Coward v Phaestos Ltd & Ors

This is a dispute as to the ownership of the intellectual property rights in certain of the Gauss software used by a highly successful quantitative trading business, the IKOS investment business which is now carried on through the Defendant companies. The IKOS business provides hedge fund and hedge fund management services to professional investors. Investment decisions are made by means of an automated system based on unique mathematical models and algorithms implemented in software and databases. It was not disputed that the business has been hugely successful, largely as a result of the software.

The business was founded as a partnership in 1992 in England. The precise date on which that partnership was founded and whether it was Ms Elena Ambrosiadou’s (Ms Ambrosiadou’s) business in which the Claimant, her husband Dr Martin Coward (Dr Coward) participated or was a joint enterprise in which for a short time, others participated, are matters in dispute. Ms Ambrosiadou and Dr Coward are now estranged, Ms Ambrosiadou having filed for divorce in April 2009. It was around that time in December 2009, that Dr Coward left the IKOS business and sought to set up a rival organisation based principally in Monaco. As a result of those events, numerous sets of proceedings were commenced in a number of jurisdictions, including these proceedings.

Dr Coward is a mathematician and computer programmer with a PhD in Control Theory Engineering from Cambridge University. Until his resignation on 11 December 2009, Dr Coward was Chairman and a director of IKOS CIF Ltd, the Third Defendant, (IKOS CIF). It is not disputed that Dr Coward wrote the original software upon which the IKOS business was based and made a significant contribution to the development of the software over the years.

Ms Ambrosiadou is a Chemical Engineering graduate who obtained an MBA from Cranfield Business School and went on to work for British Petroleum before founding the IKOS business with or with the assistance of Dr Coward. She is a Greek national. It is not disputed that whilst Dr Coward focussed on the programming side of the business, Ms Ambrosiadou dealt with structural, legal, financial and human resources issues.

The Defendants are companies which are part of, or have been associated with, the IKOS business. The First Defendant, Phaestos Limited is a UK company, incorporated on 5 July 1991. During part of the time with which this case is concerned, it was called IKOS (UK) Limited. For the sake of simplicity I shall refer to it as IKOS UK throughout. It was one of the partners of IKOS Partners to which I shall refer below, until IKOS Partners was dissolved as of 31 December 2006. Between October 2006 and April 2008, IKOS UK provided programming, research and technical services to IKOS CIF. It is not disputed that some of the software used in the IKOS business was written by IKOS UK employees between March 1993 and April 2008.

The Second Defendant, Mindimaxnox LLP (“Mindimaxnox”) is an LLP incorporated on 11 April 2008. It was previously known as IKOS Research (London) LLP. It provided programming, research and technical services to IKOS CIF. It is also not disputed that some of the software used in the IKOS business was written by employees of Mindimaxnox between April 2008 and December 2008.

The Third Defendant, IKOS CIF, is a Cypriot company incorporated on 29 December 1995. It was formerly known as IKOS OFC Limited. It has been IKOS Asset Management Limited’s (IKOS AM) sub-investment manager since February 2006 (for the equities portfolio only) and since 1 July 2006 it has been IKOS AM’s sub-investment manager for all the management of futures portfolios. It is not disputed that some of the software used by the IKOS business was also written by employees of IKOS CIF.

The Fourth Defendant, IKOS AM is a Cayman Islands company incorporated on 12 January 1996 and is the investment manager to the IKOS Fund which is a hedge fund also located in the Cayman Islands.

Currently, Ms Ambrosiadou is the Chief Executive Officer and a director of IKOS CIF and is the Chief Executive Officer and a director of IKOS AM.

Dr Coward’s claim, in summary, is that he wrote a substantial part of the software used by IKOS in its business; and that he owns the copyright in that software. He contends that the copyright in such software was never the partnership property of IKOS Partners nor was it owned by IKOS CIF by which during part of the relevant period, he was employed and of which he was a director. He contends that the IKOS business had an implied licence from him to use the software and that that licence was determined by him in December 2009, so that IKOS’s continued use of the software amounts to a copyright infringement.

The precise lines of code of which Dr Coward claims to be the author and the owner of the copyright or the co-author and co-owner were set out in a schedule which became known as Annex 4. At the beginning of the trial it was made clear that Dr Coward confined his claim to software which he claims to have written up to 31 December 2006 and not up to the date on which he resigned from the IKOS business in December 2009. In addition, before Dr Coward gave evidence, various amendments were made to the content of Annex 4 which is confidential. I shall refer to the software details of which are contained in Annex 4 in its final version, as “the Coward Software”. In addition, where appropriate, references to software are in addition, intended to refer to the copyright in the software in question.

In response, the Defendants contend that the Coward Software became the partnership property of IKOS Partners and that all rights to it passed to IKOS UK as a result of the partnership dissolution agreement of 31 December 2006. As an alternative, it was contended that Dr Coward wrote the Coward Software in his capacity as an employee of IKOS UK.

If which is denied, the copyright in the Coward Software was owned by Dr Coward it is contended that a licence was granted by Dr Coward to the IKOS business in order to enable it to use the Coward Software and that the licence was irrevocable and exclusive or alternatively, that Dr Coward is estopped from asserting the copyright relied on against IKOS.

IKOS counterclaims against Dr Coward for copyright and database infringement and breach of confidence. The counterclaim arose in part from what was alleged to have been the use by Dr Coward of the software used by the IKOS business in November/December 2009 (the 2009 Software) in a new venture which he had set up in Monaco. However, claims in relation to copyright infringement and breach of confidence which would have required a detailed comparison of the 2009 Software and what became known as the New Venture Software are no longer pursued.

As I understand it, the counterclaim in relation to what became known as the Gardening Leave Code is also not pursued. This was a claim for copyright infringement and breach of confidence in relation to code which was allegedly written by Drs Drescher and Westphal during their notice period after they had left IKOS and before they joined Dr Coward’s new business which it was alleged was incorporated in the New Venture Software. Undertakings have been offered but their precise nature remains to be determined.

Dr Coward admits that in November 2009, shortly before he left IKOS, he covertly downloaded a copy of the 2009 Software for his own purposes although he denies that he intended to use it commercially. In this regard, IKOS alleges copyright infringement. IKOS also counterclaimed for breach of confidence in respect of some material referred to as “the Burns materials” and “the Steyning materials”. A regime for its return and/or destruction has been proposed by Dr Coward and is something to which I shall return.

The central questions in the claim therefore, are first whether Dr Coward wrote the Coward Software and secondly, whether he owns the copyright in that software. As a result of the way in which the IKOS business developed, it is natural to seek to answer the questions as to ownership and authorship by reference to distinct periods of time and that is reflected in the way in which the agreed issues have been drafted. Accordingly, I will address the relevant periods and the issues which relate to them. Before doing so, I should set out the main legal principles which apply and which, for the most part, are not in dispute.

Copyright and database infringement

The relevant provisions of the Copyright, Designs And Patents Act 1988 (the 1988 Act) are as follows:

“1.—(1) Copyright is a property right which subsists in accordance with this Part in the following descriptions of work—

(a)

original literary, … works,

…

(2)

In this Part “copyright work” means a work of any of those descriptions in which copyright subsists.

…

3.—(1) In this Part—

“literary work” means any work, other than a dramatic or musical work, which is written, spoken or sung, and accordingly includes—

(a)

a table or compilation other than a database,

(b)

a computer program;

…

16.—(1) The owner of the copyright in a work has, in accordance with the following provisions of this Chapter, the exclusive right to do the following acts in the United Kingdom—

(a)

to copy the work;

. . .

and those acts are referred to in this Part as the “acts restricted by the copyright.”

(2)

Copyright in a work is infringed by a person who without the licence of the copyright owner does, or authorises another to do, any of the acts restricted by the copyright.

References in this Part to the doing of an act restricted by the copyright in a work are to the doing of it—

(a)

in relation to the work as a whole or any substantial part of it, and

(b)

either directly or indirectly;

….

17.—(1) The copying of the work is an act restricted by the copyright in every description of copyright work; and references in this Part to copying and copies shall be construed as follows.

(2)

Copying in relation to a literary, dramatic, musical or artistic work means reproducing the work in any material form.”

It is not disputed that the issues which arise in relation to copyright infringement were accurately set out by Jacob J (as he then was) in IBCOS Computers Ltd v Barclays Mercantile Highland Finance Limited [1994] FSR 275 at 289, in the following order: (1) What are the work or works in which the [claimant] claims copyright? (2) Is each such work “original”? (3) Was there copying from that work? (4) If there was copying, has a substantial part of that work been reproduced?

In the case of computer software, Article 1.3 of the Software Directive 2009/24/EC provides:

“A computer program shall be protected if it is original in the sense that it is the author’s own intellectual creation. No other criteria shall be applied to determine its eligibility for protection.”

The requirements of the 1988 Act must be interpreted accordingly.

In the case of databases, section 3A of the 1988 Act provides that:

“a literary work consisting of a database is original if, and only if, by reason of the selection or arrangement of the contents of the database the database constitutes the author’s own intellectual creation.”

The basic position in relation to the ownership of copyright works is set out in section 11 of the 1988 Act in the following way:

“11.—(1) The author of a work is the first owner of any copyright in it, subject to the following provisions.

(2)

Where a literary, dramatic, musical or artistic work, or a film, is made by an employee in the course of his employment, his employer is the first owner of any copyright in the work subject to any agreement to the contrary.”

It is also not in dispute that copying is a question of fact. As Jacob J pointed out in the IBCOS Computers case at 298, to prove copying the claimant can normally do no more than point to parts of his work and the defendant’s work which are the same and prove an opportunity of access to his work. If the resemblance is sufficiently great then the court will draw an inference of copying.

What is meant by “substantial part” was summarised by Lord Hoffmann in Designers Guild Ltd v. Russell Williams (Textiles) Ltd [2001] FSR 113, HL at [24]:

“Ladbroke (Football) Ltd v. William Hill (Football) Ltd [1964] 1 WLR 273 establishes that substantiality depends upon quality rather than quantity (Lord Reid at 276, Lord Evershed at 283, Lord Hodson at 288, Lord Pearce at 293), and there are numerous authorities which show that the “part” which is regarded as substantial can be a feature or combination of features of the work, abstracted from it rather than forming a discrete part. That is what the judge found to have been copied in this case. Or to take another example, the original elements in the plot of a play or novel may be a substantial part, so that copyright may be infringed by a work which does not reproduce a single sentence of the original.”

The question therefore, is whether the author invested a substantial amount of skill and labour in that which was copied. Lord Hoffmann also made clear at [17] and [18] that when determining whether the feature or combination of features form a substantial part, it is not relevant to ask whether the defendant’s work resembles or does not resemble the claimant’s work. Furthermore, Lord Bingham, Lord Millett and Lord Scott made clear that where the similarities between two works are such as to found an inference of copying, those similarities will normally be sufficient to amount to a substantial part of the copyright work.

Arnold J considered the question of “substantial part” and gave extensive guidance in the context of a claim for infringement in respect of software in SAS Institute Inc v World Programming Ltd [2010] EWHC 1829 (Ch), [2011] RPC 1 at [149]-[244], considering both the domestic legislation (i.e. the 1988 Act) and the Software Directive which I adopt.

He also noted that the Court of Justice has now adopted the same approach as the House of Lords in the Designers Guild case in Infopaq International A/S v DANSKE Dagblades Forening [2009] ECR I-6569, [2010] FSR 20. In that case, the Court of Justice held that an extract of 11 words from a literary work constituted a substantial part of the work if the extract contained an element of the work which expressed the author’s own intellectual creation. On the other hand, the Court of Justice also held that it is necessary to consider the cumulative effect of what has been reproduced.

I should also mention that the Supreme Court held in Lucasfilm Ltd v Ainsworth [2011] UKSC 39. [2012] 1 AC 208 that the English Court may hear claims for copyright infringement wherever committed in the world. As a result, IKOS amended its Counterclaim to extend its claims to acts wherever committed.

In relation to database rights, the right was created by European Parliament and Council Directive 96/9/EC of 11 March 1996. The Database Directive was implemented in the UK by the Copyright and Rights in Databases Regulations, 1997, SI1997/3032 (the 1997 Regulations), but as Jacob LJ pointed out in British Horseracing Board Ltd & Ors v William Hill Organization Ltd [2005] EWCA Civ 863, [2005] RPC 35 at [8] it is convenient to concentrate upon the wording of the Directive.

For the purpose of the Directive, “database” means a collection of independent works, data or other materials arranged in a systematic or methodical way and individually accessible by electronic or other means. Article 7.1 of the Directive provides that a database right subsists in a database where there has been “qualitatively and/or quantitatively a substantial investment in either the obtaining, verification or presentation of the contents”. The right is owned by the maker of the database, who is the person who takes the initiative and the risk of investing in the database.

It is not in dispute in this case that the alleged database rights exist and that they were current at the relevant times. However, for the sake of completeness I should mention that by virtue of article 10 of the Directive, a database right lasts for 15 years, although a substantial further investment in the database will give rise to a new database with its own term of protection.

The right is infringed by the extraction or re-utilization of the whole or of a substantial part, evaluated qualitatively and/or quantitatively, of the contents of that database. By virtue of regulation 23 of the 1997 Regulations, an infringement of this right is actionable in the same way as an infringement of copyright, and the same remedies are available.

Breach of confidence

The clearest statement of the elements necessary to found an action for breach of confidence remains that of Megarry J in Coco v AN Clark (Engineers) Ltd [1969] RPC 41 at 47:

“First, the information itself … must ‘have the necessary quality of confidence about it’. Secondly, that information must have been communicated in circumstances importing an obligation of confidence. Thirdly, there must have been an unauthorised use of the information to the detriment of the party communicating it.”

Arnold J carried out a comprehensive review of the case law relating to these three elements in Force IndiaFormula One Team Limited v 1 Malaysia Racing Team SDN BHD [2012] EWHC 616 (Ch), [2012] RPC 29 at [215]-[238]. A former employee is entitled to use for his own benefit information which forms part of his own skill, knowledge and experience even if it is confidential and was learnt during the course of his employment, but is not entitled to use any trade secrets of his former employer (Faccenda Chicken Ltd v Fowler [1987] Ch 177 at 135G-138H per Neill LJ).

Partnership issues

It is not in dispute that a partnership is a relationship resulting from a contract, express or implied: Philips v Symes [2002] 1 WLR 853 per Hart J at [43]. Section 1 Partnership Act 1890 makes clear that it is the relationship which subsists between persons carrying on a business in common with a view of profit. The existence of a partnership can be inferred from the conduct of the parties: a legally binding partnership can be created wholly informally, by parties commencing business together with a view to sharing profits. Where this happens, the law fleshes out their relationship by means of the implication of detailed terms through the Partnership Act 1890. Where terms are agreed between partners however, they will generally displace terms which would otherwise be implied by the Partnership Act 1890.

In relation to partnership property, section 20(1) of the Partnership Act 1890 provides as follows:

“All property and rights and interests in property originally brought into the partnership stock or acquired, whether by purchase or otherwise, on account of the firm, or for the purposes and in the course of the partnership business, are called in this Act partnership property, and must be held and applied by the partners exclusively for the purposes of the partnership and in accordance with the partnership agreement.”

A gloss on this is set out in Lindley & Banks on Partnership at §18-06:

“Whatever at the commencement of a partnership is thrown into the common stock, and whatever has from time to time during the continuance of the partnership been added thereto or obtained by means thereof, whether directly, by purchase or circuitously by employment in trade, belongs to the firm, unless the contrary can be shown.”

Whether an asset has been brought into the partnership therefore, is a question of fact. Where an asset belonging to one partner has been used by the partnership and treated as its property, there is a presumption that it has been brought into the common stock (Lindley & Banks on Partnership §18-13).

At the heart of any partnership is the fundamental duty of good faith which each partner owes each other partner. That duty of good faith is recorded at paragraph 16-14 of Lindley & Banks on Partnership as having been described by Lord Lindley as requiring:

“. . . that a partner shall not obtain a private advantage at the expense of the firm. He is bound in all transactions affecting the partnership, to do his best for the common body, and to share with his co-partners any benefit which he may have been able to obtain from other people, and in which the firm is in honour and conscience entitled to participate; . . . . . ”

The duty of good faith exists not only between partners but also between parties who are merely negotiating their entry into partnership: Conlon v Simms [2008] 1 WLR 484.

The two principal witnesses were Dr Coward and Ms Ambrosiadou themselves. They were cross examined extensively. It was quite clear that they are both highly intelligent and astute individuals. Unfortunately, their approach to giving evidence was tainted by their obvious and deep animosity and the extremely close correlation between their business and their personal affairs.

Dr Coward is quite clearly a highly intelligent and articulate man. However, at times, I found his approach to giving evidence to be cavalier. Despite his involvement in the creation and development of the software at the heart of his claim, he showed a lack of attention to the detail of that claim in relation to authorship. He appeared both to have reviewed the expert evidence scantily and late in the day and to have failed to give detailed attention to the code in Annex 4 of which he claims to be the author. In cross examination he also altered his evidence in relation to the use of comment styles in the code in a way which was clearly designed to suit the moment and was unsupported in any way. I also found him to be evasive when cross examined as to his knowledge of the content of various agreements which he had signed and public documents relating to the IKOS business. In all therefore, I did not find Dr Coward to be an entirely satisfactory witness.

Ms Ambrosiadou is also clearly, a highly intelligent and sophisticated person who had a detailed knowledge of the facts surrounding this matter. She quite clearly found giving evidence extremely stressful and difficult. I found Ms Ambrosiadou to be extremely evasive and prone to making lengthy speeches in order to avoid answering questions which did not suit her, in what often appeared to be an attempt to obfuscate and confuse. Accordingly, I did not find her to be an entirely satisfactory witness any more than Dr Coward.

In the case of both Dr Coward and Ms Ambrosiadou, unless their evidence is consistent with the contemporaneous documents I prefer the oral evidence of others where it differs from their account of events.

Mr Constantinides is the Chief Compliance Officer and Finance Director of IKOS CIF. He joined IKOS CIF in 2005 in Cyprus. On the whole I found him to be a clear and careful witness who took his responsibilities as a director seriously although it was quite clear that he felt a strong loyalty towards Ms Ambrosiadou which affected the evidence he gave, in particular as to his knowledge of the ownership of the business.

Mr Polymenakos is an independent consultant to IKOS CIF whose expertise is as a computer programmer and who worked on a series of projects for IKOS CIF involving technical IT and risk management issues. I found him to be a truthful, clear and careful witness.

Dr Worden, an expert with extensive experience in the development of software and information technology, specialising in the forensic applications of such technology produced two reports on behalf of Dr Coward, a substantial part of which was concerned with the New Venture Software in relation to which the counterclaim is not pursued. Nevertheless, he was cross examined extensively. He is an experienced expert witness and I found his evidence to be careful, fair and balanced.

