England and Wales High Court (Patents Court) Decisions

De Silva Farmer v. Moseley (Holdings) Ltd, RTK Marine Ltd, Composite Industries Ltd, Christopher Brewer [2000] EWHC Patents 128 (7th March, 2000)

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
PATENTS COURT

BEFORE: MR JUSTICE NEUBERGER

Dr Anthony Stephen De Silva Farmer the claimant appeared on his own behalf.

Mr Michael Hicks (instructed by Messrs. Lester Aldridge, Bournemouth) appeared on behalf of the defendants in the first listed action above.

Mr Matthew Kime (instructed by Messrs. Sherwin Oliver, Portsmouth) appeared on behalf of the defendant in the second action listed above.

Mr Martin Aaron (of Messrs. Sterling Ford) appeared on behalf of the Liquidator of Composite Industries Limited.

1. Section 1. INTRODUCTION
2. This is the judgment in proceedings brought by Dr Anthony Farmer against Mr Christopher Brewer ("the Brewer action"), and also the judgment on a preliminary issue in proceedings brought by Dr Farmer against Moseley Holdings Limited and RTK Marine Limited ("the RTK action"). Since it is unnecessary to distinguish between the two companies for present purposes, I will simply refer to either and both of them as "RTK". In the Brewer action Dr Farmer and Mr Brewer each contend that he is the owner of the registered and unregistered design rights of, and the copyright in the drawings relating to, certain speedboats, and each of them also claims to be the owner of certain moulds and other chattels consisting of, forming part of, or relating to, such speedboats. Although Dr Farmer claims ownership, his alternative contention is that the owner of the design rights and the copyright ("IP rights") and/or chattels is a company called Composite Industries Limited ("CIL") which is now in liquidation. The RTK action is for infringement of Registered Design No. 2,003,549 ("the 549 design") in relation to one of these craft, known as the RDV and of related unregistered design rights and copyright ("the RDV rights"). The preliminary issue in that case is whether, as he contends, Dr Farmer is in fact the owner of those rights; whereas RTK contends that CIL is the owner.
3. For the purpose of both sets of proceedings, I am assuming that the alleged registered and unregistered design rights exist, and that the alleged copyright exists. As I understand it, while RTK will, if necessary in due course, contend that no such IP rights exist, both Dr Farmer and Mr Brewer contend that they do.
4. Section 2. THE UNCONTROVERSIAL FACTS
5. In 1986, RTK acquired the assets of a company known as Dell Quay Limited ("DQ"), which up until then had been part of the Wadham Stringer group of companies. For some 25 years, DQ had supplied a vessel known as the Rigid Raider Craft ("RRC") to the Ministry of Defence ("MOD").
6. In May 1988, the MOD issued its requirements for a new high speed craft called a Large Rigid Raiding Craft ("LRRC"). RTK was invited to bid. Mr Brewer also heard about the MOD's requirements. He had been born and brought up in Australia, and had been involved in various business activities, often involving design, an area in which he appears to have been self-taught to a substantial degree. By May 1988, he had sold his most recently acquired business, and was looking for something else to do. He was particularly interested in the MOD's requirements for the LRRC, partly because of his practical experience of design, and partly because he had always been interested and involved in boats. On 10th May 1988, Mr Brewer formed CIL, and was effectively the sole shareholder, the chairman, and one of the two directors. Mr Brewer recruited a number of people to work for CIL, including Mr Bill Murch, who had experience of boat construction and of fibreglass technology, and, from February 1989, Mr Jim Potter who had been a production executive with RTK and was introduced to Mr Brewer by Mr Murch. Until it went into liquidation CIL was provided with finance largely by Mr Brewer, who told me he invested hundreds of thousands of pounds in the company.
7. It is also right to record that Mr Brewer purchased another company called Europower Marine Limited ("EML") of which one share was owned by Mr Brewer and the other by CIL. Somewhat confusingly, CIL traded from time to time under the name Europower or Europower Marine Limited.
8. According to his evidence, Mr Brewer was involved in a total of four craft relevant to these proceedings. The first was known as the Bambino, which he said he may have started designing even before he had formed or acquired CIL. The Bambino originated from an American craft of the same name, which had been designed and manufactured by an American company called Addictor Boats ("Addictor"). Mr Brewer said that he offered Addictor $25,000 for the right to build and sell Bambino boats, and to buy two such boats which would be air freighted to England. One such boat was indeed air freighted to England, but its design, and in particular the interior, was significantly altered by Mr Brewer. On 28th April 1989, Mr Brewer arranged for an application to be made in the name of CIL to register the design of this altered Bambino on the register of designs, and such registration was duly effected in the name of CIL on 6th July 1990 with registration number 1,059,113 ("the 113 Registration").
9. The second relevant craft was the Seaskate, which was produced under licence from J Stone & Son who had been introduced to Mr Brewer by Mr Potter after he had joined CIL. It subsequently transpired that Mr Stone had in fact copied the design from an American company.
10. Thirdly, there is a craft known as the Reefrunner. This originated from a partly completed craft called the Dolphin, which Mr Brewer (together with Mr Murch and Mr Potter) collected from Mr Stone in early 1989. According to Mr Brewer, substantial alterations and additions to the design of the Dolphin were carried out, and these resulted in the Reefrunner.
11. It was while the Reefrunner was being developed, that Mr Brewer learnt of the MOD requirements to which I have referred. In March 1989, Mr Brewer wrote to the MOD, on CIL writing paper and in the name of CIL, offering to provide a model LRRC free of charge, an offer which the MOD accepted the following month. Mr Brewer said that the craft which he ultimately designed to satisfy the MOD requirements, namely the RDV, was based on the Reefrunner, but was redesigned partly for general military purposes and partly because of the specific requirements of the MOD. Mr Brewer said that initial tests on the RDV took place in December 1989, and, following those tests, the MOD placed orders with him for the hire of the RDV, an arrangement which was extended from time to time into the second half of 1990. In or about December 1989, Mr Potter had instructed an agent, A.R. Davies & Co. ("Davies"), to register the design of the RDV at the Registry in the name of CIL, and the application was filed on 20th December 1989, and the 549 design was duly registered on 3rd August 1992 in the name of CIL.
12. In July 1989, a Mr Reg Beale, a marine and reinforced plastics consultant, had visited CIL's premises to inspect the RDV (then often referred to as "The Normandy") and had written a letter to "Europower Marine", for the attention of Mr Potter, about its dimensions and likely costs, and who might construct it. With his letter, dated 15th July 1989, he had also enclosed drawings of the RDV. He had sent further drawings to Mr Potter on 23rd August 1989. Mr Beale was paid for this work in October 1989. He made a further visit to CIL's premises and produced further drawings of the RDV in December 1989. I shall refer to these various drawings by Mr Beale as "the drawings".
13. It appears that the MOD was impressed with the RDV, but Mr Brewer and CIL were suffering problems in connection with what he called "the MOD's stringent requirements as to the financial viability of its chosen supplier". Because of the expense which had been incurred in connection with the RDV and the Reefrunner, because of the delay in anticipated orders from the MOD, because of the collapse in the leisure boat market towards the end of 1990, and indeed also because of the general recession in 1989/1990, both CIL and Mr Brewer were in financial difficulties.
14. By early 1991, the financial position of CIL had become so serious that it had been unable to pay the rent for its premises, and, as a result, bailiffs instructed by its landlord seized and removed various chattels at the premises and also took possession of the premises. Mr Brewer sought financial assistance from Dr Farmer, whom he described as having been "a very close business associate and friend". In that connection, they had by this time already been discussing and formulating a business plan in relation to a fisheries venture off the Somali coast. Dr Farmer was, and indeed is, the sole proprietor of a Panamanian company called Environmental Management Incorporated ("EMI"). On 12th November 1989, EMI executed a Power of Attorney giving Dr Farmer certain, pretty wide, powers to act on its behalf.
15. As a result of Mr Brewer's approach to Dr Farmer and their subsequent discussions, Dr Farmer agreed to help CIL. On 22nd January 1991, Mr Brewer wrote a letter on CIL writing paper to EMI "on behalf of" CIL (and indeed EML) referring to CIL's problems and the fact that it had approached its bank. The letter went on to say that, if CIL's bankers were not prepared to help, CIL would "immediately sell" to EMI "and guarantee clear/clean title to the following second hand used goods for the sum of £11,313-23". These included a complete set of moulds for the Reefrunner and the RDV. CIL also agreed to sell to EMI these chattels "together with the assignment of any and all design rights related thereto" and a set of moulds for the Bambino "together with any and all rights thereto".
16. It appears that, on or about the day that this letter was written, Dr Farmer introduced Mr Brewer to a friend, a Mr Williams, who carried on a property development business through a company called Cardinal Holdings plc ("Cardinal"). Initially, it was apparently envisaged that Mr Williams might provide CIL directly with the money it needed; in the end it was Dr Farmer who provided the money, albeit that he was only able to provide the money because he was put in funds by Cardinal. By a letter dated 23rd January 1991 ("the Cardinal letter") on Cardinal's writing paper and signed by Mr Williams, Cardinal recorded the fact that Cardinal had agreed to lend Dr Farmer £15,000 "for up to 90 days from today" to be repayable pursuant to one of three options, namely £20,000 by 22nd February, £25,000 by 24th March or £30,000 by 23rd April, 1991, with a proviso that if payment was not made by 23rd April 1991, interest was payable on £30,000 at the rate of 4% per annum over Lloyds Bank Base Rate.
17. On the same day, 23rd January 1991, Mr Brewer wrote on CIL writing paper, again "on behalf of" CIL (and indeed EML) to EMI, confirming that EMI had provided a bankers draft in the sum of £11,313.23, which was in fact paid to the bailiffs, as a result of which CIL got back possession of its premises and the chattels which had been taken by the bailiff. The letter went on to say that this sum was "payment in full for clear and unencumbered title and ownership by sale to you" of certain goods, including the goods and rights specifically referred to in the letter of 22nd January from which I have quoted. This letter authorised EMI "to remove the above property belonging to you from our premises forthwith".
18. It appears that the balance of £15,000 which had been made available to Dr Farmer was used by Mr Brewer/CIL to pay expenses in connection with the transportation of certain items.
19. On 25th January 1991, Dr Farmer wrote "for and on behalf of [EMI] to Mr Brewer as chairman of CIL" confirming that EML "and or any other party or parties nominated by you shall have the option at any time to purchase the various goods acquired from [CIL]... for the same price that [EMI] originally paid for these goods". The letter went on to say that these goods were effectively "being held "in trust" by [EMI] on behalf of [EML] and/or your nominees until such time that the repurchase... has been affected". The letter ended by saying that EML "and/or your nominees" would in the meantime be "granted unrestricted access to all of the goods... for the purposes of carrying out your normal business activities". Also on 25th January, Mr Brewer wrote a letter on CIL writing paper to Davies confirming that "all design rights" to the RDV and the Reefrunner had been sold to EMI, effectively indicating that EMI was to be recorded as the owner of the registered design. In this letter, Mr Brewer authorised Davies to sign "any transfer documentation" on behalf of CIL which needed to be signed.
20. On 31st January 1991, Dr Farmer executed a document confirming that:

"Clear unencumbered title to all the goods and associated rights purchased from [CIL] shall pass to Miss Linda Bishop and/or her nominee... on payment in full of the debt outstanding to Cardinal..."

21. Miss Bishop was at that time living with Mr Brewer.
22. On 19th February 1991, apparently after he had been contacted by Dr Farmer, Davies wrote to EMI enclosing a draft assignment in relation to the registered design rights in respect of the 113 design and the 549 design ("the registered designs"), to be executed by CIL and EMI.
23. Although the loan of £15,000 from Dr Farmer solved the immediate problem faced by Mr Brewer and CIL, there was still a need for capital, partly to discharge the debt owed to Dr Farmer, but also to convince the MOD that CIL would be a reliable supplier of the RDV. Mr Brewer had discussions with the contractor already approved by the MOD, FBM Marine Limited ("FBM"), and also with a potential investor, a Mr O'Connor, who owned a company called Astron Marine Limited ("Astron"). According to Mr Brewer, the upshot of those negotiations was that Astron would provide the finance, CIL/Mr Brewer would provide the design input, and FBM would manufacture the RDV for the MOD, and, for that purpose, the registered design would be transferred, albeit temporarily, into the name of FBM. Mr Brewer also said that at the end of March 1991 "it was agreed that certain moulds and rights would be "sold" to Astron" and "in particular the moulds for the RDV". Although the assignment of the registered designs as prepared by Davies had not yet been executed, this agreement was made out in the name of EMI rather than CIL. Astron agreed to pay £80,000 for the moulds of the RDV and the registered designs and the unregistered design rights in respect of the RDV, by way of two equal instalments on 28th March and 28th April 1991. The first instalment was paid late, namely on 18th April 1991. On the following day, £15,000 of that £40,000 instalment was paid to Cardinal (as Mr Williams acknowledged on behalf of Cardinal on 2nd May). The balance of the £40,000 was used to pay various creditors.
24. The arrangement with Astron failed because, at least according to Mr Brewer at the time, Astron failed to pay the second instalment of £40,000. It appears that Astron took a rather different view of the position, considering that it had been misled by Mr Brewer and was in fact entitled to the return of the £40,000 it had paid to CIL/Mr Brewer.
25. During July 1991, there was correspondence between Mr Williams of Cardinal, Dr Farmer and Mr Brewer relating to the "profit" and the "interest" due on the loan, but that correspondence had petered out by the end of July. Mr Brewer said that Dr Farmer indicated that interest would be forgiven.
26. Meanwhile, following the breakdown of the arrangement with Astron, there were negotiations with Astron as well as with other parties; at least judging by the letters involved, some of those negotiations were carried out by Dr Farmer and others by Mr Brewer, but Mr Brewer says that letters apparently written by Dr Farmer were actually drafted and typed by Mr Brewer. Negotiations with Astron reached the position whereby on 21st November 1991, EMI, presumably on Mr Brewer's instruction, wrote to Astron stating that the £40,000 would be paid by mid-January 1992.
27. Meanwhile, on 28th November 1991, Mr Brewer received a letter from a company called Mustang Marine Limited of Cowes ("Mustang") referring to a dispute between Mr Brewer and Astron and to the fact that Mustang had "the RDV demonstrator at our premises, on which we have carried out a number of items of work so far at our own expense". The letter immediately went on to refer to the fact that Mustang also held moulds for the Seaskate, the Reefrunner and the RDV, and enclosed an invoice for over £19,000 plus VAT. It appears from Mustang's letter that it had been approached by Mr O'Connor of Astron, and had accepted his version of the dispute with Mr Brewer/CIL. In his faxed letter reply on CIL writing paper of 2nd December 1991, Mr Brewer referred to "the previous involvement of myself and my company with the items listed in your letter" but stated that EMI "are the legal owners and/or trustees of [those] items" and also stated that the letter should have been addressed to Dr Farmer "who represents [EMI] in the UK". Two weeks later, in a fax also on CIL paper, Mr Brewer wrote to EMI for the attention of Dr Farmer, confirming that EMI "are the legal owners and/or trustees of all the items listed" in Mustang's fax. In this fax, Mr Brewer also stated that the Seaskate moulds had nothing to do with Mr Stone and had in fact been "totally developed and owned by [CIL] only and on that basis legally sold to [EMI]".
28. On 16th December 1991, CIL wrote to EMI stating that, if required, CIL's auditors would confirm that EMI had legally purchased various goods from CIL in 1991. On 31st December 1991, EMI faxed the MOD (with Mr Brewer's approval, indeed, I believe, at Mr Brewer's instigation) stating that it had "irrefutable original evidence" that it was the owner of "the design rights and of the total concept and design of the... RDV".
29. On the basis that the moulds and other chattels at Mustang's premises were the property of EMI and/or CIL/Mr Brewer, Dr Farmer and Mr Brewer secretly went to Mustang's premises on 7th December 1991 and collected all these chattels (save for the Seaskate boat, which Dr Farmer reported to the police as having been stolen, and for the Bambino, which were at some point recovered from Mustang in return for a payment made by Mr Murch). Since that time, these chattels have been kept under the control of Mr Brewer in the sense that he has arranged for their storage and has incurred significant liability personally in that regard. In practice, therefore, Mr Brewer has had the chattels under his control and in his possession since December 1991.
30. As Astron was not paid the £40,000 as promised, the dispute between CIL/Mr Brewer and Astron/Mr O'Connor intensified, and, according to Mr Brewer, he was subjected to physical threats by Mr O'Connor's agents. On any view, Mr O'Connor was anxious to recover the £40,000 which Astron had paid. Despite these problems, Mr Brewer was still negotiating with FBM, and, according to him, by September 1992, he was "close to agreeing a deal with them for the manufacture of the RDV". Mr Brewer was also still discussing the Somali fishing project with Dr Farmer; as Mr Brewer said in his evidence, at that time they "were still friends". At the beginning of September 1992, they "therefore", according to Mr Brewer's evidence, "agreed orally that it would be appropriate to complete an assignment of the registered designs relating to the Bambino and the RDV from CIL to EMI". On 7th September 1992, the assignment document prepared by Davies was therefore finally completed by CIL and EMI. The following day, Dr Farmer wrote to FBM, confirming that EMI owned the registered design for the RDV. On 13th May 1993, EMI became the registered proprietor of the registered designs.
31. Around the end of 1992 or the beginning of 1993, an agreement had been reached with FBM whereby, in return for a payment, FBM was to build 24 RDVs for the MOD. Thereafter, the RDV was manufactured by FBM. On five occasions between March and June 1993 and pursuant to an arrangement agreed with CIL/Mr Brewer and/or EMI/Dr Farmer, FBM made royalty payments to Anthony Farmer & Associates, Dr Farmer's fisheries consultancy in the UK, because EMI had no bank account in the UK. On each such occasion Dr Farmer accounted for such payments, after deductions. Thus, the first payment of £28,707.60 was received by Dr Farmer from FBM. After deducting from it the VAT and payments due to Davies, £22,976 was left, which was then paid by Dr Farmer "to Miss LS Bishop (on behalf of CJ Brewer)" on 24th March.
32. Eventually, terms of compromise were finally agreed with Astron in a document dated 14th July 1993 executed by Mr O'Connor and EMI. Astron was paid £50,000 in settlement of their claim for £40,000. This involved Mr Brewer openly accepting, as I believe he always had done in his own mind, that Astron was entitled to the return of the £40,000 payment it had made. However, even as late as May 1993, as Mr Brewer himself accepted, Mr O'Connor "had to be given reasons why I could not pay him what he wanted" and, to that end, Mr Brewer said that he wrote letters which were not accurate but were "a smoke screen to put O'Connor off as long as possible".
