Supreme Court New South Wales Medium Neutral Citation: Sydney Water Corporation v Paul Makucha [2011] NSWSC 1411 Hearing dates: 7, 8, 9, 10, 11, 14, 16, 17, 18 March8, 9, 10, 11, 12, 15, 16, 17, 18, 19, 22, 23, 24, 25, 26 August 2011 Decision date: 13 December 2011 Jurisdiction: Equity Division Before: Sackar J Decision: Paragraphs 278 and 279 Catchwords: Actual authority to enter agreement - ostensible authority to enter agreement - representation of principal corporation of giving agent authority to enter agreement - belief of third party as to authority given by principal to corporation of giving agent authority to enter agreement - belief of third party as to authority given by principal to agent - actual authority to issue invoices - ostensible authority to issue invoices - breach of fiduciary duty - third party in knowing receipt of trust property - Barnes v Addy constructive trust - infringement of copyright in literary and artistic works Legislation Cited: Sydney Water Act 1994 (NSW) State Owned Corporations Act 1989 (NSW) Trade Marks Act 1995 (Cth) Copyright Act 1968 (Cth) Cases Cited: Sydney Water Corporation v Makucha [2010] NSWSC 114 Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 Barnes v Addy (1874) LR 9 Ch App 244 Lysaght Bros & Co Ltd v Falk (1905) 2 CLR 421 White v Illawarra Mutual Building Society Limited [2002] NSWCA 164 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 Greater Pacific Investments Pty Ltd (in liq) v Australian National Industries Ltd (1996) 39 NSWLR 143 Shell Co of Australia Ltd v Rohm and Haas Co (1949) 78 CLR 601 Coogi Australia Pty Ltd v Hysport International Pty Ltd (1998) 86 FCR 154 Aussie Home Loans v Phillips (1998) 40 IPR 392 Category: Principal judgment Parties: Sydney Water Corporation Paul Makucha & Ors Representation: J Stevenson SC, A Bouris Paul Makucha - Litigant in Person Mallesons Stephen Jaques Paul Makucha - Litigant in Person File Number(s): 2010/25631 Judgment The Proceedings 1By its further amended statement of claim the plaintiff, Sydney Water Corporation (Sydney Water), a statutory State owned corporation, brought proceedings against the first defendant (Mr Makucha), a litigant in person, and two corporate entities of which the first defendant was at all material times the sole owner and controller. 2The plaintiff seeks a declaration that it did not enter into a valid and binding agreement with the defendants on or about 3 December 2009 or valid and binding agreements purportedly set out in letters of 11 June, 18 September and 30 October 2009. 3In the alternative the plaintiff seeks a declaration that by the service of the letter dated 29 January 2010 it validly rescinded the relevant agreements. 4The plaintiff also sought that there be an enquiry and accounts and directions as might be necessary or expedient for the purposes of ascertaining what sum or sums are owing and what property currently represents the sum of $293,283 paid by the plaintiff or such other sum as was found to have been paid away to an entity known as Mascot Administration Services Pty Limited in the period November 2008 and 17 December 2009 which entity was from 2 February 2009 a deregistered corporation. In light of the way the proceedings were conducted the plaintiff in the end simply sought this amount plus interest by way of equitable compensation. This amount relates to what might be described as monies paid pursuant to certain alleged unauthorised invoices. 5The plaintiff also seeks orders restraining the defendants from using the name "Sydney Water" or any combination of the words in trade or commerce or at all. Further, an order is sought restraining the defendants from advertising, promoting etc, sale of any goods or services under or by reference to the name "Sydney Water", without the licence of the plaintiff and/or authorising or directing or procuring any other company or person to engage in any such conduct. 6The plaintiff also seeks relief against the first defendant and the third defendant by way of a declaration that there has been an infringement of the copyright of the plaintiff by them in the literary and artistic works comprised in registered trade mark 1164718 owned by the plaintiff. An order restraining infringement of the copyright of the plaintiff in the Sydney Water logo mark in the future is also sought against the defendants. 7Further relief was also sought to the effect that trade mark applications numbers 1317577 and 1317578 made by the third defendant be withdrawn. 8The defendants filed a defence to the amended statement of claim but not to the further amended statement of claim. However the only difference between the two statements of claim is the additional relief sought in the further amended statement of claim. 9The defence filed to the amended statement of claim by the defendants then solicitors is somewhat cryptic. So far as it concerns the invoices the plaintiff's allegations are denied, somewhat uninformatively. 10In relation to the allegations concerning the trade mark applications the defendants assert that the first defendant intends, unless restrained, to prosecute in the name of Sydney Water Pty Limited the application to register the trade mark "Sydney Water" under class 32 and/or obtain registration for those words in respect of goods and services under class 32. It is further contended that they will endeavour to sell or licence for sale, water bearing the mark "Sydney Water" unless restrained by the court. The defendants in any event further deny that the court has jurisdiction to determine the issue concerning trade marks. 11So far as the copyright allegations are concerned the defendants deny that any copyright subsists in the Sydney Water logo. There is also a denial of any infringement of copyright. 12So far as the relevant agreement or agreements are concerned the defendants assert that the relevant employee Mr Edward Harvey had actual authority to enter the arrangements or alternatively he had ostensible authority to do so. It is further denied that the agreements have been "effectively avoided". The Conduct of the Trial 13The plaintiff was represented throughout by senior and junior counsel. The first defendant, Mr Makucha, appeared throughout as a litigant in person, on his behalf and the other defendants. 14The plaintiff called a great many witnesses. The first defendant was the only witness for the defendants. No statements or affidavits have ever been filed on behalf of the defendants. That is partly explained by the first defendant seeking to maintain his right against self incrimination. He gave evidence however and was cross examined. I provided him with a certificate under the Evidence Act. 15Mr Makucha cross examined each of the witnesses who were called by the plaintiff. Some of those cross examinations were relatively short, some were quite lengthy. 16As will appear from the transcript the first defendant sought to cross examine many of the witnesses on topics that were quite irrelevant to the proceedings. A considerable amount of the time taken in the trial was caused by the first defendant's ability regularly to distract himself by seeking to explore matters which could not assist the court in the determination of the matters raised in the litigation. In doing so he made what in my opinion were not only irrelevant but scandalous and baseless allegations of criminal behaviour and/or serious professional misconduct concerning senior executives of the plaintiff and/or officers of the court. One such issue was his allegation that one version of the agreement executed by him and a Mr Harvey purportedly on behalf of Sydney Water had been unlawfully tampered with. Although not relevant to the proceedings I have dealt with it in this judgment because of the seriousness of the allegation and because I regard it as baseless. 17I should also record that the plaintiff filed a written outline of its submissions and a copy was provided to the court and the defendants on 25 August. Plaintiff's counsel addressed the court shortly on 26 August. The first defendant absented himself from the courtroom when counsel for the plaintiff made his final submissions. 18Thereafter the first defendant made numerous applications the effect of which would have been to have in my opinion unjustifiably delayed the completion of the matter. I formed the view in the end that the only way to ensure reasonably that the resources of the court were appropriately and efficiently used was to direct that the defendants place written materials before the court if they wished in order to finalise the matter. That invitation was simply never taken up. Background Facts 19Sydney Water is a State owned corporation incorporated under the State Owned Corporations Act 1989 (NSW) and the Sydney Water Act 1994 (NSW). In January 1995 the business undertaking of the then Water Board was transferred to Sydney Water Corporation Limited. This was done by ministerial order. By further ministerial order in January 1999 the business undertaking of Sydney Water Corporation Limited was transferred to Sydney Water. 20The principal functions of Sydney Water involve the storing and supply of water. The functions also involve the provision of sewerage services, the provision of storm water drainage systems and the disposal of the waste water. Sydney Water also provides facilities which are necessary and ancillary or incidental to those principal functions. 21Sydney Water is Australia's largest supplier of urban water and supplies water throughout the Sydney, Illawarra and Blue Mountains regions. It does not sell or produce bottled water rather, its business is the delivery of water through reticulated systems. It has from time to time distributed water bottles and paper cups branded with the Sydney Water logo but for publicity purposes only. 22As a State owned corporation Sydney Water's shareholders comprise shareholder ministers. When the proceedings were commenced those ministers were the then Police Minister Michael Daley and the then treasurer Eric Roozendaal. The current shareholders are the Premier Mr Barry O'Farrell and the Treasurer Mr Michael Baird. 23By virtue of section 20W(2) of the 1989 Act the approval of shareholder ministers is necessary before the formation of any subsidiary of Sydney Water. 24Sydney Water is the registered proprietor of the business "Sydney Water" and is and was at all material times the owner of the copyright subsisting in Australia in the Sydney Water logo and the logo trade mark. The Sydney Water logo in the current form was adopted in or about March of 2009. It has existed however in a slightly different form from 1994. 25Sydney Water is also the registered owner of trade mark 1164716 (the words "Sydney Water") and trade mark 1164718 (the Sydney Water logo). Each trade mark is registered for a period of 10 years from 5 March 2007 in respect of a number of classes. The classes comprise class 37 (the operation and maintenance of water supply mains and water reticulation services), class 39 (the storage of water in dams and reservoirs for the supply of water by pipelines and water distribution services), class 40 (water treatment and purification services), and class 41 (education and information services in connection with the above matters). 26Until March 2011 Sydney Water had not sought to register its marks in class 32 (a beverage class including bottled water). A decision had been taken not to register in that class on advice of its trade mark attorneys and because Sydney Water did not and does not manufacture or sell bottled water. 27The defendants concede, as frankly they must, that Sydney Water had at all material times a substantial goodwill and reputation throughout Australia in its corporate and business name "Sydney Water" including by reason of its use of that name in relation to its business, its goods and the services it had advertised. There is also no doubt that Sydney Water has substantial goodwill and reputation throughout Australia in the common law trademarks "Sydney Water" and the Sydney Water logo, including the prior form of the logo, of course in its two registered trademarks and in the services in respect of which those trademarks are registered. The logo appears on its letterhead, its stationery, its publications and in all advertising. Mr Edward Harvey 28Edward Kenneth Harvey (Mr Harvey) was a Property Assets Manager at Sydney Water from 3 July 2006 until his dismissal shortly after 27 January 2010. His employment was in fact formally terminated on 25 February 2010. 29From about October 1991 the first defendant, Mr Makucha was in occupation of land owned by Sydney Water at 111 Baxter Road Mascot, under a lease which expired in 2003. He had in fact been in possession since about 1980. The property was maintained for the protection and maintenance of the Main Southern Outfall Sewer. 30In 2007 Sydney Water started proceedings to obtain possession of that property. It was in that context that Mr Harvey and Mr Makucha met. 31From the period November 2008 to January 2010 the two had extensive dealings with each other. 32During that time Mr Harvey authorised the payment of some twenty (20) invoices totalling just under $300,000 to either a company controlled by Mr Makucha or his then accountants Hall Chadwick in respect of work done for companies associated with Mr Makucha. Mr Harvey also signed handwritten documents that Mr Makucha caused the third defendant to use in order to apply to register Sydney Water's two trademarks in class 32. Further, Mr Harvey engaged in a long process of negotiation with Mr Makucha during which he executed certain documents purportedly on behalf of Sydney Water including so called exclusivity agreements written on the letterhead of Hall Chadwick dated 11 June 2009, 18 September 2009 and 30 October 2009 and a document called "The Confidentiality and Business Implementation Agreement" (CBIA) dated 3 December 2009. 33As Property Asset Manager Mr Harvey's duties were to: "Manage the Sydney Water property portfolio in a strategic and commercial manner, to reflect benchmarked/industry practice and standards in total portfolio management, including facility and asset management. To ensure property assets contribute effectively to the Corporation through maximising returns." 34His duties included an obligation to perform to the best of his ability and knowledge the duties assigned to him; to serve Sydney Water faithfully and diligently; to use all reasonable efforts to promote the interests of Sydney Water and to act in Sydney Water's best interests. 35Clause 3.3 of Mr Harvey's employment contract acknowledged that he had no authority to bind Sydney Water in contract except in accordance with delegations issued by Sydney Water from time to time. 36The delegations relevant to Mr Harvey were delegations numbered 604 and 610 being delegations to: (a)Approve payment of charges associated with the disposal or lease of land where the charges did not exceed $100,000 and; (b)Approve the procurement of professional services and consultancies where such services were appropriate for property acquisition and management up to an amount not exceeding $100,000. 37As Property Asset Manager Mr Harvey was manager of the Lease and Licensing Group. In that capacity he was in charge of the day to day management of approximately eight hundred (800) leases and licenses. His responsibility was to minimise risk to and exposure of Sydney Water's property assets and to maximise revenue generated from Sydney Water's property assets. He was responsible for ensuring that the corporation entered into optimal leases and occupancy agreements. Mr Harvey had direct supervision over four employees in his team. He was not involved in the sale or acquisition of assets, his role was purely that of a manager. He had no authority to negotiate or enter into agreements for establishing commercial enterprises or to enter into joint ventures. 38Mr Harvey reported to the Manager Group Property, Mr Gary Inberg. Mr Inberg in turn reported to the General Manager Asset Management Division, Mr Paul Freeman. 39Matters concerning intellectual property including trademarks were at all relevant times the responsibility of the General Manager of Sustainability and those employees of Sydney Water who reported to that person which included a Dr Hudman who gave evidence before me. 40Mr Harvey was at no time a member of Sydney Water's Sustainability Group and at no time did he have responsibility for or authority to deal with Sydney Water's intellectual property. There is little doubt that it was the responsibility of any employee of Sydney Water to refer matters concerning Sydney Water's intellectual property to the General Manager of Sustainability. 