BSW Ltd v Balltec Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Patten |
| Judgment Date | 11 April 2006 |
| Neutral Citation | [2006] EWHC 822 (Ch) |
| Docket Number | Case No: IHC 501/05 |
| Court | Chancery Division |
| Date | 11 April 2006 |
[2006] EWHC 822 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
PATENTS COURT
Mr Justice Patten
Case No: IHC 501/05
Mr Thomas Moody-Stuart (instructed by Boodle Hatfield) for the Applicant
Mr James St.Ville (instructed by Maclay Murray & Spens) for the Respondent
Hearing dates: 20 —22 March 2006
Introduction
This is an application for the pre-action disclosure of six classes of document under CPR 31.16. The applicant BSW Limited ("BSW") is a private limited company which was incorporated in February 1994. Its original shareholders were Mr Owen Walmsley and Mr Robert Emmett who each owned half of the issued share capital. BSW was the successor to a partnership between Mr Walmsley and Mr Emmett formed in July 1983 which traded under the name of BSW Design & Engineering. They both have a background in mechanical engineering and met about 40 years ago while working for a company called Greenbank Engineering. Later they worked together for ICI and for Vickers in Barrow.
Mr Emmett served an engineering apprenticeship with English Electric plc in Accrington and has qualifications in mechanical engineering from Blackburn Technical College. He became a junior draughtsman at English Electric designing specialist tools for use in the aircraft industry. At Greenbank Engineering he was involved in designing a variety of machinery including dryers, conveyors, hydraulics and pneumatics. In 1976 while at Vickers he helped to design what is described as a haul down system for repairing underwater pipelines. The evidence therefore indicates that he has had wide experience in designing a range of machines and other mechanical components.
In 1983 he formed the partnership with Mr Walmsley and they became engaged on a project for British Nuclear Fuels designing specialist equipment for mechanical handling inside nuclear reactors. It was at this time that they also decided to look into the possibilities of designing a pipe handling system which could be used in the offshore oil industry, to lift pipes from the sea bed. To this end, Mr Walmsley came up with the idea of using what is described as ball and taper technology
The ball and taper technology for use in underwater tools typically consists of a series of balls located in tapers on a central mandrel and held in place by an outer ball cage. When pressure is exerted on the lifting eye and the mandrel is pulled out of its receptacle the balls are forced outwards down the tapers and jam against the receptacle. This system has been found to be extremely strong and effective. The prototype was manufactured in 1983 and pipe lifting tools incorporating what has become known as the ball grab system were designed and supplied by BSW Design and Engineering from about 1985 onwards to a variety of customers including Mobil, British Gas and Shell. The ball and taper technology has been in existence in other applications since the 1930s. But Mr Emmett and Mr Walmsley have, on the evidence, pioneered its use in this particular field.
In 1994 the partnership business was taken over by BSW. The company continued to design and supply ball grab tools for use in pipe laying and pipeline repair, but in 1995 they began to produce mooring connectors for anchoring oil rigs and other offshore installations using the same technology.
In September 2001, Mr Emmett and Mr Walmsley agreed to sell a majority shareholding in BSW to Arnlea plc, a company owned and controlled by Mr Ian Suttie. Mr Walmsley then retired from the business. Mr Emmett's evidence is that Mr Suttie adopted an aggressive approach to the management of the company and that there were changes in staff. Mr Ian Brown, who had joined BSW from Shell and who came up with the idea of using ball grab technology in the mooring connectors, fell out with Mr Suttie and was replaced as managing director by a Mr Desmond Hatfield. Allegations are made in the evidence that Mr Hatfield's aim was to remove Mr Emmett from the business and that he was excluded from meetings and marginalised. He says that he was forced to leave BSW's employment, which he did on 28 February 2004 and was only paid to the end of that month. He resigned as a director of BSW in July 2004.
Shortly after his resignation on 23 July 2004, the Respondent company Balltec Ltd ("Balltec") was incorporated. The directors and shareholders are Mr Emmett and Mr Graham Halstead, whose company H.B Halstead & Sons Ltd were the sub-contractors who manufactured the tools supplied by BSW. According to Mr Emmett a disagreement had occurred between Mr Halstead and Mr Suttie over payment terms.
