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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Ultraframe UK Ltd v Clayton & Ors [2003] EWHC 242 (Ch) (14 February 2003) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2003/242.html Cite as: [2003] EWHC 242 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(transferred from the Leeds District Registry)

		Royal Courts of Justice Strand, London, WC2A 2LL
		14th February 2003

Mr Justice Laddie:

1. I have to resolve a dispute between the parties on the issue of costs following on from the determination of the preliminary issues ordered to be heard by His Honour Judge Behrens. It is difficult to summarise the complex multifaceted dispute which exists between the parties and in relation to which the determination of the preliminary issues arose. The issues I had to concern myself with related to the ownership of the design rights in the parts from which conservatories are made, whether a case of infringement by the defendants have been out and whether design rights subsisted. However this is just a part of what is really a very big and convoluted dispute.
2. The power to make an order for costs is set out in the CPR. The primary rule is that costs follow the event, although the court does have a discretion to make another order where the circumstances justify.
3. Before turning to consider the immediate effect of the order made on the preliminary issues I should say something about this multifaceted dispute. There are, in substance, two camps waging a war of attrition against each other. On the one side is Ultraframe (UK) Limited ("Ultraframe") which is represented before me today by Mr. Speck. Ultraframe is a major designer, builder and supplier of conservatories in the United Kingdom. On the other side is a camp which is also involved in the manufacture, design and supply of competing conservatories. The company which currently carries out that business is called The Burnden Group Plc ("the Burden Group"). 90% of the shares of that company are owned by Mr. and Mrs. Fielding. Mr. Fielding is the managing director of the Burnden Group. Other people who are or were, at least at one stage, on what might be called the Burnden side were Mr. Alan Clayton, Mr. Edwin Birkett and Mr. Jeffrey Naden. There are two other companies which feature as parties to the litigation whose allegiance may be said to have changed over time. They are Northstar Systems Limited ("Northstar") and Seaquest Systems Limited ("Seaquest").
4. As I have said, it is difficult to summarise the complexity of the dispute but I will try to do so as briefly as possible. Northstar and Seaquest were companies created by Mr. Howard Davies. Mr. Davies also owned or controlled some other companies, the majority of which included the word Quickfit in their name. Mr. Davies was the designer of a new form of conservatory system which was marketed through one or more of his various Quickfit or Northstar/Seaquest companies from time to time in fierce confrontation with Ultraframe. In the judgment in relation to the preliminary issues, I described Mr. Davies. As the parties agreed, he was likely to have made an unreliable witness had he attended court. Although I held that he was primarily responsible for the design work for what became known as the Quickfit designs of conservatory parts, he demonstrated a certain flexibility both as to the question of paying tax, receiving wages and to saying precisely on what basis the design work he carried out was carried out. From time to time he claimed to own the designs personally. Sometimes he claimed that the designs were the property of his companies. Tying him down would have been a difficult task. Indeed it may have proved impossible.
5. For reasons I do not need to go into now, Mr. Davies and his companies fell on hard times. Mr. Davies was made bankrupt and, on different dates, his various companies went into liquidation. Ultraframe purported to purchase Mr. Davies' title to the design right in the Quickfit designs from Mr. Davies' trustee in bankruptcy. On one version of Mr. Davies' account of events, it would have been the correct thing to do if Ultraframe were to end up owning those designs. Subsequently Ultraframe acquired Northstar and Seaquest. Whether Northstar owned the design rights depended upon whether Mr. Davies created those designs for and on behalf of his companies either as an employee or as director or whether he owned them personally.
6. According to Ultraframe, Messrs. Clayton, Birkett, Naden and the Fieldings were cooperating with or at the least highly sympathetic to Mr. Davies. Mr. Davies was continuing his interest in the conservatory business through some or all of them. The suggestion is that Mr Davies is in or sympathetic to the Burnden camp. With the demise of the Quickfit, Northstar and Seaquest companies and Mr. Davies' bankruptcy, and their purchase of the design rights, Ultraframe thought that it had secured the designs to the competing conservatories. However, within a short time, any confidence it could have had that that was so must have evaporated because it discovered that shares in Northstar and Seaquest were being transferred by some or all of Messrs. Clayton, Birkett and Naden to Mr. Fielding.
