Torpey Vander Have Pty Ltd v Mass Constructions Pty Ltd

COUNSEL : G B Hall QC and S J Burchett (A) C J Birch SC and J-J Loofs (R) SOLICITORS : Margiotta (A) Wehbe & Co (R) CATCHWORDS : ARCHITECTS- Copyright in plans- Licence to construction company- Construction company fails- Mortgagee sells- Purchaser from mortgagee builds using plans- Whether architect can succeed in contract or unjust enrichment against purchaser- Held "No" (Young CJ in Eq dissenting on unjust enrichment)- Whether mortgagee's sale transfers licence to use plans- Held "No". PRACTICE- Amendment sought after expiry of limitation period to raise alternative case in breach of copyright on same facts as existing contract case- Refused by District Court Judge- Allegation that judge influenced by fact that applicant's solicitor an alleged persistent offender against good case management- Whether refusal within judge's discretion- Held "Yes"- Whether judge disqualified- Held "No". (D) LEGISLATION CITED : Copyright Act 1968 (Cth), ss 131B, 196 District Court Rules, Part 17 r4; Part 17(5) Acohs Pty Ltd v RA Bashford Consulting Pty Ltd (1997) 37 IPR 542 Aerial Advertising Co v Batchelors Peas Ltd (Manchester) [1938] 2 All ER 788 Avel Pty Ltd v Multicoin Amusements Pty Ltd (1990) 171 CLR 88 Bailey (R & A) & Co Pty Ltd v Boccaccio Pty Ltd (1986) 4 NSWLR 701 Beck v Montana Constructions Pty Ltd [1964-5] NSWR 229; 5 FLR 298; 80 WN (NSW) 1578 Bourke v Filmways Australasian Distributors Pty Ltd (Eq 3219/79, Powell J, 9.10.1979) Brenner v First Artists' Management Pty Ltd [1993] 2 VR 221 Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 Burns Philp Trustee Co Ltd v Ironside Investments Pty Ltd [1984] 2 Qd R 16 Byrne v Australian Airlines Ltd (1995) 185 CLR 410 Daniels v Pynbland (Nos 1 & 2) (1985) 4 BPR 9716 CASES CITED: De Garis v Neville Jeffress Pidler Pty Ltd (1990) 37 FCR 99 Devefi Pty Ltd v Mateffy Pearl Nagy Pty Ltd (1993) 113 ALR 225 Fink v Fink (1946) 74 CLR 127 Gay v Johnston (1936) 37 SR (NSW) 454 Gruzman Pty Ltd v Percy Marks Pty Ltd (1989) 16 IPR 87 Independent Grocers Co-Operative Ltd v Noble Lowndes Superannuation Consultants Ltd (1993) 60 SASR 525 McGee v Yeomans [1977] 1 NSWLR 273 Ng v Clyde Securities Ltd [1976] 1 NSWLR 443 Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146 Stevens v Benning 1854) 1 K & J 168; 69 ER 414 Stovin-Bradford v Volpoint [1971] 1 Ch 1007 Wardley Australia v Western Australia (1992) 175 CLR 514 DECISION : (By majority) Appeals dismissed with costs.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

CA 40087/01 DC 3397/98 SPIGELMAN CJ YOUNG CJ in EQ FOSTER AJA

Tuesday 13 August 2002 TORPEY VANDER HAVE PTY LTD v MASS CONSTRUCTIONS PTY LTD

Judgment 1 SPIGELMAN CJ: I have had the opportunity of reading the judgment of Young CJ in Eq in draft. I have come to a different conclusion on some issues.

The Background Facts 2 The Appellant conducted business as a provider of architectural services. The shareholders and directors of the Appellant at the relevant time were a Mr Torpey and a Mr Elkhoury. These two men also engaged in property development through corporations they controlled, relevantly Vamugi Pty Ltd and Donmint Pty Ltd. Those corporations formed a joint venture called Citron Developments to develop a site at 5-7 Campbell Street, Parramatta, which those corporations had purchased in November 1989. A development consent had been obtained on the basis of plans prepared by a different firm of architects. Deficiencies in those plans and the engineering assumptions upon which they had been based necessitated a new consent. The Appellant prepared new plans. 3 The financier for the joint venture was Farrow Mortgage Services Pty Ltd. It held a mortgage over the land proposed to be developed by Citron Developments. The Farrow group encountered financial difficulties and eventually a liquidator was appointed. Attempts by the joint venturers to obtain alternative finance for the development proved unsuccessful. The liquidator of the mortgagee exercised the power of sale with respect to the property. It was sold on 21 May 1992 by public auction. The Respondent was the successful purchaser. In due course the Respondent completed the development. On the pleadings in the present proceedings the Respondent admitted that it used the plans prepared by the Appellant to carry out the development. 4 On 11 February 1994 the Appellant forwarded a letter and invoice to Mr J Wehbe, the controller of the Respondent at that time. This constituted a demand for the payment of professional fees with respect to the preparation of the development application and supporting drawings and plans with respect to the development in Campbell Street, Parramatta. The invoice made a claim for fees due on the basis of a percentage of what was described as "Quantity Surveyor's Construction Estimate". The work said to have been done included preparation of development application documents and building application documents including drawings, plans and various other matters associated with the obtaining of the application and preparation of a detailed design of the development. The total amount claimed was $162,500. 5 In the letter to Mr Wehbe the Appellants said, inter alia: "Citron Developments does not and never has owned the copyright to the documents or approvals granted for the above building, being the property of Torpey Vander Have Pty Ltd - Architects and as such the rights of usage remain their property until payment is received. As you are the legal entity or owner of such entity, that owns and developed the above property, I have no alternative but to look to you for payment of the outstanding professional fees. I enclose the Statement of outstanding Architectural fees, it should also noted that their [sic] also outstanding consultants to be paid and I would assume that they will be in contact."

