wr f JUDGMENT No, SAY B77. y INTELLECTUAL PROPERTY - copyright - Jesigns - interlocutory injunction - artistic works - rlans for beat - moulds - mould made from boat and coples from mould - whether rould 16 infringing cepy of artistic work - whether mould artistic work - cngravine - sculpture - unregistered des'gr - 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 Fx1im Corporation Act 1986 Companies Code (WA) s.533 Copyright Act 1968 (Cth) s.10, s. 14, 8.32, s.35, sub-s.36(1), s.38, s.74, 8.77, 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 s.56 Nesigns Act 1906 s.4, s. 17, s.18 Copyright Act 1911 (UK) Registered Designs Act 1949 Copyright Regulations Pearce ~ Statutory Interpretation 1n 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) pa Lahore Intellectual Property in Australia (1977) p. 2 Cornish - Intellectual Property (1981) p.413 - mr ere a '- mm JEIC O87. i FEDERAL COURT OF /~ * AUSTRALIA Ja - PRINCIPAL Fan / . ' REGISTRY "NY NOP 2. Co-operative Bulk Handling Ltd v 'iaterside Vorkers' Federation of Australia (1983) 51 ALP 79 Barneys Blu-Crete Pty Ltd v Australian Workers' Union (1979) 43 FLR 463 Springdale Comfort Pty Ltd v tlectrial Trades Lnion of Workers (W.A. Branch) Perth (1986) 8 ATPP 49-694 Bullock v Federated Furnisting Trades Society of Australasia (No. 1) (1985) 5 FCP 464 King Features Syndicate, Inc. v C. and ™%. Kleenan, Ltd [1941] ac Dorling v Honnor Marine Ltd [1955] Ch. 1] Merchant Adventurers Ltd v M. Grew & Co. Ltd (1971) 1 All "R 657 LB (Plastics) Ltd v Swish Products Ltd [1979] 5 FSR 145 S.W. Hart & Co. Pty Ltd v Edwards Wot Water Systems (1985) 41 ALR 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 Ogden Industries Pty Ltd v Kis (Australia) Pty Ltd (1982) 45 ALR Wham-Q MFG Co. v Lincoln Industries [1984] 1 N2LR 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 Stephenson, Blake & Co. v Grant, Legros & Co. Ltd (1916) 33 RPC 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) 49 ALR Fencott & Associates Pty Ltd v Fretta Pty Ltd (Unrep. French J., 13.3.87) KEVLACAT PTY LTD v TRAILCRAFT MARINE PTY LTD, R. & A. HARRINGTON FIBREGLASS MODELLERS (A FIRM), CARIBOU HOLDINGS PTY LTD NO. WAG 120 of 1987 FRENCH J. PERTH 2 DECEMBER 1987 IN THM FEDFPRAL COURT OF AUSTPALIA WESTEPN AUSTRALIA DISTPICT REGISTRY GRrERAL DIVISION PET MR rte JUDGE MAKING ORDER: DATE OF OPDER: WHERE MADE: Mo. WAG 129 7 © FEVLACTT DIN LID Anplicart and TPAILCPArT MARIPVP PTy LTD Pirst Pespondent and P. & A. NARRINGTON FIBPhGLASS MODELLERS (A Firm) Second Respondent and CARIBOU HOLDINGS PTY LTD Third Respondent MINUTE OF ORDER FRENCH J. 18 NOVEMBER 1987 PERTH THE COURT ORDERS THAT: l. 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 2. discharged in so far as 1t would nrevent the third respondent From performing 1ts contract with the Western Australian Exim Corporation for the supply of 8 Trailcraft patrol hoats. The decision as to the continuance of the interlocutory tnjunction and the motion for security of costs 1s otherwise further reserved. Note: Settlement and entry of orders is dealt with in Rule 36 of the Federal Court Rules. IN THE PRDERAL COMUPRT OF AUSTRALIA WESTEPN AUSTRALIA DISTPICr RPGISTPY GENEPAL DIVISION wee BF TWEE OU Ms: PO. VAG 120 cf 1937 KPYLACAT PTY LTD Avplicant and TRATLCRAFY MARINE PTY LTD First Pesnondent and R. & A. HARRINGTON FIBREGLASS MOPELLFRS (A Firm) Second Respondent and CARIBOU HOLDINGS PTY LTD Third Respondent MINUTE OF ORDER JUDGE MAKING ORDER: DATE OF ORDER: WHERE MADE: PERTH THE COURT ORDERS THAT: l. The interlocutory 1 2. The respondents' dismissed. FRENCH J. 2 DECEMBFR 1987 njunction is discharged. motion for security for costs 1s 4. The costs of the hearing in relation to the interlocutory injunction and the motion for security for ecsts will be in the cause. Note: Settlement and entry of orders 1s dealt with in Order 36 of the Federal Court Rules. vv IN THF FRDERAL COUPT OF AUSTPALTA WESTFPSN ATISTRALIA DISTRICT PEGISTPY GPNTRAL DIVISION wee .o. TAG 129 of 1997 BPTWE PY: keevracay pry TTP asolieant and TRATICPAFT MARINE PTY LTD First Pespondent and P. & A. HAPRINGTON FIBREGLASS MONELLERS (A FIRM) Second Respondent and CARIBOU HOLDINGS PTY LTD Third Respondent CORAM: FRENCH J. 2 DECEMBER 1987 REASONS FOR JUDGMENT 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. Today 1t 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. as ew pemeene e "TESTER rerRETTT Soe n= ermver 2. Commereial invention which moulds language with the same facility as exotic materials has brought forth such a oat under the name "Kevlacat". Its eesiyner and manufacturer In Australia 1s 0a Queensland company, Kevlacat Pty Ltd. That caonnany, which 1s the applicant 10 these proceedings, says that it 1s the owner of the copyright in drawings from which the boat 1s produced. 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, 1t alleges that they have contravened s.52 of the Trade Practices Act 1974. 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. 