Dr Thorpe has as PhD in Computer Science from Harvard University and is a Chartered Financial Analyst. Initially, he was also asked to review and compare the items of code contained in the 2009 Software and the New Venture Software on behalf of the Defendants. The New Venture Software is no longer relevant. In addition, he was asked to review Dr Coward’s particulars of authorship and the contents of Annex 4 and evaluate them in the light of the code contained in the 2009 Software in comparison with previous versions produced in 1998, 2003 and 2007 and further backups in 2008 and 2009. He accepted in cross examination that he had carried out his task under considerable time pressure and on reflection he wished that he had done it differently. It was also clear that he had created a computer program to highlight areas of greatest change in the code and then focussed on them rather than viewing all the code himself. However, Dr Thorpe gave careful, fair and balanced evidence. I found both experts to be careful and scrupulously truthful witnesses.

The evidence of Vassilis Bekos, Matthew Earl, Dr Peter Leadbitter, Maria Papakokkinou, Athanasios Pittaras and Dr Barbara-Vivian Ambrosiadou were not challenged by way of cross examination.

1983 to December 1992

Dr Coward and Ms Ambrosiadou were married in 1983. Having been awarded his PhD in 1984, in 1986, Dr Coward went to work for Goldman Sachs and in 1989 took up a post with Investcorp bank in Bahrain where he wrote software in the Gauss language for the purposes of a trading business specialising in currencies and Japanese warrants.

Having worked for BP, Ms Ambrosiadou joined her husband in Bahrain in May 1990. It was her evidence that from this point she concentrated on setting up a business of her own and that she researched the fund and mutual fund business. She also began working on a fund structure and the related offer and regulatory documents. Dr Coward did not dispute the nature of any of her endeavours, nor that Ms Ambrosiadou was doing most of the preparatory work at that stage, but he did take issue with the notion that the business was to be Ms Ambrosiadou’s. His evidence was that the business was intended to be a joint one in which they were both equally involved and deployed their complementary skills.

Their differences in this regard extended to a dispute as to who had chosen the name “IKOS” for the business. Ms Ambrosiadou’s evidence was that it was her choice and that being Greek, she chose a Greek word meaning “treasury”. In cross examination, Dr Coward asserted for the first time that he had chosen the name. Although the issue itself is of little direct consequence, it highlights the level of animosity between them. In this regard, I prefer the evidence of Ms Ambrosiadou. There was nothing to support Dr Coward’s assertion and on the balance of probabilities and taking account of Ms Ambrosiadou’s nationality and the fact that she was involved with the structural and administrative side of the business, in my judgment it is more likely than not that she chose the name.

As part of the preparations for the business, IKOS UK was incorporated on 5 July 1991. Ms Ambrosiadou and Steve Brown whom she had met whilst completing her MBA at Cranfield University, were the shareholders and directors. Steve Brown ceased to be a director in November 1992 and a shareholder in 1994. The company was described in a business plan for submission to the Securities and Futures Authority, written in the autumn of 1992 and dated 1 November 1992, (the 1992 Business Plan) in which both Dr Coward and Ms Ambrosiadou had a hand, as having been formed as a vehicle to bear the legal, accounting and financial advisory and other expenses relating to the activities which had led to the formation of IKOS Partners.

Contrary to Ms Ambrosiadou’s evidence, Dr Coward stated that he had paid for the incorporation of IKOS UK despite the fact that the monies came from Ms Ambrosiadou’s bank account. He says that she was not earning at the time and that he provided the money for this very purpose. This is another example of the animosity between the couple and the concern which both of them displayed to prove ownership of the IKOS business.

The 1992 Business Plan describes the funding as having been from both of them. In this regard, it seems to me that given that Dr Coward had a salary at the time and they did not run a joint account, it is more likely than not that at least some of his money was used as he suggests. Overall, in my judgment, it is more likely than not that the summary written for the Securities and Futures Authority reflects the truth of the matter.

There was also a dispute between Dr Coward and Ms Ambrosiadou about which of them was first in contact with Paloma General Partners LP (Paloma) and when in 1992 the contact first occurred. It is not disputed however, that Paloma was a US asset management business and that the discussions centred on an exclusive arrangement to trade in Japanese warrants on Paloma’s behalf. In cross examination Dr Coward accepted that he could not be certain that Ms Ambrosiadou had not made contact with Paloma on one of her trips to the United States of America in the Spring of 1992 although his evidence was that the contact had been made by him and followed up by a trip to New York made by him and a colleague of his at Investcorp, Edwin Robertson, although no mention of this was made in his witness statements.

It was common ground that contact had been made with Paloma before Dr Coward left his job with Investcorp in August or September of 1992. He says that he left with a view to going into business with Ms Ambrosiadou. Her evidence was that he had been required to leave his job and that she invited him to join her investment business which she had already begun to establish. In any event, there was no dispute that it was intended that the investment business would be based upon computer software, the creation of which was within Dr Coward’s rather than Ms Ambrosiadou’s expertise and experience and that they would trade exclusively for Paloma in Japanese warrants, which was also within Dr Coward’s expertise.

Despite her insistence that the business was hers alone, it was Ms Ambrosiadou’s evidence which I accept, that it was clear to her that they would go into business together and that from August/September 1992 when Dr Coward ceased to work for Investcorp, everything they did was for that purpose. In the light of this evidence, it seems to me that it is unnecessary to make a finding as to the exact reason for Dr Coward’s departure from Investcorp.

In my judgment Ms Ambrosiadou’s acceptance that it was clear that they would go into business together and that from August/September 1992 everything they did was for that purpose, is entirely contrary to her assertion that the business was hers alone. In the circumstances, it does not seem to me to be necessary to decide who first made contact with Paloma, or whether when in Bahrain, Ms Ambrosiadou viewed her initial researches as having been on her own behalf.

My conclusion that by September 1992, the business was not Ms Ambrosiadou’s alone, is supported not only by my finding as to the funding of IKOS UK but also by the fact that it was not disputed that Dr Coward and Ms Ambrosiadou discussed whether they should invite others to join them and that Dr Coward suggested Mr Edwin Robertson, a colleague from Investcorp who was also a programmer with a background in finance. Mr Robertson resigned from Investcorp and moved back to England in order to do so. Dr Coward and Ms Ambrosiadou also moved back to England in or around September 1992. Around that time, it was also agreed that initially they would enter an exclusive arrangement with Paloma to trade Japanese warrants using mathematical models.

It was Dr Coward’s unchallenged evidence that shortly before his return from Bahrain he had transferred all the money which he had accumulated offshore into a bank account in Jersey in Ms Ambrosiadou’s name with the intention of taking advantage of her non-UK domiciled status and as result to reduce their UK tax liability.

It was also accepted that this was a busy period during which Dr Coward, Ms Ambrosiadou and Mr Robertson were all working from a warehouse conversion flat in East London which was the couple’s home. Mr Robertson was writing the back office software to be used in the business, Ms Ambrosiadou was undertaking various tasks including the preparation of an application to the Securities and Futures Authority, including the 1992 Business Plan and from September 1992, Dr Coward described himself as focussing on writing the software to be used in what he described as “our business”.

On 4 September 1992, Ms Ambrosiadou wrote to Jeremy Scholl in response to a fax she had received from him. Her response made clear that “IKOS” would act as investment adviser to Paloma and would manage a fund of US$50m on its behalf. The relevant parts of the letter are as follows:

“1)

. . . We have one single UK investment company, signing for the amount of US$50.0 MM. I can forward you the copy of the agreement, but it is not relevant to you at this stage.

This investor is in charge of setting up the investment vehicle (fund) in the USA. IKOS will act as Investment Adviser to them. This american investing company called Paloma Partners . . . .

. . . we still want to register with the SFA, voluntarily, and the accounts are relevant to that and must be completed satisfactorily IKOS & Paloma Partners will be in charge of the SFA registration and of meeting all the required criteria.

2)

I would be careful about describing the expenses of IKOS as a large loss. The company has not yet traded, and therefore has earned no income. The trading activity which has been carried out with our own funds, has generated profits which far outweigh the capital expenditure. Since we are offshore residents, these profits belong to us and we have no interest whatsoever to pass them through the company. . . . . .

3)

Regarding the capital base, before commencement of operations and commencement of trading, the partners equity and all other investment will be clearly specified in a partnership agreement.

4)

Regarding setting a clean slate for IKOS, this is absolutely what we do not want to do. We are going to write off first year profits against this loss, and I want it to reflect accurately the expenses incurred by us in the process. . . . .. . . .

Similarly all the trading software will be sold to the company by Martin, and that cost to be written off against profits. The software is worth at least $400,000.

So I would like you to look into providing the most efficient tax structure for IKOS, given all these considerations, if you are wiling and able to do so.. . . . .

I confirm our meeting on Tuesday morning at 11.30am, Martin [Dr Coward] and Edwin Robertson will be joining us. . .”

It is not disputed that the approach in this letter to tax efficiency and a concern to make the most of the couple’s status as offshore residents was the motivation which ran through the entirety of the structuring of the IKOS business down the years.

In addition, in my judgment, the content of Ms Ambrosiadou’s letter and the 1992 Business Plan to which I refer below are both inconsistent with her assertion that the business was hers alone which I reject.

The 1992 Business Plan was written at around this time. In its opening paragraph it described IKOS Partners as having been established in the past tense. Under the heading “Staff/IKOS Partners” it stated as follows:

“IKOS Partners intends to register with the SFA as an arranger. The Partnership is comprised of IKOS (UK) Ltd, Martin Coward and Edwin Robertson Ltd. Details of the partnership agreement accompany this document.

IKOS (UK) Ltd was incorporated on 5^th July 1991. Owned by and under the control of Elena Ambrosiadou and Steve Brown, IKOS (UK) Ltd was formed as a start up vehicle funded by Martin Coward and Elena Ambrosiadou to bear the legal, accounting and financial advisory and other expenses related the actives that have led to the formation of IKOS Partners.

The partners of IKOS have a long standing relationship. .. .. Martin Coward left Investcorp to establish IKOS Partners in September 1992.

To date, IKOS (UK) Ltd has an accumulated operating deficit fully funded by a subordinated debt to Martin Coward. . . . IKOS (UK) Ltd is expected to collect an initial retainer fee of 200,000 in November, 1992 resulting in a comfortable operating surplus.

Edwin Robertson Ltd, was formed as a UK limited company in October 1992. It is wholly owned and controlled by Edwin Robertson.

MJ Coward, E Ambrosiadou, EM Robertson , whose CVs are attached, will be the senior management of IKOS Partners. The partners’ major responsibilities are as follows:

MJ Coward Trading

EM Robertson Compliance

E Ambrosiadou Settlements, Financial Management and Administration”

In cross examination, Dr Coward admitted that in fact, he, Ms Ambrosiadou and Edwin Robertson had come together in about September 1992 to conduct the business of the trade in Japanese warrants for Paloma using mathematical models and that the business was for profit. He accepted that his mathematical and programming skills had been complementary to Ms Ambrosiadou’s business skills and that they had been brought together in the business in August or September 1992. He also admitted that the software which he wrote at that time had been for the purposes of the business for which he, Ms Ambrosiadou and Edwin Robertson had come together.

On 10 November 1992, IKOS Partners entered into an agreement with Mill Street Partners LP, an entity through which the project with Paloma was intended to be conducted. A copy of that agreement has not come to light. However, Dr Coward accepted that the agreement dated 15 March 1993, (the March 1993 Mill Street Agreement) in which reference is made to the 1992 agreement, was for the most part a restatement of the 1992 version. He also accepted that he had signed both the 1992 version and 1993 version on his own behalf and that of IKOS Partners and that he had been involved in negotiating the terms of both agreements.

The opening paragraph of the March 1993 Mill Street Agreement reads as follows:

“Mill Street Partners LP and IKOS Partners have previously entered into an agreement dated November 10, 1992. We have agreed to make certain changes to that agreement and in the interests of convenience and clarity we have restated that agreement in its entirety to read as follows:”

The March 1993 Mill Street Agreement was in the form of a letter written by IKOS Partners to Mill Street Partners LP and as I have already mentioned, was signed on behalf of IKOS Partners by Dr Coward. At paragraph 1(b) the basis of the relationship was set out in the following way:

“You have stated your intention to open an account with IKOS Partners with a minimum amount of U.S. $50 million which you desire that we manage for you . . .”

It provided at paragraph 10(d) as follows:

“Any software developed for use by the Account (“the IKOS Software”) shall be used solely for the benefit of the Account during the term of this agreement and the parties shall keep the IKOS Software confidential. We represent and warrant to you that the use on behalf of the Account of neither the IKOS Software nor any other software will infringe the rights of third parties. The IKOS Software shall be owned by IKOS Partners; . . . .”

In cross examination, Dr Coward maintained that the statement in relation to the ownership of the copyright in the software was untrue and that there had been no agreement between the partners as to the ownership of the software and that the purpose of the clause was to make clear that it was not owned by the client, Mill Street. However, he also accepted that neither at this stage nor at any time later, had he stated that he considered that he retained the copyright in the software which he was producing.

December 1992 to December 1994

Thereafter, a partnership deed was executed on 11 December 1992 between IKOS UK Ltd, Edwin Robertson Ltd and Dr Coward. It is not disputed that Edwin Robertson Ltd was Mr Robertson’s corporate vehicle and that IKOS UK Ltd was represented by Ms Ambrosiadou. It was also Ms Ambrosiadou’s unchallenged evidence that at the time, the Securities and Futures Authority required there to be an unlimited partner to act as the regulated person for regulatory purposes and that was Dr Coward. Clause 2 of the Partnership Deed provided that “the Partners shall be and become partners in the business of Investment Advisers with effect from 8^th December 1992.” Clause 4 provided that the duration of the partnership was for a term of two years from 8 December 1992. Clause 5 was headed “Partnership Property” and was in the following form:

“Save as otherwise agreed all the furniture, safes, boxes, professional equipment and office and other equipment and fittings in or about the Partnership premises hereinbefore referred to and used for the purposes of the Partnership business shall be assets of the Partnership and shall belong to the Partners in the proportions in which the Partners from time to time share the capital of the Partnership.”

No reference was made to the software which had already been written or for that matter, to the benefit of the agreement with Mill Street Partners which had been entered into in November 1992. In fact, a schedule headed “assets supplied by Partners to be incorporated into the business” was prepared and described to be “as at end 1992”. It contained two further sub-headings referring to those items contributed by Elena (Ms Ambrosiadou) and those contributed by Edwin, (Mr Robertson). There was no such heading for Dr Coward. The list contained for the most part, items of furnishings and an assortment of stationery and books to which values were attributed. The value of the items contributed by Ms Ambrosiadou totalled £6980 and the total value of those contributed to Mr Robertson was £750.

The capital of the partnership was expressed to be £100 contributed as to 10% by Dr Coward, 10% by Edwin Robertson Ltd and 80% by IKOS UK and the profits and losses were to be borne in the same proportions. By sub-clauses 11.2 and 11.4 of the Partnership Deed, partnership accounts were to be drawn to 31 December each year and audited. They were to be signed by the partners whereupon they became binding save in the case of manifest error pointed out within three months of signature.

Further, by virtue of clause 18, each partner was obliged to be just and faithful to the others in all matters relating to the partnership, to devote his whole time and attention to the business of the partnership, use his best skill and endeavours to carry on the same for the utmost benefit of the partnership and diligently and faithfully employ himself therein and conduct himself in a proper and responsible manner and use his best skills and endeavours to promote the partnership business for the utmost benefit of the partnership.

Clause 19.1.1 and 19.1.8 provided that no partner was entitled, without the prior written consent of the other partners, to engage directly or indirectly in any business other than that of the partnership, nor to enter into partnership with any other person concerning his share in the partnership.

With regard to the partnership shares, Dr Coward explained that despite his 10% share, he considered himself to be equally interested in the business with Ms Ambrosiadou on a 50:50 basis. He stated that had the parties been at arm’s length he would have expected to have been entitled to at least 80% of the profits of the business but because they were husband and wife they should own everything equally, even if for tax reasons, assets or monies were put in her name. He said that they had been advised as to their relative percentage interests by Jeremy Scholl their tax advisor and accountant. Dr Coward gave two reasons for having been recorded as having a 10% share. The first was an attempt to limit liability as the only non-corporate partner and the second was tax planning based upon Ms Ambrosiadou’s status as a non-UK domiciliary. He also mentioned that they had been advised that in any event, the partners could agree to pay themselves whatever they thought fit.

In this regard, he was referred to correspondence on his behalf between Jeremy Scholl & Co, Chartered Accountants and the Complex Personal Returns Team of the Inland Revenue dated 18 July 2006, in response to a notice under section 19A Taxes Management Act 1970 to produce documents in relation to enquiries as to Dr Coward’s 2005 Tax Return. The letter contained reference to the fact that Dr Coward had been an employee of IKOS (UK) and that he was a partner in IKOS Partners which was a partnership at that stage, between him and IKOS UK (which was owned by Ms Ambrosiadou) and that he obtained his partnership share for a capital contribution of £10. He was also referred to correspondence between an international tax adviser and HM Customs and Revenue in October 2010 in which it was stated that Dr Coward held a 10% interest in the IKOS Partnership. He accepted that both letters were accurate and reflective of his 10% share in the partnership business.

To return to the chronology of events, a meeting of IKOS Partners was held on 3^rd February 1993 at which Dr Coward, Ms Ambrosiadou, Mr Robertson, Julian Gover, the IKOS Partners in-house accountant, and Dr Coward and Ms Ambrosiadou’s accountant and tax adviser, Jeremy Scholl, were present. The agenda for the meeting contained a number of discussion points including:

“Discussion Points:

Partners’ Drawings Paid to companies or individuals?

Partnership Year End Discuss consequences of year end date to be set. Either 30/11 or 31/12.

Group Taxation Strategy of present group structure to be discussed, as well as a budget of tax flows based on the present business plan.

Offshore Trust re Elena To be discussed in detail.

Cyprus Pros and cons of various group structures to be discussed.

Partners/Directors/Current Accounts

Establish best way of treating monies injected to date by the partners (loans with interest – tax treatment of int paid to non domiciled person?)

Accounts to 31/7/92 Finalisation points to be discussed.

Ownership of Assets Should assets be owned by the Company, the Partnership, or individuals?

Company Year End Photocopy of notification to Companies House required.

Additional Points:

Tax District and code

Accounts dollar based

Purchase of trading software

Recharging part of house cost in Docklands”

The relevant parts of the minute of the meeting reads as follows:

“Group Structure

The theory behind the group structure was explained by Jeremy.

It was confirmed that Ikos (UK) Limited should undertake all of the expenses of the group and hold all of the assets. It then invoices the Partnership for all costs incurred, including an additional management fee of 10%. For assets acquired by Ikos (UK) Limited, it was agreed that a usage fee should be billed to Ikos Partners at the rate of 25% of the net book value of the asset per annum (Pro-rated monthly/quarterly if desired), this causes the depreciation charge in Ikos (UK) Limited to be offset exactly by the recharge to Ikos Partners.

Offshore Trusts

Part of the theory behind the group structure is that dividends are paid from the Companies to offshore trusts. For this to be possible, it is necessary to transfer the share holdings in the two companies to offshore trusts. This was discussed and it was decided that there was no immediate necessity to establish the trusts. However, because of its importance on the overall tax status of the group, this point is to be carried forward to the next meeting, where a timetable for the implementation of the trusts should be established.