7. This was the trigger for the first of the numerous actions which have now been commenced. It was started in the Leeds District Registry. In those proceedings Ultraframe sought to prevent the transfer of the shares in Northstar and Seaquest and sought to bring proceedings against Messrs Clayton, Birkett and Naden for breach of trust. It also claimed that there was a conspiracy to injure Ultraframe by various unlawful means, including infringement of design right, breach of trust and so on. Interlocutory proceedings were brought but I do not need to go into those. Then came the second Leeds Action, this time brought against Mr. Fielding, Northstar and Seaquest. In these proceedings Ultraframe tried once again to stop the transfer of shares in Northstar and Seaquest which had by this time been acquired by Mr. Fielding. It also sought to set aside two allegedly fraudulent debentures over the assets of Northstar and Seaquest. Summary judgment has been obtained by Ultraframe in relation to some of the causes of action in this action but for present purposes that does not matter.
8. Those actions were consolidated and, in the consolidated action, Ultraframe sought a declaration that the intellectual property rights, in particular the design rights, were owned by Mr. Davies, whose rights, it will be recalled, it had acquired from Mr Davies' trustee in bankruptcy.
9. Additional proceedings were commenced in London. They have been called the London proceedings. In these proceedings Ultraframe is the claimant and Mr. and Mrs. Fielding and the Burnden Group are the defendants, the Burnden Group being the group which is now making conservatories and parts for conservatories which Ultraframe claims are, in substance, copies of the Quickfit designs which it thought it had purchased from the trustee in bankruptcy. In fact, Ultraframe says that if the designs happen to belong to Northstar, it has also acquired them by an alternative route, because it owns Northstar. Needless to say, all questions of who owns what is thoroughly in dispute as a result of the Leeds proceedings. There has been an order for consolidation of the two Leeds Actions and also that those actions and the London Action should be tried together,
10. There are two other actions with which I should deal now, although they are very recent compared to all the others. There is a fourth action by the liquidators of Northstar for design right infringement and breach of trust and fiduciary duty against the Fieldings, Mr. Naden and the Burnden Group. In other words the liquidators are arguing that, to the extent that Northstar owns the design rights, then they are entitled to sue the Burnden Group for infringing those rights by making substantial reproductions and copies of the Quickfit designs. There is also a fifth cause of action which is either to be commenced as separate proceedings or may be introduced by amendment into the fourth action. The fifth action is also to be brought by the liquidators. The fourth action does not include claims for design right infringement. The fifth action does. When I asked Mr. Wyand, who appears for the Burndon Group – but not the other defendants -, whether that was the sum total of the proceedings, he did remind me -- I am sure I was told it earlier -- that in fact there was a certain circularity about this because in the Leeds Action an order is being sought to have the liquidators removed on the basis that they are mere "poodles" for Ultraframe. It is not in dispute that Ultraframe is funding the liquidators of Northstar to bring the various proceedings they have commenced against the Burnden Group. I do not know yet whether the ingenuity of the parties will lead to the commencement of further proceedings. Perhaps five is enough.
11. Weaving a thread through this thicket of litigation are the design rights. His Honour Judge Behrens ordered the trial of preliminary issues as to who owned design rights, whether those design rights subsisted and whether they were infringed. They came before me last year. In those proceedings Ultraframe advanced its primary case, or, as Mr. Wyand would say, its only case, on the pleadings then existing in the various actions, namely that it owned the design right by virtue of the acquisition from Mr. Davies' trustee in bankruptcy. On the other hand the defendants said that the design rights did not exist because they failed the so-called must fit and must match provisions of the Copyright, Design and Patents Act 1988. I was taken at length through Mr. Davies' varying versions of who owned the rights and whether he owned them for himself or for the company. At the end of the day I came to the conclusion that Mr. Davies was at all material times, except for a short interregnum, an employee of one or other of the Quickfit companies or Seaquest or Northstar and that the designs were created by him in the course of his employment. The design rights, therefore, belonged to one or other of his companies. Indeed, all or nearly all of them have ended up in Northstar. Mr. Speck has indicated that he will apply shortly for permission to appeal on the decision in relation to ownership by Northstar. On the other hand, I have held that, save in respect of two trivial parts, design right did subsist in the various parts and that all of them had been infringed by the manufacture of substantial copies by the defendants, irrespective of who the correct owner was.
