The City of Sydney v Streetscape Projects

The application before the Court 1There is before the Court an application brought by the plaintiff to be released from undertakings given to the Court on the 11 June 2010. The undertakings were to the effect that the City would not enter into any agreement for the sale of the intellectual property in the "S1" and "S2" series of "Smartpole" poles (" the Undertakings "). 2The history relating to the Undertakings is set out in the affidavit of Sylvia Fernandez sworn 18 April 2011. A set of the relevant documents for the City's application to be released from the Undertakings are set out in the Exhibit to the Fernandez Affidavit. 3The circumstances relating to the undertakings may be summarised as follows: (1)On 6 October 2009, the City issued a tender in relation to the sale of intellectual property in the "Smartpole" multifunction poles, the manufacture and supply of those poles to the City and the service and maintenance of those poles. (2)On 22 February 2010, the tenders which had been received were rejected and, on 24 February 2010, the City issued a Request for Offer to those interested parties who had submitted a tender. (3)On 16 March 2010, ex parte orders were obtained by Streetscape restraining the tender from proceeding. Those orders were discharged on 19 March 2010 on the basis of other undertakings by the City which would expire when a Notice of Motion for interim injunction would be heard before Justice Hammerschlag on 28 March 2010. (4)On 28 March 2010, during the course of argument in relation to that motion, in response to an indication from the Court that if interim orders were agreed, it would fix the matter for hearing on 31 May 2010, the parties agreed to a regime which included undertakings by the City in relation to the sale of the intellectual property in the "Smartpole", the manufacture and supply of Smartpoles to the City and their service and maintenance. (5)Following substantive amendments to the Commercial List Response of Streetscape on 13 May 2010, together with late served affidavits, the hearing date was vacated by Justice Hammerschlag on 25 May 2010. (6)On 1 June 2010, the City filed a Notice of Motion in relation to the undertakings given to the Court on 29 March 2010. (7)That Notice of Motion was heard before me on 9 and 11 June 2010. On that motion, the City limited the application to a discharge of the undertakings concerning the manufacture and supply of the Smartpole to the City and their service and maintenance, but not the sale of intellectual property. (8)At the same time Court rejected the injunctive relief sought by Streetscape on the bases : that the Court was not satisfied to the requisite standard that the defendants had shown sufficient of a prime face the case, and for the reason that the clear balance of convenience was against the granting of that injunctive relief (9)I made orders in accordance with the varied undertakings sought in the City's motion on 11 June 2010. (10)On 5 April 2011, Streetscape Projects served the Cross Claimant's Outline of Opening Submissions ("Streetscape's Submissions"). Paragraph 10(c) of those submissions stated that Streetscape Projects did not press Order 1 in its Amended Cross Summons which was an order that the agreement for purchase of the intellectual property between the City and Streetscape Projects be specifically performed.

The plaintiff's contentions 4The plaintiff's contention is that the consequence of Streetscape Projects not pressing relief for specific performance is that there is no basis for any continuation of the Undertakings which restrain the City from selling the intellectual property in the "S1" and "S2" "Smartpole" poles. 5Streetscape Projects' claims in relation to the March 2007 Representations and the September 2007 Representations are now limited to the orders sought in paragraphs 8, 9, 19, 20 and 23 of the Amended Cross Summons. Those orders are limited to orders varying the First and Second Deed of Variation relating to the S2 (pursuant to s87 of the Trade Practices Act ) (Orders 8 and 9), damages (Orders 19 and 20) and account of profits (Orders 21 and 23). This position is confirmed in paragraphs 41, 42, 47 and 48 of Streetscapes Submissions.

The proceedings 6The litigation before the Court concerns what came to be known as the Smartpole Project developed by the City of Sydney [The City] in around 1996/1997 in preparation for the 2000 Sydney Olympic Games and in order to consolidate and refine street infrastructure (such as street lights, traffic lights, signage and banners) into one single system.

The parties to the litigation 7The City of Sydney is the plaintiff claiming to be a body politic having the legal capacity and powers of an individual both in and outside the State. The first defendant ( Streetscape Projects ) was incorporated on 22 June 1998 "with the specific intention of providing the city with the highest standard of support, management and implementation of the Smartpole project." From its inception, "the design, manufacture, supply and operation of the Smartpole system represent[ed] the 'core business' of Streetscape Projects." Streetscape Projects was "conceived, incorporated and developed with the sole objective of successfully undertaking... Smartpole related tasks as contractor to [the City]." The second defendant, Mr Moses Obeid, has since November 2003 been the sole director and secretary of Streetscape Projects. Streetscape Projects' former directors include Mr Gerard Obeid, the brother of Mr Moses Obeid, who resigned as a director on 17 November 2003 and Mr Robert Matchett who resigned as a director on 18 February 2000.