Balltec now trades in direct competition with BSW. It offers for sale a similar product range which includes both pipe lifting tools and mooring connectors which utilise the ball grab technology. In his first witness statement Mr Green, the general manager of BSW, says that as a result of information obtained from its customers BSW has good reason to believe that the activities of Balltec have crossed the line from fair competition into something more serious. By this he means that Balltec has infringed the unregistered design rights of BSW in its products by selling products which incorporate identical design features; that it has infringed BSW's copyright in the design drawings for its products by copying these drawings and using them in order to obtain the certification of its own products; and that it has infringed two of BSW's patents.
The infringement claims (at least in respect of design right and copyright) are based largely on the shortness of the interval between Mr Emmett ceasing to be a director of BSW in July 2004 and the subsequent certification and manufacture of at least a pipeline recovery tool in September 2004. Mr Green's evidence is that Balltec, through Mr Emmett, could not have got to that stage within a period of no more than two months, unless Mr Emmett (who was the designer involved) either commenced work on his designs much earlier whilst still a director of BSW, or alternatively, used BSW's designs and drawings in order to produce the tool. BSW therefore allege (as an alternative to the claims for design right and copyright infringement) that Mr Emmett acted in breach of his fiduciary duty to the applicant and that he and Balltec are liable to account for the profits which they have made.
Mr Emmett's evidence is that he did no work at all on the designs for Balltec's own products until after he had ceased to be a director of BSW and that none of his designs infringed any design right vested in BSW. By the same token, he says that he used his own design drawings in order to gain the necessary certification for the Balltec designs. It is said that he is an experienced draughtsman (which he clearly is) who has the ability to work quickly and that all the Balltec designs are new and different. In a witness statement made by Mr Christopher Woodruff, the solicitor at Messrs Maclay Murray Spens who act for Balltec in these proceedings, he says that he has been told by Mr Emmett that the new designs were created from blank pieces of paper and that neither Mr Emmett nor Balltec had any of BSW's plans. Mr Emmett says in his own witness statement (which was admitted late in the proceedings) that he commenced work on the designs after 23 July 2004 and that he worked from first principles. The design work was underway at the beginning of August and resulted in a complete 26 inch pipe line recovery tool by the end of September. This was tested on 29 September and a design for a mooring connector was produced and sent for a computer based finite element analysis (FEA) at the end of August 2004. He therefore rejects both the claims for infringement and the suggested impossibility of his having produced the designs in the time available from which the inferences of breach of fiduciary duty or infringement are derived.
It will be necessary for me to analyse the evidence relied on by BSW in support of its belief that it may have a claim against Balltec. But Mr Moody-Stuart on behalf of BSW accepts that it has no direct evidence as things stand, on which to base either of its alternative claims, or to particularise the allegations of design right infringement and breach of copyright. None of its customers, nor any third parties, has provided documentary evidence to support the inferences drawn, nor has it been possible to gain access so as to inspect any of Balltec's products in order to make a comparison. BSW makes this application for pre-action disclosure on the basis that the design and other drawings relating to Balltec's 2004 product range will reveal whether there is any substance in its belief that the designs either originated from work carried out prior to 23 July 2004 or involved the use of BSW's own designs and design drawings. If the documentation confirms Mr Emmett's version of events then, says Mr Moody-Stuart, further litigation will be avoided and costs saved. For its part, Balltec resists any pre-action disclosure of the kind sought. It stands by Mr Emmett's evidence that it used new designs created after July 2004 and contends that disclosure of its designs will cause it irremediable prejudice because it will give BSW access to its design material and sight of the improvements in design which it has introduced. The application, Mr St Ville submits, is a classic fishing expedition based on nothing more than speculation and there is no real foundation even for BSW's alleged fears. It represents, he says, the culmination of a long and bitter campaign by BSW against its former director and his new company which is designed to undermine Balltec's business in the eyes of its potential customers by making unjustified allegations of...
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