The Proceedings in the District Court 6 On 13 May 1998 the Appellant issued a Statement of Claim in the District Court. That Statement of Claim alleged that there was a contract between the Appellant and the Respondent to pay professional fees in exchange for the Appellant permitting the Respondent to use the plans that had hitherto been prepared and also for the provision of further services that may be required in the course of construction of the development. Alternatively, the Appellant sought to recover on the basis of quantum merit, by reason of making available the plans and preparing further drawings. 7 Early in 2000 the Appellant sought to amend its Statement of Claim, inter alia, by putting forward a claim based on the Appellant's copyright in the drawings. This amendment was considered by Judge Garling of the District Court. In a judgment of 8 August 2000 his Honour rejected the application for an amendment. The Appellant seeks to challenge his Honour's refusal to permit the amendment and also to challenge his Honour's failure to accede to an application that he should disqualify himself from hearing the application. 8 The proceedings were heard by Judge Gibb of the District Court. In a judgment of 29 January 2001 her Honour dismissed the Appellant's claims on the bases contested before her Honour. 9 One of the issues considered by her Honour was whether Citron Developments had a licence to use the plans, as contended by the Respondent, or whether any such licence was limited to the purpose of constructing the development only to the point of substantial commencement, in order to preserve the value of the development approval, as contended by the Respondent. Her Honour found that there was no relevant restriction on the scope of the license held by Citron Development. 10 In its Defence to the Statement of Claim the Respondent asserted that it was entitled to use the plans that had been prepared by the Appellant for the purpose of the development. The particulars of its entitlement given in the Defence referred to an express licence. Nevertheless, on the opening day of the trial counsel for the Respondent asserted that there was an implied licence. The proceedings were conducted on the basis that this was an issue raised by way of defence to the Appellant's claim. Her Honour treated it as such in her judgment. No complaint is made on this appeal that this issue did not arise. Indeed, on the contrary, the grounds of appeal assert that her Honour erred in imposing on the Appellant, rather than the Respondent, the onus of proving the extent of any implied licence. 11 The Appellant challenged her Honour's conclusion that a licence ought be implied. One ground of appeal was that her Honour applied the wrong test for the implication of such a licence. Alternatively, it was submitted that her Honour failed to take into account a number of matters that had the effect of negativing any implication. These matters were the alleged involvement on the part of the Appellant as a joint venture partner with the developer, the personal nature of the arrangement between the developer and the Appellant and the Appellant's expectation of remuneration. 12 Another ground of appeal is that the implied licence that her Honour found, constituted an assignment other than in writing which would have no effect pursuant to s196 of the Copyright Act 1968. It does not appear that any submission of this character was made to her Honour. The Respondent submitted that this ground of appeal was entirely misconceived on the basis that s196 of the Copyright Act applied only to assignments of copyright. No issue of an assignment of copyright arose in the proceedings. The most that was said to have been involved was a licence. This submission is plainly right and this ground of appeal should be rejected. 13 With respect to the implication of a licence to use the plans, her Honour quoted extensively from the landmark judgment of Jacobs J in Beck v Montana Constructions Pty Ltd [1964-1965] NSWR 229 and the application of that authority by Wootten J in Ng v Clyde Securities Limited [1976] 1 NSWLR 443. Jacobs J concluded at 235: "… the engagement for reward of a person to produce material of a nature which is capable of being the subject of copyright implied permission, or consent, or licence in the person giving the engagement to use the material in the manner and for the purpose in which and for which it was contemplated between the parties that it would be used at the time of the engagement. It seems to me that this must be regarded as a principle of general application … [The principle] relates to permission or consent to what must have been taken to have been within the contemplation of the parties at the time of the engagement after all it must be borne in mind that it is the engagement which brings the copyright material into existence. When that principle is applied in the present case it seems to me to be inevitable that one should conclude that the payment for sketch plans includes a permission or consent to use those sketch plans for the purpose for which they were brought into existence, namely for the purpose of building a building in substantial accordance with them and for the purpose of preparing any necessary drawings as part of the task of building the building." 14 His Honour went on to observe at 235: "There then remains the question whether there should be any implied right to transfer it and here I think that it must inevitably be implied that the owner, having permission to sketch plan and having obtained the right to use it for the purpose of erecting on that site a building in substantial accordance with it, should have the right to transfer it to a new owner of the land." 15 In Ng v Clyde Securities a developer had gone into liquidation and a finance company, exercising its rights under a mortgage, entered the land in order to complete the development project. It used the plans prepared by the original architect. In that case the existence of an implied licence in accordance with the judgment of Jacobs J in Beck was accepted. However, it was submitted that such a licence could be terminated in certain circumstances. In particular the Appellant relied on an implied term that it could be terminated if the stipulated payment was not made. Wootten J concluded at 446: "In my view, it is not reasonable to imply a term that the licence, once granted and acted upon, may be revoked in the event of subsequent non-payment. This is particularly so when, as here, a licence for immediate use of the copyright is granted in return for promises of payments at the dates of future events contingent on its use. The withdrawal of the licence would not merely affect the future activities of the licensee, but, by preventing completion of a building, would render valueless what might be an enormous past investment in the building. Looking at the matter in terms of business efficacy, I find it unthinkable that an owner would agree to a licence revocable if a possible temporary difficulty prevented him from paying his architect at the agreed time. Unless an architect expressly stipulated for such a devastating right of revocation to enforce actual payment, it is more reasonable to regard him as giving the licence in return for a debt recoverable, if unpaid, by ordinary litigious processes. He is essentially selling something, viz., his plans and a licence to build in accordance with them, in return for a promise of future payment, and the ordinary basis of a sale is that it gives the vendor a right in the event of non-payment to sue for recovery of the purchase price, not a right to deprive the purchaser of enjoyment of the object sold, or to complain of the use by the purchaser of the article sold prior to payment for it…" 16 In her judgment, her Honour referred to Ng as involving a term implied by law. As suggested by Wootten J, a term of this character would generally pass the business efficacy test, although such a test is generally applied only to a specific contract. It is convenient to refer to terms which are generally implied in all contracts of a particular kind as terms implied by law, although nothing turns on that particular characterisation. As McHugh and Gummow JJ said in Byrne v Australian Airlines Limited (1995) 185 CLR 410 at 449: "However, the more modern and better view is that these rules of construction are not rules of law so much as terms implied, in the sense of attributed to the contractual intent of the parties, unless the contrary appears on a proper construction of their bargain. There is force in the suggestion that what now would be classified as terms implied by law in particular classes of case had their origin as implications based on the intention of the parties, but thereafter became so much a part of the common understanding as to be imported into all transactions of the particular description." (footnote omitted) 17 Their Honours went on to observe at 450: "Many of the terms now said to be implied by law in various categories of case reflect the concern of the courts that, unless such a term be implied, the enjoyment of the rights conferred by the contract would or could be rendered nugatory, worthless, or, perhaps, be seriously undermined. Hence the reference in the decisions to 'necessity'." (footnote omitted) 18 The reasoning of Jacobs J in Beck has been applied on numerous occasions. It is authority for the proposition that a term can be said to be "implied by law", in the sense discussed in the reasoning of McHugh and Gummow JJ to which I have referred. In all such cases, however, the implication cannot be drawn if there was an agreement of an inconsistent character. Such a proposition was advanced by the Appellant in the present case. 19 The contention advanced before the trial judge was that the licence to use the plans was a restricted licence. If that was so, then an intention contrary to the implication would be established and the use of the plans to complete the dwelling would not have been authorised. The contention advanced by the Appellant below was that Citron Developments was granted a limited licence to use the plans solely for the purposes of achieving substantial commencement of the development but, inferentially, not for the purposes of completion of the development. Her Honour noted that no such evidence had been adduced in the Appellant's case until, apparently without objection, in the course of re-examination the Appellant's principal witness said: "The licence that was granted to them was for a limited period and was to do with, to obtain substantial commencement on the site." 20 Her Honour dealt with this contention and the evidence that supported it at two different points of the judgment. She noted at p2: "A limited licence for use of plans and drawings is asserted in terms that are, to say the least, unusual. On the plaintiff's case the architect/plaintiff (Torpey Vander Have Pty Ltd) retained the exclusive property rights in respect of the drawings for a development that the joint venture enterprise (Citron Developments) simultaneously is said to have intended to complete. There is no contemporaneous record of any such restricted licence; and no evidence of any conversation or agreement in which the terms of that restricted licence was settled as between the relevant parties at the relevant times." 21 After referring to the evidence led in this respect which I have referred to above, her Honour said at p2: "I do not consider that to provide a satisfactory basis on which I could (or do) find an agreement between the architect/plaintiff and the joint venture companies whereby the terms of the architect/plaintiff's retainer expressly or implicitly restricted the scope of the joint venture development/landowner's entitlement to the use of or licence over the plans produced by or on behalf of Torpey Vander Have Pty Ltd." 22 Her Honour returned to the issue later in the judgment, after she had set out the relevant passages of Beck v Montana Constructions and Ng v Clyde Securities Ltd, and concluded at p9: "I find that there was no relevant restriction upon the scope of the licence held by Citron Developments in respect of the drawings produced by Torpey Vander Have Pty Ltd (or its subcontractor(s)) for the Campbell St property. I find that, as at the date of the auction in May 1992, Citron Developments had a licence to use and transfer the plans, and that it did so by the agreement of sale into which it entered as a consequence of that auction. The licence was then held, was transferable, and in fact, was transferred to the purchaser, Mass Constructions Pty Ltd, the defendant, as part of that transaction."

