Gentry Homes Pty Limited v Diamond Homes Pty Limited; Leslie Williams and Christine Williams Trading As C-Tite Services and Stephen Gerard Roach and Helena Patricia Roach [1993] FCA 319; (1993) Aipc 91-008 (8 July 1993)

FEDERAL COURT OF AUSTRALIA

GENTRY HOMES PTY. LIMITED v. DIAMOND HOMES PTY. LIMITED; LESLIE WILLIAMS AND
CHRISTINE WILLIAMS trading as C-Tite Services and STEPHEN GERARD ROACH AND
HELENA PATRICIA ROACH
No. G213 of 1992
FED No. 448
Number of pages - 5
Copyright
[1993] FCA 319; (1993) AIPC 91-008

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Beazley J(1)

CATCHWORDS

Copyright - s.115 Copyright Act 1968 requires an election as to remedy sought - election to pursue account of profits - whether respondent made profit on project - whether costs incurred by respondent solely referrable to the project - evidential onus on party with means of knowledge in its possession - whether tender of primary documents from which evidence drawn caused prejudice to applicant

Copyright Act 1968 s.115

Dart Industries Inc. v. Decor Corp. Pty. Limited and Anor. (1990) 20 IPR 144

Gentry Homes Pty. Limited v. Diamond Homes Pty. Limited and Ors.

HEARING

SYDNEY, 29, 30 April 1993; 11 May 1993
8:7:1993

Counsel for the Applicant: P.T. Taylor

Solicitors for the Applicant: Robert A. Hannam and Co.

Counsel for the Respondent: J. Anderson

Solicitors for the Respondent: Smith, Kerrison and Foster

DECISION

BEAZLEY J The applicant carries on business as a project home builder and is the owner of the copyright in certain building plans, drawings and specifications (the plans) of a particular style of home known as the Carrington. The first respondent carries on business as a builder. The second respondents conduct a drafting business trading under the name "C-Tite Services". The third respondents are the owners of property known as 95 Damien Street Greystanes, upon which they had a home built by the first respondent, the building plans for which were prepared by the second respondents. The applicant brought proceedings against the respondents alleging that each had breached its copyright in the plans for the Carrington in that the second respondents had reproduced those plans in a material form or had copied substantial parts thereof, which the first respondent had used in the erection of the home built upon the third respondents' land.

2. Prior to the hearing, settlement had been reached between the applicant and the second and third respondents. At the commencement of the hearing of the matter against the first respondent on 29 April 1993, counsel for the first respondent informed the court that his client admitted paragraphs 1, 2, 3 and 4 of the statement of claim, these being admissions as to the incorporation of the applicant and the first respondent, an admission that the first respondent carried on a home building business and an admission of the applicant's ownership of the copyright in the plans. Counsel further stated that the first respondent admitted:
"that in or about 1990 the first respondent made an adaptation of

the plan by erecting a building house substantially according to
the plan but not otherwise".

3. Counsel added that it followed from that admission that the applicant was entitled to an order for an account of profits. It was clear at an early stage of the proceedings that the first respondent's case was that it had made no profit on the project.

4. Shortly after these admissions had been made, the applicant applied to amend the statement of claim, to claim damages. This was opposed. Counsel for the first respondent referred to the last directions hearing at which the applicant was requested to state whether it was intending to claim an account of profits or damages at which time it advised the court that it sought an account of profits. Counsel for the applicant did not contest that this was an accurate account of what had occurred at the directions hearing, however, he stated that after the directions hearing, the applicant's solicitors had written to the first respondent's solicitors advising that it was intended to claim damages at the hearing and asking whether the first respondent was prejudiced. The first respondent's solicitors wrote back and advised that the amendment was opposed, but did not specify any prejudice. Counsel for the applicant eventually withdrew the application for an amendment to claim damages. Shortly before 3.00pm, counsel for the applicant made application for an adjournment which was granted until 12.00 noon on 30 April 1993. The reason for the adjournment was that the first respondent had not produced all documents in response to a subpoena at the time that the subpoena was called earlier in the day, and in fact produced further documents shortly before the application for adjournment was made. Counsel for the applicant was thereby obviously hampered in his cross-examination of Mr. Lazzarini, the principal of the first respondent.

