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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 >> Shanley v Lloyds TSB Insurance Services Ltd & Anor [2013] EWHC 411 (Ch) (25 February 2013) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2013/411.html Cite as: [2013] EWHC 411 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
INTELLECTUAL PROPERTY

		Case Number HC12C00789 The Rolls Building 7 Rolls Building Fetter Lane, London EC4A 1NL
		25 February 2013

1. In these proceedings the claimant seeks injunctions and an inquiry as to damages for alleged infringement of copyright, breach of confidence and breach of contract, together with other associated relief in relation to some computer software, the copyright in which is owned by him. Initially, this was meant to be the trial of all the liability issues that arise, and unfortunately there were some developments at the start of the trial which meant that by the start of the second day it was recognised by all parties that the trial could proceed to resolve all issues other than an allegation of allegedly infringing activity after 28th November 2011, and the result, therefore, I ordered by consent that

"This trial shall henceforth be for the purposes of resolving all issues, save whether there has been ongoing infringing use of the pilot scoping tool, as that term is defined in the amended particulars of claim herein, provided that the issues of whether pure archive use as asserted in paragraph 34A of the amended particulars of claim, and the use by Mr Ian Sutherland set out in his witness statement of 20th February 2013, are infringing shall also be resolved at this trial ..."

2. The trial took place on 20th to 22nd February 2013. I heard oral evidence in support of the claimant's case from Mr James Muirhead, the claimant, that the claimant's son (who I refer to hereafter as "JTS") and in support of the defendants' case from Mr Poulsen, Mr Monteith, Mr Hanson, whose evidence was not in the end challenged, Mr Williams and Mr Gulliver. The statements of Messrs McGarvie, McKeown, Eckett, Boyd and Redfearn were tendered by the claimant and were admitted unchallenged.

Background

3. The claimant is an experienced building contractor and businessman who has, in the past, operated substantial building construction businesses, principally concerned with the repair of properties on the instructions of building insurers. The second defendant ("Halifax") is a company that was part of the HBoS group. Halifax's business included the underwriting of home and building insurance. The first defendant ("Lloyds") carries on business in a similar area. As is well known, the HBoS group was taken over by Lloyds Banking Group in early 2009. Surprisingly, it is unclear on the evidence before me whether, following that takeover, Lloyds took over the business of Halifax or whether both continued to trade within the Lloyds group. The pleadings suggest that both continued to trade, although some of the correspondence that I was referred to suggested that only Lloyds continued to trade. It is not necessary that I attempt to resolve that issue, however, for reasons that I explain in detail later. It is necessary to note only that each defendant operated through a network of contractors who were contracted to the relevant defendant to carry out works necessary to make good damage to insured premises as and when instructed to do so by the insurer concerned.
4. These proceedings are concerned with the development of what has been referred to in these proceedings as a "Scoping Tool". In summary, a scoping tool is a PC application used by contractors, surveyors and claims consultants to create an estimate of the cost of repairing a building or part of a building using rates that have been pre-set by the insurer or have been agreed between the contractor and insurer concerned. Broadly, it enables an estimate to be created from primary measurements taken by the surveyor by the application to those measurements of various rates for different tasks as set out in the schedule of rates agreed with or fixed by the insurer concerned. Clearly, the preparation of such estimates will take a significant amount of time if done manually. The more automated the process can be made, the less time-consuming and, therefore, less costly it will become as an exercise.
5. The claimant disposed of his interest in a large and apparently successful construction company operating in the sector I have described some years prior to 2002. In 2002 he formed a new company called Completecare Scotland Limited ("CSL"). From the outset it was intended that the profitability and efficiency of the business would be maximised by the use of IT solutions applied both to scoping and claims management. With that in mind, the claimant embarked on a collaboration with Mr Muirhead, who, from 1996, had owned and managed a software development house called Ultrasoft Limited. The result of this collaboration was that by the autumn of 2006, CSL had developed and deployed within its own business a computerised claims management system called "Claims Control System", which incorporated or utilised a scoping tool called "Estimate Builder". This was, in effect, a spreadsheet which consisted of different pages for each room within a property where repairs were to be undertaken, and included as part of its functionality the capacity automatically to transfer data assembled on each page to a summary build-up page and then to the claims control system.
6. The benefits of these systems were described at paragraphs 18 to 19 of the claimant's second witness statement as being:

"... a turning point in the level of service management in controlling and increasing profits of jobs. It was tied to the database of rates and service levels for each aspect of the work, which was set by each of our customers so that as soon as a job was set up, it used the correct rates, and the admin staff could see that a contract had to be made with the insured within the right number of days, the surveyor's appointment within the next number of days, and so on. The system displayed critical jobs which had not yet been done in red, so it acted as a time-management function as well. After logging on, the admin staff could already see which were the most urgent things for them to tackle that day.

"As a result of everyone using the same basic information about a job, such as dimensions of the room being repaired, there was much greater accountability. The scope for accidental or deliberate exaggeration for the amount of work needed for plastering or flooring, for instance, was gone, so cost leakage was tightly controlled. This meant the estimate tool could also be used in an auditing function to check what had actually been done against what had been identified as needing to be done. Also it speeded up the progressing of the job compared with the previous way of doing things, where surveyors or foremen used to take notes by hand on site, typing them up when they got back to the office, transferring that information across to any of the tradesmen who needed them to work on the job and so on. It removed the risk of errors creeping in when communicating about the job between the various people working on it, and it allowed reporting to the client and to the insured about what was happening. We made so it you could print a report of the schedule of works without the pricing for that purpose. It saved time, labour, mistakes and miscommunication. Overall it was very, very cost effective."

7. At this time (September 2006) Halifax had its own scoping tool. It consisted of an Excel spreadsheet with separate sheets for each room of the building in respect of which the scoping exercise was to be carried out, with an automatic transfer of data created on those pages to a summary sheet. This scoping tool had no other functionality. Mr McKeown was employed at this time by Halifax as a business manager in its building services division. The hierarchical structure within that division was that Mr McKeown was Mr Monteith's line manager, and Mr McKeown's line manager was Mr Poulsen. Mr McKeown's witness statement was admitted unchallenged. He described in his witness statement the various estimating systems operated by the Halifax at this time, before saying this at paragraph 3 of his statement:

"Halifax provided no IT support for suppliers under any of these systems. The suppliers just used spreadsheets with no consistency. There was no end-to-end managing of the process once it had been given to a supplier. The process simply involved instructing the supplier by fax and awaiting an invoice. It was often commented on at the highest level that the most sophisticated piece of supplier management kit was a fax machine, and our supplier management process was referred to as 'fax and forget'. The supplier was given the job and eventually an invoice came back. It was all fragmented and unsatisfactory, with little or no cost or service level control of the supply chain."

Mr Poulsen accepted in cross-examination that the claim management system operated by Halifax was deficient because:

"Once we instructed a supplier ... we could not see what was happening to the claim until we received an invoice."

This was to be contrasted with the position at CSL, which was described by Mr McKeown at paragraph 9 of his statement in these terms:

"Completecare Scotland were a supplier on the Halifax network going back to 2006. CCS were one of several HBoS suppliers who had developed their own claims management system. CCS's system was one of the most sophisticated."

8. In late 2006 CSL started to undertake work for Halifax as one of its network of contractors. The process by which this came about involved some negotiation, which was handled in part at least by Mr Monteith on behalf of Halifax with the claimant on behalf of CSL. The claimant's case at trial was that a meeting took place on 8th September 2006 between him and Mr Monteith at which the discussions concerning CSL joining Halifax's network of contractors were concluded and that in the course of those discussions an oral agreement was reached between Mr Monteith, acting on behalf of Halifax, and the claimant, by which it was agreed that CSL would re-write the Halifax scoping tool so as to incorporate within it the functions of Estimate Builder, which would then be supplied, without charge, to Halifax for testing and evaluation alone. The claimant maintains that it was agreed that upon completion of testing and evaluation, the parties would negotiate a contractual licence for the commercial use by Halifax of that product, assuming that Halifax wished to proceed. This was disputed by Mr Monteith, who maintains that there was never any agreement between him and the claimant, either as alleged or at all.
9. What is not in dispute is, and in any event I find, that thereafter a scoping tool, referred to in the amended particulars of claim as the "Pilot Scoping Tool", was devised or developed by Mr Muirhead on the instructions of the claimant, acting at that time on behalf of CSL. The pilot scoping tool was developed from the existing Halifax scoping tool using Visual Basic for Applications ("VBA") language within the Microsoft Excel spreadsheet environment. This was different from Estimate Builder, which operated in the Access Database environment. In the result, the development added to the Halifax scoping tool much of the functionality and user interface to be found in Estimate Builder, utilising VBA macros, commands and soft buttons.
10. Mr Muirhead described the process in paragraph 12 of his witness statement in these terms:

"I did not discuss or know anything about the contractual arrangements between Jim Shanley and the Halifax for this work, since I did not expect or need to, nor did I discuss the contractual or financial arrangements for the work to be done with Jim Monteith at any time. Jim Shanley asked me to do the work and paid me for doing it. It must have been quite obvious to Jim Monteith that I was doing the work for Jim or else for CCS, since I would not have been doing the work at all unless someone was paying me for it. I did not just walk in and sit at CCS's premises doing coding for anyone who happened to pass by, and needed something done. I have never given the Halifax a licence to use the spreadsheet. I could not have done since, as far as I was concerned, the software belonged to Jim Shanley."

