Martin John Coward v Phaestos Ltd and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice David Richards,Lord Justice Ryder,Lord Justice Moore-Bick |
| Judgment Date | 02 October 2014 |
| Neutral Citation | [2014] EWCA Civ 1256 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2013/2635 |
[2014] EWCA Civ 1256
Lord Justice Moore-Bick
Lord Justice Ryder
and
Mr Justice David Richards
Case No: A3/2013/2635
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(Mrs Justice Asplin)
HC10C02788
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Michael Bloch QC and Mr James Walmsley (instructed by Lewis Silkin LLP) for the Appellant
Ms Elspeth Talbot Rice QC and Mr James Abrahams (instructed by Herbert Smith Freehills LLP) for the Respondents
Hearing date: 23 July 2014
Introduction
This appeal concerns the order for costs made at the conclusion of hard-fought intellectual property litigation. The costs of £19 million incurred by the parties, £6 million by the claimant and £13 million by the defendants, dwarf the great majority of civil claims, including most claims in the High Court.
The central issue is the effect of a Calderbank offer, that is, an offer made without prejudice save as to costs (see Calderbank v Calderbank [1976] Fam. 93). The claimant, who brings this appeal, says that the offer made by him provided for all that the defendants ultimately recovered, save for insignificant items.
The claimant applied for permission to appeal against some of the substantive orders as well as the order for costs, but, at a renewed oral hearing, Briggs LJ gave permission to appeal limited to the order for costs.
Facts
For the purposes of this appeal, only a brief summary of the underlying facts and issues is required. The claimant, Dr Martin Coward, and Ms Elena Ambrosiadou were married in 1983. Dr Coward is a mathematician and computer programmer who, after the award of his PhD in 1984, worked for banks in London and Bahrain, writing software for use in their currency and securities trading businesses. Ms Ambrosiadou, after graduating in chemical engineering and obtaining an MBA, pursued a business career. In 1992, Dr Coward and Ms Ambrosiadou together started a quantitative trading business and over the following years developed it into a highly successful enterprise. The business was carried on in the following years through a number of partnerships and companies, including the defendants, which for convenience I will refer to collectively as IKOS. The marriage and business relationship between Dr Coward and Ms Ambrosiadou broke up acrimoniously in 2009.
Essential to their joint business were the computer programs for their quantitative trading activities. Dr Coward wrote the original software on which the business was based and made a significant contribution to the development of the software over the following years. When the relationship between Dr Coward and Ms Ambrosiadou broke down in 2009, Dr Coward resigned from IKOS and set up his own competing business, which also involved computer-based trading. Each side alleged that the other was using software in which it owned the copyright. Litigation ensued in a number of countries.
The proceedings
The present proceedings were commenced by Dr Coward in August 2010. He claimed declarations that he was the owner, or in some instances the co-owner, of the copyright in software being used by IKOS and the owner of database rights in associated databases. He further sought an order for delivery up and/or destruction of copies of the software in which he owned the copyright and an injunction to restrain IKOS from infringing his copyright and associated database rights, together with an enquiry as to damages or an account of profits.
IKOS defended the claim on the basis that copyright in the relevant software together with the database rights did not belong to Dr Coward but belonged to the partnership established by Dr Coward and Ms Ambrosiadou in 1992 and its successors in title. IKOS counterclaimed for declarations that the software and databases used by the IKOS entities were not the subject of copyright or database rights owned by Dr Coward and that such software could without the consent of Dr Coward lawfully be used, maintained and updated by the IKOS entities.
IKOS further alleged that Dr Coward was himself infringing copyright belonging to IKOS in the use of computer software and was retaining valuable confidential information and trade secrets belonging to IKOS.
These claims and counterclaims struck at the heart of each side's business.
For the purposes of IKOS's counterclaim, it is necessary to distinguish between a number of different types of software and information.
