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  4. Foxworth Pty Ltd v Polwood Pty Ltd - [2006] QSC 185

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Foxworth Pty Ltd v Polwood Pty Ltd[2006] QSC 185

Foxworth Pty Ltd v Polwood Pty Ltd[2006] QSC 185

  

SUPREME COURT OF QUEENSLAND

 

CITATION:

Foxworth P/L & Ors v Polwood P/L & Ors [2006] QSC 185

PARTIES:

FOXWORTH PTY LTD (ACN 010 516 855)
(first plaintiff)
AUSSIE PEAT PTY LTD (ACN 085 498 933)
(second plaintiff)
PEACHESTER THOROUGHBREDS PTY LTD
(ACN 069 059 294)
(third plaintiff)
PAUL DAVID POWER
(fourth plaintiff)
v
POLWOOD PTY LTD (ACN 010 708 146)
(first defendant)
LEA CHARLES RAMPTON
(second defendant)
MARGUERITE FRANCOISE RAMPTON
(third defendant)
POLWOOD AUSSIE BARK PTY LTD
(ACN 068 346 529)
(fourth defendant)

FILE NO:

S5291 of 2002

DIVISION:

Trial Division

PROCEEDING:

Trial

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

1 August 2006

DELIVERED AT:

Brisbane

HEARING DATE:

10-14, 17-20 July 2006

JUDGE:

Muir J

ORDER:

1.That Polwood Pty Ltd deliver up possession of the PSU as modified to Foxworth Pty Ltd.

2.That the deposit moneys be paid out of court to the solicitors for Polwood Pty Ltd.

3.All existing injunctions be dissolved.

CATCHWORDS:

TRADE AND COMMERCE – TRADE PRACTICES AND RELATED MATTERS – CONSUMER PROTECTION – MISLEADING, DECEPTIVE OR UNCONSCIONABLE CONDUCT – CHARACTER AND ATTRIBUTES OF CONDUCT – GENERALLY – where plaintiffs allege defendants made representations inducing entry into Deed – where representations alleged to be fraudulent or innocently false – whether representations made – whether representations induced entry into Deed – whether relief under Trade Practices Act 1974 (Cth) available

INTELLECTUAL PROPERTY – PATENTS – INCIDENTS OF AND DEALING WITH PATENTS – GENERALLY – where defendants made patent application – where plaintiffs assert ownership of invention – whether plaintiffs or defendants entitled to patent

INTELLECTUAL PROPERTY – COPYRIGHT – INFRINGEMENT – APPROPRIATION OF SUBSTANTIAL PROPORTION OF ORIGINAL WORK – where plaintiffs allege three-dimensional construction substantially similar to two-dimensional works – whether infringement of copyright

EQUITY – GENERAL PRINCIPLES – OTHER MATTERS – where plaintiffs became privy to defendants’ intellectual property – whether information was confidential – whether plaintiffs breached of duty of confidence – whether relief available

Copyright Act 1968 (Cth), s 14, s 21(3), s 116(1)

Patents Act 1990 (Cth), s 15, s 16

Trade Practices Act 1974 (Cth), s 52, s 82, s 87

Akerhielm v de Mare [1959] AC 789, cited

Alati v Kruger (1955) 94 CLR 216, cited

Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd [1967] VR 37, cited

Armstrong v Strain (1952) 1 KB 232, cited

Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700, applied

Australian Steel and Mining Corporation Pty Ltd v Corben (1974) 2 NSWLR 202, cited

Clydesdale Bank v Paton [1896] AC 381, cited

Coco v AN Clark (Engineers) (No 2) Ltd (1969) RPC 41, applied

Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337, cited

Cranleigh Precision Engineering Ltd v Bryant & Anor (1966) RPC 81, applied

Davies Shephard Pty Ltd v Stack [2001] FCA 501, applied

Derry v Peek (1889) 14 App Cas 337, applied

Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd [1979] VR 167, applied

Folsom v Marsh 9 F. Cas. 342, 346, applied

Franklin Motors Pty Ltd v Piano [1999] SASC 476, cited

Goldpeg International Pty Ltd v Kovan Engineering Aust Pty Ltd (2006) 225 ALR 57, applied

Gould v Vaggelas (1985) 157 CLR 215, cited

Hospital Products ltd v United States Surgical Corp [1983] 2 NSWLR 157, cited

Iluka Midwest Ltd v Wimmera Industrial Minerals Pty Ltd (2001) 55 IPR 140, applied

Interfirm Comparison (Australia) Pty Ltd v Law Society of NSW (1975) 2 NSWLR 104, applied

Kenny & Good v MGICA 1992 Ltd (1997) 77 FCR 307, applied

Ladbroke (Football) Ltd v William Hill (Football) Ltd [1964] 1 All ER 465, cited

Mense & Ampere Electrical Manufacturing Co Pty Ltd v Milenkovic [1973] VR 784, cited

Merchant-Adventurers Ltd v M Grew & Co Ltd [1972] Ch 242, cited

Moorgate Tobacco Ltd v Philip Morris Ltd (No 2) (1984) 156 CLR 414, applied

National Australia Bank Ltd v Blacker (2000) 179 ALR 97, cited

NH Dunn Pty Ltd v L M Ericsson Pty Ltd (1979) 2 BPR 9241, cited

Ritter v Northside Enterprises Pty Ltd (1975) 49 ALJR 202, cited

Row Weeder Pty Ltd v Neilsen (1997) 39 IPR 400, applied
Saltman Engineering Co Ltd v Campbell Engineering Co Ltd (1948) 65 RPC 203, applied

Senanayake v Cheng [1966] AC 63, applied

Skybase Nominees Pty Ltd v Fortuity Pty Ltd (1996) 36 IPR 529, applied

SW Hart & Co Pty Ltd v Edwards Hot Water Systems (1985) 159 CLR 466, cited

TCN Channel Nine Pty Ltd v Network Ten Pty Ltd (No. 2) (2005) 216 ALR 631, applied

Wardley Australia Ltd v Western Australia (1992) 175 CLR 514, cited

COUNSEL:

A Crowe SC, with him A Musgrave, for the plaintiffs

M Amerena for the defendants

SOLICITORS:

Hawthorn Cuppaidge & Badgery for the plaintiffs

Deacons for the defendants

The proceedings initially instituted

  1. These proceedings had a relatively modest beginning when, on 12 June 2002, the first plaintiff Foxworth Pty Ltd, by originating application sought the return of 13 chattels, including a peat bark sterilising unit, associated plant and equipment, two front end loaders and a Commodore station wagon, from the first defendant Polwood Pty Ltd, the second defendant Lea Rampton and the third defendant Marguerite Rampton.
  1. On 8 July 2002, the initial defendants (the respondents to the originating application) were ordered to deliver up to Foxworth certain chattels. It was also ordered that the originating application be treated as a claim. It was not until 8 October 2003 that Foxworth filed and served a statement of claim. In it Foxworth claimed:
  1. Return of the chattels, now expanded to 23 items;
  1. Alternatively, damages for conversion of the chattels;
  1. In the further alternative, damages for breach of a warranty contained in a Deed of Licence entered into between Foxworth and the initial defendants and/or damages for fraudulent representations inducing the entering into of the Deed and/or a declaration that an option to acquire an 85 per cent interest in certain equipment of the initial defendants had been terminated by Foxworth on or about 5 December 2001.[1]
  1. In a defence and counterclaim filed and served on 7 November 2003, the initial defendants admitted that they were in possession of the plant and equipment and that it had been used by them between January 2000 and January 2001 to develop a new process of manufacturing peat bark within the meaning of clause 4.3 of the Deed. It is further alleged that the option contained in the Deed was not exercised and that “in the premises” the plant and equipment involved in a new process brought into existence by the initial defendants was the property of such defendants.
  1. How the transfer of such property rights came about does not emerge from the pleadings. The other allegations in the statement of claim were denied and the initial defendants counterclaimed for 15 per cent of the annual net profits of the business conducted by Foxworth under the Deed.

The current statement of claim

  1. By the time this matter came to trial, four new parties had been added and the issues raised on the pleadings had expanded exponentially. Aussie Peat Pty Ltd, Peachester Thoroughbreds Pty Ltd and Paul Power had been added as the second, third and fourth plaintiffs respectively; and Polwood Aussie Bark Pty Ltd had been added as the fourth defendant.
  1. The plaintiffs’ claims are now for:
  1. a declaration that the first and second plaintiffs are entitled to immediate possession of certain plant and machinery (later described as “the PSU”);
  1. an order for return of the PSU;
  1. a declaration that the Deed is void ab initio;
  1. a declaration that the plaintiffs lawfully terminated a contract entered into upon exercise of an option contained in the Deed;
  1. damages for fraudulent misrepresentation and/or misleading and deceptive conduct.  Alternatively, relief under section 87 of the Trade Practices Act 1974 (Cth);
  1. damages for breach of warranty;
  1. an order pursuant to s 116(1) of the Copyright Act 1968 (Cth) that an infringing copy of the PSU be delivered up to the plaintiffs; and
  1. a declaration that the third and fourth plaintiffs are sole eligible persons within the meaning of the Patent Act 1990 (Cth) and are entitled to registration as co-owners in equal shares of a patent in respect of the PSU.

The Deed of Licence

  1. It was recited in the Deed, which was entered into in early November 1998, that:

“A.The Licensor has developed a process of manufacturing a product described by the Licensor as ‘processed premium peat’ derived from pine bark (the Process).

B.The Licensor has patented the Process under Patent No. 682200 in Australia (the Peat Patent).

C.The Licensor has for several years conducted the business of processing and selling the peat for profit (the Business).

D.The Licensor owns plant and machinery utilised in the manufacturing process (the Equipment).”

  1. Under the Deed, Polwood granted a licence to Foxworth to operate the Business and to utilise “the assets”.[2] The term of the licence was three years.[3] It thus expired in November 2001. Foxworth was required to pay Polwood $75,000 in consideration of the grant of the licence and the option and Foxworth agreed “to contribute an amount up to $30,000 for the maintenance and/or replacement of items of equipment”.[4] Polwood was required to consult with Foxworth concerning the expenditure of such moneys. Provision was made also for payment by Foxworth of an annual licence fee of “an amount equal to 15% of annual net profit (as determined by the Licensee’s accountant…)”.[5] The following clauses have relevance to the issues for determination:

“4.2That the right to use the Process, the Patent and the business name shall cease immediately upon the expiration or earlier termination of the licence agreement…”

“4.3The Licensor and the Licensee agree that any improvements to the existing premises or any developments of any new process or product arising out of the operation of the business by the Licensee shall be jointly owned by the parties in the proportion of 85% Licensee and 15% Licensor, provided that the Licensee exercises the option.”

“8.1The Licensor warrants that Patent No. 682200 will remain in force until 20 July 1999 and provided that this agreement continues in existence then the Licensor will take all steps to ensure the renewal of the Patent at the Licensee’s expense. The Licensor warrants that the Patent adequately protects the Process within Australia under the current legislation regulating patents.

…”

“8.4Figures and accounts. The trading figures annexed hereto and marked with the letter ‘A’ are true and correct. The Licensor acknowledges that the Licensee relies upon the figures provided in entering upon this agreement.”

“8.5Continued profitability. The Licensor is not aware of any fact or circumstance which would have a materially adverse effect on the profitable operation of the business by the Licensee.”

  1. Under clause 15.1, Polwood granted Foxworth an option to “acquire an interest equating to 85% of [Polwood’s] legal and beneficial ownership of the assets”. It was to be exercised “by delivering to [Polwood] an offer to purchase in the form provided in Annexure B to this agreement”.[6] Clause 15.3 further provided: “Upon the proper exercise of the option the Licensor shall without delay execute the attached agreement, it being the intention of the parties that they will then create a binding legally enforceable contract.”
  1. Annexure B to the Deed took the form of an agreement for the sale and purchase of “an 85% interest in the Process, the Peat Patent, the equipment and the business and the trademark …”. The business, trademark and equipment were defined in a Schedule to Annexure A.
  1. Clause 3.01 of Annexure B provided for payment of the purchase price by a deposit of $30,000 to Swanwick Murray Roche Solicitors as stakeholders on or before the signing of the sale and purchase agreement and for payment of the balance “in the manner directed by the vendor”. The completion date was stipulated as the date 30 days from the date of the contract.
  1. By clause 16.1, the Ramptons, in consideration of the payment of wages of $500 net per week to Rampton and $250 net per week to Mrs Rampton, covenanted to “provide every assistance and instruction to the Licensee in respect of the Process and in the operation of the business”.
  1. Clause 17 contained an acknowledgement by Foxworth that Polwood had developed the “orchid bark process”, that the licence did not confer any rights on Foxworth in respect thereof and that Polwood was entitled to continue to carry on the orchid bark business provided that it did not interfere with or adversely affect the operation of Foxworth’s business or “adversely affect or restrict or limit services of” the Ramptons in Foxworth’s business.

Polwood’s business

  1. In 1998 Polwood, the directors of which were Mr and Mrs Rampton, was carrying on business as manufacturer and supplier of bark products for use in the cultivation of orchids and other plants. The products were orchid bark, potting mix and a peat substitute. All three products were derived from the processing of pine bark obtained from sawmills. The orchid bark, or at least the great majority of it, came from the external layer of the pine bark – the “exogenous bark”. It is lighter and less fibrous than the inner layer of bark adjoining the sapwood – the “endogenous bark”. These components of the bark were readily separable in a liquid solution as the “exogenous bark” is more buoyant than the “endogenous bark”. Orchid bark was produced in different sizes dictated by the use to which it is intended to be put.
  1. The potting mix, originally a waste product of the production of orchid bark, consisted of the pieces of “endogenous bark” which sank to the bottom of the water in the process of producing the orchid bark. The peat substitute was made from the further shredding or disintegration of the potting mix into finer materials by means of a hammer mill. The reasons why orchid bark was Polwood’s primary product are historical. There is no reason why pine bark, whether exogenous or endogenous, cannot be made into potting mix or peat substitute without also producing orchid bark. The three products all consist of processed bark and, except for the necessity or desirability that the orchid bark consist of exogenous bark, and disregarding fertilizer additives are differentiated by size only. As a general rule orchid bark has a particle size larger than the bark used for potting mix. The size difference results from time spent in a hammer mill. Peat substitute is bark which has undergone even more pulverization in a hammer mill than the bark to be designated as potting mix.
  1. By 1998 Polwood, from time to time, was producing potting mix and peat substitute (“peat products”) from batches of pine bark without also producing orchid bark. In fact, in the year ended 30 June 1998, considerably more peat products than orchid bark were produced.
  1. On 25 August 1989, Polwood obtained a patent in respect of the process developed by it for production of the orchid bark (“the orchid bark patent”). In about 1993, Rampton reached the conclusion that the potential for sales and profit from the manufacture and sale of peat products exceeded that from the production and sale of orchid bark. Polwood applied for a patent for the process for the production of peat products and the patent (“the peat patent”) was granted in July of that year.
  1. In and after 1993, Rampton, usually in consultation with a neighbour, Mervyn Connick, continued experimentation with a view to improving the processes and equipment used in Polwood’s business. Connick was a retired engineer with an interest in orchids and materials which promoted their growth. As part of the process of improvement, in about 1996, Rampton resolved to construct a much larger boiling tub (“the big tub”) to supplement the markedly smaller chamber then in use in the initial plant. The idea, at least initially, was not to substitute the big tub for the tub and separator but to use it in conjunction with the components of the plant to improve capacity and provide greater flexibility. Lack of finances, however, prevented Polwood from finishing its work on the big tub and from otherwise developing the business of producing and selling peat products (“the peat business”).

The introduction of Power as a prospective purchaser of part of Polwood’s business

  1. With a view to obtaining the requisite capital, Polwood looked for a business partner or investor between about 1994 and 1998. In 1998, Rampton was approached by Susan McRae, a business consultant. That contact led to a meeting between Rampton and Power in the premises of Foxworth’s Xerox shop in Rockhampton in about August 1998. Shortly after that meeting, Power visited Polwood’s Maryborough property and was shown over it by Rampton, who explained the nature of Polwood’s business and the manufacturing processes.
  1. There is a difference in recollection between the two men as to the extent of the inspection and of the explanations offered by Rampton about Polwood’s plant and processes that day and subsequently. It is Power’s evidence that he was not told that orchid bark was produced and sold as a separate product or of the fact that the manufacturing process was designed to produce orchid bark, potting mix and peat substitute. He asserts also that no separator was included in the production line inspected by him.

