British Sky Broadcasting Group Plc and Others v Digital Satellite Warranty Cover Ltd ((in Liquidation)) and Others

JurisdictionEngland & Wales
JudgeSir William Blackburne
Judgment Date19 December 2012
Neutral Citation[2012] EWHC 3679 (Ch)
CourtChancery Division
Docket NumberCase No: HC10C01262
Date19 December 2012

[2012] EWHC 3679 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Sir William Blackburne

Case No: HC10C01262

Between:
(1) British Sky Broadcasting Group PLC
(2) British Sky Broadcasting Limited
(3) Sky Subscribers Services Limited
(4) Sky In-home Service Limited
Claimants
and
(1) Digital Satellite Warranty Cover Limited (in Liquidation)
(2) Nationwide Digital Satellite Warranty Services Limited (in Liquidation)
(3) Bernard Freeman
(4) Michael Sullivan
(5) Paul Marrow
(6) David Steele T/a Daltons Data
(7) Michael Waters T/a London Data
(8) Michael Sibbald
(9) David Reynolds (in Bankruptcy)
(10) Steven Lee
Defendants

Mr Thomas Moody-Stuart and Tom Shepherd (instructed by Herbert Smith Freehills LLP) for the Claimants.

Mr Daniel Bayfield (instructed by Berwin Leighton Paisner LLP) for the First and Second Defendants.

Mr Aubrey Craig (instructed by Brabners Chaffe Street LLP) for the Third and Fourth Defendants.

Mr Paul Marrow, the Fifth Defendant, appeared in person.

Ms Kelly Pennifer (instructed by McKays Solicitors) for the Sixth Defendant.

Mr Michael Waters, the Seventh Defendant, was not represented.

Mr Michael Sibbald, the Eighth Defendant, did not appear.

Ms Genevieve Parke (instructed by Sillett Webb Solicitors) for the Ninth Defendant.

Mr Steven Lee, the Tenth Defendant, appeared in person.

Hearing dates: 6 and 7 November 2012

COSTS JUDGMENT

Sir William Blackburne

Introduction

1

This judgment deals mainly with costs issues arising out of my judgment ("the judgment") in this matter (at [2012] EWHC 2642 (Ch)) delivered on 1 October 2012. In addition relief is sought against the first and second defendants, Digital and Nationwide. The order which I made on 1 October also left another matter for later decision. This judgment deals with those other matters as well.

2

Representation and appearances before me have been as at the trial and I shall continue to refer to the parties in the same manner as I did in the judgment. The only difference has been that Digital and Nationwide are represented before me on this occasion. They have done so acting by their joint liquidators. They appeared by Daniel Bayfield. For reasons which will shortly appear Mr Bayfield also appeared for Satellite Services acting by its joint liquidators. Satellite Services was the partnership previously carried on by Mr Freeman and Mr Sullivan. The same two persons are the joint liquidators of all three entities. The other point to note is that the estate of Mr Waters has been unrepresented. It will be recalled that he died in the period between the conclusion of the trial and the handing-down of the judgment.

3

I will deal first with the issues affecting Digital and Nationwide. Next I will deal with the outstanding matter arising out of the judgment. Last I will deal with costs where several issues arise. I preface what follows by stating that there were no applications for permission to appeal.

Digital and Nationwide

4

The issue here is whether it is appropriate to grant Sky relief against these two companies notwithstanding that they took no part in the action. Mr Moody-Stuart submits that the court can and should. Mr Bayfield submits that it would be wrong to do so.

5

Two things in particular are to be noted about the two companies. The first is that an appeal to the Supreme Court against the order to wind up Digital is shortly to be heard. Satellite Services is also appealing. For some reason Nationwide is not. All three entities were wound up on public interest grounds and not because they were insolvent. The second is that, as explained in paragraph 31 of the judgment, Arnold J, in a reserved decision delivered on 27 October 2011 ( [2011] EWHC 2662 (Ch)), granted Sky declarations, as against Mr Freeman, Mr Sullivan and Mr Marrow (who between them owned or controlled 75% of the shares in Digital and Nationwide and were its only officers — see paragraph 9 of the judgment), that the two companies and Satellite Services were liable for breach of confidence, database right, trade mark infringement and passing off. However, as noted in paragraph 32 of the judgment, he declined to grant any relief against the two companies themselves. This was because of the statutory stay imposed by section 130(2) of the Insolvency Act 1986 arising in consequence of the fact that the two companies were in compulsory winding-up. (As that paragraph further noted, he did grant relief against Mr Freeman and Mr Sullivan in their capacity as partners trading as Satellite Services, lifting the statutory stay for that purpose although not for the purpose of financial recovery against any partnership assets.) As against Mr Freeman, Mr Sullivan and Mr Marrow the trial before me was concerned to establish their liability for the wrongful acts which Arnold J had found the two companies to have committed. But the two companies themselves were unrepresented before me and no relief was sought or, in view of the statutory stay, could be sought against them. No attempt was made to lift the stay.