Partners’ Drawings

Partners’ drawings are to be paid to the actual partners, i.e. Martin Coward and the two companies. The companies then pay their shareholders. This creates an overdrawn director’s current account, which is restored to a zero balance twice a year through the payment of dividends.

It was therefore decided to set up loan accounts within the companies, so that monthly standing orders may be set up.

Partnership Year End

It was agreed that the year end for the partnership should be the 30^th of November. (The partnership commenced trading on 1/12/92).

This will have the effect of pushing the performance fee into the following year’s income, thus postponing payment of tax.

Partners’ Present Current Accounts

It was noted that Elena has signed an agreement agreeing not to seek repayment of any monies spent by her on behalf of Ikos (UK) Limited, in turn on behalf of Ikos Partners, until such a time as the withdrawal of the money would not put Ikos Partners in breach of its minimum capital requirements for SFA purposes. To this extent, the current amount is effectively a capital account.

Cyprus

Jeremy to write to KPMG on Cyprus issue and liaise with them to ascertain optimum structure for Cyprus company.

. . . . . . .

Points Forward to Next Meeting

Software: How shall it be treated for accounting purposes (approx £400,000 worth of development by Martin)

Co Sec: To be actioned

Personal Tax: Both Elena’s and Martin’s to be brought up to date

Offshore Trusts: Meeting to be set up with Jeremy and KPMG to discuss Cyprus venture.”

It was Dr Coward’s evidence that the intention to pay dividends through offshore trusts was explained by Jeremy Scholl at the meeting which I accept. In relation to the comment on software, Dr Coward did not accept that the reference was consistent with it being treated as partnership property. In cross examination, Ms Ambrosiadou had no real answer to the question of where the value of £400,000 for software had come from and insisted in fact that there was little or no software at that stage. Given that such a significant value was recorded, it seems to me that on the balance of probabilities it is likely that a significant amount of software whether in volume or importance had already been written and I reject her evidence in this regard.

IKOS Partners began trading in Japanese warrants in the first quarter of 1993. It was Ms Ambrosiadou’s unchallenged evidence that from around March 1993 IKOS UK began recruiting skilled researchers to work on software development to support the arrangement with Paloma. In 1993, Peter Ho joined as a trading systems strategist and was joined by Sam Gover in early 1994. As I have already mentioned, the March 1993 Mill Street Agreement, signed by Dr Coward on behalf of IKOS Partners, expressly acknowledged that software developed for use by the account which Mill Street opened with IKOS Partners would be owned by IKOS Partners. When asked why he had not warned the partnership about expending money on developing the software which he now contends that he owns, Dr Coward responded that it was unnecessary to do so because he regarded himself and the business as one and the same.

Thereafter, by a deed dated 13 May 1994, Edwin Robertson Ltd retired as a partner of IKOS Partners and Andrew Bird Advisors Limited was admitted as a partner with a 12.5% capital contribution (IKOS UK’s capital contribution being reduced to 77.5% and Dr Coward’s staying the same at 10%). Net profits and losses up to the first US$300,000 were to be shared equally, and thereafter were to be shared in the same proportions as the partners’ capital contributions. Edwin Robertson Limited was paid £58,964.83 in full and final settlement of all monies due to it whether of an income or capital nature and at clause 2.04 it was stated that on payment of that sum the cash and other assets of the Partnership capable of passing by delivery were to pass to the Continuing Partners.

It was Ms Ambrosiadou’s evidence that she and Dr Coward agreed with Mr Robertson that he would be allowed to continue to use and further develop the back office software which he had developed whilst either he or his company was a partner in the business. Dr Coward accepted in cross examination that this may well have been correct. However, he denied that they had necessarily treated the software created by Mr Robertson as partnership property or that that would have any bearing on whether the software created by Dr Coward himself was treated in the same way. In this regard, he stated that he saw IKOS Partners as being at arm’s length with people like Edwin Robertson and that its other function was in relation to Dr Coward himself and Ms Ambrosiadou. In that context, he saw it as a family partnership and stated that he and Ms Ambrosiadou did not consider that the documents and agreements which applied to others such as Edwin, applied to them.

On that basis Mrs Talbot Rice QC asked Dr Coward why therefore, he did not consider the software to belong to himself and Ms Ambrosiadou? His immediate response was, “Perhaps, it does.”

It was Ms Ambrosiadou’s evidence that Andrew Bird Advisors Limited was brought on board to develop a trading system for bonds to diversify the trading strategy. However this was unsuccessful and Andrew Bird Advisors Limited retired from IKOS Partners with effect from 30 November 1994, as set out in a deed dated May 1995. This deed provided that the partnership should not be treated as dissolved and varied the £100 capital contributions of the continuing partners as to 10% from Dr Coward and 90% from IKOS UK. The cash and assets of the Partnership capable of passing by way of delivery were expressed to pass to Dr Coward and IKOS UK on 11 November 1994. Nothing was mentioned about rights to intellectual property.

The arrangement with Paloma ended in December 1994 following heavy losses in the Japanese equity warrant market. The specific IKOS warrants software was now obsolete although it was Dr Coward’s evidence which I accept, that many of the core functions of that software remained useful. In this regard, Ms Ambrosiadou accepted that Dr Coward would know better than she did. In any event, IKOS Partners started to develop methodologies for real time continuous equity trading which it had been working on to some degree previously. Dr Coward had more time to dedicate to software development and programming. In addition, IKOS UK recruited several more programmers in 1995-1996 to work on software development.

1995 to 2004

It was at this stage that, Ms Ambrosiadou investigated various jurisdictions in which to establish a hedge fund and selected the Cayman Islands. The IKOS Fund was established as a single class fund named IKOS OAF (Offshore Arbitrage Fund) on 29 May 1995 and started trading around 8 August of that year. Dr Coward became a director of the IKOS Fund.

On 21 July 1995, Ms Ambrosiadou set up the Felix Trust which is a discretionary trust subject to the law of Cyprus. It became the beneficial owner of 99.9% of the shares in Felix Holdings Ltd which was the parent company of IKOS OFC (IKOS CIF) and later IKOS AM. Ms Ambrosiadou was expressed to be the beneficiary as to income during her lifetime. In the event of Ms Ambrosiadou’s death, her sister and Dr Coward became entitled to the income in the ratio 1:3.

Dr Coward suggested that it was as a result of tax reasons that he was not an income beneficiary of the Felix Trust during Ms Ambrosiadou’s lifetime. His evidence was that from that point onwards, it was the couple’s approach to cause IKOS AM to remit to IKOS Partners by way of fee for the sub-investment management services, only an amount roughly equivalent to the UK costs plus a little extra, the net effect of which was to keep most of the profits offshore in IKOS AM. This evidence was not challenged.

IKOS AM was incorporated in Cayman Islands on 12 January 1996 and was granted regulatory status in July 1996. It was then appointed as the investment manager of the IKOS Fund by an agreement dated 31 July 1996 and in turn, it appointed IKOS Partners as the sub-investment manager which it remained until 2006.

Ms Ambrosiadou’s evidence was that by this time, IKOS AM was the lead company in the IKOS hierarchy, that she discussed the business plans and structures with Dr Coward frequently. It was Dr Coward’s evidence that he considered himself to have an interest in IKOS AM and that the arrangements were convenient for tax purposes, but did not reflect the real state of affairs. He accepted that he had enjoyed the benefit of that structure through Ms Ambrosiadou because she had been the one receiving the money but he had enjoyed it indirectly through her. He also stated that he treated everything as jointly owned partly as a result of their marriage and also as a result of an agreement between them. There was no other evidence of any kind of such an agreement and I reject Dr Coward’s evidence in this regard.

Dr Coward accepted that during this period he continued to write software as a partner of IKOS Partners. By a further deed dated 12 May 1997, the net profits and losses were to belong to and be borne by the two remaining IKOS Partners in the same shares: IKOS UK 90% and Dr Coward 10%. IKOS Partners remained in this form until it was dissolved in 2006. However, by 1999, the accounts revealed that he only had a 0.003% interest in the partnership and in 2002 it amounted to 0.004%. I should mention that the accounts were signed by Ms Ambrosiadou on behalf of IKOS UK and by Dr Coward.

At a meeting between Ms Ambrosiadou, Jeremy Scholl and others which took place on 13 May 2003, the structure of the IKOS business and its tax status were discussed. The Key factors were described as:

“for MC: IKOS group structure too complex. Don’t mind paying a fair amount of tax, but too many companies causes too much work. Would like to simplify things.

For EA: Less onshore taxation of group earnings (ie. To give IKOS offshore activities as much credibility /substance as economically possible in order that appropriate remuneration levels may be established for these services. . . . .

Summary of Action Points Arising:

. . .

Follow up meeting to discuss MJC/EA efficient offshore earnings repatriation. . . . . “

Further, the agenda for the meeting records amongst other things:

“Personal Tax Planning:

1.

Repatriation of Offshore Funds

Gift of money from EA offshore to MJC offshore which MJC then repatriates to UK to pay for items which do not directly benefit EA

. . . .

IKOS AM

1.

Payment of directors for services provided:

General discussion around ensuring IKOS AM does not have a UK branch by “overpaying” EA for services provided . . . . .

2.

IKOS AM vs IKOS Partners: % of income that can reasonably be retained by IKOS AM

. . . . . .

Related companies

1.

Relationship of IKOS UK and IKOS Securities to each other (by the fact that EA settled the FELIX Trust).

. . . .

EBT

1.

Current possibilities for achieving a deduction of payments into EBTs

2.

Alternatives

3.

Other “pension” schemes for EA/MJC which would allow a flexible way of getting a deduction for large contributors. . . .”

In this regard, Ms Ambrosiadou accepted in cross examination that the business structure was such that the profits remained offshore and were directed towards IKOS AM, the Cayman company.

2004 to 2006

In or around March 2004, Ms Ambrosiadou moved back to Greece and decided to develop the IKOS business in Cyprus. Ms Ambrosiadou was already a director of IKOS OFC which had been incorporated in Cyprus in December 1995 and Dr Coward became a director on 13 May 2005. IKOS OFC’s name was changed to IKOS CIF in June 2005 and it became regulated by the Cyprus Securities and Exchange Commission in November of that year.

In a due diligence questionnaire of March 2005, in respect of the IKOS Financial Fund Strategy and the IKOS Currency Fund Strategy, IKOS Partners and IKOS AM having been identified as the relevant organisations, Ms Ambrosiadou and Dr Coward were described as the registered principals and Senior Partners and in response to questions as to the company’s current ownership it was stated: “wholly owned by Martin Coward and Elena Ambrosiadou.” I should add that given the mixed use of IKOS Partners and IKOS AM throughout the document, it is not clear to which entity this actually directed. Ms Ambrosiadou’s evidence was that it was directed to IKOS Partners.

At around the same time she was involved in producing an IKOS Strategy Review 2005 and 5 year Plan for IKOS AM in which the business is described as having adopted the concept of family Partners. It also stated that Ms Ambrosiadou and Dr Coward had guided IKOS safely over the years and that they had chosen the business model.

As part of this re-organisation, tax advice was sought from McDermott Will & Emery and an advice memorandum dated 17 October 2005 and charts showing the structure of the IKOS business entities and the proposed new structure were produced. The new structure included IKOS CIF and as before, showed IKOS AM, the Cayman company, at the hub of the organisation. The memorandum described the proposed changes and their tax effects and included reference to a reduction in the business activities of IKOS Partners. In this regard, the advisers noted at paragraph 16(2):

“Although there is intellectual property vested in IKOS Partners relating to the computer programmes used in the course of the equities and futures business, this asset should not be affected by the re-organisation of IKOS Group, . . .”

Both the advice and charts showing the structure of the IKOS business entities and the proposed new structure were forwarded to Dr Coward. However, Dr Coward did not comment on them and in particular, did not comment upon paragraph 16(2). In cross examination as to whether he had read the advice and seen the charts, Dr Coward was extremely evasive but had to accept that he might have read it, although he added that he was pretty sure he had not. He also did not accept that he had requested sight of the memorandum and charts despite the fact that the original message and attachments sent to Ms Ambrosiadou and John Vellinga were copied into an email to him containing the message, “Here is the message dealing with the business reorganisation.” In my judgment, given the nature of the covering email, the importance of the content and the extremely evasive response to cross examination, it is more likely than not that Dr Coward read the content of the memorandum at the time.

2006 to 2009

2006

Thereafter, in or around April 2006, Dr Coward became resident in Cyprus in part in order to fulfil one of the requirements of IKOS CIF’s licence. From that time onwards, he worked in Cyprus until his resignation in December 2009. He was also placed on IKOS CIF’s payroll for compliance reasons and declared to UK HMRC that he was so employed. Dr Coward was an integral part of that business and he accepted that it depended upon him. He was Chairman and Chief Investment Officer of IKOS CIF. However, he did not sign an employment contract and stated that rather than a specific salary, was paid whatever he needed.

As soon as IKOS CIF had completed the necessary regulatory and registration processes to permit it to perform investment activity, including marketing, it replaced IKOS Partners as IKOS AM’s sub-investment manager. By an agreement dated 1 February 2006, it became IKOS AM’s sub-investment manager in respect of the equities strategy. The agreement was between IKOS CIF, IKOS AM and IKOS Partners and was signed on behalf of IKOS Partners by Dr Coward. The provision in relation to intellectual property was in the following form:

“12.

Intellectual Property

(a)

Under this Agreement, “Intellectual Property Rights” shall mean patents, trademarks, trade names, design rights, copyright, software, confidential information, rights in know-how and other intellectual property rights, in each case whether registered or unregistered and including applications for the grant of any of the foregoing and all rights or forms of protection having equivalent or similar effect to any of the foregoing which shall subsist anywhere in the world.

(b)

The Company, Partners and IKOS A.M. foresee that either the Company and Partners or IKOS A.M. may make or discover or create intellectual property in the discharge of their duties under this Agreement. The Company, Partners and IKOS A.M. hereby agree that all Intellectual Property Rights discovered, created or arising out of the performance of their duties under this Agreement shall be the property of IKOS A.M. and the Company and Partners undertake to do all acts and things as may be thought by the Company and Partners to be necessary to vest any such property in IKOS A.M. and to register title in such property in IKOS A.M.”

(c)

In the event that the Company or Partners fail (for whatever reason) to do all acts and things effectively to vest any such property in IKOS A.M., IKOS A.M. and the Company or Partners, as the case maybe, hereby agree to treat all Intellectual Property Rights as the property of IKOS A.M.

(d)

IKOS A.M. hereby grants to the Company and Partners and their employees a licence to use such Intellectual Property Rights for the discharge of their duties under this Agreement. The licence shall be non-executive, non-transferrable, and worldwide and shall cease to exist upon termination of this Agreement, provided no other arrangements are made between the Company, Partners and IKOS A.M. for the continuation of the licence after termination of this Agreement.”

In cross examination, Dr Coward denied that he had ever read these clauses despite the importance of their contents and the fact that he was not only one of the two partners in IKOS Partners but was also the Chief Investment officer of IKOS CIF and had signed the agreement on behalf of IKOS Partners. In all the circumstances, despite the fact that Dr Coward concentrated on software development and it was not disputed that Ms Ambrosiadou was responsible for business structure, on the balance of probabilities I consider it more likely than not that Dr Coward was aware of the provisions of the agreement including clause 12.

I should mention that the changes in the business structure were marked by an announcement dated 1 February 2006 in which it was stated:

“The principals of IKOS CIF Limited are Ms Elena Ambrosiadou and Dr Martin Coward. . . .

At IKOS Martin [Dr Coward] is the architect of the company’s unique trading structure which integrates forecasting, portfolio construction and risk management. Dr Coward is a partner of IKOS Partners.. . ”.

Dr Coward accepted that he had seen the announcement but had not had a hand in writing it. He also accepted that the reference to the unique trading structure was in part a reference to the software including the Coward Software but he denied that the implication was that the software was owned by the company.

By an agreement dated 1 July 2006 IKOS CIF became IKOS AM’s sub-investment manager in respect of the futures portfolio. Finally, on or about 30 September 2006 it became IKOS AM’s sub-investment manager for the Managed Accounts and at that point IKOS Partners ceased carrying on any regulated activity.

Dr Coward accepted that throughout this period of reorganisation and announcements to the public and to relevant regulators, he made no mention to anyone, including the IKOS Fund of which he was a director, of the fact that he contended that he owned the Coward Software upon which the business was founded.

By a Deed of Settlement dated 11 August 2006, Cymanco Services Ltd as trustee of the Felix Trust made a settlement, the Eclectic Trust, the trustee of which was Cyproman Services Limited. Cymanco Services Ltd transferred 100% of the class A, B and C shares in Kamper Ltd to the trustees of the new trust, the beneficiaries of which were Ms Ambrosiadou during her lifetime as to 100% of the Class A shares, Dr Coward during his lifetime as to 100% of the Class B shares and their son as to the Class C shares. In fact, the trusts both of capital and income were discretionary and with the written consent of the Nominators who were Dr Coward and Ms Ambrosiadou, the Trustee had power to add or exclude anyone from the definition of Beneficiaries.

By a letter of wishes of the same date, the Settlor, the trustee of the Felix Trust, confirmed that it wished the trustee to follow the requests of the Nominators at all times. At paragraph 8 the letter of wishes provided as follows:

Kamper Ltd is a BVI company which is the parent of what Ms Ambrosiadou described as family office companies. They were Anaxilea Ltd, MFP Ltd and Iridanos Ltd. Although at one stage in cross examination, Ms Ambrosiadou denied having any personal wealth, Ms Ambrosiadou’s evidence was that the Eclectic trust was intended as a family trust in which to house that wealth.

IKOS Partners was dissolved pursuant to a dissolution agreement dated 31 December 2006, by which the partners being IKOS UK and Dr Coward agreed to dissolve the partnership with effect from the date of the agreement and by clause 2 to divide all assets and liabilities of the partnership between the partners in accordance with the shares to which they were entitled of the net assets of the partnership as shown in the respective balances in their capital and current accounts as at the date of the dissolution.

The IKOS Partners' accounts for the year ending 31 December 2006 were drawn up by KPMG Cyprus and were approved by both partners on 4 September 2008 and signed by Dr Coward and by IKOS UK (acting by Ms Ambrosiadou). They show that Dr Coward had a negative balance on his capital and current accounts. Hence, Dr Coward had no entitlement to any partnership assets, which all passed to IKOS UK pursuant to the terms of the dissolution agreement. In fact, the partnership accounts which were available showed a gradual increase in the capital contributions by IKOS UK and accordingly, an increase in its share in the partnership.

In fact, Mischon de Reya had advised on the dissolution and produced a memorandum which contained the steps which ought to be followed. They included a fair valuation of the assets. Ms Ambrosiadou accepted that nevertheless, there had been no valuation of the software.

From 2006, IKOS CIF continued to build up its business in Cyprus and by the time Dr Coward resigned in December 2009 it employed in the region of sixty people there, some of whom were involved in software research and development.