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 3. third respondents for security for costs were reserved. These reasons dcal witt the nartial discharge already ordered and the other reserved decisions. The time available for thelr consiteration and the necessarily incomplete nature of the materials befors 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) 5] ALR 79, 87 (Lockhart J.); Barneys Blu-Crete Pty Ltd v Australian Workers' Union (1979) 43 FLR 463, 465-6 (Northrop J.) Nevertheless, I have had the benefit of substantial submissions on the facts and the law and will endeavour to do justice to them. The criteria for the grant of interlocutory injunctions are well settled. They reguire 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.) They also require that the balance of convenience should favour the grant of relief. eS f: 4. 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 Federate@® Furnishing Trades Society of Australasia ({Mo.1) (1985) S FCR 464, 472. Factual Background Trere 1S at present a number of powered catamarans on the market. One of them 1s known as the Sharkcat and has been sold in Australia since 1975. It 1S manufactured by a company called Sharkcat Pty Ltd. 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. 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. 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 shane of the boat, they did not include "oxact measurements". From the sketches Temminck and D'Auria huilt a handmade fibreglass prototype of their proposed Kovlacat and From that Prototype they made moulds. After testing the prototype in September 1935, they engaged ASC 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 ASN's own design. The work was done by an employee of ASD and completed on 29 October 1985. 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. 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". 6. On 8 December 1926, and following 'l1iscussions he had with Kevin Brown, the marketing manager of Caribou, Temminck agreed that the applicant would sell Trailcraft a ¥Yevlacat boat for demonstration and possible resale. Trarlcraft nad $18,)292.0N for the boat which had the cuddy cahin confisyuration. Temminck and Brown also discussed the possibility of a Gistributorship agreement hetween Kevlacat and Trailcraft. Their accounts of this conversation diverge somewhat. However, 1t 1S common ground that Temminck was not prepared to allow either Trailcraft or Caribou to make its own mould for the manufacture of Kevlacats, In the end the presence or absence of any concluded oral agreement is irrelevant, for moulds were never supplied. What did happen thereafter emerges from the affidavit and oral evidence.of Graham John Blythman, the manager of Caribou and Trailcraft. The Western Australian Exim Corporation ("Exim") 1s 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). 7. Following the tender of a pronosal and = subsequent written quotation, Dxim placed an ordter with Caribou for the supply of eight 20 ft Trailca* catamaran patrel boats for a total price of $338,994.N0. According to Blythman the Trailcat moulds held hy Caribou were not 1n good condition and 1t was necessary to prepare fresh moulds to meet the order. He made enquiries to determine whether or not there was any design registered with respect to the Kevlacat. It 1s 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 bu1ld the eight boats for Exim using a mould taken from the demonstration Kevlacat. Harrington did the work and eight boats were delivered to Caribou. One was shipped to Saudi Arabia in October 1987. 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. JI 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 The staterent of claim alleties that the annlicant is Ehe owner Of copyright in "certain plans of a f.14 metre mator- owered catamaran." It is plain from the approach taken hy counsel for the applicant, that 1t treats each of the documents as a separate work. 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:- (1) A sheer plan showing the longitudinal profile of the hull. (11) Superimposed on the profile, a body plan showing the hull in cross-section. (i11) A plan view of water lines. 97-4 Superstructure This plan shows:- Construction. (i) a side view of the superstructure, (11) a plan view of the superstructure and deck; (1ii) a vertical section of the hull, deck and superstructure; rise row wpe PORTER FERRE rT 97-5 Null construction, 97-6 General Arrangement 6.14 metre Kevla Catamaran. 