6

Against that background Sky now seeks, belatedly, to revisit its earlier decision. It applies to lift the statutory stay against the two companies and enter judgment against them for declaratory, injunctive and other relief in all respects as if at the trial before me the stay had been lifted, the action had proceeded against the two companies (as well as against the other defendants) and their liability established. In effect it seeks on the current application (concerned, as I have said, with the form of order I should make following the conclusion of the trial and how I should deal with costs) to obtain summary judgment against the two companies and thus to make good its previous inaction.

7

Mr Moody-Stuart accepted that the relief he was seeking could have been sought at the trial or earlier and that to that extent he was seeking to make good that omission and to do so in a wholly summary and informal manner (there was before me no formal summary judgment application or application to lift the stay). He submitted nevertheless that there were good reasons why the court should accede to this unusual course. The first was a concern over what might happen if Digital's appeal to the Supreme Court should succeed and the winding-up order (which for that reason he described as "precarious") be set aside. Were that to happen, he submitted, it would be open to Digital, restored to the control of Mr Freeman, Mr Sullivan and Mr Marrow, to deal with its assets unconstrained by any judgment let alone any injunctive or other relief designed to protect any judgment. Sky wished, he said, to avoid that possibility by obtaining judgment here and now, including injunctive and other relief to protect such judgment. What is more, he said, Sky wished to pursue Mr Freeman, Mr Sullivan and Mr Marrow for financial redress for the wrongs which at the trial it had established against them, either by an inquiry as to damages or by an account of profits (it had yet to make an election) and it was concerned that it should not find, having made its election and pursued that election to judgment, that it then faced having to go over the same ground against Digital and Nationwide once it had entered judgment against them. If that were to happen there would, said Mr Moody-Stuart, be a risk of inconsistent outcomes to what was likely to be a difficult and complex inquiry or account (depending on which was elected), to say nothing of the undesirability of incurring additional costs. Moreover, he submitted, given the findings made by Arnold J against Mr Freeman, Mr Sullivan and Mr Marrow in respect of the two companies' wrongful conduct and given the findings of their responsibility for these wrongs at the trial before me, it was wholly unrealistic to suppose that the two companies had any defence to the claims against them. He drew my attention to decided authority concerned with the purpose of the statutory stay and the circumstances in which it will be lifted. He emphasised that Sky had no intention, having obtained judgment and established the quantum of its loss (or the amount of profit to be recovered), of seeking to enforce that judgment to the prejudice of other creditors. He pointed out that the orders Sky were seeking were drafted with this in mind.

8

Mr Bayfield submitted that what Sky was seeking was both premature and unprincipled. It was premature, he said, because pending determination of the appeal to the Supreme Court the liquidators have unsurprisingly done little in the way of winding up the affairs of the two companies beyond securing their assets and have not yet even established whether there will be sufficient assets to make any distribution to creditors, let alone invited creditors to submit proofs of debt. It was wrong therefore for Sky, under the guise of a hearing to determine the form of order following the trial and deal with costs, to seek to force the liquidators either to submit to judgment on claims which had deliberately not thus far been pursued or else advance reasons now why judgment should not be entered against the two companies. It might very well be, he said, indeed it was quite likely given the earlier findings both before Arnold J and before me, that the liquidators when they come to examine Sky's claims will conclude that there is no defence to them. But it was wrong in the events that have happened and faced with an imminent resolution of Digital's appeal that the liquidators should be forced into any decision at this stage and in this manner. It was wrong in principle, he said, having regard to the statutory scheme laid down for the winding up of companies. That scheme includes the stay of proceedings against the company in liquidation (except by the leave of the court)...

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