The Disqualification Point 23 The contention that Judge Garling should have disqualified himself from sitting on the application was based on some comments that his Honour had made on another occasion about the solicitor for the Appellant. The application for an amendment was conducted by counsel. One of the issues involved in the application was the effect of delay. There was no suggestion that the delay had been caused in any way by the conduct of the solicitor. Indeed, the evidence was that the delay was caused by the impecuniosity of the Appellant. It appeared that the only reason the case was able to proceed at all was that the solicitor agreed to conduct the proceedings on a 'no win-no fee' basis. 24 In my opinion, nothing in the issues raised on the application for amendment were such that a reasonable bystander might come to the view that his Honour might not approach the task with an open mind. The fact that the solicitor had, on a prior occasion, been the subject of certain critical comments from his Honour did not suggest in the circumstances that his Honour would approach issues raised by another party represented by that solicitor in anything but a proper and impartial way.

The Amendment Point 25 Part 17 r4 of the District Court Rules expressly contemplates an amendment being permitted after the expiration of a limitation period. The Court is given a general discretion to grant an amendment when justice so requires. (McGee v Yeomans [1977] 1 NSWLR 273 at 280) 26 Young CJ in Eq refers to Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 at 555 per McHugh J. That case was concerned with the extension of a limitation period under a Limitations Act. The approach in such a case is not the same as that applicable to the general discretion under Pt 17 r4, although the important public policies served by Limitations Acts, identified by McHugh J, should be taken into account. I do not understand Garling DCJ to have accepted the submission made to him, based on the observations of McHugh J in Taylor, that a party seeking to amend bears an onus of proving that a fair trial is possible. 27 Garling DCJ found that the delay had prejudiced the ability of the Respondent to defend the proceedings. His Honour referred to a number of elements of prejudice but placed particular reliance on the death of Mr Wehbe who had conversations about the use of the plans with Mr Elkhoury. The Appellant submitted that there was no additional prejudice because the evidence of Mr Wehbe was pertinent to the case as originally pleaded. This submission does not take into account that the issue arose on the original pleadings only by way of an alternative defence. 28 The statement of claim alleged a contract to provide plans for reasonable remuneration. The Respondent denied any such agreement. In the alternative it asserted an express permission to use the plans given by Mr Elkhoury as agent for the appellant. In the case of the proposed copyright claim, an express license would be the primary defence. There was additional prejudice in this regard. 29 I agree with Young CJ in Eq that it was open to Garling DCJ to refuse the amendment in the exercise of his discretion.

The Implied License 30 As I have indicated above, insofar as the licence issue arose in these proceedings it arose in the Respondent's Defence. By reason of the judgment of Judge Garling, an action based on breach of copyright was not before the Court and is not before this Court. (See s131B of the Copyright Act 1968 (Cth).) 31 The implied licence was established by reason of the relationship between the Appellant and the Citron Developments joint venture. On the authority of Beck it would readily be concluded, as her Honour did conclude, that such a licence conferred permission to construct the dwellings in accordance with the plans and to transfer the right to do so to a purchaser of the property. The transfer in the present case was effected by means of a mortgagee sale. 32 Whether or not a mortgagee had a right to use the plans depends on whether or not the licence fell within the property the subject of the mortgage. This is a matter that has arisen on numerous occasions with respect to various kinds of licences relating to the conduct of businesses upon property or other aspects of the operation of the property. (See the authorities referred to by Young CJ in Eq). The Respondent did not tender the mortgage in this case. Accordingly it failed to prove that it had a licence. It cannot succeed on its Defence in the present proceedings. 33 Her Honour's finding that the license had in fact been transferred cannot stand. Accordingly, the issue of unjust enrichment needs to be determined.

