Kieran Corrigan & Company Ltd v Onee Group Ltd

Hearing dates: 14, 15, 16 May 2024

Judgment circulated in draft 6 August 2024

Approved Judgment

This judgment was handed down remotely at 10.30am on 16 August 2024 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

HHJ

Introduction

Inquiry as to damages

This judgment concerns the inquiry as to damages in this case, at which the Court is to determine the quantum of the Claimant's claims for damages against the First, Third and Fourth Defendants for their misuse of confidential information, and associated unlawful means conspiracy, consisting in their taking and using the Claimant's confidential information (‘Confidential Information’) relating to a tax planning structure, of several variants (‘the Structure’), based on relief for expenditure on Research and Development (‘R&D’) under Part 13, Chapter 2 of the Corporation Tax Act 2009 (‘ CTA’) which enabled small and medium-sized enterprises (‘SMEs’) not involved in R&D to take advantage of the relief.

The liability judgment

These Defendants' liability was established in the judgment (‘the Judgment’) of Jonathan Hilliard KC (‘the Judge’), which he gave on 23 March 2023 following a 5-day trial in December 2022.

He rejected the evidence of the Third and Fourth Defendants that they had not copied and used the Confidential Information in the Defendants' own structure (‘the Nemaura Structure’), which was based on providing R&D to a company connected with OneE (and partly owned by the Second Defendant), namely Nemaura Pharma Limited (‘Nemaura’). He held that the Nemaura Structure embodied and utilised the Claimant's Confidential Information.

The Confidential Information itself is set out in [219] of the Judgment. It included a detailed set of draft Instructions to Counsel (‘the Instructions’) prepared by Mr Kieran Corrigan, the Claimant's principal, which provided a description of the Structure (including various options for its implementation, for instance as to gearing) and associated tax analysis. Key parts of the Confidential Information are set out in the tables in the Appendix to the Judgment, with comparisons to a prior structure (‘the Ultra Green Structure’) and the Nemaura Structure and an earlier, 2013, structure proposed by the First Defendant (and/or members of its group – ‘OneE’) based on Nemaura.

The Judge held that the inspiration and principal thinking behind the use of the sub-contractor R&D relief – the key to the Structure and the Nemaura Structure – came from Mr Corrigan: [167] of the Judgment. He also held that that the use of such relief had not occurred to OneE when it prepared the 2013 Nemaura structure.

He held that the claims for breach of confidence and unlawful means conspiracy in relation to that were made out against the First, Third and Fourth Defendants, but not the claims for procuring breach of contract (the contract in question being a nondisclosure agreement with a company in the First Defendant group).

The Second Defendant

The Second Defendant was found not to be liable, essentially on the footing that he was not sufficiently involved in the wrongful activities. The Claimant has obtained permission to appeal that finding, and I am told that its appeal is due to be heard not long after the hearing of this inquiry. The prospect of a successful appeal raised the possibility of a re-run of this inquiry being required as against the Second Defendant, unless the inquiry was stayed until after the appeal. However, that difficulty was avoided because, as recorded in the order of Master Clark made on 1 December 2023, the Second Defendant undertook to the Court that he would submit to any finding made at the trial of the inquiry and would participate in this inquiry as a party. In the event, he did not attend and was not represented at the trial of the inquiry.

Disclosure

Following the Judgment, the First, Third and Fourth Defendants were ordered to give Island Records v Tring disclosure to enable the Claimant to elect between pursuing an inquiry as to damages or an account of profits (although the Judge had not at that time positively determined that the Claimant was entitled to an account). They did so in the form of the Second Defendant's second witness statement (for the First Defendant) dated 17 April 2023, the Third Defendant's second, third and fourth witness statements dated respectively 17, 18 and 27 April 2023, and the Fourth Defendant's second witness statement dated 17 April 2023. Although expressing itself unsatisfied with the disclosure given, the Claimant then elected to pursue this inquiry as to damages rather than an account of profits.

Issues

The parties have agreed a list of issues, although the Claimant says that most of them do not arise. Their respective positions are helpfully summarised in the case summary which has been prepared for the inquiry.

(1) The Claimant's position is that equitable compensation / damages should be quantified on the basis of a 50/50 split of fees generated from the Nemaura Structure as follows (i) the cash raised from investors by the promoters by way of fees and (ii) the promoters' share in any success fees generated from the research and development funded by the Nemaura Structure as this was the deal that the Claimant had offered and would have been agreed. Alternatively, the Claimant seeks a hypothetical reasonable licence fee, based on a split of the sums received and success fees (at a level the Court holds appropriate, with 50% being the Claimant's primary case) or alternatively, if the Court rejects that approach, based on a flat consultancy fee.

(2) The First and Third Defendants contend that their wrongful acts caused no loss, alternatively damages should be calculated as a split of the success fees as negotiating damages or, if a flat fee is appropriate, that it should be lower than that paid to the barrister engaged in respect of the Nemaura Structure, Rory Mullan.

(3) The Fourth Defendant disputes that a deal would have been agreed as the Claimant contends, alternatively that it would have been based on a split of net profits (no net profits were made) or would have been for a ‘minimal’ split of revenue. If the hypothetical fee approach were used, then that split would still be a split of net profits and so would generate no liability to the Claimant. Alternatively, if a flat fee approach were used, the fee should be less than that paid to Mr Mullan.

The Confidential Information

The Judge found that the relevant information (which was supplied to OneE) consisted of the proposed structure set out in the instructions to Counsel (the Structure with several variants devised by the Claimant in conjunction with tax counsel, Michael Sherry), using the R&D relief provisions of the Corporation Tax Act 2009 (‘the 2009 Act’), the proposed Morvus structure and the proposed Fast Track Pharma structure referred to in the Judgment.

He held that

“…the most important feature of the Structure for the purposes of the present claim was the use of R&D sub-contractor relief, including the reasoning on s.1053(6). However, as I have explained above, that feature is not to be taken in isolation. Rather Mr Corrigan's key insight for the purposes of the present claim was that that one could build an R&D sub-contractor structure with an LLP at the top. Further, one could build it in a way that the LLP was unconnected to the subcontractor, which would (if the LLP traded) attract R&D relief of 181.25% on the sub-contractor payment (paragraph 39 above), and would do so without the need for the expenditure of the subcontractor to be limited to the categories of expenditure on staff, software, consumables and externally provided workers that formed the subject matter of ss.1124, 1126 and 1132. Those categories were also reflected in s.1134 in relation to connected subcontractors, together with payments to subjects of clinical trials. As part of the insight above, the Claimant provided legal reasoning for its view that the limits that I have just mentioned did not apply.”

He held that those elements of the Structure in isolation were sufficient to amount to confidential information. Although the insight about sub-contractor R&D relief under the 2009 Act, particularly using unconnected sub-contractors, and using it in a LLP structure that corporates could invest in, could in theory have been achieved by someone else with sufficient time, effort and skill, as evidenced by the opportunity that Ultra Green came up with based on the 2000 Act, it was not one that appeared on the evidence before him to have previously been done by others or under the 2009 Act, and like many simple ideas, it was the product of significant preparatory work. He held that the Confidential Information was imparted in circumstances importing an obligation in confidence over a period starting on 4 February 2014.

The Judge held that in breach of confidence the Confidential Information was used in developing the Nemaura Structure from 3 June 2014 in preparing and commenting upon instructions and then on 4 August 2014 in sending them to Counsel's clerk, and in the lead up to the October presentation at the...