41Mr Harvey was bound by Sydney Water's Procurement Guidelines which provided that for engagements of less than $50,000 an exchange of letters was sufficient but for engagements above $50,000 Sydney Water's standard "Contract Shell" was to be used. The Sydney Water Procurement Policy required that approval be given for the total value of any engagement with a professional service provider so that if the total value of the engagement exceeded $50,000 a formal contract was to issue. Purchase orders raised and approved on an invoice by invoice basis (rather than on the basis of total value of the engagement) was regarded as "order splitting" and not permitted under Sydney Water's policy. 42Mr Harvey was authorised by a power of attorney (jointly with one of the other attorneys named in the power) made on 19 March 2008 to amongst other things: "Make, sign, seal, deliver execute accept and do all such acts of every description that may be necessary or expedient to transfer property both real and personal from Sydney Water and to Sydney Water..... and to execute contracts and counterparts thereof that had been approved by or on behalf of Sydney Water." 43However, the power of attorney also provided that: "...nothing in this Power of Attorney shall authorise any of the Attorneys to exceed the authority for the time being held by him under any delegation, authorisation or conferral of powers from the Board of Directors or the Managing Director of Sydney Water..." Baxter Road 44As I have already mentioned, the property at 111 Baxter Road, Mascot, was maintained by Sydney Water (and its predecessors) for the protection and maintenance of the Main Southern Outfall Sewer. 45On 16 October 1991 Sydney Water formally leased the site to Mr Makucha for 12 years. The lease was to expire on 15 October 2003. 46On or about 10 November 2006, not long after he commenced employment, Mr Harvey received a memorandum from a Mr Cordrey. The memorandum gave a history of attempts which had been made previously by Sydney Water to terminate Mr Makucha's tenancy at Baxter Road due to outstanding rental. The matter had reached an unsatisfactory and somewhat dormant stage. It had come to Sydney Water's attention that Mr Makucha was probably living in a shipping container and/or demountable building on the site. 47On 14 November 2006 Sydney Water wrote to Mr Makucha asking him to vacate the premises. This was followed on 14 February 2007 with the service of a notice to quit upon him. On 5 April 2007 Sydney Water instructed Messrs Sparke Helmore to commence possession proceedings against Mr Makucha. 48Mr Harvey was the officer at Sydney Water responsible for instructing Sparke Helmore in relation to the proceedings. On 11 September 2007 judgment for possession was entered in favour of Sydney Water. The court ordered that Mr Makucha give vacant possession of the land and remove all of his effects from it. An order was also made by way of security that Mr Makucha pay $25,000 into court. That security deposit was in fact paid on 27 September 2007. The writ of possession was issued on 21 November 2007. However, over the next 12 months the proceedings were adjourned from time to time and orders were made staying execution on the writ. In November 2008 Sparke Helmore ceased to be involved in court appearances. It was at this point that Mr Harvey liaised directly with Mr Makucha and he appeared personally in court on behalf of Sydney Water. As it happens the writ of possession was stayed on various occasions up to and including 14 March 2010. In any event, from late 2008 Mr Harvey dealt directly with Mr Makucha and authorised various stays of execution it seems without consulting anyone at Sydney Water or at Sparke Helmore. 49On 29 October 2008 Mr Harvey made an offer to Mr Makucha to the effect that Sydney Water was prepared to pay him a total of $27,000 in full and final payment for goods and effects which were then said to be currently on the property in Baxter Road. The offer was said to be made strictly on the basis that payment would be made within fourteen (14) days following the removal by Mr Makucha of all containers and portable buildings by midday on 6 November 2008 in "a satisfactory manner". 50Mr Makucha accepted the offer on 11 November 2008. Mr Harvey, in a letter of 21 November 2008 to Mr Makucha, indicated that he acknowledged Mr Makucha's acceptance and that a payment of a sum of $27,500 (the $500 difference is not explained in the evidence) would be made within seven (7) days of the receipt of a tax invoice for that sum and the completion of the removal of all containers and portable buildings from the property. 51The agreement also purported to make payment of that sum conditional on Mr Makucha vacating the site. There is no issue but that Mr Makucha did not leave the premises until April 2010 when the Sheriff took possession. He never removed any goods from the property as he had agreed he would. Invoices 52The payment of the $27,500 was effected however by five (5) payments. Five invoices were issued by Mr Makucha on 25 November 2008, 28 January 2009, 24 February 2009, 12 March 2009 and 23 March 2009. 53Between 25 November 2008 and 3 December 2009 Mr Makucha submitted in total some twenty (20) invoices to Mr Harvey for payment. Fifteen (15) of those invoices requested payments to a company associated with Mr Makucha, Mascot Administration Services Pty Limited. Five (5) of the invoices were on Hall Chadwick letterhead and requested payment to that firm. Hall Chadwick as I have already observed was a firm of accountants retained by Mr Makucha. 54Mascot Administration Services Pty Limited was deregistered on 2 February 2009 after the second invoice had been submitted and before the submission of the third invoice. There is no issue in these proceedings but that Mr Makucha caused such payments to be withdrawn from the account of Mascot Administration Services Pty Limited in cash soon after such deposits were made. 55Mr Harvey caused all of the twenty (20) invoices to be paid by lodging the invoices with the "Accounts Payable" section of Sydney Water. 56I will return to these invoices in detail later in this judgment. The "Joint Venture" 57Between December 2008 and February 2009 Mr Makucha raised the idea of a "potential deal" with Mr Harvey. He told Mr Harvey that he had some ideas of ways that he and Sydney Water could work together to start up a business and generate revenue. He described it along the lines of a joint venture to develop what he said would be a water bottling business. He indicated in discussions with Mr Harvey that he was prepared to contribute his "tax losses to the deal". He insisted at all times that Mr Harvey keep his dealings with Mr Makucha a secret. Mr Harvey complied in that regard until the end of January 2010. 58Mr Harvey told Mr Makucha that his priority was to have Mr Makucha vacate the Baxter Road property but he invited Mr Makucha to provide a proposal letter in respect of the joint venture. 59In the month from 11 March 2009 Mr Makucha sent Mr Harvey a total of sixteen (16) letters in which he outlined his proposals and purported to confirm Mr Harvey's agreement to them. 60All of this correspondence was addressed to the Managing Director of Sydney Water and directed to Mr Harvey's attention. All correspondence from Mr Makucha (including this correspondence) was hand delivered to Mr Harvey although Mr Harvey did on one occasion receive an email from the Hilton Hotel. At no time did Mr Makucha mail, fax or email any correspondence to Mr Harvey. At no time did Mr Makucha expect or intend that Mr Harvey would forward such correspondence to the Managing Director of the plaintiff. 61Based on the letter of 11 March 2009 and his conversations with Mr Makucha, Mr Harvey understood that the joint venture being proposed would involve the creation of new joint venture companies and the acquisition of shares by Sydney Water in those companies and in certain other companies which Mr Makucha was presently a director and shareholder. Further, Mr Makucha proposed Sydney Water taking the benefit of what was said to be in the order of $10 million from the accumulated tax losses of certain of Mr Makucha's companies in which Sydney Water would purchase shares. There would also be the creation of a new water bottling plant that would be owned and operated by the joint venture and that it would sell bottled water to the public under the brand name "Sydney Water". 62The proposal revealed that Mr Makucha was suggesting that Sydney Water be involved in a wide range of activities including a nuclear powered ship; a floating moveable water desalination plant utilising nuclear power to melt ice anywhere in the world; the use of water to increase land value and turn deserts into arable land; the development of chemicals which were able to be used in medicines as "anti-illness additives" and "nuclear war medicine"; anti drug use water additives and the air borne delivery of water. 63It was also proposed at the outset that Sydney Water would acquire a 49% interest in an entity known as Makucha Sydney Water Pty Limited for $1 million in return for which Makucha Sydney Water Pty Limited would be given an exclusive right to use the Sydney Water Corporation "Sydney Water" logo and its exact shape and words and in the same colours as are used by the Corporation. It was further suggested that if at any time in the future the letters or words or colours used in the logo were replaced by or superseded by another group of letters which were the same or different and also the same or different colours, such revised alternatives would also be exclusively licensed to Mr Makucha's company. 64By 12 May 2009 Mr Makucha's proposal that Makucha Sydney Water Pty Limited be granted an exclusive licence to use Sydney Water's logo had evolved into a proposal whereby Sydney Water assigned its trade mark and associated goodwill to the third defendant then known as Sydney Water P Pty Limited. 65By 15 May 2009 Mr Makucha discovered that Sydney Water's trademarks were not registered in class 32 (relevantly bottled and aerated waters). 66In March 2009 Mr Makucha retained a Mr Gino Malacco, a partner in the accounting firm Hall Chadwick. 67Mr Malacco gave Mr Makucha advice about corporate structures to be put in place to implement Mr Makucha's proposed venture. Mr Malacco also arranged to incorporate various companies with which Mr Makucha intended to implement the proposed venture including the third defendant. 68Mr Malacco did some work bringing the tax affairs and ASIC filings of certain of Mr Makucha's companies up to date. 69Mr Malacco also gave advice to Mr Makucha concerning the carrying forward of tax losses of various of Mr Makucha's companies. For example, he gave Mr Makucha advice that such tax losses as existed could never be transferred to Sydney Water as such. 70Although Mr Malacco wrote letters to Mr Makucha and Sydney Water and/or to either Mr Makucha alone or Mr Harvey alone there is no issue but that Mr Malacco was only ever retained by Mr Makucha. 71At all relevant times Mr Malacco only ever acted on Mr Makucha's instructions. 72In or about August of 2009 Mr Makucha also retained a Mr Michael Stafford, solicitor, a partner of Eakin McCaffrey and Cox. Mr Stafford only ever regarded himself as acting for Mr Makucha and or one of his corporate entities. 73Mr Stafford prepared a great many drafts of various agreements in relation to the proposed joint venture on Mr Makucha's instructions. The main agreement he prepared was called the Confidentiality and Business Implementation Agreement (CBIA) which Mr Harvey purported to sign on behalf of Sydney Water on 3 December 2009. Mr Harvey's Conduct is Discovered 74On or about 21 January 2010 a Ms Christine Valentine who was employed in Sydney Water's Purchasing and Contracts area noticed that Mr Harvey had approved payments of invoices to a company associated with Mr Makucha, inconsistently as she believed with Sydney Water's Procurement Guidelines. On that day she sent a detailed email to Mr Harvey pointing to what she regarded as irregularities with various payments made in relation to invoices issued by Mr Makucha. 75Mr Harvey approached Mr Inberg first thing on Wednesday 27 January 2010. That was not before he had conversations with Mr Makucha on 22 and 25 January 2010 in which Mr Harvey discussed the irregularities that had been raised by Ms Valentine. 76At about 8am on Wednesday 27 January 2010 Mr Harvey approached Mr Inberg in his office. Mr Harvey told Mr Inberg that he had done some wrong things in relation to dealings with Mr Makucha. Mr Inberg immediately set up a meeting with Mr Jonathan Sesel the Manager Internal Audit. 77During the meeting with Mr Sesel, Mr Harvey confessed that he had entered into contracts with Mr Makucha for example for outdoor advertising, an intellectual property venture and a confidentiality agreement all without delegation. 78Mr Harvey told Mr Sesel that the reason he had come forward was because the accounts payable section had sent him an email querying a payment and indicating that they would be contacting his manager. He also handed over all his papers. 79On the same day Mr Sesel referred the matter to the Independent Commission Against Corruption by letter under the hand of the Managing Director, Dr Schott. 80On 29 January 2010 Sydney Water purported to rescind any such agreement by a notice to each of the defendants in a letter dated 29 January 2010. 81Proceedings were commenced in this Court later that day. The Contentions of the Parties 82In summary the plaintiff contends that Mr Harvey had no actual or ostensible authority to enter into any of the relevant agreements or to authorise the payment of the monies in respect of the twenty (20) invoices. 83The plaintiff also contends that not only were the payments of the various invoices outside Mr Harvey's authority but that they were not genuine invoices for goods or services rendered, at least goods or services for which Sydney Water received any value and consequently they were rendered dishonestly. 84It is further contended by the plaintiff that Mr Harvey had no authority in relation to intellectual property and that he had no capacity to entertain or enter any arrangements with the defendants in relation to those matters. 85The defendants have asserted in their defence in the most general terms that Mr Harvey did have the requisite authority to bind Sydney Water in the relevant respects. As I have already observed there are mere general denials in relation to the invoices. 86On the question of authority, I should observe that the defendants position changed somewhat during the course of the trial. It emerged that Mr Makucha appeared to accept that Mr Harvey had no authority to execute the CBIA. Mr Makucha asserted that he believed that Mr Harvey only had authority to sign what he described as a "confidentiality agreement". He said that his concern was to ensure that "his ideas" were kept secret. Apart from his belief as to Mr Harvey's authority to enter a confidentiality agreement as I understood his position Mr Makucha appeared to concede that anything beyond such an agreement would have to be a matter for the Board of the plaintiff. 87In their defence in general terms the defendants also assert various intellectual property rights which they say one or other of them is fully entitled to pursue and as the defence makes clear that unless restrained they would seek to do so. Discussion The Agreements 88On 18 June, 18 September, and 30 October 2009 Mr Harvey signed documents purporting to enter "exclusivity agreements" with Mr Makucha. They appear to have been overtaken by the CBIA which he signed on 3 December 2009. Authority 89I should say at the outset it is clear in my opinion that Mr Harvey did not have actual authority to execute the CBIA nor any of the "exclusivity agreements". There is simply no written material in his employment contract, his delegations and/or the relevant power of attorney which could confer actual authority upon him. Actual authority was never seriously in issue. 