Ownit Homes Pty Ltd v D & F Mancuso Investments Pty Ltd

REASONS FOR JUDGMENT It is easy to sympathize with a man of limited means, seeking to build a home for his family, who finds it necessary to avoid or reduce cost at every stage. But no one would condone his doing so by taking someone else's bricks. The question in this case is whether the respondent, who was in the position I have sketched, appropriated, not bricks, but the applicant's plans, by which it earned its income, and in which it claimed copyright. Before coming to the decisive legal issues, I should give an account of the facts. Since about 1982, Stephen Sadleir has been involved in the business of producing kits for the construction of homes, and in the sale of these kits to the public. For some time, he carried on business in association with one Andrew Wilson, who was an architect. Mr Wilson was the author of certain architectural drawings of houses the facades of which had an appearance typical of a style of country homestead constructed in Australia during the last century. Mr Wilson's interiors were more in keeping with the late 20th century, since few people today would wish to live in homes with separate external kitchens, bathrooms and toilets. In about September 1989, the business was taken over by a company, the applicant, which became New England Country Homes Pty Limited. From the beginning, Mr Sadleir was both a director and an employee. Since his account was questioned in some respects, and I heard him cross-examined, it is appropriate to state at once that I accept him as a witness of truth. Over time, the company expanded the range of kit homes which it produced. When a particular design had been developed to suit the needs of a customer, it would, if Mr Sadleir thought the design was satisfactory, be utilized in the company's ongoing activities. The design which is the subject of the present case was developed in this way. In 1990, Mr Sadleir had produced a design of a cottage which he designated "Rose Cottage 4". The original "Rose Cottage" designs had been drawn by Mr Wilson. In producing the "Rose Cottage 4", Mr Sadleir utilized Mr Wilson's facade, but with a different internal layout and floor plan. Though Mr Sadleir was not qualified as an architect, he had accumulated a number of years of experience in the industry. Shortly before June 1990, a Mr Andrew Morrison requested a kit along the lines of the "Rose Cottage 4", but with variations. Mr Sadleir made a rough drawing of a floor plan showing the rooms, hallways, verandah, built-in appurtances and dimensions, and then had a contract draftsman produce a fair copy. He instructed the draftsman to prepare also an elevation drawing by marrying the facade previously designed by Mr Wilson to the new floor plan. The elevation was that of the design known as the "Rose Cottage 3". Some amendments were made in June and again in September 1990 for Mr Morrison, and subsequently Mr Sadleir made further changes to the design, involving the repositioning of the en-suite toilet and shower attached to the main bedroom, the addition of a fireplace and chimney for the lounge room, and some alteration in the window designs at the front of the home. The resulting plan was hand-drawn by one of the company's employees, and a kit house in accordance with the design, "Rose Cottage 4A", was advertised and sold. I should state, at this point, that one submission put to me on behalf of the respondent was that the ultimate drawing differed substantially from the original drawing which Mr Sadleir had made, as he said, as an employee of the company. It was suggested that the authorship of the changes was not known, and that accordingly I should not be satisfied of the company's ownership of the copyright in the ultimate drawing. I do not accept this. In the period up to September 1990, some details were added and the layout was subjected, in accordance with an instruction given by Mr Sadleir, to a mirror reversal. The instruction was endorsed on the original rough drawing. The later changes I have already mentioned. They were not major, and in any case I do not accept that they were made by persons unknown. As I understood Mr Sadleir's evidence, it was he who developed the design further, both before and after the delivery of Mr Morrison's kit. The final drawing incorporating the changes was then produced by an employee of the company. It was not disputed that the company would have owned the copyright in an artistic work of which one of its employees was the author: Copyright Act 1968, s 35(6). But a question was raised, by reason of the fact that the elevation drawing was produced by the utilization of Mr Wilson's facade design. The argument was that the set of drawings constituting the "Rose Cottage 4A" plans should not be regarded as one artistic work in which the copyright