Save that it was suggested to Mr Muirhead in cross-examination, and accepted by him, that it was CSL rather than the claimant that paid him for the work, this part of his evidence was unchallenged.

11. The claimant's case is that in or about February 2007, Mr Monteith informed the claimant that Halifax had decided not to pursue the pilot scoping tool project. If this is what Mr Monteith told the claimant, then it was manifestly and admittedly not true. This is so because, by paragraph 13 of the amended Defence, the defendants plead that:

"It is admitted that until 9th September 2011, the defendants had continued to use the spreadsheets as amended by Mr Muirhead, and further admitted that such use was at all times commercial use. As of 12th December 2011, the defendants have started to use new spreadsheets which were created independently of the earlier spreadsheets."

12. It is accepted that the scoping tool was supplied to all the contractors on Halifax as network. This would appear to have taken place on or about 5th March 2007, judging by the e-mail from Mr McKeown to Mr Monteith of that date. It required every contractor to return a new signed contractor, in return for which it was to be sent the new scope tool, the schedule of rates to go with it and a note as to how to use the tool.
13. It is equally clear that within the Halifax organisation, the new scoping tool was regarded as a success, and Mr Monteith's role in delivering it was recognised as well. An internal appraisal for Mr Monteith in April 2007 recorded:

"HRS: Jim has worked hard and well to ensure the successful launch of HRS with his 13 suppliers. All of Jim's suppliers (13) who were offered contracts accepted the terms offered and signed their contracts. Jim completed training on the new scope tool with all of his suppliers prior to the launch of HRS. To date, Jim reports that all of his suppliers are finding the new scope tool to be more user-friendly than the previous versions. Only minor issues/queries have been raised by the suppliers to Jim, and Jim has easily been able to address these. Indeed, as the building services 'scope tool champion', Jim has successfully supported his colleagues in the wider HRS network in the addressing of any issues with the new scope tool since network launch."

An internal appraisal dated 21st May 2007, also for Mr Monteith, records:

"Jim has shown initiative in leading the development/improvement of the scope tool. We agreed that this was a critical area, as it would help drive down CPS estimating cost and thus overall claims costs to HBoS. Jim will complete improvement work in line with the overall rates review forum work by the end of June 2007."

14. Various modifications and improvements were made the pilot scoping tool that it is acknowledged were carried out by Mr Muirhead, on the instructions of Mr Monteith on behalf of the Halifax, but at the expense of CSL. The improved scoping tool was rolled out to Halifax's contractor panel, under cover of an e-mail of 21st May 2008 from Mr McKeown, which was in these terms:

"Dear contractor/partner,

Subject to a successful IT upgrade over the weekend of 24th/25th May, Monday 26th May will see the launch of our new HBoS GI buildings scope tool and updated schedule of rates.

The ability to produce an accurate, detailed and fairly priced scope of work on each and every HBoS GI job is, it goes without saying, a prerequisite to the service offering of each contracted partner on the HRS network. The new HBoS GI scope tool and updated schedule of rates will undoubtedly enhance your ability in this regard.

From launch on 26th May, all HBoS GI contracted partners must use the new scope tool and updated schedule of rates for the pricing of all HBoS GI building repair works.

An electronic copy of the new scope tool and updated schedule of rates are now combined in one easier to use document and, together with an instruction guide, are attached for your attention.

Your Partner Manager is of course available at any time to answer your queries and to help with any ongoing training requirements you may have in the use of the new scope tool. Please feel free to give him a call at any time.

For HBoS GI, the launch of the improved building's scope tool and updated schedule of rates represents an undoubted improvement to our contracted partners over our existing arrangements in respect of the processing of building claims. ..."

15. On 30th June 2008 the claimant sold his interest in CSL to its incumbent management team in a management buyout transaction. Copyright in the software with which this litigation is concerned was assigned to the claimant by an assignment in writing dated 30th June 2008. It is now common ground that the effect of this document is that the claimant is the owner of the copyright and the software that constitutes the pilot scoping tool in its various iterations.
16. The claimant and his family emigrated to Australia following the management buy-out, but for reasons that are immaterial to these proceedings, the claimant and his family returned to the UK in February 2009. The return of the claimant and his family to the UK coincided with the takeover of HBoS by Lloyds Banking Group. The business of Arngrove Construction Services Limited (in administration) was acquired by Shanley Investments Limited from the administrators. There are no corporate governance records relating to Shanley Investments Limited included within the trial bundles. This is surprising, given that one of the issues that arises is the degree to which the claimant was concerned with the day-to-day management of that company after it had acquired and started to trade on the business formerly carried on by Arngrove Construction Services Limited. I was told by counsel for the claimant on instructions that Shanley Investments Limited traded as Arngrove after the business had been acquired, and where I refer hereafter to "Arngrove", I mean Shanley Investments Limited trading as Arngrove. I was also told by counsel for the claimant on instructions that Shanley Investments Limited was owned beneficially as to one-third by the Shanley family trust, as to one-third by JTS and as to one-third by Mr McGettrick. The evidence was that the managing director of the company was JTS and that the claimant acted in a somewhat nebulous but essentially "big picture, fundamental issues" chairmanship type role. CSL ceased trading in 2010. Arngrove traded until 2011, when it was placed into creditors' voluntary application.
17. It is admitted in paragraphs 12 and 13 of the defendants' Defence that Lloyds started to use the pilot scoping tool following the takeover by Lloyds Banking Group of HBoS. When Lloyds started to use the scoping tool is not entirely clear. However, it could not have been later than July 2010, as is apparent from the e-mail to contractors of 5th July 2010 written on behalf of Lloyds.
18. In June 2011, Lloyds carried out an audit of work undertaken by Arngrove. In the result, there was a meeting attended by the claimant, standing in for his son, who was about to, or had left, for a holiday on the west coast of the United States of America. The outcome of the meeting was that Lloyds required explanations from Arngrove concerning various alleged discrepancies concerning sums paid by Lloyds to Arngrove. In order to provide the required information the claimant had to review various files maintained by Arngrove in relation to the projects undertaken by Arngrove for Lloyds where the alleged discrepancies had supposedly occurred. The claimant maintains that it was in the course of carrying out this exercise that he discovered for the first time that Lloyds was using the pilot scoping tool. This led to what the claimant describes as a "heated meeting" with Mr Monteith. This meeting took place on 24th October 2011. It was recorded, and an agreed transcript was included in the trial bundle. The substance of the complaint made by the claimant concerned the use being made of the software by Lloyds without his permission.
19. Although the transcript has to be read in its entirety in order to understand its full impact, the following are the most significant parts. In the quotation that follows, references to "JM" are to Mr Monteith and references to "JS" are to the claimant. The most material parts of the transcript are to the following effect:

"JS: The reality is, Jim, my software is getting Lloyds, getting used at Lloyds Banking Group and the reality is, Jim, if I don't get this sorted out then people are ... court order and I'll ask you to stop using my software and I mean that …

But I need a list of who is currently using this ...

But see, all the times and creating all the scoping tools, printing buttons and all that, that's all mine. That's my software and that gets used at Lloyds Banking Group up and down the country and that must save a contractor and your suppliers at least an hour every day in work, and I've checked out the software, Jim ...

And I told him exactly where the software sat. That is my software. And at the moment I'm saying you've not got permission to use that any longer.

"JM: Well, as I say, I'll give notice and obviously I'll speak to Reuben later on regarding that ...

Okay, he knows that the scoping tool is being used. Sorry, I think he is still aware of that ...

"JS: So the reality is that for Lloyds Banking Group that you read about intellectual property rights within your contract and it tells you that you have got to protect mine. Now I need to know how many claims it's been used on because there will be a charge per claim, so I will need to know how many claims throughout Britain have used that.

"JM: Well, as I say, I'm going to raise that just now, you know, whenever Reuben feels he needs to go with it then you'll ...

"JS: No, wherever Reuben wants to go with it, tell him where it's going with me. If he doesn't stop using the contract, I'm going to the High Court to seek an injunction, but this is separate for the WIP, but I will need a list, whether you supply it or the court will ask for it. They need a list of who's used it, how many claims it's been used on, and ultimately the reality is is it's not right that a company like Lloyds can come, in, take over and just say, 'You know what, see all that brilliant work that Jim Shanley created and did? We're just going to take that and roll it right through my business and give him no recompense for it.' At no point did I agree to give that to Lloyds Banking Group."