90However before I analyse the CBIA in any detail I propose to make some general observations about the relationship that developed between Mr Harvey on the one hand and Mr Makucha on the other. It is fair to say that Mr Makucha's plans for the joint venture and the ultimate commercialisation of bottled water were ambitious if not grandiose. There is no doubt that Mr Makucha was both infatuated and obsessed by his plans and he seemed to have a very strange but potent influence upon Mr Harvey. Mr Harvey, a well educated man who I had the opportunity to observe over a number of days, whilst he was cross examined appeared to be a perfectly reasonable, sensible and relatively capable property manager. However, whilst he might have put up some resistance at least in principle to the ideas and machinations of Mr Makucha his evidence leaves me in little doubt that he was ultimately powerless to resist Mr Makucha's requests and demands, very much to his obvious disadvantage. 91Mr Makucha insisted that Mr Harvey keep his dealings with Mr Makucha secret from everybody else in Sydney Water. Mr Harvey abided by that until his dealings were discovered in January 2010. There is simply no evidence that any person at Sydney Water had any inkling at all about the dealings which were taking place between Mr Harvey and Mr Makucha or for that matter the extent of them. 92Mr Makucha frequently required Mr Harvey to assure him that he had not spoken to anyone about their dealings. He was clearly concerned that his ideas, which he was entirely convinced were the product of a brilliant entrepreneurial mind, should be kept confidential lest they be stolen. He did not want to take any chances that anyone, in particular at Sydney Water, might wish to utilise any of the ideas or concepts that he had dreamt up. This became especially important to him once he discovered that Sydney Water had not registered a trademark in relation to class 32. 93Mr Harvey gave evidence to the effect that he abided by Mr Makucha's request and did keep his dealings secret. He said and I accept that he did not discuss these dealings with anyone else at Sydney Water or for that matter any person external to Sydney Water. He certainly did not disclose to anyone at Sydney Water Mr Makucha's discovery in relation to class 32 until at least 27 January 2010. The subterfuge undertaken by Mr Harvey was seemingly quite elaborate. He was of course in total control of the proceedings in relation to the property at Baxter Road. He managed to keep entirely secret from employees, most importantly those persons to whom he reported at Sydney Water during 2009, that he was in fact contriving consent orders with Mr Makucha which had the effect of staying the execution of the writ of possession. Further, he did not disclose the fact or the extent of his contact with Mr Makucha notwithstanding that many of their meetings took place at Sydney Water's premises either in the foyer or in meeting rooms on the premises. He never told anyone about his negotiations over the many drafts of the agreements, nor the roles of Mr Malacco or Mr Stafford. Until Ms Valentine made her discovery in relation to the various invoices rendered by Mr Makucha, Mr Harvey quite dishonestly facilitated them being processed. In his evidence he accepted that in no case did he believe any invoice represented a genuine transaction which benefited Sydney Water. 94Mr Makucha rather proudly identified this secret process of dealing with Mr Harvey as "single channel focussing". Indeed, Mr Makucha put to Mr Harvey during cross examination that he had told Mr Harvey that he did not trust any of the executives at Sydney Water and that his greatest fear was that he would get "shafted" and that was the principal reason for him requiring Mr Harvey to maintain confidentiality in relation to their dealings. 95As I have already observed, the CBIA was executed by Mr Harvey in early December 2009. It was drafted by Mr Michael Stafford, solicitor, between August and December. In the end there were twenty seven (27) increasingly complex drafts of that agreement. 96Somewhat bizarrely, notwithstanding it had gone through so many drafts, Mr Harvey in his evidence said that he merely signed the document ultimately when requested to do so by Mr Makucha. He did not read through the document in any detail but merely flicked through some of the pages. Mr Harvey insisted that he wanted to finalise what he described as an executive summary to append to the agreement which could ultimately, according to him, be presented to the Board of Sydney Water. 97A matter (not pleaded) arose in the proceedings whereby Mr Makucha asserted that a version of the CBIA had been manipulated or improperly altered. The argument Mr Makucha advanced was that because one copy of the CBIA appeared not to have been signed by Mr Harvey, it followed that his signature had been removed as part of some sinister plot directed at him in order to defeat him in the litigation. 98There is no doubt that both Mr Harvey and Mr Makucha executed the CBIA on 3 December 2009. Sydney Water has never disputed (and has pleaded from the outset) that Mr Harvey executed that agreement. 99Mr Harvey gave evidence that Mr Makucha had two copies of the CBIA on 3 December when the two met. Mr Harvey said that he signed one copy and was given a suitcase by Mr Makucha in which Mr Makucha indicated that it contained, "all the CBIA documents". He also said the execution page had both his and Mr Makucha's signatures. 100In his cross examination however Mr Harvey said he signed two copies of the CBIA. It does seem to me that he is mistaken in that recollection. 101The CBIA was executed by Mr Harvey and Mr Makucha at page 57 of the document. A complete copy of the CBIA, which is in the plaintiff's tender bundle, does not bear Mr Harvey's signature but does bear that of Mr Makucha and also that of Mr Stafford. This document clearly came from Mr Harvey. 102I accept Mr Stafford when he said that he witnessed Mr Makucha's signature in his offices and before Mr Harvey had executed the document. 103The copy of the execution page which Mr Sesel says Mr Harvey gave him at the end of their interview on 27 June 2010 and which is attached to Mr Sesel's affidavit, bears both Mr Harvey's and Mr Makucha's signature. 104On the facts the most obvious conclusion is that Mr Harvey, when he received the suitcase full of documents from Mr Makucha, simply did not execute every copy and kept one with Mr Makucha's signature alone. I should also say there is no evidence whatsoever that the complete copy of the CBIA that was in Sydney Water's possession has been interfered with or manipulated, nor does it make sense that that would have been the case as the plaintiff has at all times accepted Mr Harvey executed the CBIA. 105The allegation of impropriety in relation to the "missing" signature was however agitated on numerous occasions by Mr Makucha, including as recently as 22 November when he sought my leave to file a cross claim to yet again ventilate this issue. I refused such application. 106The innocuous and obvious conclusion that Mr Harvey was simply mistaken in his belief that he had signed all copies of the CBIA escaped Mr Makucha who by far much preferred his own sinister conspiracy theory. His theory had no place in the case, the only relevant issue being Mr Harvey's authority. 107As I have already observed and in any event during the course of the hearing Mr Makucha appeared to accept that Mr Harvey had no authority to execute the CBIA. 108Mr Makucha conceded in his evidence that he knew that the approval of the Board was required for "anything beyond a confidentiality agreement". At another point in his evidence he accepted that that Board approval was needed for the "final agreement between himself and Sydney Water". At another point in his evidence he accepted that Board approval was needed for the "joint venture". 109It is plain that on Mr Makucha's evidence he did not believe that Mr Harvey had authority to do anything more than execute a confidentiality agreement. Everything else was a matter for the Board. 110Both his legal and accounting advisers, that is Mr Stafford and Mr Malacco, were at pains to draw to Mr Makucha's attention the potential limitations on Mr Harvey's authority. It is clear to me that Mr Makucha knew or did not really want to know what the true position was. That rather explained to my satisfaction why Mr Makucha insisted that Mr Stafford for example remove a clause which Mr Stafford had proposed be inserted in the CBIA which would have obliged Mr Harvey to provide evidence of his delegated authority. Mr Makucha in my mind had had sufficient commercial experience to know that the joint venture agreement, including the provisions about trademarks, would likely be way outside the scope of any authority on the part of someone like Mr Harvey. Leaving aside its grandiose aspects it could not have been regarded in my view by Mr Makucha as a reality that Mr Harvey could have bound Sydney Water to an agreement as complex as the CBIA. 111In his judgment in Sydney Water Corporation v Makucha [13] to [30] White J analysed the CBIA. As his Honour observed "the agreement is complex and requires execution of numerous additional agreements". 112It is not possible in my opinion to improve upon the concise but thorough analysis of the CBIA undertaken by White J. I respectfully adopt his analysis. For present purposes however it is sufficient for me to simply observe that amongst other things the CBIA contemplated all manner of commercial dealings between Sydney Water and Mr Makucha and/or his corporate entities (for example Paul Makucha Holdings Pty Limited (PMH). 113The agreement involved for example payment of monies by the plaintiff to PMH upon the happening of certain events with for example no obligation on the part of either PMH nor Mr Makucha to contribute funds. There was a labyrinth of so called project entities contemplated by the agreement comprising in total thirty (30) companies. Further, the agreement contemplated the payment of royalties, the setting up of a banking business predominately providing finance into the home unit market and the issue of free computers to all customers of the plaintiff to facilitate the electronic payment of their accounts. As White J observes, additional projects were contemplated by the CBIA to be conducted through different project entities which included analysis of narcotics from sewerage, diabetes analysis, the operation of offshore desalination plants and ships operated by nuclear power or liquid gas, water trading and the purchase and resale of drinking water around the world using ships specifically designed according to the specifications of Mr Makucha. Other clauses dealt with topics such as the payment of Mr Makucha's health insurance premiums and arranging his transport and admission to the Mayo Clinic or St Vincent's Hospital if seriously injured or sick. Further, should Mr Makucha become aware of a terrorist attack the plaintiff was to ensure that his concerns were properly investigated by the relevant authorities. 114As White J further observed at [57] the agreement contained onerous terms for Sydney Water. Examples of such terms included clauses 4.3 and 4.4 dealing with the assessment of damages, clause 10, dealing with the valuation of what is described as the Makucha Intellectual Property, the failure to specify the Makucha intellectual property and the substantial payments running into millions of dollars (as least $16 million for the royalties payable by Sydney Water P) to be made for the use of Sydney Water's own name and logo albeit in respect of a new class of goods. 115When one looks at its complexity and the diverse topics dealt with by the CBIA and the numerous additional entities and agreements contemplated by it, it is inconceivable as I have said in my mind that Mr Makucha could ever have thought that Mr Harvey had authority to enter such an agreement. I am quite confident that his state of mind was that he was engaged in an elaborate strategy at Sydney Water's expense to create an edifice in order to gain some commercial leverage which he could exploit in due course. 116I am satisfied and so find that Mr Harvey for example believed he had no authority to execute the CBIA and he repeatedly told Mr Makucha about his perceived lack of authority. In particular, aside from entering a confidentiality arrangement, Mr Harvey was at pains to make clear to Mr Makucha that whilst he could deal with him to a point, he would have to provide or present a detailed executive summary of the joint venture proposal to the Board for its consideration. Mr Harvey stated in his evidence that he told Mr Makucha and I so find that whilst he was happy to sign a confidentiality agreement he did not otherwise have the delegated authority to bind Sydney Water. Mr Harvey however was prepared for example in the letter of 10 September 2009 to state that he did have appropriate delegated authority to act on behalf of Sydney Water in dealings with Mr Makucha. He said in his evidence that he did not believe that was true. He accepted that what he told Mr Makucha was a false statement and that he did not believe he had authority to deal with any party in relation to a proposed joint venture. 117Importantly, Mr Malacco gave evidence that on or about 10 September 2009 Mr Harvey said in his and Mr Makucha's presence that he could negotiate but that he did not have any authority to bind Sydney Water to the joint venture. Further, he went on to say that any deal had to be given to the Board of Sydney Water for approval. I accept Mr Malacco's evidence. I also accept that Mr Harvey said just that. 118It is difficult to identify precisely why Mr Harvey made some of the statements he did in relation to his alleged authority. One can only surmise he felt some compelling desire to please Mr Makucha and was accordingly from time to time provoked to state that he did have authority to negotiate the "project on behalf of Sydney Water", when he did not believe he did. 119It is abundantly clear as White J pointed out at [43] of his judgment of 25 February 2010 that Mr Makucha only ever dealt with Mr Harvey. 120For a principal to be bound by authority ostensibly but not actually conferred on its agent there must be a representation by the principal and not by the agent himself as to the extent of the agent's authority. 121The High Court in Pacific Carriers Ltd v BNP Paribas said at [36]: "In Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd, and in Northside Developments Pty Ltd v. Registrar-General, this Court followed and applied Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd as to the general principles concerning the apparent or ostensible authority of an officer of a company dealing with a third party. Where an officer is held out by a company as having authority, and the third party relies on that apparent authority, and there is nothing in the company's constitution to the contrary, the company is bound by its representation of authority. "The representation, when acted upon by the contractor by entering into a contract with the agent, operates as an estoppel, preventing the principal from asserting that he is not bound by the contract." It is not enough that the representation should come from the officer alone. Whether the representation is general, or related specifically to the particular transaction, it must come from the principal, the company. That does not mean that the conduct of the officer is irrelevant to the representation, but the company's conduct must be the source of the representation. In many cases the representational conduct commonly takes the form of the setting up of an organisational structure consistent with the company's constitution. That structure presents to outsiders a complex of appearances as to authority. The assurance with which outsiders deal with a company is more often than not based, not upon inquiry, or positive statement, but upon an assumption that company officers have the authority that people in their respective positions would ordinarily be expected to have. In the ordinary case, however, it is necessary, in order to decide whether there has been a holding out by a principal, to consider the principal's conduct as a whole." 122As Diplock LJ pointed out in Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd at 503 the most common activity on the part of a company from which it may be inferred that the agent is acting with ostensible authority is the way in which a company conducts itself by, for example, permitting the agent to act in some way in the conduct of the principal's business with other persons. 