The Ramptons’ account of Power’s first visit to the Maryborough property

  1. Rampton’s evidence is as follows. He explained in detail how the three products were produced by the existing plant. He explained how Polwood’s business had developed and how he had come to recognise the marketability of the peat substitute, which was regarded initially as the waste produced from orchid bark production. He said that what Polwood was looking to sell at that stage was the potting mix and peat substitute business (“the peat business”) but it wished, if it could, to retain the orchid bark business. He mentioned the two registered patents, one protecting the orchid bark process and the other protecting the “peat products derived from the process”. He showed Power copies of both patents, which Power cursorily read. Mrs Rampton, in the course of discussion in Polwood’s office after Power’s inspection, gave Power copies of four brochures currently used or which had been used in the business.
  1. In the course of Power’s inspection, Rampton showed him the big tub and explained how it was intended to incorporate it in the production process in order to increase production.
  1. Mrs Rampton said that in the office after Power’s inspection she gave Power copies of four brochures which had been used by Polwood in its business. She recalls Power being shown the two patent specifications and being given an explanation of Polwood’s product range.

The Ramptons’ evidence of other pre-contractual dealings with Power

  1. Prior to the signing of the Licence, Power visited the Maryborough property again. He recalls two other visits. Rampton’s recollection is that there were at least three visits and “a great many telephone conversations” between Power and either himself or Mrs Rampton. Power accepted that there were many such phone calls.
  1. Included in these pre-contractual discussions was mention of Polwood’s need for funds to develop the big tub so as to increase production. Rampton estimated the cost of this work at $30,000 and stated that this was the genesis of clause 3.2 of the licence. That was accepted by Power.
  1. At about the time that the first draft of the Deed was prepared by Foxworth’s solicitors and sent to Polwood, the Ramptons claim that discussion occurred between Power and Mrs Rampton concerning the possible purchase by Foxworth of the orchid bark business. The discussion included reference to the incorporation of the big tub in the manufacturing process. Both Rampton and Power agree that they had in contemplation at the time the Deed was entered into that the big tub would soon be in use.
  1. Mrs Rampton’s evidence is that Power, in a telephone conversation initiated by him, raised the possibility of a sale of the orchid bark business. She told him that she and her husband would want a further $250,000 for it. Power responded that he would need to think about it and asked to be supplied with “some figures” on the orchid bark business. She explained that separate figures were not kept for that part of Polwood’s business. Power then asked for a statement showing, inter alia, a break down of sales between the orchid bark and peat products. Mrs Rampton states that following that request, she asked Polwood’s part-time bookkeeper, Mr Jones, a retired bank manager, to prepare such a document. It was prepared by Jones in long hand, typed by Mrs Rampton and faxed to Power on 16 October 1998.
  1. This document, which bore the heading “Estimation of financial results of boiled orchid bark products”, subsequently became Annexure A to the Deed. Jones gave evidence that he prepared the document in consultation with Rampton.

Power’s evidence about pre-contractual meetings

  1. Power, in cross-examination, swore that the first time he became aware that Polwood’s manufacturing process was designed to produce, and in fact produced, orchid bark as well as peat products was when he received a copy of a letter dated 16 October 1998 from Polwood’s solicitors to Foxworth’s solicitors. That was on 20 October 1998. But the evidence establishes that Mrs Rampton’s fax was sent to him on 16 October 1998. The faxed document contains a fairly rudimentary calculation of the quantity of bark products sold in “year ended 1998”, a statement of revenue, expenses and profit for that year and an apportionment of profit and expenses between peat and orchid bark products. A similar exercise is done in a second column under the heading “Budget year end 1999”. Notes to the document explain:
  1. Budget for year 30/6/99 is based on our own business plan before Paul entered the scene. Since then, and because of the injection of funds, the peat budget has been amended.
  1. Apportionment of costs between peat and bark is not an exact calculation. There are some elements of costs for which we do not have the necessary information to disseminate.

However, we believe the above calculations are reasonably representative.”

  1. Note 4 states that the year ended 30 June 1998 was one of Polwood’s worst years for bark sales “but saw a substantial increase in peat sales”.
  1. Power’s evidence is that prior to 16 October 1998 he was told only of the manufacture of peat substitute. I consider it unlikely that Rampton, who was seeking to interest Power in the purchase of at least some of Polwood’s business, would not have explained in some detail the nature of that business. It is even less likely that, in conducting Power over the Maryborough property and showing him the plant, Rampton would not have discussed the products which were derived from the pine bark and how they each came to be produced. In close proximity to the plant, which Power remembers inspecting, were silos for the storage of orchid bark. It is unlikely that their use was not mentioned.
  1. It would be curious also if, as I find to be the case, the Ramptons intended retaining the orchid bark business if they could, that they would risk creating confusion and disharmony by not mentioning their intentions to a prospective buyer at the outset. Even if they did not intend to retain the orchid bark business, it would not have made sense for them not to mention that orchid bark was one of the products of the business. Rampton was proud of his development of the orchid bark business and enthusiastic about the other products which originated as by-products of the orchid bark business. There is no reason why he would not have wanted to tell a prospective purchaser of the range of products produced by the business offered for sale.
  1. Another difficulty with Power’s account is that, on his version of events, once he found out that he was not acquiring all of Polwood’s business he did not trouble, beyond obtaining the information in the 16 October 1998 fax, to enquire into matters such as: the relationship between the three products produced by Polwood; whether the sales of one product assisted sales of the others; whether the products competed in any way; or whether the orchid bark was produced by the same or substantially the same process and plant that produced the peat products. It would surely have been prudent, and an obvious course for him, to enquire closely into how the continued production of orchid bark would interfere with the part of the business being acquired. It would also have been an obvious precaution on his part to enquire into the profitability of the orchid bark business in comparison with the balance of the business.

Findings in relation to first inspection at the Maryborough property and pre-contractual discussions

  1. I do not accept, as Power’s evidence would suggest, that the 16 October fax was unheralded by discussion. Nor do I accept Power’s evidence that he thought the document related to the product the subject of the Deed.
  1. I find that the Ramptons’ evidence about the initial inspection and conversations with Power held prior to the entering into the Deed is substantially accurate. In particular, I find that Power was given a full explanation of Polwood’s products and of the manufacturing processes.

The conduct of the peat business after the date of the Deed

  1. After the execution of the Deed, the Ramptons continued to work in the peat business as contemplated by the terms of the Deed. After the incorporation of Aussie Peat in 1999, however, their wages were paid by that company.
  1. In about late April 1999, Neil McRae (“McRae”), husband of Susan McRae, was engaged by Foxworth to investigate and advise in relation to the conduct and improvement of the peat business. McRae visited the Maryborough property on a number of occasions over a period of about three months. Relations between McRae and the Ramptons did not prosper, in part at least, because of McRae’s somewhat abrasive personality.
  1. In a fax to Power of 25 May 1999, McRae reported:

“Thought that I may have the answer to the product variability issue after reading the patent document where it is stated that the product must be cooled in ambient temperature water after boiling and that boiling time is to be varied in duration depending on particle size.

 

Apparently, not, as Lea and Marguerite tell me that was put into the patent document to try and mislead any potential patent copiers.

 

Were you aware of this?? (since this was typed we have spoken)

 

Other issue is the question as to whether or not this makes your pending purchase of the patent risky. Could you (or anyone) patent a process removing the steps considered unnecessary and get away with it??

 

Stick this in the back of your mind anyway.”

  1. On 30 June 1999 he sent a fax to Power in which he reported on the aggressive stance he had taken with the Ramptons mentioning, amongst other things, that he had told them (quite erroneously) that “they did not currently own the business”. He asserted also that the business could not support three people and if the Ramptons did not “make a recommendation [he] will fire somebody”. He reported that the new boiler, elevator and repaired hammer mill would be operating by the following Monday.
  1. On 1 July 1999 McRae wrote to the Ramptons complaining of broken promises in relation to the installation of the new boiler and elevator, which he said “was originally promised to be installed prior to the end of December 1998”. He confirmed that the new completion date was July 1999.
  1. By May 1999, McRae was looking on Foxworth’s behalf to interest companies of substance in entering into a joint venture with Foxworth in relation to the peat business. McRae hired an engineer to document the production process with a view to having plans drawn up to assist with its continued maintenance and improvement. The Ramptons were concerned about divulging detailed information regarding the production process without steps being taken to protect trade secrets and Rampton asked McRae to complete a confidentiality agreement. McRae refused. Rampton then spoke to Power about the matter and declined to provide any such information to McRae or any engineer retained by Foxworth unless confidentiality agreements were signed by them.
  1. The big tub was finally installed and working on 9 July 1999.
  1. In December 1998 and January 1999, one of the employees of the peat business was Maurice Gill, Susan McRae’s brother and a long-standing friend of Power. He worked in the peat business for about 146 hours tending the boiler to ensure that raw material fed properly into the green hammer mill and looking out for foreign materials. He also did other work of a labouring nature. He gave evidence about the plant and processes. I am doubtful about the accuracy of his recollection. It is likely that he had discussions with Power and possibly other witnesses called by the plaintiffs before he swore his affidavits. Also, he was only at the Maryborough property for a relatively short time.

The construction of the PSU – Rampton’s evidence

  1. The evidence of the plaintiffs and their witnesses diverge markedly from the evidence of the defendants and their witnesses as to the circumstances surrounding the construction, by Foxworth, of a machine which sterilised pine bark as part of the process of manufacturing peat products (“the PSU”). Rampton’s recollection is as follows. In about March 1999, in discussion with Power at the Maryborough property, Rampton explained that a weakness in the big tub was its inability to be pressurised. He informed Power of experiments with a pressure cooker and how the pressure and increased heat in the water enabled better penetration of the dolomite into the bark. He said that this resulted in a more consistent product and explained to Power an idea of his and Connick’s of a steaming tube.
  1. This was something Rampton had discussed from time to time with Connick before settling on the idea of the big tub. He had decided to build the big tub, rather than the steaming tube, for reasons of cost and convenience and because of his belief that the steaming tube may be unsuitable for orchid bark production. The problem he envisaged was that the augers used to move the product through the tube could break down the size of the bark particles to a greater degree than was desirable. Accordingly, he contemplated that the steaming tube would be built later when demand warranted it. He discussed these matters with Power.
  1. In about May 1999, Power told Rampton that he had a brother-in-law who was an unemployed boilermaker who he wanted to work in the Peat business. Nothing came of the discussion immediately. Some weeks later, the person concerned, Robert Kemp, came to the Maryborough property and introduced himself. He visited the property on seven or eight other occasions prior to early 2000 during which time he observed the operations of the plant and engaged in lengthy discussions with Rampton, and sometimes with Connick, in Rampton’s presence about the plant and the processes. There was discussion also about the big tub, the tub and separator, the desirability of increasing production of the peat products, and the steaming tube concept. In that regard, Connick drew a rough sketch of his contemplated steaming tube in order to explain it to Kemp. Kemp volunteered, in early 2000, to build a prototype of the steaming tube to see if it would work and Rampton agreed.
  1. The discussion about the steaming tube included discussion of: the advantages of pressure and increased temperature; advantages in terms of water and heat retention; and the benefits augers would confer by way of more consistent saturation of the bark.
  1. In late 1999 Power and Rampton discussed the production capacity of the existing plant. Power said that he wanted to increase production to improve cash flow.
  1. Sometime in 2000, Power telephoned Rampton to tell him that Kemp had built the prototype. Power requested that Rampton bring some raw bark to Power’s Peachester property to assist in production trials. Rampton complied with the request. He also brought bark on a later occasion for further trials. During his two visits to Peachester and on other occasions, he gave advice about the modification and improvement of the prototype, including: the length of boiling time required; the desirable temperature range; “the synchronicity of the augers”; and the quantities of dolomite which should be added to the bark being processed. On his second visit to the property he was requested to, and did, inspect the processed product. Once the PSU was constructed he needed to inspect it so he could prepare concrete footings and make other arrangements for its installation.
  1. In about September 2000, Power and Kemp visited Rampton at the Maryborough property where they discussed with him the construction of a production machine based on the prototype. Rampton gave advice in that regard. Power and Kemp returned later in the day and the discussions were resumed. Connick was then present and also advised as to the size of the appropriate tubes and the viability of the auger and drive system, should piping of particular dimensions be used. Power suggested that the PSU be built on his property at Peachester. He explained that the Maryborough property was already congested; it was accessible to the public and located on a highway. He said that protection of the design could be better be achieved at Peachester. He also explained that Kemp had a gambling and drinking problem and could be better managed by Power if Kemp did the work on the property at Peachester. Rampton agreed.
  1. Prior to Christmas 2000 Power, in a telephone conversation with Mrs Rampton, said that he intended not to bring the PSU to Maryborough after it was constructed but to take it to another property on the Sunshine Coast close to a bark supplier. Rampton rang Power and told him that he would agree to this course only if the option was exercised. Power indicated acceptance and agreed that the PSU be brought to the Maryborough property. He said, as he had said on a number of occasions in the past, if he elected not to exercise the option, “he would walk away with nothing and any improvements to the machinery and process would remain the property of Polwood”.
  1. During the construction process, Kemp continued to visit the Maryborough property on a regular basis where he sought and was given advice by Connick and Rampton in respect of problems being encountered in the course of construction.
  1. Many of these matters are denied by Power and where their accounts conflict, I prefer Rampton’s evidence generally over Power’s. Power’s evidence in this regard was both minimalist and implausible. I do not accept, though, that after the date of the Deed Power gave Rampton any assurance about walking away with nothing and laying no claim to improvements to the machinery and processes. I consider it probable that Rampton believed that he was given such an assurance as a result of discussions prior to the Deed and his understanding of the content of the Deed. It is likely also that discussion subsequent to the date of the Deed influenced Rampton’s understanding. But, after hearing Rampton’s oral evidence, I am unable to find that any such discussion resulted in an agreement or was sufficiently clear to give rise to an estoppel. It is not apparent either that Polwood acted on any such representation to its detriment. I note that none of the correspondence exchanged between the parties prior to the commencement of the proceedings made any reference to an alleged agreement between Power and Rampton to the effect that if the option was not exercised Rampton could keep the PSU.
  1. Rampton’s evidence about Connick’s drawing, MLC1, was contradictory. In his first affidavit, sworn on 7 July 2002, Rampton refers to the drawing but does not assert that it was used to explain anything to Kemp. In his oral evidence and also in his affidavit sworn on 7 June 2006 he asserted that the drawing was made in front of Kemp and explained to him. In the July 2002 affidavit he also erroneously described one of his own drawings as Connick’s. I have taken these matters into account in assessing Rampton’s credibility.

The installation and initial operation of the PSU – Rampton’s evidence

  1. The PSU was brought to the Maryborough property on about 1 February 2001 and placed on concrete footings constructed by Rampton and installed over a period of about three weeks. Installation involved steps which included: the dismantling of the existing plant; the connection of a new hammer mill and existing conveyor belt; and the extension of the conveyor belt.
  1. The PSU had extensive teething problems as the auger in the longer tube did not take up material at the rate in which it was fed into the PSU by the shorter auger. This led to jamming towards the end of the longer tube. Kemp, Power, Connick and Rampton discussed the problem and possible solutions. Eventually a square piece was cut out of the base of the longer tube near its end to give access to the auger adjoining the vertical auger. Additional flights were then added to the horizontal auger. The rate of jamming was lessened but performance still remained unsatisfactory as it normally jammed once or twice a day. On occasions the jam took two to three days to remedy. In the course of cross-examination Rampton conceded that the jamming problem was caused, not by any deficiencies in the PSU, but by the rate at which bark was fed into the PSU from the hopper.
  1. In about October 2001 the bearings with seals in the longer auger collapsed, causing serious leaks. The bearing at the top of the shorter auger also collapsed as did the metal flights at the top of the longer auger. Kemp remedied the problems.

