Re Kevlacat Pty Ltd v Trailcraft Marine Pty Ltd; R & A Harrington Fibreglass Modellers (A Firm) and Caribou Holdings Pty Ltd [1987] FCA 439 (2 December 1987)

FEDERAL COURT OF AUSTRALIA

Re: KEVLACAT PTY. LTD.
And: TRAILCRAFT MARINE PTY. LTD.; R. &. A. HARRINGTON FIBREGLASS MODELLERS (A
Firm) and CARIBOU HOLDINGS PTY. LTD.
No. WAG 120 of 1987
Intellectual Property

COURT

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
French J.(1)

CATCHWORDS

Intellectual Property - copyright - designs - interlocutory injunction - artistic works - plans for boat - moulds - mould made from boat and copies from mould - whether mould is infringing copy of artistic work - whether mould artistic work - engraving - sculpture - unregistered design - whether industrially applied - non-exhaustive deeming provision - "process" - dual protection provisions - corresponding design - requirement for inherent registrability - whether requirement for novelty and originality - balance of convenience - security for costs.

Trade Practices Act 1974 s.52

Western Australian Exim Corporation Act 1986

Companies Code (WA) s.533

Copyright Act 1968 (Cth) s.10, s. 14, s.32, s.35, sub-s.36(1), s.38, s.74, s.77, sub-s.116(1)

Copyright Act 1912 (Cth)

Copyright Act 1842

Copyright Act 1970 (Canada)

Copyright Act 1956 (UK)

Fine Arts Copyright Act 1862

Judiciary Act 1903

Federal Court of Australia Act 1976 s.56

Designs Act 1906 s.4, s. 17, s.18

Copyright Act 1911 (UK)

Registered Designs Act 1949

Copyright Regulations

Pearce - Statutory Interpretation in Australia 2nd Ed. para. 62

Laddie Prescott and Vitoria - The Modern Law of Copyright (1980) para. 3.71 n.4

Blanco-White - Patents for Inventions (1974) para. 8-305

Sterling and Carpenter: Copyright Law in the United Kingdom (1986) p 443

Copinger and Skone James on Copyright 12th Ed. (1980) para. 208

Lahore Intellectual Property in Australia (1977) p 283

Cornish - Intellectual Property (1981) p 413

Co-operative Bulk Handling Ltd v. Waterside Workers' Federation of Australia (1983) 51 ALR 79

Barneys Blu-Crete Pty Ltd v. Australian Workers' Union [1979] FCA 89; (1979) 43 FLR 463

Springdale Comfort Pty Ltd v. Electrial Trades Union of Workers (W.A. Branch) Perth (1986) 8 ATPR 40-694

Bullock v. Federated Furnishing Trades Society of Australasia (No. 1) (1985) 5 FCR 464

King Features Syndicate, Inc. v. O. and M. Kleeman, Ltd (1941) AC 417

Dorling v. Honnor Marine Ltd (1965) Ch 1

Merchant Adventurers Ltd v. M. Grew & Co. Ltd (1971) 1 All ER 657

LB (Plastics) Ltd v. Swish Products Ltd (1979) 5 FSR 145

S.W. Hart & Co. Pty Ltd v. Edwards Hot Water Systems [1985] HCA 59; (1985) 61 ALR 251

University of London Press, Ltd v. University Tutorial Press, Ltd (1916) 2 Ch 601

Ladbroke (Football) Ltd v. William Hill (Football) Ltd (1964) 1 WLR 273

Ogden Industries Pty Ltd v. Kis (Australia) Pty Ltd (1982) 45 ALR 129

Wham-O MFG Co. v. Lincoln Industries (1984) 1 NZLR 641

Interlego AG v. Tyco Industries Inc. (1987) 13 FSR 409

LB (Plastics) Ltd v. Swish Products Ltd (1979) 96 RPC 551

Hutchence v. South Sea Bubble Co. Pty Ltd (1986) 64 ALR 330

Kambrook Distributing Pty Ltd v. Delaney (1984) 4 IPR 79

Ex p. Armstrong; Re Hughes (1963) 80 WN (NSW) 566

Safe Sport Australia Pty Ltd v. Puma Australia Pty Ltd (1985) 4 IPR 120

Stephenson, Blake & Co. v. Grant, Legros & Co. Ltd (1916) 33 RPC 406

Bayliner Marine Corporation v. Doral Boats Ltd (1987) 13 FSR 497

Interlego AG v. Alex Folley (Vic) Pty Ltd (1987) 13 FSR 283

Edwards Hot Water Systems v. S.W. Hart & Co. Pty Ltd [1983] FCA 251; (1983) 49 ALR 605

Fencott & Associates Pty Ltd v. Eretta Pty Ltd (Unrep. French J., 13.3.87)

HEARING

PERTH
2:12:1987

Counsel for the Applicant: Mr D. Catterns

Solicitors for the Applicant: Robinson Cox

Counsel for the First and Third Respondents: Mr C. Pullin

Solicitors for the First and Third Respondents: Murie Valenti

Counsel for the Second Respondent: Mr M. Workman

Solicitors for the Second Respondent: Pullinger, Sanderson & Workman

ORDER

Upon the undertaking of the first and third respondents in terms of the signed minute handed up in Court on 16 November 1987, the interlocutory injunction is discharged in so far as it would prevent the third respondent from performing its contract with the Western Australian Exim Corporation for the supply of 8 Trailcraft patrol boats.

The decision as to the continuance of the interlocutory injunction and the motion for security of costs is otherwise further reserved.

The interlocutory injunction is discharged.

The respondents' motion for security for costs is dismissed.

The costs of the hearing in relation to the interlocutory injunction and the motion for security for costs will be in the cause.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

DECISION

The word "catamaran", which appeared towards the end of the seventeenth century is adapted from the Tamil "kattumaram" meaning "tied wood" and originally referred to a raft of two or more logs.

2. Today it extends to a type of twin- or tunnel-hulled power boat which may be made of alloy or fibreglass, and more recently a very strong aramid fibre reinforcing material known as Kevlar.

3. Commercial invention which moulds language with the same facility as exotic materials has brought forth such a boat under the name "Kevlacat".

4. Its designer and manufacturer in Australia is a Queensland company, Kevlacat Pty Ltd.

5. That company, which is the applicant in these proceedings, says that it is the owner of the copyright in drawings from which the boat is produced.

