House of Spring Gardens Ltd v Waite
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE STUART-SMITH,LORD JUSTICE McCOWAN,LORD JUSTICE FOX |
| Judgment Date | 11 April 1990 |
| Judgment citation (vLex) | [1990] EWCA Civ J0411-3 |
| Docket Number | 90/0334 |
| Court | Court of Appeal (Civil Division) |
| Date | 11 April 1990 |
[1990] EWCA Civ J0411-3
Lord Justice Fox
Lord Justice Stuart-Smith
Lord Justice Mccowan
90/0334
1985 H. No. 2355
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
HIS HONOUR JUDGE FOX-ANDREWS)
Royal Courts of Justice,
MR LIONEL SWIFT Q.C. and MR M. HARRINGTON (instructed by Messrs. T. Cryan & Co., Solicitors, Harrow) appeared on behalf of the Appellants.
MR GAVIN LIGHTMAN Q.C. and MR A. BOYLE (instructed by Messrs. Phillip Conn & Co., Solicitors, Manchester) appeared on behalf of the Respondents.
This is an appeal by the third defendant (Mr McLeod) from a judgment given by Sir Peter Pain sitting as a Deputy High Court Judge, against all defendants on 2nd February 1989, pursuant to the Rules of the Supreme Court, Order 14, in the sum of £3,179,673.52., plus interest. The first and second defendants (Mr Waite and Mr Seamus Waite respectively) have not appealed.
The plaintiffs obtained a judgment against all three defendants in the Republic of Ireland for £3,474,570 and interest of £78,337. That was a judgment given by Costello J. initially on 20th December 1982, when he determined the question of liability in favour of the plaintiffs, and on 7th March and 27th April 1983, when he assessed damages in their favour.
An appeal by the three defendants to the Supreme Court of Ireland was dismissed with costs on 11th January 1985, save that the amount of interest was, to a small extent, reduced. No money has been paid by any of the defendants in satisfaction of the judgment, though sums totalling some £950,000 have been recovered from other sources.
The purpose of the present proceedings in this country is to enforce the judgment of Costello J. The Civil Jurisdiction and Judgments Act, 1982, does not apply to that judgment. The answer put forward by the defendants in these proceedings is that the judgment of Costello J. was obtained by fraud, namely misrepresentation as to the plaintiff's entitlement to the confidential information and copyright in issue in the action. Each of the defendants in the present action pleaded that on 28th January 1985 Mr Waite and Mr Seamus Waite commenced an action in Ireland to set aside the judgment of Costello J. on this ground of fraud. At the time those defences were served that action had not been tried in Ireland. However, on 9th October 1987, after a 21 day hearing on the merits, Egan J. dismissed the action. On 10th June 1988 the Supreme Court dismissed an appeal by Mr Waite and Mr Seamus Waite for default in setting down the appeal. It is the plaintiffs' case that having regard to the result of the action before Egan J., the defence of fraud is no longer available to the defendants.
Background
In the late 1970's the third plaintiff (Mr Sacks) invented a bullet-proof vest. According to Costello J., a great deal of expertise went into the design. Mr Sacks' information about the construction of the vest represented a valuable asset. In late 1978, Mr Sacks met Mr Waite and they discussed establishing a joint venture. The aim was that Mr Sacks would provide the techinical know-how, and Mr Waite would provide the manufacturing capacity and the marketing skills and contacts. Mr Waite had connections in North Africa, particularly in Libya; and Mr Waite's son, Mr Seamus Waite, and his son-in-law Mr McLeod, were involved in Mr Waite's business.
Mr Waite induced Mr Sacks to impart all the valuable information which he had developed as regards the bullet-proof vests on the faith of an oral agreement by Mr Waite that he would enter into a joint venture for the supply of vests to Libya, and that the profits of the joint venture would be equally divided between them. From an early stage there was the prospect of a very substantial contract for the sale of 50,000 vests to the Libyan army at a price of some £20,000,000. Mr Sacks went out to Libya to demonstrate his product, and the Libyans were greatly impressed. But Mr Waite deceived the Libyans into thinking it was his own company, Molex Limited, which had developed the vest, and that it was already being manufactured by Molex. This was untrue.