The evidence of Connick

  1. Mr Connick was born in 1916 and was thus about 90 at the time he gave his evidence. His eyesight had deteriorated to the extent that he could no longer read without the assistance of relatively sophisticated equipment. I consider it likely that his powers of recall were also fading to some degree. His 2006 affidavit had to be read to him by the defendant’s solicitor before it was sworn and he also had it read to him by a friend on another occasion. The evidence does not disclose whether he was able to or did read his earlier affidavit.
  1. Connick’s recollection is generally supportive of the account given by Rampton. His evidence was as follows. He recalls discussing with Rampton in the early 1980s the concept of transporting bark through the processing equipment by means of two augers positioned at right angles. He referred to this as “the steaming tube concept”. He and Rampton had concerns that a process using the steaming tube concept may have damaged the bark so as to diminish its unsuitability for use as orchid bark. Because of that, the decision was taken to build the tub and separator designed by him.
  1. After Rampton recognised the potential to use the waste product of orchid bark production as potting mix or a peat substitute, in about 1996 Rampton and Connick again discussed the potential of the steaming tube concept as the prospect that the movement of the materials by augers might further break up the bark particles was not a concern in relation to those two products. After lengthy discussion Rampton decided to incorporate the big tub in the process instead of building a steaming tube, on grounds of cost and convenience. Connick then designed the big tub and its incorporation in the plant.
  1. At the Ramptons, on occasions on which a need to increase production of peat substitute and potting mix were discussed, Connick told Kemp of the steaming tube concept. In particular, he told Kemp about his dual auger idea and of his opinion that it would permit a higher level of production and was the preferred design if orchid bark was not being produced. From time to time, on such occasions, he drew a sketch in order to explain his concept to Kemp. During or subsequent to one of these discussions, Kemp told Connick that he was going to build a prototype of the steaming tube concept. By this time Connick was at the stage of not wanting any design responsibility and he was quite happy to hand over the design reins, as he perceived it, to Kemp.
  1. In an affidavit sworn on 17 August 2004, Connick said that in one of the discussions between himself, Rampton and Kemp in early 2000 he produced a particular diagram (“MLC1”), a copy of which was exhibited to his affidavit, in order to explain his concept to Kemp. He said that this was the only drawing that he had retained. In cross-examination he said that he had not found the document himself, but that it had been shown to him by the defendant’s solicitor.
  1. He was also cross-examined on the fact that in his affidavit sworn on 7 June 2006, unlike in his earlier affidavit, he was unable to state the specific occasion on which he produced MLC1.
  1. I do not attach a great deal of significance of these discrepancies in Connick’s evidence: they do not affect the substance of his evidence which is to the effect that he did drawings of the steaming tube and dual auger concepts from time to time in Kemp’s presence and had discussions with Kemp about them.
  1. Of more significance is a concession extracted from Connick in cross-examination that there were “one, perhaps two” occasions on which he had met Kemp before the PSU was brought from Peachester. This concession was made after Connick had confirmed orally his affidavit evidence of “occasions” on which Kemp had been present at discussions about the steaming tube and dual auger concept.
  1. I am satisfied that Connick is a person of integrity who took care to have included in his affidavits his best recollection of what had transpired. I think it likely that his implicit concession that there may have been only one meeting with Kemp prior to the shipment of the PSU arose from an accommodating disposition and was inconsistent with his true recollection which found expression in the affidavits.

The construction of the PSU – Power’s evidence

  1. Both Power and Kemp deny any discussions with Rampton or Connick about the concepts of steaming tubes, the use of augers or any other matters concerning the construction and design of the PSU. They deny seeing the Connick drawing and refute any suggestion that Rampton and/or Connick were involved in, or gave advice concerning, the construction of the PSU.
  1. Power’s version of events is as follows. He was concerned about the big tub process and employed Kemp to see what improvements could be made to it. Kemp consulted with Mel Barsby, an engineer in Bundaberg. These consultations led to the construction of the prototype PSU and to the conclusion that an auger or augers would provide the best means of transporting the product through water. As a result of a process of experimentation and after the testing of three prototypes, Kemp and Power arrived at the final shape of the tubes, coupled with a feeding auger and an extracting auger.
  1. Part of Power’s design criteria was that the PSU be readily transportable so as to facilitate its transportation around Australia. The entire cost of construction of the PSU, including the prototypes, came to $122,037. The moneys were provided from a bank account belonging to Aussie Peat. Kemp’s wages, totalling $29,369 during the period of testing of the prototypes and construction of the PSU, were met by Peachester Thoroughbreds.
  1. In the period during which the prototypes and PSU were being built, Rampton visited the Peachester property on two occasions and only at Power’s request. On the first occasion, Rampton delivered raw material for testing by a prototype or prototypes. On the second occasion Rampton came to take Power to attend a meeting in Ipswich. On no occasion did Power discuss with the Ramptons or Connick the principles applicable to the machine being designed at Peachester, show Rampton any drawings or describe the workings of the machine.
  1. In July or August 2000 Rampton, who had brought bark to the Peachester property, was present when the bark was run through a prototype. That was the only occasion on which Rampton observed any testing of a prototype or the PSU. The PSU was sent to the Maryborough property by Power because the production capacity of the existing plant was too small and because Rampton was complaining of difficulty in meeting production.

Construction of the PSU – Kemp’s evidence

  1. Kemp states that on an occasion in about June 2000, he went to Connick’s place to obtain some equipment he needed for the construction of the PSU. That was the first time on which he had met Connick.
  1. As part of his preparation for his task, Kemp read a copy of the peat patent provided to him by Power. He also visited the Maryborough property and inspected the existing plant and discussed its operation and the process with Rampton. Kemp sought to minimise the extent of his discussion with Rampton. In paragraph eight of his affidavit, sworn 1 November 2005, he mentioned that when he first started on his task he went to the Maryborough property and looked “at the system”. He described in his affidavit the process then in place and commented that it was “hit and miss”. He accepts that he spoke to Rampton about the process at that time. Later in his affidavit, he states that Rampton was “not very forthcoming with information at any time”. He asserts that on one of those occasions Rampton switched the plant off when Kemp was “taking observations with a thermometer and stop watch to calculate the speed of the process and the heat”.
  1. When questioned about how he went about determining such matters as: the temperature to which the bark should be subjected; the length of time during which the bark should remain in steam or heated water; and the quantities of dolomite or other substances to be added; Kemp responded, in effect, that these matters were attended to by Power. He stated that Power did growth tests using product that had been subjected to differing processes in order to arrive at solutions to these types of problems. He swore also that Power tested the water retention of the end product from time to time.
  1. During the construction of the PSU he was placed under pressure to complete construction so that it could be used in the peat business to increase production. He states that his idea initially was to “build something similar” to the existing plant, which would operate more efficiently. He wanted to improve the process as well as the productive capacity of the plant. At an early stage of his work he faxed Rampton and Power a drawing containing one of his ideas for improvement. On Kemp’s evidence, the design of the prototypes, which led to the PSU, evolved from a combination of his own ideas and ideas given to him by technically oriented persons (other than Rampton and Connick) with whom he had discussions about his project.

Conclusions as to the communications and conduct of the parties in relation to the design, construction and installation of the PSU

  1. The fact that Kemp’s initial task was to improve the process, as well as the plant, suggests that he would have been likely to get whatever advice and assistance he could from Rampton and Connick, at least in the early stages of his work.
  1. Kemp admits that he visited the Maryborough property from time to time with a view to familiarising himself with the peat products process. It was necessary for him to do that in order to design equipment suitable for manufacturing the peat products. Neither he nor Power had any prior familiarity with the process or the products and Kemp’s initial role was to “seek to improve the efficiency” of Polwood’s existing process.
  1. It is difficult to accept that in the course of these visits, Kemp did not discuss the process and the equipment used in the process with Rampton. After all, Kemp’s focus was on the machinery rather than the product produced by the machinery. Matters which required consideration in any design were the temperature to which the product was to be exposed and the length of exposure, whether steam was preferable to water, the duration in which the product should be submerged and the amount of dolomite or other products to be added.
  1. It would be curious if, contrary to their assertions, Kemp and Power did not attempt to gain the benefit of Rampton’s experience. They were aware that he had developed the peat products over a lengthy period by a process of experimentation. Power professed no expertise in relation to such products or horticulture for that matter. Rampton was under a contractual obligation to provide his services and expertise. While the PSU was being developed and constructed Power had it in mind to exercise the option in the Deed and he continued to believe that the peat business showed great promise. There was thus good reason why Power and Kemp would have wanted to obtain the benefits of whatever knowledge and expertise Rampton possessed.
  1. Nothing was said or done to suggest to the Ramptons that the PSU was not being developed and constructed for the purposes of the peat business. It must have been obvious to Power when requesting Rampton to deliver bark to Peachester for use in trials that Rampton would have been very concerned had he understood the trials to be for equipment available for use by a competitor. It would have been odd also if Kemp declined to discuss with Rampton the design principles underlying the prototypes when Rampton was viewing the prototypes at Peachester in Kemp’s presence. Such conduct would have alarmed Rampton.
  1. The latter considerations do not of themselves establish that Power and Kemp did discuss the processes and ideas for improving them with Rampton but they tend to support the Ramptons’ version of events rather than Power’s and Kemp’s. It is also unlikely that Power, who already had extensive business commitments, would have attempted to develop the expertise necessary for testing and arriving at the correct processes and products when Rampton was available and employed to assist in the peat business.
  1. My findings on this aspect of the matter are as follows. Kemp and Power decided to build a machine in the form of two tubes connected at right angles through which bark was to be moved by means of separate but synchronised augers in each tube after Kemp was told of this arrangement and its benefits by Connick and Rampton. Connick in Rampton’s presence and/or Rampton told Kemp that such a steaming tube arrangement would permit a higher level of production and would confer benefits in terms of: increased temperature, water and heat retention and more consistent saturation of the bark.
  1. In the course of development of the prototypes and the PSU Rampton supplied information to Kemp and/or Power which was used for the purposes of design and construction. That information included advice as to the quantities of dolomite to be added, the desirable temperature range and length of boiling time required. Neither Connick nor Rampton, however, had any other material input into the engineering design of the PSU apart from the one matter referred to by Connick in his evidence. Kemp did not look to Rampton or Connick for any engineering design assistance as he went about designing and constructing the PSU based on the concept provided by Connick and Rampton and neither Connick nor Rampton volunteered any material assistance in relation to the engineering design of the PSU after being informed of Kemp’s plans.

Attempts by Aussie Peat to market the peat products and the PSU

  1. In January 2001 Aussie Peat employed Roy Saunders (“Saunders”) as a salesman with responsibility for marketing the PSU. The PSU was demonstrated by Saunders to prospective purchasers and hirers in 2001, but no orders were obtained. Rampton urged on Power the desirability of having such persons sign a confidentiality agreement. The suggestion was rejected.
  1. In about August 2001 Saunders approached Bettergrow Pty Ltd, a company engaged in the sale of nursery products, with a view to leasing a PSU to it. Bettergrow’s sole director, Neil Schembri, was not persuaded of the PSU’s viability and nothing came of the approach.
  1. Saunders contacted Neil Schembri again in February 2002 and the two men met shortly afterwards. It was agreed that Aussie Peat would build a new PSU on Bettergrow’s Wagga Wagga land in order to demonstrate it to Bettergrow. Construction of the new PSU was commenced in October 2002. Neil Schembri spoke to Saunders about the prospect of Bettergrow becoming Aussie Peat’s exclusive licensee in respect of PSUs. According to Saunders, Power had been talking about PSUs processing one million cubic metres of product a year and Schembri said that Bettergrow wanted “to have a go at selling that amount of potting mix”.
  1. Construction of the PSU was protracted. It is Saunders’ evidence that in July Simon Leake of Sydney Environmental Laboratories, who was testing the product to determine whether it met the appropriate Australian Standard, advised that the product was ready for sale “with no problems”. He swears also that at another meeting attended by Neil Schembri, Paul Schembri, Leake, Power and himself in Sydney on 29 October 2003, Leake confirmed that the product was ready for sale as potting mix.
  1. Bettergrow, however, could not be persuaded to enter into a written agreement with Aussie Peat. Eventually, in late 2003, Saunders told Neil Schembri that Aussie Peat would no longer offer an exclusive agreement to Bettergrow. Neil Schembri, according to Saunders, responded “I won’t take this lying down”.
  1. In mid-2004 Saunders entered into a partnership with Power and Power’s brother to carry on a bark and compost business located in Hervey Bay.
  1. Neil Schembri, his brother Paul and Leake give a rather different account of their dealings with Saunders and Power to that given by Saunders and Power. Leake’s evidence is as follows. The result from the testing of the first batch of potting mix received on 11 April 2003 was very poor. Leake conveyed that fact to Neil Schembri. Not only did he not state in July 2003 that the product was ready for a fertiliser program or ready for sale with no problems, his opinion was that the product was not marketable and he did not suggest that it was marketable. In his opinion the product “was still of a very poor standard”. He carried out further tests on 3 September 2003 and concluded that the potting mix remained unmerchantable. Ph levels were too high and nitrogen, phosphorus and iron levels were too low. There were other deficiencies as well. A further testing was conducted on about 20 October 2003. The results of that testing revealed that many of the previous deficiencies in the product had been rectified but that the potting mix was still deficient in a number of respects. It was his belief, though, that these deficiencies could be overcome in a matter of weeks. Once this was done and before the product could be marketed successfully it would be necessary to develop a suitable fertiliser program for inclusion in the product. This would take another few weeks.
  1. At the meeting at Bettergrow’s premises in late October/early November 2003 with Power, Saunders and Schembri, Leake, although being positive about the potential of the process, stated that the potting mix was not yet ready for sale. He explained its deficiencies and gave the opinion that with further modification and improved test results, it could soon be ready for market. Leake’s evidence is of benefit in that it provides some illustration of the time and effort required in developing a merchantable potting mix.
  1. Neil Schembri said that, particularly in the last six months of 2003, he lost confidence in Saunders and Power as a result of non-performance and delay. He concluded that Power was prepared to sell the Aussie Peat’s product without ensuring it met Australian Standards.
  1. Paul Schembri, Neil Schembri’s brother and a former General Manager of Bettergrow, gave evidence to the following effect. The PSU at Wagga Wagga often broke down and was not able to process much material.
  1. Paul Schembri’s business, Susan River Potting Mixes, since 1 December 2005 has used the replica PSU on the Maryborough property to make potting mix. It has produced approximately 80 cubic metres of product per day and is operated three days a week for eight hours each day. He accepted that the PSU technology is revolutionary and that the owners of the technology would “have a large advantage over their competitors”. He considered, however, that it would not be an easy task to convince others in the industry of its merits.
  1. I find the Schembris and Leake to be credible witnesses. The substance of their evidence was unshaken in cross-examination. I find their evidence more reliable than that of Power and Saunders.

The exercise of option and subsequent events

  1. The solicitors for Foxworth wrote to Polwood on 23 October 2001 enclosing a signed contract in the form of Annexure B to the Deed, stating that it was enclosed “in exercise of the Option contained in the Deed”. The letter stated that a deposit of $30,000 was being held in the solicitors’ trust account and requested that Polwood sign the contract and return it by facsimile. A copy of the contract was executed by Polwood, but before the date for completion Foxworth received advice from a patent attorney that the peat patent did not protect the process and would be “ineffective in preventing a competitor from copying the process”. The patent attorney advised also that the orchid bark patent was currently in force and related “to a method and an apparatus and has claims similar in scope to that of [the patent]”.
  1. By letter dated 5 December 2001 from its solicitors, Foxworth purported to terminate the contract of sale arising out of its exercise of option. The letter asserted that Foxworth entered into the Deed in reliance upon representations that the patent protected the process of manufacturing the peat products and that Foxworth had obtained “clear evidence” that this was not so. Polwood’s solicitors wrote to Foxworth’s solicitors on 6 December 2001, noting their understanding that settlement under the contract was due on 5 December and that Polwood had executed a deed of assignment of the peat patent. The letter alleged that Foxworth was in default under the contract through not having settled and demanded that settlement take place no later than 12 December. Settlement did not take place on or before that date and thereafter both parties treated the contract as at an end. According to Rampton, he and his wife met with Power on 27 December 2001 and it was agreed that the Ramptons would continue to operate the business “throughout December, as if under the Agreement”. He said that they did that and drew their “agreed wages with the consent of Power on 27 December 2001”.

The development of the Mark III or replica PSU and the further patent application

  1. After proceedings were commenced by Foxworth and Aussie Peat for the return of the PSU, Rampton decided, as a matter of prudence, to construct a replacement machine. The defendants refer to this machine as Mark III. The plaintiffs refer to it as the replica PSU.
  1. Rampton’s evidence in relation to the replica PSU is as follows. He made some rough concept drawings, unassisted by measurements or images of the PSU. He then had a drafting service prepare some drawings. In the course of that process, he would sit with the person preparing the drawings by means of a computerised drawing system and advise alterations. That process led to the production of “dimensional scale drawings” on 9 May 2002. In that month, Rampton instructed patent attorneys to prepare a provisional patent application in respect of the replica PSU and a provisional application was lodged on 22 July 2002. An International Patent application was also made on 22 July 2002.
  1. In February 2003, Rampton engaged Robert Rapley, the proprietor of an engineering firm in Maryborough, to construct a replica PSU based on the drawings obtained in May 2002. Construction took about four months and, when completed, the replica PSU incorporated some features which Rampton devised in the course of its construction. One is a gravity feed drainage system. The replica, in Rampton’s opinion, is superior to the PSU in a great many respects. The differences between the PSU and the replica are critical to the resolution of the plaintiffs’ copyright claim and are discussed in detail later. As a result of an injunction obtained by Foxworth and Aussie Peat in these proceedings, the replica has not been used.
  1. Rapley said that the drawings given to him by Rampton were not of much assistance in the manufacturing process as they lacked measurements and other necessary details. The necessary measurements and specifications were supplied by Rampton in the course of many visits to Rapley’s premises and also over the telephone. When at Rapley’s premises, Rampton often sketched designs on scraps of paper or on the floor with chalk. Often information of this nature was given from memory or after calculations made on the spot by Rampton.
  1. Before constructing the replica Rapley had some familiarity with the modified PSU. In early 2002 when Rampton was carrying out extensive work on it he asked Rapley to examine the flights at the end of the augers with a view to redesigning and strengthening them to avoid any further collapse. Rapley advised in that regard. He also visited the Maryborough property on two or three occasions during the construction of the replica. On one such occasion he inspected the modified PSU in the presence of Rampton and Rohan Hatfield, the sales representative for a supplier of motors and drive systems.
  1. Rapley swore in his affidavit, which became part of exhibit 17, that when Rampton first came to see him he said that he wanted a direct drive system. The point of the inspection, according to his affidavit, was to look at the modified PSU “to better understand how it was driven and what the requirements and specifications for a direct drive mechanism” would be. During this visit, also according to the affidavit evidence, Rampton explained that he wanted a different direct drive mechanism and that he left it to Hatfield and Rapley to devise such a system. He said that on that inspection he did not take any measurements, photographs or other images of the replica PSU. Despite a concession made by Rapley in cross-examination I consider it probable when regard is had to all of his evidence that Rampton did not ask him at anytime to copy the PSUs drive mechanism.