33. It appears that the MOD was not satisfied with at least some of the RDVs produced by FBM, but nothing hangs on that in relation to the issues before me.
34. In or around March 1995, Dr Farmer and Mr Brewer fell out over the Somali fishing project. On 15th May 1995, Dr Farmer caused EMI to execution assignment to him of "the goods... as set out in a letter from [CIL] to [EMI] dated 23rd January 1991 [including] the IP rights referred to therein".
35. While all these negotiations were going on, CIL's financial position had become untenable. On 22nd June 1992, the Inland Revenue presented a petition for its winding up, and on 7th October 1992 the Court made an order winding CIL up. Mr Philip Navier of 69 Middle Street, Brighton, East Sussex, became the first liquidator of the Company.
36. On 29th September 1997, Dr Farmer began the Brewer action in the Bristol County Court, and two days later he issued the writ in the RTK action out of the High Court. Thus began the two sets of proceedings which are now before the Court. On 24th November 1997, EMI assigned the registered designs to Dr Farmer, who thereafter became the registered proprietor, as he remains today.
37. On 1st May 1998, Mr Navier, as liquidator of CIL, filed two notices of disclaimer under Section 178 of the Insolvency Act 1986 ("Section 178"), which he had executed on 22nd April 1998. In the first disclaimer, he disclaimed "all the Company's interest in... the legal action between Dr... Farmer and Mr... Brewer". In the second disclaimer he disclaimed "all the Company's interest in... all moulds and equipment only (not drawings etc.) as set out in the attached schedule". The attached schedule set out prototypes and moulds relating to the RDV, the Seaskate and the Bambino.
38. On 20th August 1999, Miss Bishop assigned all her rights (if any) in the RDV to Mr Brewer. On 12th September 1999, Mr Beale assigned any rights he had in the drawings to Dr Farmer. On 5th November 1999, I gave leave to Mr Brewer to be joined in the RTK action and to Dr Farmer to amend to add a claim against RTK for infringement of copyright.
39. The case came on for hearing on 15th November 1999, and when it concluded on 19th November 1999, I reserved judgment. After making a draft judgment available to the parties, I received, unusually, further detailed submissions on behalf of Mr Brewer, as well as some briefer submissions in reply from Dr Farmer and RTK. Because I thought it right to have these matters further discussed and because I was concerned about the fact that CIL was not a party to these proceedings, I decided not to hand down the judgment I had prepared, but to adjourn the matter for further argument. The adjourned hearing took place on 11th February 2000. At the hearing there was not only further argument, but there was also an application on behalf of RTK to join CIL. That application was not opposed by anyone. Indeed, it was supported by Mr Martin Aaron, who appeared on behalf of Mr Donald Gendall, his partner in Sterling Ford, Insolvency Practitioners, the present Liquidator of CIL.
40. Given the substantive arguments and the lack of opposition, it seemed to me plainly right to accede to the application. This judgment, therefore, is my final judgment. It takes into account not only the evidence and arguments I received at and before the hearing of 11th February 2000, but also the written submissions which I have been sent since that date.
41. Section 3. THE ISSUES
42. The substantive issue between Dr Farmer and Mr Brewer is the ownership of the chattels (by which I mean the prototype and moulds of the RDV, the Seaskate and the Bambino and a number of drawings and other chattels set out in paragraph 3 of Dr Farmer's amended particulars of claim against Mr Brewer) and the ownership of the IP rights. If Dr Farmer owns any of these chattels or rights, then the question which needs to be considered is that of the relief to be granted to him. So far as the preliminary point between Dr Farmer and RTK is concerned, it is whether Dr Farmer has, in effect, any title to sue RTK, and that involves considering whether Dr Farmer is the owner of the 549 design, and any related unregistered design right in the RDV (i.e. the RDV rights).
43. Dr Farmer's contention is that he is the owner of the chattels and of the IP rights; as against Mr Brewer, Dr Farmer's alternative contention is that CIL is the owner. Mr Brewer's contention is that he is the owner of the chattels and the IP rights. RTK's contention is that CIL is the beneficial owner of the 549 registered design, and of the associated unregistered design rights for the RDV - i.e. that CIL is the beneficial owner of the RDV rights. CIL, now it has been joined in the proceedings, effectively adopts RTK's case. If RTK's primary case is rejected and it is, as it were, forced to choose between Dr Farmer and Mr Brewer, Mr Michael Hicks who appeared for RTK said that his client's alternative position is that Dr Farmer is the proprietor of the RDV rights.
44. Mr Matthew Kime, who appeared for Mr Brewer, said that it would be possible for me to reach inconsistent conclusions as to the ownership of the RDV rights as between Dr Farmer and RTK, on the one hand, and, on the other hand, Dr Farmer and Mr Brewer. I agree. However, I would reach such a conclusion reluctantly, save on the estoppel issue to which I refer below. First, such a result would offend against commercial and general common sense, secondly, there were two reasons for having the preliminary point in the action against RTK being heard at the same time as the action against Mr Brewer, namely saving of expense and court time, and ensuring that the evidence and argument on what are overlapping points should be heard together: it would be rather odd in those circumstances, if I reached different conclusions in the two cases. Thirdly, Mr Brewer is, by his own application, a party to the RTK action: it would therefore be difficult to arrive at a different conclusion as between Dr Farmer and Mr Brewer from that I arrive at as between Dr Farmer and RTK. Nonetheless, particularly on the issue of estoppel dealt with in Part 9(b) of this judgment, I accept that there would be nothing wrong, or even odd about, reaching a different conclusion.
45. Given that it is RTK's primary case, and Dr Farmer's alternative case against Mr Brewer, that CIL retained all or some of the chattels and IP rights, it was unfortunate that CIL was not a party to these proceedings. During the hearing, I expressed concern that RTK and Dr Farmer appeared to be raising a defence or argument of jus tertii. However, in light of the decision in Roban Jig & Tool -v- Elkadart [1979] FSR 130, this was not a point which Mr Kime put in the forefront of his argument. As Mr Hicks contended, it does appear to me that that case supports the proposition that, in an action for infringement of an intellectual property right, it is for the claimant to establish that, on the balance of probabilities, he is the proprietor of that right. Indeed, it does appear that the rule (if it may so be called) that it is not open to a defendant to raise jus tertii has been cut down, at least so far as chattels are concerned, by Section 8 of the Torts (Interference with Goods) Act 1977.
46. Despite this, I had concerns about the fact that CIL was not a party to these proceedings. In so far as it was necessary, but only in so far as it was necessary, to make findings as to the rights of CIL for the purpose of determining the issues raised between the parties in these proceedings, I felt that I should not be deterred by the fact that CIL was not a party from making those findings, albeit that it would have to have been accepted, I think, that the findings would not have been binding on CIL. In the event, my concerns have been met by CIL being joined as I have described.
47. In these circumstances, I propose to turn to the issues which, as I see it, need to be decided. They appear to be as follows:

The original ownership (i.e. until 23rd January 1991) of the chattels and the IP rights;

The effect of the arrangement between CIL/Mr Brewer and EMI/Dr Farmer in January 1991;

Dr Farmer's rights, subject to the next three points;

The effect of the transfer dated 7th September 1992 ("the 1992 transfer");

The IP rights: Mr Brewer's contention that CIL assigned the IP rights to him (a) as against CIL (b) as against Dr Farmer;

The effect of the two disclaimers, especially on the chattels;

Conclusions.