The significance of the licence agreement 8These proceedings principally concern the proper construction of a licence agreement entered into between the City and Streetscape Projects on around 26 August 2002 ( Licence Agreement). 9Pursuant to the Licence Agreement, the City claims to have licensed Streetscape Projects the use of the intellectual property (as defined) in relation to a "multi-function" streetpole known as the "Smartpole" on the terms set out therein.

Brief History of the proceedings 10In July 2009, the City commenced proceedings against Streetscape Projects and Mr Moses Obeid in the Supreme Court to enforce contractual obligations that it claims had been breached during the course of the Licence Agreement (and prior to its expiration on 31 August 2009). These proceedings will be referred to as " the Supreme Court proceedings ". 11In the Supreme Court proceedings, the City seeks, inter alia , orders restraining Streetscape Projects from continuing to use the "Intellectual Property" and "Confidential Information" to manufacture "Smartpoles" , delivery up of documents which contain the "Intellectual Property" and "Confidential Information", delivery up of moulds and the recovery of licence fees and royalties for distribution of "Smartpoles" in the United Arab Emirates (UAE), Singapore and other territories. 12In October 2009, after the expiration of the Licence Agreement, the City commenced proceedings against Streetscape Projects and Australian Light & Data Pty Limited ( Australian Light & Data ) in the Federal Court to restrain what it argued was inappropriate post Licence Agreement conduct in relation to, inter alia, the continued use of the trade mark "SMARTPOLE" and the deceptively similar mark "SmartMFP", misleading or deceptive conduct and passing off. 13The City also seeks declaratory relief and damages in relation to the aforementioned conduct. These proceedings will be referred to as " the Federal Court proceedings " . These proceedings were transferred to this Court and renumbered 2010/00085353. 14The City claims that when it became aware (in late 2009) that Streetscape Projects was continuing to sell S2 poles (notwithstanding the expiry of the Licence Agreement), it amended the Federal Court proceedings to seek relief restraining the continued use of the City's "Intellectual Property" in relation to the S2 poles. 15The City later amended the Supreme Court proceedings to include a similar claim for relief in relation to the S2 poles as well as claim for relief restraining the continued use by Streetscape Projects of other " Smartpoles" which Streetscape Projects, now asserts rights in relation to and/or continues to manufacture and sell. 16Over time, both sets of proceedings have been substantially amended and issues in both proceedings have overlapped to the point where there are now many issues in common in both proceedings and much of the pleading (particularly that of Streetscape Projects) is replicated in both proceedings. The parties have agreed that evidence in the Supreme Court proceedings be evidence in the Federal Court proceedings and vice versa.

The current state of the litigation 17The proceedings commenced before the Court on 11 April 2011. For reasons which do not require elaboration the Court stood the further proceedings over to 1 August when the proceedings are due to continue.

The principles concerning whether interlocutory orders should be varied 18In Pivotel Satellite Pty Ltd v Optus Mobile Pty Ltd [2010] FCA 121 Gagot J had occasion to examine the principles concerning whether interlocutory orders should be varied in light of the true factual position. Her Honour approached the matter [at 26] as follows : The question whether the interlocutory orders should now be varied in light of the true factual position has to be determined by reference to the relevant principles. Those principles were not in dispute. (1)A Court has jurisdiction to vary or set aside any interlocutory order but the re-litigation of issues already decided, even on an interlocutory basis, is undesirable having regard to the need for finality ( Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44 at 46). (2)The "overriding principle governing the approach of the Court to interlocutory applications is that the Court should do whatever the interests of justice require in the particular circumstances of the case" ( Brimaud at 46). (1)The interests of justice should be assessed having regard to the nature of the interlocutory order in question. Interlocutory orders that are merely procedural or made by consent without any contest are different from substantive orders made after a contested hearing and intended to operate until the final hearing. In the latter case the general rule is that there must be a material change in circumstances or the discovery of new material which could not reasonably have been put before the Court on the earlier application ( Brimaud at 46). (2)There is a debate in the authorities between approaches that are more and less permissive. Nevertheless the approach generally adopted at first instance accords with that of Goldberg J in P Dawson Nominees Pty Ltd v Australian Securities and Investments Commission (No 2) (2009) 255 ALR 466; [2009] FCA 413 at [49, namely, that an applicant seeking to vary a substantive interlocutory order made after a contested hearing must persuade the Court that: ...one or more of the following factors has occurred or is satisfied: (a)there is new material or new evidence which was not available, or reasonably available, to them at the time the orders were made ...; (b)there has been a material change in the circumstances since those orders were made; (c)there are exceptional circumstances which warrant re-consideration of the matter...; and (d)as a matter of discretion, the justice of the matter requires that the applicants be allowed to revisit the matter.... 19With respect, her Honour's analysis was clearly correct.