20. The claimant instructed Bird & Bird to act on his behalf. A letter before action was written by that firm dated 28th November 2011. The letter is lengthy, but on page 2 Bird & Bird set out the claimant's case as to the use of the scoping tool software in these terms:

"Supply to the Halifax.

"Through its use of the scoping tool and other associated processes, CSL became known for its efficient and economical way of running insurance claims and was asked to join the insurance repair network of the Halifax division of Bank of Scotland Plc ('Halifax'). In 2004 Halifax began to show interest in adopting the scoping tool internally, as it was felt that companies in the supply chain would be able to work on claims together more productively if they both used the scoping tool. Our client was approached by Karl Poulsen of Halifax and entered into an oral agreement through which Halifax was licensed to use the scoping tool on a temporary trial basis. Mr Muirhead and our client subsequently worked together with Jim Monteith, the network manager for Halifax, to modify the scoping tool to meet the particular specifications required. A modified version of the product was sent to Halifax on 19th May 2004. This was further adapted over the period 2004-2007, although our client understood that as a result of ongoing work to merge the networks of Halifax and Bank of Scotland following the mergers of legal entities in 2001, no decision could yet be taken as to Halifax formal procurement of the package. At this stage, our client believed that the package had been trialled by approximately 60 personnel within Halifax's claims handling department.

"In or about November 2006 Jim Monteith informed our client that Halifax was not known to take a product on a permanent basis. Our client was given the impression that HBoS would instead create its own bespoke system to include parts of the company outside the insurance market. At this point Mr Shanley believed the matter to be closed and all use within Halifax to have ceased."

The letter went on to allege copyright infringement in these terms:

"It has recently come to our client's attention that Halifax continues to use a scoping tool through its business in substantially the same form, subject to minor changes, to reflect, for example, the VAT increase at the beginning of 2011. We have advised our clients that the use of the scoping tool is an infringement of his intellectual property rights.

Furthermore our client has discovered that the scoping tool is being used by other companies within, and connected to, Lloyds Banking Group, of which HBoS has since January 2009 formed part, including Lloyds TSB Bank Plc, insurance networks, suppliers and contractors. Our client has never provided or licensed the scoping tool to any of these parties, which must have received copies derived from Halifax. Halifax was licensed to use the scoping tool only internally, and only on a temporary trial basis. There was never any licence to distribute it to connecting companies, let alone third parties. Consequently this unlicensed distribution and use of the scoping tool is a further infringement of our client's intellectual property rights."

21. The points that emerge from this letter are that

(a) it was being alleged that an oral licensing agreement had been made between Mr Poulsen and the claimant in 2004,

(b) the temporary arrangement allegedly so licensed came to an end in November 2006 as a result of a conversation between the claimant and Mr Monteith,

(c) two distinct allegations of infringement of copyright were being made, being

(i) continued use by Halifax; and

(ii) unauthorised distribution to Lloyds by Halifax and use by Lloyds and its various connections.

22. The defendants instructed Bevan Brittan to act on their behalf. On 15th December 2011, that firm responded to the letter before action. It would not normally be necessary to refer to the substance of this, but Mr Monteith's credibility is subjected to serious challenge in these proceedings, as is the claimant's, for reasons that I will come to in a moment. It was accepted that the source of instructions that led to Bevan Brittan's response was Mr Monteith. The letter included the following assertions:

"As a preliminary point, we note that your reference to the 'scoping tool' appears to be a reference to a software package used for the planning and management of construction projects arising from buildings insurance claims, whereas your client's complaint appears to relate to use by our client of a spreadsheet in respect of which our client asserts it is the copyright owner. Having sought clarification from our client, it would appear that the software package you refer to is an end-to-end claims management system demonstrated to our clients, Jim Monteith and Karl Poulsen, in or around 2007, but not adopted in any way by our client. Whilst your client may be the owner of the copyright that subsists in the wider elements of the software package, it is not the owner of the copyright that subsists in the spreadsheet which our client is using. We are instructed that our client has not at any time used any software provided to it by your client, his associates, or business concerns."

This is now accepted to be untrue. What is described as the "spreadsheet" was the scoping tool that utilised the software written by Mr Muirhead and owned by the claimant following the assignment to which I have referred. The issue is whether the claimant licensed its use for commercial purposes by Halifax, and whether to license its distribution to or use by Lloyds. The letter continued:

"We note that your letter makes reference to 'source code'. We are instructed that Mr Hanson did not write any source code for the work, the only source code being the code in the Excel software develop by Microsoft, but created specifically formulae within Excel which allowed the work to perform calculations using the data that was inputted by the case handlers on the screen. Furthermore, at no time during the creation of the work or during its ongoing development by either HGISL or any external contractors used by it ... was any new source code written for the work. For the avoidance of doubt, our client wishes to confirm that at no time has any stand-alone software been used in conjunction with or developed for use with the work, and it has been in the form of a spreadsheet developed within Microsoft Excel."

This too is now accepted to be untrue. Mr Muirhead's evidence as to what he did is set out in paragraphs 13-14 of his witness statement and was in these terms:

"I could not just copy the Estimate Builder code into the Halifax spreadsheet. Instead I broke the Estimate Builder down into component functions and wrote new Visual Basics deliver the same functions in the new Halifax version as a stand-alone. It was an iterative process. I would add some functionality, and, with Jim Shanley's approval, e-mail the amended spreadsheet to Jim Monteith, who would come back with comments and further requirements. I also wrote user instructions on to the spreadsheet. Between September 2006 and March 2007, my timesheet shows that I spent at least 50 hours on this project. The modified spreadsheet was used as the basis for all the Halifax claims CCS worked on while I was there. From March 2007, I continued to receive requests for modifications, tweaks and corrections from Jim Monteith, and I continued to make the changes. I did not discuss this with Jim Shanley, since it was just a continuation of the work I'd already been doing. Halifax also issued updates to ourselves from time to time, which seemed to be simply amendments to rates and other minor tweaks. On some occasions I had to correct changes which had been made by someone at the Halifax.

Nonetheless, the Halifax scoping spreadsheet was never as sophisticated as the CCS Estimate Builder since this was part of a much more sophisticated system. The functionality that I put into the Halifax tool is more basic, allowing the user to move around the spreadsheet, and more open to amendments, since it is less easy to control the functions of the user in respect of a portable stand-alone Excel aisle."

None of this was challenged, other than in relation to the knowledge of the claimant concerning activity after the date when he alleges he was told that the trial pilot, which he claimed to have licensed, had come to an end.

23. Equally untrue was an assertion in the letter that copyright in the scoping tool was owned by the Halifax. Notwithstanding what was said in this letter, as I have said, the defendants ceased using the scoping tool developed by Mr Muirhead on 9th December 2011
24. These proceedings were commenced by claim form issued on 2nd March 2012. The claim pleaded on behalf of the claimant was advanced by reference to an alleged written agreement that had not been foreshadowed Bird & Bird's letter before action referred to above. Paragraphs 16-17 of the Particulars of Claim, which contained a statement of truth signed by the claimant, were in these terms:

"Halifax agreed with the claimant's proposal and on 8th September 2006 Halifax entered into a written agreement with the claimant ('the scoping tool agreement') in the following terms:

"i. The claimant is the owner of CSL and all the claims control software is currently owned by him independently and used in his business.

"ii This will remain on the same basis on which the claimant will create the same or similar scoping estimating tool for the Halifax.

"iii It has therefore been agreed that the claimant will provide and develop a similar estimating scoping tool to that which he has already created with the CSL business.

"iv The claimant and Halifax have agreed to enter into the first stage of this agreement being about a development pilot ...

"v In order that the claimant creates the desired product for Halifax, they may wish to have some historical elements of their previous tool incorporated in the future development of the Halifax scoping tool to be developed by the claimants similar to the scoping tool mentioned above.

"vi Therefore it has been agreed, as Halifax is in the process of terminating their historic and current scoping tool, that they therefore agree to assign complete historic and current ownership and any rights to the claimant. In return, he has agreed to use/adapt any elements requested from previous Halifax scoping tools and the claimant agrees to use and implement them if required.

"vii The claimant agrees to allow direct communication between Jim Muirhead of Ultra-Soft, his developer, and his current employees to Jim Monteith and his pilot team, in order to provide direct feedback et cetera during the creation of the scoping tool pilot, but on the strict basis that Jim Muirhead cannot be asked to create any work whatsoever for the Halifax, including current, past, future employees and linked associates, without the claimant's written consent.

"viii Once the pilot work and testing has been completed, the claimant agrees to licence this to the Halifax on the basis that he will invoice and prorate per licence for each charged licence which is restricted to 1 PC and 1 PC user.

"ix Further costs will be agreed based on the additional savings that have been created through the introduction of the scoping tool throughout Halifax insurance and future licence fees et cetera will be charged/invoiced on current market rates at the time, which will be reviewed annually.

"x The claimant agrees to provide a fair and average market discount.

"xi The claimant and the Halifax agree to respect each other's confidential works and not provide them to any other parties unless either party has provided and obtained the written consent, and the same will apply to the copying of any works, et cetera.