On 11th August 1979 Mr Waite signed a contract for the sale of £5,000,000-worth of vests to the Libyan army, using an Isle of Man company called Emory Limited. But he deceived Mr Sacks into thinking that negotiations with the Libyans had broken down. Mr Waite secretly established a manufacturing plant at Cork, at which the vests were manufactured by a company known as Point Blank Limited, a subsidiary of Emory Limited. Production started in January 1980.
In February 1980 Mr Waite told Mr Sacks that the contract with the Libyans had collapsed. This was also a lie. However, Mr Sacks subsequently discovered the deception, and this led to the first of four rounds of litigation between the parties.
The first round
In June 1980 the plaintiffs launched actions in this country and the Republic of Ireland for damages for misuse of confidential information and breach of copyright. Those proceedings were settled by an agreement dated 10th September 1980 (the settlement agreement) The principal terms of that agreement were that Mr Waite and his companies would pay a royalty on the vests sold to the Libyans of 11.53 per cent., and that Mr Waite and his companies would notify any further contract which might be entered into with the Libyans. Mr Waite and his companies paid the royalty on the first contract, but they did not notify a further contract for £5,000,000-worth of vests. Instead, they engaged on a second round of deception. The second contract was entered into on 22nd January 1931; but it was effectively concealed from Mr Sacks until early 1982. When he did discover it, the defendants denied that it was a notifiable contract within the meaning of the settlement agreement. Manufacture of the vests to fulfil the second contract had begun in Cork in July 1981, and was still continuing at the time of the discovery by Mr Sacks of its existence. This discovery led to the second round of litigation.
The second round
In February 1982 the plaintiffs launched two main actions, one in the Republic of Ireland and one in this country. There were subsidiary proceedings in Guernsey, Jersey and the Isle of Man. The proceedings in the Republic of Ireland proceeded to trial, which lasted for 16 days in October 1982. They culminated in the judgment of Costello J. in favour of the plaintiffs.
Costello. J. made the following findings, amongst others:
(1) That Mr Waite had tricked Mr Sacks into parting with valuable confidential information about the design of the vests.
(2) That Mr Waite had deceived Mr Sacks about the existence of the first Libyan contract.
(3) That the second Libyan contract was clearly notifiable under the settlement agreement. He rejected the defendants' suggestion that the vest was sufficiently different from that supplied under the first contract as not to be notifiable under the settlement agreement. The contract was not notified because of a dishonest decision by Mr Waite not to pay royalties on it.
(4) That Mr Waite had created a fictitious contract with a bogus company with a view to concealing the truth; that he had suppressed the original contract with the Libyans and the invoice and letter of credit because these would have shown that the vests supplied under it were the same as those supplied under the first contract.
(5) The Judge disbelieved Mr Waite's evidence that he had no financial benefit from the second contract, and he recorded that both Mr Waite and Mr Seamus Waite had given evidence which they knew to be false in the course of the trial. On the other hand, he found Mr Sacks to be a truthful witnesses, blessed with a good and accurate memory.
(6) He held that a deliberate decision had been taken not to call Mr McLeod as a witness. He would have been able to explain the true circumstances of the second contract. The Judge held that he did not attend in order to avoid answering questions about it.
(7) He held that the Waites were in breach of the settlement agreement and that all three defendants had wrongfully used confidential information imparted by Mr Sacks to make the vests, and that they had been in breach of copyright in respect of the cutting patterns for the vests.
After damages had been assessed at a later hearing the defendants appealed to the Supreme Court. The appeals were heard in November 1984, and after they were over the defendants made an application to adduce fresh evidence, and launched a motion for a new trial. The application was based on the evidence of a Mr Parish and a Mr Waldie, as well as on the evidence of Mr Waite. Affidavits from those two witnesses were placed before the Supreme Court. The defendants claimed, on the basis of their evidence, that Mr Sacks had deceived Costello J. regarding the role which he played in developing the armoured vest.
The Supreme Court allowed the defendants' motion for a new trial on terms that £3,750,000 was paid into court, representing the amount of damages and costs. The Court took into account the fact that Costello J. had held that the defendants had had the money from the second contract, the gross proceeds of which amounted to some £5,000,000. The defendants did not bring the money into court, so the new trial did not take place. The appeal proceeded to judgment on the basis that there would be no new trial, and was dismissed on 11th January 1985.
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