2007

In 2007, Ms Ambrosiadou commissioned an IP Audit on behalf of IKOS. The purpose was expressed to be to gain a clear understanding of the intellectual property that exists and achieve comfort as to its ownership. The audit was carried by a team of lawyers from Dechert and in particular, by Renzo Marchini who went to Cyprus in order to discuss the intellectual property position with Dr Coward and others.

When asked in cross examination to comment upon the purpose of the audit and the visit by Mr Marchini, Dr Coward stated that there had been an ongoing discussion between himself and Ms Ambrosiadou for a number of years about the ownership of the intellectual property, how it should be dealt with and how the 40:40:20 split should be recognised. His reference to the split was to the beneficial interests set out in the letter of wishes to which I have referred. There was no reference to the discussion in his witness statements and there is no documentary basis for it. Given that it is central to the issues in this case, in my judgment, it is more likely than not that if the discussions had taken place, reference to them would have been made in Dr Coward’s witness statements. In the circumstances, I am unable to accept Dr Coward’s evidence in this regard.

In any event, Dr Coward accepted that he was not in a position to say that he had informed Dechert of his ownership of the Coward Software at any stage.

It seems that a draft of the Dechert Report was received by Mr Constantinides and Mr Polymenakos in August 2007 and that the final version was available in or around 27 November of that year. In his email in August, Renzo Marchini noted the importance of the issue and the fact that he knew KPMG were looking into the ultimate destination for the software. It was accepted by Mr Polymenakos that they were concerned to establish the most tax effective destination. At that stage, Mr Marchini was still working on three possibilities namely, that IKOS Partners owned the software, that it was owned by IKOS UK alone or that it was owned jointly by IKOS UK and Dr Coward. Despite having already met with Dr Coward, Mr Marchini stated that in order to bottom out how the software had been treated by the entities he needed to pose further questions.

Having received the draft, Mr Polymenakos informed Ms Ambrosiadou of the headline conclusions by email. In relation to the ownership of the intellectual property, she responded on 6 August 2007:

“ . .No it rests with IKOS partners and it moved with Martin to IKOS CIF. He is 80+ percent oof [sic] the intellectual property.”

In cross examination she stated the use of 80% was off the cuff and that the reference to the software moving with Dr Coward to IKOS CIF was because he was the Chief Investment Officer and he was primarily concerned with the development of software for trading. Her explanation is consistent with the effect of the Dissolution Agreement in relation to IKOS Partners and I accept it as her understanding.

In summary, in the final report Dechert concluded that there was no document clearly establishing that copyright in the software was owned outright by IKOS UK, that IKOS UK and Dr Coward retain legal ownership to it whether individually or jointly as to all or part and whether the beneficial title was partnership property would depend upon all the facts including whether there was an assumption that it would be so owned and how it was treated, but that even if IKOS Partners was not beneficially entitled it would have a right to use the software. It was also assumed that it would not be necessary to determine the difficult question of precisely how the copyright was owned because all the relevant parties including Dr Coward would sign a confirmatory assignment to IKOS AM which it was assumed held the beneficial interest.

At around this time, Ms Ambrosiadou had written or at least contributed to an article for the Autumn 2007 edition of the Cranfield Business School newsletter which described the successful development of the IKOS business. In it she was quoted as having stated that she and Dr Coward had looked together for the right area of business in which to be involved and that it had been their joint dream of launching their own company. The article also made clear that “high quality business systems and processes” were the hallmarks of the business.

Also around that time, a document headed “IKOS Due Diligence Questionnaire September 2007 was produced. It was stated to cover “IKOS investment vehicles which track the IKOS Financial and Currency strategies.” In response to the requirement to describe the company’s group and ownership structure, to name its owners, the percentage of their ownership and their role within the company the answer was that the investment manager which was a reference to IKOS AM and the sub-investment manager, which was a reference to IKOS CIF were owned by the trust of the founders. Ms Ambrosiadou accepted in cross examination that the reference to the founders was to her and Dr Coward and they are both described as such in the following section of the Questionnaire. She also accepted that the way in which the issue was described in the Questionnaire was a shorthand way of describing the ownership. She added “I think it means the trust interest of the founders. I think it also does not describe any of the trust arrangements. It does describe that there is a beneficial interest within that structure which includes Martin Coward and me, and that is correct.”

On 22 January 2007, Ms Ambrosiadou had created the Hestia Trust which was to replace the Felix Trust and was also a discretionary trust governed by the law of Cyprus. The trustee was Cyproman Services Limited and Ms Ambrosiadou was the sole settlor and nominator. As Ms Ambrosiadou described it, the trustee of the Hestia Trust could receive dividends from the business structure and on a discretionary basis make ad hoc settlements to other beneficiaries including the Eclectic Trust which itself was designed to house what was termed the family office assets. At the time it was settled, the sole beneficiary of the Hestia Trust was the trustee of the Eclectic Trust which was a trust settled on 11 August 2006 by the trustees of the Felix Trust. The objects of the discretionary power of appointment under the Eclectic Trust were and are Dr Coward, Ms Ambrosiadou and their son.

In addition, in 2007, the shares in Felix Holdings Limited were transferred to Flavian Limited and Flavian became wholly owned by the trustees of the Felix Trust.

In January 2008, when questioned by an investor, there is a record indicating that Mr Dowdye, the Global Sales Manager on behalf of IKOS CIF, had responded that although the business structure was opaque, ultimately, it was wholly owned by Elena and Martin. Mr Dowdye did not give evidence.

However, in cross examination, having denied that any of the staff were aware of the ultimate ownership of the business, Mr Constantinides eventually conceded that he was aware that dividends were paid from what he described as the corporate to the family trust arrangements, in other words, from the Felix Trust and thereafter the Hestia Trust to the Eclectic Trust. He accepted that he was asked his opinion on the best way to channel money from the business trust structure and that he attended a meeting where the arrangements for the family trust were laid out and that the meeting involved Elena, Martin and their trustees amongst others. He also accepted that the dividends were of hundreds of millions of US dollars. However, he denied knowledge of the ultimate beneficiaries of the trust structure and as I have said, of the ultimate ownership of the business.

In February of 2008, Mr Constantinides was contacted by Dr Coward about obtaining funds for his UK current account. In an email, Mr Constantinides set out a number of options including a payment for services from IKOS AM, a distribution from “the Trust”, a loan from IKOS AM to his Cyprus current account or a loan from Ms Ambrosiadou personally. In response, Dr Coward suggested a gift from his wife and in the context of the tax consequences of the various options, Mr Constantinides responded that he was unsure. In the light of his evidence, the record of Mr Dowdye’s discussion with an investor and the statements made for example, in the IKOS Due Diligence Questionnaire of September 2007, in my judgment, although Mr Constantinides and other members of staff may have been unaware of the detail of the trust provisions, it is more likely than not that they were generally aware that Dr Coward, Ms Ambrosiadou and their son were the major beneficiaries and that for regulatory purposes, it was not inaccurate to describe Dr Coward and Ms Ambrosiadou as the founders of the business.

In December 2008, Ms Ambrosiadou was conducting an internal audit trail of code developments. At this time, she also dispensed with the services of the entirety of the research team based in Brighton, without consulting or subsequently informing Dr Coward.

2009

The relationship between Dr Coward and Ms Ambrosiadou and his dissatisfaction with the way in which the IKOS business was being operated escalated. In an email of 13 January 2009 to Ms Ambrosiadou, Dr Coward questioned why she should want to continue the business with him as they disagreed so much. He suggested that he would set it up so that she could run it on her own. On 19 January 2009, Ms Ambrosiadou sent an email to the other directors of IKOS CIF, including Dr Coward in which she stated that she “fully respected Martin’s wishes to compete with IKOS on an immediate basis and his instruction to remove funds.” She stated that she could not hold off the decision of announcing the IKOS closure to investors.

In March 2009, Dr Coward was forwarded a proposed project plan to engineer a new software trading platform to replace Fox and Wendy which were part of the Gauss software. It was his evidence that Ms Ambrosiadou had been keen for some time to have the software re-written in a new computer language other than Gauss. Although Dr Coward resisted the change initially, he later agreed and it became the project to re-write Fox and Wendy in Python code.

David Burns’ employment as internal auditor of IKOS CIF was terminated on 4 June 2009. That same day, at a board meeting, Dr Coward put forward proposals for the creation of two separate entities, one dealing with investment management and the other with business management. The proposal was rejected by the board. This atmosphere led to Dr Coward recruiting David Burns, the internal auditor of IKOS CIF, to assist him personally.

A meeting took place between Dr Coward and Mr Burns in the week of 27 July 2009. The note of the meeting reveals that a wide range of issues were discussed. Under heading “Trust” one of the bullet points reads:

“IP issue with IKOS AM – will keep on top of PI to consider how MJC [Dr Coward] can get hold of this.”

At the same time, disputes had arisen in relation to the use of confidential information and software by a number of former employees of the IKOS business including the Govers. On 7 August 2009, Ms Ambrosiadou emailed Dr Coward. All but a sentence of the message is redacted. The remaining sentence reads:

“If you spoke with Jeremy you would have found out how Julian was trying to establish for years the intellectual property rights to his brothers, so they could steal it from you.”

This is said to be an admission by Ms Ambrosiadou that the copyright in the software belonged to Dr Coward and was treated as such. In cross examination her explanation was that she was trying to goad Dr Coward into action on behalf of IKOS.

Mr Burns’ involvement also led to the production of a confidential Corporate Governance Report produced by Dr Coward and David Burns and dated 9 September 2009 intended to highlight what Dr Coward saw as the mismanagement of the IKOS business. In it there is an estimation of the value of the IKOS business in mid 2009 which in itself is confidential. Suffice it to say that the value placed on the business was very substantial. It was Dr Coward’s evidence that one of the figures had been based upon an offer which was made for the business in 2007. Nevertheless, he denied that the value included the software or that the offer had been made on the basis that the copyright in the software was owned by the IKOS business. Given that it is not disputed that the software was the bedrock of the business which would not have been able to function without it, I am unable to accept Dr Coward’s evidence in this regard.

In order to produce the Corporate Governance Report, Dr Coward provided Mr Burns with or allowed him to access and copy confidential IKOS material which included an investor presentation and a business continuity plan. All of the materials which were received by Mr Burns have become known as the Burns Material.

Thereafter, on 24 September 2009, Dr Coward wrote to Cymanco Services Limited, the trustee of the Hestia Trust suggesting terms upon which he and Ms Ambrosiadou could go their separate ways by splitting the IKOS business and assets. The letter was headed “Re: IKOS CIF Limited”. One of the headings for the outline of a compromise was as follows:

“Intellectual Property (“IP”). In the interests of keeping this, and other settlement issues, amicable and expedited we agree that a value and composition of the IP is cut at today’s date and that this can be used jointly or severally by both Parties. Any IP development thereon, and related enhancement value, is to the account of either Party, or licensee, if such an arrangement continues to exist.”

Further disagreements between Ms Ambrosiadou and Dr Coward were aired at a meeting of the board of IKOS CIF in September 2009 and on 12 November 2009, Dr Coward sent an email to the IKOS CIF directors stating that he wished to place on the agenda his proposed solution to corporate governance issues which was to establish an independent entity in Monaco to service the IKOS group. This was swiftly rejected by Ms Ambrosiadou and the meeting did not take place. Around this time, Ms Ambrosiadou was arranging for surveillance of Dr Coward to be conducted in Monaco.

However, a board meeting did take place on 11 December 2009 prior to which Dr Coward had sent out an email proposing that he resign as Chief Investment Officer and Chairman of IKOS CIF and establish a new company in Monaco. He suggested that for a short time he could continue to manage the IKOS portfolio management and research through a services contract with his new company. At the meeting he also stated that if agreement was not reached on his proposals, he would set up his own hedge fund.

Dr Coward effectively resigned at the meeting and immediately sent out a press release announcing his departure and his intention to go into business for himself. Dr Drescher who reported to Mr Westphal had resigned on 30 November 2009 and Mr Westphal, the portfolio manager for futures and currency trading, a few days later on 4 December. They both intended to join Dr Coward in a new investment business to be based in Monaco and in fact, they did join Dr Coward’s new company, Marmidons (Cyprus) Limited. During their period of gardening leave they wrote some code which was originally the subject of a counterclaim by the Defendants. As I have already mentioned, undertakings have been offered in this regard and as I understand it, the Defendant companies do not pursue their counterclaim.

After their gardening leave had expired, they were also involved in developing what became known as the New Venture Software for the new business. As I have already mentioned, the Counterclaim in relation to the New Venture software is also not pursued.

In the meantime, between 14 and 20 November 2009, Dr Coward had downloaded onto a red laptop, what became known as the Red Laptop Gauss Data and the Red Laptop Sbox Data. These materials included Gauss code and Python code, the latter including particular code the nature of which is confidential, as well as IKOS’ historical trading data.

On the 19 November 2009 he copied 8,434 of the 12,250 paths from the Red Laptop onto an external hard drive. These materials included Gauss code and IKOS’s historical trading data but not Python code. Thereafter, he copied 2,779 paths from a USB storage device to the Red Laptop on 27 November 2009. This material became known as “the Red Laptop User Generated Files.”

Further steps were taken on 7 March 2010 when 3,814 paths were copied to a different location on the Red Laptop: and the Red Laptop Gauss Data and the Red Laptop Sbox Data were encrypted and copied to an online storage facility called Ubuntu One Cloud. These included the majority of the Python code, including code which was confidential in nature. Further, in early 2010, the Red Laptop Gauss Data and Red Laptop Sbox Data including Python code were copied to an Amazon S3 Cloud account.

It is accepted that confidential materials relating to the IKOS business were also stored on the personal computer at Dr Coward and Ms Ambrosiadou’s property in Steyning, West Sussex (the Steyning Material). That personal computer was collected by Dr Coward’s then solicitors, Hogan Lovells on 30 March 2010 and kept in their safe keeping.

Thereafter on 31 March 2010 Dr Coward copied 3,761 paths of the software from the Ubuntu One Cloud to a black laptop 7 and did the same in relation to a sub-set of 1,275 paths onto what has become known as black laptop 8 on 7 August 2010. The material copied on 31 March 2010 became known as the Black Laptop 7 Encrypted Sbox Data and included the great majority of the Python code, including confidential material. The materials dealt with on 7 August 2010 became known as the Black Laptop 8 Encrypted Sbox Data and included a substantial part of the Python code including the confidential element.

Thereafter, on various occasions, the Red Laptop and the Black Laptop were connected to wi-fi access points or alternatively, hotel internet connections in Greece, Monaco, Italy and Egypt. All of the steps to which I have referred were either carried out by Dr Coward or were carried out at his instruction or in his presence. This is all now admitted and it is also admitted that the steps in relation to copying the software were carried out covertly.

It is intended that a regime whereby the Burns and Steyning Materials in Dr Coward’s possession can be returned and/or destroyed, subject to the retention of a single image will be agreed. Therefore, I am not concerned directly with this part of the counterclaim.

2010

On 11 January 2010, Ms Ambrosiadou in her capacity as the nominator of the Hestia trust wrote to Cymanco Services Limited, the trustee of that trust giving her consent for the appointment of Cyproman Services Limited, the trustee of the Moltke Trust which had been established under the law of Cyprus on 10 December 2009 and of which Dr Coward was not a beneficiary of any kind, as a new and additional beneficiary of the Hestia Trust. In cross examination, Ms Ambrosiadou refused to accept that she had acted in this regard other than at the request of the Cymanco Services Limited. It seems to me that for the purposes of the issues before me, it is not necessary for me to decide how the additional beneficiary was added. Had it been necessary however, I would have decided that the step was taken at Ms Ambrosiadou’s request.

Thereafter, it is not disputed that Dr Coward was subjected to surveillance at Ms Ambrosiadou’s instigation, both in their house in England and by attaching a device to his car. Proceedings were commenced in numerous jurisdictions and Ms Ambrosiadou sought to encourage the authorities in Monaco to bring a criminal prosecution against Dr Coward.

On 9 August 2010, Hogan Lovells were provided with the Burns Material, Burns Laptop and Burns USB stick and on 19 August took custody of the Red Laptop. Lastly, at the end of August 2010, they took custody of the Black Laptop and the External Hard Drive.

It is undisputed that software was the key technology on which the IKOS trading business was based. It was described by Mr Polymenakos as its “crown jewels” and by Dr Coward himself as “the cornerstone of the success of the business”. It was also accepted by Dr Coward that it was unique. Nevertheless, it is also not disputed that it was never valued and never appeared in the accounts of any of the IKOS entities, including IKOS Partners.

It is also undisputed that from the outset when researchers and programmers were employed by IKOS UK in order to assist with the development of the trading software in or about 1993 through until the change in business structure in 2006 and the move to IKOS CIF in Cyprus and that thereafter, researchers employed by that company had continued to add to and develop the software used by the business. It is also not disputed that until his departure in December 2009, Dr Coward had opposed the use of versioning. In fact, as a result of his opposition, it was not introduced at IKOS until mid 2009. Versioning is a means by which it is possible to retain and separate out versions of software created or amended at different times.

Dr Coward’s claim as first enunciated, was that he is the owner of the copyright in the Initial Coward Software and the Further Coward Software and the owner of the database rights in the associated databases and that he is the co-owner of the copyright in the Co-authored Coward Software and co-owner of the database right in those associated databases.

The Initial Coward Software is alleged to have been created prior to 8 December 1992. It was written by Dr Coward in the Gauss program language and comprised mathematical and statistical algorithms underpinning the trading software.

The Further Coward Software was a reference to further software which was developed and continued to be developed after IKOS Partners had been established and included versions of an algorithm “fdp”, algorithm “mtmm”, “getalfa”, “aardanal”, factor projection algorithms and database algorithms.

The Co-Authored Software was a reference to software which it is alleged was co-authored by Dr Coward and employees of IKOS UK from approximately 1993 onwards. It is said that this included for example, the development of Kalman filtering software between 1994 and 1997 and the modification of the multi-period optimiser for use in the so called Fox system between 2005 and 2006.

The schedule in Annex 4 containing the code or procedures of which Dr Coward claims to be the author or co-author, was produced in the first place, purely from memory. The second version was produced once the codes for the 2009 Software were disclosed. However, as I have already mentioned, Dr Coward has since restricted his claim to those procedures in respect of which it is said that there is absolutely no doubt but that he wrote them of which there are two hundred. The schedule in Annex 4 in its first and second versions was the subject of detailed consideration by the experts Drs Thorpe and Worden.

The procedures were dated from 1992 until 2006 and amongst other things the percentage of the procedure of which it is alleged that Dr Coward was the author by the date of his departure from IKOS is set out. By a letter of 4 March 2013 from Dr Coward’s solicitor to those instructed on behalf of the Defendants, the codes contained in the schedule in respect of which Dr Coward maintains his claim were further categorised into the following:

In cross examination, Dr Coward confirmed that he had studied the code and made changes to the schedule to reflect that further study before giving evidence. As I have already mentioned, there remain two hundred procedures of which he claims to be the author. However, Dr Coward accepted in cross examination that the Gauss software had been a collaborative effort amongst a large number of programmers and that it was a single system which worked as a whole and that the individual components did not function on their own. His claim in respect of 200 procedures amounts to about 19% of the entirety of the 2009 Software.