"xii It has been agreed that, during the pilot and roll-out, the master copy would remain in the claimant's office at 134 Comiston Road, Edinburgh, given that complete ownership rests with the claimant, as set out and agreed above. All parties agree and consent to ensure that written approval is received that they require to alter this agreement.

"17. The pilot agreement had the following effects:

i. the claimant was to be the owner of and all rights in the estimating scoping tool that was to be developed under the pilot agreement ('the pilot scoping tool');

ii. Halifax assigned to the claimant any and all rights in the Halifax tool;

iii. Halifax enjoyed a licence to use the pilot scoping tool for the exclusive purposes of developing and evaluating the same during the period of the pilot scheme;

iv. Halifax was obliged to keep the pilot scoping tool confidential and not disclose the same beyond the Halifax pilot team."

25. By their Defence served on 16th April 2012, the defendants asserted that the agreement relied upon by the claimant, which was alleged by the claimant had been signed by Mr Monteith, had not been signed by him and the signature appearing on the document produced by the claimant had been placed there by forgery. The allegation of forgery was denied in a Reply served which contained a statement of truth signed by the claimant dated 8th June 2012. Witness statements were ordered to be exchanged, and as part of that exercise the second witness statement of the claimant was served. It contained a statement of truth signed by the claimant, and was dated 26th October 2012. At paragraphs 33-43 the claimant addressed the contract issues. In essence, he claimed to have drawn up the agreement he relied on in the presence of Mr Monteith at a meeting that took place at CSL's trading premises, that he signed it, and proffered it to Mr Monteith to read and sign while he went off to do other things. He maintained that he returned to find that Mr Monteith had signed the document. He claimed to have scanned the document to a floppy disk, which he had claimed then to have lost on a trip to the United States of America during Christmas 2011.The detail of that trip and what was said about it is not material for present purposes.
26. On 25th January 2013 a third witness statement from the claimant was served, together with a draft amended Particulars of Claim. In paragraph 3 of the third witness statement the claimant admitted to having created, that is to say fabricated and forged, the agreement he served on 19th December 2011. By paragraph 14 of his third witness statement, he retracted paragraphs 37-43 of his second statement and claimed the true position to be as set out in paragraphs 15-20 of his third statement. The amended Particulars of Claim deleted most of what had previously been pleaded in paragraph 16, and then set out his case as to what he alleged to have been agreed on 8th September 2006 in these terms:

"Halifax agreed with the claimant's proposal, and on 8th September 2006 Halifax entered into an oral agreement with the claimant ('the pilot agreement') in the following terms:

"i Halifax accepted that the claimant was the owner of the copyright in Estimate Builder in the claims control system.

"ii The claimant was to develop a scoping tool for Halifax similar to and based upon Estimate Builder ('the pilot scoping tool').

"iii The pilot scoping tool was to be developed for the purpose of testing and evaluation by Halifax, and Halifax was permitted to use it for these purposes.

"iv At Halifax's demand, the claimant would seek to incorporate some elements of the previous Halifax scoping tool and the pilot scoping tool.

"v Halifax agreed that the claimant would be the owner of the copyright in the pilot scoping tool.

"vi Halifax was permitted to liaise directly with the claimant's programmer, Mr Muirhead, during the development of the pilot scoping tool.

"xii Upon completion of testing and evaluation of the pilot scoping tool by Halifax, if Halifax wished to use the same, the parties would negotiate terms for such use in good faith to reflect existing market practice and Halifax's expected volume of use."

An amended defence was filed in which, in relation to the new paragraph 16 of the amended particulars of claim, it was pleaded that:

"Paragraph 16 of the amended particulars of claim is denied: (a) Mr Monteith did not say or hear any words to the effect of subparagraphs i to vii; (b) Mr Monteith had no actual or ostensible authority to contract on behalf of the second defendant in the terms set out in subparagraphs i to vii."

The issues

27. As will be apparent from what I have said already, the most significant issue of fact I will have to decide is whether an agreement to the effect alleged by the claimant was reached on 8th September 2006 or not. That depends upon an evaluation of the evidence of respectively the claimant and Mr Monteith. This issue is likely to prove determinative of both the claims against the Halifax, other than in relation to the claim for infringement by distribution to Lloyds.
28. The second issue I have to resolve is whether, and if so in what terms and by what means, use of the scoping tool by Lloyds was licensed. The defendants set out the substance of their case on this issue, as far as I can see for the first time, in paragraphs 48-50 of their closing submissions in these terms:

"48. Clearly, if C was unaware of the use by Lloyds of the scoping tool, then C's failure to object would not be relevant to ascertaining the scope of the indefinite consent. Here there would be two possible arguments why Lloyds had a consent: firstly, that the consent was given to Monteith, allowing Monteith to sub-licence his employer, provided always that the employer continued to use C's companies as contractors.

"49. Secondly, that the consent extended to any company in common corporate governance with Halifax, provided again that C's companies continued to be used as contractors. However, if C knows that Lloyds is using the tool, as D submits was the case in fact, then the acquiescence of C is the best evidence of the true scope of the licence as originally granted in indefinite terms.

50. D's doubt that an analysis based on the equitable principles of acquiescence are quite right in this case, because acquiescence is all about the case where no words are spoken. Here words were spoken, and the resulting licence was indefinite and needs to be defined by reference to, amongst other things, subsequent conduct. In ascertaining that scope, the court takes note of the fact that C did not complain of a particular circumstance of which he knew. Whether this is classified as licence or acquiescence probably doesn't matter. The latter requires detriment and unconscionability, but both are present in this case in any event."

The factual issue that arises is whether the claimant was aware of the use by Lloyds of the scoping tool prior to June 2011. The claimant denies that he had the alleged knowledge, but in any event it is asserted by him that whether he did or not is immaterial in law.

29. The final issue that I have to resolve concerns what is called in this case "archive use". As is apparent from what I have said so far, both defendants have used the scoping tool for a significant period in their respective commercial operations. It is now apparent by reference to the witness statement of Mr Ian Sullivan dated 20th February 2013 that there has been at least one instance of use of archived material for ongoing commercial purposes after 9th December 2011 when, on the defendants' case, the licence to use the scoping tool had come to an end. It is conceded that this was an infringement and that there must be both an injunction, absent an undertaking being offered to similar effect, and an inquiry into damages in relation to such activity and, for that purpose, an audit needs to take place to identify any further instances of such activity, and there will have to be a disclosure exercise of the material relevant to any other such infringements. It has been agreed, as I have said, that those issues be left over for detailed direction after the conclusion of this trial and judgment.
30. The issue that remains concerns what is called "pure" or "view only" archive use. It is now accepted, on the basis of answers given in the cross-examination of Mr Gulliver, that action of opening an electronic archive record relating to a project which was created using the scoping tool software involves loading and, therefore, copying the software on to the PC or laptop on which the archive is being viewed. The issue between the parties is that identified in paragraph 15A-D of the amended defence, namely an assertion that even if the claimant withdrew the voluntary licence in December 2011, the claimant is nonetheless to be regarded as estopped from withdrawing consent to view archive material on a view-only basis in the way I have described.

The Halifax licence issue.

31. The claimant's case depends upon me concluding that there was an oral agreement reached, as alleged, in paragraph 16 of the amended Particulars of Claim. If that case fails, the evidential burden rests upon the defendants to establish the grant of a voluntary licence, not merely to Halifax, but to Lloyds as well.
32. As will be apparent from the factual material so far set out, the outcome depends in essence on whether the claimant's or Mr Monteith's evidence is to be accepted. The credibility of each has been challenged. It is accepted by the claimant that in the circumstances, he cannot expect his evidence to be accepted, save where it is admitted, corroborated or is against his interest. That necessarily follows, in my judgment, from the fact that he has admitted fabricating the document on which he founded his originally pleaded case, denied forgery and sought to support his originally pleaded case in his Reply and two witness statements, in circumstances where each statement of case and witness statement contained a statement of truth signed by him. There can scarcely be a stronger case for exercising the level of caution I have mentioned in relation to the uncorroborated evidence of a witness.
33. The position in relation to Mr Monteith is nowhere near as stark as is the case for the claimant, but nonetheless I have come to the conclusion that I should be cautious before accepting his uncorroborated evidence as well. I say that for the following reasons:

(a) Mr Monteith was cross-examined about his ability to alter macros, and specifically about the removal of the claimant's name from a piece of code. The substance of his response was that the exercise was beyond his technical expertise (see transcript Day 3, page 1, line 20 to page 2, line 8). He was then cross-examined by reference to a section of code that on the face of it recorded that it had been carried out by Mr Monteith (see transcript Day 3, page 4, lines 9-15).He was then driven to accept that he could carry out coding but when coached by Mr Muirhead (see transcript Day 3, page 5, lines 19-21) before the following exchange took place:

Q: "In 2007, if I gave you a scoping tool, you could have brought it up to your laptop and you could have accessed the virtual basic code, couldn't you?"

