Council of the City of Sydney v Goldspar Australia Pty Ltd

D. Future CBD Projects (1 July 1998 onwards) The City of Sydney are committed to take minimum delivery of 300 column arrangements for each year, over subsequent 3 year period. Provide unit rates for the following equipment manufacture and supply to site. … (details followed) E. Future CBD Projects (1 July 1998 onwards) The City of Sydney are committed to take minimum delivery of 300 column arrangements for each year, over subsequent 3 year period. Provide unit rates for the following equipment manufacture, supply and installation to site: … (details followed)" 8 The introduction to the tender submitted by Goldspar was as follows: "1.0 INTRODUCTION Goldspar are an appropriate company to supply the City Of Sydney with the new Multi-Function Street Poles due to Goldspar's 10 years experience designing, developing and manufacturing Multi Function Street Poles for over 20 sites throughout Australia, including Melbourne City Council. Goldspar have assembled a team of designers and manufacturers for the supply of the Sydney Multi Function Poles which have experience and a proven track record to successfully fulfil all of the requirements of the City Of Sydney Tender. Following a detailed review of the Tender Documents and the design as provided in the Request for Tender, Goldspar have decided to provide both a Conforming and Non-Conforming Tender. … 3.0 NON-CONFORMING TENDER - VERSION 2 The Non-Conforming . Version 2 design departs in principle from the design as supplied in the Request for Tender. 3.1 The key features which have been retained are: 3.1.1 The overall aesthetic of the pole has been retained. 3.2 The key areas where the design departs in principle from the City Of Sydney design are: 3.2.1 There is no modular extruded panel cladding system. The Upper Pole consists of a full height, complete, structural hollow aluminium extrusion sleeved over and mechanically fixed to a steel structural member. The steel member is not full height of the pole and only extends as high as is necessary to support the required accessories (refer detail drawings). 3.2.2 Aluminium outreach arms are fixed to minimally and sensitively designed cast aluminium collars with integral spigots which clamp directly to the upper pole. 3.2.3 All RTA, Energy Australia and Communications cabling will be within the structural aluminium extrusion. The various cables will not be segmented. 3.2.4 Industry standard dissimilar metal isolating methodologies will be employed." 9 Version 2 contained a detailed set of drawings, issue A, which bore the name of both Goldspar and KWA Design Group Pty Ltd, the latter described as street furniture consultants. 10 The contract drawings (issue C) are different again in detail from both the drawings with the request for tender and the issue A drawings provided with the non-conforming tender. The cover sheet bears the names of both Goldspar and KWA Design Pty Ltd. 11 The questions posed for determination depend upon the provisions of the contract in relation to intellectual property. The principal document governing the terms of the contract was the General Conditions of Contract. The critical provision for relevant purposes is clause 10, which is in the following terms: "10. PATENTS, COPYRIGHT AND OTHER INTELLECTUAL PROPERTY RIGHTS The Supplier warrants that any 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 the Council to the Supplier as at the date of Supply of the Product. 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 Contract. 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." This needs to be considered with some interpretation provisions from clause 2 which apply "except where context otherwise requires". The most important of those are as follows: " '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;" " '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;" " 'Production Drawings' means the drawings in Appendix A and signed by the parties for the purposes of identification;" " 'Specification' means the Specification for work to be carried out, 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;" 12 Other clauses of relevance include the following: "8.6 Confidential Information Drawings, specifications and other information, samples, models, patterns and the like, supplied by either the Supplier or the Council and marked or otherwise identified as confidential shall be regarded as confidential and shall not be disclosed to a third party except with the prior agreement of the other party to the Supply Contract. If required in writing by a party the other party shall enter into a separate agreement not to disclose to anyone else any confidential matter even after the expiry of the supply Contract. … 31. ALTERATIONS TO THE DESIGN OF THE PRODUCT The Supplier shall discuss with the Council any matter which arises during any phase of the Supply Contract which may be likely to be relevant to or affect in any manner the design or manufacture of the Product. Without prejudice to the generality of the first paragraph of clause 31, the Supplier shall advise the Council in writing of any alterations it wishes to make to the design of the Product, provided in the Drawings and as set out in the Specification, in order to finalise the design, and, to suit its manufacturing processes. In the event the Supplier gives notice in accordance with the second paragraph of clause 31, the Supplier shall not alter its manufacturing of the Prototype or the Product in accordance with the Drawings and Specification until it has received the written approval of the Council to the alterations to the design it has proposed. All such alterations to the design of the Product will be the responsibility of and at the cost of the Supplier. 