Masterton Homes Pty Ltd & Anor v L E D Builders Pty Ltd [1996] FCA 171

CATCHWORDS COPYRIGHT - whether infringement - whether copying from drawings and brochures of plans for project houses. EVIDENCE - proof of particular matters - chronological tracing of provenance of plans - witnesses - credibility - adverse finding on a witness's credibility at trial, notwithstanding demeanour, because of objective factors. EQUITY - laches, acquiescence and delay - whether 'something beyond mere delay' encouraged belief in appellants of no intent of respondent to rely on strict rights, resulting in prejudice - whether delay created disadvantage by impeding recollection of witnesses. Copyright Act 1968: s. 115

MASTERTON HOMES PTY LIMITED, MASTERTON HOMES (NSW) PTY LIMITED v L E D BUILDERS PTY LIMITED G 914 of 1994

LOCKHART, WILCOX and BEAZLEY JJ. SYDNEY 20 MARCH 1996

IN THE FEDERAL COURT OF AUSTRALIA) ) NEW SOUTH WALES DISTRICT REGISTRY) No. G 914 of 1994 ) GENERAL DIVISION ) ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN: MASTERTON HOMES PTY LIMITED First Appellant MASTERTON HOMES (NSW) PTY LIMITED Second Appellant AND: L E D BUILDERS PTY LIMITED Respondent COURT: Lockhart, Wilcox and Beazley JJ. DATE: 20 March 1996 PLACE: Sydney MINUTE OF ORDER THE COURT ORDERS THAT: 1. The appeal be dismissed. 2. The appellants pay the costs of the respondent of the appeal.

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

IN THE FEDERAL COURT OF AUSTRALIA) ) NEW SOUTH WALES DISTRICT REGISTRY) No. G 914 of 1994 ) GENERAL DIVISION ) ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN: MASTERTON HOMES PTY LIMITED First Appellant MASTERTON HOMES (NSW) PTY LIMITED Second Appellant AND: L E D BUILDERS PTY LIMITED Respondent