A: "I have to say, at this moment in time, I don't know whether or not I could do that back then."

Q: "I put to you that you could and that yesterday you lied about your ability in relation to virtual basic code."

A: "I don't necessarily agree with that. I think the question yesterday was whether I removed anything from the document that was through the macro."

These answers I am afraid do not persuade me that Mr Monteith was being frank in the evidence he gave.

(b) Mr Monteith was cross-examined by reference to the transcript of the meeting on 24th October 2011, which led to the following exchanges:

"All he is asking you, this man who did you this terrific favour, is to tell the truth, and you indicate there that you will, yes?"

A: Yes."

Q: Why didn't you?"

A: "I don't think I've ever been on record as saying Mr Muirhead and Mr Shanley were not heavily involved."

Q: We discussed yesterday, instead of telling about the heavy involvement, you said that the contribution of Mr Muirhead and Mr Shanley amounted to minor technical changes and, on the basis of that assertion, Bevan Brittan on behalf of Lloyds and Halifax said there was no copyright in them. Why?"

A: "The choice of words may well be sort of detracted away from the input that Mr Shanley had, but as I say there, and I will stick by that, you know, Mr Shanley and Mr Muirhead did a lot of development on that tool."

Q: I'm sorry, I couldn't hear what you said at the end there. Could you just repeat that?"

A: Yes. I said that Mr Shanley and Mr Muirhead did have heavy involvement in the development of that tool."

Q: Can't you see the difference between heavy involvement in the development and minor technical changes? What I don't understand is on your case this man did you a big favour. Why are you deriding his contribution to your employers?"

A: Mr Shanley did not do me a big favour. Mr Shanley did work on behalf of Halifax, not on behalf of me."

Q: On your case, on your evidence, Mr Shanley did Halifax and Lloyds a very big favour. Why did you deride his contribution to them?"

A: If that's the way it's come across, I'm sorry about that."

Question: "No, no. That's how it did come across. We've established that. I'm asking you why."

A: As I say, it may be a poor choice of words at that particular time."

Q: No, that's not an explanation though, is it?"

A: I'm sorry, you're asking me a question, I can only give you the answer I'm giving you."

Q: You could give me a truthful answer." A: I think that is a truthful answer."

Q: A poor choice of words?" A: Yes."

Q: There is a motivation underlying this. Do you not see that?"

A: No."

Judge Pelling: Can I just ask you this. I don't want you to tell me anything about what Bevan Brittan said to you, but I do understand you to accept that you told representatives of Bevan Brittan that the involvement of the claimant was minor as described by counsel?"

A: My Lord, yes, if it is down there, I did say that to Bevan Brittan."

Judge Pelling: So was that in circumstances where you knew that the information you were providing to Bevan Brittan would be used for the conduct of this litigation?"

A: I assumed it would be used for this."

Thus Mr Monteith was driven to accept that he had misled the lawyers acting for the defendants on a critical issue at the time, in circumstances where he knew that the answers he gave would be used in a formal litigation setting. It is not necessary that I decide why he did what he did; it is sufficient for present purposes to note what he did. I do not accept the explanation that it was a poor choice of words. It was an active attempt to mislead, in my judgment.

34. Mr Williams, the legal manager employed by the defendants, had filed a witness statement by which he endeavoured to support what had been said by Bevan Brittan in response to the letter before action. He was called to give evidence after Mr Monteith had completed his evidence. He chose, at any rate initially, to stand by his witness statement. That led to this exchange in cross-examination; transcript Day 3, pages 34-35, lines 15-20:

Q: "Towards the bottom you say that 'with that in mind, the defendants stated that they had not at any time used any software provided to it by Mr Shanley'."

A: Yes.

Q: In fact it says 'or his associates', right? You said, 'I believed that position to be true at the time and indeed I believe that position to be true today', and you told my Lord that this statement is accurate?

A: That bit is not accurate.

Q: How much of this is not accurate? I gave you the opportunity to avoid all of this.

A: Yes, that is accurate at the time we had.

Q: You thought it was accurate at the time, it was inaccurate always. It was just that you had a reason to believe it because Mr Monteith told you lies.

A: Well, he told me what he said had happened, yes.

Q: We now know it wasn't quite like that, was it? A: Right.

Ultimately, Mr Williams was driven to accept that the letter he had come to court to defend was in fact indefensible, and that was so in substantial parts at least because he had been provided with false information by Mr Monteith.

35. In those circumstances, it is necessary, as I see it, to attempt to resolve the issue that I am now considering by reference to such contemporary documentation as there is, to the overall probabilities, to the objective facts proven independently of the evidence of the claimant and Mr Monteith, and by reference to subsequent events which can be analysed as being more consistent with one party's case over another - see in this regard the approach approved in Grace Shipping v CF Sharp & Co [1987] 1 Lloyd's Rep 207 at pages 215 to 216, following The Ocean Frost [1985] 1 Lloyd's Rep 1. Subsequent conduct by parties to an unwritten agreement may be relevant because it may show what the parties thought that they had agreed, if anything - see Carmichael v National Power Plc [1999] 1 WLR 2042 at 2050-2051.
36. I conclude that the oral agreement for which the claimant contends has not been proved for the following reasons. First, had there been an agreement to that effect, I see no reason why he would not have instructed Bird & Bird to that effect. Even allowing for the fact that there could be room for a failure to recall the year in which the agreement was reached, it is difficult to understand why the claimant should mis-recall the identity of the employee with whom he supposedly made the agreement. Mr Monteith was, after all, the claimant's principal point of contact for most, if not all, of time that CSL was involved with the Halifax. While this point is of limited significance when viewed in isolation, it provides significant support for the conclusion that I have reached when weighed with all the other factors to which I refer hereafter. The invention of the written agreement may be inconsistent with the existence of an oral agreement, but I prefer to leave that point to one side for the moment. I do so because I remind myself that people lie for a variety of different reasons, one of which may be a misguided and inevitably dishonest attempt to bolster an otherwise tenable case. Thus, whilst a lie of the sort told and maintained by the claimant will always have the effect of damaging or destroying the credibility of the person concerned, it does not necessarily lead to the conclusion, for example in this case, that the whole of his case is without substance, though of course it may do and is more likely to do so where what has been dishonestly invented is inconsistent with the supposedly true case that is in the end advanced.
37. The next point concerns subsequent conduct by the claimant. As I have described already, by September 2006 the defendant was an experienced and highly successful self-made business man. He had formed one company, traded it successfully for a number of years, and had then sold his interest in it profitably. CSL was a start-up company he formed a few years later on the basis of the experience he had acquired over many years operating the previous company.
38. On 11th September 2006, that is three days after the agreement on which the claimant relies, the claimant sent two e-mails to Mr Monteith. The first enclosed various documents relating to CSL and concluded with the following sentence:

"We are hoping this is of interest and would welcome a chance to demonstrate our service."

Two points emerge from this. First, it is consistent with the notion that the claimant was keen for CSL to win business from Halifax. Secondly, it contains no mention of the oral agreement which it is now alleged was made on the previous Friday.

39. The other e-mail dated 11th September 2006 from the claimant to Mr Monteith is to the following effect:

"Hi Jim. I confirm on behalf of Completecare Scotland Limited that I have reviewed U schedule of rates and fully accept them and confirm we will work strictly to your SLA. My team are currently learning and adapting our reports to ensure we deliver you format and system requirements. We hope you have us up and running on this coming Monday, as we have now implemented your template into our management tracking system, et cetera. Kind regards, Jim Shanley for Completecare."

This email is significant because it too contains no mention of the oral agreement alleged to have been made on 8th May 2006. That point is all the more significant, in my judgment, because of the final sentence, which refers in terms to "implementing your template into our tracking system". This is a clear reference to the IT relevant to the conduct of the business emanating from the Halifax, and would have been the obvious and natural point to record the existence of the agreement, if only to demonstrate what steps were being taken by the claimant or CSL to implement it. Although the claimant tried to distance himself from this e-mail (see transcript Day 1, pages 113-116) he conceded, at transcript Day 1, page 117, line 1, that it: " … is more than likely that ..." he typed it.

40. My third reason for reaching the conclusion that the claimant has failed to prove an agreement in the terms alleged concerns his conduct after February 2007. It is alleged in paragraph 29 of the amended Particulars of Claim that this was when the claimant was informed that Halifax was not going to pursue the pilot scoping tool project. The claimant's evidence in relation to this, at paragraph 48 of his witness statement, was as follows:

"In or about the first half of February 2007, after my return from Australia, Jim Monteith and I had a meeting. In this meeting I asked about the scoping tool and he said that they do not wish to use the scoping tool, as the insurance company are going with a bidder product that incorporate all areas of their entire company. I also attended the Halifax suppliers' forum that month and saw the presentation where Karl Poulsen said that they were moving to a new claims-management system designed by someone else, and they were going down the route with them it seemed. This confirmed my understanding of their decision that it was part of their overall process/re-organisation which was discussed at the suppliers' forum. After that I thought no more about it. It seemed to me that I had made a proposal, but, as had happened with the Churchill discussions, it had not worked out and someone else's scoping tool would be used."

