Steven Worbey+kevin Stuart Farrell V. Steven Elliott
| Jurisdiction | Scotland |
| Judge | Lord Tyre |
| Neutral Citation | [2014] CSOH 19 |
| Published date | 06 February 2014 |
| Docket Number | CA109/13 |
| Date | 06 February 2014 |
| Court | Court of Session |
| OUTER HOUSE, COURT OF SESSION | |
| [2014] CSOH 19 | |
| CA109/13 | OPINION OF LORD TYRE in the cause (FIRST) STEVEN WORBEY and (SECOND) KEVIN STUART FARRELL Pursuers; against STEVEN ELLIOTT Defender: ________________ |
Pursuers: A Smith QC, Barclay; Simpson & Marwick
Defender: Currie QC, McClelland; Brodies LLP
6 February 2014
Introduction
[1] In this action the pursuers seek an accounting by the defender of his intromissions with the receipts obtained by him from two social networking applications ("apps"), and payment of such sum as may be found to be due to them following that accounting. In the alternative, they seek payment of a sum estimated to represent the sum due to them. The action came before me for debate of the defender's preliminary pleas to jurisdiction and relevancy.
The pursuers' averments
[2] The pursuers reside in Scotland; the defender resides and, for the purposes of the Civil Jurisdiction and Judgments Act 1982, is domiciled in the south of England. The pursuers aver that in about 2009 they and the defender discussed the development of an app for mobile phones to facilitate social contact among members of the gay community. These discussions took place orally and in email correspondence. The first pursuer suggested the name "Bender" for the app; there was subsequent discussion of the launch of a similar app for the lesbian community called "Brenda". The pursuers acknowledge in their pleadings that the agreement that they claim subsisted was never reduced to writing; they aver, however, that the parties formed a concluded agreement to the following effect. The defender was to provide technical expertise in the development of the app. He would negotiate with organisations such as Apple and Google to enable the app to be launched on the market. The pursuers would contribute such funding as might reasonably be required by the defender from time to time to facilitate the initial development of the app. They would also provide marketing advice and assistance. Profits would be divided as follows: 51% to the defender; 49% to the pursuers (and a third individual whose involvement ceased at a later stage). It is averred that the contract was formed "no later than 17 October 2009". In this regard the pursuers found upon the terms of an email sent by the defender to them and to the third individual on 17 October 2009, in which the defender intimated that he had purchased a second hand laptop computer - the implication being that it would require to be paid for by the pursuers - and also indicated his approval of the name Bender suggested by the first pursuer. The email continued (the triple dots appear in the original):
"We need to get something in writing that just states in basic terms how we all fit together with this. I'm obviously going to be the developer, at least for the foreseeable future ... and you guys are going to be a mixture of investors/marketing gurus etc. To get something up and running, I'll probably be investing hundreds of hours programming, and then when it is running ... there will be constant work to improve it, deal with issues etc. So, to reflect that ... and also to safeguard my control over the application that after all that time will probably feel like "my baby", I said to Steven and Kevin that my only condition would be I have a controlling interest so that if in five years time for example, if it's a massive success and some investor offers you guys an fantastic amount of money to buy you out, but I don't want to ... I can't lose control to them because your shares add up to more than mine. So, what we agreed on the other night was that I have 51%, and the other 49% can be divided up between you three however you fancy."
[3] The pursuers aver that in implement of such an agreement they provided funds amounting in total to £2,100, including reimbursement of the cost of the laptop, to assist the defender in development of the app. They carried out marketing and testing of the app. In 2010, the first pursuer, at the defender's request, applied for and paid for a trade mark in the name of Bender.com. According to the pursuers' averments, the parties continued to act in accordance with their agreement by, respectively, the pursuers providing funding and marketing input and the defender attending to the technical development of the app. On 14 December 2010, the defender emailed a business plan for Bender to the first pursuer in which he proposed an amended profit sharing of 80% to the defender and 20% to the pursuers and the third individual; the pursuers aver that this attempted re-negotiation of the profit sharing was not agreed. In February 2011 the defender intimated to the pursuers his intention to operate the business through the medium of a limited company and observed in an email: "You should fully expect the first few injections of cash to be eaten up by expenses, so don't be expecting a payday check just yet". It is averred that by March 2011 the defender was deriving income from the app, but shortly thereafter stopped providing information to the pursuers. In April 2011 the defender indicated an intention to instruct a solicitor to draft an agreement between the parties in revised terms. Direct communications between the parties thereafter ceased.
[4] The pursuers seek an accounting and payment of a share of all of the defender's receipts from the Bender and Brenda apps. They aver that all versions of the Bender app for different platforms are derived from the name, idea and trade mark to which reference has been made, and that the Brenda app is essentially the same idea.
The defender's response
[5] As this is a debate of the pursuers' pleadings it is unnecessary to set out the defender's case in detail; it may be summarised as follows. The parties never went beyond the stage of negotiation regarding the nature and extent of the pursuers' financial participation in the app business, and no contract was concluded. The email of 17 October 2009 was a proposal which did not record an agreement capable of having contractual effect. Negotiations were still continuing in 2011 when the parties' relationship came to an end. In the meantime the pursuers had proved themselves unable or unwilling to provide, on a reliable and regular basis, the financial investment needed by the defender, and had failed to meet the costs that they had undertaken to meet. On 9 May 2011 the defender wrote to the pursuers terminating the negotiations and enclosing a cheque refunding the pursuers' contributions to date with interest. Esto there was a contract, the defender avers that it was lawfully rescinded in response to the pursuers' repudiatory breach of contract in failing to make financial contributions sufficient to cover the costs of the business. In any event the pursuers' marketing and testing input was limited to version 1 of the Bender iPhone app; they made no contribution to subsequent versions or platforms or to any Brenda app.
Jurisdiction
Argument for the defender
[6] On behalf of the defender it was submitted that the pursuers had failed to aver a relevant basis upon which the defender could be sued in a Scottish court. The pursuers relied upon paragraph 3(a) of Schedule 4 to the Civil Jurisdiction and Judgments Act 1982, which provides that a person domiciled in a part of the United Kingdom may be sued, in matters relating to a contract, in the courts for the place of performance of the obligation in question. Interpretation of paragraph 3(a) should accord with relevant decisions of the European Court of Justice on interpretation of article 5 of the Brussels Convention (Kleinwort Benson Ltd v Glasgow City Council [1999] 1 AC 153, Lord Goff of Chieveley at 163). The word "obligation" in article 5 referred to the contractual obligation forming the actual basis of the legal proceedings (De Bloos v Bouyer [1976] ECR 1497, paragraph 11; Custom Made Commercial Ltd v Stawa Metallbau GmbH [1994] ECR I-2913, paragraph 24). Where a number of obligations under the same contract formed the basis of the proceedings, the principal obligation would determine whether the court had jurisdiction (Shenavai v Kreischer [1987] ECR 239, paragraph 19). It was for the court to identify the principal obligation; a pursuer cannot camouflage the principal obligation by relegating it to a subordinate...
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