is in the applicant, but as two artistic works, being the floor plan and the elevation drawing. I do not think this is right. Architectural drawings normally consist of more than one sheet devoted to the depiction of the one proposed building. I think the artistic work is the set of drawings. A set of architectual drawings was referred to, in the singular, as "an original artistic work" in Ownit Homes Pty Ltd v D & F Mancuso Investments Pty Ltd (1987) 9 IPR 88 at 90, where also the fact that the drawings derived in part from earlier drawings was held not to be an obstacle to their attracting copyright, a view supported by A-One Accessory Imports Pty Ltd v Off Road Imports Pty Ltd (1996) 34 IPR 306 at 316-319. The drawings so derived were themselves held in Ownit Homes to be "the result of a substantial degree of skill, industry or experience". See also LED Builders Pty Ltd v Eagle Homes Pty Ltd (1996) 36 IPR 1 at 1, where Davies J directed attention to sets of drawings, not to individual drawings. The true relevance to an infringement case of evidence that a part of the work is derivative, and not original, is indicated in Laddie, Prescott and Vitoria, The Modern Law of Copyright and Designs 2nd ed. (1995) vol 1 at para 3.33. A copyright work may well include something borrowed by the author, but if that is so, the consequence will be that a defendant who has taken only the borrowed material will not have infringed the author's copyright. So, in the present case, the respondent would not be liable to the applicant for merely copying Mr Wilson's facade design. For, as Whitford J put it in Krisarts S.A. v Briarfine Limited [1977] 3 FSR 557 at 562: "The question at the end of the day is whether the defendant has, in producing the alleged infringement, made a substantial use of those features of the plaintiffs' work in which copyright subsists." I turn to what the respondent did do. He is a carpenter, living in Milton on the south coast of New South Wales, who decided to build a house for occupation by himself and his wife. Having acquired a block of land in Croobyar Road Milton, he looked at house designs. He admits that he saw the applicant's "Rose Cottage 4A" plans, and that he "did a number of rough diagrams based on [them]". He gave his own sketch plans to a draftsman, who charged $535-00 for the preparation of fair plans for submission to the local council. With some minor changes during construction, the respondent's home was built in accordance with these plans. In his affidavit, he claimed: "When I was making my plans and building my house it did not occur to me that I might be breaching any copyright because my plans were so different to the plans of New England Country Homes." The applicant's evidence, however, throws a different light on the matter. One of its sales representatives, a Mr Grant Ridden, made a call in Ulladulla, which is very near Milton, in 1994 to discuss a possible sale. He was given some information, as a result of which he called round on the same day to the building site where the respondent's home was by then "a few weeks from lock-up stage". Mr Ridden walked onto the site, where he spoke to the respondent who was then working on the construction of the house. A conversation ensued in which Mr Ridden asked where the respondent got the design, and the respondent replied: "It's a New England design". He added: "New England Homes, I've taken the design and altered it a bit". Mr Ridden was not cross-examined, and I accept his evidence. The applicant also called a well qualified architect, Dr P J Briggs of Johnston Briggs Architects Pty Limited, who had compared the "Rose Cottage 4A" plans with those submitted by the respondent to the local council in respect of his house. Dr Briggs reached the following conclusion: "Taken in total it is my opinion that a designer starting a fresh [sic] or having only sighted the New England houses or brochures would be unlikely to produce two plans so closely resembling those of New England Country Homes Pty Limited. I have therefore formed the view that the concept, plans and elevations of the Moore house at Croobyar Road, Milton have been substantially copied from the designs known as 'Rose Cottage 4a' and 'The Coach House' and other building designs owned by New England Country Homes Pty Ltd, notwithstanding differences in elevational treatment and the dimensions of some parts of the plans." In reading this opinion, one should bear in mind that the applicant did not pursue a claim for breach of copyright in relation to the plans referred to under the designation "The Coach House", since it was unable to prove any assignment of these plans, of which Mr Wilson was the author. However, if I had been in any doubt about the copying of the "Rose Cottage 4A" plans, I think it would have been appropriate to take into account the