Lilley v Chartered Institute of Management Accountants

This is an application to strike out the claim in this action brought under CPR 3.4(2)(a) and/or (b) and/or (c), alternatively under the court's inherent jurisdiction.

The respondent to the application (the claimant in the proceedings) is Mr Victor Lilley. He has appeared in person to resist this application, but he is a very articulate individual of obvious intelligence, if I may say so; and he has put in much work on the law which has enabled him to put forward a detailed claim, including the product of his legal research.

I say a "detailed claim": the Particulars of Claim which Mr Lilley has served comprise 12 parts, including schedules of damages that run to some 180 pages, albeit it should be mentioned that they are in a large typeface which has no doubt increased the number of pages involved. It is, with great respect to Mr Lilley, a somewhat convoluted document which refers in turn to many authorities and sometimes to documents that, as it emerged in the hearing, were not served with the Particulars of Claim. If this action were to proceed, it would need to be re-cast into a proper form. But the nature of his case can be ascertained from that document and I was able, with Mr Lilley's assistance, to clarify it at the outset. It may be helpful if I summarise what the case involves, as confirmed to me by Mr Lilley at the opening of this hearing.

Mr Lilley wrote 13 articles about what may generally be described as business and accounting management, particularly with reference to Information Technology (“IT”). He submitted them through his company, Lilley Information Systems Limited ("LIS"), to the editors of the magazine Management Accounting, which is published by the defendant, The Chartered Institute of Management Accountants ("CIMA").

Those 13 articles were submitted between 1992 and 1998. They were accepted for publication and published between May 1992 and December 1998. In each case, in providing the articles to the editors of Management Accounting the submission and the articles themselves stated that they would be provided with "first British serial rights". What I have said so far, appears to be common ground and not disputed by the defendant.

On that basis, Mr Lilley contends that copyright was retained by LIS and that LIS was only giving CIMA a licence for first published publication in the United Kingdom. In particular, it was not giving CIMA the right to sub-license others for further publication, nor to reproduce the articles in electronic form on-line. Copies of all of those articles were in fact published on certain websites that are distributed from the United States. There were four particular on-line distributors involved. One was called the Thompson Gale group, which published through an on-line site called “Access by Library”; they published six of the 13 articles. They, it seems, passed them on or sub-licensed them to an entity called Highbeam, which published nine of the articles. The second of the distributors was Factiva, which published five of the articles. The third has been referred to as EBSCO, which published ten of the articles. Finally, there was ABI Proquest, which published all 13 articles.

The publication by Thompson Gale group was pursuant to an agreement which CIMA had entered into with the Thompson Gale group under its previous name of IAG in 1993. Mr Lilley contends that the on-line publications infringed the copyright of LIS and I think, although not perhaps spelt out with clarity in his Particulars of Claim, he contends that there was a breach of the contract by which he licensed the copyright for first UK printed publication to CIMA, the breach consisting of an agreement that was given by CIMA to these US on-line distributors to republish in electronic form.

Next, he contends that LIS assigned the copyright in all the articles to himself. The details of the assignment are not included anywhere in his lengthy Particulars of Claim, but he showed me the document which he says constitutes the written assignment. That was entered into on 10 August 2007, initially without consideration; and then there was a supplemental agreement with nominal consideration on 8 December 2008.

As assignee of the copyright, Mr Lilley claims damages for infringement. He has obviously considered carefully the leading authority of General Tire & Rubber Co v Firestone Tyre and he says his primary claim is on the basis of a Group 2 approach. It may be that it is more appropriately seen as a Group 3 approach, but in any event he sets out his detailed calculations in schedules included with his Particulars of Claim. It is striking that he alleges that the damages to which he is entitled are over £450 million.

He also includes an additional claim for damages for what he calls "unlawfully resisting the infringement claim". That is explained in Part 1 of his Particulars of Claim at para 10 as follows: "...apart from the defence being wrong, the defendants have wasted LIS’ time [and I presume he now says his time] because of failing to give adequate reasons and authorities." And, he says, "this is claimed as negligence or failing that, attempted deceipt or whatever tort the court deems appropriate".

The claim form was issued on 26 April 2012, naming a single defendant, Mr Charles Tilly, who is the Chief Executive of CIMA. On 24 August 2012, and thus within the four months validity of the claim form, Mr Lilley purported to serve it on the solicitors to the present defendant. However, they responded that they were not authorised to accept service on behalf of Mr Tilly. By that stage, Mr Lilley had applied to the court to amend the claim form to delete Mr Tilly and substitute CIMA and with his letter he sent a draft of the amended claim form, since he had not yet received a stamped claim form issued by the court.