Credibility generally

  1. I found much of Power’s evidence implausible and significant parts of his evidence were inconsistent with the evidence of other witnesses whom I consider to be more reliable. This lack of confidence in the reliability of Power’s evidence causes obvious difficulties for the plaintiffs’ claims, which rely to a major extent on that evidence.
  1. I concluded that Kemp was a partisan witness, anxious to avoid making concessions. He was anxious also to minimise the nature and extent of the information obtained from Connick and Rampton. I did not regard his evidence is generally reliable.
  1. Rampton’s evidence, to my mind, was generally more plausible than Power’s. It tended to coincide more nearly with objective probability and received more corroboration in important respects from other witnesses than did Power’s evidence. Rampton presented as much less sophisticated than Power. He was also less articulate and less able to handle the stresses of cross-examination. He is not a man given to precision of thought or expression. I gained the impression from his and other evidence that, with a better understanding of the issues in the case, he could have given more detailed evidence of the precise information of a confidential nature disclosed during the licence period.[7] Rampton’s recollection was shown by skilful cross-examination to be wrong in a number of significant respects and I have treated his evidence with caution.
  1. I regard Mrs Rampton’s evidence as generally reliable.

Construction of the Deed

  1. Under clause 3.2 of the Deed, Foxworth agreed to contribute “an amount up to $30,000 for the maintenance and/or replacement of items of equipment”. The “equipment” is defined in recital D as “plant and machinery utilised in the manufacturing process”. Under clause 2.1, Polwood granted to Foxworth a licence to operate the business and to utilise “the assets”. That term was defined in recital E as encompassing “the Process, the Peat Patent, the Equipment (detailed in the Schedule) and the trade name” and, possibly, the peat business.
  1. The only provision in the Deed directed to establishing title to improvements to property or after acquired property is clause 4.3. It operates only where the option has been exercised by Foxworth. The option was exercised and a contract for the sale and purchase of an 85 per cent interest in the business and related assets came into existence but was never completed.
  1. In my view, it is implicit in clause 4.3 that the rights created by it only operate if the contract of sale and purchase entered into consequent upon exercise of the option is executed, so as to effect an assignment of the subject property. It is impossible to conceive that it was the intention of the parties, objectively ascertained, that the subject property rights would be acquired by Foxworth and disposed of by Polwood even if the exercise of the option did not result in the assignment of 85 per cent of the subject property to Foxworth. The implication of such a term, if an implied term is required to produce this result, meets the tests propounded in Codelfa Construction Pty Ltd v State Rail Authority of NSW.[8]

Foxworth’s entitlement to the return of the PSU and to the intellectual property relating to it

  1. The defendants allege that a term should be implied in the Deed to the effect that in the event of the option not being exercised, or in the event that the contract coming into existence on exercise of the Deed is wrongfully repudiated, the right title and interest of Foxworth referred to in clause 4.1 of the Deed and in any improvements to the existing premises or any development of any process or product arising out of the operation of the business by Foxworth remain in or vest in, as the case may be, Polwood as licensor.
  1. The defendants argue that the tests for implication of a term stated in the reasons of Mason J in Codelfa Construction Pty Ltd v State Rail Authority (NSW)[9] are fulfilled. The argument proceeds as follows. Clause 4.3 of the Deed shows that the parties contemplated improvements to existing premises, the development of new processes and the development of new products in respect of a business in its commercial infancy. The parties also had in contemplation, as can be gleaned by reference to the matrix of fact, that such improvements and developments would require Mr Rampton’s advice and assistance and access to his knowledge of matters which were inherently confidential in nature.
  1. The wording of clause 4.3 and in particular that of the provisos, indicates that there has been “a deficiency in the expression of the consensual agreement”[10] arising from the failure of the parties and their legal advisers “to direct their minds to a particular eventuality and make explicit provision for it”.[11]
  1. The term contended for is reasonable and equitable because, if Foxworth decided not to exercise the option, it was fair that it should return the peat business to Polwood “with all improvements and developments or for that matter, any deteriorations or difficulties”. Foxworth would have had the benefit of Rampton’s “advice, expertise and assistance” as well as the benefit of confidential information.
  1. Whether or not the requirements for the implication of a term exist must be determined as at the date of the contract. As at the date of the Deed the licensor could not be certain about the commercial prospects of the peat business, whether during the licence period the licensee might make a profit or whether it would be worth exercising the option from a commercial point of view. Nor was the licensee in a position to know what moneys were likely to be expended by it on research and development and in what manner. For example, it could not predict whether it might find the licensor’s plant and processes of minimal value or whether it might devise plant or processes quite different in nature to those of the licensor.
  1. In the circumstances, I am unable to conclude that the term contended for by the defendants goes without saying or that it is just and equitable. The claim for entitlement to the product of the plaintiffs’ endeavours is quite different in nature from the claim, addressed later, that an obligation of confidence attached to information provided by Polworth to Foxwood and the existence of such an obligation detracts from the implied term argument.
  1. It is relevant that the parties expressly turned their minds to the question of trade secrets and other intellectual property in a number of clauses of the agreement.[12]
  1. Also in support of their arguments, the defendants point to the impracticability of removing plant and equipment introduced during the term of the licence. They use the modified PSU as an example of this problem. It was introduced into the production line and its removal, particularly as it had been worked on and improved by the defendants, would seriously and adversely impact on the profitability of Polwood’s business.
  1. The point is not lacking in substance. But parties to agreements such as the one under consideration cannot be expected to, and do not, plan for every eventuality. Many rights are left to be determined by reference to general legal principles. In determining how much to spend and how to spend it, Foxworth as licensee could always look to the consequence of its conduct.
  1. Consequently, under the Deed Polwood gained no legal right or entitlement to any chattels acquired by Foxworth for the purposes of the peat business or used by Foxworth in relation to the business, unless title was transferred as a result of property of Foxworth’s becoming affixed to the land or to some plant or equipment to which Polwood had title.
  1. In Australian Provincial Assurance Co Ltd v Coroneo,[13] Sir Frederick Jordan observed that:

“The test if whether a chattel which has been to some extent fixed to land is a fixture is whether it has been fixed with the intention that it shall remain in position permanently or for an indefinite or substantial period, or whether it has been fixed with the intent that it shall remain in position only for some temporary purpose. In the former case, it is a fixture, whether it has been fixed for the better enjoyment of and land or building, or fixed merely to steady the thing itself, for the better use or enjoyment of the thing fixed. If it is proved to have been fixed merely for a temporary purpose it is not a fixture. The intention of the person fixing it must be gathered from the purpose for which and the time during which the user in the fixed positions contemplated.”

  1. In order to determine whether a chattel has been so annexed to the land that it becomes part of it, it is necessary to consider all of the circumstances under which the annexation occurred as well as the means and degree of annexation.[14]
  1. Here, Power and Rampton both regarded the placement of the PSU on the Maryborough property as temporary. As both of them were aware, the PSU was designed to be transportable. That circumstance further tends to show that the PSU was not intended to be part of the land on which it sat.
  1. It is certainly a very large item of plant and was incorporated in a production line but its disengagement from that production line presented no particular difficulty. It rested on the land on a frame constructed to enable it to be placed, without further securing, on a concrete pad. Its removal would necessitate the removal of some roofing placed over part of it to protect some of the other plant associated with it. That is a consideration which supports the argument that it is a fixture.[15] In my view, however, these are relatively minor considerations when regard is had to the considerations earlier discussed.
  1. There was never a sustainable argument that the PSU was a fixture and the argument was abandoned during the trial. Having regard to my earlier finding as to the construction of the Deed and obligations of confidentiality, Polwood has no right to retain the PSU and its delivery up will be ordered. The plaintiffs no longer seek damages for its detention or conversion.

The misrepresentation allegations

  1. It is alleged that prior to the entering into of the Deed, Rampton, on behalf of himself and Polwood, represented that:
  1. The peat patent protected the process the subject of the licence granted by the Deed;
  1. The peat patent protected the process utilised at all material times by Polwood in the business of processing and selling peat for a profit;
  1. The process utilised by Polwood in the business was that described in the peat patent;
  1. The business was profitable and would continue to be profitable; and
  1. The use or operation by Foxworth of the process “within the scope of” the peat patent did not infringe any other Australian patent.
  1. The alleged representations are alleged to have been made by or are to be inferred from:
  1. Statements made by Rampton to Power prior to the entering into of the Deed;
  1. The conduct of Rampton in showing Power on or about 4 September 1998 the operation of the plant on the Maryborough property;
  1. The supplying by Polwood to Foxworth on or about 16 October 1998 of “trading figures annexed to the [Deed] by a facsimile transmission” and by the terms of the Licence;
  1. Clause 8.1 of the Deed under which Polwood warranted that the Patent “did adequately protect the process”.
  1. The representational statements of Rampton are alleged to be to the effect that:
  1. The business involved the manufacturing of orchid bark and processed premium peat from pine bark;
  1. The business was profitable;
  1. The business was conducted at the Maryborough property;
  1. No one else could produce process premium peat because Rampton had a patent on it; and
  1. The peat patent had 16 years to run.
  1. The representations which were made fraudulently or, alternatively, innocently were false and the warranty in clause 8.1 was breached in that:
  1. The peat patent did not provide any protection in respect of the process which was capable of duplication and commercial exploitation in Australia without infringement of the patent;
  1. The peat patent did not protect the process used in the business by Polwood as it was capable of use without infringement of the peat patent;
  1. Further or alternatively, the process utilised in the peat business at all material times by Polwood differed materially from that described in the peat patent as it did not include in it the separation tub vessel described in the peat patent;
  1. The peat business was not profitable “and would not be profitable in the future”; and
  1. The use or operation by Foxworth of the process “within the scope of” the peat patent would infringe another Australian patent.

Principles applicable to the misrepresentation claims

  1. It is essential that a representee establish reliance on the misrepresentation in entering into the contract. However it is not essential that he show that it was the only inducing factor. It is sufficient if the misrepresentation was an inducing cause and its importance in comparison with other inducements is not relevant.[16]
  1. Where a representation of an existing fact is made with the intention of inducing a representee to enter into a contract and a representee in fact enters into the contract, there arises “a fair inference” that the representee was inducted to enter into the contract by the representation.[17]
  1. Misrepresentations inducing the entry into of contracts are classified by the common law into two classes, innocent and fraudulent.[18] A representee induced to enter into a contract in reliance on a misrepresentation of either type may elect to rescind the contract if he has not affirmed it. Where the contract  has been affirmed the representee may recover damages but only in the case of fraudulent misrepresentation. For misrepresentations to be actionable in the manner discussed they must be representations of fact. But an opinion or statement as to future events or intention may contain within itself a representation as to a present event, circumstance or state of mind and thus constitute a representation as to existing fact.[19] 
  1. For a representation to have been made fraudulently it must have been made without an honest belief in its truth.[20] In Derry v Peek, Lord Herschell said:

“Secondly, fraud is proved when it is shewn that a false representation has been made knowingly, or without belief in its truth, or recklessly, careless whether it be true or false. … To prevent a false statement being fraudulent, there must, I think, always be an honest belief in its truth. And this probably covers the whole ground, for one who knowingly alleges that which is false, has obviously no such honest belief.”[21]

  1. Any such recision operates ab initio.[22] Where it is impossible, however, for the parties to be restored to the status quo or where the plaintiff has acted unconscientiously, the court may refuse relief.[23]
  1. In Senanayake v Cheng[24] it was said, in a passage often cited with approval, that the important question for the court was:

“whether restitution in integrum is substantially possible and whether recision is timely just and fair.” 

  1. Normally there will be no breach of s 52 unless the conduct complained of conveys a misrepresentation. Damages can be recovered for misleading and deceptive conduct only where the loss or damage has been suffered “by” the conduct.[25]
  1. In Kenny & Good v MGICA 1992 Ltd[26] the following propositions, referred to with approval in Franklin Motors Pty Ltd v Piano,[27] were advanced in the judgment of the court. 

…

  • “ [A] person induced to enter a transaction by misrepresentations, generally speaking, must show that the losses claimed are related to the misrepresentation. It is not enough simply to show that the transaction was induced by the representation and the losses would not have occurred but for the transaction. The loss must flow directly from inducement.
  • if the applicant would have entered into the relevant transaction, event if the misrepresentation had not been made, any losses flowing from the transaction as such cannot be said to flow directly from the inducement. In such a case the applicant would have been exposed, in any event to the precise risk that ultimately eventuated.”

The alleged misrepresentations as to profit and profitability

  1. Power gave evidence that Rampton told him on the occasion of his visit to Foxworth’s premises in Rockhampton that “as the business’s costs were mainly of a fixed nature, being debt service, increased production would greatly increase net profit”. In cross-examination Rampton admitted making such a statement.
  1. I have no doubt that Rampton spoke at some length to Power prior to the entering into of the licence of the great potential of the peat business, and Rampton accepts that this was so. I am not satisfied, however, that he made any direct oral representations as to the current state of profitability. Nor am I satisfied that Rampton is able to recall the substance of what, if anything, was said by either of the Ramptons before the date of the Deed about the level of profitability of the business at that time.
  1. Rampton also agreed in cross-examination that he said to Power prior to entering into the Deed that “once the new tub vessel became operational the profitability of the business would be substantially increased because the costs would remain fixed while productivity would be significantly expanded by the new tub vessel”.
  1. Recital C of the Deed provided:

“The licensor has for several years conducted the business of processing and selling the peat for profit (the Business)”.