Drs Worden and Thorpe in their joint report, dated 25 February 2013, agreed eleven propositions in relation to the Gauss Software authorship. In summary, the propositions central to this matter were:

It was not in dispute that the task of determining the author of the Coward Software was extremely difficult. Dr Worden accepted in cross examination that the lack of a copy of the code which Dr Coward had contributed, separated from other code on which others had worked on alone and together and together with Dr Coward, plus the lack of different versions and contemporaneous records caused a big difficulty when seeking to carry out the kind of analysis which the parties required.

He accepted that as there had been no automated back up, and until very late in the day no version management system or configuration management system, one was left with very few snapshots of the software which were inevitably mere fragments. He also accepted that time stamps which apply to files rather than a particular procedure within them might relate to a copy or to a modification of content and in any event, were not necessarily always preserved.

Dr Worden also accepted that one could not tell from a date stamp when any procedure may have been written before that date and one cannot tell how often a code may have been amended prior to its first appearance. His evidence was that one cannot tell therefore whether the code in the earliest form found in the back ups is the form in which it was originally written. In fact, Dr Coward himself accepted that the time stamps were almost useless.

The code also contains comments which the experts considered. Dr Thorpe estimated that in fact, less than five procedures contained comments containing Dr Coward’s initials. The experts reported that many of the comments are not attributed at all and Dr Worden accepted that without such an attribution one cannot connect a trail of code to a particular author. An attributed comment may also indicate the author of a change but does not necessarily assist when determining the author of the rest of the code.

Dr Worden accepted in cross examination that an attributed comment with initials other than those of Dr Coward could be accepted as a negative indicator in the case of codes where Dr Coward had claimed 100% authorship. The experts had agreed on twelve such instances and Dr Worden accepted another, the Lazlo example, in cross examination. Conversely, Dr Worden accepted that an attributed comment even if it contained Dr Coward’s initials was not necessarily a positive indicator that he wrote 100% of the code in question.

Inevitably, Dr Worden accepted that where there were different versions of a procedure the position is further complicated. He also accepted that matters were complicated yet again by the uncertainties as to the completeness of each backup and the fact that on occasion there were multiple versions of a source code in a backup file. He accepted that the true position might be of a tree of development with different branches rather than simple linear development.

In the authorship pleading it was also stated that use of @ . . .@ for comments assisted in indentifying code written by Dr Coward. In fact, Dr Coward accepted in cross examination that the style of comment was not particularly helpful in determining the date on which code may have been written. In fact, he went as far as to say that his style changed over time and that although there was a time when he favoured @ . . .@ and went back and changed comments which were in the “/* . . .*/” style, he later went back to using /* . . .*/. As I have already mentioned, I found Dr Coward’s unsupported, new and entirely self-serving evidence in this regard, difficult to accept.

Although the point was not covered in evidence by Dr Coward or in Dr Worden’s report, it was put to Dr Thorpe in cross examination that “mj” at the beginning of the name of a procedure was an indicator of authorship. His response was that it would be equally possible that such a naming convention had been adopted by others and took the matter no further forwards.

For the purposes of his report, Dr Worden looked at one in ten procedures and therefore, examined a total of twenty five. As a result he found three to be unsupportable. It was demonstrated in cross examination that in fact, in relation to one of his examples, he had used other than the latest version. He also accepted that there were obviously going to be instances of further errors in the schedule of procedures put forward by Dr Coward which had not been detected.

Dr Coward accepted that the earliest date stamp in his schedule is August 1994 and the experts agreed that such a date stamp does not indicate what was written before that date. One cannot say therefore, what was written before December 1992. In addition, twelve procedures included in the Initial Coward Software as created before December 1992, were identified by Dr Thorpe in his second report as not being in the 1998 backup. Two of these were also identified by Dr Worden. This means that they must have been written after 1998. Nevertheless, they appeared in Dr Coward’s schedule which he says he re-checked shortly before giving evidence.

In this regard, reference was made to the procedure “yrtsrt” which Dr Coward added to the schedule and in respect of which he claimed 100% authorship. However, it was clear that it had been written by Peter Ho and Dr Coward accepted this in cross examination. The same was true of “trstdc” the code for which contained the reference “PH” and “Lazlo” and in addition used the /* . .*/ comment style. In cross examination, Dr Coward maintained that he had written the original version but had talked to Peter Ho about it. He accepted that comments of this kind were rare and that he could have got it wrong. In relation to “genalfa” which is also in the schedule, he accepted that it had been written by Sam Gover.

The position is equally confused in relation to equalfa. This was described by Dr Worden as an extract from a “monster procedure” which was more than 2000 lines long. He identified it as a part of the Gauss software which was most likely to have had different authors and that it was evident that Sam Gover had worked on it.

In relation to “getalfa” Dr Coward accepted that the code had changed over time and that it was almost impossible in 2009 to see what was there in 1998. He stated that nevertheless, he could follow it and that it was difficult for anyone but him, partly because there was no independent evidence and only his word to go on.

Procedure “mtmm” was an example of a procedure of which Dr Coward had claimed 100% authorship but which Dr Thorpe pointed out once again as having been worked on by Sam Gover. Dr Coward amended his schedule to remove his claim but suggested that the amendment was a result of his review rather than the expert’s report.

In relation to “rolreg_auto’ and “rolreg_autz”, Dr Coward accepted in cross examination that the position was confusing and unclear. In respect of “delrows” having claimed 100% authorship, the procedure was removed from the Annex 4 schedule Dr Thorpe having pointed out that the 1998 backups demonstrated that Dr Coward was wrong. This is despite the fact that Dr Coward’s evidence was that he had reviewed the backup. Once again the code for “movavg” reveals that Lazlo contributed to it, something which Dr Worden pointed out.

Lastly, the code for the procedure “updrows” shows comments in the /* … */ format which led to Dr Coward removing it from his schedule. There are other examples of such a style, none of which were spotted by Dr Coward.

On Dr Coward’s behalf it is said that sixteen procedures on which the cross examination was focussed are not sufficient to displace his evidence as to the remainder. This was all the more so in the light of the fact that Dr Thorpe accepted in cross examination that the sixteen identified procedures were not a representative sample of the whole code and in the light of Dr Coward’s evidence that he did study the code. It is also emphasised that although many people may have worked on the code it should not be inferred that the procedures Dr Coward wrote had been changed. In fact, the majority of the procedures had never changed.

Also Dr Thorpe accepted that he had only inspected those of the many procedures which his computer program had identified as areas of interest. The criteria applied by Dr Thorpe were also criticised. They were:

Despite such an approach, Dr Thorpe did not go as far as to conclude that Dr Coward did not write the procedures in issue and implicitly accepted in his first report that many of the procedures had been written by Dr Coward and had remained unchanged. In fact, he viewed the Gauss software as falling into two categories being the core code and the remainder. He considered it fairly obvious from the style of design that Dr Coward wrote large parts of the core code.

In the absence of a versioning system, it is necessary to rely upon Dr Coward’s memory. The Defendants say that even the level of detected error in the schedule together with an acceptance of the experts that there are inevitably more and what appeared to be Dr Coward’s cavalier attitude towards the detail in the schedule, is such that I should treat it and his evidence as unreliable.

I should add that it was accepted that there is no requirement as a matter of law that a claimant in a copyright action produce the original work on which he relies and that it is possible to infringe an original work by copying a derivative one.

Was there a partnership in existence from September 1992?

As Mrs Talbot Rice QC on behalf of the Defendants submitted, a partnership can be created entirely informally, and inferred from the conduct of the parties. Section 1 Partnership Act 1890 makes clear that such a relationship exists when two or more individuals or entities carry on business in common with a view to profit and can be inferred from their conduct: Medcalf v Mardell [2000] EWCA Civ 63. Peter Gibson LJ giving the judgment of the Court of Appeal stated at [65]:

“The policy of the law has been to recognise that a legally binding partnership may be created wholly informally by parties commencing business together with a view to sharing profits, the law fleshing out their relationship by means of the implication of detailed terms through the Partnership Act 1890…”

He went on at [66]:

“. . . . . In the present case the business found by the judge to have been the business of the partnership was the development and exploitation of the idea of the Big Break. That, in our view, distinguishes the present case from Khan v Miah. True it is that no monetary receipts were received for several years after 1987 [the year of commencement of the partnership found by the judge], but we see no reason why a partnership did not arise if the parties were collaborating in May 1987 on a commercial venture with a view to sharing profits. There can be no doubt that each of them was collaborating with a view to financial reward.”

It is clear therefore, that such a relationship commences when the partners embark upon the activity in which they have agreed to be engaged. This can be long before the actual business activity commences. This is also illustrated by Khan v Miah [2000] 1 WLR 2123, to which I was referred by Mrs Talbot Rice QC. In that case, the parties wanted to open a restaurant. Amongst other things, they obtained premises, opened a bank account, acquired furniture and equipment, entered into a contract with a laundry and advertised in the local press. However, relations between the parties broke down before the restaurant opened. In his speech in the House of Lords, Lord Millett reiterated that whether parties who propose to enter a business venture in partnership together have actually done so is a question of fact. He went on at 2127E – G to hold:

“There is no rule of law that the parties to a joint venture do not become partners until actual trading commences. The rule is that persons who agree to carry on a business activity as a joint venture do not become partners until they actually embark on the activity in question. It is necessary to identify the venture in order to decide whether the parties have actually embarked upon it, but it is not necessary to attach any particular name to it. . . .

The work of finding, acquiring and fitting out a shop or restaurant begins long before the premises are open for business and the first customers walk through the door. Such work is undertaken with a view of profit, and may be undertaken as well by partners as by a sole trader.”

He went on at 2128C-D:

“The question in the present case is not whether the parties “had so far advanced towards the establishment of a restaurant as properly to be described as having entered upon the trade of running a restaurant,” for it does not matter how the enterprise should properly be described. The question is whether they had actually embarked upon the venture on which they had agreed.”

Mr Bloch QC referred me to Greville v Venables [2007] EWCA Civ 878, a case in which the preliminary issue was whether there had been a partnership. The judge found that there had been no oral agreement as alleged. Permission to appeal was given in order to allow the court to consider whether the claimant was entitled to argue that a partnership was to be implied from conduct and if so, whether the facts supported such a finding. Lloyd LJ referred to the judgment of Bingham LJ (as he then was) in Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council [1990] 1 WLR 1195 for the proposition that contracts are not to be lightly implied and at paragraph 38 stated:

“The difficulty for the claimant (or one of them) is that such an inference may be legitimate if the parties have not addressed in express terms what the basis of their business cooperation should be. If, however, as here, they have addressed the subject expressly, including discussions about whether there should or should not be a partnership, but these have not reached agreement because one party has declined to agreed to the proposal on the part of the other that they should carry on business in partnership together, then the suggested inference would contradict the express dealings and discussions between the parties.”

Ms Talbot Rice QC submits that the case does not assist here because in that case the conduct upon which an inference would be based and the express dealings were directly inconsistent with each other. In this case she says, the subsequent 1992 Partnership Agreement is not inconsistent with an inference arising from the conduct of the parties before that date.

In this case, the Court did not have the benefit of the evidence of Mr Robertson. Nevertheless, Dr Coward’s evidence and that of Ms Ambrosiadou was that this was a very busy period during which she, Dr Coward and Mr Robertson were all working to set up the business, she was progressing the regulatory status of the business, Mr Robertson was writing the back office software and Dr Coward was beginning the trading software. In such circumstances, in my judgment, there can be little doubt but that they had embarked upon the venture upon which they had agreed and accordingly that there was a partnership between them during the period from September to December 1992.

Such a conclusion is supported by the fact that all three of them have moved back to England with the intention of commencing the partnership business and the content of Ms Ambrosiadou’s letter to the accountant Jeremy Scholl of 4 September 1992 which states that an agreement had already been reached with sole client Paloma and reflects steps being taken by all three partners in relation to the establishment of the business, including a meeting to be attended by all three. As the extract from Medcalfe v Mardell reveals, it is not necessary that profits should have been generated for the partnership relationship to have come into existence.

In this regard, I also give considerable weight to the 1992 Business Plan which Dr Coward accepted that he had a hand in writing. As I have already mentioned, it refers to the establishment of the partnership in the past tense and contains the express assertion to be submitted to the Securities and Futures Authority that Dr Coward left Investcorp to establish IKOS Partners in September 1992. The response of the Securities and Futures Authority dated 18 November 1992 is also consistent with the existence of the partnership. It was addressed to Dr Coward at IKOS Partners, referred to IKOS Partners throughout and also included a reference to “your firm”.

The existence of a partnership before December 1992 is also supported by the agreement entered into between Mill Street Partners LLP and IKOS Partners on 10 November 1992. It is said on Dr Coward’s behalf that this is purely an outward facing document and does not reflect the relationship between the would be partners. However, in my judgment it is almost inconceivable that a formal agreement would be executed with the single client upon which the business was intended to be based and signed by Dr Coward on behalf of IKOS Partners unless such a partnership existed.

In addition, the minutes of the meeting of IKOS Partners in February 1993 actually record that the partnership commenced trading on 1 December 1992. This was not addressed in evidence and I do not place a great deal of weight upon it.

In coming to this conclusion I have taken in account that the Partnership Deed of 11 December 1992 makes no reference to an earlier partnership business and contains express reference to the partners agreeing to “be and become partners in the business of Investment Advisers with effect from 8 December 1992”. Mr Bloch QC on behalf of Dr Coward drew particular attention to the reference to the specific date of commencement and the reference to the agreement to be partners expressed in the present and future.

In my judgment, given that the Partnership Deed was between different parties, namely IKOS UK Limited, Dr Coward and Edwin Robertson Ltd, a company which had not been incorporated in September 1992 and contained an express agreement as to partnership shares, I do not find either its existence or the backdating of the commencement of that partnership between different parties to be such as to outweigh the other factors to which I have referred.

Furthermore, I do not accept that either the execution of the Partnership Deed or the reference in it to the partners with effect from an earlier date, renders the agreement to form the partnership executory. Mr Bloch QC referred me to paragraph 2-19 of Lindley on Partnership where it is stated that “so long as an agreement to form a partnership remains executory, no partnership will be created.” It seems to me that the paragraph is directed to a different circumstance where there is an actual executory agreement rather than a situation such as this where the partners had already embarked on the activities of the partnership and an agreement was entered into at a later date.

Neither, in the light of all the indicators to which I have referred, do I consider that this case is on all fours with the position under consideration by the Court of Appeal in Greville. In that case, the conduct from which a partnership might have been inferred was directly inconsistent with the express discussions between the parties on the subject. That is not the case here.

Was the software written by Dr Coward from September 1992 written by him as a partner and in the course of the September Partnership business?

It is admitted by Dr Coward that if there was a partnership from September 1992, that the software written by him during the period until December of that year was written “as a partner” and in some sense “in the course of” the September Partnership business. However, he denies that there was any agreement express or implied, to the effect that the software which he had written was to be a partnership asset.

In cross examination Dr Coward accepted that it was precisely his mathematical and programming skills together in the financial services sector that he was bringing to the business. He went on to accept that the software which he was writing at that time was for the purposes of the business for which he, Ms Ambrosiadou and Mr Robertson had come together. In addition, he expressly stated in his witness statement that from September 1992, after his return from Bahrain, he had focussed on writing the software to be used in what he described as “our” business.

There is no contrary evidence.

On this basis, it seems to me that there can be no doubt but that the software written by Dr Coward prior to December 1992 was written by him as a partner in the course of the September Partnership. This is also consistent with the terms of the 1993 Mill Street Agreement and its 1992 version. Had Dr Coward been writing the software in any other capacity, in my judgment it is extremely unlikely that he would have signed an agreement both on his own behalf and that of the IKOS Partnership in that form. I have come to that conclusion despite Dr Coward’s evidence that he viewed the Mill Street Agreements as purely outward facing documents. He nevertheless did not seek to question their validity or that of clause 10(d) which dealt with the ownership of software. In my judgment, his position in that regard was unsustainable.

Was such software a partnership asset of the September Partnership?

It is appropriate to turn straight on to the third issue therefore. In this regard, it was accepted by Dr Coward both in his witness statement and in cross examination that the mathematical models and software implementing them were the cornerstone of the success of the business and that the business was built upon the computer programs which he wrote or of which he was a co-author. He went on to add that the profits were made by the performance fees generated by the operation of the computer programs in question and that the software was fundamentally important to the IKOS business.

In this regard, in summary, Mr Bloch QC submitted that the test of whether an asset is partnership property is whether the parties are to be taken on a proper analysis of the facts and in the light of all the surrounding circumstances, to have agreed that the asset be treated as such. He says that an asset is not a partnership asset unless it is necessary to infer that it should be treated as such, to give business efficacy to the situation. He acknowledges that in the generality of cases where partners are independent of each other, the natural commercial assumption is that property used in the business is partnership property.

However, he emphasises that the inference depends upon the particular facts and in this case, he says that the relationship between the parties was unusual and very special. He termed it “the family partnership”. This term was intended to encompass a business relationship which it was submitted arose from the fact that Dr Coward and Ms Ambrosiadou were and are married, their close association in the development of the IKOS business, that they were both termed Founders, the tax efficient structure which was adopted, the ultimate beneficial entitlement through the offshore trust structure and Dr Coward’s claim that he was remunerated through those offshore structures, other than directly as a partner, employee or director of the respective IKOS entities. Mr Bloch QC submits that in such circumstances, it is not necessary as a matter of business efficacy to infer that the software was a partnership asset. He submits that all that was necessary for business efficacy was a terminable licence from Dr Coward to IKOS to use the software.

Further, Mr Bloch QC says that even if the test is not one of necessity, on the facts, the partners of the September Partnership are not to be taken as having agreed to treat the software as a partnership asset and the matter is also informed by the December Partnership Deed which dealt expressly with partnership property. Lastly, it is said that an analysis based on fiduciary duties cannot carry the matter further, since the scope and effect of the fiduciary duties will mould themselves to the contractual position.

In relation to the alleged principle that it should not be inferred that property is partnership property unless such an inference is necessary to give business efficacy to the relationship between the parties, Mr Bloch QC referred me to the judgment of Harman J in Miles v Clark [1953] 1 WLR 537, a case in which the judge was required to determine what terms should be implied into a partnership agreement where nothing had been agreed other than the sharing of profits. At 540, Harman J held:

“In my judgment no more agreement between the parties should be inferred than is absolutely necessary to give business efficacy to that which has happened, and that is the only safe way to proceed.”

In fact, that was a case in which the partners had intended to enter into a formal partnership deed but no agreement was ever drawn up. The question as to the status of various assets and the need to imply terms arose in the course of the dissolution of the partnership. It was held that it was absolutely necessary to assume the stock in trade must be treated as having been brought into the partnership and accordingly, those negatives which were actually used during the course of the business must be partnership assets.