He received the issued claim form very shortly afterwards on 29 August 2012. It bears the stamped date of 9 August and it appears that there had been delay in sending it to Mr Tilly, no doubt because of shortage of staff over the summer holiday period. On that same day, Mr Lilley served it on the defendant's solicitors, who of course were authorised to accept service on behalf of the defendant. Since the original claim form was issued on 26 April, by the time Mr Lilley came to serve it in the amended form it was therefore out of time under CPR 7.5.

Mr Lilley has not applied for an order extending the period for compliance pursuant to rule 7.6. The first point taken by Ms Lane on behalf of CIMA is that, therefore, the claim was not served within time and it should be struck out on that ground. She acknowledged this is a somewhat technical point in the present case, but normally an application to extend time must be made and made promptly within the time for service.

I think it is appropriate for the court nonetheless to grant an extension of time to Mr Lilley. I say that because it is clear that he was endeavouring to get the claim form amended within the four month period. Given that the court issued it on 9 August, he had obviously sent his application before 9 August. He was also diligent in sending it to the defendant by way of service as soon as he had received it. It follows that it could be inferred that if he had received it before 26 August he would have served it before 26 August. And most significantly of all, in my view, in his letter to the defendant’s solicitors of 24 August he sent the amended claim form in unsealed form and, therefore, the defendant had full notice within the four month period that an amended claim form was about to be served.

I consider, taking all that into account for a litigant-in-person, it is appropriate to extend Mr Lilley's time.

The next point that was taken is that the substitution of CIMA for Mr Tilly is one that in so far as it occurs after the limitation period requires the permission of the court pursuant to CPR 19.5; moreover, CPR 19.5(2) restricts the circumstances in which such substitution may be permitted. This only arises on the assumption that the period of limitation under the Limitation Act 1980 had expired. I shall return to that when considering the limitation defence, but for this purpose I shall assume that CPR 19.5 is engaged.

I should also make clear that in so far as Mr Lilley is claiming for violations that occurred within six years of the issue of the claim form, he does not need permission and, therefore, for any breaches or infringements in that period there is no problem about the substitution. The issue concerns those that would otherwise be time barred.

Rule 19.5(2) says that the court may add or substitute a party only if "(a) the relevant limitation period was current when the proceedings were started; and (b) the addition or substitution is necessary". I will assume for this purpose that the limitation period was current when the proceedings were started and turn to the second ground of necessity. That is explained in paragraph (3):

“The addition or substitution of a party is necessary only if the court is satisfied that... (a) the new party is to be substituted for a party that was named in the claim form in mistake for the new party."

(The two alternative grounds in (b and (c) are not relevant here.)

Mr Lilley says that he had intended in his original claim form to name not just Mr Charles Tilly but also CIMA and it was a mistake that CIMA was omitted. He referred to the letter that he wrote when asking for the amendment which said that it was a mistake, but he says he cannot remember why that mistake was made.

I have to say I am somewhat sceptical that someone who had devoted so much effort to the pursuit of his claim would have left off CIMA by simple error in that way. I note that on 17 April 2012, just over a week before the claim form was issued, Mr Lilley wrote a personal letter to Mr Tilly, after having corresponded with his solicitors, complaining about the conduct of his solicitors in which he made accusations regarding CIMA, and then concluded:

On the other hand, it may be that the correct interpretation of that letter is that he was suggesting that Mr Tilly would be personally liable for the way in which Collyer Bristow were acting and not for the underlying infringements of copyright about which he was complaining. It is certainly correct to observe that in correspondence with Collyer Bristow that had been conducted by Mr Lilley for several years, he had been alleging infringements by CIMA and never suggested that Mr Tilly was personally responsible. I refer in particular to his letter of 16 April 2008, written perhaps on behalf of LIS and enclosing a draft Particulars of Claim in which it is clear that the defendant he was potentially holding responsible for infringement of copyright was CIMA. There is no suggestion of any personal liability on the part of its chief executive.

Despite this scepticism, in the light of the explanation that Mr Lilley put forward, and bearing in mind that mistake, as explained in the authorities to which Ms Lane has helpfully referred me, must be a mistake as to the name of the party rather than as to the identity of the party, I am just persuaded that it can be said that Mr Lilley really had intended to put the name of CIMA into the pleading and had not deliberately sought to identify a different party. I am reinforced in this on the basis that it is clear that the party which Mr Lilley says he intended to sue, namely CIMA, was well aware of the proceedings and does not suffer, it seems to me, any injustice through this substitution. That is particularly so where the original claim form naming Mr Tilly was only served at the same time as the draft amended claim form correcting the mistake by substituting CIMA.