6. It complains that the respondents have infringed that copyright by producing and selling boats from moulds prepared with the use of a demonstration Kevlacat. Arising out of substantially the same facts, it alleges that they have contravened s.52 of the Trade Practices Act 1974.

7. The question for decision at this stage of the proceedings is whether an interlocutory injunction initially granted ex parte should be continued until the determination of the substantive application.

8. The first respondent was under a contractual obligation to ship seven of the boats, subject to the interim restraint, to Saudi Arabia on 19 November. The restraint was lifted on 18 November in so far as it affected them. The continuance of the restraint on further manufacture and a motion by the first and third respondents for security for costs were reserved. These reasons deal with the partial discharge already ordered and the other reserved decisions.

9. The time available for their consideration and the necessarily incomplete nature of the materials before the Court lends emphasis to the well worn caveat about the provisional character of findings in interlocutory injunction proceedings - Co-Operative Bulk Handling Ltd v. Waterside Workers' Federation of Australia (1983) 51 ALR 79, 87 (Lockhart J.); Barneys Blu-Crete Pty Ltd v. Australian Workers' Union [1979] FCA 89; (1979) 43 FLR 463, 465-6 (Northrop J.)

10. Nevertheless, I have had the benefit of substantial submissions on the facts and the law and will endeavour to do justice to them.

11. The criteria for the grant of interlocutory injunctions are well settled. They require the demonstration of a serious question to be tried, and under that rubric, some evidence going to each of the elements making up the cause of action relied upon - Springdale Comfort Pty Ltd v. Electrical Trades Union of Workers (W.A. Branch) Perth (1986) 8 ATPR 40-694 at 47,623 (Toohey J.)

12. They also require that the balance of convenience should favour the grant of relief.

13. The extent to which that balance must tend in favour of the grant will depend upon the strength of the applicant's case - Bullock v. Federated Furnishing Trades Society of Australasia (No.1) (1985) 5 FCR 464, 472.

Factual Background

14. There is at present a number of powered catamarans on the market. One of them is known as the Sharkcat and has been sold in Australia since 1975.

15. It is manufactured by a company called Sharkcat Pty Ltd.

16. In 1985 Jacobus Temminck incorporated the applicant and became a director of it together with Paul D'Auria, who was formerly a director of Sharkcat Pty Ltd.

17. Temminck and D'Auria decided to design a new tunnel hulled boat based on the Sharkcat shape. They drew sketches depicting a modified Sharkcat. These showed a longer and wider hull, an alteration to the shape of the pontoons and the tunnel cross-section and the substitution of slab sides for clinker built sides.

18. The sketches, whose existence emerged almost incidentally in the oral evidence, were not before the Court and Temminck was unable to say where they are now. He said however that while they showed the shape of the boat, they did not include "exact measurements".

19. From the sketches Temminck and D'Auria built a handmade fibreglass prototype of their proposed Kevlacat and from that prototype they made moulds.

20. After testing the prototype in September 1985, they engaged ASD Marine Pty Ltd ("ASD") to prepare working plans. Measurements were taken from the moulds and formed the basis of the hull and superstructure drawings. Plans of the deck configuration were to ASD's own design. The work was done by an employee of ASD and completed on 29 October 1985.

21. In June 1986 the applicant began to manufacture the Kevlacat boats in accordance with these plans. Since that time it has produced about 80 of them. They have varying deck and cabin layouts, according to customer requirements. The great bulk have been built with what is called a "cuddy cabin". About 40 in this configuration had been sold by the end of August 1987.

22. The applicant competes with Trailcraft Marine Pty Ltd ("Trailcraft") and Caribou Holdings Pty Ltd ("Caribou"). Caribou manufactures a range of motor powered twin hull boats which are retailed by Trailcraft under the trade name "Trailcat".

23. On 8 December 1986, and following discussions he had with Kevin Brown, the marketing manager of Caribou, Temminck agreed that the applicant would sell Trailcraft a Kevlacat boat for demonstration and possible resale. Trailcraft paid $18,182.00 for the boat which had the cuddy cabin configuration.

24. Temminck and Brown also discussed the possibility of a distributorship agreement between Kevlacat and Trailcraft. Their accounts of this conversation diverge somewhat. However, it is common ground that Temminck was not prepared to allow either Trailcraft or Caribou to make its own mould for the manufacture of Kevlacats.

25. In the end the presence or absence of any concluded oral agreement is irrelevant, for moulds were never supplied.

26. What did happen thereafter emerges from the affidavit and oral evidence of Graham John Blythman, the manager of Caribou and Trailcraft.

27. The Western Australian Exim Corporation ("Exim") is a statutory corporation established to promote the expansion of economic activity in Western Australia, with particular regard to export or import opportunities (Western Australian Exim Corporation Act 1986).

28. Following the tender of a proposal and subsequent written quotation, Exim placed an order with Caribou for the supply of eight 20 ft Trailcat catamaran patrol boats for a total price of $338,904.00.

29. According to Blythman the Trailcat moulds held by Caribou were not in good condition and it was necessary to prepare fresh moulds to meet the order.

30. He made enquiries to determine whether or not there was any design registered with respect to the Kevlacat. It is common ground that there were and are none. He formed the opinion that the Kevlacat could be copied. Caribou engaged the second respondent, R. & A. Harrington Fibreglass Modellers ("Harrington"), to build the eight boats for Exim using a mould taken from the demonstration Kevlacat.

31. Harrington did the work and eight boats were delivered to Caribou. One was shipped to Saudi Arabia in October 1987.

32. The precise parts of the boat copied did not emerge with clarity, due partly, I think, to some terminological confusion between deck and superstructure components. I am however prepared to accept, on the evidence, that what the respondents used were moulds relating to the production of the hull and deck and fixed components of the superstructure.

The Plans

33. The statement of claim alleges that the applicant is the owner of copyright in "certain plans of a 6.14 metre motor-powered catamaran."

34. It is plain from the approach taken by counsel for the applicant, that it treats each of the documents as a separate work.

35. A brief description of the plans and their content follows.

Plan No. and Content Content

97-3
Lines Plan and
Table of Offsets This plan embodies three elements:-

(i) A sheer plan showing the
longitudinal profile of the hull.

(ii) Superimposed on the profile, a
body plan showing the hull in
cross-section.

(iii) A plan view of water lines.

97-4
Superstructure This plan shows:-
Construction.

(i) a side view of the
superstructure,

(ii) a plan view of the superstructure
and deck;

(iii) a vertical section of the hull,
deck and superstructure;

(iv) a portion of the deckhead plan
showing the deckhead layup and
deckhead stiffener;

(v) a detail which appears to be of
the superstructure front
stiffeners; and

(vi) a section through the chain locker
hatch.