Unjust Enrichment 34 Young CJ in Eq concludes that the Appellant is entitled to receive damages on the basis of unjust enrichment. In the absence of proof that it acquired a license to use the plans under the mortgage, it appears that the Respondent received a benefit for which it did not pay. However, benefit is not the only element in such a claim. The benefit must be at the Appellant's expense and there must be an element of injustice. (See e.g. Mason & Carter, Restitution Law in Australia, Butterworths 1995 at [221], [327] and [226]. 35 The Appellant prepared plans for which it was not, in the event, remunerated. However, it did so in a context where its principals had a financial interest in the real estate development. Her Honour rejected the contract case by which the Appellant sought to establish a basis for payment, irrespective of the success of the development and the solvency of the joint venturers. 36 The Appellant also propounded a form of license to the developer - up to the point of substantial commencement - which was patently uncommercial and her Honour was plainly right to reject it. Substantial commencement is a long way down the track beyond preparing plans for a development application, considered in Stovin-Bradford v Volpoint [1971] 1 Ch 1007. In any event, the Appellant lost on the factual issue of whether there was any such restriction and there is no appeal from that finding. 37 The arrangements were such that the inference should be drawn that the joint venture had a license to use the plans. Obviously, the inference will not be drawn if there was any evidence to the contrary. At the least, the Appellant bore an evidentiary burden to raise as an issue, the possibility that an obvious and compelling inference should not be drawn. It did not discharge that onus. 38 For these reasons, the Court should act on the basis that it was the joint venture, now in the form of the liquidators of the two companies, that had the benefit of the license. Accordingly, there has been no enrichment at the Appellant's expense. Nor is there any injustice if the loss occasioned by the failure of the development lies where it falls, as in Ng v Clyde Securities supra. 39 In my opinion, the appeal should be dismissed with costs. Were I of a different opinion, I would agree with Young CJ in Eq's reasons on damages and costs. 40 YOUNG CJ in EQ: It is customary to commence judgments by giving a brief statement as to what aspect of the law the judgment covers. This cannot be done in the instant case as the Court must consider a wide range of topics including court practice, the law of architects, copyright law, the law of mortgages, unjust enrichment and the assessment of compensation where there is a paucity of evidence. 41 It is thus best to commence by setting out the pleadings and the course which the trial of this matter took in the District Court. 42 On 13 May 1998, the plaintiff/appellant (hereafter simply referred to as "the plaintiff") filed an ordinary statement of claim in the District Court which essentially pleaded its cause of action as follows:

(A) The plaintiff was a corporation practising as an architect.

(B) A joint venture of Vamugi Pty Ltd and Donmint Pty Ltd trading as Citron Developments was the registered proprietor of land in Campbell Street, Parramatta.

(C) Prior to October 1990, the plaintiff prepared development and building approval drawings for Citron Developments to develop that land.

(D) Citron Developments mortgaged the land to Farrow Mortgage Services Pty Ltd.

(E) Citron Developments defaulted under the mortgage and the mortgagee, exercising its power of sale, sold the land to the defendant for $487,000 as at 14 July 1992.

(F) There was an agreement between the plaintiff and the defendant that the defendant would pay the plaintiff reasonable fees and disbursements for the preparation of the plans and the obtaining of an expert engineer's drawings.

(G) Alternatively, the defendant used the plaintiff's drawings for profits and had been unjustly enriched.

(H) The defendant refused to pay the plaintiff any monies.