97-7 Transverse Hull Structure. (iv) a rortion of the deckhead plan showing the doeckbeat layup ane Cockhhead stiffener; (v) a d2ta1l which apnears to be of the superstructure Front stiffeners; and (v1) a section through the chain locker hatch, This nlan has two drawings on it. (1) a section through the starboare demihull Looking inboare; (11) the transverse structure 1n nlan view. Fach of these drawings 1S primarily directed to the internal structure of the hull hut does show. the external configuration in longitudinal plan and section. There are 4 drawings on this plan which have the character of artist's impressions and which show:- (1) a starboard profile; (1i) a bow v1ew; {1i1) a stern view; (iv) the deck plan. There appear to be 10 separate drawings on this plan. They relate to internal features of the hull structure viewed in transverse section. They include:- (1) a drawing of the transom; (i1) two drawings of the starboard demihull looking aft; (iii) port demihull looking forward; (iv) port side looking forward; " 10. {v) @ section through the gas-tight door; (v1) a further secticn showing the stern of the boat with the engine bracket arrangqemenk ana its backing plate, Statutory Framework (1) The Copyright Act 1968 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. It also extends to an engraving or sculpture cach 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". 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. ll. The conditions for subsistence of copyright in an artistic work are set out in $.32. The only presently relevant condition 1s that the work be "original". The section 15 expressed to be subject to the Act and therefore to provisions withdrawing copyright protection from artistic works whicr disclose industrially applied designs. 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)). 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. Infringement of copyright 1s defined for present purposes by sub-s. 36(1) and 5.38. 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". 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. 12. The acts comyorised in the copyright in an artistic work include "reproduction cf the work in a material form" - sub-nara. 31(1)(b) (1). The concepts Gf Cong 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." 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) aun 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) ain 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." 13. This transdimensiona] rerroduction may be effected directly or indirectly by copying in three dimensions from a three Gimensional version of the work - King Teatures Syndicate' Inc. v Qa. and ". Vleeman, Ltd [1941] AC 417; Rorling v Fonnor Marine Ltd [1965] Ch. 1.; Merchant Adventurers ttd v M. Grew & Co. Ltd (1971) 1 All FR 657; LB (Plastics) Ltd v Swish Products Ltd [1979] 5 FSR 145. For completeness it 1s to he 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 fdwards Hot Water Systems (1985) 61 ALR 251, 254 (Gibbs CJ), 258 (Mason J.), and 268 (Brennan J.). 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. 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 14. (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 ccrresnonding desigr kas heen registered under the Pesigns Act 1906-1962, the succeeding sub-sections of this section have effect. (2) During the period of 16 years commencing or 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)(¢), it 1S not an infringement of the copyright in the work to do anything that, at the time when 1t 15 Cone, would have been within the scope of the monopoly in the corresponding design if the corresponding design had, immediately before that time, been reqistered in respect of all articles mace 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, 1t 1S not an infringement of the conyright 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." 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. 15. (2) In this Division - (a) a reference to the scone of the mononoly ina registered design 1s oa 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". Regulation 17 of the Copyright Regulations, which 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 1t 1s 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, 18S 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 1n the article in the course of the production of the ro article." Also relevant in the present case 15 Sub-3.116(1) of the Copyright Act, which confers on the owner cf copyright certain deemed ownership ciughts in respect of infrtraing copies or rlates from which infringing copies may be marie:~ "1L16(1) Subject to this Act, the owner of Ehe conyright in a work or other subject-matter 15 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 1€ he were the owner of the copy or plate and had been the owner of the copy or olate since the time when 1t was made." 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 f1lm of the work or adaptation; being an article the making of which constituted an infringement of the copyright in the work..." ""plate" auncludes a stereotype, stone, block, mould, Matrix, transfer, negative or other similar appliance". (i1) The Designs Act 1906 It 1s 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 ins. 4:- 17. ""article"™ means any article of manufacture and ineludes & part of such an article 1£ made senarately; "design" means fcakures of shape, configuration, nattern or ornamentation applicable to an = article, being features that, in the finished article, can be jJadged hy the eye, but does not includ. 