That brings me to one of the main grounds on which this strike out application is based, namely a limitation defence. In that regard, it is necessary to go back to the nature of the claim. What it is said CIMA did was, in effect, to authorise the US on-line distributors to place these articles on their websites. If that was, as I suggested could be alleged, a breach of the contract made by LIS with CIMA when the articles were submitted, those contracts were made between 1992 and 1998, it is clear that the placing of the articles on-line was done shortly after they were published in print. It was certainly not done for the first time after 2006 and so any breach of contract was well beyond the six year limitation period. The same is true, therefore, of any agreement whereby CIMA may have authorised those distributors, assuming that such agreements were made with distributors other than the Thompson Gale group as to which at present there is no evidence.

Beyond that, the other acts that may be complained of can only give rise to a cause of action against CIMA on the basis that they constitute infringement under section 16(1) of the Copyright, Design and Patents Act 1988 (“the Copyright Act”) that was further authorised. This is on the assumption that any authorisation by CIMA was continuing, and therefore constitutes a continuing infringement under section 16(2). But the protection given by section 16(1) is territorial in its scope: see the opening words of the subsection. Infringement therefore involves copying the work or communicating the work to the public in the United Kingdom.

The distributors are all, as I said, based in the United States so they did not copy the work in the United Kingdom. Therefore, the only infringement as to which there could be any continuing authorisation is communicating through the web to the public in the United Kingdom. Where there is on-line publication, it is established that infringement involves establishing both that the website is targeted at the United Kingdom and that there is downloading in the United Kingdom. Targeting the United Kingdom may constitute a threatened infringement, but this case is not about threats: the articles have all now been taken down from the websites. Thus, there is no question of a continuing injunction; this is a claim for damages only.

In his recent judgment in EMI Records & Ors v British Sky Broadcasting Ltd [2013] EWHC 379 (Ch), Arnold J discussed what is required for communication to the public, referring to his previous judgment in the case of Dramatico v Sky, and the questions that arise. They essentially involve, first, an intention on the part of a person to target members of the public in the United Kingdom and, secondly, acts of downloading in the United Kingdom. That has not been addressed specifically by Mr Lilley in his Particulars of Claim. He did not appreciate how section 16 operated and he explained to me with some feeling that this point had not been raised with him in correspondence. I see that it may well be arguable that the publication of articles from an English magazine, Management Accounting, in the English language on a database on the worldwide web was targeted at the United Kingdom along with other English speaking countries. But whether there was any downloading in the United Kingdom within the relevant limitation period is a very different question.

Given the subject matter of the articles and the fact that they were published between 1992 and 1998, I can well imagine that there might have been downloading in the United Kingdom in the months and perhaps even couple of years after publication. But it would have to be alleged and supported by some evidence that there was some downloading within the six years before 2012 if that were the limitation period; that is to say, if the ordinary limitation period applied and it could not be extended.

Mr Lilley realistically accepted that, and that for his case to get anywhere he has to establish a postponement of the limitation period pursuant to section 32 of the Limitation Act 1980 (“the Act”). He showed from the repeated references to limitation in his correspondence that he had the Act in mind and a whole section of his Particulars of Claim is devoted to postponement of the limitation period under section 32 of the Act: see Part 8 of his Particulars of Claim.

Section 32 is headed "Postponement of Limitation Period in case of Fraud, Concealment or Mistake". In material part it reads as follows:

Mr Lilley's primary contention was that he comes within subsection (1)(c) because, he says, the authorisation or licensing by CIMA of the US on-line distributors must have been a mistake in that it failed to appreciate the way he had reserved copyright, since he did not imagine that CIMA had deliberately sought to violate his copyright.

However, that is a fundamental misunderstanding of what subsection (1)(c) means. It does not mean simply a situation where someone has made a mistake. It means that the action is for relief from the consequences of a mistake: that is to say, that the mistake from which relief is sought is an essential ingredient of the cause of action. It does not extend to a mistake which is causally connected with the cause of action. The cause of action here is under section 16(2) of the Copyright Act, or conceivably for breach of contract. Mistake is of course not an ingredient of either of those causes of action.

This is a point that was explained to Mr Lilley in a letter from the defendant's solicitors, written as long ago as 7 December 2009, when they pointed out that it had been observed judicially that it would be an odd result if the claimant were to be in a better position where the error is merely accidental than where it is deliberate. They pointed out that the mistake provision in section 32 could not apply. They were correct: see the reference in note 8-85.1 in Civil Procedure 2012 (The White Book), Volume 2, to the Court of Appeal judgment in Test Claimants in the FII Group Litigation v IRC [2010] EWCA (Civ) 103

In the alternative, Mr Lilley relied on deliberate concealment in subsection (1)(b) as explained by subsection (2). However, that too is a provision that has received full judicial consideration and is explained in the judgments of the Court of Appeal in Williams v Fanshaw Porter & Hazelhurst [2004] EWCA (Civ) 157. In his judgment in that case, Park J said at paragraph 14:

