Fraser v Oystertec Plc
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr Justice Lightman,Mr Justice Lightman |
| Judgment Date | 06 October 2004 |
| Neutral Citation | [2004] EWHC 2225 (Ch) |
| Docket Number | Case No: HC0201138 |
| Court | Chancery Division |
| Date | 06 October 2004 |
[2004] EWHC 2225 (Ch)
IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Lightman
Case No: HC0201138
Mr Adrian Sutcliffe QC (instructed by DLA LLP 3 Noble Street, London EC2V 7EE) for the Claimants
Mr John Baldwin QC and Mr Philip Marshall QC (instructed by instructed by Berg & Co, Solicitors, Scottish Mutual House, 35 Peter Street, Manchester M2) for the First Defendant
Ms Fiona Clark (instructed by Lockett Loveday McMahon, Arkwright House, Manchester M3 2LF) for the Third Defendant
Mr Stephen Phillips QC (instructed by Pannone & Partners, 123 Deansgate, Manchester M3 2BU) for Mr Warburton
Hearing dates: 27 th September – 4 th October 2004
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
INTRODUCTION
These proceedings relate to certain patents ("the Patents") which were vested in three companies namely the Fourth Defendant Easyrad Limited ("Easyrad"), the Third Claimant Davidson Tools Limited ("Davidson") and the Fourth Claimant Sankey Product Development Limited ("Sankey"). (I shall refer to Easyrad, Davidson and Sankey together as "the Claimants".) None of the Claimants is trading. These proceedings are financed by loans from a backer. It may be inferred that none of the Claimants have any assets or any assets of any value other than the claims in these proceedings.
On the 20 th October 1998, two directors of the Claimants, the Second Defendant Paul Davidson ("Mr Davidson") and the Third Defendant Adrian Binney ("Mr Binney"), transferred or purported to transfer the Patents from the Claimants to Mr Davidson. On the 5 th May 2000 the Claimants' solicitors DLA wrote a letter ("the DLA Letter") to Mr Warburton of Addleshaw Booth, solicitors for Mr Davidson, challenging the validity of the transfer of the Patents to Mr Davidson and threatened proceedings. On the 6 th February 2001 pursuant to a sale agreement ("the Oystertec Agreement") for a deferred consideration of £3 million Mr Davidson transferred or purported to transfer the Patents to Oystertec. Foremost amongst the Patents transferred or purported to be transferred was what is now called "the Oystertec Converter" owned by Easyrad. The transfer to Oystertec was an essential preliminary to the subsequent successful flotation of Oystertec in February 2001. The prospectus issued on the 14 th February 2001 made plain that ownership by Oystertec of the Oystertec Converter was central to the flotation. The flotation was highly successful and Oystertec since that date has (no doubt in large part through exploitation, or on the back of ownerships, of the Patents) become a substantial profitable company.
On the 1 st May 2001, the Claimants commenced these proceedings. Easyrad at that date was substantially owned and controlled by Mr Davidson and accordingly it was necessary to obtain the permission of the court for the First and Second Claimants to bring derivative proceedings on behalf of Easyrad. Permission to bring this action as then and presently pleaded was granted by Pumfrey J on the 27 th July 2002. In these proceedings the Claimants claim against Oystertec the return of the Patents and against Mr Davidson and Mr Binney damages for breach of fiduciary duty. The claim to the return of the Patents is made on two alternative bases. The first is that Mr Binney and Mr Davidson had no authority to transfer the Patents to Mr Davidson and accordingly Mr Davidson conferred no title on Oystertec. On this basis the Claimants claim the return of the Patents as owners of them. The second is that, if Mr Binney and Mr Davidson did have authority to transfer the Patents to Mr Davidson, in transferring the Patents they acted in breach of fiduciary duty to the Claimants, that accordingly Mr Davidson obtained title to them as trustee for the Claimants, that Oystertec acquired title to the Patents from Mr Davidson with notice of the trust and that accordingly Oystertec likewise held the Patents as trustee for the Claimants.