evidence concerning the Coach House plans as evidence bearing on the question how the respondent proceeded with his project to build his home. Of course, while architectural evidence may assist, it cannot be permitted to take the place of the Court in deciding the very question for determination, whether a substantial part of the applicant's artistic work was taken by the respondent: Collier Constructions Pty Ltd v Foskett Pty Ltd (1990) 19 IPR 44 at 50-51, per Gummow J. The respondent contended that his plans differed from those of the "Rose Cottage 4A" in ten respects. However, these differences do not seem to me to alter the fact that, as he himself told Mr Ridden, he had "taken the design and altered it a bit". The first change was simply the elimination of the internal wall between the lounge and the fourth bedroom, thereby reducing the number of bedrooms to three and at the same time enlarging the lounge room. The second change was to omit a short internal wall dividing the toilet from the main bathroom. The third change was to reduce slightly the width of the verandahs. (However, the overall appearance of the verandahs, which is individual, was retained.) The fourth change was to the roof line, by the alteration of two hips to two gables. The fifth change was the omission of a small pitched roof over the portico at the front door. The sixth change was simply the elimination of a built-in linen cupboard. The seventh change was the conversion of front French doors to windows at the same location. The eighth change was in the position of the fireplace (and therefore of the chimney) in the lounge room. The ninth change was in the style of the front door. The tenth change was said to be in "the relative dimensions", but I accept the evidence of Mr Sadleir that the only differences were those already mentioned. The "key question", as Laddie Prescott and Vitoria point out (op cit) vo1 1 at 212, is whether the respondent has "taken a substantial part of what [the applicant] has created". Prichard J, in Inglis v Mayson (1983) 3 IPR 588 at 605, in a passage cited by Laddie Prescott and Vitoria, explained infringement involves "that a substantial amount of the skill and effort which was devoted to making the drawing was appropriated by the defendant." This depends on the quality of what was taken rather than just its quantity: Ladbroke (Football) Ltd v William Hill (Football) Ltd [1964] 1 WLR 273; Collier Constructions Pty Ltd v Foskett Pty Ltd at 49; and on appeal, (1991) 20 IPR 666 at 669. In my opinion, what was here taken was indeed the whole substance of the applicant's plans, and that is so whether the entirety of the "Rose Cottage 4A" plans is considered, or whether attention is confined to the floor plan. The changes are all unimportant. What has been taken, both quantitatively and, of more significance, qualitatively, is almost all of the floor plan, and almost all of the entire plan. In reaching this conclusion, I have accepted as correct the statement of the law to be found in LED Builders Pty Ltd v Masterton Homes (NSW) Pty Ltd (1994) 30 IPR 447, per Sheppard J; S.W. Hart & Co. Proprietary Limited v Edwards Hot Water Systems (1985) 159 CLR 466 at 472, per Gibbs CJ; LED Builders Pty Ltd v Eagle Homes Pty Ltd (1996) 35 IPR 215 at 218-219, 225, per Davies J. For a recent application of these principles, see Eagle Homes Pty Limited v Austec Homes Pty Limited (1998) AIPC ¶91-385. Since s 31(1)(b) of the Copyright Act includes in the copyright of an artistic work the exclusive right to reproduce the work in a material form and to publish the work, and since reproduction includes (by s 14(1)(b)) reproduction of a substantial part of a work, and s 21(3) enables a three-dimensional object, such as a house, to be regarded as a reproduction of a two-dimensional artistic work, such as a plan, the finding I have made involves the conclusion that the respondent has infringed the applicant's copyright: see s 36(1) of the Copyright Act. The next question raised by this case is whether the respondent has any defence under s 115(3) of the Copyright Act, which provides: "Where, in an action for infringement of copyright, it is established that an infringement was committed but it is also established that, at the time of the infringement, the defendant was not aware, and had no reasonable grounds for suspecting, that the act constituting the infringement was an infringement of the copyright, the plaintiff is not entitled under this section to any damages against the defendant in respect of the infringement, but is entitled to an account of profits in respect of the infringement whether any other relief is granted under this section or not." The scope of this defence was considered by a full court in Golden Editions Pty Limited v Polygram Pty Limited (1996) 61 FCR 479. There, it was stated in the joint