Permavent Ltd v Stephen John Makin

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.

HIS HONOUR JUDGE Hacon

Introduction

This is an application by the Defendant (“Mr Makin”) for specific disclosure to be given by the First Claimant (“Permavent”). Pursuant to the direction of Mr Justice Mann dated 2 December 2020, this judgment is given on the papers.

Background

Permavent is a supplier of roofing products to the construction industry. The Second Claimant (“Greenhill”) is the parent company of Permavent.

Mr Makin was Managing Director of Permavent from its incorporation in February 2003 until his resignation on 5 June 2017. For the latter part of that period he was also an employee of Permavent.

On 10 July 2017 Permavent brought this action against Mr Makin seeking, broadly, an assignment to it of certain patents and patent applications owned by Mr Makin. Permavent did not dispute that Mr Makin was the inventor in each case but asserted that he made the inventions while in Permavent's employment, or subject to an agreement that he would grant an exclusive licence to Permavent under the patents.

The proceedings were settled by an agreement dated 8 September 2017 (“the Settlement Agreement”). The Settlement Agreement was annexed to a Tomlin Order dated 16 October 2017 made by Mrs Justice Rose, as she then was. It was in the usual Tomlin form.

So far as is relevant to this application, the Settlement Agreement included a term under which Mr Makin assigned eight patents and patent applications to Greenhill. Also, Permavent and Greenhill undertook to pay to Mr Makin what was defined as the Easy Roof System Payment. Mr Makin was to be paid 5% of sales revenue and licence fees received by companies in Greenhill group of companies from the sales of seven roofing products which fell within the claims of the assigned patents. Such payment would continue until the expiry or revocation of the patents.

Mr Makin had doubts as to whether the payments due to him under the Settlement Agreement would be honoured and in order to secure his position he registered an equitable interest in five patents in the Patents Register. This prompted a renewal of these proceedings by Permavent and Greenhill under the permission to apply given in the Tomlin Order. The relief sought included an order requiring Mr Makin to cancel his registration and other relief pleaded on the basis that Mr Makin had acted in breach of the Settlement Agreement by registering his purported right. Permavent and Greenhill claimed that Mr Makin was no longer entitled to payment under that Agreement and was required to repay a sum already received.

Mr Makin served a Counterclaim. It has since been amended, the latest Defence and Counterclaim being dated 8 December 2020. The Counterclaim is for payment of sums due to him under the Settlement Agreement, Mr Makin alleging that to date he has been underpaid.

By an Order dated 11 May 2020 I gave summary judgment in the claimants' favour in relation to the registration of Mr Makin's interest on the Patents Register, requiring Mr Makin to have it removed.

Also on 11 May 2020 I gave directions in the case management conference for the remaining claims and the counterclaim. In broad summary, the issues are (i) whether the claimants are no longer obliged to make payments under the Settlement Agreement and Mr Makin is obliged to repay sums received, (ii) whether the clauses in the Settlement Agreement relied on by the claimants are penalty clauses and (iii) whether Mr Makin has been underpaid. Among the directions given was that each side should give disclosure. Disclosure was limited to (a) known adverse documents and (b) documents relied on by the party to support their case. The claimants' counsel in this application (who was also present at the CMC) says that the disclosure order was by agreement. Mr Makin says it was not and exhibits the first two pages of the skeleton argument filed for the CMC by counsel then acting for him. But the paragraph relied on by Mr Makin, a summary of issues to be resolved, suggests only that there was a dispute about disclosure of documents referred to in witness statements. I am not sure whether that was pursued but I believe that otherwise the disclosure order was agreed at the CMC.

The Application

Mr Makin filed his Application Notice on 26 November 2020 together with a draft Order to which is scheduled a list of 14 categories of documents which he requires Permavent to disclose. Mr Makin has served amended draft Orders since then, the latest being sent to Mann J's clerk on 14 December 2020 and forwarded to me. Although only Permavent is identified as Respondent to the Application, I will treat it as having been brought also against Greenhill to cover the possibility that some of the documents are held by Greenhill.

The documents sought concern the Claimants' sales in the three years from 1 September 2017 to 30 September 2020 and some related data for the same period, such as calculations of patent box tax relief.

Mr Makin also apparently seeks permission to amend his own disclosure list. I observe only that the obligation to give disclosure continues until trial. Mr Makin is not only entitled to, but obliged to add to his disclosure list if further documents emerge and it does not require the permission of the court to do so.

Counsel for Permavent filed a skeleton argument dated 7 December 2020 in relation to Mr Makin's application. Mr Makin filed a written response dated 9 December 2020.

The claimants' arguments

The claimants' first point was that Practice Direction 57AB – Shorter and Flexible Trial Schemes discourages applications for disclosure once the CMC is done. Paragraph 2.43 provides:

“ 2.43 Applications for specific disclosure and further information made after the CMC are discouraged under the Shorter Trials Scheme and should not be made without good reason.”

I agree that Mr Makin has to show good reason for requiring the disclosure he now seeks. Mr Makin was represented by counsel at the CMC so there should be no question of his interests at the CMC having been overlooked because a lack of awareness of the court's procedural rules. I must assume that Mr Makin and those advising him believed at the time that the disclosure order at the CMC was appropriate, aside from a possible issue as to whether one side or the other should disclose documents referred to in witness statements.

The claimants' substantive point is that the Settlement Agreement contains provision for an audit, which includes the disclosure of documents by the claimants to Mr Makin's nominated accountant to justify the quantum of payments made. The claimants say that Mr Makin's accountant would have received all necessary documents before now if Mr Makin has not been obstructive in agreeing appropriate terms of confidentiality.

In the Settlement Agreement ‘GIHL’ is Greenhill, ‘the Companies’ are companies in the Greenhill Group including Permavent and Greenhill, the ‘Easy Roof System Payment’ is the name given to the payments due to Mr Makin under the Agreement and ‘the Easy Roof System Products’ are the products the sale of which attract payment to Mr Makin. Clauses 2.7 and 2.8 state:

“2.7 Within 14 (fourteen) days of the end of each Quarter, GIHL and Permavent shall (a) provide the Stephen Makin a statement of the aggregate Easy Roof System Payment due in respect of that Quarter and (b) pay or procure the payment of the Easy Roof System Payment due in respect of that Quarter to Stephen Makin.

2.8 Each of the Companies shall maintain books of accounts in respect of all sales of the Easy Roof System Products in the period during which the Easy Room System Payment is payable to Stephen Makin and for a period of not less than 12 (twelve) calendar months thereafter. The Companies shall permit an independent firm of chartered accountants appointed by Stephen Makin to have access to such books of account upon not less than 15 (fifteen) business days' notice of request in order to enable Stephen Makin to verify the amount of Easy Roof...