 17 In further support of that apparent principle, senior counsel for Concrete referred to the following passage from the minority subsequent judgment of Stephen J (with whom McTierman J agreed) in Eaton & Sons Pty Ltd v Warringah Shire Council (1972) 129 CLR 270 at 293: '… although a consent will no doubt result from an application by an individual it is essentially impersonal in the sense that it does not concern itself with and is not limited to the applicant but is a consent to the world at large in relation to the land which is its subject. Once granted it makes lawful, in a town planning context, what would otherwise be unlawful but does so by reference to the acts done and not to the identity of the actor; I would think that a mere trespasser could justify his use of land in terms of town planning controls by reference to some prior consent successfully applied for by a prior lawful occupier.' The majority of the High Court in Eaton did not find it necessary to address that subject. 18 If the principles enunciated in Royal Ryde Homes and Eaton still operate in the present town planning legislation, it is not easy to envisage how the respondents/cross-claimant can succeed in principle in obtaining the relief sought in their notice of motion. Plainly further research is required by counsel for the parties in that regard. Presumably the plans etc the subject of the present copyright claims were the subject of the town planning and/or building approvals obtained by Concrete or its predecessors in title.

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