Mr Bloch QC also referred me to the judgment of Lightman J in RobinRay v Classic FM PLC [1998] FSR 622 at 642 in which he says that the business efficacy approach (albeit outside the partnership context) was also endorsed in the following terms:

“circumstances may exist when the necessity for an assignment of copyright may be established … these circumstances are, however, only likely to arise if the client needs in addition to the right to use the copyright works the right to exclude the contractor from using the work and the ability to enforce the copyright against third parties. Examples of when this situation may arise include: (a) where the purpose in commissioning the work is for the client to multiply and sell copies on the market for which the work was created free from the sale of copies in competition with the client by the contractor or third parties; (b) where the contractor creates a work which is derivative from a pre-existing work of the client, eg when a draughtsman is engaged to turn designs of an article in sketch form by the client into formal manufacturing drawings, and the draughtsman could not use the drawings himself without infringing the underlying rights of the client; (c) where the contractor is engaged as part of a team with employees of the client to produce a composite or joint work and he is unable, or cannot have been intended to be able, to exploit for his own benefit the joint work or indeed any distinct contribution of his own created in the course of his engagement … In each case it is necessary to consider the price paid, the impact on the contractor of assignment of copyright and whether it can sensibly have been intended that the contractor can retain any copyright as a separate item of property.”

Mr Bloch QC contends that the same principle of necessity was adopted by Jacob J in Ibcos Computers Ltd v Barclays Finance Limited. [1994] FSR 275 in the following passage:

“Logically one must consider first the position before the agreement and secondly the effect of the agreement, particularly clause 6. So what was the position when the company started operation? Prior to then Mr. Poole and Mr. Clayton were in an informal partnership. There was (and to my mind this is important) no version of the Mark 3 program as it existed back in 1979. All there was was a large disk (we are back in the days before convenient floppies) about the size of a cake which could be loaded into and out of Mr. Clayton's computer. Any alterations of the 1979 program involved overwriting it so that one could not as a practical matter distinguish between the 1979 work and the modified and added-to form. Who owned the copyright in the modified form? In my view it was the partnership. Mr. Lambert submitted otherwise on the authority of Miles v.Clarke. In that case there had been an informal partnership of photographers. The partnership had used premises, furniture and equipment originally belonging to one partner. When the partnership broke up it was contended that the lease and plant had been contributed to the partnership "pot." Harman J. held otherwise, saying:

In my judgment no more agreement between the parties should be inferred than is absolutely necessary to give business efficacy to that which has happened and that is the only safe way to proceed.

The difficulty in Mr. Lambert's way is twofold: first the program as it then stood was the very foundation of the venture. Moreover even though he had not contributed to it by way of programming, Mr. Clayton contributed to it in other ways-by considerable discussion as to what the program should do and by some payment. Mr. Lambert suggested that he was doing that solely for his own benefit. I do not so hold on the evidence. He was for some time with Mr. Poole intending that the developments should result in a vendible product. No doubt he also got a benefit in his own business but the parties' intention at the time was a two-fold benefit. I think it was indeed "absolutely necessary" that the company should own the copyright in the program as it was in 1982. If the position were otherwise once the program was established commercially Mr. Poole could have left the company and sold the same product on his own account. Or if there was a third party pirate, it would not be the company's right to sue for infringement and claim damages. Neither of these would make any commercial sense. More difficult is the position as regards the copyright in the 1979 Mark 3 program. The problem is that the parties never considered this at all. Indeed they probably did not know there was a separate copyright or copyrights in that. To my mind the answer to this question is to be found in how Mr. Poole had treated the physical embodiment of that program. He had not sought to retain this program separately. He may have happened to have some listings from then (a matter which on the evidence remained murky both in relation to the position in late 1981 and early 1982 but also later when Mr. Poole was writing Unicorn). If the intention had been to keep the 1979 programs separate in copyright terms then the same would have been done physically. So in the end I hold that the copyright in the 1979 programs also came to the company.”

Mr Bloch QC points to the lack of any assignment of the copyright in the Coward Software.

Ms Talbot Rice QC on behalf of the Defendants submits that by virtue of section 20(1) Partnership Act 1890 and/or the fiduciary duties and duty of good faith owed by partners to each other, Mr Bloch’s approach is wrong. She says that to put the matter as one of necessity goes too far. She analysed section 20(1) Partnership Act 1890 as containing two limbs and submitted that this case was concerned with the second, namely property and rights and interests in property acquired other than by purchase “for the purposes and in the course of the partnership business”. In such a case, she says that by virtue of section 20 such property and rights must be held exclusively for the purposes of the partnership.

Ms Talbot Rice QC emphasised that the software was the very essence of the IKOS business without which the trading could not take place. She referred me to a number of cases in which an essential asset had been held to be a partnership asset. In Waterer v Waterer (1872-1873) Eq 402, a case which pre-dated the Partnership Act 1890, land used for the purposes of a nursery business was held to be partnership property because the use of the land itself could not be separated from the shrubs which were the partnership’s stock in trade. Equally, she says that the position of the software is analogous to the photographic plates in the case of Miles v Clarke.

She also referred me to O’Brien v Komesaroff [1982] 56 ALJR 681, which was an appeal and cross appeal from the Supreme Court of Victoria. The claim was for infringement of copyright and breach of confidence by use of draft unit trust deeds and company articles produced by a solicitor as devices for minimising taxation. A defence to the action was based upon ownership of the copyright having been vested in the claimant in the action and his partner jointly by operation of s24(1) Partnership Act 1958 (Vic). It is in all but identical form to section 20 Partnership Act 1890. Mason J held at 685 C-F as follows:

“The second point to be made is that not all the property of each partner used for the purposes of the partnership business can be said to be brought into the partnership, It may in some circumstances remain the separate property of one partner: Gian Singh & Co v Hamar [1965] 1 WLR 412; Harvey v Harvey (1970) 120 CLR 529. Whether the property of a partner becomes partnership property depends on the agreement of the parties. In Harvey v Harvey (at p. 549) Barwick CJ said:

Of course, the answer to the question whether or not the land itself has been brought into the partnership as distinct from a mere licence to use it for partnership purposes, must ultimately depend on the agreement which the partners have made.

See also Menzies J at p 553, Walsh J at pp 562-563.; Higgins & Fletcher at p 137; Lindley on the Law of Partnership (14^th ed. 1979), at p 445. What I have said applies with equal force to both limbs of s. 24. The acts and intention of the partners, not the operation of s. 24, determine finally and ultimately the question whether property owned by a partner becomes partnership property.”

In my judgment, although this authority is consistent with the analysis of section 20(1) as containing two limbs, it seems to me that it makes it abundantly clear the section itself does not override the agreement of the parties whether express or to be implied.

Ms Talbot Rice QC also prayed in aid Dr Coward’s fiduciary duties as a partner and his duty of good faith. She submitted that those duties are consistent with the second limb of section 20 and in the light of those duties, if Dr Coward had wanted to retain the ownership of the software for himself, it was up to him to state his position expressly. She says that otherwise he was in breach of those duties. She went as far as to say that in effect, he was in competition with IKOS Partners because on his case, he could have licensed his software to a third party competitor.

She also submits that once it is accepted that something is produced in the course of the partnership business, no actual transfer of that asset to the partnership is necessary because in those circumstances, what is created necessarily belongs to the partnership from the outset. If she is wrong about that she says that a transfer is necessary and in the circumstances, should be implied. In this regard, she relied upon Don King Productions Inc v Warren [2000] Ch 291, a case concerning whether certain boxing licences were partnership property. Morritt LJ (as he then was) held at 335 D-F:

“ . .The question whether in the terms of section 20 of the Partnership Act 1890 an asset is “brought into the partnership stock or acquired . . . on account of the firm . . . or for the purposes and in the course of the partnership business” does not depend on whether it is assignable at law. In both Ambler v Bilton LR 14 Eq 427 and Pathirana v Pathirana [1967] 1 AC 233 the asset was inalienable. In both cases the inalienable asset had been acquired by the individual partner in his own name during the subsistence of the partnership but was still treated as acquired on account of the firm. In my view, it would make no difference if the asset had been acquired before the commencement of the partnership but the partner in question was required by the terms of the partnership to bring it into the common stock. The reason is quite simply that partnership property within section 20 of the Partnership Act 1890 includes that to which a partner is entitled and which all the partners expressly or by implication agree should, as between themselves be treated as partnership property. It is immaterial, as between the partners whether it can be assigned by the partner in whose name it stands to the partners jointly.”

Ms Talbot Rice roundly rejected any reliance upon what Mr Bloch styled the family partnership. First, of course, she submits that the business was Ms Ambrosiadou’s in any event, a proposition which I have rejected and secondly, she says that the family partnership amounts to nothing more than the fact that Dr Coward and Ms Ambrosiadou are married. She says that that can have no impact of any kind upon the treatment of the software.

As Mr Bloch pointed out, nothing can be gained from a weight of authority. Each case turns upon its own facts and is only of assistance for the principles of law to be applied. However, the cases to which I have referred are at least indicative of the way in which the courts have treated property which is central to a partnership business. As the editor of Lindley & Banks on Partnership points out at 18-13, the real question is always: was the asset both used and treated as partnership property?

It seems to me that it cannot be correct to commence the task as Ms Talbot Rice would have it, as if the effect of the second limb of section 20(1) PA 1890 were mandatory. This was not the view of Mason J in the extract from O’Brien v Konesaroff to which I have referred. As the editor of Lindley & Banks on Partnership puts it at 18-04:

“Although these statutory rules will assist in determining what is and what is not partnership property when the intentions of the partners are not readily apparent, they cannot be applied in the face of a contrary agreement, whether express or implied. Moreover, the status of a partnership asset, once determined in accordance with the statutory rules, may subsequently be altered by agreement of the partnership, so that what was partnership property may be converted into the separate property of one or more of the partners or vice versa.”

This is also apparent from section 19 Partnership Act 1890 which provides that:

“The mutual rights and duties of partners, whether ascertained by agreement or defined by this Act, may be varied by the consent of all the partners, and such consent may be either express or inferred from a course of dealing.”

I also do not see that reliance on fiduciary duties, at least at the outset of a partnership relationship is of assistance. The issue is one of agreement express or implied and as Mr Bloch points out, the ambit of the fiduciary duties in relation to the treatment of assets at the outset, would be moulded by the status of those assets. Of course, the fiduciary duties of a partner once the partnership is in being, will be a relevant factor to take into account in relation to assets produced after that date. In this regard, I was referred to Vitof Limited v Anthony John Altoft [2006] EWHC 1678 (Ch), a decision of Mr Richard Arnold QC (sitting as a deputy high court judge) as he then was. It concerned a copyright work created by a director of a company after its incorporation. At paragraphs 144-149 the deputy judge held as follows:

“144.

The second stage in counsel’s argument was to submit that, given that Mr Altoft accepts that 8-9% of the PDFM source code was created after the incorporation of Vitof, although Mr Altoft was the legal owner of the copyright in the resulting literary work (assuming that he was not an employee, so that section 11(2) of the Copyright, Designs and Patents Act 1988 did not apply), Vitof was the equitable owner since Mr Altoft had created that work in the course of his duties as a director and in fulfilment of clause 7.3 of the Shareholders’ Agreement. In support of this counsel relied upon Copinger & Skone James on Copyright (15^th ed) §§5-15 and 5-176. . . . . .

145.

In support of this analysis the learned editors cite several cases, in particular Antocks Lairn Ltd v I. Bloohn Ltd [1972] RPC 222 and Ultraframe (UK) Ltd v Fielding [2003] EWCA Civ 1805, [2004] RPC 24. To these may be added the unreported case of Charly Acquisitions Ltd v Immediate Records Inc (Pumfrey J, 7 February 2002) at [78]-[79]. The trade mark case of Ball v The Eden Project Ltd [2002] FSR 43, which is mentioned in Ultraframe v Fielding and to which I drew the parties’ attention, is also supportive of this analysis. In that case Laddie J cited at [22] the following statement of principle by Viscount Sankey in Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 at 137:

“In my view, the respondents were in a fiduciary position and their liability to account does not depend upon proof of mala fides. The general rule of equity is that no one who has duties of a fiduciary nature to perform is allowed to enter into engagements in which he has or can have a personal interest conflicting with the interests of those whom he is bound to protect. If he holds any property so acquired as trustee, he is bound to account for it to his cestui que trust.”

“. . . . . .

146.

In my judgment counsel’s submission is correct for the following reasons:

(i)

Mr Altoft was one of Vitof’s two directors, and as such owed it fiduciary duties. It is common ground that, as recital (B) to the Shareholders’ Agreement recites, Vitof was established by Mr Altoft and Mr Chiovitti as the vehicle through which to conduct “a business involving design of labelling equipment”. Accordingly Mr Altoft owed Vitof a duty not to place his interests in conflict with Vitof’s interests with regard to the design of labelling equipment. For him to retain the copyright in source code written by him for Vitof’s labeller would inevitably have that result. . . . . .

(iv)

Mr Altoft says that all modifications to the source code up until around spring 2004 were made on his own computer, but even assuming that this is true it is a minor consideration. Mr Altoft did not dispute that the work was done in Vitof’s time.

147.

I have no doubt that Mr Altoft holds the copyright in the source code on trust for Vitof, and must assign it to the company. . . . .

148.

The third stage in counsel’s argument was to submit that, with regard to the 1-2% of the source code which Mr Altoft estimates was created before the incorporation of Vitof, Mr Altoft likewise held this on trust for Vitof because the work was done in contemplation of the incorporation, and for the benefit of, Vitof. This submission is supported by a decision of the Federal Court of Australia in a case cited in a footnote to Copinger §5-176, A-One Accessory Imports Ltd v Off Road Imports Ltd (1994) 34 IPR 306.

149.

In my judgment counsel’s submission is again correct. I consider that it is plain that from at least early July 2002, and probably from mid April 2002, Mr Altoft and Mr Chiovitti intended to set up a company to manufacture and market a new labeller which they – or at least Mr Altoft - would design. I also consider that it is plain that both Mr Chiovitti and Mr Altoft started work on the design of the new labeller before the company was incorporated in anticipation that it would be incorporated later. The inference that this work was intended to benefit the company, rather than the individuals personally, is irresistible.”

Ms Talbot Rice says therefore, that the very nature of the fiduciary duties of a partner are part and parcel of why the software is partnership property and why Dr Coward’s assertion that he created it for the partnership but nevertheless retained it for himself is unsustainable.

In fact, it seems to me that there is little between the approaches adopted by Dr Coward and the Defendants in this regard, at least on the facts of this case. In my judgment both on a proper analysis of the facts and in the light of the surrounding circumstances and as a matter of necessity to give business efficacy to the situation, it should be inferred that the software was a partnership asset. Just as in Ibcos, in my judgment, any other conclusion would have made no commercial sense.

It is not in dispute that the software which was created by Dr Coward, was created for the purposes of the partnership and was the bedrock of that business. The trading could not have been undertaken without it. It was the central tool by which the trading and investment operations of the business were to be carried out.

If one tests the proposition further by applying the criteria set out by Jacob J in Robin Ray, in my judgment, it is equally clear that it is necessary to infer that the software was partnership property. The software was the foundation of the business without which there would have been no business at all. It was consistent with this that Dr Coward accepted in cross examination that a potential purchaser of the business would have required ownership of the software and in fact, it is more likely than not that the value attributed to the business in 2007 was on that basis. Secondly, as a result of the uniqueness of the software, its positive effect upon the trading record of the business and consequent value, it was and is essential that Dr Coward and any successor in title to him be prevented from using the software in order to compete with the IKOS business and to enforce the copyright against third parties. After all, that is what this action is all about. If another business whether run by Dr Coward or a third party, were able to access the mathematical models employed, it would seriously prejudice the IKOS business, if not destroy it.

As I have already mentioned, in this regard, Mr Bloch relies heavily upon what he has called the family partnership in the sense that it was always appreciated, not just in the initial few months of the IKOS business but throughout its very successful development, that Dr Coward and Ms Ambrosiadou were its founders and in fact, its ultimate owners through the offshore company and trust structures. As a result it is said that the inference is that the software remained in Dr Coward’s ownership and that only a licence to IKOS Partners to use it was necessary.

In such circumstances, it seems to me that it would never have been relevant to seek to hold the ownership of the copyright in the software back from the “family business”, nor was there any indication of an intention to do so until the breakdown of the relationship between Dr Coward and Ms Ambrosiadou. There is no indication that Dr Coward ever asserted ownership during the period 1992 to 2009. As Dr Coward put it, he considered himself and the business to be one and the same.

It seems to me that even if one takes such a factor into consideration, it makes it all the more likely that the essential bedrock of the business, the software would be owned by it and not separately from it. As Jacob J pointed out in Ibcos this is all the more so in circumstances in which Dr Coward allowed that software to become intermingled, a matter to which I shall return below.

I have come to this conclusion despite the fact that there is no reference to the software in the December Partnership Deed, nor does it appear in the list of assets contributed. As Ms Talbot Rice QC pointed out, neither document contains a reference to the benefit of the Mill Street Agreement or to goodwill. In addition, in my judgment, little weight can be placed upon the list of assets given that they are all furnishings or stationery and the list itself does not purport to be exhaustive. This conclusion is also consistent with the reference to the software made in Ms Ambrosiadou’s letter to Mr Scholl of 4 September 1992 in which she states that the software will be sold to the company. In my judgment, this accords with an intention that the software be a partnership asset, despite the failure actually to assign the copyright.

In this regard, I accept Mrs Talbot Rice’s submission that an asset is not prevented from being partnership property as a result of a lack of a transfer of the legal title. As in the case of Don King Productions Inc v Warren, if necessary, the legal owner of the asset will found to hold the legal title upon trust for the partnership.

What is more, without any assertion to the contrary, Dr Coward signed the 1992 Mill Street Agreement in November 1992. I also consider that the fact that express permission was given to Mr Robertson to use the software which he had created whilst both he and his company were partners in IKOS Partners both before and after December 1992 is indicative of it having been treated as a partnership asset despite the fact that it was not expressly stated to be so. Dr Coward was not able to give any explanation of a difference between that software and that which he created, other than to state that it was his business. Rather than assist him, I consider that such a response is consistent with the bedrock of that business being an asset of it.

A more general point which I also take into consideration is that if Dr Coward were keeping the copyright to the software for himself, it is difficult to see what if anything he was bringing to the partnership business particularly in its early days before December 1992.

In addition, if more were necessary, it seems to me that Ms Talbot Rice’s submission in relation to Dr Coward’s duty of good faith as a partner, based upon the extract from the Vitof case, to which I have referred, is correct. To have retained ownership of the copyright in the Coward Software would inevitably have conflicted with Dr Coward’s duty of good faith to his partners.

In my judgment, therefore, the facts support the conclusion that the software was used and treated as partnership property. It was also central to the carrying on of the business itself and could not be separated from it. In my judgment, it was analogous to the land in Waterer v Waterer and the used photographic plates in Miles v Clark.

Was the software written by 8 December 1992 brought into the common stock of the IKOS Partnership? In other words, was it property which, as between the partners, was regarded as an asset of the partnership?

On the creation of the IKOS Partnership by the deed of 11 December 1992, there was a technical dissolution of the September Partnership. It is not disputed that whether such of the Coward Software as had been written at that stage was brought into the common stock of the IKOS Partnership at that stage is a question of fact.