97-5
Hull construction. This plan has two drawings on it.

(i) a section through the starboard
demihull looking inboard;

(ii) the transverse structure in plan
view.

Each of these drawings is primarily
directed to the internal structure
of the hull but does show the
external configuration in
longitudinal plan and section.

97-6
General Arrangement There are 4 drawings on this plan
6.14 metre Kevla which have the character of artist's
Catamaran. impressions and which show:-

(i) a starboard profile;

(ii) a bow view;

(iii) a stern view;

(iv) the deck plan.

97-7
Transverse There appear to be 10 separate drawings
Hull Structure. on this plan. They relate to internal
features of the hull structure viewed in
transverse section. They include:-

(i) a drawing of the transom;

(ii) two drawings of the starboard
demihull looking aft;

(iii) port demihull looking forward;

(iv) port side looking forward;

(v) a section through the gas-tight
door;

(vi) a further section showing the
stern of the boat with the engine
bracket arrangement and its
backing plate.

Statutory Framework
(i) The Copyright Act 1968

36. The plans each come within the description of an "artistic work" within the meaning of that term as defined in sub-s.10(1) of the Copyright Act 1968, which definition includes a drawing, whether of artistic quality or not.

37. It also extends to an engraving or sculpture each of which is separately, but not exhaustively, defined:-

""engraving" includes an etching, lithograph, product of
photogravure, woodcut, print or similar work, not being
a photograph."

""sculpture" includes a cast or model made for purposes
of sculpture".

38. Like the drawing, it is not necessary that the engraving or sculpture be of artistic quality. While of peripheral importance in the case, these definitions will be considered in their application to the moulds.

39. The conditions for subsistence of copyright in an artistic work are set out in s.32. The only presently relevant condition is that the work be "original".

40. The section is expressed to be subject to the Act and therefore to provisions withdrawing copyright protection from artistic works which disclose industrially applied designs.

41. Ownership of copyright in an artistic work ordinarily vests in the author by force of sub-s.35(2). However by virtue of sub-s.35(5), ASD was the owner of such copyright as subsisted in the plans, they having been prepared by one of its employees. (Sub-s.35(6)).

42. On 27 October 1987 that company assigned the copyright in its plans to the applicant by written assignment pursuant to s.196 of the Act.

43. Infringement of copyright is defined for present purposes by sub-s. 36(1) and s.38. Under sub-s.36(1), copyright in an artistic work is infringed by any person who, not being the owner of the copyright and without the owner's licence, does in Australia or authorises the doing in Australia of any "act comprised in the copyright".

44. Section 38 brings within the scope of infringing conduct, the sale or exposure for sale of articles known to the vendor to have been made in infringement of copyright.

45. The acts comprised in the copyright in an artistic work include "reproduction of the work in a material form" - sub-para. 31(1)(b)(i).

46. The concepts of doing an "act comprised in the copyright" and "reproduction of the work" are picked up and expanded in s.14:-

"14(1) In this Act, unless the contrary intention
appears -

(a) a reference to the doing of an act in relation
to a work or other subject-matter shall be
read as including a reference to the doing of
that act in relation to a substantial part of
the work or other subject-matter; and

(b) a reference to a reproduction, adaptation or
copy of a work shall be read as including a
reference to a reproduction, adaptation or
copy of a substantial part of the work, as the
case may be."

47. Three-dimensional reproduction of a two-dimensional artistic work is dealt with in sub-s.21(3):-

"21(3) For the purposes of this Act, an artistic work
shall be deemed to have been reproduced -

(a) in the case of a work in a two-dimensional
form - if a version of the work is produced in
a three-dimensional form; or

(b) in the case of a work in a three-dimensional
form - if a version of the work is produced in
a two-dimensional form,

and the version of the work so produced shall be
deemed to be a reproduction of the work."

48. This transdimensional reproduction may be effected directly or indirectly by copying in three dimensions from a three dimensional version of the work - King Features Syndicate' Inc. v. O. and M. Kleeman, Ltd (1941) AC 417; Dorling v. Honnor Marine Ltd (1965) Ch 1; Merchant Adventurers Ltd v. M. Grew & Co. Ltd (1971) 1 All ER 657; LB (Plastics) Ltd v. Swish Products Ltd (1979) 5 FSR 145.

49. For completeness it is to be observed that the substantiality provisions of s.14 apply to the process contemplated by sub-s.21(3) - S.W. Hart & Co. Pty Ltd v. Edwards Hot Water Systems [1985] HCA 59; (1985) 61 ALR 251, 254 (Gibbs C.J.), 258 (Mason J.), and 268 (Brennan J.).

50. The present case raises the application of s.77 of the Act which partially withdraws copyright protection from classes of artistic work depicting designs which have been industrially applied.

51. The material parts of s.77 provide:-

"77(1) Where-

(a) copyright subsists in an artistic work;

(b) a corresponding design is applied industrially
by, or with the licence of, the owner of the
copyright in the work;

(c) articles to which the corresponding design has
been so applied (in this section referred to
as "articles made to the corresponding
design") are sold, let for hire or offered or
exposed for sale or hire in Australia; and

(d) at the time when those articles are so sold,
let for hire or offered or exposed for sale or
hire, they are not articles in respect of
which the corresponding design has been
registered under the Designs Act 1906-1968,

the succeeding sub-sections of this section have
effect.

(2) During the period of 16 years commencing on the
date on which articles made to the corresponding
design were first sold, let for hire or offered or
exposed for sale or hire in the circumstances
referred to in paragraph (1)(d), it is not an
infringement of the copyright in the work to do
anything that, at the time when it is done, would
have been within the scope of the monopoly in the
corresponding design if the corresponding design
had, immediately before that time, been registered
in respect of all articles made to the
corresponding design that had, before that time,
been sold, let for hire or offered or exposed for
sale or hire in those circumstances.

(3) After the expiration of the period referred to
in the last preceding sub-section, it is not an
infringement of the copyright in the work to do
anything that, at the time when it is done, would,
if the corresponding design had been registered
immediately before that time, have been within the
scope of the monopoly in that design as extended to
all associated designs and articles.

.
.
.
(5) The regulations may make provision for
determining the circumstances in which a design is,
for the purposes of this section, to be deemed to
be applied industrially."

52. The key concepts of "corresponding design", and "the scope of the monopoly in a registered design" are defined in s.74.