41. There is a significant amount of material that contradicts this, and suggests that there was no conversation to the effect alleged. Paragraph 19A of the amended Particulars of Claim pleads that:

"Following a review of disclosure in this action, the claimant has become aware that Mr Muirhead continued providing further updated versions of the pilot scoping tool to Halifax pursuant to the pilot agreement until around February 2009."

The implication of this is that at the post February 2007 work, it came as a surprise, at any rate, to the claimant. This cannot be right for the following reasons: first, as Mr Muirhead made clear in the part of his witness statement quoted in the background section of this judgment, he expected to get paid for his work. Secondly, he was paid by CSL acting by the claimant - see transcript, Day 1, page 57, lines 17-21). Thirdly, Mr Muirhead's evidence at transcript Day 1, page 58, on this issue was as follows:

"Q: As I understand it, Mr Muirhead, you did a large amount of work on the spreadsheets after February 2007 and continued after that date; do you recall that?"

A: I recall doing some work after that, the amount of it I'm not sure about."

Q: Mr Shanley, Jim Shanley, says he didn't know you were working on that spreadsheet after February 2007; is that something that surprises you, to hear him say that?"

A: There were times when I was asked by Mr Monteith to do work and I did it without referring to Mr Shanley."

Q: But there were occasions when you let Mr Shanley know what you were up to?"

A: I suspect there would have been, yes. I expect there would have been."

This is evidence that I accept because Mr Muirhead could have no reason to mislead me in relation to this point. There can be no possible basis on which the claimant could have been paying or sanctioning payment to Mr Muirhead for work being done on the scoping tool for Halifax after February 2007 if the position was that there was an agreement to the effect now asserted by the claimant, made in September 2006, and Halifax had informed him that it had decided not to proceed further with the development of the pilot scoping tool in February 2007. It might have been suggested that in some way the work was of benefit to CSL. The claimant's case is however that this work would have been of no direct benefit to CSL in the sense of improving its systems. Indeed, the claimant's case is to the contrary, that the CSL and Halifax scoping tools were utilised different operating software.

42. The e-mail exchange between the claimant and Mr Monteith of 16th and 17th May 2007 too is entirely inconsistent with the notion that there was an agreement made on 8th September 2006, as alleged by the claimant, that had come to an end in February 2007. These e-mails, on the face of it, show the claimant writing to Mr Monteith concerning ongoing developments of the scoping tool. Mr Muirhead accepted (see transcript Day 1, page 62, line 12) that the spreadsheet attached to the e-mail came to the attention of the claimant. This was material that the claimant was cross-examined about in some detail. At transcript Day 1, pages 153-154, there was this telling exchange:

"Judge Pelling: The question was, your recollection/understanding in evidence is it, is that the pilot in relation to your software, which you say was the subject of the oral agreement with Mr Monteith, came to an end in February 2007, yes or no?"

A: Around that time I agreed that there was no contract, they were not taking up my licence. I can't specifically say the pilot was at an end. I can remember them saying that they were not going to be taking it on, going forward. I just thought nothing of it ..."

Mr Onslow...

Q: You would agree with me that it would be most surprising to see you discuss improvements for your scoping tool with Halifax after the pilot came to an end; would you go that far?"

A: Repeat the question, please."

Q: Would you agree with me that it would be surprising to find you discussing improvements for the scoping tool with Halifax after the pilot came to an end?"

A: Yes."

Q: So that if the pilot came to an end in February 2007, when Mr Monteith had said that Halifax weren't interested in the tool, it would be surprising to see you discussing improvements for the scoping tool after February 2007; you'd agree with that?"

A: I would agree with that, yes."

Q: Now we know, at paragraph 50 of your statement, if you just turn on to that, that you do faintly remember discussing improvement for the scoping tool around May and June 2007?"

A: Yes."

Q: Yes?"

A: Yes."

Q: You do faintly remember discussing those improvements, do you?"

A: I will be honest, you know. I, at that time -- at that period I can't -- I can vaguely remember the timing of what happened because it is difficult for me today. It is really not having the real, you know, the actual -- my old e-mail account. It has been very difficult, the evidence, and I have tried to get these dates as close to what happened at that time

..."

In my judgment, this was a clear example of an attempt to avoid what was perceived by the claimant -- correctly -- to be a damaging point, but at a time when he had perceived the potential damage that would be done only relatively late in the exchange. He was asked specifically about the e-mail exchange that I had been considering. He said first it related to another pilot (see transcript Day 1, page 155, lines 24-25), then that he was busy and not on the ball (see transcript page 156, line 20), then that he could not recall it, (see transcript Day 1, page 157, lines 17-21). I reject all this as an attempt to avoid the effect of these e-mails on the basis that it is mutually inconsistent, and is an attempt to avoid what is obvious: that there were e-mails, one of which was written by him, concerning the development of the scoping tool after the date when he maintains the alleged agreement with Halifax had come to an end following a conversation that had taken place between him and Mr Monteith in February 2007.

43. Similar considerations apply to the e-mails of 23rd May 2007 and 26th June 2007 from Mr Monteith to the claimant. The only answer offered to this was that he did not control the e-mail address, and the e-mails would not have been forwarded to him by his staff. I reject that as being at all likely. The e-mail was addressed to him personally, and there is no evidence, aside from what the claimant himself suggests, that CSL staff would not forward e-mails addressed to the claimant personally, as this was. The exchange of e-mails on 23rd July 2007 is particularly telling, in my judgment. The e-mail from Mr Bellamy at Halifax to five separate contracting companies had attached to it all separate spreadsheets designed to standardise scoping for properties damaged in the Hull flooding disaster of 2007. It would have been apparent to the claimant, had he read the e-mail, that this was the scoping tool that had been devised and developed by Mr Muirhead being applied by Halifax commercially in the course of managing its contractor network. It was addressed to the claimant personally on a first-name basis. The information was critical to the profitable conduct of this type of business, as the contents of the exchange shows. The response to Mr Bellamy was signed "Jim Shanley for Completecare", a formulation that, in another context, the claimant accepted would be likely to be applied only if he was originating the e-mail. The reply is written carefully using the word "we" when referring to CSL, and using the first person when referring to specific matters concerning the claimant. For example:

(a) "... as per my discussion with you on Friday ..." in the first paragraph on page 1;

(b) "... I detail below some of the reasons why your financial plan ... simply cannot work for us ...", fourth paragraph on page 1; and

(c) "... I am sure you will appreciate I didn't have the time to do this last week ..."

This satisfies me that the response was written by the claimant. I accept he did not type it, and that if he had typed it himself, the grammar and layout may not have been the same but that is not the point. It was, on any view, a document that he had had significant input to, or had dictated, and the content of which pre-supposed sight of an understanding of the spreadsheets attached to the original Bellamy e-mail.

44. Finally, and before leaving this part of the case, I note that at the meeting on 23rd October 2011 the claimant did not assert the existence of an oral agreement to the effect alleged in the amended particulars of claim, much less that it was one that had come to an end in February 2007. This is, in my judgment, highly significant, given that this was the first point at which the claimant was setting out his case as to why his copyright in the scoping tool technology had been infringed.

All this material leads me to reject the claimant's case concerning the oral agreement he alleges. It also leads me to accept the defendants' case that a voluntary bare licence was the result which was the outcome of the discussions which took place in 2006 concerning the scoping tool. This material shows ongoing development work well beyond February 2007, and shows, by reference to at least the exchange of e-mail on 23rd May 2007, that to the knowledge of the claimant the scoping tool was being exploited commercially by Halifax in the management of its contractors' network, of which CSL was a member.

45. The only point that, in the end, could be deployed on behalf of the claimant was a commercial probability point. CSL was a business. It was in business. And so the question was asked rhetorically by the claimant's counsel: why would CSL deploy its resources to develop some software that could only benefit Halifax and then permit it to be deployed commercially for no reward?
46. The difficulty about this point is that it has to be balanced with the other points already considered. These demonstrate in my judgment unequivocally that (a) there was no oral agreement to the effect alleged but (b) the software was supplied to Halifax and further developed thereafter at the expense of CSL. In my judgment, the reality (and the answer to the commercial probability point) is that the claimant wanted to win business for CSL from Halifax in 2006, and was willing to spend money developing what was then CSL's software for use by Halifax because it enabled him to establish a favourable relationship with Halifax and thus advance his objective of winning business from Halifax. The desire to win business was not really in dispute, and as I have noted already, received some support from the terms of the first of the 11th September 2006 e-mails referred to above. There is a hint of the commercial benefits for CSL of the relationship with Halifax in the appraisal of Mr Monteith of 21st May 2007, which is to this effect:

"Jim Monteith 1:1

21/05/07

"1 HRS: Jim reports that PCC usage of HRS is 'low'. Cashing out prefers to be the preferred PCC settlement route. However, large loss PCC Tony Bowie (?) has been instructing his HRS network on larger claims. Jim further reports that Completecare are the PCC-preferred supplier of choice, and as such are picking up the most PCC constructions. Other CPs have commented on this, but the rebuttal from Jim is that Completecare are providing the benchmark service level that all suppliers in his region need to aspire to."