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 1s so registered". Coné@itions of registrability are set out in s.17 and the registrability of functional designs 1s preserved by s.1]8:- "17(1) Subject to this Act, a design shall not be registered unless it 1S a new or original design and, in particular, shall not be registered in respect of an article 1f the design - (a) differs only in aimmaterial details or an 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." 18. The design monopoly 15 conferred by s.25:- G t "Subject to section 254, the owner of a registered design has a monopoly in that desiyn." Conduct constituting infringement of that menopoly 15 defined by $.30. It 185 net 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 The ASD drawings fall into two categories, those which were copied from the Kevlacat mould, and those which were the product of 1ts own design. To the extent that drawings taken from the mould reflect the sketches from which the prototype and the mould were produced, 1t may be contended that they are nothing more than indirect copies of sketches. As such, it 1S 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. "WYRE FORNEY BIG es HFG 19. In that event the relevant copyright, if it exists, subsists in the sketches ané 1s owned by the applicant. And this may be the case even if the sketches have heen destroyed - Interlego AG v Tyco Industries Ine. (19387) 13 FSP 409. Of course there can be "originality" in a copy. As Whitford J. pointed out at first instance in LR (Plastics) Ltd v Swish Products Ltd [1979] 96 RPC 551 at 568, 1t 15 a question of degree, the answer to which depends upon whether sufficirent skill, labour or talent has gone into the copy work to merit protection under the Act. If that 1s the position with respect to the ASD drawings taken from the mould, the end result 1s the same, namely, that the copyright, if it exists, will vest in the applicant by assignment. 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. Overshadowing this question however, 1s that of the application of s.77 and whether and to what extent it withdraws copyright protection in respect of the works. ee. Section 77 and the "oulds Tt was subnitted "er the anplicank that whatever the pos1tion in relation to the drawings, 3.77 'oes not affect its rights with respect to the moulls oreduced Ly the respendents. Gj t ¥ l This follows, 1t 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", There 1s no evidence of any dealing 1n the moulds on the part of the applicant. The submission 18S supported by the decision of this Court in _Hutchence v South Seas Bubble Co. Pty Ltd (1986) 64 ALR 330. 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 ae ee eel - 21. 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." 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. 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. 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 15 based. 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 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. 22. 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. Certain classes of moulds may be described as engravings - @.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). 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. It 1s 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. 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). 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. the 199 23. In the event, whatever the possibility For argument on ue, 1t 15 not sufficiently develope to cupport the OF interlocutory relicof in relation to the use of the moulds, Section 77 and the Plans So far as copyright protection of the plan and ske 1S concerned, the application of s.77 raises the following 1 for consideration:- Whether there 18 a relevant corresponding design in relation to the artistic works in question. Whether the corresponding design has been "applied industrially". Whether the corresponding design must satisfy all or any of the criteria of registrability uncer the Designs Act 1904. Whether it is sufficient that the corresponding design satisfy criteria of registrability other than novelty and originality. grant tches ssucs It 1S necessary for the purposes of this part of the discussion to distinguish between internal and external components of the boats produced by the respondents. So far as internal components are concerned there was no real evidence of reproduction. Neither Temminck nor the other witness called for the applicant, David Clarke, had seen any of the internal structure of the boat. fe 1; eS IE, Bt: It seemed to be common ground that the bull and the superstructure were cenroduced save for the roof and windscreen, Temminck saic that the deck configuration on the resnondents' heats Scllowe?) the ""euddy" cabin version of the Kevlacat. Clarke also gave evicence that the deck was the same as that in the Kevlacat. 