48. I propose to deal with these issues in the above order in Parts 4 to 10 of this judgment.
49. Section 4. THE ORIGINAL OWNERSHIP OF THE CHATTELS AND THE IP RIGHTS
50. There was no real issue as to the original ownership of the chattels. In my judgment it is clear that, at least until January 1991, they were owned by CIL. The financial records of CIL show that it was CIL who paid for the materials from which the chattels were made, that it was CIL who paid for the employees who carried out the work, that it was CIL who paid the rent for the premises in which the work was done to work on and design the chattels. The basis of the negotiations with the MOD was that it was CIL who would be carrying out the work and who would have the right to carry out the work; that also indicates to me that CIL owned the prototypes, and that it owned the moulds as well.
51. However, the fact that CIL owned the chattels is, at best, very slender and indirect evidence in relation to the question of the ownership of any of the IP rights. Mr Kime submitted that it was not unusual for an individual responsible for designing an item to retain all the IP rights relating to the design, while conferring all production rights, and therefore the ownership of all physical versions of the item, in a company, frequently owned wholly or partly by the individual. I did not understand Mr Hicks to dissent from that. In these circumstances, I propose to proceed on the basis that the fact that CIL owned the chattels is of no assistance or relevance whatever when it comes to deciding who owns the IP rights.
52. Despite this, I have come to the conclusion that it was CIL who beneficially owned the rights, at least until January 1991. I reach this conclusion for a combination of reasons.
53. First, Mr Brewer decided to register the two registered designs in the name of CIL. In this connection, Section 1(2) of the Registered Designs Act 1949 as amended ("the 1949 Act") provides for registration "upon application by the person claiming to be the proprietor". Mr Brewer knew of, and was ultimately responsible for, the decision to apply for registration in the name of CIL.
54. Secondly, although this was hotly contested by Mr Brewer and indeed by Mr Murch in their respective testimony, as well as by another employee, Mr Parker, I consider that it was not Mr Brewer alone who was responsible for carrying out the designs of the various craft. It is clear from the evidence of Mr Brewer and Mr Murch, each of whom said that Mr Brewer was the individual solely responsible for the designing of the craft, that the design was effected on an informal and ad hoc basis, and was not the subject of detailed or formal drawings. There are therefore no drawings which bear directly on the issue, but I believe the evidence of Mr Potter; he said that he contributed significantly towards the development of the design of the RDV and of the Reefrunner.
55. In this connection, the description of his job in his letter of appointment of 31st January 1989 as "Marketing & Development Manager" does not take matters much further. A discussion which he apparently had with Mr Beale (at least according to Mr Beale's letter of 15th July 1989) appears to me to be more consistent with Mr Potter having been closely involved in the design of the RDV than the evidence of Mr Brewer and Mr Murch would suggest, albeit I accept that there is nothing in Mr Beale's letter which is anything like conclusive on the issue. A fax from Mr Potter to a Mr Murdoch of the Balmoral Group and dated 6th November 1989 appears to indicate a fairly close degree of familiarity on the part of Mr Potter with the design of the RDV, which again is both somewhat more consistent with Mr Potter's evidence than that of Mr Brewer and Mr Murch, but is not conclusive. A note of a directors meeting of "Europower Marine" (which I think must be CIL) attended by Mr Brewer and Mr Potter (as well as another person) on 14th May 1990 records that "it was agreed that in future Mr Potter would concentrate his efforts on sales activity as opposed to product development...". To my mind, this is a significant document, because it suggests that Mr Potter had been involved in product development to a significant extent, and, whatever that term may mean, it is hard to reconcile with the evidence of Mr Brewer and Mr Murch, save possibly to the extent that they had suggested that Mr Potter had put forward nothing but unhelpful suggestions as to the design of the RDV. I consider that those suggestions were motivated more by bad feeling to Mr Potter and (in Mr Brewer's case) self-interest than accuracy.
56. Further, albeit with exceptions, I thought Mr Potter a generally satisfactory witness with no particular reason not to tell the truth, other than the fact that he had fallen out with Mr Brewer. Despite Mr Kime's submission to the contrary, he did not appear to me to be activated by any animus to Mr Brewer. On the other hand, Mr Brewer has shown himself as being a person who is prepared to be less than straightforward in his actions and statements. For instance he played somewhat fast and loose with regard to the ownership of the design rights and the chattels when he realised that they might be under threat due to the financial difficulties faced by CIL and by himself. In addition, he kept creditors such as Astron at bay with admittedly bogus reasons.
57. Further, there were aspects of Mr Brewer's evidence and behaviour with regard to the provision of documentation after he was joined in the RTK action on 5th November 1999 which gave me cause for concern. There was a document which appeared late and which he said he did not know about which cast direct and substantial doubt on his previous evidence that it was he, rather than CIL, who had paid money to Addictor (which I deal with a little more fully below). Further, although there was a specific section of a file in the possession of Mr Brewer marked "Addictor", it does not appear to have contained any documents, at least by the time it was made available by Mr Brewer to his solicitors.
58. Overall, I have to say that Mr Brewer's conduct during 1991 to 1993, his behaviour in relation to disclosure in these proceedings, and the impression he made in the witness box do not lead me to conclude that he was a particularly reliable witness. It is understandable, but not excusable, that, after he got into financial difficulties, and having spent so much effort and money, Mr Brewer might be prepared to act in a less than wholly honest fashion to protect his interests, and I am not without sympathy for him. Further, my criticisms do not, of course, mean that he did not tell the truth in the witness box. However, they do cause one to look at his evidence, in relation to an issue which directly and substantially affects his own interests, with a degree of scepticism. So far as Mr Murch is concerned, he was a friend, indeed I think a close friend, of Mr Brewer, and I believe that this influenced his evidence more than it should have done. Mr Parker's evidence, which was generally supportive of Mr Brewer's case on this issue, was not of great value: he had a poor recollection of relevant matters. That Mr Potter had a reputation as being knowledgeable about design (which was disputed by Mr Brewer and Mr Murch) is supported not only by the documents, but also by the evidence of Mr Peart, who had worked for the MOD. Mr Kime has identified a number of respects in which it can be said that Mr Peart had an interest in the outcome of these proceedings and that there are a number of reasons for perceiving him as predisposed in Dr Farmer's favour. Those points do not cause me to doubt the reliability of Mr Peart's evidence on the limited issue of Mr Potter's reputation.
59. Mr Potter's contributions to the design of the RDV and the Reefrunner were made when, and in his capacity as, a paid employee of CIL, and therefore any design rights he might otherwise have would be vested in CIL, at least in the absence of any good reason to the contrary - see Section 215 of Copyright Designs and Patents Act 1988 ("the 1988 Act").
60. So far as Mr Brewer is concerned, I accept that he was the individual responsible for most of the design aspects. He said in his evidence that, although he was chairman and one of the two directors of CIL, he never received any salary. However, I am satisfied that he did receive substantial benefits at the expense of CIL, including a valuable BMW motor car (worth some £30,000), and various other significant sums (totalling nearly £30,000 in all) most of which were described in CIL's records as being on account of salary.
61. Further, Mr Brewer represented on many occasions, directly and indirectly, in the correspondence to which I have referred, that CIL was the owner of the design rights relating to the various craft. The most obvious and direct occasion was in the various documents in January 1991 from which I have quoted. First, express reference is made to the IP rights in those documents; secondly, the IP rights are clearly treated as effectively going together with the chattels. The argument that Mr Brewer was not bound by letters that he signed because he signed them as director of CIL rather than in his own capacity is not only deeply unattractive: it also misses the point. Even after January 1991, when Mr Brewer was attempting to persuade third parties (e.g. the MOD or Mustang) that EMI had title to the design rights, this could only have been on the basis that EMI had acquired those rights from CIL, and therefore on the basis that CIL owned those rights.
62. It is also to be noted that in the draft balance sheets prepared on 1st September 1990 for CIL for periods ending 31st March 1990 and 30th June 1990, CIL is recorded as the owner of the "intangible assets" worth just under £450,000. I find it difficult to believe that those drafts were not known to Mr Brewer. On the evidence I have heard, it is difficult to think that those "intangible assets" can be anything other than the IP rights.
63. Further support for this conclusion is to be found from the accounting records of CIL. On the documents I have seen, the costs incurred by Mr Murch in travelling to the United States to see Addictor, the licence fee of $20,000 (equivalent to £11.483.39) paid to Addictor, and the VAT and Duty paid on the import of the boat from Addictor were all paid by CIL. Additionally, the cost of applying for the registration of the registered designs were not paid by Mr Brewer. The costs of obtaining the 113 registration were paid by CIL as were the costs (albeit in the name of Europower) of taking a licence for the Seaskate. The costs of obtaining the 549 registration were paid for by CIL or EMI/Dr Farmer.
64. Also, so far as the drawings were concerned, I consider that they were not only commissioned by Mr Potter, as an employee of CIL, but that Mr Beale was reimbursed by CIL. I do not accept Mr Brewer's evidence that he personally paid Mr Beale any money for the drawings. The copyright in the Beale drawings is therefore held by Mr Beale on trust for CIL - see Section 4(1) of the Copyright Act 1956 and paragraph 11.280 of Modern Law of Copyright (1995) by Laddie, Prescott and Vitoria.