The Lloyds Position

47. I have so far considered the position in relation to Halifax. I now turn to Lloyds. The defendants argue that:

(a) there was an implied licence granted to Lloyds because either

(1) Mr Monteith was entitled to grant sub-licences or

(2) the voluntary licence granted to Halifax was one that extended to any company in common corporate governance with Halifax; but

(b) irrespective of whether Lloyds' use had been licensed, the claimant was precluded from denying that such was the case by acquiescence and/or estoppel founded on alleged knowledge of use by Lloyds and the absence of any objection after that knowledge was acquired.

48. I turn first to the implied licence theory. Contrary to the assertions made on behalf of the defendants, the voluntary licence granted in September 2006 was not granted to Mr Monteith personally. It arose exclusively as a result of the desire of the claimant on behalf of CSL to establish a commercial relationship with Halifax. Mr Monteith was entirely immaterial, other than that he was the Halifax representative with whom the claimant was perforce bound to interact. Indeed, Mr Monteith was at pains to distance himself from any suggestion of personal involvement - see transcript Day 3, page 8, lines 24-25.Thus, in my judgment, the notion that the voluntary licence that is to be inferred from what happened in September 2006 and thereafter was a licence of Mr Monteith is, with respect, both fanciful and unsupported by the evidence.
49. In any event, the point is without substance for the following reasons. Generally a licence is personal, not proprietary, and thus will not generally carry with it rights either to sub-licence or assign. Here it is necessary in order to give effect to what the parties intended in September 2006 to hold that a gratuitous licence was granted to Halifax to use the pilot scoping tool software in connection with the management by it of its network of contractors, as I have explained. However, where necessity requires only the grant of a licence -- and it is not suggested by Halifax that anything more is necessary in this case -- then the ambit of the licence must be the minimum that is required to secure to the licensee the entitlement the parties intended at the time. It does not extend to enable the licensee to take advantage of new and unexpected opportunities not in contemplation at that time - see in this regard Robin Ray v Classic FM Plc [1998] 25 FSR 662, per Lightman J at 642-643. There is no evidence at all that it was ever contemplated by the parties that Halifax might sub-licence or assign the scoping-tool technology to a trade competitor of Halifax's. Indeed, the whole point of the exercise was to improve the efficiency and profitability of Halifax when compared to others within its industry. It was the result of collaboration between CSL, acting by the claimant, and Halifax for the benefit of each of them. In the case of CSL it was one means by which it secured and maintained its relationship as one of Halifax's network of contractors. In the case of Halifax, was the more efficient operation of its network of contractors, and/or the management of building projects in respect of which it was the funder for its own business purposes. There is nothing in the circumstances to suggest it was intended that Halifax should be entitled to sub-licence anyone other than a contractor within its contractor network to use the scoping tool for Halifax's business purposes. In my judgment, precisely similar difficulties face the alternative formulation. In fact there is no evidence at all which explains how or why Lloyds came to be permitted access to the software and by whom. The main point however is that the voluntary licence granted to Halifax was personal to it.
50. Thus, the sole issue that remains is an assertion of acquiescence or estoppel. Acquiescence is an inferred waiver of rights - in this case, the statutory right accorded to the claimant in circumstances under the Copyright Design and Patents Act. Mere inactivity is not sufficient to justify a finding of acquiescence or, for that matter, estoppel for quiescence is not acquiescence - see Lamare v Dixon [1873] LR 6, HL 414 per Lord Chelmsford C at 422. The test is whether it has become unconscionable to press for enforcement. I do not understand these propositions to be seriously in controversy between the parties.
51. The defendants' factual case depends upon it being demonstrated that the claimant saw two e-mails sent to an e-mail account, the address of which was "[email protected]", dated respectively 5th and 7th July 2010. As will be apparent from the background section of this judgment, by July 2010 the claimant was no longer carrying on the business of CSL. That business was being carried out by those involved in the management buy-out of the shareholding in that company. The claimant's only interest in the insurer building repair business was through his interest in Arngove. He describes his role as that of a chairman, as did JTS. It would have been open to the defendants to test this role by reference to the shareholder interest in Shanley Investment Limited. However, that course was not taken. I have recorded what I was told by counsel for the claimant on instructions concerning these issues. There is no sworn evidence that supports it. However, even taking what I was told at face value, it follows that the claimant had a financial interest in the success of Arngove, by reason of his interest as a potential beneficiary of the discretionary trust that owned one-third of the shares in Shanley Investment Limited, and an indirect interest because other members of his family were also potential beneficiaries.
52. I was told that JTS was 18 in 2006 (see paragraph 3 of his witness statement) and is currently 25. This suggests that he was between 21 and 22 at the time of the acquisition by Shanley Investments Limited of the Arngove business. There is no explanation as to how he could have acquired the funds necessary to acquire such an interest at that stage, but as I have said, it was not tested in cross-examination and thus I accept at face value what I was told. Nonetheless, as I have said, the claimant had a financial interest in Shanley Investments Limited, trading as Arngove, on any view.
53. On 5th and 7th July 2010, e-mails were sent to the e-mail account I have mentioned. The caption referred to an updated Lloyds construction agreement, and either referred to, or had attached to it, what was there described as "the LBG scope and tool". It is common ground that, had at least the e-mail of 7th July 2010 been opened, then the claimant would have seen that his scoping-tool technology was being utilised by Lloyds. It was accepted in the end by both JTS and the claimant that there was a link between the e-mail account, to which I have referred, and the claimant's iPhone. In the result, the evidence was that each of JTS and the claimant had access to the account, and the claimant forwarded e-mails he had opened that he considered should be seen by JTS, unless it was apparent that the e-mail had already been opened and that the technology on his iPhone was such as to enable that readily to be apparent. The claimant admitted that he would have read everything in the text of any e-mail that he opened, and thus that he would have seen the reference to an LBG scoping tool in the first of the two e-mails and the attachment in the second, had he opened them.
54. The Defendants' factual case depends upon it being concluded that the claimant had opened, read and understood each of the e-mails. The claimant's evidence was that he could not remember if he had or had not. This evidence has to be balanced and tested with subsequent events.
55. I have already mentioned the circumstances in which the claimant maintained he discovered that his scoping tool was being used by Lloyds following an audit meeting in June 2011. The evidence suggests that immediately following that meeting, the claimant acted almost immediately. The reaction, when he discovered the use of his scoping tool, was hostile. He asked his son to set up a pretext call to Mr Monteith for the purpose of obtaining an acknowledgement as to the source of the scope-tool technology, and then the meeting of 24th October 2011 took place. JTS was cross-examined about the meeting. I accept his evidence as to what took place at the meeting. He described how the software copyright issue arose for the first time at the end of the meeting, which was otherwise about the audit issue with Lloyds.
56. JTS's evidence as to what happened next is at transcript Day 3, page 174, and is in these terms:

A: And then, near the end, by father brought up the situation about the software, from what I can recall."

Q: Right."

A: And it was all -- well, myself and Tom, I know myself felt quite awkward."

Q: I'm sorry?"

A: It was quite an awkward situation." Q: Awkward?"

A: Yes."

Q: In what way?"

A: Well, it was quite intense. It was quite -- you know, we were talking about an audit and then the software was brought up at the end, and it's, you know, it's got nothing to do with me and Tom, so I was quite uncomfortable."

Q: It had nothing to do with you and Tom, this complaint of your father's?"

A: No."

Q: Is it a complaint of your father that you supported, or are you neutral about it?"

A: At the start I was neutral because, you know, I didn't know anything about it. I knew he owned the scoping tool but I didn't know he didn't have an agreement with them in regards to, as time has gone on, and obviously supportive of himself ..."

This evidence is supported by the transcript of the meeting that hints at real anger, which also records the claimant as very clearly making the point that the claimant had not granted a licence to Lloyds. The recording does not suggest that this was challenged by Mr Monteith, who accepts that the record is accurate.

57. It was submitted on behalf of the defendants that I ought to find that the claimant had opened the relevant e-mails, and thus became aware that Lloyds were using the scoping-tool technology. In my judgment, the evidence is not sufficiently strong to permit such a finding. I am satisfied by the manner in which the claimant conducted himself after the audit meeting that he was not aware prior to his file review that occurred immediately thereafter that Lloyds were using the scoping tool in which he owned the copyright. I accept that the claimant was not involved in the day-to-day management of the company to the extent and on the same basis as he was with CSL, as is clear, for example, from the fact that he attended the audit meeting in Cardiff only because his son was not otherwise available. Not merely was that the evidence of the claimant and his son but Mr Monteith accepted that to be so in his oral evidence at transcript Day 2, page 272, lines 4-9. He was referring to the 24th October meeting and was being asked why he had gone to his boss to explain the role of the claimant in the development of the scoping tool. His answer was:

"Again, you know, through conversations with myself and Jim, Jim has started to intimate, you know, his input into the scoping tool. At this stage of our relationship, you know, we'd been working, you know, both at Completecare and Arngove, not necessarily at Arngove, because it's more Jamie working at Arngove. All of a sudden, the scope tool to be mentioned, the fact that all the development work that went in from, as Jim put it himself ..."