"74(1) In this Division, "corresponding design", in
relation to an artistic work, means a design that,
when applied to an article, results in a
reproduction of that work.

(2) In this Division -

(a) a reference to the scope of the monopoly in a
registered design is a reference to the
aggregate of the things that, by virtue of the
Designs Act 1906, the person registered as the
owner, or all persons registered as owners, of
the design has, or have, the exclusive right
to do".

53. Regulation 17 of the Copyright Regulations, which is made pursuant to sub-s.77(5), provides:-

"17(1) For the purposes of section 77 of the Act, a
design shall be deemed to be applied industrially
if it is applied -

(a) to more than fifty articles; or

(b) to one or more articles (other than hand-made
articles) manufactured in lengths or pieces.

17(2) For the purposes or paragraph (a) of the last
preceding sub-regulation, any two or more articles
-

(a) that are of the same general character;

(b) that are intended for use together; and

(c) to which the same design, or substantially the
same design, is applied,

shall be deemed to constitute a single article.

17(3) For the purposes of this regulation, a design
shall be deemed to be applied to an article if -

(a) the design is applied to the article by a
process (whether a process of printing,
embossing or otherwise); or

(b) the design is reproduced on or in the article
in the course of the production of the
article."

54. Also relevant in the present case is sub-s.116(1) of the Copyright Act, which confers on the owner of copyright certain deemed ownership rights in respect of infringing copies or plates from which infringing copies may be made:-

"116(1) Subject to this Act, the owner of the copyright
in a work or other subject-matter is entitled in
respect of any infringing copy, or of any plate
used or intended to be used for making infringing
copies, to the rights and remedies, by way of an
action for conversion or detention, to which he
would be entitled if he were the owner of the copy
or plate and had been the owner of the copy or
plate since the time when it was made."

55. To understand the application of that section it is necessary to go to the definitions of "infringing copy" and "plate" in s.10.

""infringing copy" means -

(a) in relation to a work - a reproduction of the work,
or of an adaptation of the work, not being a copy
of a cinematograph film of the work or adaptation;

.
.
.
being an article the making of which constituted an
infringement of the copyright in the work..."

""plate" includes a stereotype, stone, block, mould,
matrix, transfer, negative or other similar appliance".

(ii) The Designs Act 1906

56. It is also necessary to refer to certain provisions of the Designs Act 1906 and in particular the definitions of "article", "design" and "monopoly" as set out in s. 4:-

""article" means any article of manufacture and includes
a part of such an article if made separately;
.
.
.
"design" means features of shape, configuration, pattern
or ornamentation applicable to an article, being
features that, in the finished article, can be judged by
the eye, but does not include a method or principle of
construction;
.
.
.
"monopoly", in relation to a registered design, means
the exclusive right to apply the design to an article in
respect of which the design is so registered".

57. Conditions of registrability are set out in s.17 and the registrability of functional designs is preserved by s.18:-

"17(1) Subject to this Act, a design shall not be
registered unless it is a new or original design
and, in particular, shall not be registered in
respect of an article if the design -

(a) differs only in immaterial details or in
features commonly used in the relevant trade
from a design that, before the priority date
in respect of the application for
registration, was registered, published or
used in Australia in respect of the same
article; or

(b) is an obvious adaptation of a design that,
before the priority date in respect of the
application for registration, was registered,
published or used in Australia in respect of
any other article."

"18 An application for registration of a design shall
not be refused, and a registered design is not
invalid, by reason only that the design consists
of, or includes, features of shape or configuration
that serve, or serve only, a functional purpose."

58. The design monopoly is conferred by s.25:-

"Subject to section 25A, the owner of a registered
design has a monopoly in that design."

59. Conduct constituting infringement of that monopoly is defined by s.30. It is not necessary to set out its text save to say that the conduct so prohibited extends beyond the mere enforcement of the exclusive right conferred by s.25, and covers "fraudulent imitation" and the sale, or exposure for sale, of infringing articles.

Subsistence of Copyright

60. The ASD drawings fall into two categories, those which were copied from the Kevlacat mould, and those which were the product of its own design.

61. To the extent that drawings taken from the mould reflect the sketches from which the prototype and the mould were produced, it may be contended that they are nothing more than indirect copies of sketches. As such, it is arguable that they lack originality - University of London Press, Ltd v. University Tutorial Press, Ltd (1916) 2 Ch 601, 608-9, Ladbroke (Football) Ltd v. William Hill (Football) Ltd (1964) 1 WLR 273, Ogden Industries Pty Ltd v. Kis (Australia) Pty Ltd (1982) 45 ALR 129, 133, Wham-O MFG Co. v. Lincoln Industries (1984) 1 NZLR 641, 644.

62. In that event the relevant copyright, if it exists, subsists in the sketches and is owned by the applicant.

63. And this may be the case even if the sketches have been destroyed - Interlego AG v. Tyco Industries Inc. (1987) 13 FSR 409.

64. Of course there can be "originality" in a copy. As Whitford J. pointed out at first instance in LB (Plastics) Ltd v. Swish Products Ltd (1979) 96 RPC 551 at 568, it is a question of degree, the answer to which depends upon whether sufficient skill, labour or talent has gone into the copy work to merit protection under the Act.

65. If that is the position with respect to the ASD drawings taken from the mould, the end result is the same, namely, that the copyright, if it exists, will vest in the applicant by assignment.

66. If copyright subsists in either the sketches or the ASD drawings, or both, then there is a serious question to be tried as to whether the production of the Trailcraft boats from Kevlacat moulds would infringe, such use involving reproduction in three dimensions of a version of the artistic works comprised by the sketches and the plans.

67. Overshadowing this question however, is that of the application of s.77 and whether and to what extent it withdraws copyright protection in respect of the works.

Section 77 and the Moulds

68. It was submitted for the applicant that whatever the position in relation to the drawings, s.77 does not affect its rights with respect to the moulds produced by the respondents.

69. This follows, it was said, because sub-s.77(2) only withdraws copyright protection in respect of the application of the "corresponding design" to articles which have been "sold, let for hire, or offered or exposed for sale or hire".

70. There is no evidence of any dealing in the moulds on the part of the applicant.

71. The submission is supported by the decision of this Court in Hutchence v. South Seas Bubble Co. Pty Ltd (1986) 64 ALR 330.