As I have already mentioned, Ms Talbot Rice referred me to paragraph 18-13 of Lindley on Partnership in support of the proposition that where an asset has been used by the partnership and treated as its property, there is a presumption that it has been brought into the common stock. In fact, the passage refers to assets paid for by a partner. Nevertheless, it seems to me that it is relevant to a case such as this where the asset is created by the partner.

Mr Bloch QC submitted that although section 20 creates a presumption, it is clear that it cannot override the contrary agreement of the parties whether express or implied. As I have already found, I consider this to be the correct approach.

Inevitably, as the editor of Lindley on Partnership states at paragraph 18-12, in order to determine whether an asset acquired by a partner has in truth been acquired “on account of the firm, or for the purposes and in the course of its business” all the surrounding circumstances must be taken into account. Mr Bloch nevertheless, referred me to a number of authorities including Bathurst v Scarborow [2005] 1 P& CR 4, Kelly v Kelly 92 ALR 73 Lukin v Lovrinov, a decision of the Supreme Court of South Australia, 1998 SASC 6614 and Broadhurst v Broadhurst [2006] EWHC 2727 (Ch) in support of the proposition that all of the surrounding circumstances must be taken into consideration. He also referred me to the passage in the judgment of Morritt LJ in Don King Productions Inc v Warren [2000] Ch 291, to which I have already referred.

In this regard, Mr Bloch referred me to the reference in the letter of September 1992 to the possibility of the sale of the software, something which never took place and the fact that it was referred to even at that stage as being of considerable value suggests that it if was to be brought into the partnership it would have been done so expressly. I was also taken to the 1992 Partnership Deed and to the list of assets produced at the time, which makes no reference to intellectual property, nor was the value of the pre December 1992 software brought into the partnership accounts.

It is also said that the initial term of the partnership was only two years and that in such circumstances, it cannot have been envisaged that such a valuable asset as the software would be partnership property. Reference was also made in this regard to the minutes of February 1993 which it is said suggest that the treatment of the software remained a matter for discussion.

Ms Talbot Rice QC reminded me once again about the fiduciary duties of a partner and submitted that at the point at which the Partnership Deed was executed in December 1992, Dr Coward had a duty to disclose all material facts which in this case would include his intention to retain the ownership of the software for himself. In this regard, she referred me to Conlon v Simms [2008] 1 WLR 484 a case in which the defendant was a solicitor in partnership with the claimants. He was struck off the roll of solicitors it having been found that he had acted dishonestly in his capacity as a solicitor. The claimants alleged that the defendant had induced them to enter into the partnership with him by fraudulent misrepresentations.

It was accepted in cross examination by Dr Coward that the only relevant change in circumstances in December 1992 was the execution of the Partnership Deed and that in all other respects the business continued as before. The software remained the bedrock of the business and Dr Coward continued to develop and refine it for the purposes of carrying on the trading for the Paloma account.

In my judgment, in such circumstances and given the conclusions I have already reached in relation to the earlier period, there is nothing post December 1992 which would warrant the rebuttal of the presumption that the software was brought in as common stock of the IKOS Partnership.

As I have already mentioned, I consider the reference to software in the minutes of the meeting of 3 February 1992 supports the conclusion that it was intended to bring the software in as a partnership asset and that the queries being raised with the accountant were as to the best way in which to treat it in the accounts. The fact that it did not appear in the accounts subsequently and that there was no express transfer of the legal title to the software to the partnership does not detract from that conclusion. As Mrs Talbot Rice pointed out, the appearance of an asset in partnership accounts or its omission, is not conclusive. In fact, there is reference in general terms, in a Question and Answer sheet produced by Julian Gover, the IKOS Finance Officer to the effect that intellectual property did not have to be recognised financially on the balance sheet. Mrs Talbot Rice also pointed out that Statements of Standard Accounting Practice and more recently, Financial Reporting Standards do not permit internally generated intellectual property which does not have a readily ascertainable market value to be capitalised and shown as an asset on the balance sheet.

Further, it seems to me that even if I am wrong about the software written before December 1992 having been a partnership asset, the software was created for the purposes of the partnership business carried on after December 1992, to enable the trading of the Japanese warrants to take place. There is no evidence that it was differentiated in any way from software created after that date, nor are there any indicators that it was to be treated solely as the property of Dr Coward, other than those which I have already considered. Clause 10(d) of the 1992 and 1993 Mill Street Agreement signed by Dr Coward, is entirely consistent with such a conclusion.

Once trading under the Mill Street Agreement had commenced in early 1993, given that the software was the very foundation of the venture and continued to be modified by Dr Coward in his capacity as a partner, without differentiation in product, in order to meet the needs of that business, in my judgment, it was necessary that the copyright in the software should be owned by the partnership in just the same way as Jacob J described the situation in Ibcos.

Was software written by Dr Coward from December 1992 onwards written by him as a partner and in the course of the IKOS Partnership’s business?

It seems that it is accepted by Dr Coward that the software which he wrote from December 1992 onwards was written by him as a partner in the course of the IKOS Partnership business. An alternative case was pleaded namely that Dr Coward wrote the software in the course of his employment as an employee of IKOS UK. In the event, this was not pursued.

Was software written by Dr Coward from December 1992 onwards a partnership asset of the IKOS Partnership?

Despite his acceptance that the software written by Dr Coward from December 1992 until its dissolution in 2006 was written by him as a partner in the course of the IKOS Partners business, he nevertheless contends that it was not a partnership asset.

It seems to me that for all the same reasons to which I referred in relation to Issues 2, 3 and 4 the software written by Dr Coward after December 1992, in his capacity as a partner and in the course of the partnership business falls to be treated as a partnership asset. With regard to software written after 1992 this is also consistent with the second limb of section 20(1) Partnership Act 1890. The software created after that date was used and treated as the bedrock of the partnership business. As I have found, the inference from all the circumstances is that the software was a partnership asset.

In addition, in this regard, I take into account the fact that by virtue of clauses 18 and 19 of the Partnership Deed, Dr Coward owed express duties to be just and faithful to his fellow partners and to devote his whole time and attention to the partnership business, not to engage in any business other than that of the partnership and to use his best skills and endeavours to carry on its business for its utmost benefit.

This is all the more so over the period from 1993 because various employees of IKOS UK Limited also worked on the software over the period. The software was written, re-written and modified by a combination of Dr Coward and the IKOS UK employees in such a way that it was inextricably co-mingled. In my judgment that is only consistent with an implied agreement that the software was an asset of the partnership. To permit such collaboration and comingling in circumstances in which the Coward Software was owned by Dr Coward in his personal capacity would make no sense, whether commercial or otherwise.

Dr Coward’s position is also inconsistent with the 1993 Mill Street Agreement and the content of the agenda and minute of the February 1993 meeting which in my judgment is consistent with a discussion of how best to deal with the software based on the assumption that it was an asset of the business. In my judgment, it is also inconsistent with the way in which the back office software was treated when Edwin Robertson Ltd left IKOS Partners in May 1994. Had that software not been treated as a partnership asset there would have been no reason to have reached the agreement for its use which was reached. Just as with the Coward Software, the back office software was not included in any accounts nor prior to May 1994, was it the subject of an express agreement as to its status. In my judgment, there was no justification for the differentiation which Dr Coward tried to draw.

It is also inconsistent with the fact that Dr Coward never raised his alleged ownership of the software and in particular, made no comment as to the comment made by McDermott Will & Emery in 2005 to the effect that the intellectual property was vested in IKOS Partners or clause 12 of the 1 February 2006 agreement by which IKOS Partners became IKOS AM’s sub-investment manager in respect of futures strategy and the 1 February 2006 announcement, which in my judgment is consistent with the trading software being an asset of the business. To put the matter another way, Dr Coward’s failure to comment at all despite in the case of the February 2006 agreement personally signing it, is in my judgment wholly inconsistent with his claim that he personally retained the ownership of the Coward Software.

In this regard, I do not find the content of the Dechert IP Audit of particular assistance one way or another. It was produced as Dr Coward says without much reference to him but does not contain anything which in my view is inconsistent with the software having been a partnership asset.

As I have already mentioned, in my view little weight can be attached to Ms Ambrosiadou’s reference in her email of 6 August 2007 to Dr Coward being 80% of the intellectual property. She made the statement which in itself does not necessarily go to ownership, in the context of having stated in the same email that began “No, it rests with IKOS partners”. In relation to her email of the very next day containing a reference to intellectual property being stolen from Dr Coward, I accept Ms Ambrosiadou’s explanation that she was seeking to goad Dr Coward into action. Equally, the email from Jeremy Scholl of 6 August 2007 stating that the “original program was Martin’s copyright and developed by IKOS UK” was written in the context of the tax treatment of the asset and does not carry the matter much further.

Lastly, in this regard, although I do not place a great deal of weight upon them, I consider that the note of the discussion at Dr Coward’s meeting with Mr Burns on 27 July 2009 to which I referred at paragraph 126 is consistent with Dr Coward in fact holding the belief that the Coward Software was indeed a partnership asset or at least, was not in his ownership and the proposed terms of a compromise which he put forward in September 2009 to which I referred at paragraph 130 are inconsistent with the Coward Software being Dr Coward’s alone.

It is accepted that in the relevant circumstances, the effect of the Dissolution Agreement in respect of IKOS Partners is that the assets of the partnership which as I have found, included the Coward Software passed to IKOS UK.

I should also add or perhaps reiterate that despite Mr Bloch’s emphasis on the “family partnership” dynamic, Dr Coward did not seek to contend that any of the business or trust structures or documents were a sham or that they did not reflect the true state of affairs. It seems to me that he was content to take advantage of them whilst his relationship with Ms Ambrosiadou lasted and it is not now open to him to seek to circumvent their effect whilst accepting their validity.

What are the terms of the implied licence Dr Coward granted IKOS to use the software?

Given my decision in relation to Issues 1 - 6, this issue does not arise for determination. Nevertheless, I will record the submissions in this regard. It is common ground that if Dr Coward had owned the copyright in the Coward Software, IKOS had a licence from him to use it. In such circumstances, it was accepted by the Defendants that the terms of the licence would be determined in accordance with the “necessity” test explained by Lightman J in the Robin Ray case. On that basis, the Defendants contend that the licence would have had to have been permanent in the sense of irrevocable and would have had to have been exclusive, including an ability to prevent Dr Coward from using the software to compete with the Defendants. Mr Bloch submits that a licence terminable on reasonable notice would be sufficient.

Had it been necessary to decide the point, I would have held that in the circumstances of this case including the centrality of the software to the business, the test of necessity would have required the implied licence to be exclusive and accordingly, to enable the IKOS entities to prevent the use of the software both by third parties and by Dr Coward. However, in my judgment, it would not as a matter of commercial necessity have been necessary for the licence to be irrevocable, but could be terminated on reasonable notice.

What period of notice would be reasonable?

This matter also does not now arise. However, if it had been necessary to decide it, given the central nature of the software to the IKOS business, the way in which it is embedded within the software as a whole and the fact that Dr Coward did not take steps to make his software readily and clearly identifiable, the length of any notice period would have run from the date upon which the Defendants were given precise details of the Coward Software and would be the period which it would reasonably take to re-write such lines of code and the parts of the remainder of the software the design of which relied upon the Coward Software.

In the absence of any evidence, it would be inappropriate to hazard a guess as to how long such an exercise would take but it would have been likely to have been of considerable length.

Is Dr Coward estopped from asserting his strict legal rights in the Coward Software?

This too is an issue which it is no longer necessary to decide. However, in case I am wrong and Dr Coward is the owner of the copyright in the Coward Software, I will set out both the submissions and my reasoning.

The Defendants contend that if contrary to their defence, Dr Coward is the owner of the copyright in the Coward Software, he is estopped from asserting his legal rights against the defendants, having represented that the software belonged to IKOS Partners and after its dissolution in 2006, to IKOS CIF and IKOS AM.

He is said to have done so first, by his conduct in allowing his work to be intermingled and his admitted refusal to use versioning. Secondly, it is said that Dr Coward made express representations that IKOS Partners and from 2006, IKOS AM owned the software by means of clause 10(d) of the Mill Street Agreements of November 1992 and March 1993 which he signed on behalf of the partnership and by the announcement recording the change in the sub-investment manager for the fund dated 1 February 2006 to which I have already referred and the Corporate Governance Report which Dr Coward hired David Burns to help him produce. In that report, it is not disputed that the value placed on the IKOS business takes into account that it owned the software. Thirdly, it is said that Dr Coward represented that the software was owned by IKOS Partners and thereafter by IKOS AM and IKOS CIF by failing to correct Ms Ambrosiadou’s email to the effect that intellectual property “rests with IKOS Partners”, failing to correct the statement made in a memorandum of 17 October 2005 produced by McDermott Will & Emery that “intellectual property relating to the computer programmes used in the course of the equities and futures business was vested in IKOS Partners”, failing to warn IKOS UK Ltd and thereafter IKOS CIF when it was incurring expense in developing the software, that in fact, he could bring the business to an end at any time should he wish to, by the withdrawal of his software, a failure to explain to the IKOS Fund of which he was a director, the precarious position of its sub-investment manager or to tell Dechert of his ownership at any time when they were completing their intellectual property audit.

It is said that in reliance upon his representations both express and by conduct over the course of fifteen years, to which I have referred, it is now unconscionable for him to assert his legal rights to the copyright in the software because Dr Coward stood by and allowed the IKOS business to recruit programmers and expend significant sums upon the development of the software, to expand the business as a whole and to employ over sixty people in Cyprus in reliance upon his representations and to its detriment.

It is also said both that he allowed the product of his own work and those of the IKOS programmers to be intermingled rendering them all but inextricably linked and the IKOS contributions useless without the Coward Software underpin and allowed billions of US dollars to be invested by clients on the basis of the IKOS investment management model which in turn is based upon the software.

In this regard, Ms Talbot Rice QC referred me to the passage in the judgment of Jacob J in Ibcos at 281:

“I have already characterised the counterclaim in respect of copyright infringement as “preposterous.” It is convenient to explain why here. The argument ran that Mr Poole owned the copyright in the Mark 3 software. This had become embedded in ADS as it stood in 1986. [Counsel] said it followed that there was a licence from Mr Poole which he could revoke. This would mean that all the improvements and additions made over the years, mainly by Mr Poole himself, would be useless. The whole foundation of PK’s (or any successor in title’s) business would be at his mercy. Even given the premise of ownership of copyright there would surely be an estoppel on those facts. That must be so even without the clause providing that all PK Software is the property of PK.”

In fact, as Mr Bloch QC pointed out, the way in which the estoppel is said to have arisen was pleaded more generally in the Amended Defence and Counterclaim and was met in the Amended Reply and Defence to Counterclaim by a denial and the assertion that no proper basis for an estoppel had been pleaded. In the Amended Defence and Counterclaim reference is made to encouragement of and partaking in mixing of the software, at the IKOS entities’ substantial expense, a failure to state that the software should be treated separately or differently and a failure to take any step to ensure that they were so treated and as a result the fact that the Claimant’s software if any, became embedded in that utilised by the IKOS entities. Further, that by seeking now to enforce his copyright, if any, he would render the IKOS investment, improvements and additions useless, that his conduct was all the more unconscionable because he had not identified precisely which pieces of code he claimed and that the IKOS entities had relied upon their use of the software to build their very substantial business with the encouragement of Dr Coward.

Furthermore, Mr Bloch QC pointed out that nowhere in the evidence in chief was it said that a representation was made to Ms Ambrosiadou in relation to the software upon which she relied.

He submitted therefore, that four elements are required in order to establish an estoppel and that they are not present in this case. He says that they are a legal relationship between the parties, an unequivocal representation by one to another that he will not enforce his rights, an intention by the representor that the representee will rely upon it and actual reliance. In this regard he referred me to an extract from Chitty on Contracts 31^st Ed at 3-085 and 3-086 concerning forbearance in equity. The extract appears in the context of a discussion of the difference between variation and forbearance as to contractual rights. It contains a reference to the classic statement of Lord Cairns in Hughes v Metropolitan Railway Co (1877) 2 App Cs 439, 448 from which the principle of equitable estoppel is derived, namely:

“ . . .it is the first principle upon which all Courts of Equity proceed, that if parties who have entered into definite and distinct terms involving certain legal results – certain penalties or legal forfeiture – afterwards by their own act or with their own consent enter upon a court of negotiations which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have thus taken place between the parties.”

With regard to the entanglement of the software, Mr Bloch QC says that given that it is not impossible to separate, the mere assertion that Dr Coward by intermingling was representing that he would not assert his rights is just that. He says as Dr Coward said in cross examination, clause 10(d) of the Mill Street Agreement was for the third party and was not a representation to the IKOS Partners. In the same way, he submits that there was no evidence that Ms Ambrosiadou relied upon the company announcement of 1 February 2006. Furthermore, he pointed out that in cross examination, Dr Coward stated that although he probably saw the announcement at the time, he did not write it. In relation to the figures in the Corporate Governance Report, Mr Bloch submits that they cannot be elevated into a representation that he would not rely upon his legal rights.

As to the remainder of the matters to which Ms Talbot Rice refers, Mr Bloch submits that at best, they would amount to representations by silence. In relation to Dr Coward’s failure to correct Ms Ambrosiadou’s email, he points to Jeremy Scholl’s request that the parties desist from further email discussion on the point. In relation to the failure to correct the statement made by McDermott, Will & Emery he says that there was no reason to assume that it referred to Dr Coward’s software and in relation to the alleged failure to inform Dechert, he points to Dr Coward’s evidence that he had very little involvement with the Dechert IP audit.

Mr Bloch QC referred me to Godfrey v Lees & Ors [1995] EMLR 307 in which the plaintiff claimed to be the joint author and joint owner of copyright in six musical works in the versions in which they were performed by the pop group of which the defendants were members. It was held that the plaintiff had allowed the defendants to assume to their detriment that, subject to the arrangements they had reached with their recording and publishing companies, they were entitled to exploit the six works as their own. He had allowed them to labour under that assumption for fourteen years before asserting his rights. In the meantime, the defendants had worked hard to build their reputation and market the recordings. In the circumstances, Blackburne J held that it would be unconscionable for the plaintiff to assert his legal rights and accordingly, he was estopped from revoking the implied licence.

Mr Bloch QC emphasised that nevertheless, reliance remains an essential part of establishing an estoppel and referred me to the speech of Lord Neuberger in Fisher v Brooker [2009] 1 WLR 1764, a case which was also concerned with copyright in a song performed by a band. In his preliminary observations, Lord Neuberger stated as follows:

“63 Fourthly, in so far as the respondents’ argument is put on the basis of estoppel, they would have to establish that it would be in some way unconscionable for Mr Fisher now to insist on his share of the musical copyright in the work being recognised. As Robert Walker LJ said in Gillett v Holt [2001] Ch 210, 225D, “the fundamental principle that equity is concerned to prevent unconscionable conduct permeates all the elements of the doctrine” of estoppel. Given that their case at each of the three stages is based on the fact that Mr Fisher did not raise his entitlement to such a share, one would expect the respondents to succeed in estoppel only, if they could show that they reasonably relied on his having no such claim, that they acted on that reliance, that it would be unfairly to their detriment if the was now permitted to raise or to enforce such a claim. As was also said in Gillett v Holt [2001] Ch 210, 232D, the “overwhelming weight of authority shows that detriment is required” although the “requirement must be approached as part of a broad inquiry” into unconscionability.

