One Picture Ltd v Craig

LORD JUSTICE MUMMERY: One Picture Ltd ("OPL") developed and sold computer software programmes under OPL's registered trade mark Hypermatter, along with an explanatory note.

Dr Jonathan Smith is the sole director and shareholder of OPL. The appellant, Mr Timothy Craig, is a software developer and electronic engineer. On 18 September 2002 OPL started proceedings against Mr Craig to establish and enforce its intellectual property rights against Mr Craig, who had dealings with OPL and Dr Smith over a period between November 1998 and 2001. Mr Craig was claiming that the intellectual property rights were an asset of a partnership subsisting between him and Dr Smith. The rights related to copyright, trade mark and passing off. Mr Craig had registered domain names incorporating the mark "Hypermatter".

Mr Craig's claims to an interest in the intellectual property rights were rejected by His Honour Judge Weeks QC who heard the case, sitting as a judge in the Chancery Division. He gave judgment on 20 November 2003. He heard both Dr Smith and Mr Craig give evidence. Each of them conducted his own case in person. The judge said he preferred the evidence of Dr Smith to that of Mr Craig. He found that the arrangement between them was not a partnership but, as was accepted by Dr Smith, an arrangement under which Mr Craig would be paid 50 per cent of the gross sums received on sales of software introduced by him. He described Mr Craig as a "broker" for OPL services, not a partner in the business of OPL and not the joint owner of the intellectual property rights in the computer software or trade mark.

In his order entered on 26 November 2003 the judge granted the following relief: first, a declaration that OPL was the owner of the copyright in the Hypermatter software and the explanatory note; second, he made an injunction restraining Mr Craig from infringing the copyright, from infringing the registered trade mark and from passing off computer programmes or computer programming software design, updating, maintenance services as or for the goods of services of OPL by use of the mark Hypermatter or any confusingly similar mark or by the use in connection with the said goods, services or business of any domain name, including the word "Hypermatter" or any confusingly similar name or mark. He ordered delivery up by Mr Craig of all copies of the Hypermatter software, and the explanatory note in his possession, custody or control, and of all articles in his possession, custody or control, possession, use, or offer or exposure for sale of which would breach the injunctions. The articles to be delivered up were to be forfeited to OPL. Mr Craig was also ordered to transfer to OPL the specified domain names, including the mark or word "Hypermatter".

The judge refused various items of relief in specified paragraphs of a counterclaim made by Mr Craig against OPL and against Dr Smith. He did, however, make an order under paragraph 8 of Mr Craig's counterclaim in his favour by ordering Dr Smith to repay to Mr Craig the sum of £33,500 for monies lent, and OPL was ordered to pay Mr Craig the sum of £5,440 monies due. He ordered Mr Craig to pay the costs of the action, but made no order for costs on Mr Craig's counterclaim. The judge refused permission to appeal.

Permission to appeal against the relief in relation to the intellectual property rights was also refused by Lord Justice Neuberger. Lord Justice Neuberger did grant limited permission to appeal to Mr Craig. It was limited to points arising on the counterclaim.

In the counterclaim Mr Craig had claimed against Dr Smith and OPL for various items of relief. In paragraph 16 of his counterclaim, which was preceded by 15 paragraphs relating to the partnership which the judge had rejected, Mr Craig pleaded:

I should mention now that the judge dismissed the claim by Mr Craig for a quantum meruit, finding that the express commission agreement to which I had referred excluded an implied agreement for the payment for Mr Craig's efforts, work and expenses. The judge also dismissed a claim of proprietary estoppel advanced by Mr Craig based on an alleged representation by Dr Smith that he would go into partnership with Mr Craig. Mr Craig succeeded in his claims against Dr Smith for the repayment of loans made over a period of nine months by six instalments of £5,000 each and a further payment of £3,500, those sums and that liability not being disputed by Dr Smith. He also ordered the reimbursement of expenses by OPL totalling £5,440, a figure I have already mentioned, made up as to £2,400 paid by Mr Craig to OPL's solicitors, Laytons, to settle outstanding bills, a sum of £1,440 in respect of half the gross proceeds from a contract with Nanying University, Singapore and the sum of £1,600 in respect of half the gross proceeds from a contract with Toshiba. Those two sales were the only ones that had been achieved by Mr Craig over a period of two years. The judge refused to order payment of interest on the judgment sum on those sums in favour of Mr Craig as, he said, there had been no prior demand for payment before the action commenced.

On the appeal, permitted only on the limited basis I have mentioned, Mr Craig submits that the main error of the judge was in failing to deal with the claim which he had made in paragraph 16 (c) of the counterclaim. During the course of the hearing a broad measure of agreement was reached between the parties about what had gone wrong in relation to the judgment on the counterclaim. It was agreed that the judge had dealt with the recovery of monies advanced, which was claimed by Mr Craig along with the quantum meruit, and he had made a ruling on the question of interest. It was accepted by Dr Smith that the judge had not dealt explicitly in his judgment with the claim in 16 (c) seeking recovery of expenditure incurred by Mr Craig on behalf of the business activities of Mr Craig and Dr Smith/ OPL. It was also accepted - correctly I think - by Dr Smith that the reason why the judge had not dealt with 16 (c) was that it was apparent from the judgment itself that, in giving judgment on the counterclaim, the judge was basing his decision on the wrong version of the counterclaim.