65. It is fair to say that there is evidence the other way. Thus, there is the fact that the payments received by Dr Farmer from FBM in March to June 1993 were accounted to Miss Bishop "on behalf of [Mr] Brewer", and not, as one might have expected, on behalf of CIL. However, I believe that there are three possible answers to that point. The first is that these payments were made in 1993, after CIL had been wound up, and while Dr Farmer and Mr Brewer were still good friends. Mr Brewer was quite happy not to distinguish between CIL and himself, and to regard the ownership of chattels and rights as interchangeable between them, as it suited his interests from time to time. As a friend, who hoped to continue to involve Mr Brewer in his Somali fishing venture, and as someone who has also shown himself not to be entirely scrupulous in all matters, Dr Farmer was, in my judgment, perfectly happy to treat Mr Brewer as personally entitled to money which he may well have appreciated was or may have been the property of CIL. Secondly, Dr Farmer may not have even thought about the distinction at that time. Thirdly, and quite apart from that, it is perfectly conceivable that the IP rights were owned by CIL up to January 1991, but that those rights were subsequently transferred by CIL to Mr Brewer.
66. Mr Kime's submission that I should accept Mr Brewer's evidence to the effect that he, in his own capacity and as effectively the only shareholder in and chairman and director of CIL, intended that he, and not CIL, should own the IP rights, must, in my judgment, be rejected. Looking at the evidence overall, I think that Mr Brewer formed CIL with a view to that company owning and carrying on all aspects of the business which he had embarked on during the first half of 1988. Although, as I have indicated, it is not unusual for designers to retain IP rights personally while arranging for the product to be made and owned by a company, I do not accept that that was Mr Brewer's intention in the present case. There is nothing in the documents to support it. Nor do I accept Mr Kime's suggestion that Mr Brewer intended the beneficial registered design right in the two registered designs to remain with him, even though the legal proprietor was to be CIL. Indeed, as Mr Kime effectively accepted, the submission is inconsistent with documents emanating from Mr Brewer in 1991 and 1992. There is no reason to think that Mr Brewer intended the unregistered design rights to be legally or beneficially owned in a different way from the registered design rights.
67. In his original particulars of claim in the Brewer action, Dr Farmer alleged that Mr Brewer, and not CIL, was the original proprietor of the IP rights. However, that pleading was prepared some time after the relevant events, and it is unclear what documents and instructions were available to the solicitors and counsel who were then acting for Dr Farmer. Ironically, it is interesting to note that Mr Brewer appears to have been refused legal aid to pursue any claim in relation to the IP rights on the basis that, at least so far as his original instructions were concerned, his lawyers seem to have formed the view that whatever claim there was to those rights was vested in CIL rather than in him. I do not mention that as a reason for reaching my conclusion on this topic; more as a reason for not placing much weight on the fact that Dr Farmer's original pleading proceeded on the basis that Mr Brewer, rather than CIL, was the proprietor of the IP rights.
68. I should also mention a document dated 9th November 1999 signed by Mr Richard Hoffman, who says that he was the owner of Addictor in September 1988 and that there was a licence agreement "entered into between myself and Chris Brewer". Mr Hoffman was not cross examined, and therefore there was no opportunity to see whether, as to my mind is perfectly possible, he would have agreed with the proposition that, as far as he was concerned, the agreement could well have been with a company which was wholly owned by Mr Brewer. The fact that that may be right is reinforced by the last sentence of his brief statement which states that "Mr Brewer paid all financial obligations of our agreement in full": as I have mentioned, the documents show that at least some, and quite possibly all, of those obligations were actually met by CIL.
69. Mr Kime suggested that even if I found that Mr Potter had contributed towards the design of some or all of the craft, then it would be possible for CIL (through Mr Potter) to have the design rights in relation to the aspect he designed, on the basis that the other aspects of the design were owned by Mr Brewer. As Mr Hicks contended, there are a number of problems with that submission. First, so far as the registered designs are concerned, they are only in respect of the whole vessel. Secondly, the basis upon which the hearing before me proceeded, and indeed upon which Mr Brewer was permitted to join in the action between Dr Farmer and RTK, was that Mr Brewer was only seeking to rely upon the rights relied upon by Dr Farmer as against RTK, and Dr Farmer's pleaded case had throughout been based on the combination of various design features, and does not involve considering each individual design feature separately. Thirdly, my reasons for concluding that all the design rights were owned by CIL is by no means based solely on the fact that I consider that Mr Potter made significant contributions to the design. In any event for reasons I will come to in the next section of this judgment, the issue is academic.
70. In conclusion on this issue, as at 23rd January 1991, I consider that the registered design rights, and any unregistered design rights in the Bambino, the Reefrunner and the RDV which are said to have been owned by CIL or Mr Brewer were owned at least in equity by CIL. I also conclude that CIL owned the copyright in the drawings. So far as the design rights are concerned, it is accepted by Mr Kime that, if Mr Brewer was an employee of CIL and carried out the design work in the course of such employment, then the designs belong in law to CIL - see Section 215 of the 1988 Act. As I see it, even if Mr Brewer was not an employee of CIL, then while CIL and Mr Brewer were the joint legal owner of the design rights, the equitable title was held for CIL alone while the issue is probably academic, on balance, I am of the view that Mr Brewer was an employee of CIL: he was a director, he received benefits in the form of money and a valuable motor car; while not conclusive, the money was recorded as being on account of salary.
71. Furthermore, the contemporaneous evidence all suggests that the IP rights were owned by CIL. First, that is what Mr Brewer intended at the time, although by the end of January 1991 he was sufficiently concerned to consider keeping his options open. Secondly, that is what Mr Brewer represented in January 1991, and continued to represent sometime thereafter, to third parties. Thirdly, Mr Brewer and CIL decided that CIL should be registered as the proprietor of the registered designs, and despite the existence of a number of contemporaneous letters in that connection, there is nothing, as Mr Kime accepts, to suggest that CIL was not to be the beneficial owner as well. Fourthly, draft accounts of CIL treated the design rights as CIL's. Fifthly, the design of at least the RDV was effected not only by Mr Brewer (who I accept was responsible in the main) but also by Mr Potter, undoubtedly in his capacity as an employee of CIL. Sixthly, even Mr Brewer carried out his designs at premises owned by CIL, with the assistance of employees of CIL, on chattels owned by CIL and at a time when he obtained benefits from CIL (although I accept that he was paid no salary by CIL) and was chairman and one of the two directors of CIL. Seventhly, the original Bambino and the rights connected therewith were paid for not by Mr Brewer but by CIL or by EMI as a result of the arrangement it entered into with CIL. Further, the cost of registering the registered designs were not paid for by Mr Brewer or on his behalf. Eighthly, there is a presumption that registered design rights and the unregistered design rights stay together: see Section 224 of the 1988 Act and Section 19(3A) and 19(3B) of the 1949 Act. So far as copyright is concerned, I am satisfied that the drawings were prepared on the instructions of CIL (largely through Mr Potter) and that they were paid for by CIL.
72. Section 5. THE ARRANGEMENT BETWEEN CIL/MR BREWER AND EMI/DR FARMER
73. The basic arrangement between Dr Farmer and CIL as embodied in the documents of 21st to 23rd January 1991 appear to me to have amounted to Dr Farmer making available a sum to CIL in return for which CIL made over the chattels and the IP rights to Dr Farmer. The language of the documentation in so far as it relates to the chattels and the IP rights, viewed in isolation, could fairly be said to be more than consistent with the concept of a sale rather than a charge, and the view that the arrangement constituted a sale rather than a charge could be said to be supported by many of the letters written subsequently, and indeed by the execution of the 1992 transfer. However, it seems to me that the true nature of the arrangement was that the chattels and the IP rights were being provided to Dr Farmer as security for repayment of the loan. In those circumstances, if and when the loan was repaid, CIL was entitled to recovery of the chattels and those rights. Indeed, during the course of the hearing, Dr Farmer conceded that this was the case, based, he said, upon advice he had received from his legal advisers.
74. This conclusion is supported not only by consideration of the nature and purpose of the transaction entered into between CIL and EMI on 23rd January 1991, but also by the terms of Dr Farmer's letter of 25th January, and the somewhat unusual declaration of Dr Farmer of 31st January, 1991.
75. Initially, as is clear above all from Dr Farmer's letter of 25th January 1991, it was intended that EMI/Dr Farmer should retain the IP rights and the chattels only until the loan which had been made to CIL was repaid. However, I consider that, even in January 1991 (and possibly earlier than that), Mr Brewer was aware that CIL's financial circumstances were such that there was a real risk that it would be wound up by the court, as a result of which he would not only lose control of CIL, but would also risk losing control of the IP rights and the chattels. He was also concerned, I think, that his own financial circumstances were precarious and that he might be forced to dispose of his assets either through insolvency or for some other reason. Mr Brewer therefore appreciated that it would be desirable to maintain to the world that the chattels and the IP rights were no longer owned by CIL and indeed that there was no question of his owning them. It was for that reason that during 1991 and, indeed, during 1992 and 1993, he was content, indeed keen, to maintain that the rights still remained vested in EMI. Dr Farmer was happy to go along with all that, partly because he and Mr Brewer were friends, and partly because he was anxious to persuade Mr Brewer to become involved, or perhaps more accurately, to continue his involvement, in the Somali fisheries project.
76. In these circumstances, Dr Farmer undoubtedly has the legal title to the registered designs, in the sense that he is the registered proprietor, but there is still an issue as to whether he holds those registered designs on a bare trust because he has been repaid or for some other reason, or whether he still holds them as mortgagee. So far as the other IP rights are concerned, it seems to me that the effect of the letter of 23rd January 1991 was sufficient to transfer the unregistered design rights (as they were "design rights relating thereto") and, indeed, any copyright. Accordingly so far as the unregistered design rights, the copyright and chattels, are concerned, the issue is whether Dr Farmer still holds them as mortgagee or not. That is the issue to which I next turn, ignoring for the moment the effect of the disclaimers by CIL's liquidator and any arrangement which may have divested CIL of its rights as mortgagor or in some other capacity.