First, there is "the 2009 Software". This refers to software which Dr Coward accepted that he downloaded from IKOS computers to his own computers in November 2009. He maintained that, as owner of the copyright in such software, he was entitled to do this. IKOS alleged that he had used this software and associated databases in his business and threatened to continue to do so. In the counterclaim, as amended prior to 30 July 2012 (the date of the Calderbank offer), IKOS sought an injunction to restrain Dr Coward from infringing their rights in the 2009 Software and an order for delivery up of all copies of such software, as well as an enquiry as to damages or an account of profits for infringement of copyright and database rights. In particular, they alleged that the 2009 Software had been used in the software developed by Dr Coward and his associates for use in his business (the New Venture Software).
Second, there is the "Gardening Leave Code". This refers to software developed by programmers for Dr Coward's new business, while they were still employed by IKOS, during a period of gardening leave following the giving of notice to terminate their employment. IKOS's counterclaim as regards the New Venture Software was pleaded on the basis that it infringed rights in their 2009 Software. IKOS might have made a claim to ownership of the Gardening Leave Code on the basis that it had been developed by programmers at a time when they were still employed by IKOS, but no such case was in fact pleaded.
Third, there is "the Burns material". This refers to documents alleged by IKOS to contain confidential information and trade secrets belonging to it, which, on the instructions of Dr Coward, were copied to a laptop and a USB drive by David Burns, who was at the time still employed by IKOS.
Fourth, there is "the Steyning material". This refers to documents alleged by IKOS to contain confidential information and trade secrets belonging to it, which Dr Coward had copied to a laptop kept at the former matrimonial home in Steyning in West Sussex.
In the counterclaim, IKOS alleged that Dr Coward was misusing the confidential information contained in the Burns material and the Steyning material. It claimed an injunction in respect of this material and an order for delivery up, together with an enquiry as to damages or an account of profits.
The outcome on substantive issues
The action was tried by Asplin J over 12 days in March 2013. On 17 May 2013 she handed down a 68-page judgment, comprehensively dealing with all the issues before her. She dismissed Dr Coward's claims, holding, as alleged by IKOS, that the relevant software had been written by him at a time when he was in partnership with Ms Ambrosiadou and was therefore a partnership asset. She further held, in any event, that the software became an asset of the partnership and that, if those grounds were wrong, Dr Coward was estopped from denying that the software had become a partnership asset. The judge therefore refused to make the declarations sought by Dr Coward or to make any of the further orders for injunctions, delivery up, damages or an account of profits sought by him. On the counterclaim by IKOS, the judge made the reverse declarations, as sought by IKOS, that the software and databases used by it were not the subject of any copyright or database rights owned by Dr Coward and that IKOS was, without his consent, entitled to use, maintain and update the software and databases.
The outcome of the other claims made by IKOS in the counterclaim is more complex. As regards the 2009 Software, the judge upheld the claim by IKOS that Dr Coward had infringed copyright by downloading it in November 2009. She made a declaration to that effect and ordered Dr Coward to deliver up or destroy all copies of such software in his possession, custody or control. She also ordered Dr Coward to pay IKOS the sum of £1,000 by way of nominal damages for copyright infringement and breach of confidence. At the hearing in July 2013 to decide the terms of the final order and other consequential matters, IKOS applied for an injunction to restrain any use by Dr Coward of the 2009 Software or other infringement of their copyright in such software, relief which had been included in the counterclaim. Dr Coward resisted the grant of this injunction but, when it became apparent that the judge was minded to grant it, he offered an undertaking in place of an injunction. The undertaking is set out in schedule F to the order. It is relevant to note that in addition to undertaking not to use or otherwise infringe copyright in the 2009 Software, the undertaking extends to "any materials which derive from the 2009 Software or any parts of the 2009 Software". Paragraph 2 of the undertaking states that, for the avoidance of doubt, the undertaking does not preclude Dr Coward from "using anything contained in the New Venture Software (as disclosed in these...
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