Easyrad applied for summary judgment against Oystertec in respect of the Oystertec Converter and against Mr Davidson and Mr Binney for damages for breach of fiduciary duty. These applications were the subject of two judgments of Mr Peter Prescott QC ("Mr Prescott") dated the 8 th September and the 7 th November 2003. By his order dated the 4 th December 2003, he declared that Mr Binney and Mr Davidson had no authority from Easyrad to transfer the Oystertec Converter to Mr Davidson and accordingly Mr Davidson had no title to transfer to Oystertec and he awarded Easyrad equitable compensation. Nonetheless by reason of laches and delay on the part of Easyrad he refused to make the requested declaration of ownership of the Oystertec Converter in favour of Easyrad so long as Oystertec paid the equitable compensation which he awarded in respect of the wrongful transfer to Oystertec of the patent. He also awarded summary judgment against Mr Davidson for breach of fiduciary duty but declined to do so against Mr Binney.
Oystertec in a Part 20 claim applied for summary judgment against Mr Davidson for breach of warranty in the Oystertec Agreement. The warranty was to the effect that Mr Davidson was the owner of the Patents and that there were no adverse claims. The Oystertec Agreement placed a cap on the damages that could be awarded for breach of warranty, but provided that there should be no cap in case of fraud or wilful or reckless non-disclosure. Mr Prescott gave Oystertec summary judgment as asked and upheld the contention of Oystertec that the cap on damages was inapplicable, not because of any fraud, but because of Mr Davidson's wilful or reckless non-disclosure of the adverse claim by Easyrad. On the 5 th August 2004 Oystertec obtained the appointment of a receiver by way of equitable execution of Mr Davidson's shares in Easyrad. By reason of the final judgments granted against him, there is no live issue at the trial between the Claimants or Oystertec and Mr Davidson.
Oystertec decided to re-transfer to Easyrad the Oystertec Converter. The completion of this re-transfer (as of the other re-transfer which Oystertec has offered to make) has yet to take place because (leave aside agreement as to the terms of the transfer which should occasion no problem) the board of directors of Easyrad refused for undisclosed reasons to authorise any such re-transfer. It is common ground that, beyond the retransfer of the Oystertec Converter, Easyrad remains entitled to equitable compensation awarded by Mr Prescott in respect of the wrongful purported transfer of that patent to Mr Davidson, the purported transfer by Mr Davidson of that patent to Oystertec and the exploitation of the patent by Oystertec (giving credit for the re-transfer when made) and that Easyrad has no other claim in this regard against Oystertec.
On the 18 th June 2004 Oystertec offered voluntarily to return all patents claimed by Easyrad and DTL and amended its Defence to reflect this position on the 23 rd July 2004. Oystertec maintains its claim to retain the Sankey Patents.
The outstanding issues between the Claimants and Oystertec on the pleadings as they stand are whether Sankey is entitled to the re-transfer of the Sankey Patents and whether Davidson and Sankey are entitled to equitable compensation (or perhaps other relief) beyond the retransfer of their patents. The outstanding issue between the Claimants and Mr Binney is whether the Claimants are entitled to damages for breach of fiduciary duty against Mr Binney.
When Mr Prescott made his order on the application for summary judgment on the 4 th December 2003 he gave directions for the further conduct of the proceedings. On the 12 th February 2004 Lewison J after a case management conference gave detailed directions for trial and a trial estimated to last 8–10 days has been fixed for the 15 th November 2004. There has been some slippage, but it is common ground (as it is plain) that the action as presently pleaded will be ready for trial on the 15 th November 2004. The trial of the action on that date is of the greatest importance most particularly to Oystertec, for its business interests require that the position in respect of this action (now some two years old) be finally resolved. The uncertainty and the concomitant adverse publicity in the financial press pending resolution are highly damaging.
THE APPLICATION TO AMEND
By the application dated the 16 th August 2004 now before me the Claimants applied for permission to join Mr Warburton as an additional defendant and make what are described as consequential amendments.
The application to join Mr Warburton is a very belated application. As long ago as the 24 th May 2001 the Claimants wrote to Mr Warburton threatening a claim against him, but for no apparent reason (let alone a good reason) Mr Warburton was not joined as a defendant and no application for his joinder was made until this very late date. No explanation (certainly no meaningful explanation) has been given for the delay. The application as made sought to join him as party to a conspiracy together with Mr Davidson, Mr Binney and Oystertec to injure the Claimants. (As I shall recount in more detail in a moment) on the first and second days of the hearing the Claimants put before the court successive versions of a proposed amended pleading. On the third day of the hearing the Claimants...
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