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. Nevertheless 1t 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. 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. tae Ot Si aor On this basis the relevant plans are 97-3 in relation to the hull and 97-4 in relation to the superstructure and deck. Tn My opinicn, there 16 a Serious question te be trred that they each ftisclose features of shape and canfiguration which when appliee' te the articles they depict, narely, a boat hull, boat deck and cabin superstructure, would constitute a reproduction of the artistic works embodied in the drawings referred to. Given that copyriqht subsists in those works, the conditions for the application of sub-s. 77(2), set eut 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". Counsel for the applicant submitted that the production of Kevlacat boats by the applicant did not constitute an industrial application of the corresponding designs. He relied upon the provisions of Regulation 17 of the Copyright Regulations whereby a design is deemed to be applied industrially 1f£ the conditions there set out are fulfilled. His argument proceeded on the basis that Regulation 17 exhaustively defined the circumstances of industrial application, 26. AS a proposition, that 1s, 1 think, attended by consitereble doubt. Pegulation 17 1s made pursuant to sub-s.77(5) for Lhe purpose of Jetermining the circumstances in which a desiqn 15 Geemed to be industrially applied. The word "deemed" ray be used ir a statutory definition to extend its meaning to include matters that might or might not fall within the scope of the word "define". then used in that way the word has an inclusive rather than exhaustive sense - Pearce - Statutory Interpretation in Australia 2nd Fd. para.62; Ex p. Armstrong; Re Hughes (1963) 8&0 WN (NSW) 566. The sense will depend upon the context but there does not seem to be any statutory policy warranting an exhaustive construction. 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 1t needs to have (sic), and I think that there 1s 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." x 27. The facts disclosed that the only relevant application of the cesign in that case was to the preduction of a prototyne. His Honeur took the vicw that the making OF prototypes 16 pot an industrial application of a design. Tt was therefore not necessary for him to exnress a concluded view ef the operation of regulation 17. The better view, I think, is that the regulation is wnelusive and, if it 1s anclusive, 1t is inclusive in all respects. Counsel did not place any reliance upon the numerical element of the Pegulation, and while the evidence was that only 4n cuddy cabin Kevlacats had been produced by the end of August, the cud@y 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. Counsel, however, contended that PRegulation 17 in sub-para. (3)(b) contemplates application of the design by a "process". Whatever the number of boats produced, their production, 1t 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 1n a definite 28. Manner; a continuous (natural or artificial) oneration or series Cf uperations 1627. b. A narticular method of oneration in eay manufacture, Resscmer ¢., callocion p., eke. In recenr use sneer, applied to methoes other than sir nle engraving by hand of producing blecks fur srinting from; elliot. a nrink from such a Llaock 1839." The Macquarie Pictionary definition was also advanced:- "L. a systematic series of actions directed to sone end: the process of making butter. 2. a continuous action, cperation, or series of changes taking place in a definite manner: the process of decay." The essentially manual element of preparing comnonents of the boat from the mculds by spraying on to them successive layers of fibreglass mat and kevlar was said not to he consistent with the concept of a process. 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. 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. Its proper application can be further understood in the context that it is defining circumstances which will determine an ROT ERNODE RRR OEE 0 or — industrial application = of the design. ae) ta the word "industrial", the Shorter Oxford Fnoylaish Tictioiwary sayor- "Pertaining to of of the neture of industry or productive labour; resulting From industry. The word "industry" 1¢ in turn: "Systematic work or labour; habitual cmployment, now esp. in the productive arts or manufactures. 161] 5. A particular branch of productive lahour; a trade or manufacture 1566." The element of system seems central to both "industry" and "process". 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. 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. 