123It is one thing for Mr Harvey to have instructed solicitors for Sydney Water in the eviction proceedings concerning the property at Baxter Road. As a manager in the property division of the company that type of activity would and should be regarded as wholly unexceptionable. But entering into contracts such as the CBIA in my opinion fell into an entirely different category. Mr Stafford and Mr Malacco 124I have already observed both Mr Stafford and Mr Malacco were retained by Mr Makucha to advise him and the other defendants on aspects of the joint venture. Both gave him relevant and accurate advice especially about Mr Harvey and his authority. Mr Makucha basically it seems to me ignored much of what he was told. 125It is particularly telling from the evidence of Mr Stafford, which I accept entirely, that he was very much alert to the question of authority. He had worked for the State Crown Solicitor and knew only too well that when dealing with government departments it was usual for persons signing documents on behalf of those departments or instrumentalities to have the appropriate delegated authority in writing. I accept that he advised Mr Makucha that he needed to sight Mr Harvey's authority to sign the proposed agreement. I also accept that he advised Mr Makucha that if anyone below the relevant minister or Director General were to sign an agreement on behalf of Sydney Water they would have to have appropriate delegated authority. 126Although Mr Stafford knew that any letters signed by Mr Harvey merely asserting his authority would not of itself be evidence of that authority, he was, I am persuaded, concerned to ensure that this matter was appropriately dealt with because he was of the view that if any agreement be signed it should not merely be signed by, for or on behalf of an employee of Sydney Water. Further, I accept that Mr Stafford advised Mr Makucha that if it turned out that Mr Harvey did not have authority to execute the agreement that that agreement would not be enforceable. Mr Stafford also said, and I accept, that he had two relatively brief meetings with Mr Harvey in about September 2009. He said that he did not discuss the question of authority with Mr Harvey on those occasions. 127Mr Stafford said that on or about 22 September 2009 he observed the draft agreement becoming more complicated and advised Mr Makucha that Mr Harvey would need to produce evidence of his delegated authority. Mr Stafford describes the events which thereafter followed. He observed that Mr Makucha became agitated and accused him effectively of trying to sabotage the "deal". Mr Stafford said that Mr Makucha said to him, and I accept, that "if I ask him to produce evidence of authority now he will think I do not trust him. It sounds like you are not on my side. You might as well start working for Champion Legal". Champion Legal was a firm of lawyers acting for a creditor attempting to recover monies from Mr Makucha. 128Mr Makucha's reaction seems to me indicative of him simply turning a blind eye to the true position. He was thereby unwilling to confront the question of authority honestly. 129Mr Stafford also gave evidence that in draft twelve (12) of the CBIA, prepared on or around 6 October 2009, he included a clause 7.12 (which in turn became clause 8.12). The thrust of the clause was to oblige Mr Harvey to produce a copy of his delegated authority at the time of signing the agreement. In addition draft clause 7.12 provided: "Sydney Water agrees at the signing of this agreement to provide Makucha with a copy of the authority from its Board of Directors evidencing the grant of such delegated authority for the Key Employee to sign this agreement and any other agreements as contemplated by this agreement on behalf of Sydney Water." 130Mr Stafford said that he had a meeting with Mr Makucha on 7 October during a review of one of the drafts. Mr Makucha referred to the additional words set out above and again accused Mr Stafford, whose evidence I accept, of trying to sabotage the deal. Mr Stafford says that he told Mr Makucha that such a provision was needed and that it was his advice that such a clause should be included so that there could be no issue about Mr Harvey's authority to execute the agreement on behalf of Sydney Water. Mr Stafford said, and again I accept him entirely, that Mr Makucha gave instructions to take the words out. Mr Stafford, for reasons he could not explain, did not immediately delete the wording but in any event during a later meeting with Mr Makucha, Mr Stafford observed Mr Makucha crossing out the relevant words and he said that he wanted Mr Stafford to take the words out. On draft 17 dated 29 October 2009 Mr Stafford made a note adjacent to the then proposed clause 8.12 as follows: "PM wants out despite my advice". 131In subsequent drafts he merely inserted an execution clause that made reference to an "instrument of delegation" and a "book number". He is certain that he would have brought to Mr Makucha's attention the form of the execution clause and advised him that it would be necessary for Mr Harvey to complete the details before signing the agreement. I accept Mr Stafford in that regard. He did have some recollection of discussing the form of execution clause with Mr Makucha. 132I do not accept Mr Makucha when he said that he was not asked by Mr Stafford to get a copy of Mr Harvey's authority. Mr Makucha tried to suggest that Mr Stafford's evidence was indeed untruthful but as far as I am concerned that description can only be applied to Mr Makucha's evidence. Mr Makucha was quite willing as he was on other occasions to make disparaging remarks about persons referring as I understood him at one point to the fact that "lawyers frequently make false notes". That, I must say, is typical of the kind of baseless allegation made from time to time by Mr Makucha when he had no rational basis upon which to contest some obvious proposition or fact. 133Mr Malacco gave evidence that he asked Mr Makucha to find out what Mr Harvey's authority was and said that Mr Makucha responded by saying: "I dont want to put Mr Harvey off by forcing him to show me his authority." 134I accept Mr Malacco's evidence on this matter. 135In my view the evidence as a whole supports a finding which I make that Mr Makucha knew at all relevant times that a letter from Mr Harvey asserting his authority while it could be obtained was insufficient to establish his authority. Further, he quite deliberately did not require that Mr Harvey produce evidence of his authority. He clearly did not believe that Harvey could speak with sufficient authority to enter into the CBIA. 136There is simply no evidence at all that any person at Sydney Water made any representation or by their conduct did anything to convey an impression or assurance to Mr Makucha concerning Mr Harvey's authority. Mr Makucha attempted to rely upon the terms of Mr Harvey's business card and of the fact that he authorised payment of invoices. In my opinion both of those matters are untenable, and provide no evidence of authority. Nothing flows from Mr Harvey's position as Property Asset Manager at Sydney Water sufficient to constitute a representation that he had for example authority to enter into the CBIA. 137I entirely agree with the submissions made on behalf of the plaintiff that no legitimate inference could be drawn from the position occupied by Mr Harvey to the effect that the act of placing him in that position would give him authority to conclude an agreement of the far reaching kind represented by the CBIA. As White J pointed out in his judgment the defendants were indeed put upon enquiry as to Mr Harvey's authority if by nothing else but the very nature of the transaction. On its face as White J observed the agreement was one which contemplated Sydney Water embarking on a joint venture in new areas of business and not as part of its existing or core business. This was after all Mr Makucha's commercial objective. He was attempting as I understood it to increase the size and scope and hence the value of Sydney Water by seeking to steer it into novel and innovative areas of commercial activity. 138In addition there were of course terms and conditions of the agreement which benefited Mr Harvey. As is pointed out by the plaintiff it is not within the scope of an agent's authority to bind the principal by a contract which although made ostensibly on behalf of the principal is to the knowledge of the other party made for the agent's own benefit even if the contract is of the kind which the agent has general authority to make. 139In Lysaght Bros. & Co Ltd v Falk , Griffith CJ made the following observations at 431: "If the agent has acted in his own interest, he does not bind his employer. But there is an exception to this rule in the case of a person dealing bona fide with the agent without knowledge of the limitation of his authority. That is based upon the principle of estoppel; but there can be no estoppel if the person dealing with the agent knows the actual facts, and knows that the agent is acting in his own interests and not in the interests of his employer." 140Mr Makucha knew that Mr Harvey was to take a benefit under the arrangements and was obviously acting in his own interests and not in the interests of Sydney Water. Mr Makucha was well aware of the provisions of the CBIA and took an active role in carefully attending to the drafting of that agreement. He clearly knew that Mr Harvey was proposed to be a trustee of the Makucha Foundation. Mr Harvey of course knew that he was receiving a benefit and ultimately told Sydney Water in January 2010 of the benefit to accrue to him under the proposed arrangements. 141In particular Mr Harvey was to be appointed as a director of Sydney Water P Pty Limited when Sydney Water became a shareholder of that company and was to be appointed as a director of the parent company and the project entities when Sydney Water became a group member. Additionally, Mr Harvey was to be a trustee of a charitable trust and was to receive $25,000 in annual remuneration increased to $75,000 and a motor vehicle when Mr Makucha died. Sydney Water was clearly not aware of these arrangements, nor of Mr Harvey's so called agreement in relevant respects. Mallesons 142An issue that arose at the trial was an assertion by Mr Makucha that he attended Mallesons' offices on 15 May 2009 to discuss the prospect of them accepting a retainer to act as it were for him and Sydney Water on the joint venture. Mr Makucha said that whilst he was at their office on 15 May 2009 he gave an employee of Mallesons a letter dated that day. In particular he said he left it with a Mr Nicholas Smith, solicitor. As a result he asserted that as Mallesons had acted for Sydney Water, it was its agent and thereby had obtained knowledge of the proposed joint venture and the dealings between Mr Makucha and Mr Harvey from that day. 143This evidence potentially goes to the question of whether it could be argued that somehow Sydney Water was put on notice of Mr Makucha's activities and whether from the middle of May 2009 Sydney Water could be said to have represented that Mr Harvey was authorised to undertake negotiations with Mr Makucha. The relevant events in my opinion when carefully examined do not lead to that conclusion factually or legally. 144On 15 May 2009, somewhere between 9.30am and 10.00am, Mr Nicholas Smith a solicitor employed at Mallesons received a telephone call from Mr Makucha. Mr Smith said that Mr Makucha identified himself as a business man who was involved in a joint venture with Sydney Water for the production of bottled water. He told Mr Smith he was looking for a firm to assist him with the registration of a trade mark for the bottled water. He was enquiring whether Mallesons had any conflict. He told Mr Smith that two other IP firms including Spruson and Ferguson had refused to act because of conflicts. Mr Smith indicated that he did not think there would be a problem but he would need to check. Mr Makucha then gave him the details for Sydney Water P Pty Limited including the ACN number. 145Mr Makucha further asked whether he could give Mr Smith a copy of his instructions later in the day. Mr Smith said that he was happy to meet at 2.30pm but he would call Mr Makucha back and confirm whether or not Mallesons could act. I should indicate that I accept Mr Smith's version of that initial conversation. He prepared a contemporaneous diary note which in my view corroborates the substance of that conversation. 146As a result of the telephone conversation Mr Smith requested his secretary to procure an urgent conflict search in relation to Mr Makucha. He also requested a company search on Sydney Water P. Mr Smith then did some research on the internet on Mr Makucha. The research amongst other things disclosed an article in the Sydney Morning Herald concerning various unflattering events relating to Mr Makucha. 147At approximately 10.21 on the same morning Mr Smith sent an email to Mr Zipfinger, a partner at Mallesons. The email referred to the unsolicited call from Mr Makucha and explained that the reason why Mr Smith was corresponding with Mr Zipfinger was that the partner to whom he would normally report, Mr Gonsalves, was out of the office. The email went on to indicate that Mr Makucha had informed Mr Smith about a joint venture with Sydney Water. Mr Smith indicated that he was going to see Mr Makucha again on that day at 2.30pm to discuss whether Mallesons could act for him. Mr Smith noted in the email that it was proposed that Mallesons receive a letter of instructions later that day from Mr Makucha. 148Later again in the morning Mr Smith received a telephone call from Mr Zipfinger. The two discussed the nature of the approach by Mr Makucha. Mr Zipfinger noted that normally instructions relating to Sydney Water came directly from its legal counsel. Mr Zipfinger recommended that Mr Smith speak to Mr Stewart Fuller, one of the firms two managing partners before any instructions were accepted. 149At 11.19am a company search was obtained which disclosed that Sydney Water P Pty Ltd was a company solely owned by Paul Makucha Holdings Pty Ltd. 150As Mr Fuller was not in the office Mr Smith had a meeting with Mr O'Malley the other managing partner. Mr O'Malley told Mr Smith that even in the context of an alleged joint venture Mallesons could only accept instructions directly from Sydney Water's legal team and not a third party and the matter would need to be cleared with Sydney Water's legal team and the Mallesons new client committee. Again I accept that all of these events occurred as suggested by Mr Smith. Again he kept contemporaneous notes of his meeting with Mr O'Malley. 151After the meeting with Mr O'Malley Mr Smith called Mr Makucha at approximately 11.48am. He informed Mr Makucha that having spoken to the conflicts team at Mallesons the firm would not be able to accept instructions from him. He further told Mr Makucha that in matters involving Sydney Water, Mallesons could only accept instructions directly from Sydney Water's legal team. Mr Makucha indicated that he had instructions from Sydney Water to register the trade mark and asked whether that was sufficient. Mr Smith asked Mr Makucha who the instructions were from and specifically whether they were from Sydney Water's counsel. Mr Makucha said that the instructions were from a senior manager in response to which Mr Smith indicated that unless instructions were received from Sydney Water's legal team Mallesons could not act. Mr Makucha expressed his disappointment and asked that the matter be confirmed in writing. Mr Smith offered to email such confirmation to Mr Makucha but Mr Makucha said first he wanted a letter from the managing partner of Mallesons and secondly as he liked to do things personally he would call into the offices at 2.30pm and pick up the letter. Again I accept Mr Smith's version of that conversation. He again prepared contemporaneous notes which corroborate the substance of the conversation. 152Following the telephone call Mr Smith prepared a short letter stating that Mallesons could not act for Sydney Water P Pty Limited. He took it to Mr O'Malley for signature. Mr Smith said he informed Mr O'Malley that he had told Mr Makucha that Mallesons could not act without instructions from Sydney Water's legal team. He told Mr O'Malley that he had prepared the letter at the request of Mr Makucha. At the time the letter was prepared and signed by Mr O'Malley neither he nor Mr Smith picked up a minor typographical error in it. 153At approximately 2.30pm Mr Smith met with Mr Makucha in the reception area at Mallesons. As Mr Smith did not anticipate the meeting would take very long he had not booked a conference room. He handed the letter signed by Mr O'Malley to Mr Makucha. He also confirmed with Mr Makucha that Mallesons could not act unless they received confirmation from Sydney Water giving them permission to do so. Mr Makucha then asked who could provide the confirmation to Mallesons to which Mr Smith indicated yet again that it would be Sydney Water's legal counsel. 