COURT: Lockhart, Wilcox and Beazley JJ. DATE: 20 March 1996 PLACE: Sydney REASONS FOR JUDGMENT LOCKHART J. This appeal from the judgment of a single judge of the Court (Sheppard J.) turns on questions of fact. His Honour held that the appellants (it is unnecessary to distinguish between them) infringed the respondent's copyright in its plans of a project house by copying them to design a project house which came to compete with the respondent's house. There was an issue at the trial of whether copyright subsisted in the respondent's drawings for what is known as the respondent's 'Essington' range of houses. However, it was conceded on the appeal that his Honour's findings that copyright did subsist in those drawings should not be disturbed. Central to the case at the trial was the question of the credibility of the principal witness, and chief executive of the appellants, Mr W J Masterton. His Honour did not accept his evidence as credible. This finding was attacked on appeal; and the appeal was conducted on the basis that if his Honour's findings with respect to Mr Masterton's credit were not reversed the appeal must fail, except for the second issue in the case, namely: whether the respondent should be denied relief for the appellants' infringement of its copyright because of its alleged laches, acquiescence or delay. But on this issue also, his Honour found against the appellants and granted relief to the respondent. Accordingly, he made declarations that the appellants had infringed the respondent's copyright in certain drawings of the respondent's houses by making drawings and brochures for the building of project houses of the appellants. His Honour granted injunctions restraining the appellants from reproducing or authorizing the reproduction of the drawings, and from authorizing the building of any of the relevant houses of the appellants. He also made an order for delivery up by the appellants to the Registrar of the Court of all relevant sketches, drawings, diagrams and brochures. His Honour did not proceed to consider the question of damages or account of profits; but he stood the proceeding over to a later date and gave directions for the preparation of the case with respect to the remaining issues. His Honour also dismissed a cross claim of the respondent which was discontinued during the hearing. The respondent filed a notice of contention asserting that his Honour's rejection of the appellants' case of laches, acquiescence or delay should be upheld on a basis additional to that found by his Honour, namely, that a defence of this kind is not available in respect of remedies under the Copyright Act 1968 ('the Act'). The witnesses called on behalf of the appellants were Mr Masterton and Mr McLain, the latter being employed by the appellants as Design Manager for the past seven or eight years, and in 1986, which is the most relevant year, being in charge of the drawing office of the appellants. The witnesses called by the respondent whose evidence is relevant to the appeal were Mr W J Thompson, the General Manager of Beechwood Homes, which is a division of the respondent; Mr P R Haigh, who acts as a consultant for the respondent; and Mr P Romano, who is a design draftsman employed by the respondent. The primary facts are stated in the judgment of Sheppard J. and they were not challenged on appeal (although some peripheral findings of fact were challenged, to which I shall refer later). I shall summarize them. Both the appellants and the respondent have carried on business for many years as builders of project houses. They do this by providing their customers with a service which involves the construction on customers' land of houses designed and built in accordance with one of the range of plans available for customers to consider. From time to time there are exhibitions of houses designed and built by project builders. Indeed, the parties regularly have project houses constructed in exhibition centres or villages so that they may be inspected by potential customers, along with project houses designed and built by other companies. From 1987 onwards the respondent marketed a range of houses under the name 'Essington'. A series of alternative designs was offered: there were houses of three, four or five bedrooms; houses which had either single or double garages; and houses which had rumpus rooms, or not. From time to time the appellants marketed a range of houses known as 'Carisbrooke', which were in competition with the respondent's 'Essington' range of houses. During the period when the two ranges of houses were on the market they underwent changes in design. In 1991 the appellants decided to adopt a number of features of the 'Carisbrooke' houses which gave them a distinctive appearance, particularly on the interior. These were marketed as the appellants' 'Carisbrooke Limited Edition'. Like the earlier 'Carisbrooke' range of houses, they were claimed by the respondent to have been designed and built from plans copied from the respondent's plans. There was no threat of litigation by the respondent in respect of any alleged infringement of copyright until after the 'Carisbrooke Limited Edition' came on to the market in 1991. Litigation was first mentioned in early 1992 in a conversation between Mr Haigh of the respondent and Mr Ainsworth, an employee of the appellants. At that time, if there had been an infringement by the appellants of the respondent's copyright, it had continued for four or five years. Moving on from the unchallenged primary facts, there are certain findings of fact made by his Honour which both parties agreed were in error, and others were challenged by one side or the other. The respondent, in its notice of contention, contended that the finding of the primary Judge that the appellants had access to the respondent's floor plans for the 'Essington' house at the time the respondent drew its plans should be upheld on a different basis from that assigned by his Honour. This contention relates to a finding by his Honour that there was evidence which suggested that the first house in the new or improved 'Essington' range was not open for inspection before December 1986. Counsel for the respondent submitted that this was an erroneous finding; and that the correct finding should have been that it was open for inspection at some stage before 12 November 1986. That date is critical because it is the date written by Mr Masterton on his sketch plan on a piece of tracing paper (exhibit N1) which assumed great importance at the trial and on appeal. It was contended by the respondent that the correct basis for his Honour's finding of access by the appellants to the floor plans was that copies of the floor plans for the three-bedroom 'Essington' houses were publicly available when the 'Essington' display house was opened in late October 1986. Counsel for the appellants submitted that there was evidence which could support his Honour's finding of December 1986; but having read and heard the submissions and considered the relevant