Brimaud v Honeysett Printing Pty Ltd 20The holding In the headnote of Brimaud v Honeysett Printing included the following : (1)It would be conducive to great injustice and enormous waste of judicial time and resources if there was no limit on the power of a party to have any interlocutory application or order re litigated at will (2)The ordinary rule of practice is that an application to set aside, vary or discharge the order must be founded on a material change of circumstances since the original application was heard, or the discovery of new material which could not reasonably have been put before the Court on the hearing of the original application. 21McLelland J at 46 observed as follows : Interlocutory orders, of their very nature, create no res judicata or estoppel, and the Court retains jurisdiction to set aside, vary or discharge an interlocutory order up to the time of the final disposition of the proceedings. However the general rationale of the principles last referred to applies even in the case of interlocutory orders. It would be conducive to great injustice and enormous waste of judicial time and resources if there were no limit on the power of a party to have any interlocutory application or order relitigated at will. The overriding principle governing the approach of the Court to interlocutory applications is that the Court should do whatever the interests of justice require in the particular circumstances of the case. In giving effect to that general principle, and in recognition of the public and private interests earlier referred to, rules of practice have been developed in accordance with which the discretionary power of the Court to set aside, vary or discharge interlocutory orders will ordinarily be exercised. Not all kinds of interlocutory orders attract the same considerations. For present purposes one may put to one side orders of a merely procedural nature (as to which see for example Wilkshire & Coffey v Commonwealth (1976) 9 ALR 325 and injunctions (or undertakings) made or given by agreement and without contest "until further order" (as to which see for example Warringah Shire Council v Industrial Acceptance Corp (unreported, SC(NSW), McLelland J, 22 November 1979).

The plaintiff's entitlement to revisit the undertakings given by it to the Court on 11 June 2010 22Clearly enough a seachange is to be discerned in the defendants' late election not to seek relief by way of specific performance. 23One needs to return to the current pleadings in the defendants' amended cross summons.

The defendants ' amended cross-summons 24The defendants continue to press three claims for proprietary relief in the Amended Cross-Summons, these are: (1)Prayer 2: A declaration that in the events which have occurred the CofS holds the Intellectual Property on trust for SPA; (2)Prayer 3: Alternatively, a declaration that in the events which have occurred the CofS holds the Intellectual Property on trust for sale to SPA; and (3)Prayer 9: Further, in the premises of the September 2007 Representations SPA seeks the following order: (a) an order pursuant to s87(2)(a) of the TP Act declaring part of the Second Deed of Variation dated March 2007 to be void, as it relates to the ownership of the intellectual property of the four S2 streetpoles. 25The defendants submitted that these claims are sufficient to negate the plaintiff's motion for release from the undertakings.

Prayers 2 and 3 of the amended cross-summons 26Prayers 2 and 3 of the Amended Cross-Summons (which seek declarations that the City holds the "Intellectual Property" on trust for Streetscape Projects) are premised on an alleged oral contract between the City and Streetscape Projects in March 2007 or September 2007 whereby the City agreed to sell and Streetscape Projects agreed to purchase "all of [the City's] intellectual property in the Smartpoles during the first quarter of 2008 at a price to be determined". Insofar as Streetscape Projects submits that prayers 2 and 3 of the Amended Cross-Summons "hinge upon the interpretation of relevant contractual documents" that submission must be rejected for the simple reason that the defendant's Amended Commercial List Cross Claim Statement does not set out any such contractual claim giving rise to a trust. 27As the plaintiff submits, these prayers for declaratory relief proceed on the basis that the City is the owner of intellectual property in the Smartpole poles, something which Streetscape Projects, at different times in its pleadings, disputes. 28Leaving that to one side, the declarations sought will not be made as Streetscape Projects no longer seeks an order for specific performance of the alleged oral contract(s). The law is clear that equity only regards a purchaser as having, before completion, a beneficial interest in property if specific performance is available against the vendor. Reference was made by the plaintiff to Jacobs Law of Trusts in Australia , Seventh Edition, (2006) by R.D. Heydon and M.J. Leeming and Birmingham v Renfrew (1937) 57 CLR 666.