  1. By the facsimile of 16 October 1998 which became Annexure A to the Deed, Polwood represented that the orchid bark part of its business had made a net profit before tax of $20,692 in the year ended 30 June 1998 and that profit derived from sales of $52,347 less cost of goods sold of $19,921 produced a gross profit of $32,426. Other expenses, which were deducted to arrive at the net profit, were stated to be $11,734.
  1. What Annexure A represented, inferentially, about the profitability of the peat products business is difficult to say. It does not on its face apportion cost of goods sold, sales or gross profit between orchid bark and other products on a percentage basis. The plaintiffs argue that Annexure A should be understood in context with the oral representations and recital C and that it was calculated to reinforce “to Power that the [peat] business was profitable”.
  1. Power swears that when he read Annexure A he did not appreciate that it was referring to two different products or that one of the products was to be excluded from the proposed licence. Having this belief, he concluded from the “Summary of trading” that “the business was a profitable business”.
  1. He conceded, somewhat reluctantly, that by the time the Deed was signed he came to understand that the orchid business was not to be included in the proposed licence. According to him he was not concerned about this as he understood that the figures in Annexure A “referred to the process the subject matter of the Licence Agreement” and thus remained relevant.
  1. The only evidence given by Power about a document headed “Notes to cash flow” and a number of pages of cash flow projections which accompanied it, was that he understood from the documents that with the injection of capital to the order of $30,000 “the profitability of the business would be magnified”. It was not disputed that he was given these documents before the Deed was entered into. This group of documents was also relied on by the plaintiffs.
  1. The profit projections made by both sets of financial documents contained estimates based, as was or ought to have been apparent to Power, on increases of production and thus sales arising from the expected commissioning of the big tub. It was not established that the estimates were not made in good faith or that there was no reasonable basis for them. The plaintiffs’ financial misrepresentation case thus depends on establishing that the peat business was not profitable at the time of the representations.
  1. Polwood’s profit and loss statement for the year ended 30 June 1998, which Rampton admits he probably had prior to the entering into of the Deed, showed a gross profit from trading of $92,803, expenses of $93,872 and a net loss of $1,069. Included in the expenses were a managing director’s salary of $26,232, rent of $29,079 and consultant’s fees of $6,400. It was not shown to or relied on by Power but provided a significant basis for a challenge to the Ramptons’ credibility in relation to the alleged representations as well as the foundation for the assertion that the peat business was not profitable.
  1. The profit and loss statement was in respect of the whole of Polwood’s business, not just that part of it to be licensed. The statement could not, without more, establish that the peat business was unprofitable. The way the plaintiffs sought to do this was by reference to Annexure A, a note to which stated that the year to 30 June 1998 “was one of our worst for Bark Sales, but saw a substantial increase in Peat Sales”. It was said that, at least by inference, when regard is had to the profit and loss statement, Annexure A inflates the true profits of the orchid bark business and by implication the profits, if any, of the peat business.
  1. The plaintiffs’ case, however, is not that the profits were overstated but that the peat business was not profitable. The subject representations need to be understood in the context in which they were made. They are not referable to any particular accounting standard. The words used by Rampton must be given their natural and ordinary meaning and are to be understood as a reasonable person would have understood them.[28] More relevant to Power and Rampton than net profit or loss arrived at as a result of a sophisticated accounting exercise would be the amount of money which the proprietor could take from the business. Relevant in that regard would be the salaries or wages paid to and benefits obtained by the proprietor.
  1. The Ramptons took $26,232 from Polwood in the year ended 30 June 1998 as a salary. There were also consultants’ fees. Jones, in the course of his evidence, identified the sum of $29,079, shown as an outgoing of Polwood’s in the profit and loss statement as rent, as a sum payable by the Ramptons personally to their bank on account of interest. It is the case also that the accounts of Polwood for the year ended 30 June 1998, prepared by the accountants for tax purposes, disclosed a small profit rather than a small loss. Furthermore, the representation relied on is that “the business was profitable”, not that its degree of profitability was static throughout the financial year ended 30 June 1998. The evidence does not show any declining profitability in the latter part of 1998. Indeed, if it shows anything as to trends, it is that the peat business was developing.
  1. For these reasons, I find that the alleged misrepresentation as to profitability has not been made out and that there was no breach of section 52 of the Trade Practices Act in relation to it.  In any event I am not persuaded that Power relied on such a misrepresentation in entering into the Deed.
  1. By the time the Deed was entered into, Power had not formed any view about the Ramptons’ managerial or financial skills. He swears to reliance on the material contained in the 16 October letter and in the financial statements appended to the Deed. Yet he did not trouble to find out who was responsible for the preparation of those statements or to discuss them with any legal or financial advisor. Annexure A was plainly amateurish in nature and also obscure in meaning. It raised questions about the degree of profitability of the peat business. Nevertheless Power, an experienced businessman who had retained the services of a particular accountant for many years, on his evidence saw no need to seek any expert advice.
  1. A possible explanation for Power’s behaviour is that he had become convinced of the potential of the peat products, recognised that Polwood had only just commenced to exploit their potential and had little or no interest in how Polwood had been trading. It is possible that he paid some regard to the cash flow projections as they included sales projections. The view that he placed no reliance on any financial representations is supported by the fact that the solicitor’s letter of termination of 5 December 2001 makes no allegations in that regard. Also there was no suggestion in his dealings with McRae, in the course of McRae’s extensive investigations into the peat business, that Power had been misled by financial information provided by Polwood.
  1. Finally, on this aspect of the case, I find that Foxworth did not rely on the alleged representations in entering into the contract. By the date the option was exercised Foxworth was well aware of the true state of the peat business’ financial affairs and had no regard to what Rampton may have said in that respect in 1998. Nor did Foxworth have regard to Annexure A at that time.

The patent representations

  1. Rampton admits telling Power that the peat patent protected the process utilised by Polwood in the business of processing and selling peat products for a profit.
  1. The plaintiffs contend that, if the step in the peat patent specifications of passing the product through the separator was not part of the process of “processing and selling peat for a profit”, the patent did not offer protection to the process. The defendants do not contend to the contrary and the proposition is supported by authority.[29] The defendants seek to meet this difficulty by the argument that the representation was true in respect of the process in use at the date of the representations and the date of entering into of the licence: it became inaccurate only when the big tub was commissioned in July 1999.
  1. But the meaning of the representation must be gathered by reference to the context in which it was made. It was Rampton’s understanding, and he explained to Power, that the production of the peat substitute would be by means of a process which incorporated the big tub. It was understood by both men that the introduction of the big tub had been delayed only by lack of funds and that, once the funds provided for in clause 3.2 of the Deed were forthcoming, the big tub would be able to be commissioned quite quickly.
  1. When referring to the peat patent and its protection in connection with the Polwood’s process, Rampton was referring to the process in existence at the time of the representation and also to the process which involved the big tub. Power was intended to understand, and probably did understand, Rampton’s observations in relation to the peat patent in this way.
  1. Rampton does not suggest that he turned his mind to the effect the introduction of the big tub would have on the protection afforded the new process by the peat patent. Nor does he suggest that any temporal limitation was expressed in relation to the patent protection. Plainly neither Rampton nor Power, if he thought about it at all, considered the patent protection in terms of the relatively short period between the date on which the proposed licence would commence and the date of commissioning of the big tub.
  1. Even if this conclusion were wrong, the statement was inaccurate as the peat patent did not protect the process in use prior to July 1989. The second integer of claim 1 of the peat patent provides:

“Immersing said bark granules while heated into water at ambient temperature to cause separation of exogenous and endogenous portions of said bark granules.”

  1. A person following the peat products production process used at the time of the representations and up until July 1999 would not have been immersing the bark from the boiler “to cause separation of exogenous and endogenous” parts of the bark. Separation was not only unnecessary, it was pointless.
  1. The passing of the product through the separator tub, where that happened, was not for the purposes of separation and any separation which took place was transitory and achieved no practical result. It occurred merely because Rampton had found no practical way of deleting the separation tub from the production line when only peat products were being produced. One significant obstacle to the by-passing of the separation tub was that the conveyor, which took the product from the boiler carried the product on its underside. It follows from what I have said that I do not accept the evidence of those who contended that prior to July 1999 the separator tub had been by-passed as a normal part of the production line when peat products were being produced. It is likely though that there were relatively short periods during which the separator tub was not used with water in it, as Rampton experimented with ways of removing the separator tub step.
  1. There was thus misleading and deceptive conduct for the purposes of s 52 of the Trade Practices Act. Assuming, as the defendants’ case assumed, that the giving of an opinion in the circumstances under consideration fell within s 52, it is doubtful that the oral representation was one of fact, rather than opinion, and a non-expert one at that, but no argument to that effect was advanced on behalf of the defendants.[30] As will be seen, however, acceptance of the existence of an actionable innocent misrepresentation does not affect the outcome of the case.

Did the Ramptons know that the peat patent did not afford protection to the peat production process at the time of the representations?

  1. The McRae fax to Power of 25 May 1999, in which McRae questioned the efficacy of the peat patent on the basis that it contained an inessential step or steps, was used by the plaintiffs as evidence of the Ramptons’ knowledge that the peat patent did not afford protection to the peat production process. The defendants’ counsel argued strenuously that McRae’s evidence in relation to the subject conversation should not be accepted. It was submitted in effect that McRae, who was endeavouring to establish a role for himself in the peat business, was out to impress Power by making a sensational statement and that he had concocted his conversation with the Ramptons.
  1. I consider that McRae’s evidence was not entirely reliable but I do not accept that the report of the conversation in the fax was pure invention. It is more likely, and I find, that the account given to Power and repeated in evidence was not completely accurate. I consider it probable that there was some conversation between McRae and the Ramptons which touched upon the step in the patent specifications referred to in McRae’s fax. McRae does not suggest, however, that he raised with the Ramptons any question concerning the efficacy of the protection afforded by the peat patent. I am satisfied that at the time of the alleged representations and at the date of the Deed, the Ramptons were not of the belief that the peat patent did not protect the process used in the peat business by Polwood.

Did Foxworth enter into the Deed in reliance on the representation?

  1. The plaintiffs point out that Foxworth, under the Deed, paid $105,000 comprising: approximately $40,000 per annum to the Ramptons in wages; insurance; and $2,400 per month for the leasing of equipment. Consequently, it is argued that patent protection was a matter important to Power. These submissions have logical force. But on Power’s version of events, he did not trouble to even read the peat patent prior to the execution of the Deed. Nor is there any suggestion from him that he then sought or obtained any expert advice on the patent and the protection afforded by it. There is some evidence, denied by Power, that before entering into the Deed a Mr Dwyer, an associate of Power’s, obtained the numbers of the two patents in order to obtain copies of them, presumably with the a view to carrying out some form of assessment.
  1. It appears from the McRae fax of 25 May 1999, and I find it likely, that McRae and Power discussed the question of the protection afforded by the peat patent on or about 25 May 1999. Power claimed that the matter reported by McRae did not concern him as he understood the discussion to relate to the orchid patent.  I do not accept that evidence. Power claims to have read the peat patent in November 1998.  He does not assert that he re-read it before his telephone conversation with McRae, or referred to it at the time of the conversation.  It is thus unlikely that he would have been in a position to dismiss McRae’s observations as relating to the peat patent. McRae had no reason to refer to the orchid patent and surely, if Power thought McRae to be mistaken, he would have taken the matter up with McRae.  There is no suggestion in the evidence that Power did so. 
  1. One possibility is that Power received advice, prior to entering into the Deed, that it was doubtful that the peat patent protected the peat production process. Another is that he was not concerned about the validity of or the protection afforded by the peat patent.
  1. Mrs Rampton swears to a conversation in about May 2001 with Power, in which she informed him of receiving a notice from Polwood’s patent attorney that renewal fees for the peat patent had shortly to be paid. She said that she would have to pay the fees, to which Power responded that he “did not think that we should bother paying the renewal fees” because he “did not agree with patents”. He went on to explain that “only one or two things had to be changed in the steps described in the patent and the patent would be worthless” and that “the only people that make money out of patents are lawyers”. He also said that Kemp had welded a few extra taps and pipes on the PSU and that would give it more protection than patents. He went on to re-affirm his opinion that patents were “worthless”. After some discussion Power eventually agreed that the renewal fees should be paid. I find that this account by Mrs Rampton is substantially accurate.
  1. Just as there was no reason for Power to place reliance on the financial abilities or acumen of the Ramptons, there was no reason for him to attribute any weight to Rampton’s lay opinions concerning the efficacy or otherwise of patents. As the plaintiffs’ counsel observed in the course of his oral submissions, Power was interested “in the big picture”. What interested him was not intellectual property rights but, I rather think, the prospect of being able to exploit the process discovered by Rampton of converting pine bark into peat products.
  1. The circumstances in which Foxworth purported to terminate the contract also cast doubt on Power’s reliance on any representations as to the effect of the peat patent. On his evidence, he did not seek advice about the peat patent until 29 November 2001. He did not explain why he then sought that advice. Power was given oral advice by Mr Angliss of Cullen & Co, Patent Attorneys, on 29 November 2001. The advice was confirmed in writing on 3 December.
  1. On about 2 December, Power telephoned Rampton and told him that he had received advice to the effect that the subject process was not protected by the peat patent. Rampton said that he did not accept that the advice was correct and suggested that he and Power go to see Polwood’s patent attorney. Power agreed to this proposal but before the meeting could be arranged, Power had Foxworth’s solicitors send a letter dated 5 December 2001 to Polwood, giving notice of termination of the contract and reserving Foxworth’s rights to claim damages. Negotiations took place between Power and Rampton but it does not appear to me that Power was anxious to resolve the differences between Foxworth and Polwood or to proceed with the contract.
  1. Power claims to have been “devastated” after receiving his patent attorney’s advice as “it meant all my future plans as to how we were going to use our invention (the PSU) were for nothing.”
  1. The probability is that, after Foxworth exercised the option, Power recalled McRae’s advice about difficulties with the peat patent, or possibly other undisclosed advice in that regard, and decided to consult a patent attorney with a view to obtaining grounds of avoidance of the contract. Power’s timing is not suggestive of the conduct of a purchaser making routine precautionary checks. The option was exercised on 23 October 2001 and settlement was due on 5 December.
  1. Rather than being devastated it is probable that he was pleased to be provided with an excuse not to proceed with the contract. He retained his confidence in the PSU and had the expectation that its exploitation would generate substantial profits with or without patent protection. It is significant that there is no hint in the evidence of any other witness, including the Schembris, Kemp and Saunders, that the failure to acquire the peat business or rights to the peat patent caused any interruption to Power’s business plans or lessening of his expectations. According to Saunders, he and Power were looking to buy part of another business during the licence period and it is plain from the evidence of both Power and Rampton that well before the end of 2001 their emphasis was on the exploitation of the PSU.
  1. Despite the foregoing I find that the existence of the peat patent was of some relevance to Power, albeit slight, at the date of the Deed. Foxworth’s legal advisors considered the peat patent sufficiently important to include a warranty in relation to it in the Deed. It is likely that Power placed some weight on the warranty as conferring contractual rights. It is rather less likely that he set store by any statements made by Rampton about the peat patent’s scope or efficacy. There is little, if anything, in the evidence to show that prior to the date of the Deed, Power reposed any confidence in Rampton’s judgment, veracity or knowledge, particularly in relation to matters of legal nature. I exclude from these comments Rampton’s knowledge of and concerning his manufacturing processes and of the peat products and their markets.
  1. Not without considerable hesitation, I find that the subject representation was an inducing cause of the Deed. It was made with the intention that it be relied on and, despite the matters just discussed, I consider it more probable than not that it was a factor, albeit minor, in Power’s decision to enter into the Deed.
  1. I find, however, that the representation was not an inducing cause of the contract. Much had happened between the date of the representation and the exercise of the option. Power had perused the peat patent. McRae had considered it and its application to the manufacturing process, so had Kemp. It is likely that Kemp had discussed the contents of the peat patent with Power in relation to the intended role of the PSU in the manufacturing process.
  1. Before and after the date of the Deed, the peat business was in an evolutionary stage. The representation and the warranty in clause 8.1 were in respect of the manufacturing processes involving the big tub and its predecessor. There was no representation that the peat patent would afford protection to any later invention or development. By the time of the exercise of the option the former processes had been overtaken by the PSU. Power’s focus was on the new invention and its perceived benefits. I find that in exercising the option he did not have regard, whether consciously or subconsciously, to the alleged representations.

The relief sought

  1. The plaintiffs submit that if there is a finding of a contravention of s 52 of the Trade Practices Act the Deed should be set aside ab initio as the contract was never put into effect. All that has to be undone is the Deed and the parties can be put back into their respective positions at the time of contracting by refunding the moneys paid under the Deed including the deposit. The claim is thus for: the return of the deposit of $30,000 (now paid into court); the sum of $105,000 paid by Foxworth under the Deed; and Aussie Peat’s losses sustained in operating the Peat business under the Licence, totalling $229,573.  There were no submissions expressly directed to rescission based on innocent misrepresentation.  Perhaps it was thought, correctly I rather think, that s 87 offered the best prospects of success.
  1. It is submitted that Power, as a director of Aussie Peat, relied on the representations in causing Aussie Peat to operate the business under the licence and that it is also entitled to damages under s 82 or other relief under s 87 of the Trade Practices Act.
  1. In my view, restitution in integrum in respect of the Deed is impossible and it would not be timely, just or fair to grant Foxworth the relief it is seeking.
  1. The term of the licence granted by the Deed expired before 5 December 2001, the date on which Foxworth purported to rescind the contract. Foxworth did not purport to rescind the Deed at any time, unless it is to be taken as having done so by its claim in an amended statement of claim for a declaration that the Deed and the contract are void ab initio.
  1. Foxworth had or was entitled to have had the benefit of the licence for the whole of its three year term. It claims that the peat business was loss making and that losses of some $229,000 were sustained over the licence period. Assuming that to be so, it does not necessarily follow that Foxworth did not benefit materially from entering into the Deed.
  1. By entering into the Deed, Foxworth obtained the Confidential Information as later described. That information set Foxworth on the course of improving the process and the plant used in the peat business, which led to the construction of the PSU. Both parties, for good reason, regard the intellectual property rights in respect of the PSU to be extremely valuable. I consider it probable that the value of these rights and of the Confidential Information greatly outweigh any trading losses sustained in the operation of the peat business.
  1. It might also be said that Foxworth obtained, in substance, the business opportunity it was seeking when it executed the Deed. Under the Deed Foxworth was granted a licence to carry on the peat business, then in a developmental stage. The evidence does not suggest that Power was unhappy with the operation of the peat business during the licence period. To the contrary, he became even more persuaded of its potential.
  1. Polwood acted to its disadvantage in imparting the Confidential Information and it is not practicable or even possible to restore it to its former position. There is a complicating factor in that the plaintiffs contend that Foxworth ceased to carry on the peat business and to act as licensee from when Aussie Peat took over these functions after its incorporation. But I do not see that this causes any difficulty for present purposes. Foxworth remained the contracting party. Power was the guiding mind of both companies and if any benefits were obtained by Aussie Peat rather than Foxworth, that was assented to by Foxworth and done for Power’s administrative convenience and financial benefit.
  1. The court’s power under s 87 of the Trade Practices Act to declare contracts void ab initio is not governed or confined by equitable principles.  The remedy is discretionary but the considerations which have led to the granting or refusal of equitable relief provide useful guidance in the application of s 87.  In addition to the matters just discussed it is relevant that Power attached very little weight to the peat patent.  In May 2001 he was reluctant to pay for its renewal. And on his own evidence he didn’t trouble to read it, let alone obtain advice in relation to it before the execution of the Deed. During the term of the licence he and his agents had ample opportunity to consider the protection afforded by the peat patent and, of course, after the advent of the PSU the representation and clause 8.1 were essentially of historical interest.
  1. For the above reasons, I conclude that it would be inappropriate to set the Deed aside ab initio. For many of the same reasons I am unable to conclude that Foxworth, or Aussie Peat for that matter, suffered “loss or damage by [the] conduct”[31] of Polwood or the Ramptons of which the plaintiffs complain. In that regard I consider it probable that Foxworth would have entered into the Deed had the representations not been made.