32. OWNERSHIP OF TOOLING, ETC The Supplier acknowledges and agrees that the Council shall have ownership of the tooling, jigs, dies and fixtures manufactured or created by the Supplier for the purposes of manufacturing and supplying the Product and otherwise complying with its obligations under the Supply Contract. The Supplier shall forthwith deliver to the Council at the conclusion, termination or otherwise end of this Supply Contract the said tooling, jigs, dies and fixtures at a place to be nominated by the Council." 13 The general conditions of contract were not entered into until 29 May 1998, whereas the Council had informed Goldspar that the non-conforming tender had been accepted on 28 August 1997. In the meantime, Council had issued three purchase orders as follows: 1. Number 000638 - dated 22 September 1997 - 1 multi-functional street pole project - pole extrusion - $13,000 2. Number 000745 - dated 9 October 1997 - multi-function street poles - production, drawings and toolings - $76,937.50 3. Number 001885 - dated 19 November 1997 - 202 units of various types - $981,835. The last was in accordance with the proposed programme for delivery of poles. 14 Clause 22.6 of the General Conditions of Contract dealt with this topic in the following way: "22.6 Acknowledgment of Payment by Supplier The Supplier acknowledges and agrees that all payments made or to be made by the Council to Goldspar in accordance with Purchase Orders issued by the Council numbers SCC-000638 dated 22 September 1997 in the amount of $13,000.00, SCC-000745 dated 9 October 1997 in the amount of $76,937.50 and SCC-001885 dated 19 November 1997 in the amount of $981,835.00 are part of the Contract Sum. The Parties acknowledge and agree that the requirements of clause 22.1 do not apply to any payments under Purchase Orders SCC-000638 and SCC-000745, however, the requirements of clause 22 do apply to any payments under Purchase Order SCC-001885. The Supplier acknowledges that all amounts payable in relation to Purchase Order SCC-000638 and SCC-000745 have been paid by the Council and the amount of $542,836.82 has been paid in relation to Purchase Order SCC-001885. Subject to finalisation of the claim in respect of tooling and accessories to the Product (except to the extent of accessories to the Product referred to in the letter from the Supplier to the Council of 31 March 1998), the Supplier represents and warrants that the design of the Product, and all other work to be undertaken prior to commencing the manufacture of the Product has been completed. This work is deemed to be an approved variation under Clause 16. Accordingly, the Supplier acknowledges and agrees that Council has paid the Supplier the amount of $113,868.00 and will pay the amount of $28,655.00 once two poles nominated by the Council have been supplied and installed to the satisfaction of Council, in full and final satisfaction of all claims that the Supplier may have had for this work." The balance of clause 22 was a procedural provision for the making and payment of claims. 15 It is submitted for the Council that when clause 10 is read in conjunction with the definitions in clause 2 it is clear that the relevant intellectual property is vested in the Council. It is submitted that when the definition "Intellectual Property" is considered it is plainly not limited to that which is provided to the supplier by the Council because of the disjunctive language of the clause ("or is created in the course of or arises out of this supply contract") and because, in particular, it expressly includes all "Intellectual Property" in the "Drawings" and "Specification" which are unequivocally the drawings and specification which are part of the contract, regardless of the provenance of either of them. 16 Counsel for Goldspar submits that when the structure and form of clause 10 is understood, the intellectual property referred to is properly limited to that provided to the supplier by the Council prior to and in the course of the contract, for the purposes of manufacturing and delivering the product. It is put that this is the only way of reading the third paragraph of clause 10, and it would not be sensible to read the reference to intellectual property in the fourth paragraph in any different sense. The specific terms of clause 10 should prevail over the general interpretation provision, particularly as the latter only apply "except where the context otherwise requires". It is submitted that no part of clause 10 is framed in terms of the acquisition of intellectual property rights by the Council from the supplier, but are rather drawn to protect such intellectual property as the Council may have had in the information supplied to the tenderers, and to Goldspar in particular. It was submitted that that conclusion would apply to the fifth paragraph of clause 10, whatever it may mean. In that connection, it was put that there is no sensible way in which the Court could choose between the various ways of understanding or construing the words "and waive". It was suggested that clause 10 was in the original request for tender when a conforming tender was anticipated and would only apply in that situation. 