(I) The plaintiff was entitled to damages. 43 The defendant filed a defence which claimed that the drawings were the property of Citron Developments, denied the agreement and said that there was an operative estoppel because the plaintiff had stood by and allowed the defendant to proceed with the development without protest. 44 On 30 March 2000, the plaintiff applied to amend its statement of claim. The proposed amendment was attached to Mr Margiotta's affidavit of that date. The proposed amendment was to add a claim that the plaintiff at all times was the owner of the copyright in the drawing, that the defendant had infringed that copyright and that the plaintiff was entitled to damages or an account of profits under the provisions of the Copyright Act. The amendments also sought to add a count under the Trade Practices Act. 45 On 19 May 2000, Garling DCJ heard the application to amend which was resisted by the defendant. The transcript shows that there were two grounds for opposing the amendment in respect of the copyright claim, viz: (1) that the claims in contract and infringement of copyright were inherently contradictory; and (2) that an essential witness, Mr Wehbe, had died which would make it difficult for the defendant to meet the claim. 46 It was conceded that the Trade Practices claim was statute barred and that claim plays no further part in the case. 47 Counsel asked Garling DCJ to disqualify himself from the hearing. The essential basis for the claim was that there was an ongoing exchange of unpleasantries between the judge and the plaintiff's solicitor, Mr Margiotta, in various pieces of litigation so that no client of Mr Margiotta's could reasonably expect a fair hearing before that judge. Garling DCJ rejected the application to disqualify himself. 48 Garling DCJ gave judgment dismissing the motion on 8 August 2000. His Honour's reasons essentially are as follows: "A director of the defendant company, Mr Joseph Wehbe passed away on 26 July 1995. It is claimed that he had all the dealings on behalf of the defendant in this matter. He was able to give instructions when this matter was first raised which was some time prior to the filing of the statement of claim. Naturally he cannot now give instructions in relation to these new matters. They are the matters sought to be raised by the amended statement of claim. The defendant says they are prejudiced and so prejudiced that the amendment should not be allowed. The defendants say they do not know what the evidence will disclose, that is the evidence about these new matters, they do not know what instructions they will need to get, what evidence they will need to call in reply. They say they should not be forced into a situation where they have to defend these matters without any knowledge of what is coming and without their main witness being able to give evidence as he is now deceased. They argue that if this claim was highlighted to them some years ago as were the other claims, that they would have been able to get instructions. "Mr Raymond Wehbe, the son of the late Joseph Wehbe, said in an affidavit of 16 May that they were first told of the claim in 1994. He was able to give evidence of what his father said. His father died before the statement of claim was issued and served. They then had to meet this claim as best they could, even though at that time they felt they were prejudiced. It is then argued now that some time later when it is sought to alter the claim, they would be further prejudiced and not able to have a fair trial. Of course the prejudice is not something new in this case, it was always something the defendants had to face up to due to the death of Mr Joseph Wehbe. It is further argued that the amendments should not be allowed and the Court looks at the principles set out in the case of Brisbane South v Taylor (1996)186 CLR at 541 that the onus is upon the plaintiff to satisfy the Court that the Court should allow such amendments. The onus is upon the plaintiff to satisfy the Court that if such amendments are allowed there can be a fair trial. "On the other hand it is argued on behalf of the plaintiff that there can be a fair trial, that these are matters which the defendant should be able to meet. They are in no worse position now than they were at the time the statement of claim was filed and in fact these claims could have been made at that time and they would have had to meet them and they argue that there is no such prejudice and that there would be able to be a fair trial. That was the position when I first reserved judgment in this matter. I then concluded that I would not allow the statement of claim to be amended because in my view it raised matters out of time which were prejudicial to the defendant and in my view the defendant could not have a fair trial in relation to those matters and that the plaintiff had not discharged the necessary onus. "There was then an application made to re-open the plaintiff's case. I allowed the plaintiff to re-open and evidence was put on in an attempt to show that such amendments would not be out of time. At that stage there were a number of written submissions forwarded to me and there was also an affidavit filed by Mr Torpey dated 30 May. He was a director of the plaintiff company and he explained why it took six years to commence his action and what he was aware of from time to time. As I said, it is argued that the claim which is subject to the amendment may not be out of time and that this is a matter which should be left for a trial judge to decide. "I have considered the various submissions. I do not agree. I accept the argument put forward on behalf of the defendant contained in submissions of 21 June and 27 June of this year that indeed the plaintiff's claim is out of time and it is a matter which I should consider when considering whether or not to allow these amendments. "I then return to consideration of whether or not those amendments should be allowed. … "When I look at this matter I have come to the conclusion that the plaintiff for various reasons elected not to commence this case until the 6-year limitation period had almost expired. At that time the plaintiff whose case had been with legal representatives for some years, could have made those new allegations set out in the proposed amended statement of claim. There is nothing new about them, they were always available. For some reason they were not made. … the defendant had a statement of claim served upon them which they had to meet as it was in time, the matter was before the Court time and time again and I am not going into the reasons although the Court file reveals numerous consent orders or short minutes of orders by consent filed by the parties and then in March of this year the defendant is asked to defend a number of new matters. They are asked to do that in light of those problems I set out before. Problems essentially are one of time, the amount of time which has passed between what originally occurred and the present time. During that time people's memories fade, different things happen and as everyone knows, it is far more difficult to present a case six or more years after events than it is within a reasonable time. More importantly the witness who would appear to be the main witness for the defendant is now deceased and the plaintiff did not elect to bring these matters in the original statement of claim. I believe that the defendant should the amendments be allowed, would not be able to have a fair trial. In other words it would be unfair to allow them and accordingly I dismiss the motion relating to the amendment." 49 It would seem that in mid-January 2001, the plaintiff sought an adjournment of the pending hearing so that the result of the application for leave to appeal Judge Garling's judgment could be obtained: this was refused. 50 I should note that at an early stage of the case, the plaintiff had been ordered to provide some security for costs. This was provided. However, it would seem that the amount had been fully spent in interlocutory proceedings. The defendant made it clear that, if any amendment were granted, it would seek further security. The indications from the bench were favourable to this view, but no decision had to be reached. The plaintiff's camp gave the impression that the provision of further security might be difficult. 51 I should also note that the defendant had said that not only would it seek further security if the amendment were allowed, but also that it would file a further defence of estoppel. 52 The trial came on before Gibb DCJ on 22 January 2001. The plaintiff applied for an adjournment on the basis that Judge Garling's ruling was being challenged in this Court. Although there was no further application for leave to amend, the matters germane to that question were canvassed. After some debate, her Honour ruled that she would not grant any adjournment unless the plaintiff produced a further bank guarantee to cover the extra costs that the defendant would suffer. She granted a short adjournment to see if this could be obtained. The guarantee was not forthcoming and the applications appear then to have been refused and her Honour proceeded with the trial on the original statement of claim, save that an amendment to tidy up the unjust enrichment claim was granted by consent. However, no formal amendment was ever actually made to the statement of claim. 53 During the trial, the defence seems to have changed its ground and essentially relied on the principle dealt with by Jacobs J in Beck v Montana Constructions Pty Ltd [1964-5] NSWR 229 that in the circumstances there was an implied licence for the defendant to utilize the drawings. 54 Her Honour found a verdict for the defendant. Basically, she did not accept that the plaintiff had the conversations with the defendant's officers that it had alleged and she found that there was no contract. 55 Her Honour did not explicitly make a finding on the unjust enrichment and quantum meruit counts. However, it is clear that she dismissed these claims, basically because she was not satisfied that the plaintiff had proved that it suffered any loss or that the defendant had been enriched at its expense. However, she also said: "I find that, as at the date of the auction in May 1992, Citron Developments had a licence to use and transfer the plans, and that it did so by the agreement of sale in to which it entered as a consequence of that auction. The licence was then held, was transferable, and, in fact, was transferred to the purchaser, Mass Constructions Pty Ltd, the defendant as part of that transaction." 56 The passage I have quoted makes it clear that her Honour accepted the submission of the defendant noted earlier in her reasons, "The defendant says that a licence to use the plans is implied by law, that licence was in favour of the joint venture land owner; and was transferred by the vendor (qua mortgagee exercising its power of sale) to the defendant at (and as part of) the conveyance of the land pursuant to the auction of 21 May 1992. Accordingly, the defendant says that, in effect, Mr Torpey had nothing to sell to the defendant." 57 The contract for sale referred to is in evidence. Its parties are Farrow Mortgage Services Pty Ltd as vendor and the defendant as purchaser. Whilst the special conditions referred to a Development and Building Approval, there was no special contractual promise relating to these approvals apart from the purchaser acknowledging that it would not make any requisition with respect to them. It follows that the only transfer of any licence to use the drawings could be by an act of the mortgagee exercising its power of sale. 58 The mortgage to Farrow Mortgage Services was not in evidence before the Court either below or on appeal. 59 The plaintiff appeals from both the decision of Judge Garling and the decision of Judge Gibb. Although not quite apparent from the notice of appeal, the appellant also challenges the failure of Garling DCJ not to disqualify himself from the hearing of the motion for amendment. 60 At the hearing of the appeal, Mr GB Hall QC and Mr S Burchett appeared for the appellant and Dr CJ Birch SC and Mr J-J Loofs appeared for the respondent. 61 It is convenient to deal with the issues that arise on this appeal under the following heads:

1. The disqualification point 2. The refusal to grant an amendment 3. Licences to use architectural plans 4. Mortgagee's powers to dispose of ancillary licences 5. On whom is the onus of proof 6. The result of the appeal 7. Orders 62 1. We were cited the usual authorities as to the test to be applied when making this type of decision. It is clear that the tribunal concerned must address the question as to whether a reasonable bystander might entertain a reasonable apprehension of bias. 63 The underlying facts are fairly plain. Garling DCJ appears to have the unenviable task of case managing the litigation in the Sydney District Court. That Court has set for itself a goal of disposing of 90% of all civil matters within two years of their commencement. His Honour thus needs to goad reluctant gladiators into action. Mr Margiotta has appeared before the judge on many occasions including some where it would appear his client was not proceeding as quickly as the Court wanted. The judge, rightly or wrongly, could, in the eyes of a reasonable bystander be considered to have formed the view that Mr Margiotta was a persistent offender against good case management process. 64 Dr Birch SC made the point that the only conceivable apprehension there could be was that the judge may have mistrusted the solicitor, not that he had any bias against the client litigant. 65 This submission is too simplistic. It is true that on most occasions when faced with an aggravating or incompetent solicitor, the judge will put feelings of annoyance out of his or her mind. Indeed the danger is often that of possible over-compensation in favour of that solicitor's client. However, when there is an application for amendment being presented, on one view rather late in the day, by a solicitor who is considered to be a persistent offender in delay, a different picture unfolds. 66 As to this, Dr Birch says that the evidence before Judge Garling was that the delay was not the solicitor's fault, but had occurred because of the impecuniosity of the plaintiff and Mr Torpey who had resumed directorship after coming out of bankruptcy in 1996. He further submits that apart from the possible case where a judge loses his or her composure and uses strong language against a party's lawyer, mere criticism of a party's lawyer cannot give rise to a valid claim of bias. 67 Dr Birch also points out the extreme inconvenience if a judge is prevented from hearing many cases because they involve a lawyer whose conduct he or she has had to criticise strongly. 68 There was also the complication that the disqualification point was not taken immediately, but only on the second day. I do not consider that, in all the circumstances (which it is not necessary to review) there was any waiver of the objection. 69 Although I have been troubled by this disqualification point, I have reached the view that because - (a) the plaintiff's application was presented by counsel and not by Mr Margiotta personally;

(b) the judge conducted himself at all times with composure;

(c) that the fundamental problem was with the plaintiff's impecuniosity rather than with a solicitor's delay,