77. I should also add that the consequence of this is that it does not matter whether CIL, Mr Brewer or CIL and Mr Brewer were the legal owners of the IP rights: the legal ownership (subject to any right of redemption) were vested in Dr Farmer and any rights of redemption would have been vested in CIL as the beneficial owners.
78. Section 6. DR FARMER'S RIGHTS
79. In my judgment, and I do not believe that this was really challenged by anyone subject to the question of whether the loan was to CIL or Mr Brewer (as to which see Part 8 below), Dr Farmer borrowed £15,000 from Cardinal on or about 23rd January 1991, effectively on the terms set out in Cardinal's letter, and he lent on the money to CIL on the same terms, subject to the distinction that Cardinal's loan to Dr Farmer was unsecured, whereas Dr Farmer's loan to CIL was secured, as is recorded in CIL's letter to EMI on 23rd January 1991. It is right to mention that, at any rate initially, there was some doubt expressed as to whether Cardinal actually existed. Even if Cardinal did not exist, it does not seem to me to alter the terms upon which Dr Farmer (apparently through EMI) lent the £15,000 to CIL, but it is now accepted that Cardinal did and does exist.
80. It is also common ground that, from the £40,000 received by EMI from Astron on 18th April 1991, £15,000 was effectively treated as having been paid to Dr Farmer (the balance being paid over to Mr Brewer); and Dr Farmer immediately paid over the £15,000 to Cardinal. However, in light of the terms contained in Cardinal's letter, this was obviously not, at least on the face of it, a payment of all the monies due: considerably more should have been repaid. Accordingly, unless there is some reason for concluding otherwise, Dr Farmer is still owed money (namely a further £15,000 and a substantial amount of interest) and is therefore not merely the legal proprietor of the registered designs, but is the mortgagee properly in possession, as it were, of all the IP rights, and the chattels, subject always to such rights of redemption as CIL (as mortgagor) or its successors or appointees may have. The question therefore is whether there is any answer to this argument of Dr Farmer.
81. In my judgment, there are two separate answers. The first answer is that, despite the terms of Cardinal's letter, no further monies are in fact owing; the second answer is that, even if monies would otherwise be owing, any right to recover them is now barred by the provisions of The Limitation Act 1980, but that the right of redemption is not correspondingly barred. I shall deal with those two points in turn.
82. Both Dr Farmer and Mr Brewer appear to have considered that Dr Farmer/EMI was entitled to look to CIL for any sum which Dr Farmer was due to pay Cardinal under the terms of Cardinal's letter. It seems to me to have been implicit, and quite probably explicit, in what was agreed between Dr Farmer/EMI and Mr Brewer/CIL on the 23rd January 1991, that EMI was entitled to look to CIL for any sum which, under the terms of Cardinal's letter, Dr Farmer was obliged to pay Cardinal (provided, of course, any money which CIL paid to Dr Farmer was immediately paid off by Dr Farmer to Cardinal). In other words, Dr Farmer was entitled to recover from CIL whatever he had to pay to Cardinal, no less and no more. The arrangement was unusual because one would have thought that Cardinal would have been better off lending direct to CIL with the benefit of the security which CIL actually gave Dr Farmer/EMI, than it was by lending unsecured to Dr Farmer/EMI. However, it seems clear that Dr Farmer and Mr Williams of Cardinal were fairly close friends, and Mr Williams may have been prepared to countenance an unsecured loan (for a sum which, in his terms, may have been pretty small) in order to assist a friend. Although it is not necessary, and it may even not be appropriate, for me to so decide, I suspect that there may have been some sort of informal (and possibly legally unenforceable) understanding between Mr Williams and Dr Farmer that Cardinal would not press Dr Farmer for the payment of any sum strictly due under the terms of the Cardinal letter, if Dr Farmer was unable to recover that sum from CIL.
83. Be that as it may, I consider that, in light of the terms of the Cardinal letter, even though Cardinal would have had the right to insist on the payment of a further £15,000 together with a not inconsiderable sum by way of interest, Cardinal told Dr Farmer and, as Mr Brewer stated (but Dr Farmer denied), Dr Farmer informed Mr Brewer, that the payment of the £15,000 in April put an end to any further liability to pay: in effect, any liability for any further sum (whether the further £15,000 or interest) was forgiven. First, that is what Mr Brewer said happened, at least as between him and Dr Farmer. Mr Brewer was not, as I have already mentioned, a particularly reliable witness. However, he was a very long way from being a worthless witness. Although I have criticised his attitude and statements during the period of 1991 to 1993, it is by no means unknown for a person to behave in such a fashion when in severe financial difficulties. The fact that I do not accept his evidence on certain matters does not mean I should reject it on all matters. It is true that Dr Farmer denied that, after the £15,000 had been paid, he had agreed that CIL would be forgiven any further payments, but he did not strike me as a particularly reliable witness either.
84. It appears to me that this conclusion is supported by a number of other factors. Not only did £40,000, which Dr Farmer was happy to treat as the property of CIL/Mr Brewer, pass through the hands of Dr Farmer in April 1991, but further substantial sums which Dr Farmer appears to have been happy to treat as the property of CIL/Mr Brewer passed through Dr Farmer's hands between March and June 1993. Yet, with the exception of the £15,000 to which I have just referred, and of certain other small sums (such as VAT and the money due to Davies) Dr Farmer was apparently content to account for those sums to Mr Brewer, and not to appropriate any further sums to repay his/EMI's loan to CIL (and then to repay Cardinal's loan to himself). I find it hard to understand why Dr Farmer did not take the opportunity of appropriating any money at all towards what, on his case, would have been due from CIL to him, and from him to Cardinal, if those sums were really due. Further, during the period 1991 until shortly before the issue of the instant proceedings against Mr Brewer, Dr Farmer did not allege that any further money was owing to him or EMI from CIL, and there has been no convincing suggestion, let alone convincing evidence, of any pressure having been put on Dr Farmer by Cardinal for any payment after April 1991. Even if Cardinal had agreed not to pursue Dr Farmer for any sum other than what he could recover from CIL, it does not explain why Cardinal was not pressing Dr Farmer at least to seek to recover some of what was owing from CIL.
85. Further, although there is nothing to suggest that Dr Farmer and Mr Williams have now fallen out, and although it was made clear to Dr Farmer that I would be invited to draw inferences adverse to him if no such evidence were called, Dr Farmer did not call Mr Williams or anyone else from Cardinal to explain why it had not raised the question of repayment since 1991. Cardinal is based in the West End of London, and no explanation was given as to why Mr Williams could not be called, other than Dr Farmer saying that he did not wish Mr Williams to be bothered with this matter, and that Dr Farmer believed that sufficient evidence was available without Mr Williams.
86. I accept that it may be that there was not so much of a positive and firm agreement sometime after the middle of 1991, but more of an understanding between Cardinal, Dr Farmer and Mr Brewer, that no further sums would be paid. However, I am satisfied that, at any rate by the time CIL went into liquidation, it had been effectively understood and agreed between Mr Williams, Dr Farmer and Mr Brewer that no further sums were expected to be paid. I accept that the position is somewhat uncertain on this issue, but, on the balance of probabilities, that is the conclusion I have reached.
87. In fact, as already mentioned, I do not think that it is strictly necessary for me to reach that view. It is clear from the terms of the Cardinal letter that the liability for the payment of a sum over and above the £15,000 and for interest arose (as between Cardinal and Dr Farmer, on the one hand, and, on the other hand, between CIL and EMI) on 23rd April 1991. Although time for limitation purposes may have started running from that date, it was probably re-started by virtue of a fax from Mr Brewer to Mr Williams (copied to Dr Farmer) on 31st July 1991, where he confirmed "that the "profit" element of the loan made earlier this year... is collectable by you and will be paid in the near future".
88. I have not been taken to any later document which could in my judgment be said to amount to a written admission of the existence of the loan. It is right to mention that Dr Farmer has argued that, on behalf of CIL, Mr Brewer acknowledged the existence of the outstanding loan in a letter dated 29th May 1993 and a hand-written note dated 21st June 1993. Both documents appear to me to be too unspecific in their terms to constitute a clear acknowledgement and the context of the alleged acknowledgement also renders it difficult for Dr Farmer to make out his contention. In any event, both documents were prepared after CIL was wound up by the Court: accordingly, Mr Brewer ceased to be able to bind CIL in any event.
89. Accordingly, I consider that the time for repayment of any outstanding sums expired on 1st August 1997. Even assuming that one can treat Dr Farmer's claim in the Brewer action (which does not actually include a claim for repayment of any sums due in respect of the loan, and is not brought against CIL) as a sufficient action, it was brought more than six years after that date. Accordingly, even if I am wrong, and there was no agreement or enforceable understanding that no further sums were due over and above the £15,000 paid in April 1991, any claim for further recovery of any sums would in my view have been statute-barred. Further, although the right to recover the sums has been lost by Dr Farmer this does not mean that he can retain the security: on the contrary, the security is redeemable - see Lewis -v- Plunkett [1937] 1 Ch. 306, and Weld -v- Petre [1929] 1 Ch. 33.
90. Accordingly, subject to any question of whether CIL's rights have been given up, either as a result of the disclaimers or for some other reason, it appears to me that Dr Farmer's rights as mortgagee have effectively been lost or been determined, and that he has no beneficial interest in the chattels or the IP rights. In particular, I consider that he holds the registered designs as a bare trustee.
91. Subject to the other matters to which I now turn, therefore, I would conclude that CIL is the beneficial owner of the chattels and the IP rights, and that, while he is the legal proprietor of the registered designs, Dr Farmer would hold them on trust for CIL. However, the effect of the following matters have to be considered:

The effect of the 1992 transfer of the registered design rights upon which Dr Farmer relies;

The contention on behalf of Mr Brewer to the effect that any IP rights CIL had were transferred to Mr Brewer;

The disclaimers effected on behalf of CIL by its liquidator.

92. Section 7. THE EFFECT OF THE 1992 TRANSFER
93. The 1992 transfer had one of two possible purposes. The first possibility is that it was completed merely to formalise the transfer of the legal ownership of the registered design rights, thereby giving effect to what had been agreed in writing on 23rd January 1991. The second possibility is that the 1992 transfer was an independent transfer by CIL of the registered design rights to EMI. In my judgment, whichever of these two interpretations is correct, the result is the same: the 1992 transfer was ineffective, at least to the extent that it failed to vest the beneficial ownership of the registered design rights in CIL by Dr Farmer.
94. If the purpose of the 1992 transfer was merely to formalise what had been agreed on 23rd January 1991, as Mr Brewer and Dr Farmer suggested in their evidence, then the transfer by CIL (which may have been unnecessary anyway in light of the January 1991 correspondence) was merely being effected for the purpose of giving EMI the security to which it was entitled under the terms of the agreement of 23rd January 1991 for the loan of £15,000 made to CIL on that date. For the reasons I have discussed, that loan was either repaid in full (because any sums over and above the £15,000 repaid in April 1991 were effectively forgiven) or must, as it were, be treated as having been repaid in full (because any right in EMI to recover any further sums is now statute-barred). Accordingly, on either basis, it appears to me that Dr Farmer would hold the design right on trust for CIL.
95. If, however, the purpose of the 1992 transfer were to effect a fresh, and, as it were, separate, transfer of the registered design rights to EMI, then it seems to me that it was ineffective because of the provisions of Section 127 of the Insolvency Act 1986 ("Section 127"), given that it was completed after the petition for the winding up of CIL had been presented by the Inland Revenue. In this connection, Section 127 provides:

"In the winding up by the court any disposition of the company's property... made after the commencement of the winding up is, unless the court otherwise orders, void."

96. In a recent decision, Coutts & Co. -v- Stock (Times Law Reports, 30th November 1999) Lightman J said this:

"The invalidation of dispositions of a company's assets after the date of presentation of a winding up petition is part of the statutory scheme designed to prevent the directors of a company, when liquidation is imminent, from disposing of the company's assets to the prejudice of its creditors and to preserve those assets for benefit of the general body of creditors..."

97. Lightman J went on to say this:

"The retrospective invalidation effected by Section 127 does not change what happened between the date of the petition and the date of the winding up order: it merely denudes any disposition of the company's property during that period of legal effect;"

98. Although this decision may not in all respects be consistent with the decision of Blackburn J reported at that same time in Hollicourt (Contracts) Limited -v- Bank of Ireland, it appears to me that, on this point both judges took the same view. Further, in relation to the statutory predecessor of Section 127, Section 522 of the Companies Act 1985, Vinelott J said in re French's (Wine Bar) Limited [1987] BCLC 499 at 505d-e:

"The short answer to this submission is that it does not follow that because a disposition of the company's property without the leave of the court is void and not merely voidable a conveyance of or transfer is ineffective to pass the legal estate in land. The transferee takes the land as bare trustee for the company, which in the absence of an order under s 522 is entitled to call for it to be retransferred to it and to call for an account of any profit derived from it." (emphasis added).