The allegation that the defendants are the owners in equity of the copyright, other intellectual property and the PSU

  1. The defendants contend that the relationship of licensor-licensee between Foxworth and Polwood gave rise to “fiduciary and confidential obligations”. Although the pleadings do not allege a breach of clause 7 of the Deed, the defendants rely on clause 7 to show that Foxworth and Polwood treated “information regarding the process”, as well as the Patent, as being the subject of an obligation of confidence. The information to which the obligation of confidentiality is said to attach and which is said to have been imparted to Kemp and/or Power (“the Confidential Information”) comprises: the concept of a steaming tube being two tubes joined at right angles into which materials would be fed and through which materials would be conveyed by two augers; the information that such steaming tube concept would be a preferable method of producing peat products and would have specified advantages over the tub and separator including increased pressure and heat ensuring greater penetration of the bark by water and dolomite, water retention, heat retention and more consistent saturation by more effective submersion of the bark as a result of the rotation of the augers.
  1. In address, the defendants’ counsel added to this list[32] the timing of the process and the temperatures used in the process.  Rampton gave evidence, which I accept, that he told Kemp and Power at Peachester that “they would have to achieve between 80 degrees and 110.  If they went above the 100 they would be killing [desirable] pathogens.” In his principal affidavit he swore to advising on the “length of (boiling) time require for the process to be effective” and “the rate of dolomite required to neutralise the high acid content to achieve a Ph level of approximately 6.4. The matters are also included in the definition of Confidential Information.
  1. The plaintiffs’ submissions may be summarised as follows. Information imparted by Connick does not assist the defendants as he is not an employee or agent of the defendants. Any disclosure of information was not made in circumstances in which any obligation of confidentiality would attach. The whole basis of the licence was that the process was protected by the peat patent and it is thus difficult for the defendants to argue that there is a part of the process which is a trade secret or confidential information.
  1. There is a general equitable jurisdiction to grant relief against abuse of confidential information not involving any tort or breach of some express or implied contractual provision.[33] The basis for the jurisdiction “lies in the notion of an obligation of conscience arising from the circumstances in or through which the information was communicated or obtained”.[34] Relief is not obtainable, however, unless the information in question has “the necessary quality of confidence about it”.[35]
  1. Megarry J, in Coco v A N Clark (Engineers) (No 2) Ltd[36] in a passage approved in subsequent cases,[37] observed:

“… three elements are normally required if, apart from contract, a case of breach of confidence is to succeed. First, the information itself, in the words of Lord Green, M.R. in the Saltman case on p 215 must ‘have the necessary quality of confidence about it.’

Secondly, that information must have been imparted in circumstances importing an obligation of confidence.

Thirdly, there must be an unauthorised use of that information to the detriment of the party communicating it.”

  1. In Saltman Engineering Co Ltd v Campbell Engineering Co Ltd[38] Lord Greene, M.R. said:

“I think that I shall not be stating the principle wrongly if I say this with regard to the use of confidential information. The information, to be confidential, must, I apprehend, apart from contract, have the necessary quality of confidence about it, namely, it must not be something which is public property and public knowledge.”

  1. In Coco, Megarry J referred to the above passage from the judgment of Lord Greene in Saltman and explained:

“As Lord Greene said in the Saltman case at p.215 ‘something which is public property and public knowledge’ cannot per se provide any foundation for proceedings for breach of confidence. However confidential the circumstances of communication, there can be no breach of confidence in revealing to others something which is already common knowledge. But this must not be taken too far. Something that has been constructed solely from materials in the public domain may possess the necessary quality of confidentiality: for something new and confidential may have been brought into being by the application of the skill and ingenuity of the human brain. Novelty depends on the thing itself, and not upon the quality of its constituent parts. Indeed, often the more striking the novelty, the more commonplace its components.” (emphasis added)

  1. It will be seen that the simplicity of an idea does not defeat its confidentiality. Nor does the fact that the parts which go to make up the whole are well known or commonplace.
  1. Roskill J addressed an argument that an idea was too obvious to be protected in Cranleigh Precision Engineering Ltd v Bryant & Anor[39] in this way:

“The plaintiff’s answer to the argument that any sheet metal worker would be able to devise an interfit of the type in question was that the ordinary sheet metal worker would not know that it was this particular interlock of this size and shape which was suitable for this type of pool. The secrecy lay in the method and purpose of the interlock, and the fact that the underlying idea was simple did not affect the confidential nature of the information in question.”

  1. The fact that Kemp and Power may, given time and experimentation, have been able to arrive at the steaming tube and dual auger concept is not an answer to the defendants’ claims. The fact that they would have had to have spent time and trouble to produce that result is sufficient to impose an obligation of confidence.[40]
  1. The defendants’ argument derives some assistance from the terms of the Deed. Notwithstanding the warranty in clause 8.1 as to the peat patent, it was thought necessary to impose an obligation of confidentiality on Foxworth in clause 7. Under that clause, Foxworth “and its directors” agreed not to “disclose convey or otherwise transfer any trade secrets, information regarding the Process, the Patent … or other confidential information without the prior consent of the licensor”. Clause 7 is somewhat inadequate in providing contractual protection as it fails to deal with the question of the licensee’s use of the Confidential Information in the event that the option is not exercised.
  1. In Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd[41] Fullagar J, reviewing the decisions in Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd[42] and Mense & Ampere Electrical Manufacturing Co Pty Ltd v Milenkovic,[43] concluded that the question to which the judge in each of those cases directed his ultimate enquiry was:

“Would a person of ordinary intelligence, in all the circumstances of the case, including, inter alia, the relationship of the parties and the nature of the information and the circumstances of its communication, recognize this information to be the property of the other person and not his own to do as he likes with?”

His Honour, by necessary inference, approved such a test. Its application in the circumstances of this case would result in an answer in the affirmative.

  1. The Confidential Information did not consist of trite or obvious statements made in the course of casual conversation. The steaming tube concept was the product of long thought and experimentation by Connick and Rampton. It arose out of a depth of knowledge gained in devising the plant for Polwood’s business and in refining its product. Furthermore, the information was divulged in circumstances in which Rampton, Kemp, Connick and Power understood that Kemp would undertake or was undertaking to improve the throughput and processes of the peat business.
  1. The fact that the relationship between Foxworth and Polwood was licensee and licensor does not prevent duty of the confidentiality from arising. In Moorgate Tobacco Co Ltd v Philip Morris Ltd (No 2),[44] after concluding that the general relationship between licensor and licensee under the subject licence agreement was not fiduciary and that they were free to look to their own interest, Deane J, with whose reasons the other members of the court agreed, went on to explain:

“That does not, however, preclude the possibility that, within or arising from that general relationship, duties of a fiduciary nature might well exist.  Particular property, corporeal or incorporeal, might be held by one party on behalf of the other; particular provisions of one or other of the two agreements might require the pursuit by one party of the interests of the other without regard to its own; one party might undertake to act on behalf of the other in relation to a particular matter arising within or outside the area governed by the two agreements.  The continuing relationship between the parties under the agreements – involving shared objectives, accounting obligations and the provision of information – provided a context in which it would be easier to imply an undertaking by one party to act on behalf of the other in relation to a particular matter or venture than would be the case if that relationship had not existed.”

  1. Foxworth was given the entrée to the peat business and Polwood’s related trade secrets principally with a view to assessing over the term of the licence whether 85 per cent of the business was worth acquiring. Foxworth was given the right to use, in effect, Polwood’s intellectual property for the duration of the licence[45] and Rampton’s expertise and assistance was to be made available to Foxworth.[46] Polwood was then placed in a vulnerable position. The obligation imposed on the Ramptons by clause 7 also required that there be mutual trust and confidence between the licensor, licensee and their respective directors.
  1. In these circumstances it is difficult to resist the conclusion that the Deed gave rise to a circumstance of mutual confidence in which there was imposed on Foxworth a duty not to use or impart confidential information obtained by it from Polwood or Rampton in the course of the peat business except for the purposes of the peat business during the term of the licence unless Foxworth exercised the option and acquired an 85 percent interest in the peat business.
  1. I do not consider that the fact that at least some of the Confidential Information was imparted by Connick provides the plaintiffs with an answer to the defendants’ claim. Connick’s role at relevant times was that of a consultant and adviser to Polwood. He was on the premises of Polwood in that capacity and also as a friend of the Ramptons. But the relevant discussion addressed matters which consisted of opinions formed by Connick and knowledge gained by him in his consultative capacity. The fact that Connick provided his services gratuitously does not appear to me to make any difference for present purposes.
  1. Nor does it seem to me that the existence of the peat patent and/or the orchid bark patent deprive the Confidential Information of its confidential nature. As Bowen CJ in Eq observed in Interfirm Comparison (Australia) Pty Ltd v Law Society of New South Wales:[47]

“The authorities indicate that even though secrecy may be imperfect in relation to communication which is given in confidence, that communication may still be protected by the principles of confidentiality.”

  1. The peat patent specifications did not disclose the steaming tube and dual auger concept or the advantages of that concept over the existing processes.
  1. For the above reasons I find that Foxworth had an obligation of confidence in respect of the Confidential Information. There was an unauthorised use of the Confidential Information once Foxworth sought to use it for its own purposes after the term of the licence expired.
  1. Power and the other plaintiffs are bound by Foxworth’s duty of confidence. Power is director and the guiding force of Aussie Peat, Foxworth and Peachester Thoroughbreds. His knowledge of relevant matters is also that of the companies’. In the circumstances of this case, all plaintiffs are to be taken to have been aware of the confidential nature of the subject information.[48]
  1. Polwood claims:
  1. an amount of the net profits of the business conducted by Foxworth during the term of the licence and an order for payment of any sum found due and owing to Polwood on the taking of such an account;
  1. damages for breach of the licence;
  1. a declaration that the plaintiffs are liable to assign their copyright, if any, in the PSU drawings to Polwood and an order that they effect such an assignment;
  1. a declaration that Peachester Thoroughbreds and Power are not eligible persons within the meaning of the Patents Act 1990 (Cth) and are not entitled to registration as co-owners in respect of patent application 2002950316.
  1. The evidence is that no profit was made from the peat business during the term of the licence and the relief referred to in paragraphs (a) and (b) was not pursued.
  1. The defendants support the relief referred to in paragraphs (c) and (d) above on the grounds that a constructive trust should be imposed. There is authority which supports the imposition of a constructive trust in circumstances such as those under consideration.[49] However, even assuming the availability of the remedy, I do not regard it as appropriate here.
  1. The more significant part of the Confidential Information imparted to and used by the plaintiffs was largely conceptual in nature. It is doubtful that the Polwood for itself would have acted on the steaming tube dual auger concept. The plaintiffs did act on it and in developing the PSU, expended much time, energy and inventive skill. Polwood has had the benefit of the defendants’ endeavours and has made use of its opportunities by constructing a similar machine and developing a business relationship with Bettergrow.
  1. The evidence in the case, and the allegations, did not focus on establishing the financial benefit obtained by the plaintiffs from the Confidential Information or an appropriate sum to be paid to the defendants by way of compensation for its misuse. The counterclaim included a claim for “all further and proper accounts, inquiries and directions.” The claim was not pursued. It is therefore inappropriate to consider further this possible avenue of equitable relief.
  1. I have concluded that the application of the springboard doctrine is sufficient to do justice in the circumstances of this case.[50] By virtue of patent applications in respect of the PSU or replica PSU made by both sides, the relevant information is now in the public domain.  Injunctive relief has been granted on an interlocutory basis. I have concluded that after judgement any further injunctive relief, if sought, would not have been warranted.  The plaintiffs have already been deprived of their “head start” to the extent that is just, particularly having regard to the use by the defendants of fruits of the plaintiffs’ labours. 

The plaintiffs’ copyright case

  1. The allegations on which the plaintiffs’ copyright case is based may be summarised as follows.
  1. Kemp, as an employee of Peachester Thoroughbreds, and Power were the authors of drawings to be used in the construction of the PSU (“the PSU drawings”);
  1. The PSU drawings are artistic works within the meaning of the Copyright Act 1968 (Cth) (“the Copyright Act”);
  1. Copyright in the PSU drawings thus resides in Peachester Thoroughbreds and Power;
  1. The PSU was constructed with reference to the PSU drawings and are substantially a three-dimensional representation of the PSU drawings;
  1. The defendants substantially produced or authorised the substantial reproduction of the PSU thus infringing the copyright of Peachester Thoroughbreds and Power.
  1. Power’s drawings were produced by him on a computer. They are conceptual in nature and would have been of little or no use as working drawings. The evidence does not establish that in constructing the PSU Kemp had regard to them. Accordingly, they do not assist the plaintiffs’ case.
  1. Section 21(3) of the Copyright Act provides that an artistic work shall be deemed to have been reproduced in the case of a work in a two-dimensional form if a version of the work is produced in a three-dimensional form.
  1. Section 14 of the Copyright Act provides that unless a contrary intention appears a reference to the doing of an act in relation to a work shall be read as including a reference to the doing of that act in relation to a substantial part of the work.
  1. The Act does not define “substantial”. In that regard the plaintiffs referred to discussion on that matter by Finkelstein J in TCN Channel Nine Pty Ltd v Network Ten Pty Ltd (No.2). [51] His Honour stated:

“There is no fixed rule for determining how much of a copyright work must be taken for it to be a substantial part of the work.  The area of substantial similarity is at the heart of copyright law, yet it remains one of its most elusive aspects.  The general rule is that substantiality depends on quality not quantity: Ladbroke (Football) Ltd v William Hill (Football) Ltd [1964] 1 WLR 273 at 293 …”

  1. In the course of his reasons his Honour referred to the following comments of Store J in Folsom v Marsh:[52]

“It is certainly not necessary, to constitute an invasion of copyright, that the whole of the work should be copied, or even a large portion of it, in form or in substance.  If so much is taken, that the value of the original is sensibly diminished, or that the labours of the original author are substantially to an endureous extent appropriated by another, that is sufficient, in point of law, to constitute a piracy pro tanto … Neither does it necessarily depend upon the quantity taken …. It is often affected by other considerations, the value of the materials taken, and the importance of it to the sale of the original work … In short, we must often, in deciding questions of this sort, look to the nature and objects of the selections made, the quantity and value of the materials used, and the degree in which the use may prejudice the sale, or diminish the profits, or supersedes the objects, of the original work.”

  1. Crennan J in Goldpeg International Pty Ltd v Kovan Engineering Aust Pty Ltd,[53] in discussing the concept of substantial similarity referred with approval to the following passage from the reasons of Wilcox and Lindgren JJ in Tamawood Ltd v Henley Arch Pty Ltd:[54]

“… it is not infringement of the part, but infringement of the whole that is in question. Whether there has been an infringement of the whole requires that the originality of the part be considered in relation to the work in suit as a whole. It must be determined whether the part is an ‘essential or material’ feature of the whole work, regarded as a copyright work, in the present case, as an artistic work. In our opinion, it must be asked whether the part or parts taken represent a substantial part of the labour, skill and judgment of the author that made the whole work ‘original’. Factual questions of degrees of ‘significance’ or ‘importance’ of the part to the whole are involved.”

  1. Hill J in Skybase Nominees Pty Ltd v Fortuity Pty Ltd[55] put forward the following test for infringement of copyright, which was also referred to with implicit approval by Crennan J:

“For there to be an infringing reproduction two elements are required, although they are not unconnected. First, there must be a ‘sufficient degree’ of similarity between the two works: Francis Day & Hunter Ltd v Bron [1963] 1 Ch 587; 1A IPR 331 (CA). Secondly, there must be a ‘casual connection’ between the two works.  Such a casual connection arises, not to put too fine a point on it, where one work has been copied from the other.”