17 Counsel for the Council submits that the fifth paragraph of clause 10 should read as if "waive" is "waives". It seems to me that that is fairly obviously correct. He then submits that it is not appropriate to ignore the defined meaning of "Intellectual Property", as clause 10 is the only place in the contract that that topic is dealt with. He submitted that nothing turns on the fact that clause 10 has remained throughout, and points out that the definition of "Intellectual Property" changed. 18 Each side agreed that I should approach the construction of particular clauses upon which concentration has focused bearing in mind the provisions of the contract as a whole and the relevant matrix of facts, including the nature and purpose of the contract, in accordance with well-known principles. In my view, the introduction to the various contractual documents, the chronology of them, and the substance of them gives an adequate overall picture of the commercial setting. I do not receive any great assistance in resolving the issue of construction from considering the overall picture. Commercial considerations indicate that each of the parties would desire to have the benefit of the intellectual property if it could. The project was conceived by the Council, the poles are to be installed in its territory and it would wish to be able to put thesame same poles elsewhere in the future. On the other hand, a non-conforming tenderer such as Goldspar, which proffered its own design, would, no doubt, wish to retain the intellectual property so that it could control future and other use of that design and cement its position as supplier to the Council. 19 I agree with counsel for the Council that clause 22.6 of the General Conditions of Contract and the related purchase orders are an aspect of the wider arrangements which do give the argument for the Council some assistance, if only to remove the basis for a comment that it would be unlikely that a tenderer would provide a new or different design for no consideration other than the chance to be recouped from the supply of poles, bearing in mind that the contract was, to an extent, a requirements contract without any effective guarantee of continuity. This clause is consistent with the concept put forward in the non-conforming tender, and shows that Goldspar was paid an amount for preliminaries, including design work. 20 There is no doubt that clause 10 would sit most comfortably in the case of a conforming tender. However, the Request for Tender envisaged the submission of alternative non-conforming tenders, and there was ample opportunity for the parties to ensure that the contract was suitable for that eventuality. Whilst I see the force of the argument for Goldspar based upon the text of clause 10, I am not persuaded that it would be appropriate not to apply clause 2 to it where possible. "Intellectual Property" in clause 10 is the capitalised defined term. What is more, the defined term has no work to do otherwise than in relation to clause 10. That being so, in my view, the fourth paragraph of clause 10 cannot be read down in the manner contended for on behalf of Goldspar, and, whilst not drafted as comprehensive a vesting clause as it might have been, it is apt to make it clear that the intellectual property (as defined) in the contractual drawings and specifications is exclusively vested in the Council and cannot be used by Goldspar except for the purposes of manufacturing and supplying poles and ancillary equipment in accordance with the contract. I should add that I have gained little assistance from the fifth paragraph of clause 10. It is, however, not inconsistent with the opinion I have formed. 21 I turn to the questions for determination. I did not receive submissions as to the detail of answers to these questions. I have no doubt that, consistently with my opinion, if the drawings were limited to those identified in the second paragraph of Schedule A, the answer would be "the applicant". It is not clear to me that the same conclusions follow in relation to the documents identified in paragraphs 1 and 3 of Schedule A. I would also require some persuasion that questions 2, 3 and 4 are appropriate to be answered in the absence of a concrete set of facts. 22 The matter will stand over to enable the parties to bring in short minutes of order to give effect to these reasons. If there is no agreement, the matter will be argued. The matter will also stand over for directions as to the balance of the proceeding. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles.

Counsel for the Applicant: RJ Ellicott QC and DB Studdy

Solicitor for the Applicant: Price WaterhouseCoopers Legal

Counsel for the Respondent: D Yates SC, I Young and M Darke

Solicitor for the Respondent: Greg Judd & Associates