evidence, I am of the opinion that the first house in the improved 'Essington' range was open for inspection before 12 November 1986, probably in late October 1986. This case is replete with paper: principally, plans, drawings, working drawings, sketches, diagrams, and brochures produced by one party or another. From among these, the primary Judge relied upon two exhibits (V and W) which are plans prepared by the respondent of its display houses. His Honour used these plans for the purpose of comparison with the sketch plan (exhibit N1) produced by Mr Masterton. There is conflicting evidence about these plans. The respondent contended that they were brought into existence solely for the purpose of this litigation, but were in fact derived from plans that were in existence at the times with which the issues in this case are concerned. And indeed, the better view on the evidence seems to me to be that the plans (exhibits V and W) were, as counsel for the respondent informed us, produced for the purpose of the litigation. But this does not matter. The main question is whether the relevant plan or plans of the respondent were copied by Mr Masterton in 1986. To determine what the relevant plans were involves some tracing of the provenance of exhibits V and W. This is not an easy task; but the likely position is that exhibit R was the plan of the respondent's three-bedroom improved 'Essington' house from which brochures or fliers were prepared by or on behalf of the respondent and made available to the public in late 1986, heralding the arrival of the improved range of 'Essington' houses. It seems exhibits V and W also derive from exhibit R. Although the date on which exhibit R was prepared by the respondent is not certain, plainly it was drawn before late October 1986, because the plan for the improved three-bedroom 'Essington' house was available on fliers to the public who attended the exhibition of houses which included the four-bedroom improved 'Essington' house in Glenhaven in late October 1986. It appears that exhibit R was a reproduction of an early plan (exhibit WJT1 (Plan 8)) which contains a floor plan of the improved 'Essington' three-bedroom house. It is the likely position that the date '5/12/86' which appears on the floor plan (exhibit WJT1 (Plan 8)) is not the date on which the plan was created, because that was done some months earlier, but that it is the date of a supplier's pricing estimate. This is in accord with the probabilities and with the evidence of Mr Thompson. Mr Masterton's practice was to attend the exhibition of new ranges of houses of rival companies, and to obtain fliers or brochures available there. This is normal practice for people in the project-house building industry. The respondent's case was that it is more likely than not that thus Mr Masterton had obtained a flier when the four-bedroom improved 'Essington' house was opened for inspection in late October 1986 or thereabouts, and further, that he traced exhibit N1 from it. The drawing of the respondent's 'Essington' house on the flier, and so Mr Masterton's sketch plan, were said by the respondent to be taken by the appellants from its drawings, in particular exhibit R. It was not suggested that exhibit R itself was available to Mr Masterton; nor could it have been. By a process of tracing the provenance of the flier and exhibits V, W and N1 back to exhibit R, the respondent argued its case that the appellants had infringed its copyright. Mr Masterton gave evidence that an improved 'Essington' display house was opened in October 1986; and he said that, if the plans of the respondent were publicly available at that time, his company would have had access to them. In summary, the flier of the improved three-bedroom 'Essington' house was available to the public in late October 1986 at the exhibition of the new four-bedroom 'Essington' house at Glenhaven. One of the fliers was taken by Mr Masterton in accordance with his normal practice. The plan for the new improved 'Essington' three-bedroom house can be traced back to the original film of the floor plan, namely exhibit R, which itself plainly produces the floor plan exhibit WJT1 (Plan 8). In the course of one of his findings, the primary Judge referred to the plan exhibit WJT1 (Plan 7); but this was a mistaken reference to the plan exhibit WJT1 (Plan 14) of the new improved four-bedroom 'Essington' house. The finding of his Honour was attacked by the appellants. Although his Honour's reference was mistaken, it did not in my view ultimately affect his Honour's primary findings or his conclusions. It should be noted that the fliers which had been used in 1986 by the respondent for its new range of 'Essington' houses were not available to the respondent at the trial, and thus not in evidence. His Honour found that, in view of the way the case had developed, the issue of whether Mr Masterton copied the respondent's plans became a 'somewhat narrow one'. His Honour said that in the end the question turned upon the view he took of Mr Masterton's evidence in relation to the sketch plan exhibit N1, which was one of a number of rough drawings produced by Mr Masterton on discovery, each on tracing paper. The tracings together became exhibit N; but as I have already observed, the particular one on which the case turned was exhibit N1. His Honour found that there was a basis for saying that part of exhibit N1 could be a tracing of part of exhibit W, and he explained this in some detail by comparing the relevant drawings. His Honour did not accept Mr Masterton's evidence that the appellants' 'Carisbrooke' range of houses was developed from an earlier range known as the 'Bovis' range. His Honour found Mr Masterton to be 'an astute and canny business man'. He said he was forced to make corrections to his evidence. He found that Mr Masterton's initial claim that the sketch exhibit N1 was a freehand drawing was untenable, taking into account Mr Masterton's own contrary evidence that it must have been traced from another plan. His Honour said it became obvious that Mr Masterton's claim that the plan was derived from the 'Bovis' home could not be sustained. And his Honour found that Mr Masterton's evidence was not honest or reliable. He did not reach this conclusion based on Mr Masterton's demeanour. He found that objective factors in the evidence persuaded him that, notwithstanding his views of Mr Masterton as a witness in the box (his demeanour), he nevertheless should find adversely to him. His Honour found that objective factors militated against the acceptance of Mr Masterton's evidence; he stated seven reasons for this conclusion, namely: (a) substantial similarities between exhibits N1 and W; (b) Mr Masterton could have had a plan such as exhibit W available to him at the time he traced exhibit N1; (c) he asserted at first that exhibit N1 was a freehand sketch, but was forced to concede that it was not; (d) this in turn forced him to concede that as the plan was drawn to scale, it must have been traced from another scaled plan;