  1. It is accepted that in determining whether a three-dimensional work constitutes a copy of drawings or plans it is permissible to look at a series of drawings in order to determine what the object depicted would look like in three-dimensional form.
  1. When determining the question of substantial similarity “the question is not whether there are dissimilarities but whether the respondents’ products closely resemble the appellant’s drawings or a substantial part of them”.[56]
  1. Whether there is reproduction of a substantial part of the drawings “must be decided by its quality rather than its quantity”.[57]
  1. Both sides called expert evidence on the question of substantial similarity. Dr Grigg, who was called by the plaintiffs, produced a report in which he carefully considered and discussed drawings produced by Kemp and Power prior to the construction of the PSU. Having completed that exercise he described the aspects or elements of the replica PSU, as adapted, which were also embodied in the PSU. He separately considered and listed those features of the Kemp and Power plans which were embodied in the replica and then expressed opinions on “the materiality or substantiality of the repeated features to the nature, configuration and operation” of the replica PSU.
  1. Considering the report of Dr Gilmore, the expert called by the defendants, Dr Grigg stated:

“It is my view that Appendix B of the affidavit of Paul Power … provides a significant amount of information on the workings of the PSU and together with Kemp’s drawings … would enable a competent engineer to produce a machine very similar if not identical to the PSU and Replica.”

  1. The reference to Appendix B is to that part of the exhibits to Power’s affidavit which includes his drawings.
  1. The relevant exercise, however, is not what “a competent engineer” may have been able to do; it is the non-expert comparison by the Court of the drawings with the alleged infringing object.[58]
  1. Kemp produced some 20 drawings on which the plaintiffs relied. Many of them were quite rudimentary and conceptual in form. Some of them depicted features which did not appear in the PSU as constructed or as modified. Six of the drawings were prepared after the installation of the PSU on the Maryborough property. They are irrelevant. There is a further difficulty in that the evidence does not establish that the PSU was constructed by reference to many of Kemp’s drawings. Kemp gave evidence to the effect that he was at pains to ensure that the drawings produced by him were not such as to enable the PSU to be copied by a person who had gained access to them.
  1. According to him, his drawings were prepared on “a need to know basis” to enable him to get quotes on materials for use in the PSU. It is only drawing 15 which, according to Kemp, shows all the PSU’s features. It was his “shop drawing” which, on his evidence, he “basically followed” when he started building the PSU. That drawing was to scale and contains some measurements but it has very little in the way of detail and substantial parts of it differ in appearance from the PSU as constructed or modified. The plaintiffs’ position is not greatly improved when regard is had to all of the plans or drawings.
  1. Obvious points of difference between the PSU and drawing 15 are: the feed tube on the former has a flared inlet, the latter does not; the end of the longer tube on the former has the distinctive box shaped addition, the latter does not – it is cut away at the end; no squeeze water tube is shown on the drawing; no detail is shown of external pipes and tubes on the drawing; no detail is shown on the drawing as to the mode of driving augers. With the advantage of hindsight, one may be able to deduce from the drawing that there will be two water tanks. One could not deduce, however, that either or both were intended to be removable.
  1. In short, drawing 15 conveys not a great deal more to a lay examiner than the basic components of two tubes set at right angles, one or perhaps two water tanks and some framework for holding the apparatus upright. To that I should add the angle of the bottom of the longer tube to the base of the support (26 degrees).
  1. To my mind, the plaintiffs’ case and the evidence adduced in support of it tended to concentrate too much on the concepts inherent in the design of the PSU rather than the critical question of substantial similarity. It also appeared to me that a substantial thrust of the plaintiffs’ case rested on the similarity resulting from the fact that both designs were of two tubes connected at right angles, one being longer than the other. I do not consider the foundation to be a firm one. As I have found, the steaming tube dual auger concept was not one which emanated from the plaintiffs. It had been something in which Rampton had had an interest for a considerable period of time. It is thus difficult for the plaintiffs to succeed in an argument that copying was involved in the adoption of the two tubes and dual augur concept and configuration. The right angle between the tubes, apart from being an obvious engineering solution, was also something which Rampton had considered in the past.
  1. Other drawings of Kemp fill in some matters of detail of original design but Dr Gilmore, whose evidence I found persuasive, said of the 12 Kemp plans examined by him that:

“I wouldn’t really call them plans. They are sketches, hand sketches at very best, and outlining fairly disjointed parts of the machine. So even together they don’t really form a consistent set of drawings describing the original machine.”

  1. He later added that they were “very early drawings … of development of a concept”. Those plans did not include drawing 15.
  1. Dr Gilmore, in comparing the replica PSU with the modified PSU, noted the following points of difference:
  1. The different shapes of the intake and of the shorter tubular member;
  1. The different appearances of the discharge end of the long tubular member;
  1. The detailed shape of the pivot flanges is different on the two machines. In the case of the replica PSU the flange welded to the longer tubular member sits inside a flange welded to a base frame;
  1. The drive system for the augers is “dramatically different”;
  1. The tank systems are different. The replica PSU has no external tank  although both machines have two tanks mounted above the longer tube. The tank arrangement on the replica PSU is “much simpler”; and
  1. The main connecting pipes “emanate from quite different positions in the water storage tanks to those” on the modified PSU. The pipe and outlet arrangements constitute a development of the initial concept and produce different results in terms of water flow. Their functions are different as is their performance capabilities.
  1. I find the evidence of Rampton and Rapley as to the way in which the replica PSU was designed and constructed to be broadly accurate. It shows that Rampton did not set out to copy, even though he was familiar with the modified PSU. He wanted to improve the design wherever possible and to incorporate in his design features though of by him.
  1. For the above reasons I find that the plaintiffs have not succeeded in showing that Rampton copied the modified PSU (let alone the PSU) or that there is substantial similarity between the replica PSU and the plans on which the plaintiffs rely. I greatly doubt also whether there is substantial similarity between those plans and the PSU. The replica PSU is not a three-dimensional reproduction of the Kemp plans or any of them.

The patent claims

  1. The plaintiffs seek a declaration that Peachester Thoroughbreds and Power are the sole eligible persons within the meaning of the Patents Act 1990 (Cth) and are entitled to registration as co-owners in equal shares of Polwood’s patent application number 2002950316 dated 22 July 2000.
  1. They also seek an injunction restraining the defendants from proceeding with that application and an order that the defendants transfer the application to Peachester Thoroughbreds and Power.
  1. Polwood seeks declarations that Peachester Thoroughbreds and Power are not “eligible persons” and are not entitled to registration as co-owners of the patent application; and that Rampton, or alternatively Polwood Aussie Bark Pty Ltd, is entitled to registration as sole owner.
  1. Section 15 of the Patents Act 1990 relevantly provides:

“15(1)Subject to this Act, a patent for an invention may only be granted to a person who:

(a)is the inventor…”

  1. Section 16 of the Patents Act provides that subject to any agreement to the contrary, where there are two or more patentees:

“(a)each of them is entitled to an equal undivided share in the patent; and

(b)each of them is entitled to exercise the exclusive rights given by the patent for his or her own benefit without accounting to the others; and

(c)none of them can grant a licence under the patent or assign an interest in it without the consent of the others.”

  1. The dictionary to the Patents Act defines “eligible person” in relation to an invention as meaning a person to whom a patent for the invention may be granted under s 15.
  1. A patent may be granted only to the inventor or somebody claiming through him. A person who publishes, for the first time, another’s invention which has been communicated to him, is not the inventor for the purposes of s 15 of the Patents Act. And one of two inventors each responsible for part of an invention cannot claim a patent over the total invention.[59] Both inventors may obtain a joint patent over the whole.[60]
  1. Useful discussion of relevant principle and precedents is to be found in the following passages from the reasons of the Commissioner’s delegate in Row Weeder Pty Ltd v Neilsen:[61]

“The Harris v CSIRO (1993) 26 IPR 469 decision puts forth a number of questions to consider.  These are:

(1)what the invention(s) is/are of the person making the s.36(1) request;

(2)what the invention(s) disclosed in the specifications is/are of the person who made the patent application; and

(3)whether one person has any rights in the invention of the other and vice versa.  The decision also suggests a more significant question of whether the invention would have occurred without a particular person’s involvement.

The Costa v GR & IE Daking Pty Ltd (1994) 29 IPR 241 decision found 2 people to be joint inventors since the invention only occurred because of the involvement of both.  The invention resided in a machine for picking vegetables being a conveyor arrangement mounted laterally on a trailer.  One person had a general idea of what was required to solve the problem of tilting the conveyor boom and providing different heights for different crops.  However, that person did not necessarily know how to give effect to those ideas.  The creation of the invention required the input of the other persons.

 

The reapplications by CSIRO and Gilbert (1995) 31 IPR 67 decision stated the key issue in that case was not one of inventiveness but of entitlement.  The rights in an invention do not flow from an assessment of the inventiveness of respective contributions but rather from an objective assessment of the contribution simpliciter to the invention.  The decision held that a consequence of collaboration between parties is that entitlements to any inventions, associated with the collaboration, are shared between the parties.

 

The Falkenhagen v Polemate Pty Ltd (AIPO Application No. 84712/91, 16 June 1995, unreported decision) stated that a second person engaged because of that person’s expertise to construct the device based on instructions from or given the concept of a first person is not normally regarded as an inventor of the device.  This holds true even if the second person suggests ways to waive its design or operation.  However, if the second person’s suggestions give a result of advantage not contemplated by the original concept then the second person may qualify as a joint inventor of the improved device.  The result out advantage would need to be a material one so that the resulting device is an improved one not merely a preferred workable embodiment of the original concept.

 

The common theme from the above decision is that a person has entitlement to an invention if that person’s contribution, either solely or jointly with others, had a material effect on the final concept of the invention.  A secondary issue is whether that person’s contribution involved a key inventive step.”[62] (emphasis added)

  1. In Iluka Midwest Ltd v Wimmera Industrial Minerals Pty Ltd[63] a delegate of the Commissioner of Patents, after reviewing decisions on inventorship and entitlement, observed: 

“Although obviously there is a distinction to be made between the 2 concepts, [inventorship and entitlement] I have found the observations made in relation to inventorship or entitlement to be mutually illuminating.  A review of the facts of these decisions has revealed a consistent approach to the inventorship issue which has involved an assessment of the contribution made by the alleged inventor(s) to the invention as broadly described and claimed  …

 

I can see no reason to depart from this approach.”

  1. The mere suggestion of an idea or concept by one person to another may not suffice to give the former the status of an inventor. The learned authors of Halsbury’s Laws of England state:

“The true and first inventor is the person who substantially originated the invention, although the acceptance of suggestions (not themselves amounting to invention) from others, and the leaving of details to employees to work out, do not prevent a person from being an inventor.  The courts are, however, not astute to find that a person is the true inventor merely because he has suggested an idea or desideratum, and has left the practical working out of the intention to others.  Where more than one person has made a substantial contribution to the invention, all who have should be joined as applicants and name as inventors.”[64]

  1. The same point is made in an American text, Chisum on Patents, referred to by the Court in Davies Shephard:[65]

“It is frequently difficult to determine who has in fact contributed to the conception of a given invention because the contribution must consist of more than suggesting a desired result or following the instructions of another.”

  1. The threshold which it is necessary to surmount in order to gain inventorship status though is not particularly high. In a passage from Terrell on Patents,[66] quoted in Davies Shephard, it is said:

“In Tennant's Case (1 WPC 125, n) a material part of the invention claimed was found to have been suggested to the patentee by a chemist at Glasgow. Lord Ellenborough held that the patent was invalid, inter alia, because the grantee was not the inventor. It will be observed in this case, that although it is possible that the patentee was the first person to use the particular method for making bleaching liquor, nevertheless he was held not to be the inventor, because the particular method of producing this bleaching liquor was thought out by someone else and communicated to him.

 

In Cornish v Keene (1 WPC 501 at 507), Tindal CJ said: ‘Sometimes it is a material question to determine whether the party who got the patent was the real and original inventor or not; because these patents are granted as a reward, not only for the benefit conferred upon the public by the discovery, but also to the ingenuity of the first inventor; and although it is proved that it is a new discovery, so far as the world is concerned, yet if anybody is able to show that although that (ie the publication to the world) was new, that the party who got the patent was not the man whose ingenuity first discovered it, that he borrowed it from A or B, or had taken it from a book that was printed in England, and which was open to all the world - then, although the public had the benefit of it, it would be an important question whether he was the first and original inventor of it.’ There is no doubt that, in the circumstances stated by the Chief Justice, the person obtaining the patent would not be the true and first inventor.

 

The principle laid down in the cases cited above has invariably been followed.

 

A may have invented something; he made have made a few experiments with the invention, and then abandoned it (without publication). B may subsequently have invented the same thing, altogether independently of A. If B applies for letters patent he is at law the first inventor; but if it is shown that the process of invention was not carried on in B's mind at all, but that A communicated his ideas to B, although with the full intention of abandoning them, B will not be the first inventor.”

  1. It is asserted by the learned authors of Intellectual Property Law[67] that:

“It is commonly accepted that where a person has done something that helps to solve a particular problem or answer a particular question, this will be regarded as an inventive contribution.  As such, if it can be shown that an individual has done something that helps to solve a problem, it is likely that they will be treated as an inventor or joint inventor.  While the answering of a problem is, in some ways, the archetypal inventive contribution, it is by no means the only type of contribution that is recognised as being inventive.  For example, the perfection or improvement of a solution may also be regarded as an inventive contribution.”

  1. The approach adopted in Great Britain to determining the true inventor is to identify the inventive concept and to then ascertain who devised that inventive concept.[68]  That approach, in my respectful opinion, has much to commend it.
  1. In order to identify the inventive concepts it is necessary to go to the claims. Because these reasons are already lengthy I will not set out the claims. It is sufficient for present purposes to state that they include claims of two broad types:
  1. ones which describe the method and process of subjecting sawmill waste to immersion in heated water so as to produce potting mix; and
  1. ones which describe an apparatus for implementing the method and process.
  1. The claims which describe the apparatus include, in part, a description of the steaming tube dual auger concept which I have held to be information imparted by Polwood to Foxworth. In that regard I find, subject to questions posed by Connick’s role, that: Polwood originated the concept; it was a key inventive step and that the plaintiffs may not have designed a machine which embodied that concept if it had not been disclosed to them by Connick and Rampton.
  1. Many of the claims concerning the apparatus, however, are in respect of aspects of an apparatus which were not the subject of any communication by Polwood to Foxworth. Polwood is not the inventor of those: Foxworth (or Peachester Thoroughbreds) is the inventor, through its employee Kemp. It is unnecessary for me to determine and I make no findings as to the identity of Kemp’s employer.
  1. It is not possible however to determine, on a clam by claim basis, who devised the inventive concept contained in it. The approach of both sides was on an all or nothing basis. The possibility that a party on the other side of the record may have been a co-inventor, although raised in the course of the case, was not the subject of submissions. Consequently, the claims were not examined with a view to determining, in each case, the identity of the person or persons who devised the inventive concept.
  1. It is sufficient for present purposes to conclude, as I do, that:
  1. none of Polwood, Aussie Bark or Rampton devised the inventive concept embodied in a number of the claims; and
  1. none of the plaintiffs devised the inventive concept embodied in a number of the claims.
  1. For the above reasons neither the plaintiffs nor the defendants are entitled to the relief sought by them in respect of Polwood’s patent application.

Conclusion

  1. Foxworth is entitled to possession of the PSU as modified.  It is ordered that Polwood deliver up possession of the PSU as modified to Foxworth. 
  1. Foxworth did not establish the alleged misrepresentation as to the profitability of the peat business or reliance on any such misrepresentation.
  1. The representation as to the protection afforded to peat business by the peat patent was an innocent misrepresentation inducing the entering into of the Deed.  It does not entitle Foxworth to rescind the Deed under the general law and it is inappropriate to declare the Deed void ab initio under section 87 of the Trade Practices Act.
  1. None of the plaintiffs companies have succeeded in proving that it suffered loss and damage by the misleading and deceptive conduct constituted by the innocent misrepresentation.
  1. No fraudulent misrepresentation has been established.
  1. Foxworth did not lawfully terminate the contract and Polwood is entitled to the deposit. It will be ordered that the deposit moneys be paid out of court to the solicitors for Polwood.
  1. The claim for damages for breach of warranty was not pursued. No loss and damage resulting from any such breach was established.
  1. Breach of copyright has not been established. The replica PSU was not constructed with reference to drawings of the plaintiffs and is not substantially a three-dimensional representation of such drawings.
  1. Peachester Thoroughbreds and Power are not entitled to possession of the replica PSU.
  1. No declaratory relief in respect of Polwood Aussie Bark’s patent application will be granted in favour of any of the plaintiffs or any of the defendants. Neither the third and fourth plaintiffs, on the one hand, nor the second and fourth defendants on the other are inventors of all of the inventive concepts embodied in the claims in patent application number 2002950316.
  1. The letter of 30 January 2002 referred to in paragraph 57 of the further amended statement of claim was a “without prejudice” communication written as part of settlement negotiations. It is inadmissible, but reference to it would not have had a bearing on the outcome of these proceedings.  It is clear to me, and I have found, that none of Rampton, Connick or any of Rampton’s companies was responsible for all of the inventions the subject of the patent application.
  1. There was an obligation of confidence imposed on Foxworth and Power (which extends to the other plaintiffs) not to use or impart the Confidential Information obtained from Polwood or Rampton in respect of the peat business except for the purposes of the peat business during the term of the Licence, unless Foxworth exercised the option and acquired an 85 percent interest with peat business. 
  1. It is not appropriate to impose a constructive trust in respect of the plaintiffs’ misuse of the Confidential Information. The “springboard principle” is applicable but its application does not justify the granting or extension of any injunctive relief.
  1. All existing injunctions are dissolved.
  1. I will hear submission on costs. 