Mance LJ, discussing not only (1)(c) but also (2) said this about deliberate commission of a breach of duty, referring to the House of Lords decision in Cave v Robinson Jarvis & Rolf (a firm) [2003] 1 AC 384, at paragraph 31:

“Cave's case decided that the wording of section 32(2) -

"deliberate commission of a breach of duty” –

requires a defendant not merely to have intended to do an act which constituted a breach of duty, but also to realise that the act involved a breach of duty. In such a situation if the circumstances make it unlikely that that breach of duty will be discovered for some time, the subsection ... introduces a legal fiction that there has been deliberate concealment of the facts involved in that breach of duty."

Then at paragraphs 32-34, he continued:

Then Mance LJ continued:

On that basis, I consider the facts here. I do not see how it can begin to be said that any agreement made by CIMA to authorise the publication by distributors in the United States was a deliberate wrongdoing on its part based on a deliberate intention to violate or infringe Mr Lilley’s (or at that time perhaps LIS's) copyright. CIMA was no doubt passing internet rights in Managing Accounting in its entirety to those distributors in the way that it always did and as indeed the agreement with the Thompson Gale group required it to do. In short, there is nothing in the pleading under Part 8 of the Particulars of Claim, or in the amplified argument that I heard today, that begins to create a case that there was any deliberate breach of duty in this case, such that the “deliberate concealment” ground for postponement as amplified by subsection 32(2) could be engaged.

It follows that I find that all acts prior to six years preceding the issue of the claim form on 26 April 2012 are time barred. That means, accordingly, that the claim in respect of acts prior to 26 April 2006 cannot succeed and should be struck out.

The question then is, what is left of significance since that time? As I have explained, Mr Lilley has to show that there is by implication authorisation on the part of CIMA to on-line publication of the earlier issues of the magazine. It seems to me that he may be able to do so. This is not a summary judgment application by CIMA and I cannot say that Mr Lilley fails, on what I have seen, to set out a cause of action to that effect. But he then has to show that there has been communication of the work to the public in the United Kingdom, that is to say, an infringement within section 16(1). That brings in the two tests I referred to earlier about targeting the UK and downloading in the UK. In other words, Mr Lilley has to show that there was downloading of the articles in the United Kingdom since 26 April 2006. He has frankly not addressed his mind to that position. I expect he would say that this is because he had never had pointed out to him the territorial way in which section 16 operates.

I am very sceptical that there would have been any downloading to any material extent so long after the articles were published. As I said at the outset of this judgment, the articles concerned, in particular, the interaction of IT and business management. It is doubtful, in my view, that people in 2006 and onwards would have been interested in what had been written on such subjects eight or more years before. As everyone knows, IT is an area, perhaps more than any other, where advances in technology and techniques are very rapid. However, I recognise that Mr Lilley has not yet had an opportunity to address this point.

I should say that I was also shown information that CIMA obtained from Thompson Gale group regarding the extent of downloading of 8 of the 13 articles in the period from 2002 up to June 2006. As one might have anticipated, there is a significant decline as between 2002, when there were 179 downloads, and the first six months of 2006, when there were only 13. Moreover, those figures relate to the entire number of viewings of the articles worldwide; they are not restricted to the United Kingdom.

Ms Lane drew my attention to the position under CPR 3.4 whereby, as stated in the notes in Volume 1 of the White Book, the court can strike out a claim when it is wholly disproportionate to the costs involved and where, as the Master of the Rolls put it in Jameel v Dow Jones & Co [2005] EWCA (Civ) 75 "the game will not merely not have been worth the candle, it will not have been worth the wick." And he said:

In the light of that, it seems to me that the appropriate course to take on this application is as follows: I will strike out the claim or direct that is to be regarded as struck out in so far as it seeks damages for any period prior to 26 April 2006. I shall give Mr Lilley a period of 28 days in which to provide particulars of any downloading or viewing of any of his articles from any of these four or five website distributors in the UK in the period thereafter.

I shall give CIMA liberty to apply to the court to strike out under CPR 3.4 on the grounds of disproportionality and cost and expense, once those particulars have been supplied and it will be possible to see what in fact is being alleged under what remains of the claim. It is probably sensible that I reserve the matter to myself. I will then consider whether, if the claim is to continue, it should be transferred to the Patents County Court.

I should also state that the further claim for damages for unlawfully resisting the infringement claim discloses no cause of action. If Mr Lilley contends that CIMA is not conducting itself properly in the way it is resisting his claims, that is a matter for any application for costs; it is not a basis on which further damages can be recovered. Accordingly, that secondary claim for damages is struck out.