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 20. components were not registrable, he said, because not visible in the finisted article. Tt 15 mot necessary to consider this limb ct the argument, because there 1s neo real evidence of reproduction of the internal comporents. His residual submission was tkrat the skane of the hull in particular would net have been registrable under the Designs Act because 1t lacks novelty. The prior art relied upon was in essence the Sharkcat catamaran and other similar powered catamarans upon which the design of the Keviacat was hased. 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. 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. a yee bf 31. If absence of novelty were established, the annlicant would still have to versuede the Court tnat s.77 does net withdraw copyright protection From Cesijns which are unreaistreble only because they lack trovelty <r orljinality. The aneestry of the dual mrotectioan pravisiens may he traced to s.22 of the Copyright Act 1911 (MK), which, althondh repealed in the UK in 1955, applied in Australia by virtue oF the Copyright Act 1912 (Cth) until tho Copyright Act 1968 (Cth) came into force on 1 Nay 1949. 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 heing 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 s1x 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." 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:- een ed 32. "(5) If the propricter [of cupyright itn an artistic work] applies the work as an industrial design and does rot register the deriryjr te fFors ling so, then the sre tection of the Copyright eb cers 2s as regards eurticl<s mare te trat articular «se sign and "associated" se SlGnsS. The eriginal work weul.' continue to enjoy protection against direct copying auneer the Conyright Act." Penort of the Copyright Committec 1952 Cnd 8662 - para. 250. Its recommendations were substantially embodied in ss. 19 anc 44 of the Copyright Act 1956 (UK). It 15 interesting that the draft provision nroposed by the Chartered Tnstitute 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). 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. 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:- 33. "Ihe are of the opinion that at least until the desiqns legislation is reviewed the distinction between artistic works and industrial designs should be nreserved and we thorefere recommend the cnactnent of nrevielons to tke same effect as sections 10 and 44 of the 1954 Act." This was fone, the rebovant srovisirons heing ss. 74-77 of the Copyright Act 1968. The meaning Of "capable of registration" in $.22 had been the subject of Limited and somewhat contentious judicial exeages1ls prior to the Gregory Peport in 12952. In Stephenson, Blako & Co. v Crant, Legros & Co. Ltd (1916) 33 RPC 496, fve 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 1s novelty". 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 heen copyrighted under the Copyright Act 1842 or the Fine Arts Copyright Act 1862 but not otherwise registered as an industrial design. 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 Ss oF ass Malas 3s 34. Carpenter:Copyright Lew in the United Kingdom (1936 p.443, Contra: Copinger ane Skone James cn Copyright J2tn '4. (19%0) para.293, Labor, Int llectual Property in Australia (1277) ».223, Cornish ~ Intellectual Property (1991) n.413. The decisicr was reversed in the Court of ANpeal on yrounds which had nothing to do with the construction of $.22. However it Las not stocd tke test of time in the United Kingdom, Canada or Rong Fong. The Copyright Act 1979 (Can.) in $.44(1) uses substantially the same language as s.22(1) of the 1911 Act. It was considered by the Federal Court of Appeal in Bayliner Marine Corporation v Doral Boats Ltd (1937) 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". At 503 Mahoney J., with whom Urie and Stone JJ agreed, said:- "...1f 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 registere?. Assuming the burden were discharged, the totally unreesonable result will he that a "esign that 1s sufficiently novel te have "een registere} will be sxeluced From copyriahbt protection while one lacting tlhak nove Llty wall Ve sub, set of cooyrigrt." Urder Carceauran law & desidp rust Fe rea sake re? wrthin one year of publication in Canada. Mahoney J. went on to reject a suyygestion that ef fluxior of tite could be taken inte account in determining registrability for the purposes of sub-s.46(]):- "As to timely registration, can Parliament have intended that a person who diligently registers a design 15 entitled to, at most, a ten year monopoly, while one who neqlects or deliberately omits to apply for reqistration 1s entitled to a monopoly for tke life of its author nolus 59 years? To ask the question 1S to answer 1t. The only question to be considered is whether the subject matter of the claimed to copyright 1s a design within the meaning of the Industrial Design Act. If 1t 1S, 1t 1S subject of section 46 of the Copyright Act as something capable of heing registered under the Industrial Design Act." 