Footnotes

[1] Presumably what was sought was a declaration concerning the contract formed upon exercise of the option and “damages for loss of opportunity”.

[2] Deed of Licence cl 2.

[3] Deed of Licence cl 1.

[4] Deed of Licence cl 3.2.

[5] Deed of Licence cl 3.2.

[6] Deed of Licence cl 15.3.

[7] See e.g., the information sought by McRae in his letter of 27 July 1999.

[8] (1982) 149 CLR 337.

[9] Codelfa (supra) at 347-353.

[10] Codelfa at 346.

[11] Ibid.

[12] Clauses 4.2, 4.3, 7 and 8.

[13] (1938) 38 SR (NSW) 700 at 712.

[14] NH Dunn Pty Ltd v L M Ericsson Pty Ltd (1979) 2 BPR 9241.

[15] See the authorities referred to in National Australia Bank Ltd v Blacker (2000) 179 ALR 97 at 103.

[16] Australian Steel and Mining Corporation Pty Ltd v Corben (1974) 2 NSWLR 202 at 207-208 and Gould v Vaggelas (1985) 157 CLR 215 at 236.

[17] Gould v Vaggelas at 236.

[18] Armstrong v Strain (1952) 1 KB 232 at 247.

[19] See Clydesdale Bank v Paton [1896] AC 381 at 384 and Ritter v Northside Enterprises Pty Ltd (1975) 49 ALJR 202 at 203.

[20] Derry v Peek (1889) 14 App Cas 337 at 374.

[21] At 374.

[22] Alati v Kruger (1955) 94 CLR 216 at 224.

[23] Alati v Kruger (supra) at 225.

[24] [1966] AC 63 at 83.

[25] Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525.

[26] (1997) 147 ALR 568 at 588, 589.

[27] [1999] SASC 476.

[28] Akerhielm v de Mare [1959] AC 789.

[29] Binder v Vane (1992) 25 IPR 395.

[30] For a valuable discussion on the circumstances in which expressions of opinion may be misrepresentations of existing fact, see Bower & Handley, Actionable Misrepresentation (4th ed.) at [29]-[34].

[31] Trade Practices Act 1974 s 82.

[32] Transcript pp 646-648.

[33] Moorgate Tobacco Ltd v Philip Morris Ltd (No 2) (1984) 156 CLR 414 at 438 per Deane J.

[34] Moorgate Tobacco Ltd v Philip Morris Ltd (No 2) at 438.

[35] Ibid.

[36] (1969) RPC 41 at 47.

[37] See e.g. Interfirm Comparison (Australia) Pty Ltd v Law Society of New South Wales (1975) 2 NSWLR 104 at 117.

[38] (1948) 65 RPC 203 at 215.

[39] (1966) RPC 81 at 90.

[40] Saltman Engineering Co Ltd v Campbell Engineering Co Ltd (supra) at 215 and Coco v Clark (supra) at 47.

[41] [1979] VR 167 at 193.

[42] [1967] VR 37.

[43] [1973] VR 784.

[44] (1984) 156 CLR 414 at 436.

[45] Clause 4 of the Deed.

[46] Clause 5 of the Deed.

[47] At 118.

[48] Barnes v Addy (1874) 43 LJ Ch 513.

[49] Lac Minerals v International Corona Services Ltd (1980) 61 DLR (4th) (Can. S.C.) and Ocular Sciences Ltd v Aspect Vision Care Ltd [1997] RPC 289. See also P. Birks, “The Remedies for Abuse of Confidential Information” [1990] Lloyd’s Maritime and Commercial Law Quarterly 460.

[50] See Hospital Products Ltd v United States Surgical Corp [1983] 2 NSWLR 157 at 228-233.

[51] (2005) 216 ALR 631 at 634.

[52] F Cas 342, 346 at 348.

[53] (2006) 225 ALR 57 at 100.

[54] (2004) 61 IPR 529 at [55].

[55] (1996) 36 IPR 529 at 531.

[56] S W Hart & Co Pty Ltd v Edwards Hot Water Systems (1985) 159 CLR 466 at 474 per Gibbs CJ.

[57] Ladbroke (Football) Ltd v William Hill (Football) Ltd [1964] 1 All ER 465 at 481, referred to with apparent approval by Gibbs CJ in S W Hart & Co Pty Ltd v Edwards Hot Water Systems.

[58] Merchant-Adventurers Ltd v M Grew & Co Ltd [1972] Ch 242 at 255. 

[59] Davies Shephard Pty Ltd v Stack [2001] FCA 501 and JMVB Enterprises Pty Ltd v Camouflage Pty Ltd  [2005] FCA 1474.

[60] Davies Shephard (supra) at [28].

[61] (1997) 39 IPR 400.

[62] At 405.

[63] (2001) 55 IPR 140.

[64] 4th ed at para 556.

[65] Supra at [22].

[66] 8th ed.

[67] Bentley & Sherman Intellectual Property Law (2nd ed) at 509.

[68] Henry Brothers (Magherafelt) Ltd v Ministry of Defence and The Northern Ireland Office [1997] RPC 693 at 446.

Close

Editorial Notes

  • Published Case Name:

    Foxworth P/L & Ors v Polwood P/L & Ors

  • Shortened Case Name:

    Foxworth Pty Ltd v Polwood Pty Ltd

  • MNC:

    [2006] QSC 185

  • Court:

    QSC

  • Judge(s):

    Muir J

  • Date:

    01 Aug 2006

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2006] QSC 18501 Aug 2006Trail of claim seeking return of chattel and infringing copies pursuant to Copyright Act, declarations regarding whether a deed is void, termination of the deed, entitlements under the Patents Act, and damages for fraudulent misrepresentation under the TPA, and for breach of warranty; damages claims, TPA claims, Patent Act claim dismissed, successful in recovery of chattel as modified: Muir J.
Primary Judgment[2007] QSC 40309 Feb 2007Costs of trial following [2006] QSC 185; no order as to costs: Muir J.
Appeal Determined (QCA)[2006] QCA 57022 Dec 2006Appeal against TPA findings dismissed with costs; no basis for overturning the finding made by the learned trial judge that the representation was an inducing cause of the Deed; not demonstrated that the trial judge erred in concluding that Foxworth did not lawfully terminate the contract and that in consequence Polwood was entitled to the deposit: Williams JA, Helman and Philippides JJ.

Appeal Status

Appeal Determined (QCA)

Cases Cited

Case NameFull CitationFrequency
Akerhielm v de Mare [1959] AC 789
2 citations
Jump To
Cite 1 - [1959] AC 789
Cite 2 - [1959] AC 789
Alati v Kruger (1955) 94 CLR 216
3 citations
Jump To
Cite 1 - (1955) 94 CLR 216
Cite 2 - (1955) 94 CLR 216
Cite 3 - (1955) 94 CLR 216
Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd (1967) VR 37
2 citations
Jump To
Cite 1 - (1967) VR 37
Cite 2 - (1967) VR 37
Armstrong v Strain (1952) 1 KB 232
2 citations
Jump To
Cite 1 - (1952) 1 KB 232
Cite 2 - (1952) 1 KB 232
Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700
1 citation
Jump To
Cite 1 - (1938) 38 SR (NSW) 700
Australian Steel and Mining Corporation Pty Ltd v Corben (1974) 2 NSWLR 202
2 citations
Jump To
Cite 1 - (1974) 2 NSWLR 202
Cite 2 - (1974) 2 NSWLR 202
Barnes v Addy (1874) 43 LJ Ch 513
1 citation
Jump To
Cite 1 - (1874) 43 LJ Ch 513
Binder v Vane (1992) 25 IPR 395
1 citation
Jump To
Cite 1 - (1992) 25 IPR 395
Clydesdale Bank v Paton (1896) AC 381
2 citations
Jump To
Cite 1 - (1896) AC 381
Cite 2 - (1896) AC 381
Coco v A N Clark (Engineers) Ltd (1969) RPC 41
3 citations
Jump To
Cite 1 - (1969) RPC 41
Cite 2 - (1969) RPC 41
Cite 3 - (1969) RPC 41
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 C.L R. 337
4 citations
Jump To
Cite 1 - (1982) 149 C.L R. 337
Cite 2 - (1982) 149 C.L R. 337
Cite 3 - (1982) 149 C.L R. 337
Cite 4 - (1982) 149 C.L R. 337
Cornish v Keene (1835) 1 Web Pat Cas 501
1 citation
Jump To
Cite 1 - (1835) 1 Web Pat Cas 501
Costa v GR & IE Daking Pty Ltd (1994) 29 IPR 241
1 citation
Jump To
Cite 1 - (1994) 29 IPR 241
Cranleigh Precision Engineering Ltd v Bryant & Anor (1966) RPC 81
2 citations
Jump To
Cite 1 - (1966) RPC 81
Cite 2 - (1966) RPC 81
CSIRO and Gilbert (1995) 31 IPR 67
1 citation
Jump To
Cite 1 - (1995) 31 IPR 67
Davies Shepherd Pty Ltd v Slack [2001] FCA 501
3 citations
Jump To
Cite 1 - [2001] FCA 501
Cite 2 - [2001] FCA 501
Cite 3 - [2001] FCA 501
Derry v Peek (1889) 14 App Cas 337
2 citations
Jump To
Cite 1 - (1889) 14 App Cas 337
Cite 2 - (1889) 14 App Cas 337
Deta Nominees Pty. Ltd. v Viscount Plastic Products Pty. Ltd (1979) VR 167
2 citations
Jump To
Cite 1 - (1979) VR 167
Cite 2 - (1979) VR 167
Falkenhagen et al v Polemate Pty Ltd [1995] APO 32
1 citation
Jump To
Cite 1 - [1995] APO 32
Francis Day & Hunter Ltd v Bron [1963] 1 Ch 587
1 citation
Jump To
Cite 1 - [1963] 1 Ch 587
Franklin Motors Pty Ltd v Piano [1999] SASC 476
2 citations
Jump To
Cite 1 - [1999] SASC 476
Cite 2 - [1999] SASC 476
Goldpeg International Pty Ltd v Kovan Engineering Aust Pty Ltd (2006) 225 ALR 57
2 citations
Jump To
Cite 1 - (2006) 225 ALR 57
Cite 2 - (2006) 225 ALR 57
Gould v Vaggelas (1985) 157 CLR 215
3 citations
Jump To
Cite 1 - (1985) 157 CLR 215
Cite 2 - (1985) 157 CLR 215
Cite 3 - (1985) 157 CLR 215
Henry Brothers (Magherafelt) Ltd v Ministry of Defence and The Northern Ireland Office [1997] RPC 693
1 citation
Jump To
Cite 1 - [1997] RPC 693
Hospital Products Ltd v United States Surgical Corp (2004) 61 IPR 529
1 citation
Jump To
Cite 1 - (2004) 61 IPR 529
Hospital Products Ltd v United States Surgical Corp (1841) 9 F Cas 342
2 citations
Jump To
Cite 1 - (1841) 9 F Cas 342
Cite 2 - (1841) 9 F Cas 342
Hunter Ltd v Bron [1963] 1A IPR 331
1 citation
Jump To
Cite 1 - [1963] 1A IPR 331
Iluka Midwest Ltd v Wimmera Industrial Minerals Pty Ltd (2001) 55 IPR 140
2 citations
Jump To
Cite 1 - (2001) 55 IPR 140
Cite 2 - (2001) 55 IPR 140
Interfirm Comparison (Australia) Pty Ltd v Law Society of NSW (1975) 2 NSWLR 104
2 citations
Jump To
Cite 1 - (1975) 2 NSWLR 104
Cite 2 - (1975) 2 NSWLR 104
JMVB Enterprises Pty Ltd v Camouflage Pty Ltd [2005] FCA 1474
1 citation
Jump To
Cite 1 - [2005] FCA 1474
Kenny & Good Pty Ltd v MGICA (1997) 147 ALR 568
1 citation
Jump To
Cite 1 - (1997) 147 ALR 568
Kenny & Good v MGICA 1992 Ltd (1997) 77 FCR 307
1 citation
Jump To
Cite 1 - (1997) 77 FCR 307
Ladbroke (Football) Ltd v William Hill (Football) Ltd [1964] 1 All E.R. 465
2 citations
Jump To
Cite 1 - [1964] 1 All E.R. 465
Cite 2 - [1964] 1 All E.R. 465
Ladbroke (Football) Ltd v William Hill (Football) Ltd (1964) 1 WLR 273
1 citation
Jump To
Cite 1 - (1964) 1 WLR 273
McFarlane v Daniel (1934) 34 S.R. (N.S.W) 67
1 citation
Jump To
Cite 1 - (1934) 34 S.R. (N.S.W) 67
Mense & Ampere Electrical Manufacturing Co Pty Ltd v Milenkovic (1973) VR 784
2 citations
Jump To
Cite 1 - (1973) VR 784
Cite 2 - (1973) VR 784
Merchant-Adventurers Ltd v M Grew & Co Ltd [1972] Ch 242
2 citations
Jump To
Cite 1 - [1972] Ch 242
Cite 2 - [1972] Ch 242
Moorgate Tobacco Co Ltd v Philip Morris Ltd (1984) 156 CLR 414
3 citations
Jump To
Cite 1 - (1984) 156 CLR 414
Cite 2 - (1984) 156 CLR 414
Cite 3 - (1984) 156 CLR 414
National Australia Bank Ltd v Blacker (2000) 179 ALR 97
2 citations
Jump To
Cite 1 - (2000) 179 ALR 97
Cite 2 - (2000) 179 ALR 97
NH Dunn Pty Ltd v L M Ericsson Pty Ltd (1979) 2 BPR 9241
2 citations
Jump To
Cite 1 - (1979) 2 BPR 9241
Cite 2 - (1979) 2 BPR 9241
Ocular Sciences Ltd v Aspect Vision Care Ltd [1997] RPC 289
1 citation
Jump To
Cite 1 - [1997] RPC 289
Ritter v Northside Enterprises Pty Ltd (1975) 49 ALJR 202
2 citations
Jump To
Cite 1 - (1975) 49 ALJR 202
Cite 2 - (1975) 49 ALJR 202
Row Weeder Pty Ltd v Neilsen (1997) 39 IPR 400
2 citations
Jump To
Cite 1 - (1997) 39 IPR 400
Cite 2 - (1997) 39 IPR 400
Saltman Engineering Co Ltd v Campbell Engineering Co Ltd (1948) 65 RPC 203
3 citations
Jump To
Cite 1 - (1948) 65 RPC 203
Cite 2 - (1948) 65 RPC 203
Cite 3 - (1948) 65 RPC 203
Senanayake v Cheng [1966] AC 63
2 citations
Jump To
Cite 1 - [1966] AC 63
Cite 2 - [1966] AC 63
Skybase Nominees Pty Ltd v Fortuity Pty Ltd (1996) 36 IPR 529
2 citations
Jump To
Cite 1 - (1996) 36 IPR 529
Cite 2 - (1996) 36 IPR 529
SW Hart & Co Pty Ltd v Edwards Hot Water Systems (1985) 159 CLR 466
2 citations
Jump To
Cite 1 - (1985) 159 CLR 466
Cite 2 - (1985) 159 CLR 466
TCN Channel Nine Pty Ltd v Network Ten Pty Ltd (2005) 216 ALR 631
2 citations
Jump To
Cite 1 - (2005) 216 ALR 631
Cite 2 - (2005) 216 ALR 631
The Harris v CSIRO (1993) 26 IPR 469
1 citation
Jump To
Cite 1 - (1993) 26 IPR 469
United States Surgical Corporation v Hospital Products International Pty Ltd & Ors (1983) 2 NSWLR 157
2 citations
Jump To
Cite 1 - (1983) 2 NSWLR 157
Cite 2 - (1983) 2 NSWLR 157
Wardley Australia Ltd v Western Australia (1992) 175 CLR 514
2 citations
Jump To
Cite 1 - (1992) 175 CLR 514
Cite 2 - (1992) 175 CLR 514

Cases Citing

Case NameFull CitationFrequency
Neilsen v MB Solar Industrial Electrical as Trustee For Ballantine Family Trust [2016] QMC 72 citations
PDP Group Pty Ltd v Bennett & Philp [2013] QSC 2312 citations
1

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