Mr Bloch QC reiterates therefore, that reliance is necessary and there is no evidence of it here, nor is there is evidence of a representation and to whom it was made.

Ms Talbot Rice QC submitted that there were very close parallels between the circumstances in Godfrey v Lees and those in this case and drew particular attention to the matters which had particularly struck Blackburne J namely “the extraordinary inactivity” of the plaintiff over the period of fourteen years despite his belief that he had rights in respect of the songs in question, the fact that despite knowing that the defendants believed that he could not claim to be the composer, the plaintiff took no steps to disabuse them and that throughout the years of silence the band laboured for success.

She also took me to Gillett v Holt [2001] Ch 210 itself in which Robert Walker LJ considered the elements necessary for proprietary estoppel. In particular, at 225C:

“ . . .it is important to note at the outset that the doctrine of proprietary estoppel cannot be treated as subdivided into three or four watertight compartments. Both sides are agreed on that, and in the course of the oral argument in this court it repeatedly became apparent that the quality of the relevant assurances may influence the issue of reliance, that reliance and detriment are often intertwined, and that whether there is a distinct need for “mutual understanding” may depend on how the other elements are formulated and understood. Moreover the fundament principle that equity is concerned to prevent unconscionable conduct permeates all the elements of the doctrine. In the end the court must look at the matter in the round.”

I should add that Mr Bloch QC submitted that nevertheless it is necessary to prove each of the ingredients in order to succeed in a claim of estoppel and that can be seen from the judgment as a whole and the headings under which the various elements are considered.

Ms Talbot Rice QC also referred me to Thorner v Major [2009] 1 WLR 776 and in particular paragraphs 52-55 of the speech of Lord Walker for the proposition that “ . . .if all proprietary estoppel cases (including cases of acquiescence or standing by) are to be analysed in terms of assurance, reliance and detriment, then the landowner’s conduct in standing by in silence serves as the element of assurance . .” Here she says, Dr Coward stood by whilst the software intermingled, IKOS invested in its development and employed additional programmers and researchers. She goes further and says that he actually referred to the software as that of IKOS in the ways to which I have already referred.

It was certainly Ms Ambrosiadou’s evidence in chief and that of Mr Constantinides both in chief and in cross examination that they believed the software to be the property of IKOS. Furthermore, Dr Coward accepted in cross examination that he had never warned IKOS about its investment in software development or the intermingling of the software itself and stated that he considered himself and the business to be the same thing.

Ms Talbot Rice QC says therefore, that it is quite clear taking the matter in the round that there were both express representations and representations by silence, reliance and detriment suffered.

Had it been necessary, I would have found that Dr Coward was estopped from relying upon any legal rights he had to the copyright in the Coward Software. In this regard, I take particular note of the passage from the speech of Lord Neuberger in Fisher v Brooker in which he emphasised that unconscionability permeates all the elements of estoppel and in which he quoted with approval the approach that detriment should be approached as part of a broad inquiry as to unconscionability, adopted in Gillett v Holt.

It seems to me that the position in this case is similar to that both in Ibcos and in Godfrey v Lees. In his evidence, Dr Coward accepted that he had treated himself and the business as one, that he had gone along with the expenditure on the development of software and had never informed any IKOS entity of his ownership. He kept quiet and allowed the intermingling to take place and expenditure to be incurred.

Had it been necessary, in addition to his conduct by silence or to put it another way, his acquiescence in the intermingling and the IKOS expenditure, as I have already mentioned, I do not accept that clause 10(d) of the Mill Street Agreement was solely for the purposes of third parties. Obviously, the agreement was with a third party. However, to suggest that such an unequivocal statement as to the ownership of software had no impact in relation to the partnership itself is tantamount to suggesting that in fact, it was untrue. It seems to me that such a statement amounts to a representation for all purposes.

I accept that the valuation placed on software in the Burns Compliance report was more implied than express and that Dr Coward did not write the announcement of 1 February 2006 himself. However, his failure to correct the impression given both in that document and in the McDermott Will and Emery memorandum, or to make his position clear during the Dechert IP Audit, in my judgment when taken in context, are sufficient to amount to a representation by silence or standing by.

Equally, it seems to me that the Defendant IKOS entities relied to their detriment as Mrs Talbot Rice QC suggests. The position is very similar to that described by Jacob J (as he then was) in the Ibcos case. The IKOS entities built the business on the bedrock of the Coward Software and expended large sums in its development in a way which is almost impossible to untangle. Had it been necessary, I would have found that it would now be unconscionable for Dr Coward to seek to enforce his rights.

Was there a licence from IKOS to Dr Coward to use and/or retain IKOS’ software and if so, what were its terms?

This issue is concerned with Dr Coward’s downloading and retention of the 2009 Software. The Defendants submit that other than the “family partnership” point which they dismiss as incomprehensible, the only basis for an implied licence of the 2009 Software to Dr Coward is the principle of necessity explained in the Robin Ray case. In this regard, they point out that not only is there no pleaded case in this regard, but there is no evidence of necessity. In fact, Dr Coward himself said that he never intended to use the 2009 Software. Accordingly, it is said that there is no necessity whatever.

Mr Bloch QC submitted that it was obvious that as Chief Investment Officer of IKOS CIF, Dr Coward had a licence to make copies of the 2009 Software and the fact that they were made covertly had no effect upon the licence itself. He submitted that this was all the more so given the “family partnership” nature of the business itself. He went on to add that as a joint owner of the business, in the context of the dispute as to intellectual property and Ms Ambrosiadou’s conduct in late 2009/early 2010 in relation to surveillance, proceedings and the addition of a beneficiary in the trust structure, Dr Coward was impliedly licensed to keep a copy of the 2009 Software pending resolution of the dispute. These arguments were not pursued with any great force.

In my judgment, any licence which Dr Coward may have had as a result of his position as an officer of IKOS CIF quite clearly came to an end when he resigned in December 2009. Thereafter, in the light of the fact that Dr Coward accepted the validity of the business and trust structure, the fact that he is or was one of a number of discretionary beneficiaries in a complicated web of trust structures and received income indirectly from the IKOS business through such structures in my judgment, cannot lead to the conclusion that he had a licence to retain or use the 2009 Software. Neither, once he had parted company with the IKOS business can I see that there was any necessity for such a licence. In fact, it seems to me that the necessity worked in the opposite direction.

Which of the procedures in Annex 4 (“the Coward Software”) did Dr Coward write/co-write?

In this regard, Mr Bloch QC stressed that the Defendants have merely sought to undermine Dr Coward’s evidence but have not put forward a position case of their own. They have merely put Dr Coward to proof of his authorship of complex software written over a period of approximately seventeen years. Mr Bloch QC submits that there are no special rules of evidence in such circumstances. It is not necessary that Dr Coward’s evidence be corroborated in some way and that on the balance of probabilities what he says is true.

He also submitted that it was not necessary for a claimant to be able to produce the original in order to succeed in a claim for infringement of copyright. He referred me to Lucasfilm Ltd v Ainsworth [2009] FSR 2, a decision of Mann J. In particular at paragraph 60, he held:

“The inability to identify the drawings is not fatal to a claim to copyright and a claim of infringement. In Lucas v Williams & Sons [1892] 2 QB 113 it was held that a copyright action in relation to an original painting could be maintained notwithstanding that the original painting was not produced. All three judges held that the likeness to the original could be proved by a witness stating that he had seen the original and that the infringing item was like it. In Wham-O Manufacturing Co v Lincoln Industries Ltd [1985] RPC 127 the New Zealand Court of Appeal declined to adopt the position that in the absence of the original “the most rigorous evidence is necessary’. They adopted the position of the trial judge that where the original could not be produced to the Court establishing what it looked like was “ in each case . . . a matter of degree dictated by its own circumstances” (see 145). It is therefore clearly not necessary to produce an original. And it is a matter of inference what the contents of the original were.”

He also referred me to what is termed “the presumption of continuance” in Phipson on Evidence at paragraph 7-20. It is said that states of mind, persons, or things at a given time may in some cases be proved by showing their previous or subsequent existence in the same state, there being a probability that certain conditions and relationships continue. It does not seem to me that this presumption is of much assistance in this case.

Mr Bloch QC submits that there is plenty of evidence that Dr Coward wrote the code in Annex 4 and that even if he was careless as to its contents, which he does not accept, such carelessness would be insufficient to dislodge the evidence of authorship unless it was of such magnitude that it reflected on the reliability of Dr Coward’s evidence as a whole which he says is not the case.

He says that Dr Coward’s evidence was wholly plausible and that even Ms Ambrosiadou stated in her email of August 2007 that he wrote 80% of it. In fact, in my judgment her statement coupled with her explanation in cross examination do not amount to such a statement. Nevertheless, it was accepted by all that Dr Coward had been responsible for the architecture of the software.

Mr Bloch QC drew attention to the fact that in cross examination Dr Worden stated that Dr Coward clearly knew his way around the code and could do so in a way that neither he, Dr Worden nor Dr Thorpe could do. Mr Bloch reminded me that the Defendants have no positive case to put in relation to authorship. The question is whether they can persuade the court that on the balance of probabilities, what Dr Coward says is untrue. He says that they do not go so far as to say that Dr Coward’s evidence in this regard was untrue. Their complaints as to the incompleteness of the backups and the lack of better records do not affect the question of authorship.

With regard to the exercise carried by Dr Thorpe, Mr Bloch emphasised that although Dr Thorpe highlighted numerous instances where there were reasons to conclude that the date attributed to the original creation of the code was incorrect or that it had been contributed to, there was only one instance in which there was reason to conclude that Dr Coward had not written the original and that was the procedure known as yrstrt. In fact, although Dr Coward still maintains that he wrote all of the procedures but for yrstrt, for the sake of simplicity he has abandoned his claim to the sixteen procedures on which Dr Thorpe has cast doubt. In fact, he has abandoned his case in relation to not just Dr Thorpe’s sixteen but forty-five of the procedures over which there may be any doubt. The Defendants cannot point to anything in relation to the remaining 200 procedures which detract from Dr Coward’s evidence of authorship. He emphasised that Dr Thorpe accepted that his 16 examples were not a representative sample of the 245 procedures which were originally in the schedule, that other than yrstrt his complaints went to the date of creation and whether Dr Coward was responsible for 100% of the procedure and that he had stated in his first report that many of the procedures which he accepted Dr Coward had written, remained substantially unchanged. He also identified a substantial sub-set of procedures which he said were substantially unchanged and a further sub-set which were changed in one or more respects. Unfortunately, a table of those sub-sets was not produced. In cross examination, Dr Worden added that he recognised the layering of the software into core pieces and peripheral pieces and that in his experience the core piece was the product of one mind and it seems likely from Dr Coward’s testimony that it was his.

Mr Meade QC on behalf of the Defendants says that it is a commercial nonsense to suggest that one can disentangle the lines of code allegedly written by Dr Coward. He says that the intermingling began almost from the very start and now they are one. This is all the more so because Dr Coward eschewed versioning until some time in 2009. He submits that the 2009 Software comprises some 1300 procedures of which Dr Coward now claims 200 which it is accepted cannot stand alone. They are facets of a single system. Furthermore, he says that at the level of individual procedures it is not possible to identify the parts which Dr Coward wrote as distinct from those written by IKOS employees.

He says that the right question to ask in relation to authorship is whether in relation to each procedure Dr Coward has proved that he wrote it, not to posit generally whether he wrote some software. Dr Coward’s evidence he says is mere assertion and is confused.

In this regard, Mr Meade QC pointed for example to the procedure “arsquare”. He says that there is nothing whatever to indicate that Dr Coward wrote this other than his assertion that he did. In relation to “bs”, he says the style comment being */…/* it is likely that it was written by Peter Ho but nevertheless it remains in the procedures to which Dr Coward lays claim.

He also reminded me that there are no time stamps at all which relate to the first period in 1992, that Peter Ho worked with Dr Coward from 1993 until 2008, that they were joined by Dr Gover in 1994 and thereafter, by many others. He also submitted that a substantial part of the software, in fact, as much as 75% was re-written in 1994-5 after IKOS Partners had ceased to trade in Japanese warrants.

He also highlighted the number of changes in Dr Coward’s evidence with regard to the code. In fact, there have been five versions. The first was produced from memory, the second after the 2009 Software was made available, the third served with his witness statement after the 1998 version was released, the fourth served with a further witness statement and the fifth before his evidence was given. Nevertheless, Dr Coward appeared not to have taken account of the errors highlighted by the experts in their reports and even by his own expert Dr Worden and he had added procedures such as yrstrt which was clearly written by Peter Ho and trstdc of which he said he had written 100% whereas it was clear that there had been two other contributors. In relation to “mtmm” which Dr Thorpe pointed out had been worked on by Sam Gover, Dr Coward stated that he had seen the error for himself when reviewing the code again before trial. Mr Meade submitted that had that been the case, he would have discovered many more obvious errors. He submitted that it was much more likely that Dr Coward had merely skimmed the code and was relying on the names of the procedures.

Mr Meade QC also drew attention to the fact that Dr Coward had retained procedures which contained /*. . . */ comments despite the fact that his pleading stated that @ . . . @ was his style. As I have already mentioned, when cross examined about this Dr Coward stated for the first time that he also used the other style and because the latter had not been available throughout and that he had gone back and changed some.

Taking all these matters into account, I note that although Dr Thorpe on behalf of the Defendants looked at a number of areas of the code and from those “hot spots” discovered sixteen procedures over which he raised doubts as to the extent of Dr Coward’s input and the timing of their creation, on the whole, both he and Dr Worden were satisfied that the core of the software had been produced by a single mind.

Although Dr Thorpe’s investigations revealed numerous quite serious errors in Annex 4 which was amended on a number of occasions and Dr Coward’s evidence in cross examination showed a careless disregard of the details of that schedule, despite various errors having been pointed out both by Dr Thorpe and Dr Worden, neither the carelessness nor the errors as to timing and contribution are sufficient to outweigh my conclusion that on the balance of probabilities, Dr Coward was the original author of the 200 procedures which remain in the schedule.

In this regard, I take account of his unchallenged evidence that he designed and coded the trading system and wrote all of the Gauss software which was used in 1993 and which itself was the template for further development by him and others. In cross examination he was also able to explain the code and its workings in a way which corroborated his recollection which he had distilled into the schedule before the court. He was also able to describe the history of the development of the code as it moved between procedures. It is not in dispute that where others worked on the code they did so under his supervision and indicated their changes to it by leaving comments. Furthermore, in the remaining code of which Dr Coward claims to be the author, (other than yrstrt which is no longer relied upon) there is no attribution to anyone else in the code to suggest that it was written by someone other than Dr Coward.

When did Dr Coward write the Coward Software?

Given my finding that software written before 8 December 1992 and after that date was all partnership property, the precise date upon which any particular part of the Coward Software was written between August or September 1992 and 2006 is no longer of importance.

Had the issue arisen, in the absence of versioning and reliable backup, it would have been a difficult question to answer. This is all the more so because it was both the experts’ and Dr Coward’s evidence that the time stamps in relation to files are all but useless when it comes to dating the creation of any procedure within it. Furthermore, none of the dates in the code which Dr Coward claims to have been the author was found by the experts to be before 1994.

Who owns the copyright in the Coward Software? And if it is Dr Coward, is IKOS nevertheless entitled to continue to use it for its business?

This issue has already been determined.

In respect of each of the works in the Coward Software, is the whole or a substantial part reproduced in the 2009 Software?

As Mr Bloch put it, having decided that Dr Coward was the original author of the 200 procedures, it is necessary to determine whether in relation to each of those procedures, there is reason to believe that the original version of the procedure is different from the earliest version of which there is a copy, or is sufficiently different to reflect the contribution of other authors and will make a material difference to the assessment of whether the 2009 Software reproduces a substantial part of that original work?

As I have already mentioned, in this regard, Mr Meade QC on behalf of the Defendants objected to the four categories set out in the Lewis Silkin’s letter of 4 March 2013 which I accept.

However, Mr Bloch QC submitted that a comparite reveals that the vast majority of the original of each procedure was retained in the later version. It provides a quick visual impression. Mr Meade QC did not object to its use for this purpose. When one looks at that comparite, applying the test in the Designers Guild case, in my judgment it is relatively clear that a substantial part of the Coward Software is reproduced in the 2009 Software.

Was Dr Coward entitled to do the acts in Absolom 1 in relation to the 2009 Software?

In fact, this issue has already been addressed under Issue 10 above. I have already found that Dr Coward did not have a licence to use or retain the 2009 Software.

What was the scope of Dr Coward’s duty of confidence in relation to the materials listed in the Re-Amended Defence and Counterclaim at 55C? Was Dr Coward entitled to use such materials for his own purposes?

Dr Coward by sub-paragraphs 22E(4) and 22F of his Re-Amended Reply and Defence to Counterclaim admits that the materials listed at paragraph 55C of the Re-Amended Defence and Counterclaim are confidential and are owned by IKOS. It follows therefore, that in accordance with his duties as an employee and a director of IKOS CIF, those materials should have been kept confidential and used only for the purposes of the IKOS business.

The claim is limited to the materials in the form of documents and therefore, questions based on skill, knowledge or experience considered in Faccenda Chicken Ltd v Fowler [1987] Ch 177 do not arise.

What remedies (if any) is Dr Coward entitled to on his claim?

Given my judgment in this matter, this issue does not arise.

What remedies (if any) is IKOS entitled to on its counterclaim?

This is a matter upon which it is agreed that there be further submissions following judgment. However, during the hearing it was Mr Meade QC’s position that he sought nominal damages in relation to the Burns and Steyning matters and the copying of the 2009 Software in 2009 and 2010 which is now admitted. He drew attention to what he said was the deliberate extraction of the Burns and Steyning materials and the copying of the 2009 Software despite the fact that it contained post 2006 material. He drew attention to the covert copying and re-copying and urged me to take this into account when determining whether an injunction should be granted in order to protect the IKOS position. In summary, therefore, he seeks nominal damages, delivery up, an injunction and a declaration of infringement.

Mr Bloch QC emphasised that there was and is no threat of use and that therefore, an injunction is unnecessary.

I shall return to this matter once further submissions have been made.

What should the regime be for the delivery up/destruction by Dr Coward of the Burns/Steyning Materials?

It has been agreed that a forensic image of all of the Burns and Steyning materials should be retained by Navigant, an independent firm which has been jointly retained by the parties for similar purposes to date. It is also agreed that there be liberty to apply in this regard.

With regard to the Steyning PC, although it is not disputed that it is the property of the Defendants, as I understand it, they do not press for its return at this stage as long as it is also held by Navigant.

Although I will hear further submissions in this regard also, it seems to me to be relatively clear that all other copies of the Burns and Steyning Materials in the possession, custody or control of Dr Coward should be destroyed and the completion of the destruction confirmed on oath.