154During their brief meeting Mr Makucha identified a typographical error in the letter and requested that it be corrected and signed again. Mr Smith indicated that the typographical error could be fixed and that the letter could be sent or emailed to Mr Makucha. Mr Makucha refused that offer and wanted the letter corrected immediately. Mr Smith then left the reception area to have the letter corrected but Mr O'Malley was no longer available to sign the letter. He returned to the reception area with an unsigned version of the letter. Both it and the previous letter confirmed that Sydney Water was a client of Mallesons and that if the firm was to accept a retainer in relation to the registration of a brand name for a proposed joint venture, confirmation would have to be obtained from Sydney Water itself. 155When Mr Smith returned to the reception Mr Makucha was on his mobile. Mr Smith decided to remain a short distance away so as to not overhear Mr Makucha's conversation. After Mr Makucha had concluded his telephone call Mr Smith handed the unsigned letter to Mr Makucha and Mr Makucha indicated that he would get back to Mr Smith with instructions "by the middle of the following week". 156Mr Smith said in his evidence that although Mr Makucha mentioned a joint venture and mentioned an application for a trade mark he never identified what trade mark was to be registered by Sydney Water P. Mr Smith also said in his evidence, which I accept entirely, that at no time did Mr Makucha show Mr Smith any documentation relating to the matter. He also said and I again entirely accept that in particular Mr Makucha never left him with a copy of a letter dated 15 May 2009 which on its face was directed to Mr Smith, the managing director of Sydney Water, Mr Harvey and Mr Malacco. 157Other persons from Mallesons who were also called in evidence before me deny ever having seen such a letter. I entirely accept their evidence as well. 158Mr Smith in his email to Mr Zipfinger of 15 May makes mention of a letter of instruction which Mr Makucha indicated he would hand over during the day. However, in a subsequent email to Mr O'Malley and others Mr Smith refers to the meeting with Mr Makucha but specifically refers to not having received "his instructions" from Mr Makucha during the meeting. This provides in my view contemporaneous support for Mr Smith's evidence on this point which I accept. 159Mr Makucha in his evidence asserted that he did in fact leave a copy of the letter of 15 May with Mr Smith during his meeting in the reception area at Mallesons. I reject that evidence. It is clear that Mr Makucha prepared or had the letter prepared on 15 May. It is also clear that the letter was prepared probably after his first telephone contact with Mr Smith, hence Mr Smith being identified on the face of the letter. However, the terms of the letter make clear that it would only be relevant in the event that Mallesons had been prepared to accept the retainer from Mr Makucha. For example the letter not only informed Mallesons about the joint venture but it was proposed that there would be two annexures placed with the letter, which are referred to in paragraphs 8 and 9. Mr Makucha in his evidence never suggested that annexures A and B were left with Mr Smith at the time he asserts he left the letter of 15 May. Mr Makucha was of course told by Mr Smith in his conversation at 11.48am on 15 May that Mallesons would only accept instructions from Sydney Water's legal team and not a senior manager. It is at that point that Mr Makucha required confirmation in writing to the effect that Mallesons would not act unless such confirmation was obtained. In the light of that discussion it would have made no sense at all for Mr Makucha to have left the letter of 15 May because until confirmation of the sort required by Mallesons had been obtained no retainer was going to be entertained. For these reasons Mr Makucha's version of events which I have rejected is indeed glaringly improbable in any event. 160On the facts as I have found them, I do not consider that Sydney Water can be attributed with the knowledge of Mr Makucha's approach to Mallesons. The evidence supports that Mallesons were only instructed from time to time on matters as and when Sydney Water required their assistance and they were not in any event the sole solicitors for Sydney Water. 161It is simply not established on the evidence that Sydney Water was accustomed to retaining the services of Mallesons in relation to company names or trademarks. But even had it been established, that fact alone would not constitute Mallesons as a standing agent to receive notice of material facts. As is made clear in the New South Wales Court of Appeal in White v Illawarra Mutual Building Society Ltd at [128] per Powell JA (with whom Hodgson JA and Hamilton J agreed) "the fact that a client might be accustomed to retain the services of a particular solicitor or firm of solicitors in matters of a particular type does not constitute that solicitor or that firm of solicitors the client's standing agent to receive notice of material facts". 162I do not consider that Mallesons could be regarded as agents for Sydney Water to receive the communications from Mr Makucha. 163The retainer which Mr Makucha was inviting Mallesons to accept was of course a retainer on behalf of his interests and/or his interests and Sydney Water. The matter was dealt with by Mallesons purely as a matter of principle. It was not a retainer which Mallesons were prepared to accept. There the matter rested. Mr Makucha was of course never going to be in a position nor did he ever wish to at this stage go beyond Mr Harvey so as to secure a proper retainer for the joint venture. He had no plans for himself or for Mr Harvey to approach anyone at Sydney Water, especially their legal team. In his mind he had not yet achieved the execution of the relevant documents which he regarded as necessary to protect his interests. In all the circumstances this evidence does not and cannot amount to Sydney Waters' knowledge of Mr Makucha's alleged joint venture. Such knowledge as Mallesons acquired, to the limited extent that the firm did acquire knowledge, cannot be in my view imputed to Sydney Water. Conclusion on Authority 164In my opinion Mr Harvey did not have any relevant authority actual or ostensible to enter any of the so called agreements he purported to enter on behalf of Sydney Water. It also follows that Sydney Water was not a party to any valid or binding agreement of 3 December 2009 (the CBIA) or for that matter any of the alleged agreements of 11 June, 18 September or 30 October 2009. The Invoices General 165I have already observed that between 25 November 2008 and 3 December 2009 Mr Harvey submitted twenty (20) invoices to Sydney Water for payment to Mr Makucha. Fifteen (15) of those invoices required payment to a company associated with Mr Makucha, namely Mascot Administration Services Pty Ltd. Five (5) of the invoices were on Hall Chadwick letterhead and required payment to that firm. 166Although Mascot Administration Services was deregistered on 2 February 2009 nonetheless payment of a number of the invoices was made into the account maintained by that entity. The defendants admit that Mr Makucha caused such payments to be withdrawn from that account in cash soon after deposits were made. 167Mr Harvey caused all twenty (20) invoices to be paid by lodging the invoices with the "accounts payable" section of Sydney Water. He did this without informing Mr Inberg or anybody else at Sydney Water. 168Mr Harvey agreed in his evidence that he had no authority to process or direct payment of the invoices. He said in respect of each of the invoices that in approving the invoice for payment he knew he was causing Mr Makucha to be provided with funds to which he was not entitled and would not without Mr Harvey's assistance have ever received from Sydney Water. 169In my opinion the invoices should properly be viewed as a series of unauthorised payments to Mr Makucha or in the case of the Hall Chadwick invoices, should be viewed as being for his benefit in order to discharge liabilities he had incurred. In the course of the hearing Mr Makucha sought to assert from time to time that the invoices were genuine and that Mr Harvey had the requisite authority or in fact Sydney Water obtained value for the payments. I reject those propositions. At no time during the course of the evidence did Mr Makucha ever attempt to justify by any credible evidence that the payments pursuant to the invoices were justifiable, except to merely assert that they were. 170In my view the evidence supports the proposition that none of the invoices evidenced a genuine transaction and none of the Hall Chadwick invoices evidenced a genuine acquisition of services in relation to the business of Sydney Water. 171Mr Makucha also had the opportunity to cross examine all of the persons who gave evidence on behalf of Sydney Water and who were involved in the processing and payment of those invoices. That evidence again persuades me that all of the relevant employees (excluding Mr Harvey) were operating under the mistaken belief that each invoice was a genuine liability of Sydney Water which had been honestly authorised to be paid by Mr Harvey. In particular I have in mind the evidence which I accept of Ms Valentine, Mr Hussain, Mr Innes and Mr Massih. 172Mr Harvey's evidence was that the invoices did not reflect genuine transactions. There is an abundance of evidence to that effect and I accept Mr Harvey in relation to that matter. Insofar as Mr Makucha attempted or did in fact put contrary propositions I reject them. Invoices 1 to 5 ($27,500) 173The first five (5) invoices the first of which was dated 25 November 2008 ($5,000) sought payment for part of an amount of $27,500 agreed by Mr Makucha on 11 November 2008 to be payable only if he vacated Baxter Road. Mr Makucha knew he had not vacated Baxter Road and he must have known that he was not entitled to the payment of the $27,500 or part thereof. Mr Harvey knew that Mr Makucha was not entitled to that payment and that he had no authority to authorise the payment. That payment did not benefit Sydney Water. The real purpose and I so find on the evidence for the payment of the monies was to provide cash for Mr Makucha's living expenses. The same comment can be made in respect of invoices two to five inclusive. Apart from the fourth invoice which was for $7,500 all other invoices were for the amount of $5,000. 174Mr Makucha created a diary note of 17 April 2009. That diary note is illuminating. It is in the form of a cash flow. At the top of the diary note there is the word "money" underneath that the word there appears the words "in - $27,000". There is thereafter recorded after the word "out" a number of items which clearly identify debts or expenditure that Mr Makucha was forecasting. For example, an amount of $3,500 is identified for the registration and service of his mercedes motor vehicle. There is also a reference to parking fines. There is no doubt in my mind, and I so find, that the note corroborates the fact that Mr Makucha used these monies as Mr Makucha described it to Mr Harvey to keep "afloat". Mr Makucha accepted as I understood it that the money received from these invoices was used for his personal expenses. 175Rather than this being a series of payments related to his vacation of Baxter Road or at least having some commercial foundation that could readily be seen to be in the interests of Sydney Water they are consistent with payments made in breach of or contrary to the terms of Mr Makucha's agreement to vacate the premises. There can be no suggestion as a matter of law that Mr Makucha gave any consideration for the agreement to pay these sums. The arrangement that was made was that a payment of monies would be made upon his vacating Baxter Road. He never attempted to vacate the premises until ultimately he was evicted by the Sheriff. 176It follows that Mr Makucha was not entitled to those funds and further that he must have known that Mr Harvey had no authority to permit Sydney Water's funds to be used to pay any of Mr Makucha's personal expenses. Payments to Hall Chadwick 177Hall Chadwick Accountants were providing professional services to Mr Makucha. There are in total five (5) payments to them. 178In my view the facts support only one conclusion namely that Hall Chadwick were acting for and on behalf of the interests only of Mr Makucha, not Sydney Water. Sydney Water did not benefit from the payment of those monies. Further Mr Harvey had no authority to retain Hall Chadwick for Mr Makucha's benefit and he had no authority to approve those payments. 179The payments were obviously for the benefit of Mr Makucha and his companies in relation to their own affairs (including preparatory steps for a joint venture to which Sydney Water had not agreed) and they satisfied a debt that otherwise would have been owed by Mr Makucha and/or his entities to Hall Chadwick. 180There is simply no basis for Sydney Water being responsible for these costs. These were costs incurred by a potential joint venture partner prior to and in relation to the formation of the joint venture. 181Mr Makucha, as I have already observed, agreed in the course of the running of the trial that he knew that the joint venture if it was to proceed required approval by the Board of Sydney Water. The Hall Chadwick costs were incurred before any such approval and cannot on any view be regarded as being properly payable by Sydney Water and in relation to which Sydney Water derived any benefit. 182I have in any event already found that Mr Harvey had neither actual nor ostensible authority to negotiate or bind Sydney Water to the joint venture and it follows that he could not have sanctioned payments of these costs. 183Mr Makucha knew that Mr Harvey lacked authority to approve the joint venture and he also knew that Mr Harvey had no authority to approve the prior invoices used by Mr Makucha for his living expenses. He must also be taken to have known that Mr Harvey had no authority in respect of these expenses even if they could be characterised somehow as expenses of the joint venture. 184Mr Harvey clearly knew that he had no authority to arrange for the Hall Chadwick invoices to be paid. He agreed when he gave evidence before ICAC that he was not authorised by Sydney Water to retain Hall Chadwick and to agree to pay that firm's fees. He also agreed that he was not authorised to arrange payment relating to either Mr Makucha or to any potential business venture with Mr Makucha. Mr Harvey further agreed that the work done by Hall Chadwick benefited Mr Makucha and did not benefit Sydney Water. 185Mr Malacco accepted at the hearing before ICAC and before me that Mr Makucha and not Sydney Water was his client. 186It follows that Sydney Water was not liable for these payments and they were expended without its knowledge and consent. Invoice No 10 ($19,500) 187This was one of the more blatant contrivances agreed between Mr Harvey and Mr Makucha; on this occasion to pay Mr Makucha's Hilton Hotel bill. 188The invoice purports to be for the sale of two air conditioned site offices and one ablution block including a toilet. 189Mr Harvey in his evidence said that shortly before 21 May 2009 he had a conversation with Mr Makucha in which Mr Makucha said to him that he was having trouble with the Hilton. Mr Harvey understood it to be a reference to the Hilton Hotel in Sydney. Mr Makucha asked Mr Harvey was it possible to get some additional funds. He said he would look at a number of options and produce an invoice. 190On 22 May 2009 Mr Harvey received a letter from the guest relationship manager at the Sydney Hilton. The letter confirmed that Mr Makucha was currently a guest at the hotel and confirmed that his room rate was $199 per night. It appears from the letter that Mr Makucha had negotiated a 50% discount on photocopies during his stay. The letter enclosed a credit card authorisation form to be completed by Mr Harvey so the charges could be processed. 191On or about 25 May 2009 Mr Makucha provided Mr Harvey with a certificate of registration for a company known as Sydney Water Health Pty Limited. 192Following the conversation concerning the hotel bill and probably as Mr Harvey puts it before 26 May, Mr Makucha provided Mr Harvey with an invoice for the payment in the amount of $20,000 in the name of Paul Makucha Holdings Pty Limited. The invoice described payment as an initial deposit for entering into the joint venture and for the provision of $10 million benefit to Sydney Water Corporation. 