12. The defendants say that, on the basis of my judgment, Ultraframe has lost the overwhelming majority of the points in issue on the trial of the preliminary points. In my view they are clearly right on that. In particular they say that the result is that the current London Action (that is the third one referred to above) must be dismissed. Unless my decision on ownership is overturned, Ultraframe's claim as pleaded in that action has failed.
13. With a certain lack of enthusiasm, Mr. Speck concedes the last point. His lack of enthusiasm arises as follows. At the beginning of this hearing on costs, Mr. Moody-Stuart appeared on behalf of the liquidators for Northstar with an application which would have allowed them to be joined as claimants in the London Action so as to maintain exactly the same design right infringement claim that Ultraframe was maintaining. The difference would be that the claimants would now be claiming title through Northstar, which, as a result of my judgment, is the proper claimant to advance that claim. It was clear on that application, which was unsuccessful, that the liquidators for Northstar had discussed with Ultraframe the question of joining the London Action. It is clear that the liquidators can be regarded for this purpose as part and parcel of the Ultraframe side of the dispute. Indeed it is for that very reason, amongst others, that in the Leeds proceedings an attempt is being made to replace the liquidators and it was, as I understand it, part of the reason why objection was taken by the defendants to the liquidators being allowed to join in the London Action as it was seen to be a method of deflecting the defendants from recovering their costs of that action.
14. Normally an order for costs on the determination of the preliminary issues would follow the event. Since the Ultraframe London Action will be struck out, the costs of that action go to the defendants and the costs of the preliminary issues, in so far as they relate to the matter of ownership, should go to the defendants because the claimant's only assertion of ownership on the preliminary issue was that it had ownership through Mr. Davies. It did not raise before me a claim that it had ownership of the design rights through Northstar. It is worth mentioning that at one stage, that is to say in the second Leeds proceedings, Ultraframe was suing Northstar for infringement of design right because at that stage at least its preferred claim to title to the design right was still through Mr. Davies. If it was right on that, then Northstar did not have the design rights and any reproduction of the designs by Northstar would have been an infringement.
15. The issues that I have to consider are how to apportion the costs on the preliminary issue, whether there should be interim payments and whether I should deal with the costs at all at this stage. Mr. Speck says that I should not deal with the question of costs on the preliminary issue at this stage because there is a substantial chance that when all these actions come on for trial it will be found that the various defendants have to a greater or lesser extent been engaged in fraudulent activities, including the forgery of documents.
16. It is clear that, whatever issues are left outstanding and even if the London Action goes, all the proceedings should be heard together since it will be difficult, if not impossible, to extricate the issues in one from the issues in the others. Even if there is not yet an order that action number 4 and potential action number 5 should be heard with actions 1-3, in my view it is overwhelmingly likely that such an order will be made unless strong arguments are advanced against it.
17. As mentioned above, Mr. Speck says that there has been extensive forgery and fraud. He says that the defendants have strained every sinew to avoid the issues relating to their dishonesty being determined by the court so that they can hide their turpitude for as long as possible. He says that this is a reason why I should not deal with the costs now. He says that it is possible, though not inevitable, that if he makes out his claims for fraud and forgery the trial judge will eventually come to the conclusion that, to a greater or lesser extent, all of the disputes which have surfaced in the four or five actions have been caused by the defendants' wrongful acts. It could be said that, had Mr. Speck's clients at an early stage nailed their flag to Northstar being the owner of the rights, Mr. Davies and those who are in the same camp would have run an argument that he owned them personally. In the end it is suggested that the only way true justice can be done is if all these interlinked issues are determined by one judge who can see the whole picture rather than just the partial picture which is all that can be seen on the determination of preliminary points.
18. Mr. Speck is nothing if not an enthusiast and he told me with what, for him, might be called mild confidence that he could see a day coming when even though he had lost the issues on ownership of title through the acquisition from the trustee in bankruptcy, the judge would make an order for costs in his client's favour on that issue or might not require his client to pay its opponents' costs.