I should explain. Mr Craig had initially put in a defence and a counterclaim on 14 October 2002. In the counterclaim document he had set out the orders which he sought in 11 paragraphs, including declarations relating to ownership of copyright, claims for a quantum meruit and proprietary estoppel, claims for a share of the copyright in documentation materials and a share in the trade mark. Mr Craig had, however, been given permission to amend his defence and counterclaim by Judge Weeks in an order dated 3 July 2003. In that order the judge gave leave to Mr Craig to join Dr Smith to the proceedings as a Part 20 defendant, to amend his defence and to amend his Part 20 claim against Dr Smith, and gave directions as to the service of those documents. He also gave permission to Dr Smith to serve a defence to the Part 20 counterclaim by a specified date. The amended counterclaim set out many more numbered paragraphs than the original counterclaim. It was broadly divided into two parts, the first 15 paragraphs of which related to partnership claims and paragraphs 16 and 17 relating to claims for monetary relief and damages. It is clear from the transcript of the judgment (page 10 of the transcript, line 10) that, when the judge turned to consider the counterclaim, he quoted paragraphs from the umamended counterclaim and based his decisions on those paragraphs. As a result of referring to the wrong document as the basis of his decision on the counterclaim, the judge failed to deal expressly with the claim that Mr Craig made in paragraph 16 (c).

In those circumstances I would allow Mr Craig's appeal to the extent that there should be remitted to the judge the determination of the issues raised by paragraph 16 (c) of the counterclaim, as they do not appear to have been expressly dealt with by the judge in the judgment he gave on the counterclaim, on account of the error which I have explained i.e. referring to the wrong version of the counterclaim.

The particular items which Mr Craig claims are listed in the appeal bundles on pages 44 and 45 under the heading "Account of monies and expenses incurred by Craig on behalf of the business". It is clear that some of those items have already been dealt with by the judge. There are the references to the advances paid to Dr Smith totalling £33,500 and to the payment of £2,400 to the solicitors Laytons. There are, however, many other detailed items which are not dealt with in the judgment. It may be, and I can say no more than that, that the judge, who must have had this document in front of him at the trial, treated all the other items as disposed of by his decision that there was no partnership between Mr Craig and Dr Smith in respect of the business carried on by OPL, but it is not expressly spelt out.

It seems to me that, in those circumstances, the judge has not expressly dealt with an item in Mr Craig's counterclaim. There may be, as I indicated, a short answer which the judge may give on remission. It may be that it will be necessary for the judge to hear further evidence and argument on individual items. As suggested by Lord Justice Chadwick in the course of the hearing, the parties could considerably reduce the scope of the disagreement between them on the items on pages 44 and 45 if they could consider between themselves whether they can agree that these items were actually expended and then concentrate on what I suspect is the real issue, namely whether these monies were spent by Mr Craig on promoting his own business, which was independent of the business of Dr Smith and OPL, or whether they were spent by him for the benefit of OPL and Dr Smith.

I would not accede to Mr Craig's request that we also remit the item at paragraph 17 of his counterclaim. In paragraph 17 of the amended counterclaim dated 18 July 2003 he sought the following relief:

The only matter I would remit is the recovery of expenditure claim in paragraph 16 (c) of the counterclaim.

I can deal with the remaining matters very briefly. Mr Craig submitted that the judge was wrong not to order interest on the sums for which he gave judgment on the counterclaim. The judge found that there had been no prior demand for payment before the action began. In my view, Mr Craig should be entitled to interest at a rate to be fixed by the judge on the sums that he recovered on the counterclaim as from the date when he initially made the counterclaim for the sums advanced and the other identified sums which he had paid on behalf of OPL. The date of the original counterclaim was 14 October 2002. Although there had been apparently no demand before then, it must have been clear to Dr Smith and OPL from the date when they received the counterclaim that Mr Craig was seeking repayment of the sums that he had advanced by way of loan to Dr Smith and of the expenses which he had paid on behalf of Dr Smith or OPL.

The final matter is the question of costs. The position is that Mr Craig has succeeded to the extent which I have mentioned. I would therefore make an order that as a litigant in person he is entitled to be paid the costs of the appeal. So, to sum up, the order I would make is: remission of paragraph 16 (c), but not paragraph 17; interest at a rate to be fixed by the judge on the counterclaim sum to run from 14 October 2002 and costs in favour of Mr Craig on this appeal.

LORD JUSTICE CHADWICK: I agree.

LORD JUSTICE LONGMORE: I agree also.

LORD JUSTICE MUMMERY: Have you any questions about that?

THE RESPONDENT: No.

LORD JUSTICE MUMMERY: If you need it - and you probably will if you are not able to resolve this matter between - you can obtain a transcript of the judgment. The judge will need to see what we said in order to know what he is supposed to be doing.