193Mr Harvey gave evidence, which I accept, that Mr Makucha had arranged for a letter to be drafted by Mr Malacco of Hall Chadwick which made reference to a "small deposit of $20,000" to be paid by Paul Makucha holdings Pty Limited by 29 March 2009 "as a sign of good faith". 194Mr Harvey says that he told Mr Makucha that the payment was problematic as there was no joint venture entered into yet. Mr Makucha asked how he could get some money and Mr Harvey asked whether there were any assets at Baxter Road which Mr Makucha could sell. Mr Makucha said he would review the position. 195The so called air conditioned site offices and ablution block for some time prior to 2009 comprised some of the structures on the Baxter Road property that were not approved or allowed under the relevant lease and Sydney Water engineers had indicated a concern in so far as they may place an unsafe loading on the sewer main. 196On 26 May 2009 Mr Makucha telephoned Mr Harvey again to indicate that he wanted to resolve the difficulties with the Hilton Hotel as his bill was overdue and management was concerned about future payments. He asked Mr Harvey whether he could organise payment for the next 30-60 days. Mr Harvey indicated he could not pay for hotel expenses directly. Mr Makucha asked Mr Harvey what he could do for him. Mr Harvey indicated that he would say to the Hilton that payment would be made and that Mr Makucha could say that Sydney Water would cover accommodation charges over the next 60 days. Mr Harvey said he however needed an invoice. Mr Makucha said he could organise that and asked Mr Harvey whether he could write to the Hilton. Ultimately Mr Makucha provided an invoice. 197Shortly thereafter, on 26 May, Mr Harvey received an email from a Mr Pisecky from the Hilton. The email indicated that Mr Pisecky had had difficulties in contacting Mr Harvey and he wanted confirmation of payment of the accommodation charges. On the same day Mr Harvey prepared a draft which was to be sent to the Hilton Hotel which he was certain either he had shown to Mr Makucha or had read to him over the phone for his approval. The final version which Mr Harvey sent, having accommodated suggested alterations made by Mr Makucha, indicated that Sydney Water would be making a payment for the sum of $12,600 for two months accommodation and would in turn pay the hotel accommodation charges. The letter confirmed that the payment would be made by 1 June 2009. The letter also invited the Hilton not to evict Mr Makucha or call the police in respect of the matter. 198Mr Harvey in his evidence, which I accept, said that he did not consult or advise anyone at Sydney Water or any external legal advisors. He said that he provided the letter in the knowledge that providing such payments as described for Mr Makucha's benefit were undertaken in order to enable Mr Makucha to pay his hotel bill. Mr Harvey said that he realised at the time and again I accept his evidence, that such authorisation was beyond his delegated authority and in any event was not a payment to the benefit of Sydney Water. In the meantime Mr Makucha also had Mr Malacco from Hall Chadwick write a letter to Mr Hutton general manager of the Hilton on 27 May 2009 asking for an account reconciliation of all charges to date. The invoice raised by Mr Makucha was processed by Mr Harvey and in turn Sydney Water made payment. The payment of his hotel bill was an unauthorised expenditure which could simply not benefit Sydney Water. It was purely for personal expenditure incurred by Mr Makucha. Invoice 12 ($6,000) 199This invoice purports to be for the acquisition of an "Ex Telstra High security split system air conditioned building and split system air conditioned guard house building". Mr Inberg was of the view, and I accept his evidence, that these buildings were frankly not capable of being used by Sydney Water and of no value to it. Mr Harvey of course accepts that he at no point discussed the matter with Mr Inberg nor did he have any authority to purchase items. 200Mr Harvey's authority in relation to Baxter Road was to have Mr Makucha removed from the property and further to have any buildings thereon removed from the property. He had no authority to purchase the buildings that Sydney Water through its solicitors had been trying to remove from the premises since 2007. 201Mr Harvey gave evidence at ICAC that the transaction was a contrivance and that according to the delegations he lacked authority to do the transaction at all. It is undoubtedly correct that he had no such authority. He followed no legitimate process so far as the transaction was concerned and indeed as far as he was aware no one at Sydney Water was looking to acquire these assets. The transaction was another contrivance to again provide living expenses for Mr Makucha. Invoice 18 ($55,000) 202This invoice was said to be for six (6) months consultancy services for designs, for outdoor advertising, feasibility studies and construction and long term rental agreements for outdoor advertising. The invoice also identifies the sum of $50,000 being for the Makucha Group records from 1985. 203At or about the date of the invoice there was a judgment which had been outstanding for some time against Mr Makucha in the sum of $51,096.05 together with some $10,000 of interest. The judgment was in favour of a company known as Fairbrook PMA Pty Limited formerly known as Porter Models (Australia) Pty Limited. 204Mr Makucha agreed in his evidence that at the date of the invoice he needed to make such payment as there was a creditor who had started bankruptcy proceedings against him. He also conceded in his evidence that he needed a sum in that order namely $55,000. He also volunteered in his evidence that he gave Mr Harvey a copy of the bankruptcy notice and the documents relating to the outstanding judgment debt. He also accepted that he told Mr Harvey that he needed funds to pay creditors. He also asserted in his evidence that if he was bankrupted the tax losses would have evaporated because of what he described as the continuing "ownership test". He accepted he said to Mr Harvey that it was in everybody's interests that he make the bankruptcy notice and litigation generally go away. He also accepted that he said to Mr Harvey that creditors wanted over $100,000 but that his lawyer thought the matter could go away for something in the order of $50,000 and so he arrived at the figure of $55,000 allowing $5,000 for his lawyers fees. It was in that context that he and Mr Harvey contrived the issue of yet another invoice. 205The invoice having been processed and payment made, Mr Makucha attempted to pay the judgment debt at the Downing Centre but staff there would not accept payment. On the following Monday, which was 23 November 2009, it seems Mr Makucha re-deposited the money and obtained a bank cheque for the same amount. He eventually paid the amount of $51,096.05 to the creditor. Mr Makucha denied that the invoice for $55,000 was a device which he and Mr Harvey had come up with in order to stave off bankruptcy proceedings. I reject his denial. That is precisely what it was. The reference in the invoice to the Makucha Group records is part of the contrivance. There is no evidence before this Court that those records were of any value whatsoever. The only reasonable inference open is that such accounting records as were necessary for Hall Chadwick to have were in their possession for the purposes of updating Mr Makucha's or his corporate entities affairs. There was no attempt on the part of Mr Makucha to substantiate the suggestion that the records existed or had any value. The fact of the matter is that they were never handed over which in my mind is a reasonable reflection of not only the contrivance but that they were not regarded as having any value either by Mr Makucha or for that matter Mr Harvey. The payment was unauthorised and wholly unjustifiable. Invoices 13 to 17 and 19 to 20 (Outdoor Advertising) 206The invoices in relation to this item total seven (7) and involve the payment of $126,000. These invoices are said to be for six months of consultancy services, designs for outdoor advertising, feasibility studies and the like. In each of the invoices there is a reference to an agreement of 1 July 2009. 207There is simply no evidence of any agreement of 1 July 2009. Mr Inberg said that the outdoor advertising project did not proceed and that Sydney Water had no need for such services. Mr Harvey in any event gave evidence that Mr Makucha never provided any such services. On the face of each of the invoices there is of course a reference to six (6) months consultancy services. Invoices were provided over seven (7) months, the last on the day that the CBIA was signed. Mr Harvey was taken through each of the items referred to in the invoices at ICAC and gave unequivocal evidence that not one of those items was ever provided by Mr Makucha. Mr Harvey agreed when asked questions at ICAC that Mr Makucha never provided any feasibility studies or long term rental agreements for the outdoor advertising. He provided no designs for outdoor advertising although he provided some very basic concepts for a couple of sites. He did not in reality provide any consultancy services. Mr Harvey also agreed at ICAC that the wording of the invoices was given to him by Mr Makucha and he adopted it in its entirety. In terms, Mr Harvey accepted that the invoices were a contrivance created so as to provide a further source of funds to Mr Makucha. I am satisfied that that is an accurate characterisation of those invoices and that no value whatsoever was obtained by Sydney Water in relation to the payment of those sums of money. Breach of Duty 208It is submitted on behalf of the plaintiff that in authorising the payments in respect of the invoices Mr Harvey acted in breach of his fiduciary duty to Sydney Water as an employee thereof. 209It is further submitted that Mr Makucha had actual knowledge that Mr Harvey was acting in breach of his fiduciary duty or at the very least either wilfully shut his eyes to the obvious or wilfully and recklessly failed to make such enquiries as an honest and reasonable person would make or had knowledge of circumstances which would indicate the facts to an honest and reasonable man: Farah Constructions Pty Ltd v Say-Dee Pty Ltd at 163. 210The plaintiff also submitted that the defendants were thereby liable as constructive trustees under the first limb of Barnes v Addy by reason of their knowing receipt of monies paid to Mascot Administration Pty Limited in breach of Mr Harvey's fiduciary duty. 211Alternatively a claim under the first limb was made in restitution. This was based on the fact that monies paid over to the third party (controlled by Mr Makucha) were immediately taken by Mr Makucha for his benefit. Since Mr Makucha was aware of Mr Harvey's breaches of fiduciary duty it was submitted that this amounted to an unjust enrichment on the part of Mr Makucha. 212Mr Harvey was undoubtedly a fiduciary. As Mason J (as he then was) said in Hospital Products Ltd v United States Surgical Corporation at 96-97: "The accepted fiduciary relationships are sometimes referred to as relationships of trust and confidence or confidential relations, viz: trustee and beneficiary, agent and principal, solicitor and client, employee and employer, director and company, and partners. The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense." 213In my opinion Mr Makucha had knowledge that Mr Harvey was acting in breach of his fiduciary duty in the relevant sense. On the evidence Mr Makucha (and for that matter the other defendants) knowingly assisted Mr Harvey in a dishonest and/or fraudulent design. In each case Mr Makucha well knew that the invoices were a contrivance not for the purposes they purported to disclose on their face but simply to provide him with living expenses and/or the payment of his various debts. In my view for the purposes of the first limb of Barnes v Addy and for that matter the restitutionary remedy the defendants are liable because of the relevant knowledge on their part. That clearly gives rise to the remedy of constructive trust. Alternatively, if need be I am of the view the defendants are liable under the second limb for the knowing assistance provided to Mr Harvey in his dishonest or fraudulent design. 214Personal liability as a constructive trustee to pay equitable compensation arises if either the first or second limb of Barnes v Addy is satisfied. As McClelland A-JA said in Greater Pacific Investments Pty Ltd (in liq) v Australian National Industries Ltd at 153: "An order for the payment of equitable compensation is a remedy available to the victim of a breach of fiduciary duty against both the fiduciary and any other person who knowingly participated in that breach and has thereby become subject to a personal liability as a "constructive trustee" by application of the principles derived from Barnes v Addy (1874) 9 Ch App 244 as expounded by Gibbs J in Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 at 395-398;" 215I accept the submissions of the plaintiff that Mr Makucha knew that: (a) Mr Harvey did not have authority to cause payments to be made by Sydney Water to Mr Makucha in respect of the invoices; and (b) That the invoices were not genuine or payment for Mr Makucha's debts to Hall Chadwick and that either the services described in the invoices were not rendered or the goods purportedly acquired were not in fact by Sydney Water. 216The plaintiffs also submit that a further ground of liability on the part of Mr Makucha is that he procured the breaches of fiduciary duty by Mr Harvey. As the High Court pointed out in Farah Constructions v Say-Dee Pty Ltd at [161]: "Several points of a general nature should be made here. The first concerns the scope of the second limb. This was not expressed by Lord Selborne LC as an exhaustive statement of the circumstances in which a third party who has not received trust property and who has not acted as a trustee de son tort nevertheless may be accountable as a constructive trustee. Before Barnes v Addy there was a line of cases in which it was accepted that a third party might be treated as a participant in a breach of trust where the third party had knowingly induced or immediately procured breaches of duty by a trustee where the trustee had acted with no improper purpose; these were not cases of a third party assisting the trustee in any dishonest and fraudulent design on the part of the trustee". 217There is no doubt that liability attaches when a fiduciary's breach of duty is procured by the conduct of a third party. It is applicable where both the fiduciary and the third party act knowingly in breach of the duty. The plaintiffs submit here that this was the case with Mr Harvey and Mr Makucha. I entirely agree. 218In my opinion, Mr Makucha obtained the monies paid to the corporate entity controlled by him by fraudulent or dishonest means. That conduct should be seen as equivalent to theft and those monies were impressed with a trust in favour of Sydney Water. In my opinion, Mr Makucha and for that matter the second defendant are liable to Sydney Water by way of a constructive, presumed or resulting trust (it matters not) for the amounts paid by Sydney Water to his company and used by him in respect of all of the invoices. Trademarks 219Sydney Water is the owner of two trade marks. It is the registered owner of trade mark 11647 ("Sydney Water") and trade mark 1164718 (the Sydney Water Logo). 220Each trade mark was registered for a period of 10 years from 5 March 2007 in: (a) class 37 (the operation and maintenance of water supply, mains and water reticulation services); (b) class 39 (the storage of water in dams and reservoirs; services for the supply of water by pipelines and water distribution services; (c) class 40 (water treatment and purification services); and (d) class 41 (education and information services in connection with the above matters. 221By 15 May 2009 as I have already observed Mr Makucha had "discovered" that Sydney Water's trade marks were not registered in class 32. 222A decision by Sydney Water not to register in class 32 was arrived at on the basis of advice from S B Rice & Co, Trade Mark Attorneys and because Sydney Water did not manufacture or sell bottled water. 223Mr Harvey of course knew that he had no authority to deal with Sydney Water's trade marks. Mr Makucha in any event at no time in the course of the trial or otherwise suggested that he thought Mr Harvey had such authority. 