judgment of Burchett and Tamberlin JJ at 480 that the question is "whether the defendant has established a lack of awareness, and of reasonable grounds for suspecting, that the relevant act was an infringement of the copyright which was infringed, in whomsoever that copyright might be vested." It seems to me that the facts of the present case deny the respondent any defence so formulated. He did not lack reasonable grounds for suspecting that what he did amounted to an infringement of copyright. Nor, after considering the matter, can I accept his evidence that he did not think it amounted to an infringement. The respondent did not construct a house for sale, but as a home to live in. Accordingly, the applicant abandoned any idea of seeking an account of profits, and confined its case to damages. It did, however, seek additional damages pursuant to s 115(4). In Redrow Homes Ltd v Bett Brothers Plc [1998] 2 WLR 198 at 204, Lord Clyde described additional damages under a progenitor of this section, s 17 of the Copyright Act 1956 (UK), as "intended to be an enhancement of an award of ordinary damages". In Australia, as I pointed out in Autodesk Inc v Yee (1996) 68 FCR 391 at 394, additional damages "may be given upon principles corresponding to those governing awards of aggravated and also exemplary damages at common law". For this proposition, Bailey v Namol Pty Ltd (1994) 53 FCR 102 at 113-114 was cited as authority. The circumstances in which additional damages may be awarded were examined by a full court in Raben Footwear Pty Ltd v Polygram Records Inc (1997) 37 IPR 417. In that case, in a judgment in which Lehane J agreed, I expressed (at 422) the view that, although s 115(4) refers to "the flagrancy of the infringement", yet "glaring impropriety is not essential, depending on the presence or absence of other factors", and that flagrancy is not "an essential prerequisite" to the making of an order for additional damages. Lockhart J took the same view in the later case Polygram Pty Ltd v Golden Editions Pty Ltd (No 2) (1997) 38 IPR 451 at 461. His Honour added (at 463), however: "Courts traditionally approach an award of additional damages under s 115(4) cautiously, as they do the award of exemplary damages generally." In my opinion, it cannot be said that the respondent's conduct was such as to aggravate the harm done to the applicant by his infringement, and there is no other factor which should lead me to award additional damages. In awarding compensatory damages in a case of this kind, long standing authority authorizes the Court to adopt as a measure of damages, where it thinks this course appropriate, a fair fee for the use of the plans the subject of the infringement: Interfirm Comparison (Australia) Pty Ltd v Law Society of New South Wales (1975) 6 ALR 445 at 447; Stovin-Bradford v Volpoint Properties Ltd [1971] Ch 1007; Bailey v Namol Pty Ltd at 111-112; Mateffy Perl Nagy Pty Ltd v Devefi Pty Ltd (1992) 23 IPR 505 at 522. Cf Dixon Investments Pty Ltd v Hall (1990) 18 IPR 490 at 497-498. The applicant initially sought an assessment of damages on the basis of the profit it would have earned by the sale of a kit for the construction of the "Rose Cottage 4A". Something similar was claimed in Manfal Pty Ltd v Longuet (1986) 8 IPR 410 at 422. But Thomas J rejected the idea of awarding damages on this basis "because the infringement did not cause the loss of the project to the plaintiff". I take the same view here. It is plain that the respondent would never have purchased a kit home under any circumstances. Then, the applicant sought to rely on evidence that it had put a price of $6,000-00 on its plans when persons had sought to purchase a licence to use them. However, it was admitted that no person had ever bought the licence. That seems conclusively to show that $6,000-00 would be well in excess of the market value. A piece of evidence suggesting an alternative view of the value of the licence is the evidence of what the respondent paid his draftsman - $535-00. But that was for a task both more and less extensive than Mr Sadleir's work. More, because it included an outbuilding; and less, because the draftsman did not exercise the skills to devise and develop the plan, skills the fruit of which the respondent appropriated. It seems to me that I must do the best I can on the basis of the paltry evidence of value furnished to me. I do so on the footing that the true measure in a case such as the present is the fair value of a licence to do what the respondent did. The onus of proof of that fair value is, of course, on the applicant. I estimate it, in all the circumstances, at the sum of $750-00, and I award this amount to the applicant, which should also have an order for costs. I certify that this and the preceding eight (8) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Burchett