72. There the designs in question were combinations of pictures and words relating to the rock band INXS. Wilcox J. held that the industrial application of one of them to a record album cover sold by the applicants would not affect the right to restrain its use on other articles such as T-shirts. At 342 he said:-

"Section 77(2) is consistent with the concept of
specificity of registration. A copyright owner only
loses his or her rights under that section in respect of
infringements made by another person in regard to
articles of the same type as those previously sold,
hired or offered for sale or hire by, or with the
licence of, the copyright owner."

73. The argument will assist the applicant if the respondents' moulds are, as was submitted by counsel, able to be characterised as infringing copies of the plans.

74. In order to be infringing copies they must be reproductions of the artistic work. To be reproductions they must be "versions" in three-dimensional form.

75. The moulds are, in truth, devices for producing three- dimensional versions of that which is depicted in the artistic works. The word "version" is, I think, inapposite to describe a female mould in relation to the artistic drawings on which it is based.

76. While not expressing a concluded view on the point, I would require some persuasion to accept the submission that the respondents' moulds constitute infringing copies of any of the plans.

The Applicant's Moulds as Artistic Works

77. Of course, if the applicant's moulds can be classed as "artistic works" in their own right, the respondents' moulds may be indirect, and therefore infringing, copies of them.

78. To be "artistic works" the applicant's moulds would have to be capable of characterisation as either "engravings" or "sculptures" within the meaning of the Act.

79. Certain classes of moulds may be described as engravings - e.g. where an injection mould is produced through the excavation by a lathe of a shaped cavity in a metal die block - Wham-O Manufacturing Co. v. Lincoln Industries Ltd (supra).

80. The process by which the Kevlacat moulds were produced, however, does not answer to the description "engraving" as explained in the Wham-O case and as defined in the Copyright Act.

81. It is arguable that the moulds may be "sculptures", but there seems to be little authority on this point - Kambrook Distributing Pty Ltd v. Delaney (1984) 4 IPR 79, 93.

82. If they are so characterised then, applying the reasoning in Hutchence v. South Seas Bubble Co. Pty Ltd (supra), the respondents' moulds are arguably infringing copies whose use could be restrained under sub-s.116(1).

83. There was, however, no plea in the statement of claim nor submission in argument that the applicant's moulds were artistic works although counsel did indicate that such a contention might find its way into an amended statement of claim.

84. In the event, whatever the possibility for argument on the issue, it is not sufficiently developed to support the grant of interlocutory relief in relation to the use of the moulds.

Section 77 and the Plans

85. So far as copyright protection of the plan and sketches is concerned, the application of s.77 raises the following issues for consideration:-

1. Whether there is a relevant corresponding design in
relation to the artistic works in question.

2. Whether the corresponding design has been "applied
industrially".

3. Whether the corresponding design must satisfy all
or any of the criteria of registrability under the
Designs Act 1904.

4. Whether it is sufficient that the corresponding
design satisfy criteria of registrability other
than novelty and originality.

86. It is necessary for the purposes of this part of the discussion to distinguish between internal and external components of the boats produced by the respondents.

87. So far as internal components are concerned there was no real evidence of reproduction.

88. Neither Temminck nor the other witness called for the applicant, David Clarke, had seen any of the internal structure of the boat.

89. It seemed to be common ground that the hull and the superstructure were reproduced save for the roof and windscreen.

90. Temminck said that the deck configuration on the respondents' boats followed the "cuddy" cabin version of the Kevlacat.

91. Clarke also gave evidence that the deck was the same as that in the Kevlacat.

92. In his closing address however, and in answer to a question from the Court, counsel for the applicant said that the plan 97-4, showing superstructure and deck, was not a plan of the cuddy cabin layout.

93. Nevertheless it was submitted, and I accept for present purposes, that the external elements of the hull, deck and superstructure of the respondents' boats were substantially as shown on the drawings.

94. The materials presently before the Court do not disclose any substantial evidence of copying of internal or invisible structures depicted on the plans. Accordingly the question whether the class of "corresponding designs" referred to in sub-s.77(2) extends to components which in the finished article are not visible, need not now be considered.

95. On this basis the relevant plans are 97-3 in relation to the hull and 97-4 in relation to the superstructure and deck.

96. In my opinion, there is a serious question to be tried that they each disclose features of shape and configuration which when applied to the articles they depict, namely, a boat hull, boat deck and cabin superstructure, would constitute a reproduction of the artistic works embodied in the drawings referred to.

97. Given that copyright subsists in those works, the conditions for the application of sub-s. 77(2), set out in sub-s.77(1), require that the corresponding design shall have been applied "industrially by or with the licence of the owner of the copyright in the work".

98. Counsel for the applicant submitted that the production of Kevlacat boats by the applicant did not constitute an industrial application of the corresponding designs.

99. He relied upon the provisions of Regulation 17 of the Copyright Regulations whereby a design is deemed to be applied industrially if the conditions there set out are fulfilled.

100. His argument proceeded on the basis that Regulation 17 exhaustively defined the circumstances of industrial application.

101. As a proposition, that is, I think, attended by considerable doubt. Regulation 17 is made pursuant to sub-s.77(5) for the purpose of determining the circumstances in which a design is deemed to be industrially applied.

102. The word "deemed" may be used in a statutory definition to extend its meaning to include matters that might or might not fall within the scope of the word "define". When used in that way the word has an inclusive rather than exhaustive sense - Pearce - Statutory Interpretation in Australia 2nd Ed. para 62; Ex p. Armstrong; Re Hughes (1963) 80 WN (NSW) 566.

103. The sense will depend upon the context but there does not seem to be any statutory policy warranting an exhaustive construction.

104. In Safe Sport Australia Pty Ltd v. Puma Australia Pty Ltd (1985) 4 IPR 120, King J. considered a submission that Regulation 17 did not require the production of fifty articles as a necessary condition of industrial application of a corresponding design, and said at 126:-

"The question whether there has been industrial
application of a design where it has been applied to
more than fifty articles could be a difficult question
of fact, but reg 17 disposes of all doubts on the point.
It seems undesirable that a deeming provision should
have any wider application that it needs to have (sic),
and I think that there is nothing incongruous in leaving
it to be decided as a question of fact whether there is
industrial application of a design in a case where less
than fifty applications of the design have taken place."

105. The facts disclosed that the only relevant application of the design in that case was to the production of a prototype. His Honour took the view that the making of prototypes is not an industrial application of a design. It was therefore not necessary for him to express a concluded view of the operation of regulation 17.

106. The better view, I think, is that the regulation is inclusive and, if it is inclusive, it is inclusive in all respects.