224Notwithstanding his knowledge as to his lack of authority on 14 May 2009 Mr Harvey executed a document addressed "To Whom it May Concern" which among other things purported to confirm that Sydney Water had appointed Mr Makucha to instruct "selected" lawyers to register in all classes of water by way of amendments to the existing Sydney Water trade marks. The document went on to state that it was intended that the amended trade marks would only be used by authorised licensed holders of the trade marks. The document suggested that the proposed licence holder was going to be a joint venture company of Sydney Water, named Sydney Water P Limited. 225Further on 18 May Mr Harvey signed a further document to similar effect again purporting to indicate that Sydney Water had authorised Mr Makucha to instruct selected lawyers to create new trade marks and incorporating all classes of water. 226Ms Nicola Scheepers was called by the plaintiff. She is one of the principals of a firm of intellectual property lawyers known as Griffith Hack and whose firm Mr Makucha sought to retain. She indicated that she and Mr Makucha had two, perhaps three, meetings in 2009. Although the meetings were held to discuss the possibility of a retainer no retainer agreement was ever executed with Mr Makucha. 227On a draft retainer and costs agreement prepared by Griffith Hack, Mr Harvey made a handwritten two page note on 20 May 2009 which he then signed. Mr Makucha then counter signed it on 21 May 2009. The note made clear that Sydney Water required a specific fee proposal. The objective of the retainer was to register the trade mark of the Sydney Water brand for bulk water. The handwritten note was dictated to Mr Harvey by Mr Makucha in response to Mr Makucha's suggestion to set down with some precision what he wanted Griffith Hack to achieve. Mr Harvey said that by executing the document he was giving "clarity" to Griffith Hack. It is clear that Mr Harvey had no authority to execute the document on behalf of Sydney Water. In particular Mr Harvey had no authority to state as the note sets out: "Ed Harvey Sydney Water SWC confirms that the intellectual property in relation to these trade marks for the use of Sydney Water for bottled/packaged water sales is the IP of Paul Makucha and he will assign fair market value of the IP to the joint venture company which is to be owned by Paul Makucha and Sydney Water Corporation." 228Mr Harvey did not intend so he said and I accept him to authorise nor did he agree to the lodgement of that note with IP Australia. The note however was ultimately attached to the third defendants application to IP Australia on 26 August 2009 to register Sydney Water's two trade marks in class 32. It is reasonable to infer that the document was obviously included in the application to add force to the proposition that Sydney Water had consented to the third defendant's application. 229Mr Makucha did not tell Mr Harvey and Mr Harvey did not independently know that his note of 20 May 2009 had been submitted to IP Australia as part of an application. Indeed, Mr Harvey did not know that the third defendant's application had been lodged until several weeks after the event. 230Mr Makucha's evidence was that Mr Harvey in fact knew about the trade mark application on 26 August 2009. 231In his evidence before ICAC Mr Harvey said that he was unaware that Mr Makucha had lodged applications for registration of trademarks. Mr Harvey said he protested about that when he found out. He thought he had been left out of the loop. He was certainly not aware that any consent of Sydney Water had been obtained or for that matter provided to IP Australia other than his written note. I accept his evidence in that regard. 232In the end it seemed to me clear and Mr Makucha really accepted the fact that he had only given the documentation in relation to the application to IP Australia to Mr Harvey after the event. In any event I accept Mr Harvey's evidence that he was not told until after the application was lodged. The following exchange took place during the cross examination of Mr Makucha which confirmed the position in my mind: Counsel. "You did not tell Mr Harvey before the application was made?" Mr Makucha. "Bad luck. He would have let the dog out of the corral" 233Mr Makucha accepted that included in the documents submitted on 26 August 2009 to IP Australia was Mr Harvey's two page note. At one point he suggested it was not him who ensured that it was included but rather it was his lawyers who had filed it. At the same point in the transcript he tried to refer to Sydney Water P as not his company but "our" company. Mr Makucha was not frankly answering the question and he was dishonestly in my opinion seeking to deflect responsibility from himself by reason of his having used Mr Harvey's handwritten materials without Mr Harvey's knowledge or consent. 234Mr Makucha was well aware of the need to obtain Sydney Water's consent to the use and registration of its trade marks in the name of any entity associated with Mr Makucha. Griffith Hack 235It is important to record a little more detail of Mr Makucha's dealings with Griffith Hack and the advice obtained by him from time to time. That puts his actions of submitting Mr Harvey's handwritten note to IP Australia in context. 236On 28 May 2009 Mr Makucha received a letter from Ms Nicola Scheepers and Ms Tara Parkes of Griffith Hack. The letter refers to a telephone conversation with Mr Makucha on 25 May 2009. The letter notes that Mr Makucha required a costs estimate for various activities to be undertaken in relation to the filing and registration of two proposed trade marks. The letter made plain that it is important in Australia that a trade mark application is filed in the name of the owner of the trade mark so that its ultimate registration cannot be challenged as invalid. 237On 3 June a further letter was sent from Ms Scheepers and Ms Parkes to Mr Makucha. It referred to a telephone conversation with Mr Makucha which had taken place on 2 June. The letter warned that if Mr Makucha was to file two new trade mark applications for the words Sydney Water and/or for the Sydney Water logo in respect of various goods and services regarding or relating to water there was a likelihood that the registration of the two existing trade marks owned by Sydney Water (namely 1164716 and 1164718) could be raised as objections on examination of Mr Makucha's applications. The letter went on to say: "This is because they are identical marks and they are arguably registered in respect of similar goods and services." 238The letter concluded with the following remarks: "If the objection is raised as discussed you will need to obtain consent from Sydney Water Corporation to the use and registration of the trade marks filed in your name before the Examiner will withdraw the objections and allow your applications to proceed. We will then be happy to provide you with the appropriate draft Letters of Consent for you to arrange for Sydney Water Corporation to sign." 239Following a further conversation on 5 June with Mr Makucha, Ms Scheepers and Ms Parkes again provided an assessment of their costs. A further conversation took place between Mr Makucha and Ms Scheepers on 11 June which caused them to write a further letter on 12 June. This letter attaches a retainer and costs agreement. It also stated: "We confirm receipt of the handwritten note from Ed Harvey on behalf of Sydney Water Corporation (ABN48776225038) which states that the intellectual property in relation to the two new trade mark applications referred to above belong to you and that they will be assigned together with the associated goodwill at fair market value to the joint venture company which is to be owned by you and the Sydney Water Corporation." 240The letter went on to refer to other matters and acknowledged receipt of what was described as the "instructions" of Ed Harvey on behalf of Sydney Water that it was to guarantee payment of all fees on behalf of Mr Makucha and the joint venture company, Sydney Water P Limited. 241So far as the correspondence is concerned I am satisfied that Ms Scheepers ensured that each copy of the relevant letters, that is the letters of 28 May and 3 June and the letter of 12 June were provided to Mr Makucha. I reject any suggestion by him to the contrary. Ms Scheepers impressed me as a highly competent professional and I am persuaded that she conducted herself both professionally and efficiently in relation to her dealings, albeit brief, with Mr Makucha. 242I note that Mr Makucha suggested that the letters may have been fabrications for the purposes of the case. In my opinion that is an unsubstantiated allegation and Mr Makucha well knew that it was. He did not put that proposition to Ms Scheepers in her cross examination and for very good reason. 243The advice Mr Makucha received, particularly in the letter from Griffith Hack of 3 June, was something Mr Makucha did not want to hear nor confront. The letter was plain in its terms, namely that his applications would go nowhere without the consent from Sydney Water. 244Mr Makucha had a conversation with Mr Harvey on 22 June and he made a diary note. That diary note is illuminating. It suggests that a discussion took place with Mr Harvey at 9am on that day. Mr Harvey informed Mr Makucha that he did not propose to sign the fee proposals nor would he execute "the IP". Mr Makucha records what it is plain he said to Mr Harvey namely that he "can and will file the IP himself". Indeed this is what he did. 245When he was cross examined about this matter Mr Makucha denied that the note corroborated the fact that Mr Harvey had refused to sign the application in relation to the trade marks. He tried to suggest that the note had something to do with tax matters. I reject that construction. 246On 3 August Mr Harvey wrote a letter to a Mr Stephen Von Muenster apparently an officer at IP Australia. The letter was on Sydney Water letterhead. It indicated that Sydney Water wished to obtain legal advice on a range of issues and the registration of a trade mark to include the water that is provided and owned by Sydney Water. The letter went on to indicate that Sydney Water had appointed Mr Makucha to instruct "selected lawyers" to provide the required advice and that Sydney Water would be responsible for the payment of agreed fees. 247It seems that this letter was either drawn to the attention of Mr Makucha or Mr Malacco because as on 6 August, Hall Chadwick sent a letter signed by Mr Malacco and counter signed by Mr Makucha and Mr Harvey supposedly directed to the Managing Director of Sydney Water. The letter purports to correct what was said to be an inference from the letter Mr Harvey had written to IP Australia of 3 August. It was suggested that the letter of 3 August might have incorrectly inferred that ownership of the intellectual property belonged to Sydney Water and that Mr Makucha was merely acting as an agent for Sydney Water whereas the relevant intellectual property was in fact owned by Mr Makucha. 248This of course was a letter which was never intended to be nor was it given to the Managing Director of Sydney Water. It was part of this somewhat bizarre process contrived by Mr Makucha. Mr Harvey was unable to explain why he signed the letter. There seems to be no evidence that any corrected letter was ever issued by Mr Harvey and sent to IP Australia. 249As I have already observed on 17 August Mr Makucha retained Mr Stafford to act for him and the two met for the first time on that day. On 26 August 2009 Mr Stafford sent an application to IP Australia by the third defendant to register Sydney Water's trademarks in class 32. Enclosed with the application was the Hall Chadwick letter of 6 August 2009, Mr Harvey's handwritten note of 20 May 2009 and a company search of the third defendant. 250Mr Harvey's handwritten note of 20 May 2009 of course is incapable of constituting such consent. The note does purport to acknowledge Mr Makucha's ownership of "intellectual property" to trade marks for the use of Sydney Water for bottled/packaged water sales for what it is worth. 251It is obvious that no properly authorised person in Sydney Water knew or consented to the application to IP Australia. Dr John Hudman who gave evidence before me was at the relevant time the R & D Planning and Intellectual Property Manager, Sustainability at Sydney Water. He had held that position since late October 2002. He in turn reported to the General Manager Sustainability who had ultimate responsibility for IP Management at Sydney Water. Dr Hudman gave evidence which I accept that he had never encountered the third defendant company or Mr Makucha previously and was entirely unaware of the third defendant's application to IP Australia. 252It is obvious that Mr Harvey first learned of the third defendant's application to IP Australia on 24 September when Mr Makucha gave him the letter bearing that date. That letter in turn enclosed a letter Mr Stafford had sent on 9 September 2009. The letter from Mr Makucha refers to "our previous confidential discussions" relating to the project and related matters. In his evidence before ICAC Mr Harvey says that he had a meeting with Mr Makucha on 24 September in which Mr Makucha provided him with a copy of the letter of the same date. Mr Harvey says, and I accept, that he had a conversation with Mr Makucha in which Mr Makucha told him that the good news was that the trade mark for Sydney Water had been registered by "Eakin McCaffery Cox". Mr Harvey says that he told Mr Makucha that he was not aware that Mr Stafford's firm was progressing the trade mark application and thought it was Griffith Hack. Mr Makucha told Mr Harvey that he had decided to use Mr Stafford's firm instead of Griffith Hack. That information about the trade marks having been registered was of course false. The fate of the August application 253On 9 November 2009 a Mr Mark Ayers, a trade mark examiner with IP Australia, wrote to Eakin McCaffery Cox. He indicated that he had examined the application for the registration by Sydney Water P Pty Limited of the relevant trade mark and could not accept the application. The reasons for rejection which were contained in the pages that followed indicated that the proposed trade mark was identical with or too closely resembled Sydney Water's trademarks. 254It was not until 22 January 2010 that Mr Stafford informed Mr Makucha that the relevant examiner would not accept the trade mark application. His letter sets out in some little detail the reasons why the application was rejected. Mr Makucha was informed for example that if he could produce evidence of use under Section 41(6) of the Trade Marks Act that may well assist in the examiner's reconsideration of the application. But the evidence he would have to produce was said to be "substantial, persuasive evidence of use". That was a comment of particular reference to the use of the Sydney Water logo. In relation to the words "Sydney Water" Mr Makucha was told that he would need to provide evidence to show that the ordinary meaning of the words had been overshadowed in the market place by its significance as his trade mark. He was informed that the examiner had expressed the view that if he had not used the trade mark to date or only used it for a very short period of time (less than two (2) years) it would be unlikely that he would be able to meet the substantial evidence requirements. In any event he was informed that he had only until 9 February 2011 to resolve the issues raised by the examiner. The evidence suggests that no step has been taken by Mr Makucha or for that matter anybody else on his behalf to resolve the issues raised by the trade mark examiner in his letter of 9 November 2009 and consequently on 9 February 2011 the applications lapsed. That is unsurprising as no such evidence in my opinion could ever be forthcoming. 255On 1 March 2011 Sydney Water lodged its own application to register its trade marks in Class 32 as defensive marks pursuant to section 185 of the Trade Marks Act 1995. 256It is obvious that only a person claiming to be the owner of a trade mark can apply for its registration. Mr Makucha does not nor has he ever claimed to be the owner of Sydney Water's trade mark. The third defendant's application on 26 August 2009 was therefore at all relevant times incompetent. 257In any event Mr Makucha has repeatedly said that he does not claim to own the Sydney Water trade marks. In evidence before me when he was cross examined he attempted to suggest that he owned part of the trade mark, that is the part which attached to the class 32 "the rest I make no claims about", is what he said. That answer was in the circumstances a prevarication and in any event makes no sense in my opinion. 