5. When the matter resumed for hearing on 30 April 1993, counsel for the applicant applied for a further adjournment, on the basis that the applicant's legal representatives had not had time to undertake a reconciliation of the financial information which had been produced in answer to the subpoena. At that time, counsel for the applicant indicated that an application might once again be made to amend the application so as to claim damages and indicated that such application, if made, could be dealt with on the morning of the adjourned hearing. I granted the adjournment but did not agree that the determination of the application to amend should be left till the adjourned hearing date. I gave directions for the making of any application to amend. I considered that it was appropriate to give the applicant this opportunity because, although the first respondent had filed evidence in October 1992, to the effect it had made a substantial loss on the project, it had failed to discover any financial records. The applicant also submitted, as it had on the previous day when it sought to amend to claim damages, that it was not required to make an election as to the remedies sought, as the provisions of s.115 of the Copyright Act 1968 left it to the court to determine whether an order by way of damages or an account of profits was the appropriate remedy. When granting leave to amend, I held that the provisions of s.115 required the applicant to make an election and I directed that such election should be made prior to the hearing. The matter was listed to continue on 11 May 1993. At the commencement of the hearing on that day, counsel for the applicant advised that the applicant had elected to continue to pursue the claim for an account of profits.

6. The first respondent's evidence was that on 5 March 1991, it had entered into a building agreement with the third respondents for the construction of a home on their land. The contract was a lump sum contract for $137,885. The third respondents requested variations during the course of the construction, the effect of which was to reduce the contract price. Mr. Lazzarini, in his affidavit sworn 14 October, 1992, deposed that the first respondent had received a total amount of $133,866.80 from the third respondents in respect of the building contract, however, the house had actually cost $143,790.78 to build. Mr. Lazzarini annexed a "running sheet" which itemised the expenditure on the project and the total receipts. This running sheet was extracted from a treble cash account book which was tendered in evidence. Mr. Lazzarini gave evidence that the account book was written up by his then secretary, from information provided to her, by him, from time to time in the course of any particular project. He gave evidence that he checked the accuracy of the entries in the book and that he also checked the accuracy of accounts as and when they were received.

7. During the course of cross-examination Mr. Lazzarini said that his usual mark-up on a job was 20%-25%, but that he could not recall what percentage mark-up he had attributed to this particular project. He said that he had estimated the cost of constructing the home to be in the order of $110,000-$115,000. He agreed that the contract price was exclusive of piering. Mr. Lazzarini admitted in cross-examination, when shown documents produced by the third respondents, that the first respondent had been paid an additional cash payment of $2,080, which was not disclosed in the running sheet. Mr. Lazzarini said the amount should have been included in the book. In addition, there was evidence that there was an amount of $990 outstanding for extras. Mr. Lazzarini said that he did not expect this amount to be paid as his relationship with the third respondents had soured because of the legal difficulties which arose out of the utilisation of the Carrington plans.

8. The applicant sought to attack the first respondent's evidence as to the loss it alleged it incurred on the project on a number of further bases: first, that the first respondent had failed to make allowance for the refund of a deposit in the sum of $500, paid to Council; secondly, it disputed the amount paid to a number of trades, including for carpenters, bricklaying and concreting; and thirdly, it challenged the evidence that Mr. Lazzarini had under-estimated the costs of the entire project.

9. The first respondent conceded that allowance should have been made for the refund of the deposit paid to Council. However, Mr. Lazzarini denied that the payments made to the carpenters and bricklayers and other trades were other than in respect of this project. He was cross-examined as to whether he had used all the carpenters referred to in the running sheet, and he stated that he had. He was also cross-examined as to the payment of one of the carpenters at a supervisor's rate and said that carpenter had been employed as a supervisor at one stage during the project. There was no evidence that the carpenters referred to in the running sheet did not in fact work on the job nor was there evidence that they had not been paid. There was no other evidence against which to assess the credibility of this evidence and I considered that Mr. Lazzarini was giving his answers honestly. Accordingly, leaving aside the concreting costs, I do not see any reason to doubt that the carpentry and other trade costs as alleged were not in fact incurred.