107. Counsel did not place any reliance upon the numerical element of the Regulation, and while the evidence was that only 40 cuddy cabin Kevlacats had been produced by the end of August, the cuddy cabin was a variable feature not depicted in the drawings. To give evidence of a limit on the number of boats of cuddy cabin configuration, was not to demonstrate a limit on the number of boats with features relevant to the proceedings.

108. Counsel, however, contended that Regulation 17 in sub-para. (3)(b) contemplates application of the design by a "process". Whatever the number of boats produced, their production, it was said, did not constitute the application of the relevant designs by a "process". The relevant Shorter Oxford English Dictionary definition of "process" was relied upon:-

"6. A continuous and regular action or succession of
actions, taking place or carried on in a definite
manner; a continuous (natural or artificial) operation
or series of operations 1627.
b. A particular method of operation in any manufacture,
Bessemer p., collodion p., etc.; in recent use spec.
applied to methods other than simple engraving by hand
of producing blocks for printing from; ellipt. a print
from such a block 1839."

109. The Macquarie Dictionary definition was also advanced:-

"1. a systematic series of actions directed to some
end: the process of making butter.
2. a continuous action, operation, or series of changes
taking place in a definite manner: the process of
decay."

110. The essentially manual element of preparing components of the boat from the moulds by spraying on to them successive layers of fibreglass mat and kevlar was said not to be consistent with the concept of a process.

111. It was submitted that the Regulation contemplates some form of mechanical repetition, albeit the mechanism could be as simple as a screen print or a template for stamping soap to apply a feature of ornamentation.

112. Whatever the outer limits of the word "process" may be, it is, in my opinion, quite wide enough to encompass the systematic use of a mould to reproduce a series of like articles.

113. Its proper application can be further understood in the context that it is defining circumstances which will determine an industrial application of the design. As to the word "industrial", the Shorter Oxford English Dictionary says:-

"Pertaining to or of the nature of industry or
productive labour; resulting from industry."

114. The word "industry" is in turn:-

"Systematic work or labour; habitual employment, now
esp. in the productive arts or manufactures. 1611
5. A particular branch of productive labour; a trade or
manufacture 1566."

115. The element of system seems central to both "industry" and "process".

116. In my opinion, the means of production adopted for the Kevlacat boats falls well within the description of "process" when viewed against its wider statutory context.

117. In any event, accepting as I do, a non-exhaustive construction of Regulation 17, I am satisfied that production of catamaran hulls from the use of moulds in the way described in the evidence, falls within the statutory concept of an industrial application of the relevant design.

118. Counsel for the applicant relied otherwise upon the contention that s.77 addresses only corresponding designs which are registrable. Some of the designs depicting internal components were not registrable, he said, because not visible in the finished article. It is not necessary to consider this limb of the argument, because there is no real evidence of reproduction of the internal components.

119. His residual submission was that the shape of the hull in particular would not have been registrable under the Designs Act because it lacks novelty.

120. The prior art relied upon was in essence the Sharkcat catamaran and other similar powered catamarans upon which the design of the Kevlacat was based.

121. The argument had a two edged quality about it, for counsel had to maintain that there was sufficient independent work in the Kevlacat plans and sketches to meet the requirements of originality under the Copyright Act.

122. On this issue the evidence was of a very general character. Temminck's testimony on the development of the applicant's boats suggested a significant departure in relative proportions from that which had gone before. In the end, however, the evidence was insufficient to allow for any reliable judgment on the question of novelty. Nor could I conclude that there is a serious question to be tried on that issue.

123. If absence of novelty were established, the applicant would still have to persuade the Court that s.77 does not withdraw copyright protection from designs which are unregistrable only because they lack novelty or originality.

124. The ancestry of the dual protection provisions may be traced to s.22 of the Copyright Act 1911 (UK), which, although repealed in the UK in 1956, applied in Australia by virtue of the Copyright Act 1912 (Cth) until the Copyright Act 1968 (Cth) came into force on 1 May 1969.

125. Section 22 of the Copyright Act 1911 (UK) was at first blush a model of simplicity by comparison with s.77 and provided:-

"(1) This Act shall not apply to designs capable of
being registered under the Patents and Designs Act,
1907, except designs which, though capable of being
so registered, are not used or intended to be used
as models or patterns to be multiplied by any
industrial process.

(2) General rules under section eighty six of the
Patents and Designs Act, 1907, may be made for
determining the conditions under which a design
shall be deemed to be used for such purposes as
aforesaid."

126. It was examined by the Gregory Committee on Copyright which reported to the UK Government in 1952. That Committee adopted in substance a suggestion for reform, advanced by the Chartered Institute of Patent Agents and recommended, inter alia:-

"(5) If the proprietor (of copyright in an artistic
work) applies the work as an industrial design and does
not register the design before doing so, then the
protection of the Copyright Act ceases as regards
articles made to that particular design and "associated"
designs. The original work would continue to enjoy
protection against direct copying under the Copyright
Act."

Report of the Copyright Committee 1952
Cmd 8662 - para. 250.

127. Its recommendations were substantially embodied in ss. 10 and 44 of the Copyright Act 1956 (UK). It is interesting that the draft provision proposed by the Chartered Institute withdrew copyright protection from industrially applied designs "which although they would if new or original, be capable of registration under the Registered Designs Act 1949 have not been so registered" (emphasis added).

128. The reference to novelty in that draft was not commented upon by the Gregory Committee in its report. It is reasonable to speculate that this reflects an acceptance that the dual protection provision should apply to all "inherently" registrable designs whether novel or not.

129. The Spicer Committee, appointed by the Commonwealth Attorney-General in 1958 to review the copyright of the Commonwealth, considered the Gregory Report but, as it was not authorised to review design law, recommended at para. 436 of its own report:-

"We are of the opinion that at least until the designs
legislation is reviewed the distinction between artistic
works and industrial designs should be preserved and we
therefore recommend the enactment of provisions to the
same effect as sections 10 and 44 of the 1956 Act."

130. This was done, the relevant provisions being ss. 74-77 of the Copyright Act 1968.

131. The meaning of "capable of registration" in s.22 had been the subject of limited and somewhat contentious judicial exegesis prior to the Gregory Report in 1952.

132. In Stephenson, Blake & Co. v. Grant, Legros & Co. Ltd (1916) 33 RPC 406, Eve J. held that the term referred to "designs possessing all the attributes essential to qualify them for registration under that Act and one of those attributes is novelty".