258In an affidavit filed in the Federal Court by Mr Makucha on 5 August 2010 (para 82) he appears to agree that he told Mr Stafford on 21 October 2009 that he "PM don't own IP". 259In evidence before me he had always asserted that it was he who discovered the fact that Sydney Water did not have a registration in class 32 and as I understand his case it really is that the intellectual property in relation to class 32 is the "idea" to register Sydney Water's trade marks in that class. It is plain however that that cannot amount to ownership for the purposes of section 27 of the Trade Marks Act 1995 . 260As Dixon J (as he then was) in Shell Co of Australia Ltd v Rohm and Haas Co makes clear, the person who makes application to register a trade mark must be the proprietor of it. That as His Honour also points out needs to be looked at in the context of prior use so as to give rise to an entitlement to either legal or equitable remedies to protect the person against the use by rival traders of the same or similar marks. The rights thus acquired by prior use are in the nature of rights of property. Dixon J also analysed proprietorship (ownership) in the following terms at 625 - 627: "The basis of an application for the registration of a trade mark is a claim on the part of an applicant to be the proprietor of the trade mark: s.32. Before the passing of the Trade Marks Registration Act 1875 (38 and 39 Vict. c.91) of the United Kingdom property in a trade mark was acquired by user. If a trader had habitually employed a mark in connection with his goods so that to the public it had come to denote or distinguish his goods, he was entitled to legal and equitable remedies to protect him against the use by rival traders of the same or similar marks. The rights which he thus acquired were in the nature of the rights of property. They were so treated by the Trade Marks Registration Act 1875 which made registration of a person as the first proprietor of a mark prima-facie evidence of his right to the exclusive use of the trade mark, and, after five years, conclusive evidence: s.3. But the Act, as it was interpreted, also included provisions enabling the registration of a new mark not hitherto used with the like consequences. (In Re Hudson's Trade Marks).... This conception necessarily gave rise to the question what facts formed the title to such a new mark so that the applicants for registration could claim to be proprietors. The question is met by the following passage from the judgment of Cotton LJ: "The difficulty is this: Is a man to be considered as entitled to the use of any trade-mark when he has never used it at all? That is a difficulty, but I think the meaning is this. If a man has designed and first printed or formed any of those particular and distinctive devices which are referred to in the first part of s.10, he is then looked upon as the proprietor of that which is under that Act a trade-mark, which will give him the right so soon as he registers it. How can it be said he is entitled to the exclusive use of it? He never has used it; but in my opinion the language, though not appropriate, means this, that a man who designs one of those special things pointed out in s.10, is, as designer, to be considered as the proprietor of it, and if there is no one else who has used it, or who can be interfered with by the registration and subsequent assertion of title to the mark, then he is to be considered as entitled within the meaning of the Act to the exclusive use of that which in fact has never been in any way used, but which has only been designed by him; and which he can be treated as the person entitled to register, if no one else had so used it as that his user would be interfered with by the registration." 261The plaintiff submits that it is clear in this case that the defendant had not used the Sydney Water word mark nor the logo mark in trade so as to acquire any common law rights of proprietorship. There is certainly no evidence of that and I so find. Further it is submitted that the defendants were not the designers or authors of the marks which were designed for Sydney Water and in respect of the logo marking for which Sydney Water holds the copyright. That also cannot be gainsaid on the evidence. It was further submitted that in accordance with the principles articulated by Dixon J in Shell that the defendants could not establish a claim to ownership or proprietorship of the marks for which the third defendant had made application for registration. I entirely agree. Copyright 262It was also further submitted that in any event the third defendants reproduction and publication of Sydney Water's marks in its application of 26 August 2009 infringed Sydney Water's copyright in the literary and artistic works comprising the Sydney Water logo. Reliance was placed upon Sections 32 and 36 of the Copyright Act 1968 . 263Section 32(1) of the Act states that copyright subsists in certain "original" works even if they are not published. The courts in identifying what is necessary to satisfy the notion of originality have suggested for example that the work must not be wholly copied from another work but it should originate with the author. Further it has been considered that works that derive from a common body of knowledge will not be necessarily excluded as being viewed as original. 264The notion of originality frequently arises in the context of compilations. But expenditure of labour, skill and capital to impart to the product some quality or character that the material did not previously possess will amount to the compilation having copyright protection. The Act does not exhaustively define "literary work". Section 10(1) provides that a literary work includes a table or compilation expressed in words, figures or symbols and for example a computer programme or compilation of computer programmes. In terms of artistic work the Act has been interpreted as providing an exhaustive definition of this term. Section 10(1) again defines artistic work to mean a painting, sculpture, drawing, engraving or photograph whether the work is one of artistic quality or not (a); a building or model of the building whether the building or model is of artistic quality or not (b); or a work of artistic craftsmanship whether or not mentioned in paragraph (a) or (b) but does not include a circuit layout within the meaning of the relevant legislation. 265Section 36 deals with infringement in relationship to literary or artistic works. The most common form of copyright infringement of course involves the reproduction of work without the copyright owner's permission. The term reproduction is not defined in the Act however it is generally accepted that the concept of reproduction has at least two distinct elements. First there must be an objective similarity between an alleged reproduction and the copyright work such that one is recognisable as a copy of the other. The very notion of copying that is implicit in the term reproduction of course means that there must be a causal link between the defendant's article and the plaintiff's work since independent creation does not infringe copyright. Generally therefore the plaintiff must prove that the defendant has had access to the plaintiff's work or at least something that might be copied. 266The specific test to be applied is deciding infringement of artistic work is a visual test so that the work and the alleged infringement are visually compared. In Coogi Australia Pty Ltd v Hysport International Pty Ltd copying of the distinctive style of finely textured knitware was alleged by the company which developed the material. In deciding whether the work was reproduced the judge was unable to find infringement in the absence of evidence of what was visibly significant that is, sufficient to give the respondent's fabric the look of the applicant's fabric. 267No such difficulty arises here. Mr Makucha unashamedly and boastfully reproduced for example the Sydney Water logo and in my opinion the plaintiffs correctly submit that that amounted to a copyright infringement for the purposes of sections 32 and 36 of the Copyright Act . Relief 268I have found that Mr Harvey at no relevant time had either actual or ostensible authority to enter into any of the agreements he purported to enter for and on behalf of Sydney Water. That includes the CBIA of course and the letter agreements otherwise referred to in the pleadings. In my opinion therefore the plaintiff is entitled to the declaration in paragraph 1 of the further amended statement of claim. 269I have also found that Mr Harvey lacked any authority to agree to and process any of the relevant invoices. I therefore consider it is entirely appropriate in the light of my findings to order equitable compensation for the total amount of the invoices paid by Sydney Water, namely $293,283 (together with interest). The compensation is awarded against the first and second defendants on the basis that each of them benefited from the payments by Sydney Water either by permitting Mr Makucha to pay his creditors and to pay bills and living expenses or in the case of the second defendant in meeting obligations in respect of its corporate accounts for work done by Hall Chadwick. As I have already found, both the first and second defendants had the requisite knowledge of the breach of the fiduciary duty on the part of Mr Harvey in causing the invoices to be paid based upon the personal knowledge of Mr Makucha. 270Given my findings in relation to the trademark and copyright issues I consider the relief sought in paragraphs 5, 6, 8A and 8B and 8C of the further amended statement of claim as entirely appropriate. On the facts as I have found them to be there is in my opinion a real risk of further infringement of the plaintiff's rights, unless such relief is granted. 271I consider in particular in relation to the copyright infringement there is no impediment to this court granting such relief. Section 115 of the Copyright Act provides that the owners of the copyright may bring an action for an infringement of that copyright. The court is empowered in such an action to grant for example an injunction or damages or an account of profits. (Section 115(2)). Section 131A of the Act makes plain that a single Judge of the Supreme Court may exercise the relevant jurisdiction given my findings I consider it entirely appropriate to grant that relief. Again without such relief there is a real risk of further infringement. 272So far as the relief sought in paragraph 8D is concerned again on my findings I consider the relief is entirely appropriate. Notwithstanding the fact that the third defendants 26 August 2009 applications have lapsed it theoretically remains open to the third defendant to apply for an extension of time to revive the lapsed application. Although any extension is at the discretion of the trademark register there is no limit to the number of extension applications that can be made. 273Sydney Water seeks relief in relation to prayer 8, and thereby seeks orders that the third defendant withdraw or procures the withdrawal of its trademark applications. 274I have had my attention drawn to Aussie Home Loans v Phillips in which Lehane J made orders restraining misleading and deceptive conduct, made a declaration that the relevant copyright in the trademark had been infringed, and restrained further infringement of the copyright and importantly requiring the trade mark application that infringed the rights of the plaintiff be withdrawn. Notwithstanding the fact that the application before his Honour was there dealt with on an ex parte basis his Honour's unqualified expertise in the area and if I may say so, his concise and helpful analysis of the various issues persuades me that relief of this sort is in the circumstances of this case equally appropriate. 275Justice Lehane in Aussie Home Loans remarked as follows: Finally, the applicant seeks a particular order against the first respondent. That order would require the first respondent forthwith to do all acts and things and execute all such documents as may be necessary or desirable to be done in order to withdraw or procure the withdrawal of the first respondent's trade mark application. There was some discussion in the course of argument as to whether it was appropriate to make such an order, or whether on the other hand the court ought to decline to make an order of that kind, leaving the applicant's existing opposition proceedings to take their course. The applicant was not able to refer me to any decision of the court in which a mandatory order for the withdrawal of a trade mark application had been made and my own limited research has uncovered no such decision. The applicant did, however, refer me to the decision of North J in WMC Ltd v Westgold Resources NL (1997) 39 IPR 319. In that case his Honour made an order of a kind which is by no means unprecedented, requiring respondents to change or withdraw a registered business name. The order was made on the footing that in the circumstances of the case the use of a name incorporating the words "Western Mining" amounted to misleading or deceptive conduct. The case, it was said, was particularly apposite in the present circumstances because the name "Western Mining", like the name, "Aussie Home Loans", incorporated both geographic elements and elements descriptive of the nature of the business carried on. The Trade Marks Act provides, of course, a particular procedure, that is opposition proceedings, by which one who asserts that an applicant for registration of a trade mark is not entitled to have it registered is entitled to intervene, for the purpose of preventing registration, in proceedings in the Trade Marks Office. It seems to me unlikely, and the dearth of reported decisions may bear this out, that the court would ordinarily uphold a claim by an applicant in effect to shortcut the procedure for which the Trade Marks Act provides by commencing proceedings for an injunction requiring the withdrawal of an application. The suggestion was, however, that the present circumstances are somewhat special. The particular circumstances are that the reproduction and publication of the house device in the form in which it is incorporated in the first respondent's trade mark application constitute infringements of copyright. The circumstances also include the claim, which I have held to be made out, that the use by the respondents in the course of their business of the house device as included in their trade mark application amounts to conduct which is misleading or deceptive and to passing off. I am not by any means certain that the success of the applicant in its trade practices and passing off claims would of itself properly lead to an order requiring the withdrawal of the application for the mark. That is so because it may well be the case that, for example by the use of prominent disclaimers, the suggestion of association which I have held to exist could be overcome. The fact that the applicant has established that it is the owner of a common law trade mark comprising its house device may mean that the first respondent is not entitled to registration of a trade mark the subject of his application. But that, I think, is precisely the sort of question which is properly decided in opposition proceedings and in relation to which the court would ordinarily be reluctant to interfere by way of an injunction of the kind sought. 276I consider on the basis of my findings the relief sought in paragraph 8 is entirely appropriate. 277In the light of the relief I propose to grant it has not been necessary to consider the alternative relief to the same effect under the Trade Practices Act. I should indicate that if I had needed to, I would have granted relief under that legislation as I consider the relevant breaches have been established. 278I order that the first and second defendants pay equitable compensation to the plaintiff in the sum of $293,283 (together with interest) and I direct judgment to be entered accordingly. 279I grant the relief sought in prayers 1, 5, 6, 8, 8A, 8B, 8C and 8D of the further amended statement of claim. 280I would direct that short minutes be prepared to reflect my reasons. Costs 281It follows from the above that it is appropriate that the defendants pay the plaintiffs costs of the proceedings. ********** Amendments 15 December 2011 - punctuation and typographical errors corrected Amended paragraphs: various paragraphs DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 December 2011