58. The other point relied upon by the defendants as justifying the finding they sought from me was an assertion that JTS would have been bound to disclose to his father the receipt of the contract from Lloyds by e-mail before he signed it, irrespective of whether his father had in fact opened the e-mails. JTS denied this to be so. I do not consider it to be self-evident that he would have done as was alleged. The format showed that the contract that Lloyds was requiring to be signed was entirely standard. The e-mails were not inviting bipartite negotiations as to the terms. Lloyds required the contract attached to be signed in order that Arngrove remain on its panel. I think it entirely plausible that JTS would have signed the document and told his father, if at all, only after he had done so, because it would not have occurred to him not to sign the document, since Lloyds by definition were likely to be an important customer of Arngrove.
59. I remind myself that the evidential burden of establishing acquiescence or an estoppel rests on the defendants, being the party that alleges each. I consider that the fact the e-mails were sent to an e-mail account to which the claimant had access does not established by inference that he must have open the document at the time. As I said, I consider it entirely plausible that it was opened by JTS and the contract signed by him, and that he told his father that such was the case after the event.
60. It is fair to say that the relationship between Arngrove and Lloyds was going through a difficult phase in the autumn of 2011, as the audit issue reveals. But there is nothing in the evidence I have seen to suggest it was thought by either party to be terminal in October 2011. It is possible that the claimant was anticipating the failure of Arngrove, but that was not suggested to him as a motive for fabricating the claim against Lloyds either that he thought Arngrove was about to lose the Lloyds business or that Arngrove was about to go into liquidation. Whilst the claimant is self-evidently capable of lying, having seen him I consider that he quite capable of losing his temper when pressed but I do not think he is capable of fabricating the sort of intensity of reaction that he displayed at the meeting on 24th October, and thus I do not regard that as a part of a pattern of fabrication.
61. In my judgment, the material that is available does not establish on the balance of probabilities that the claimant was aware that the scoping tool was being used by Lloyds prior to his first discovering that fact following the audit meeting in June 2011. However, in my judgment, the real point is that it simply does not matter, for even if, contrary to what I have concluded, the proper conclusion is that the claimant had been aware that the scoping tool was being used by Lloyds by no later than July 2010, that does not, in my view, lead to the conclusion that such entitled Lloyds to assume that no objection was being or would be taken. There is no evidence at all that in fact anyone at Lloyds had reached that conclusion. In that connection, it is worth noting Copinger & Skone James on Copyright, 16th edition, Vol.1, paragraph 5-220, which is to following effect:

"Effect of Estoppel and Acquiescence

"Where a copyright owner stands back and allows another to assume that no objection will be taken to the exploitation of his work, the effect may be that the copyright owner will become estopped from asserting that there was no consent or that any consent has been revoked. The ordinary principles of estoppel or acquiescence would operate. In Fisher v Brooker, the claimant had contributed to a composition but left the band soon afterwards, making no claims to the copyright. His co-writer, the defendant, and his publishing company, continued to exploit the composition for almost 40 years. The claimant claimed that such exploitation was pursuant to an implied licence, which he purported to revoke. At first instance it was held that the claimant's contribution entitled him to a 40 per cent share and declarations as to joint authorship and joint ownership were granted, together with a declaration that the implied licence had been revoked and an order for an inquiry as to damages in respect of infringement during the period after revocation. The claim for restitution of past licence fees was dismissed on the grounds that there was an implied licence. Defences of a laches acquiescence and estoppel were rejected. The judgment was for the most part upheld in the House of Lords since the mere passage of time could not itself undermine a claim, and for it to do so, laches would need to be established. However, laches can only bar equitable relief and the declaration as to the existence of a long-term property right recognised as such by statute is not equitable relief. The defendants had not demonstrated any acts during the course of the delay which resulted in the balance of justice justifying the refusal of the relief to which the claimant would otherwise be entitled. They could not show any prejudice resulting from the delay, and even if they could, the benefit they had obtained from the delay would outweigh any prejudice."

62. In my judgment, similar circumstances apply here. I note in passing that the edition of Copinger & Skone James supplied to me was the 15th edition. The current edition is the 16th, but there is no material difference between the two in this regard.

The Archive Use Issue

63. This issue arises only in relation to the use made of the claimant's software by Halifax in light of the findings that I have made. In essence the defendants' submission is that in circumstances where the licensee knew that the software would be used to create business records, the voluntary licence entitled Halifax to retain spreadsheets coming into existence during the currency of the voluntary licence for the purpose of storage and view only for business and regulatory purposes either by necessary implication or estoppel.
64. I accept as correct the principle identified in Copinger & Skone James on Copyright (16th Ed.) volume 1, paragraph 5-217, where, having said that an implied licence incidental to a contract extends no further than the minimum which is necessary to give business efficacy to the contract, it then says this, in relation to gratuitous and informal licences:

"In a case where the licence is gratuitous and informal, the position is different, thus, where the work is supplied, knowing that it will be used for a particular purpose, the licence may be limited to that purpose, but where the purpose is less vague, the extent of the licence is unlikely to be confined to the immediate purposes which the parties had in mind. No doubt the test is objective. For what purposes would a reasonable person in the shoes of the licensee consider that he could use the work?"

In my judgment, on the findings I have made, the outcome is, or ought to be, obvious. Having been granted an gratuitous licence to use the scoping tool software for its commercial activities with its contractor network, a reasonable person in the position of Halifax would be bound to have concluded that the licence extended to archiving the material generated during the currency of the licence and to entitle Halifax thereafter to view the archived material for business and regulatory purposes, even after the licence had been terminated for all other purposes.

65. Looked at in another way, in my judgment the claimant is estopped from revoking the implied licence to store and view for the limited purpose I have mentioned. It was submitted that reliance and detriment sufficient to support such an approach had not been demonstrated. I am not able to agree. The necessary reliance and detriment derives from the use of the software by Halifax for its commercial purposes in connection with its contractor network by the voluntary licence of the claimant and his predecessor.

Conclusions

66. In summary:

(1) There was no oral or any other agreement to the effect alleged by the claimant;

(2) There was a gratuitous and informal licence granted to Halifax by which it was entitled to use the software generated by Mr Muirhead on the instructions of the claimant for the purpose of conducting its business with its network of contractors. The licence was personal to Halifax and arose out of the commercial relationship between it and CSL. It did not entitle Halifax either to grant sub licences or to assign; in consequence

(3) The claim in infringement, breach of confidence and for unjust enrichment in relation to user by Halifax must necessarily fail other in relation to infringement by permitting Lloyds to use the software. The unjust enrichment claim must fail because the existence of the licence precludes it from being asserted that there was a mutual understanding that CSL expected payment for use of the software. In any event, I do not see how the claimant could make a monetary claim for any period prior to the date of the assignment to him of the software;

(4) Halifax was not able to sub-licence use of the software by other insurers, nor was its licence capable of assignment. In consequence, Lloyds is not, and never has been, licensed to use the software;

(5) Lloyds are not entitled to assert that the claimant is precluded by estoppel or acquiescence for denying the existence of a licence in its favour;

(6) Halifax's gratuitous licence extends to the storage and viewing of records prepared by it using the software during the currency of its licence, either by implication or because the claimant is estopped from revoking the voluntary licence to that limited extent;

(7) Had I concluded that Halifax was entitled to and had sub-licensed Lloyds to use the software, I would have concluded that Lloyds would have been entitled to the same outcome in relation to the storage and viewing of records prepared by it using the software during the currency of any sub-licence or licence assigned to it;

(8) In consequence, the claim against Halifax must fail and be dismissed in relation to any usage prior to 9th December 2011 or thereafter in relation to storage and view only of records created prior to that date using the software but otherwise succeeds; but

(9) The infringement claim against Lloyds succeeds.

I will hear counsel as to the appropriate directions necessary to carry into effect the findings I have made.

Postscript

67. For the avoidance of doubt,

(a) I record that the very serious allegations of conspiracy made by the defendants against JTS in opening this case were unequivocally withdrawn by the time they came to close their case.

(b) I conclude that Mr Williams was not personally responsible for the untruths that appeared in Bevan Brittan's letter in response to the letter before action, because the information was supplied to Mr Williams by others, and in particular by Mr Monteith, and was accepted by him in good faith.

(c) I acquit Bevan Brittan of culpability for the contents of the letter, which I am entirely satisfied was written by them on instructions.