133. That construction appears to have been inspired by a concern that the contrary view would lead to complete loss of protection for any designs which had been copyrighted under the Copyright Act 1842 or the Fine Arts Copyright Act 1862 but not otherwise registered as an industrial design.

134. The decision has attracted some, but not universal criticism in the textbooks; Laddie Prescott and Vitoria - The Modern Law of Copyright (1980) para. 3.71 n.4, Blanco-White Patents for Inventions (1974) para.8-305, Sterling and Carpenter:Copyright Law in the United Kingdom (1986) p 443, Contra: Copinger and Skone James on Copyright 12th Ed. (1980) para.208, Lahore Intellectual Property in Australia (1977) p 283, Cornish - Intellectual Property (1981) p 413.

135. The decision was reversed in the Court of Appeal on grounds which had nothing to do with the construction of s.22.

136. However it has not stood the test of time in the United Kingdom, Canada or Hong Kong.

137. The Copyright Act 1970 (Can.) in s.46(1) uses substantially the same language as s.22(1) of the 1911 Act.

138. It was considered by the Federal Court of Appeal in Bayliner Marine Corporation v. Doral Boats Ltd (1987) 13 FSR 497 and the Court held that novelty was not to be taken into account in construing the term "designs capable of being registered under the Industrial Designs Act".

139. At 503 Mahoney J., with whom Urie and Stone JJ. agreed, said:-

"...if the respondent's interpretation is right, the
exclusion of section 46 applies only to designs which,
if presented for registration, would have been
registered. This will require the reading of the mind
of the Commissioner of Patents in circumstances upon
which he has not pronounced. It will present a party
invoking the exclusion with the potentially impossible
burden of proving novelty having regard to all the
designs previously registered. Assuming the burden were
discharged, the totally unreasonable result will be that
a design that is sufficiently novel to have been
registered will be excluded from copyright protection
while one lacking that novelty will be subject of
copyright."

140. Under Canadian law a design must be registered within one year of publication in Canada. Mahoney J. went on to reject a suggestion that effluxion of time could be taken into account in determining registrability for the purposes of sub-s.46(1):-

"As to timely registration, can Parliament have intended
that a person who diligently registers a design is
entitled to, at most, a ten year monopoly, while one who
neglects or deliberately omits to apply for registration
is entitled to a monopoly for the life of its author
plus 50 years? To ask the question is to answer it.

The only question to be considered is whether the
subject matter of the claimed to copyright is a design
within the meaning of the Industrial Design Act. If it
is, it is subject of section 46 of the Copyright Act as
something capable of being registered under the
Industrial Design Act."

141. Subject to the inappropriate reference to "monopoly" in relation to copyright, that decision, given on 13 June 1986, has found favour in two subsequent cases, the first of which was Interlego AG v. Alex Folley (Vic) Pty Ltd (supra), a decision of Whitford J.

142. His Honour was dealing with designs, some of which had come into existence prior to the passing of the Copyright Act 1956 and some of which postdated it. As to the earlier designs, the position was governed by a transitional provision, s.8(2) in the Seventh Schedule to that Act. That provision, which is substantially similar to a transitional provision, s.218, to be found in the Copyright Act 1968 (Cth), withdraws copyright protection from artistic works made before the commencement of the Act where the artistic work so made "constituted a design capable of registration". Although that phrase does not appear in ss.10 and 44 of the 1956 UK Act or ss. 74 to 77 of the 1968 Commonwealth Act, its construction was directly in point in the case before Whitford J. His Honour agreed with the views of Mahoney quoted above expressed in the Bayliner case and said at 302:-

"All that it is proper to consider when dealing with the
question as to whether a design is or is not capable of
being registered is the qualification put upon
registration by the terms of section 1(3) of the
enactment." (The reference to the enactment is a
reference to the Registered Designs Act 1949.)

143. The meaning of the phrase "capable of being registered" also came up for consideration in the Court of Appeal of Hong Kong where the Copyright Act 1911 (UK) continued in force until 1 January 1973 when the 1956 Act came into operation there. In Interlego AG v. Tyco Industries Inc. (1987) 13 FSR 409, the Court followed the Canadian Court of Appeal in Bayliner and Whitford J. in the Interlego case. The Court held, at 419 per Huggins VP and 451-452 per Fuad J.A., that a design "capable of being registered" in s.22, meant a design within the meaning of s.1(3) of the Registered Designs Act 1949. A design did not have to be novel in order to answer that description.

144. This approach to the construction of s.22 and its Canadian equivalent has the attractive feature that it reduces the avenue for manipulation of the application of these provisions by resort to controllable features of the design. Novelty is a manipulable variable, even allowing, within the Australian framework, for the provisions of s.17A of the Designs Act.

145. The preceding decisions do not of course resolve the question of novelty in respect of s.10 of the Copyright Act 1956 or ss.74 to 77 of the Copyright Act (1968) (Cth).

146. In this context s.77 gives rise to a constructional problem that differs from that arising out of s.22. There is no explicit reference to registrability inherent or otherwise in s.77. Yet registrability is implicitly required as a threshold characteristic of the "corresponding design". Without it the hypothesis on which sub-s.77(2) is based fails for the corresponding design could never have been registered and this sub-section is inapplicable.

147. The subject of "novelty" or "originality" is sometimes addressed as though it describes an attribute of a design. This is understandable for the Designs Act itself uses the adjectival forms "new" and "original". Yet on another analysis these words tell their reader not about the design but about what has gone before it. They refer to a time limit for registration defined by reference to the publication of other designs which may be similar or identical.

148. Had the design in question been produced prior to that which robs it of novelty or originality it may have been registrable. The only question would have been - is it a "design" within the meaning of the Act? Viewed as temporal or historical references, novelty and originality properly fall outside the criteria of registrability.

149. The question of registrability then reduces to the question of definition - is that which it is sought to register a design or not?

150. In Dorling v. Honnor Marine Pty Ltd (supra), the trial judge found that the plaintiff's claim for infringement of his copyright in plans of a boat and parts sold in kit form failed because he had not registered the design of the boat or its components.

151. Allowing the appeal, Danckwerts L.J. in the Court of Appeal held that s.10 did not apply to the relevant designs as it was conceded that they were, with one exception, essentially functional. The shape of the boat in respect of which no concession was made, was in his Lordship's view, necessarily functional and therefore also unregistrable.