10. The applicant disputed the amount of concrete used in the job. Counsel for the applicant cross-examined Mr. Lazzarini by having him make a calculation from the plans and specifications, as to the amount of concrete which was in fact used. The calculation was that approximately 16 cubic metres of concrete would have been used. However, the invoice in respect of concreting disclosed the use of 36 cubic metres of concrete and the concreter's bill to be $12,200. Mr. Lazzarini responded to this discrepancy by saying that if the invoice said that 36 cubic metres of concrete was used, that is what was used, and there must have been some error in the calculation he performed in court. Mr. Lazzarini was also shown a copy of the invoice for the concreting, which, it was put to him, was in "pristine condition". After this term had been explained to Mr. Lazzarini, Mr. Lazzarini rejected that there was anything sinister in the condition of the invoice and said that the amount had in fact been paid. He said he was certain of this because the concreter was not chasing him for the money.

11. As to the reasons for the under-estimation of the cost of the building, Mr. Lazzarini explained that he had known the third respondents socially and that "probably (he) just didn't keep good tabs on it because of that". He said that he had under-estimated the cost from the beginning but had not done so intentionally. He gave a number of reasons for the under-estimation: the house had a different gutter set up which cost a lot more money, there was the amount of the concrete in the footings, the house had a split level floor which he considered was probably another factor and further, his main market was the first home buyers' market with a smaller type house with some renovations and extensions. He said this house was a lot larger than those he usually built, which apparently caused him to "overstep" the mark.

12. The applicant asserted that the onus was upon the first respondent to prove that the costs it incurred were in fact referrable to the project, and all that was necessary for the applicant to prove was the amount received by the first respondent from the third respondents. In support of this proposition it relied upon the decision of Dart Industries Inc. v. Decor Corp. Pty. Limited and Anor. (1990) 20 IPR 144, where King J held that the evidential onus in an account of profits case should fall upon the party with the means of knowledge in its possession. The applicant alleged that the running sheet was not sufficient proof of the costs incurred. He pointed out that that document was not supported by any of the primary evidence from which it was drawn, nor was the person who wrote up the document called to give evidence.

13. Belatedly, after the conclusion of addresses, counsel for the first respondent sought to tender the primary documents from which the running sheet was derived. The applicant objected, saying it would be prejudiced by the receipt of that material at such a late stage in the proceedings. As by this time, it was well past the usual court finishing time, I decided to reserve my decision in respect of the tender. I have decided to reject the tender of the documents although I am unsure that the applicant would be prejudiced, as it had access to the documents from the time of the adjournment of the matter till the resumed hearing, and used some of the documents for the purpose of cross-examination. However, there may be reasons of which I am unaware as to why the applicant might be prejudiced, and I do not consider it appropriate that this matter be adjourned yet again.

14. Notwithstanding that the running sheet was not supported by its source documents, I consider that the first respondent has discharged such onus as it bears to demonstrate that the expenses incurred were solely referrable to this construction. As I have said, Mr. Lazzarini gave evidence that he checked invoices when they first came to him and if he had any queries in relation to them would check the invoice with the relevant trade and then give the invoices to his secretary to write up in the cash book. He would then check that book periodically.

15. It is clear that certain allowances have to be made to the amounts of receipt and expenditure deposed to by Mr. Lazzarini. The cash payment of $2,080 has to be added to the receipts. The amount of $990 probably should not be added, as it was apparently for extras. The refund from Council of $500 has to be deducted from the total expenditure. Even if an allowance is made for the difference in the amount of concrete which might have been used of say $7,000 (on the basis that the applicant asserts that only approximately 44% of the concrete alleged to have been used, was in fact used), the evidence remains that the first respondent made a loss and therefore no order can be made. Copinger and Skone James on Copyright (13th Edition) para.11-76.

16. There are a number of questions as to costs which remain outstanding in this matter. I had initially requested counsel to argue the question of costs during the course of their argument. Both informed me that they would not adequately be able to do so and requested that they have liberty to make submissions on costs after my determination in this matter. Accordingly I propose to set the matter down for a short hearing in respect of costs on a date suitable to the parties.