England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
MANCHESTER DISTRICT REGISTRY
MERCANTILE COURT
(His Honour Judge Kershaw QC)

		The Royal Courts of Justice Strand London WC2 Monday 29th July, 2002

1. LORD JUSTICE CLARKE: This is an application for permission to appeal by the claimant, Mr Karl Wallis, from an order made on 8th May 2002 by His Honour Judge Kershaw QC, sitting in the Mercantile Court in Manchester, dismissing his action against the defendant, Learonal (UK) Plc.
2. The order was made after the trial of an action in which the applicant asserted that he had made an oral contract with a Mr Whitlaw, on behalf of the defendant, on 16th November 1998. There were only two people present at the meeting, namely Mr Wallis and Mr Whitlaw. The judge heard them both give oral evidence. Having done so, and having considered the probabilities and heard the evidence of two other witnesses, he concluded that no binding agreement had been reached.
3. It is clear that his conclusion depended to a significant extent upon the view that he formed of the reliability of the evidence given by Mr Wallis and Mr Whitlaw. In these circumstances, the applicant faces a very difficult struggle before he could possibly hope to persuade this court to allow an appeal.
4. However, the question on this application is whether the applicant has a realistic prospect -- which by definition means a prospect other than a fanciful prospect -- of succeeding on appeal.
5. Mr Wallis has represented himself, as he did before the judge, but it appears to me that he should, if at all possible, be represented by counsel. Because he is not represented by counsel, I will state shortly the reasons which have led me to the conclusion that I should grant permission to appeal, albeit with some reluctance. The agreement alleged by the applicant is as follows: (1) the applicant would be paid a lump sum of £50,000; (2) the respondent would discharge all fees associated with an international patent application for the process which was the subject of the discussion; (3) the respondent would pay the applicant a royalty of 3 per cent of gross sales world-wide, but until the time that the royalty payments had reached £30,000 or more annually the respondent would pay the applicant £30,000 per annum.
6. The applicant is an inventor. The invention which is said to be the subject matter of the agreement relates to the making of printed circuit boards, which the judge described in some detail in his judgment.
7. The judge held that no agreement or no sufficient agreement was made between the parties; and as I read his judgment, he further held that there was no intention to create legal relations. He did, however, hold that Mr Wallis and Mr Whitlaw had reached at least some agreement. He said at page 12F:

"I think there was agreement, in the sense that £50,000 was offered or suggested as a sum that would be paid forthwith to cover, with a bit to spare, the expenses of obtaining their present protection, past expenses ..."

8. It thus appears that the judge held that there was agreement that the applicant would be paid a lump sum of £50,000, which was the first head of the alleged agreement.
9. Secondly, the judge held that there was agreement that the respondent would cover the future expenses of obtaining patent protection. That was the second of the heads of agreement alleged.
10. As to the third of the heads of agreement alleged, the judge I think held that no agreement was reached, at any rate in relation to the £30,000. It is rather less clear, on the copy of the judgment that I have, what his conclusion was in relation to the 3 per cent. I am not sure whether there is an approved transcript of the judgment, but on page 13 of my copy there are some dots which suggests that there is a passage missing. It appears to me that it would be desirable to obtain an approved copy of the judgment for the purposes of the appeal.
11. The judge relied upon a number of documents which came into existence after the alleged agreement, which he found supported a conclusion that the parties had not reached a binding agreement but were still in negotiation.
12. It appears to me to be at least arguable that agreement was reached, not only in relation to the £50,000 and the patent fees to which the judge referred, but also in relation to the 3 per cent. The applicant's case in relation to the £30,000 is very much weaker because he wrote a letter on 28th January 1999 Mr Whitlaw, which the judge described as an important letter, in which he said this:

"Over the next months Lea Ronal carried out further tests and on 16 November [1998] I had a meeting with you to discuss financial arrangements. You said Lee Ronal wanted to use the process and they wanted the sole rights. You asked how much I wanted, and I said I preferred for you to make me an offer. You offered 3% of world-wide gross income from the process which I accepted. You also mentioned that I had previously requested a one-off payment to cover earlier development work. You offered £50,000 which I accepted. We then discussed the minimum payment that would be made by you until the process was on the market and reaching reasonable royalties but an exact figure was not decided on.

You agreed that Lea Ronal should pay for the next stage in the patent and this was duly done. You asked that your patent agents would then take over the next stages which time we have now reached."

13. That letter is, to my mind, at least consistent with the case that agreement had been reached, save as to the £30,000.
14. What is stated in the second of the paragraphs I have read is correct, in that the respondent did pay for the next stage of the patent, which I think cost about £4,000 plus VAT.
15. The judge relied upon a number of statements in the correspondence which suggests that negotiations were on foot between the applicant and the respondent. It appears to me to be at least arguable that the negotiations referred to in the correspondence are not so much negotiations in relation to what was agreed at the meeting, but negotiations as to how the transfer of the patent should be carried out.
16. I recognise that the judge reached his conclusion in part by reference to what he regarded as the probabilities -- or as I think he would put it the improbability -- of parties agreeing to a substantial contract of this kind without having the matter drawn up and without the assistance of lawyers.
17. However that may be, I have reached the conclusion that there is a sufficient argument that agreement was reached that in return for the transfer of the relevant patent and the use of the invention the respondent would pay the applicant £50,000 forthwith, and that it would pay the patent fees and 3 per cent of gross sales. It appears to me to be at least arguable that it was agreed also that the respondent would pay a reasonable sum in the meantime, but that that sum may well not have been agreed at the meeting. That would be consistent with the letter of 28th January.
18. As to the judge's conclusion that there was no intention to create legal relations, the evidence appears to be that at no stage was the arrangement or agreement expressed to be subject to contract. That point was specifically put to Mr Whitlaw in the course of his cross-examination, and he agreed that he did not at any stage say that it was subject to contract (see page 15C of the transcript).
19. In all these circumstances, while, as I have said earlier, the applicant, Mr Wallis, faces an uphill struggle to persuade this court to interfere with the conclusion reached by the judge, it does not appear to me that the prospects of success are fanciful. I therefore grant permission to appeal.
20. I have expressly warned Mr Wallis that if his appeal fails he will of course have to pay the costs of the respondent, which will no doubt be substantial.
21. I have also indicated to Mr Wallis that it seems to me to be every desirable that he should be represented by counsel, with experience of this kind of problem, at the hearing of the appeal. Since the respondent will undoubtedly be represented by counsel, with great respect to Mr Wallis I feel sure that the court will be more assisted if it has the assistance of counsel on both sides.
22. Finally, it does seem to me, as I have indicated, that an approved copy of the judgment should be obtained so that the passage at the top of page 13, which presently has dots, can be filled in. I also think that it would be desirable to obtain a transcript of the evidence of Mr Robey. I recognise that transcripts are expensive, as far as I can understand it, but this was only a short part of the evidence, and Mr Robey's evidence is potentially relevant at least to this extent. He says in his statement that when Mr Wallis first spoke to him after the alleged agreement, he described what had happened as an agreement between the parties.
23. For those short reasons, I have decided to grant permission to appeal.
ORDER: Permission to appeal granted. (Order not part of approved judgment)