A recent High Court case confirmed that architectural plans forming part of a development consent may be used by the owner of a property, which has the benefit of a consent, even if it was not the architect’s client (Concrete Pty Ltd v Parramatta Design and Developments Pty Ltd [2006] HCA 55 (6 December 2006)).
This case concerned the right of Concrete Pty Ltd ("Concrete") to use architectural plans designed by Parramatta Design and Developments Pty Ltd ("Parramatta Design").
The Facts
The sole director of the architectural firm Parramatta Design established a property development company, which embarked on a joint venture to develop a site at Nelson Bay. The joint venture agreed that Parramatta Design would perform the architectural services for the joint venture. Parramatta Design provided plans for an eight-unit development on the site for a fee of $27,000. Parramatta Design was paid for the plans.
The joint venture parties, however, later agreed to upscale the development to accommodate six additional units and Parramatta Design prepared further plans at no additional cost. The intention was that Parramatta Design would benefit instead from the increased profits made by the joint venture as a result of the extra units.
A development application on behalf of the joint venturers was lodged and consent was granted.
Relations between the joint venture companies, however, shortly disintegrated and an application was made to the Court for the appointment of trustees for the sale of the site.
Following the appointment of the trustees, Parramatta Design put the trustees on notice that it was the owner of the copyright in the plans that formed part of the consent, and that it would not grant a licence for the use of the plans to any purchaser of the site. It was subsequently acknowledged in the Contract for Sale that a dispute existed in the relation to the right to use these plans, including "the existence of any licence to make use of the copyright in those plans and designs."
The land was sold to Concrete in August 2003, after being advertised as having the benefit of the consent. Concrete wished to construct a fourteen-unit development based upon the approved plans, in accordance with the consent, to avoid lodging a new application. Concrete also needed to resolve the dispute swiftly, so it could commence construction before the consent lapsed. Changes to the regulatory planning regime meant that if the consent lapsed, any future application for a fourteen-unit development would not be granted.
Parramatta Design refused to allow the plans to be used.
The High Court’s Decision
The High Court unanimously ruled in Concrete’s favour. It held that the plans were made available for the purposes of the joint venture i.e. to procure the grant of the consent. The purposes of the joint venture extended, upon breakdown of relations between the joint venture companies, to such use of the plans and drawings as was necessary and convenient to turn to account the development site and the DA. Concrete, therefore, enjoyed the benefit of a licence that was binding upon Parramatta Design.
The Court noted that the purpose of the joint venture was to purchase the land, obtain the consent, build units and make a profit. The question of whether there was any implied licence to use the drawings fell to be decided at the time when the plans were prepared at the request of the landowner. The High Court found that Concrete had an implied licence to use the plans as the implied consent arose from the nature of the original arrangement between the landowners and the architect.
Further, the lack of fee paid for the fourteen unit plans did not mean that there was a lack of reward for the architects. Parramatta Design was to be rewarded by way of a share of the net profits made from the subsequent sale of the land.
What does this decision mean?
Once a consent has been granted, the implied licence for the landowner to use the plans is irrevocable because one of the purposes for which the plans and drawings were prepared has been achieved. The sale of land with the benefit of a consent precludes an architect from seeking to then revoke an implied licence to use the plans. A sale of land with the benefit of a consent (that runs with the land), carries the possibility that a purchaser may wish to exploit the consent that it obtains with the land rather than pursue the option and costs of applying for a fresh approval.
Architects should ensure that any contract for the design of plans, particularly those relating to a development application and consent, is clear as to payment obligations and the extent of rights to use the plans. Payment should be made prior to any use of the plans is permitted (including use in the lodging of a development application). If an architect is not yet paid, but permits a development application to be lodged using the architect’s designs, and the development application is approved, the architect may find it difficult to prevent further use of the plans in relation to the development.
Developers can gain some comfort from the decision. It confirms and reinforces their position: where property is bought that has the benefit of a consent, developers can expect to have the right to use the architectural plans and drawings which form part of the consent, unless the licence which would be implied is expressly negated in the original agreement. This would even appear to be the case where the developer has been put on notice as to a dispute over the right to use the plans.
Reproduced with permission, Dibbs Abbott Stillman, Lawyers
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