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. 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 3A. Seventh Schedule tao that Act. That m»rovision, which 158 substantially simtler te. 7 kransitticnal provision, $.219, to he founc¢ in the Copperas ret ©6563 (Cth), witheraws conyright protection From artistic vor's nade before the commencement of the Act whore the artrvat.c wae' so rad? "constituted - on sign capable of registration". Alkttough thet nhrase does not anpcar in 3s.10 and 44 of the 1956 Uh Act or ss. 74 to 77 of the 1968 Commonwialtr Act, 1ts construction was directly in point in the case before Whitford J. Nig Honeux agread with the views of Mahoney quoted above expressed in the Paylinor case and said at 3092:- "All that 1t 1S dropper to consider when dealing with the question as to whether a design 1S or 15 not capable of being registered 1S the cualification put upon reyistration by the terms of section 1(3) of the enactment." [The reference to the enactment 158 a reference to the Pegistered Designs Act 1949.) 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. re 37. This approach te eEhe censtruction cf $,22 and its Canadian equrvelent has che artractive fectur that wt reduces the avenue fer nanipulatron oF tae anmlicetion ¢° these provisions by resert to centrellavie features of fhe eosin. Novelty 15 a Manipulable variable, even allowing, within the Australian Framework, for the mrovis1ons of s.17A of the Designs Act. The nreceding decisions Jo nok of course resolve the question of nevelty in respect of 5.19 of the Copyright Act 1956 or ss.74 to 77 of th? Copyright Act (1968) (Cth). In this context s.77 gives rise to a constructional problem that differs from that arising out of $.22. There 1s no explicit reference to registrability inherent or otherwise un $.77. Yet registrability 1S implicitly required as a threshold characteristic of the "corresponding design". Without it the hypothesis on which sub-s.77(2) 1s based fails For the corresponding design could never have been registered and this sub-section 1S inapplicable, The subject of "novelty" or "originality" 1S 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 1t. They refer to a time limit for registration defined by reference to the publication of other designs which may be similar or identical. Hae the design in question been preduced prior to that which robs 1t of novelty orf originality it may have been reaistrable. fhe only question would hav been - 16 1t a "design" within the meaning «f the Act? Viewed ee temoral or historical references, novelty and eriginality »reperly fall outside the criteria of reyistrability. Tre Guestion of reqistrability then reduces to the question of definition - is that which 1t 1S sought to register a design or not? 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 narts sole in kit form failed because he had not registered the design of the boat or its components. Allowing the appeal, Danckwerts LJ 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. Harman LJ took a similar view and Davies LJ agreed with both. 39. The judgments did not refer Le novelty as a criterion of registrability. Tris outcome was criticise rerticularly in the Whitford Committee Pepert preserted to the UF Cove crreork in 1977 wkich said at para. 96:- "As a result of this position rt became epnarent that if a design is unregistrable because 1t is Functional ofr otherwise unacceptable, it could enjoy much longer protection than a design which 1s registrable. This result, we think, was bizarre." This 1S, 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. Nor 1s there anything bizarre about the proposition that works which cannot be protected under the Designs Act may be protected under the copyright law. In Edwards Hot Water Systems v S.W. Hart & Co. Pty Ltd (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 18S 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 4q corresponding design une)er Eke Copyright Vet 196? (ctl), iat must be oa resign" under the Pescara ete TorescectfFully svort that view which, in .ayg overt, T thir' Foar tount? te Follow. The Presert cause, Tew ver, * 6 tr, ft? Ceork te ga one stay Surcther end determine whether the rerun ment for registrabilrty of the " "corresponding Wsign werdicirt ir 6.77 wnelules a requirement that tt be novel and original. In my view and for reasons I have already set out above, I am not persuaded that 1t goes that far. While the anplicant may have an arguable case to the contrary, it seems to me that anthority, construction ana policy stand opposed to 1t. Balance of Convenience If the interlocutory relief 1s 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. : On the limited materials before me, I am not satisfied that the Kevlacat 18 so distinctive