152. Harman L.J. took a similar view and Davies L.J. agreed with both.

153. The judgments did not refer to novelty as a criterion of registrability.

154. This outcome was criticised particularly in the Whitford Committee Report presented to the UK Government in 1977 which said at para. 96:-

"As a result of this position it became apparent that if
a design is unregistrable because it is functional or
otherwise unacceptable, it could enjoy much longer
protection than a design which is registrable. This
result, we think, was bizarre."

155. This is, with respect, a rather harsh judgment which noticeably elides the distinction between monopoly protection conferred under designs legislation and the lesser protection available under the Copyright Act.

156. Nor is there anything bizarre about the proposition that works which cannot be protected under the Designs Act may be protected under the copyright law.

157. In Edwards Hot Water Systems v. S.W. Hart & Co. Pty Ltd [1983] FCA 251; (1983) 49 ALR 605, Franki J. (with whom Woodward J. agreed) said of the Dorling decision that it appeared to extend to cases where the design is not registrable because it is neither new nor original. However His Honour did not express any concluded view on that question. He did hold that before a design could be a corresponding design under the Copyright Act 1968 (Cth), it must be a "design" under the Designs Act. I respectfully adopt that view which, in any event, I think I am bound to follow. The present case, however, requires the Court to go one step further and determine whether the requirement for registrability of the "corresponding design" implicit in s.77 includes a requirement that it be novel and original.

158. In my view and for reasons I have already set out above, I am not persuaded that it goes that far.

159. While the applicant may have an arguable case to the contrary, it seems to me that authority, construction and policy stand opposed to it.

Balance of Convenience

160. If the interlocutory relief is not granted then, according to Temminck, the applicant will suffer "severe damage" by loss of trade and reputation arising from the manufacture and sale by the respondent of boats identical to its product.

161. On the limited materials before me, I am not satisfied that the Kevlacat is so distinctive that there would be significant loss of trade or reputation by reason of its production and sale by the respondents.

162. It was, after all, the applicant who was contending that its want of novelty and originality deprived its principal components of registrability under the Designs Act.

163. In a boating magazine called "Sea Sprays Power Craft Monthly" for July 1983, an extract from which is exhibited to Temminck's affidavit, reference is made to a motorised catamaran produced by Sharkcat Pty Ltd, made of Kevlar, and known as the Kevlar cat. Indeed the boat in question is said to have been made for Paul d'Auria, who later became Temminck's co-director. It is reported in the article, to look "exactly like her more mundane sisters". The significant feature of the boat is said to be the weight reduction that arises from the use of the Kevlar material.

164. If the respondents were to be restrained from exporting the boats already made they would be unable to fulfil their contractual obligations to Exim and would obviously enough suffer some damage to their commercial reputation.

165. Further, the interests of third parties, namely, Exim and the ultimate purchasers of the boats already made, will be affected.

166. In order to preserve, at least in part, such rights as the applicant may have, Trailcraft and Caribou have offered an undertaking to the Court in respect of the boats so far constructed. In substance they offer to pay $6,400.00 into an interest-bearing trading bank account in the name of their solicitors until the completion of an audit of their records as to the income derived and/or to be derived from the contract between Caribou and Exim. Within 48 hours of the receipt of the auditor's written certificate, their solicitors shall deposit into an interest-bearing trading bank account in the joint names of themselves and Kevlacat's solicitors the amount of the certified net profit derived from the sale of the 8 boats.

167. If that sum should exceed $6,400.00, they further undertake to pay the difference into the joint account within 48 hours of the certification. Ancillary undertakings in relation to interest are also made which need not be set out in any detail here.

168. While there are arguable questions raised on the part of the applicant, the case that it discloses could not be described as a strong one. In respect of the boats under contract to Exim the balance of convenience tends in favour of the respondents. In these circumstances I was not prepared to continue the interlocutory restraint so far as it affected them.

169. As to the continuing use of the moulds, the absence of any undertaking of the kind offered in respect to the 8 boats, tilts the balance of convenience somewhat in the applicant's direction. However, having regard to the difficulties in the way of its case, it would require a marked balance of convenience in its favour to justify the continuance of the interlocutory restraint in respect of the use of the moulds. Subject to an appropriate undertaking to keep proper accounts in respect of boats produced with the use of the subject moulds, the interlocutory restraint will be lifted in full.

Security for Costs

170. The respondents moved for an order for security for costs and led evidence to show that the applicant, which is incorporated in Queensland, has a paid up capital of $92.00, net tangible assets of $1,189.24, a net profit for the year ended 30 June 1987 of $7,383.54 and ongoing lease commitments of $71,136.00.

171. An unaudited balance sheet for the year ended 30 June 1987 bore out these figures.

172. On the other hand, Mr Temminck pointed out that the applicant had fixed assets with a depreciated value of $64,840.72, intangible assets of $1,275.00 and net tangible assets of $342,557.00. Total assets he said, are worth $408,672.72. Gross income for the year ended 30 June was $933,638.89, representing an increase of $113,494.36 over the previous year. Gross profit was $312,665.56, but according to Temminck the bulk of this has been put back into the business to finance its promotion and expansion.

173. In the financial year in question, the company was developing three new models of Kevlacat for the retail market. This involved substantial one-off expenses. Estimated development costs were in the vicinity of $149,500.00. Production of the Kevlacat boat has doubled since March and the applicant now produces 5 per month.

174. Additional capital of $100,000.00 is being injected into the company by Mr Temminck's brother, who is acquiring a 50% interest.

175. The applicant's business while conducted at present on a modest scale, is developing.

176. It can, I think, be regarded as a company of reasonable substance. If it were to have to find the full likely costs of these proceedings up to and including trial now, it would, I think, have some difficulty.

177. The discretion to order security for costs arises under both s.56 of the Federal Court of Australia Act and s.533 of the Companies Code (WA) applied by virtue of s.79 of the Judiciary Act.

178. Taking the approach I adopted in Fencott & Associates Pty Ltd v. Eretta Pty Ltd (unrep. French J., 31/3/87), I will consider the motion in the light of the principles governing the exercise of the power under s.533.

179. In the light of the expanding nature of the applicant's operation, the increasing volume of business it is turning over and its prospective injection of capital, I do not presently have reason to believe that it will be unable to pay the respondents' costs if they be successful in the action.

180. If I were so satisfied then I would be inclined to order security on the basis that the merits of the applicant's claim do not inspire great confidence in its prospects of ultimate success.

181. Should circumstances change as the action progresses, I will entertain a renewed application for security, but for the present the respondents' motion will be dismissed.