Jacobs Law of Trusts in Australia 29The learned authors at [1307] observe as follows: Nevertheless, for some purposes, equity does regard the purchaser as having, before completion, a beneficial interest in the property if specific performance would be available against the vendor. Thus, the purchaser has an insurable interest [ Rayner v Preston (1881) 18 Ch D 1 at 15]; the executors of a deceased vendor are bound to treat the proceeds of sale when received as passing under the will as personalty not realty, although the legal title had still been in the vendor at the time of death [ Brown v Heffer (1967) 116 CLR 344; [1968] ALR 89 ; see also Fairweather v Fairweather (1944) 69 CLR 121 at 154; [1944] ALR 190 at 204-5] ; and it may be that pending completion the vendor would not be entitled to create a mortgage or charge otherwise than subject to the purchaser's rights [ Shanahan v Fitzgerald [1973] 2 NSWLR 513 at 515]. An extreme example is provided by Lake v Bayliss [1974] 2 All ER 1114; [1974] 1 WLR 1073. There the vendor resold and conveyed the land to a third party who took free from any interest therein of the plaintiff who was the purchaser under an uncompleted prior contract. However, Walton J treated the proceeds of sale received by the vendor on completion of the second sale as representing trust property (the land), and held that the plaintiff had a right to those moneys in exchange for performance of the plaintiff's obligations under the first contract. Finally, it will be recalled that in Breskvar v Wall (1971) 126 CLR 376; [1972] ALR 205; see Meagher, Gummow & Lehane, Equity: Doctrines & Remedies, 4 th ed, paras [4-184] -[4-200]] the High Court, in deciding a dispute between holders of unregistered interests as to priority, treated the interest of a purchaser under an uncompleted contract with the registered proprietor as an equitable interest to which the claim of the former registered proprietor to be restored to the register was, on the facts, postponed.

Birmingham v Renfrew (1937) 57 CLR 666 30The principles above are confirmed in Birmingham v Renfrew where Dixon J at 686-687 stated: (1)Since the Judicature Act it is possible for the beneficiaries of a purely legal chose in action to enforce it in a similar manner - cf. Harmer v Armstrong, [1934] Ch 65; Royal Exchange Assurance v Hope, [1928] Ch 179; Vandepitte v Preferred Accident Insurance Company [1933] AC 70. But in a contract for corresponding or "mutual" wills, the equities arise from a combination of considerations. In the first place, the obligations of the survivor under such a contract have always been regarded as enforceable in chancery. Necessarily the remedy could not be the same as that by which executory contracts were specifically performed. In such cases the party is compelled to carry out his contract according to its tenor. But the relief was specific and was framed to bring about the result intended by the contract. (2)The general principles to which Lord Parker refers in Central Trust and Safe Deposit Co v Snider [1916] 1 AC 266 at pp 271-2, therefore apply. His Lordship is dealing with the judgment under appeal, that of the Chief Justice of Ontario. He says: " The learned Chief Justice refers to the case of Freemoult v Desire (1718) 1 P Wms. 429, as having decided that a covenant to settle lands makes the covenantor but a trustee for the parties who would be interested if the covenant were performed, and to a passage in Lewin on Trusts (12th ed ), pp 160-161, where it is stated that if a person agrees for valuable consideration to settle a specific estate, he becomes a trustee of it for the intended objects, and all the consequences of a trust will follow. Freemoult v Desire was undoubtedly a sound decision, and there is little fault to find in the statement in Lewin on Trusts as to the general equitable principle. But it must be remembered that this principle is but the logical consequence of the power of a Court of Equity to grant, and its practice in granting, specific performance of a contract to convey or settle real estate. It is often said that after a contract for the sale of land the vendor is a trustee for the purchaser, and it may be similarly said that a person who covenants for value to settle land is a trustee for the objects in whose favour the settlement is to be made. But it must not be forgotten that in each case it is tacitly assumed that the contract would in a Court of Equity be enforced specifically." 31Streetscape Projects' abandonment of its claim for specific performance of the alleged oral contract(s) for present purposes constitutes an admission that damages are an adequate remedy to meet the justice of the case. Indeed, Streetscape Projects continues to seek damages in relation to "the loss of a chance to acquire the intellectual property in relation to the Smartpole, and accessories" and "the loss of a chance to acquire the intellectual property in relation to the Smartpole, accessories and the four S2 streetpoles". 32It is important to note that to the extent (denied by the City) that the City is not the owner of any "Intellectual Property" in the Smartpoles which it may purport to sell or licence, such a sale or licence will have no effect at law as against Streetscape Projects.