that there would be significant loss of trade or reputation by reason of its production and sale by the respondents. — 41. Tt was, after all, the anplicant who was contending that rts wank cf nevelty ani oraginelity Moris @ooLres crineipsl comoc nents of registrability uncer the Pesians Vet. Teor Yr abrne oragazirm called "Sa S reys Myer Cre Ft Monthly" for July, 1923, oan extract fram whic' 15 @abibited to Temminck's affidavit, reference 16 made to a motorised catamaran produced hy Sharkcat Pty Ltd, mace of Kevlar, and known as the Kevlar cat. Indeed the boat in question 13 sai¢@ to have been made for Paul @'Auria, who later becane Temmirck's ce-}irector,. Tt 15 reported in the article, to look "exactly like her more mundane sisters". The significant feature of the boat 1s said to be the weight reduction that arises from the use of the Kevlar material. 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. Further, the interests of third parties, namely, Exim and the ultimate purchasers of the boats already made, will be affected. In order to preserve, at least 1n 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 42. interest-bearing tracdimy bank aces a) nna nepre 3o their colrelbters urtil the corel tio r cc oar custeth OF bie ar records as to the income derave dt andere te Uy Foes 8 Prop the ecptr veh tothe rn Caribog ans tne. Tatein 8 on an 6 © rece ih ot 57 gudtter'. writter eertrFro tl, pr hoouy es cr she yy rave yt Vt eed Tnterest-"earin, bret. boat account an ths Joint nares of themselves and Pevlacat''s solicitors the arnount of tre certifie? net profit derived Erem the sale of th 7 Loats. If that sur should ox<ce+' $7,190.99, they further undertake to nay the dif ference ante the Joint accourt withir 4% hours of the certification. 'Ancillary undertakings in relation to interest are also mage which need rot be set out um any detail here. While there are arguable questions raised on the part of the applicant, the case that it discloses could not he described as a strong one. In respect of the boats under contract to Fxim 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. 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 on ms . 43. ats) favour to justify the continuance of the inti rlocutory restraint in respect ef Ere use of the moulis. Subject te an approrciete unvertaking te Keon sreser iccounts in resnect af hoats onreducet with the us OF the subject moulds, the interlocutory restrarmat will we Lifttes ain full. Security for Costs The respondents moved for an oreer for security for costs and led evidence to show that the applicant, whick 1s uncorporated in Qucensland, has a paid up capital of $92.90, net tangible assets of $1,189.24, a net profit for the year ended 39 June 1937 of $7,383.54 and ongoing lease commitments of $71,136.00. An unaudited balance sheet for the year ended 30 June 1987 bore out these figures. 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. ta, Tn the financial year in question, th. comeany was Goveloning three anw mmatoles of Revlacat for tho oe. tail market. This ar eolve 2 tabske What Gamo OF eames. Rebre st Teale meant COSES Vere ln the vretnre)e, of STAVE, Poeddebres «fF the Kevlecat crt bea Coubled sine. 'laret an? ¢' ar Tecan pw Additional capital of $100,°99.00 15 being nyected into the company by "ir Temminck's brother, who 16 acquiring @ 59% interest. The applicant's business while conducted at present on a nodest scale, is developing. It can, I think, be regarded as a company of reasonable substance. If 1t 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. 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. 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. 45. Tn the light of the expanding nature of the applicant's wpereation, the anereasing volume of Lusinese ib is turning over ane ats ~rospective injzyection of capital, To fe not presently heave reesor to belreve that at will be unabl*s to ne, the resoorderts' costs 1® they be successful in the action. If I were so satisfied then I would be inclined to order security on the basis that the merits of the applicant's clain do not inspire great confidence in its prospects of ultimate success. Shoul@ circumstances change as the action progresses, I will entertain a renewed application for security, but for the present the respondents' motion will he dismissec. I certify that this and the preceding forty four (44) pages are a true copy of the Reasons for Judgment of his Honour Justice French. Associate: Deworo Rake Date: Ql DecanWec \987. sen ne eee rer Counsel for the Applicant: itr D. Catterns Selireiters for the Anplireent: Porinson Cox Counsel for the First ane Third Pesnondents: Mr C. Pullin Solicitors for the "Tiarst and Third Respondents: smrie Velenti Counsel for the Secend Pespondent: Mr '}. Workman Solicitors for the Second Respondent: Pullinger, GEanderson & Workman Date of Hearing: 16 and 18 November 1987 Date of Judgment: 2 December 1987