any reasonable bystander could not have formed the apprehension that the judge's views of Mr Margiotta would have prevented him from fairly considering the application before him. 70 2. If there is any general principle on amendments it is that prima facie all amendments should be allowed subject to the appropriate orders being made as to costs. However, in the real world of litigation, life is not so simple. 71 Mr Hall QC submits that Garling DCJ misapprehended the application for amendment. He says that the learned judge seemed to think that he was dealing with an application to amend after the limitation period had expired, whereas the matters of fact had already been pleaded and only a new source of liability and new type of remedy were sought to be added. 72 Mr Hall says that the judge should have borne in mind more closely the points made by Kirby J in Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146, 167-172. Moreover, he submits, the judge should have left any possible Limitation Act problems to the trial judge (vide Wardley Australia v Western Australia (1992) 175 CLR 514, 533). Again, he took into account an irrelevant consideration, namely the death of Mr Wehbe. 73 Dr Birch submits that any order for amendment would just have been a waste of time as the copyright action would have been defeated by the Limitation Act. 74 In this regard, the evidence gives some indication that the relevant building was close to completion in October 1993. Thus, an amendment made in August 2000 to take effect from that date would prima facie be of no avail. An amendment made to take effect on 13 May 1998 when the summons was originally filed would face all the problems of giving leave to amend to raise a statute barred claim. 75 However, Part 17(5) of the District Court Rules specifically permits amendments outside the limitation period which raise a new cause of action if based on the same facts as were already pleaded. 76 The basal reason for Judge Garling's refusal of the application for amendment was that the plaintiff did not satisfy him that there could be a fair trial based on the death in 1995 of Mr Wehbe. 77 The answer by the plaintiff is that the defendant faced the same problem with the original action. 78 This answer is virtually nullified because of what McHugh J said in Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541, 555. 79 The decision to refuse the amendment was in the discretion of the judge. The judge decided the application on the basis of whether a fair trial of the additional count was likely and ruled that the applicant/plaintiff had not satisfied him on that point. 80 It is clear that this Court should only interfere with a discretionary judgment such as that under consideration when the judge below has acted on some wrong principle. 81 His Honour held that the new claim was out of time, but he did not advert to the question as to whether the extra copyright count was based on the same facts. Indeed this point does not even seem to have been argued and, indeed, its significance was only realized during argument of the appeal. Is this a sufficient error of principle to enable this Court to set aside his Honour's exercise of discretion and exercise it afresh? It is very hard to come to such a conclusion. 82 Accordingly, the appeal from Garling DCJ should be dismissed. 83 3. I turn now to the decision of Gibb DCJ. The first matter to consider is the law relating to licences to use architectural plans. 84 As was held below, the starting point for the present law is the judgment of Jacobs J in Beck v Montana Constructions Pty Ltd [1964-5] NSWR 229. 85 His Honour set out the general principle at p 235: "The engagement for reward of a person to produce material of a nature which is capable of being the subject of copyright implies a permission, or consent, or licence in the person giving the engagement to use the material in the manner and for the purpose in which it was contemplated between the parties that it would be used at the time of the engagement. It seems to me that this must be regarded as a principle of general application." 86 That principle has been applied in many reported decisions since, the most significant being Ng v Clyde Securities Ltd [1976] 1 NSWLR 443; Gruzman Pty Ltd v Percy Marks Pty Ltd (1989) 16 IPR 87 (M McLelland J) and Acohs Pty Ltd v R A Bashford Consulting Pty Ltd (1997) 37 IPR 542, 558-562. I applied it in connection with copyright of the labels on whisky bottles in R & A Bailey & Co Ltd v Boccaccio Pty Ltd (1986) 4 NSWLR 701, 711. 87 However, as Beaumont J said in De Garis v Neville Jeffress Pidler Pty Ltd (1990) 37 FCR 99, 112, the application of the Beck principle will depend upon the particular circumstances. I will first deal with the submission that the principle has no application at all to the present case, then with the aspect of transferability, and later, under head 6, with the remaining matters that need to be considered. 88 Plaintiff's counsel submitted on this appeal that the Beck principle did not apply as the arrangement between the plaintiff and Citron Developments was not one of "the required orthodoxy". Counsel referred to Stevens v Benning (1854) 1 K & J 168, 175; 69 ER 414, 417 in which a joint venture between an author and a publisher was held not to involve more than a personal contract. A recent example of a similar approach may be found in Devefi Pty Ltd v Mateffy Pearl Nagy Pty Ltd (1993) 113 ALR 225 where the whole of the evidence showed that, rather than a proprietor commissioning a plan from an architect, there was a joint venture contract of a personal nature between the parties. 89 Whilst in the present case, there is a hint of some convoluted agreement between the plaintiff and Citron Developments, the evidence was so sketchy that no such personal agreement could be established and nor did her Honour find any. Accordingly, the Beck principles will apply. 90 In Beck, Jacobs J said at 233 that the matter must be considered in two steps, viz: (1) did the person who engaged the architect obtain the right to use the plans in the manner in which they were ultimately used; (2) if so, did the transferee of the land where it was held out to him that plans were available and approved, obtain the like right. 91 His Honour then said at 234: "Assuming the right of the owner of land to make use of sketch plans for the purpose of erecting a building substantially in accordance with that sketch I think that when he sells the land and holds out to the purchaser that plans are available and approved from all authorities and shows those plans to the purchaser, then on the sale of the land there should be implied an agreement collaterally to the sale of the land whereby the vendor grants to the purchaser such right as he has to the use of the plans." 92 The authorities show that ordinarily the licence is considered as transferable together with the land to which it relates where the particular purpose for which the licence was granted was in connection with the land which was assigned; see eg the Acohs case supra. 93 4. In the instant case, there was no direct transfer of any land to the defendant from Citron Developments. However, the judge accepted that the licence "was transferred by the vendor (qua the mortgagee exercising its power of sale)". Although she used these words to describe the defendant's submission, as such contract was the only agreement of sale entered into at the auction, this must have been the contract to which her Honour was referring at the foot of page 9 of her judgment. 94 It by no means follows that a mortgagee has power to transfer an implied licence to use plans. Whether it may do so depends on the terms of the mortgage. As the mortgage was never placed in evidence, it is extremely difficult for an argument to succeed that the defendant acquired a licence under the Beck principle by transfer. 95 Even if the mortgage had been in evidence, there would more likely than not have been an argument as to whether the licence to use the plans was so incidental to the mortgaged land that it formed part of the security; see eg Gay v Johnston (1936) 37 SR (NSW) 454; Burns Philp Trustee Co Ltd v Ironside Investments Pty Ltd [1984] 2 Qd R 16, 21; Daniels v Pynbland (Nos 1 & 2) (1985) 4 BPR 9716 and Fisher & Lightwood, Law of Mortgage Aust ed (Butterworths, Sydney, 1995) at para [3.28]. The key question is whether the plans were inseparably connected with the mortgaged land. 96 5. Dr Birch submitted that as the onus of proof was on the plaintiff, any evidentiary deficiency affected the plaintiff and not the defendant. 97 Where a copyright owner seeks damages for infringement of copyright and a possible licence is put in issue, the plaintiff must prove the non-existence of the licence, see Avel Pty Ltd v Multicoin Amusements Pty Ltd (1990) 171 CLR 88, 94-5. The reasons given by the High Court for this result show that they are inapplicable to the present causes of action. 98 In the present matter, the plaintiff's case was that it owned the drawings, it had licensed Citron Developments (at least to some degree) and licensed no-one else to use the drawings. The defendant clearly had made use of the plans to its benefit. It was thus for the defendant to show some title to use the drawings without payment. 99 6. It follows that that part of her Honour's judgment which relied on a Beck type assignment cannot stand. 100 However, as Dr Birch points out, although the Beck licence point occupied the main bulk of the reasons for judgment, her Honour did not accept Mr Torpey's evidence on the contract point and she considered that there was insufficient material on the question of quantum so far as the unjust enrichment and quantum meruit counts were concerned. 101 It is true that the judge's finding of fact on the contract count concludes the matter. There is no warrant for any redetermination of that point. 102 So far as unjust enrichment is concerned, the only inference that can be drawn from the material is that the plans had some value to the defendant. It is also clear that it did not pay for them. There was thus some enrichment to the defendant. However, the question must also be considered as to whether it can be said that the defendant was enriched at the plaintiff's expense. 103 In order to consider this question, I must look further at the rules governing licences to use architects' drawings or plans. Although I call them "rules", they are largely matters of implication from the contract between the parties so that, in any particular case, they may be modified or abrogated by the relevant contract. 104 Apart from the case where an architect prepares drawings or plans as agent for someone else, the architect normally has copyright in the plans he or she produces. The architect retains property in the plans despite the grant of any implied licence to utilize them. 105 Unless the architect assigns the copyright outright, as I have already noted, there is ordinarily an implied licence to use the drawings or plans for the purpose of erecting the building to which they refer. 106 There is no magic in the term "licence". The word merely denotes permission or consent to do something which might otherwise be wrongful. 107 There is debate as to how far the licence is revocable; see eg Gruzman at 89-90. The authorities agree, however, that such a licence becomes irrevocable or the grantor is estopped from alleging that it is revocable at least (a) where the architect has received substantial payment (Ng v Clyde Securities Ltd supra); and (b) where construction has commenced; cf Bourke v Filmways Australasian Distributors Pty Ltd (Eq 3219 of 1979) Powell J, 9.10.1979, unreported. 108 A licensee may use the drawings and plans to such extent as he or she chooses and may depart from those plans if he or she feels like doing so: Gruzman at 89-90. 109 The licence is non-exclusive. In the present case this was conceded during argument on the appeal. 110 A licence granted to a company does not cease on its winding up. However, a licence which can only be used in connection with certain real property may cease when that property no longer belongs to the licensee. This matter was not argued before us, so this proposition is stated tentatively. 111 It seems to me that the learned trial judge did not direct her mind to these matters. It may well be that counsel did not refer her to them. 112 Her Honour rejected the plaintiff's suggestion that there was only a limited licence conferred on Citron Developments to make use of the drawings and plans. It follows that that firm had what might be called a plenary licence. 113 However, with respect to my brethren who take a different view, the fact that Citron Developments may have had a plenary non-exclusive licence to make use of the relevant drawings and plans and may still have had the potential to transfer that licence to the respondent, does not affect the position that the respondent held no such licence at the time of the trial and the plaintiff still held copyright and property in the drawings. 114 The grounds were thus made out for the claim that the respondent was unjustly enriched at the expense of the plaintiff. 115 This being so, it was the judge's obligation to do the best she could to quantify the enrichment. This is always the case in awkward assessment of damages scenarios. As Dixon and McTiernan JJ said in Fink v Fink (1946) 74 CLR 127, 143: "Where there has been an actual loss of some sort, the common law does not permit difficulties of estimating the loss in money to defeat the only remedy it provided for breach of contract, an award of damages." 116 Carter & Harland on Contract 4th ed (Butterworths, Sydney, 2002) at p 826 say in a passage adopted from a previous edition by Matheson J in Independent Grocers Co-Operative Ltd v Noble Lowndes Superannuation Consultants Ltd (1993) 60 SASR 525, 559, that there is an exception where the plaintiff puts forward no evidence of loss or damage. Accepting, without deciding, whether this is a true exception, in the instant case the plaintiff did attempt to put material before the judge as to quantum. It endeavoured to meet its obligation to put evidence before the judge; she just did not accept that material. 117 In Brenner v First Artists' Management Pty Ltd [1993] 2 VR 221, 262 et seq, Byrne J set out the principles that are applied in this type of case to quantify the amount to be paid to the plaintiff. The aim is to determine "what is a fair and reasonable remuneration or compensation for the benefit accepted" by the defendant (ibid at 262). 118 On the evidence before the Court, the only figure that could be reached would be a nominal figure. The question might be asked, "How nominal is nominal"? 119 The answer is, not into the realm of substantial figures, and exercising caution so as not to err on the side of fixing too high a sum. 120 In Aerial Advertising Co v Batchelors Peas Ltd (Manchester) [1938] 2 All ER 788, 796, Atkinson J said as to fixing quantum in a case such as the present: "I can only do the best I can, being very careful not to put it too high, and particularly for the reason that, although I appreciate the difficulty, I think that the defendants, if they had taken the trouble, could have given me more reliable figures." 121 7. Accordingly, the appeal should be allowed to the extent of setting aside the finding of Gibb DCJ on the unjust enrichment claim. 122 The next question is whether that part of the case should be remitted for a new trial. I consider that this would be out of proportion to the error made. The parties ran the case on meagre material. The judge should have found nominal damages. This Court is in as good a position as the trial judge to make an award of nominal damages. 123 I should note that this question was raised during argument on the appeal and Dr Birch made it clear that provided the damages were nominal enough, he would not oppose this course, though he never actually consented to it. Mr Hall wanted a new trial on all issues, but he is clearly not entitled to challenge the findings of fact made by the judge and her conclusion on the contract claim. 124 In my view, this Court should allow nominal damages to the plaintiff in the sum of $15,000. 125 The question of costs is an awkward one. My feeling is that although the plaintiff succeeded for a nominal sum, it essentially lost at first instance and that each party partially succeeded on the appeal. There should thus be no order for costs either of the trial before Gibb DCJ or in this Court. Interlocutory orders for costs in the District Court before 22 January 2001 should stand. 126 However, counsel may, at their own risk as to costs, within 14 days, make further submissions as to costs in writing, before the Court finally deals with the question of costs. 127 Accordingly, the orders I propose are:

1. Appeal against the decision of Garling DCJ dismissed. 2. Appeal against the decision of Gibb DCJ allowed and her orders discharged.

3. Verdict for the plaintiff for $15,000 with interest from 13 May 1998 according to the Court scale.

4. Questions of costs reserved, provided that if no written submissions as to costs are received by the Registrar within 14 days of delivery of these reasons, the Court orders that there be no order for costs of the appeal or of the trial in the District Court on and after 22 January 2001. The orders for costs made in the District Court before that date are to stand. 128 However this is academic as my brethren have taken a different view on the unjust enrichment issue so that the appeal can simply be dismissed with costs. 129 FOSTER AJA: I have had the advantage of reading, in draft, the judgments of Spigelman CJ and Young CJ in Eq. 130 I agree with their Honours that the appeal from the interlocutory decisions of Garling DCJ should be dismissed. 131 As to the appeal from the decision of Gibb DCJ, I agree with Spigelman CJ that it, also, should be dismissed. The principles established in Beck v Montana Constructions Pty Ltd and Ng v Clyde Securities Ltd require that the Citron joint venture should be held to have acquired an irrevocable licence to use the appellant's plans for the proposed development, unless the particular facts of the case demand a contrary conclusion. Such facts do not exist here. Indeed, as her Honour indicates in her judgment, there is a significant possibility that the appellant was, in fact, paid for the plans by Citron, before it became insolvent. Moreover, her Honour's credit- based findings that the appellant did not confine the permitted use of the plans to early stages of the development cannot be attacked. 132 In the result, even if the plans and the licence to use them, did not pass to the respondent, as a consequence of the mortgagee sale of the land, this question not being resolved in the evidence, their subsequent use by the respondent could not constitute a wrong to the appellant. Even if, as seems possible, there was unjust enrichment of the respondent through its use of plans to which it had no title, this could not have been at the expense of the appellant. Any right to sue, even for nominal damages, resided solely in the joint venture. 133 I agree with orders proposed by Spigelman CJ.

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