19. The arguments against this approach are simple. The third action, the London Action, is going to be struck out. It would be most unusual not to make an order for costs in favour of the defendants immediately. Furthermore, it can be said that the claimant's current problems are of its own making. As soon as an order for the determination of the preliminary issues was made by His Honour Judge Behrens, the claimant, instead of soldiering on and fighting the issue of title (which it has lost) should have thrown its hand in on that and changed to backing the Northstar origin for their claim to title. In addition to this, it is said on behalf of the defendants that Ultraframe is a very large company with enormous assets and is much bigger than the defendants. Having lost the preliminary point it should pay the costs now. There is no reason why its smaller opponents should be kept out of their money.
20. The latter argument can be refined somewhat. The Burnden Group has grown dramatically on the back of the copies of the Quickfit designs which it has been making and selling. I do not understand it to be suggested that the Burnden Group is in any way embarrassed by the cost of this litigation. As far as the Fieldings personally are concerned on the other hand, it is said that their costs of this litigation, notwithstanding the fact that most of it is designed to prevent the Burnden Group manufacturing copies of the Quickfit conservatories and notwithstanding that they are a 90% shareholder in the company, are being borne by them personally. On the other hand there is no suggestion in the evidence that that they are personally embarrassed or are in severe financial straits as a result of this litigation.
21. Mr. Wyand does not suggest that I do not have jurisdiction to make an order as sought by Mr. Speck reserving the costs of the London Action and the preliminary issues, but he says that it would be extremely unusual to exercise it in that way. Furthermore he argues that once the London Action has gone, the two Leeds Actions which will continue have Ultraframe as a party but his client the Burnden Group is not. He says in respect of the proceedings brought by the liquidator of Northstar that Ultraframe are not a party and it would be odd, therefore, to stand the issues of costs over to a judge who is hearing proceedings in none of which both his clients and Ultraframe are simultaneously parties. Mr. Purvis could not run the same argument in respect of the Fieldings, but it is clearly a point which can be made with some force in relation to the Burnden Group.
22. When I started this judgment, I referred to this as a multifaceted dispute and that description was deliberately chosen. I have already mentioned the fact that the liquidators of Northstar are bringing their proceedings, so the defendants say, at the behest of Ultraframe and indeed on Ultraframe's behalf. The reason why Mr. Moody-Stuart wanted to add the liquidators' claim under design right to the London Action was because, in substance, the liquidators were representing or could be said to represent in major part Ultraframe's interests in the design right since it is not in dispute that Ultraframe are the current owners of Northstar.
23. When it comes to deciding what to do about the question of costs, although the CPR sets out a standard approach, the discretion given to the court is there to allow it to do justice in the circumstances of individual cases. Mr. Speck's submissions in the end come down to quite a small point. He says that if I make an order for costs now in relation to the preliminary issues in the Ultraframe London proceedings, that is to say an order for costs against Ultraframe, it will deprive the judge who sees the whole dispute, including all the really unpleasant allegations which have been made by one side against the other and vice versa, of the opportunity of doing justice on the issue of costs. I think he is right.
24. If this were a case where the receiving party would be severely prejudiced by an order reserving the costs, then perhaps I would have felt driven to make an order for costs in his favour at this stage. This is not such a case. As I see it, these preliminary issues are but an important skirmish in a very large interlinked dispute. It is possible, though by no means certain, that the court may come to the conclusion that the defendants have acted so badly that it would be unjust to make Ultraframe pay their costs even of the issues they have won on on the hearing of these preliminary issues. For that reason I have decided that the better course is to reserve the issue of costs to the determination of the Leeds Actions. I will strike out the London Action but in reserving costs I reserve the costs of the London Action also. I make this order in the expectation that soon there will be an application, if there is not an agreement, for the liquidators' actions to be heard together with the Leeds proceedings.
25. I should only add one thing. I have tried to set out in this judgment the reasons why in all the circumstances I think it is better not to make a final determination of the issue of costs now but to reserve it to be determined at a later date. I have tried to indicate the complexity of the matters involved. Some measure of the complexities involved perhaps can be gathered from the fact that the argument in relation to the issue of costs itself took over a day. In my view that was not because counsel were in any way inefficient in their submissions but it was a reflection of the multitude of factors which were brought to my attention and which have played a greater or lesser part in leading me to this decision.