Prayer 9 33In relation to prayer 9 of the Amended Cross-Summons, the defendants seek an order pursuant to s 87(2)(a) of the Trade Practices Act 1974 (Cth) in relation to the ownership of the four S2 poles. 34As submitted by the plaintiff, an order under s 87(2)(a) of the Trade Practices Act will only be made if "the Court considers that the order... will compensate [Streetscape Projects] in whole or in part for the loss or damage or will prevent or reduce the loss or damage". It must be thought highly improbable that such an order will be made in light of Streetscape Projects damages claim for "the loss of a chance to acquire the intellectual property in relation to the Smartpole, accessories and buy back the intellectual property in relation to the four S2 Streetpoles" and "the loss of a chance to market and sell Smartpoles, S2 Streetpoles and associated accessories internationally." 35Additionally, the relief sought in prayer 9, relates only to four S2 poles, whereas the undertakings relate to all Smartpoles, including the S1 Smartpoles. The undertakings therefore go well beyond the relief sought. Further, if the undertakings are released, I accepted the plaintiff's submission that Streetscape will continue to have its statutory rights and remedies in relation to the four S2 poles. 36Prayer 9 provides no basis for refusing the plaintiff's motion.

The concerns expressed by Mr Obeid in paragraph 31 of his affidavit 37In an affidavit made by Mr Obeid on 13 March 2010 he deposed as follows: Streetscape is concerned that if the City continues to pursue the "Final and best offers", that a contract will be entered into between the successful bidder for the "sale of intellectual property" component of the tender, which includes, without authorisation : (1)the registered design of streetscapes extrusion (2)drawings prepared by Streetscape to which they claim copyright (3)be S2 suite of street poles, the ownership of which is the subject of a cross claim [in] the present legal proceedings. 38In all of the circumstances which now obtain these concerns fall away having no substance. On no view is it correct to assert "For the City to be released from its undertakings would be to permanently deny Streetscape the opportunity to exploit that intellectual property. Further, Streetscape would likely be faced with a third party purchaser exploiting property that is properly Streetscape's." In addition, given that Streetscape Projects has abandoned its claim for specific performance it is wrong to submit that "Damages is [sic] not an adequate remedy." 39Similarly, there is no basis for the submission by Streetscape Project that "The release from the undertakings would... "destroy the subject matter of the litigation, whilst the proceedings are part heard" or that the "ownership of a number of items - such as the S2 streetpoles - relevant to the proceedings will effectively be determined without a hearing, and adversely to Streetscape." 40Moreover, there is no evidence or basis to support the submission that "Streetscape's commercial position in relation to its competitors will be seriously damaged and will probably be irrecoverable". The only evidence of concern is found in paragraph 31 of Mr Obeid affidavit sworn 16 March 2010 which relates only to the S2 Smartpoles, and even in relation to the S2 Smartpoles, says nothing of the sort.

Other considerations 41As has been submitted by City of Sydney, it is trite that an injunction will be granted to vindicate identified rights . The defendant has not moved to seek an order of a different nature than the order that is sought. 42Additionally what the defendants are entitled to in terms of orders requires to be pleaded and identified . 43At the end of the day the plaintiff has made good its proposition that given the very substantial about-face in the defendants' case, in particular in its determination not to press for relief for specific performance, the principled exercise of the relevant discretion is to release the plaintiff from the undertakings given to the Court on the 11 June 2010. 44As McLelland J observed in Brimaud v Honeysett, the overriding principle governing the approach of the Court to interlocutory applications is that the Court should do whatever the interests of justice require in the particular circumstances of the case. In the particular somewhat unusual circumstances which prevail in relation to the part heard final hearing, the interests of justice dictate that the plaintiff be released from above described undertakings.

Orders 45The orders of the Court are as follows : (1)The City of Sydney is to be released from its undertakings given to the Court on 11June 2010 whereunder the City would not enter into any agreement for the sale of the intellectual property in the S1 and S2 series of "Smartpole" poles (2)The plaintiff is to bring in short minutes of order to reflect these reasons (3)The parties will be given an opportunity to address on costs

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