99. In my judgment, if the 1992 transfer was a separate transaction, and not intended to be a belated confirmation of the transfer of the registered design as part of the security for the loan, then it represents a classic case for the application of Section 127. The only conceivable purpose for the 1992 transfer would have been to try and put the registered design rights out of the hands of CIL's creditors; a transfer to Mr Brewer would have been obviously objectionable, and therefore a transfer to EMI, controlled by Mr Brewer's friend and business associate, Dr Farmer, which had already been held out as owning the chattels and the IP rights in light of what had been agreed on 23rd January 1991, was an obvious course.
100. It is true that the Court can retrospectively validate a transfer which falls foul of Section 127 but I am firmly of the view that that would be inappropriate in this case. As is clear from the terms negotiated with FBM, and from the payments made by FBM in 1993, at least one of the two registered designs had substantial value, and the reason for seeking to transfer the registered designs to EMI in 1992 would have been flatly within the ambit of what Section 127 as described by Lightman J, was designed to prevent. The contention that the purpose of the transfer was to ensure that the IP rights and the chattels remained together because of their marriage value is neither made out on the evidence, nor does it serve to justify the transfer.
101. Although it seems to me that, whichever of the two possible reasons for the 1992 transfer is correct, the same result obtains, my view (contrary to my initial conclusion) is that the 1992 transfer primarily had the former purpose, but it is fair to say that the two purposes are not mutually exclusive. The 1992 transfer was prepared in draft by Davies for the purpose of giving effect to the agreement of 23rd January 1991 and, according to both Dr Farmer and Mr Brewer, it was, although not dated, signed before 1992. Mr Brewer and Dr Farmer both said that it was not completed until registered designs were duly registered, which was only in August 1992. It is possible that the purpose of the 1992 transfer was purely part of an attempt by Mr Brewer, with Dr Farmer's assistance, to try to put the registered designs beyond the reach of the liquidators and creditors of CIL. That may very well have been in their minds, but I do not think that it was the only, or even main purpose.
102. Section 8. DID MR BREWER ACQUIRE THE IP RIGHTS FROM CIL?
103. On the basis that (as I have found) CIL was the proprietor of the chattels and the IP rights on 23rd January 1991, it is contended on behalf of Mr Brewer that he acquired those assets from CIL. This argument was advanced by Mr Kime on a number of bases, first against CIL and secondly as against Dr Farmer.
104. As against CIL
105. First, it was said that, in reality, it was Mr Brewer and not CIL who was borrowing the £15,000 from, and was therefore taking on the liability to repay the £15,000 to, EMI, and that, as a result, Mr Brewer in some way became beneficially entitled to the assets charged to EMI. I have difficulties with both steps in that argument. First, I do not understand how it can really be said Mr Brewer was the borrower of the £15,000: the principal purpose for which the money was borrowed was to pay rent which was outstanding from CIL and to re-obtain possession of premises which were let to CIL and of chattels which were the property of CIL. The documentation records CIL as being the borrower. The bulk of the £15,000 was in the form of a banker's draft paid to the bailiffs for the rent due from CIL, not Mr Brewer. There is nothing even to suggest that Mr Brewer was a guarantor. Even if Mr Brewer had accepted liability as guarantor, or was in some other way liable to ensure that repayment was made by CIL, I do not see why it should follow that, as a result, ownership of the chattels and/or the IP rights should in some way have passed to him.
106. Secondly, Mr Kime relied on Dr Farmer's letter of 25th January, and his written declaration of 31st January, 1991 ("the declaration"). As to the declaration, I believe that this somewhat unusual document was prepared by Mr Brewer for Dr Farmer to sign, with a view to keeping the options as to who would ultimately own or appear to own the IP rights as flexible as possible, bearing in mind the fact that Mr Brewer appreciated that CIL, and even Mr Brewer himself, might become insolvent, with the result that those rights would fall out of the control of Mr Brewer. In any event, the declaration was no more than an acknowledgement by the mortgagee's attorney, Dr Farmer, as to the position, so far as he was concerned, with regard to the equity of redemption in relation to the chattels and the design rights. It is not a document which purports to be, or indeed could be, a transfer of CIL's rights of ownership, whether of the design rights or of chattels. It seems to me self evident that a document executed by a mortgagee alone cannot operate to transfer the mortgagor's interest or any right thereto, whether equitable or legal: it can only transfer the mortgagee's interest or any right thereto. At best from Mr Brewer's point of view, it may be some evidence that what was said or intended with regard to the ownership of CIL's equitable interest in the charged chattels and IP rights. The same points may be made about the letter of 25th January 1991, whose additional purpose was concerned with access to the chattels.
107. CIL have never assigned, or purported to assign, the legal ownership of the design rights or of the copyright to Mr Brewer: for such an arrangement there are formal written requirements - see Section 90 of the 1988 Act (copyright), Section 222 of the 1988 Act (design right) and Section 19(1) of the 1949 Act as amended (registered design). Mr Kime's submission therefore is that, by virtue of events after 23rd January 1991, there was a transfer to Mr Brewer or to his order by CIL of its equitable interest in the design rights and the copyright. This submission runs into the problem that there is no document to that effect validly executed by CIL, and such a document would appear to be necessary in light of Section 53(1)(c) of the Law and Property Act 1925. Mr Kime contended that that provision does not apply to equitable interests in IP rights, but I cannot accept that contention in light of the reasoning of the Court of Appeal in Roban Jig [1979] FSR 130 at 140 (per Stamp LJ) and 143 (per Omerod LJ). Mr Kime's second submission that, because Mr Brewer effectively owned and controlled CIL, no formal document was necessary seems to me to miss the point: following the reasoning in Roban Jig, Section 53(1)(c) of the 1925 Act must be satisfied. Mr Kime's third submission was that Section 53(1)(c) of the 1925 Act was concerned with the transfer, not the creation, of the equitable interests. I think that is a good point in principle, but it does not assist Mr Brewer here. If, as Mr Kime contends, the transfer took place at the end of January 1991, CIL merely had an equitable interest in the IP rights (the legal estate was vested in Dr Farmer).
108. Even if there was a decision by Mr Brewer, as Chairman, Director and owner of all the shares in, CIL, that he personally would own the design rights, it does not seem to me that such a decision can have been taken, on the evidence, at least until some time in 1993. As I have said, it appears to me that Dr Farmer's written statements on 25th and 31st January 1991 were nothing more than evidence that Mr Brewer (with Dr Farmer's assistance) was seeking to keep open every possible option as to who would own the equity of redemption in due course. I do not consider that, at that time, any clear decision whatever had been taken, let alone implemented (even in a legally ineffective form), to transfer any of the IP rights from the person in whom they remain vested, namely CIL.
109. The fact that nothing had been done, even in Mr Brewer's mind to transfer away any of the IP rights in CIL in 1991 is supported by the letters he wrote thereafter (e.g. to Mustang and the MOD) and the letters which Mr Brewer accepts, indeed stresses, that he wrote for Dr Farmer to sign on EMI writing paper. The earliest arguable evidence of any sort of clear and arguably irrevocable intention that Mr Brewer, as opposed to CIL, should be treated as the owner of any of the IP rights appears to me to have been in March 1993, when Dr Farmer first accounted for the monies received from FBM to Mr Brewer. Until that time, I do not consider that there was any document, any action, or any unequivocal statement, made or executed on behalf of CIL, or indeed by Mr Brewer, which could be said to demonstrate such an intention. However, for a number of reasons, I do not consider that even the events of 1993 were sufficient to divest CIL of the design rights, or to vest them in Mr Brewer.
110. First, I am of the view that there could not be a transfer of the design rights simply because the owner of those rights directs payments due in respect of those rights to be made to a third party, even where (as here) consideration had been given by the owner (albeit through a third party) to the possibility of transferring the rights to the third party; even in the absence of Section 53 of the 1925 Act, that would be my view, but the provisions of that section obviously reinforce my conclusion. Secondly, 1993 was not only after the petition had been presented to wind up CIL: it was after the winding up petition had been presented, indeed the court had wound up CIL. Accordingly, it seems to me that the only person who would have had power to transfer any rights vested in CIL would have been the liquidator, and there is no question of his having been party to the arrangement.
111. Thirdly, and in any event, it would seem to me that the transfer of such valuable assets as any of the IP rights out of a company which was in as bad a financial situation as CIL, in circumstances where the transfer was to a director for no consideration, would simply not have been something which Mr Brewer could properly have done. It is all very well for Mr Kime to say that Mr Brewer was the alter ego of CIL, and that he had put a great deal of his own money into CIL: that is not really the point. CIL owed money to other people, including, it would appear, the Inland Revenue, and while one may have sympathy for the position in which Mr Brewer found himself, it would have been inappropriate, indeed a breach of trust in his capacity as chairman and director of CIL, to transfer its valuable assets (possibly its most or even only valuable assets) to himself for no apparent consideration. Indeed, it seems to me that this would have been equally true if the purported transfer had taken place in 1991 or 1992. If authority is needed to support the proposition that a director of a company cannot transfer valuable assets of the company to himself for no consideration, especially when he knows the company is in financial difficulties, I would refer to Winkworth -v- Edward Baron Development Co Ltd [1986] 1 WLR 1512 at 1516 and Cook -v- Deeks [1916] 1 AC 554.
112. As against Dr Farmer
113. In addition to the arguments as considered in Part (a) above (which I have rejected for the reasons therein set out) Mr Kime relies on further arguments for contending that, at least as between Dr Farmer and Mr Brewer, Dr Farmer is estopped from denying that the IP rights, or in the alternative the design rights, were vested in Mr Brewer and not CIL. Given that Mr Kime accepts that this estoppel cannot bind CIL, this might appear a somewhat arid argument, but I accept that it should be determined because it may bear on the question of costs as between Dr Farmer and Mr Brewer.
114. What is said to give rise to the estoppel is a combination of the declaration, which it will be recalled was made by Dr Farmer on 31st January 1991, and the various payments which Dr Farmer expressly made to Miss Bishop "on behalf of C.J. Brewer" in March and June 1993. Mr Kime's contention is that, by the documents (that is, the declaration and the five documents in 1993 recording the payments) and the actual payments, Dr Farmer was so conducting himself as to recognise that Mr Brewer was the owner of the IP rights (or the design rights), and he now cannot resile from that. Mr Kime puts the point slightly differently, namely that, in light of the documents and payments to which I have just referred, Dr Farmer and Mr Brewer conducted their relationship on the mutual understanding and basis that it was Mr Brewer, and not CIL, who owned the IP rights (or the design rights) and Dr Farmer cannot go back on that arrangement.
115. The effect of cases such as the Vistafjord [1988] 2 Lloyds LR 343, John -v- George [1996] 1 EGLR 7 and Wilson Bowden Properties Limited -v- Milner (unreported, 18th December 1997) is to emphasise, albeit in somewhat different tenses, that if a party has conducted himself in a certain way, or if parties have conducted their relationship in a certain way or on a certain express or implicit understanding, it is not open to that party, or to one of the parties as the case may be, to depart from that way or to resile from that understanding, if it would be unconscionable for him or her to do so. In other words, whatever type of estoppel is alleged, and however the estoppel is said to arise, unconscionability of one sort or another is an essential element. Mr Kime contends that, while it may frequently be necessary to establish detriment of some sort before an estoppel can be established, that is not always the case. I would agree, at least to the extent that, in order to establish an estoppel, a person need not necessarily show that he acted to his detriment, for instance in reliance on a representation or a course of conduct, but it is fair to say that some sort of detriment normally has to be established, because, in its absence, it is often difficult to establish unconscionability.
116. Accordingly, while accepting that, in light of the documents and payments to which I have referred, it can fairly be said that Dr Farmer and Mr Brewer conducted themselves on the basis that Mr Brewer owned the IP rights, the essential question, as I see it, is whether it is unconscionable, as against Mr Brewer, or, to put it another way, as between Dr Farmer and Mr Brewer, for Dr Farmer to be able to resile from that.
117. So far as the payments which Dr Farmer made to Miss Bishop on behalf of Mr Brewer are concerned, it seems to me very difficult on the face of it for Mr Brewer to contend that, because Dr Farmer made substantial payments to him, which should have been made to CIL, he is entitled to continue to insist, at least as against Dr Farmer, that any further payments due in respect of the IP rights should continue to be paid to him, although those payments are really due to CIL. On the face of it at least, it appears a somewhat extraordinary assertion that because money has been paid to you, which should have been paid to somebody else, you are entitled to go on receiving money which should be paid to somebody else, and particularly surprising that this is said to result as a matter of conscience. Of course, if Mr Brewer could show that he had organised his affairs (and had done so reasonably and foreseeably so far as Dr Farmer was concerned) on the assumption that he would continue to receive such payments, or if he could show that he paid out sufficient money or took other sufficient steps, which he would not have paid out or would not have taken, because he was being paid these sums by Dr Farmer, one can well see how an estoppel could arise. However, it seems to me quite clear that, even if Mr Brewer spent any sums in reliance on the fact that, as between Dr Farmer and himself, he was to be treated as the owner of the IP rights, no question of unconscionability arises.
118. Although other suggestions have been made by Mr Kime, the only serious contention, as I see it, is that Mr Brewer spent substantial sums on paying for the storage of the chattels (which I will discuss in a little more detail in the next section of this judgment). Two points can immediately be made. First, I am unpersuaded, whether as a matter of logic or on the evidence, that these sums would not have been paid by Mr Brewer, if Dr Farmer and he had not proceeded on the basis that he was the owner of the IP rights (at least to the extent that they did so): as the argument and the evidence in this case shows, the chattels and the IP rights are distinct, and I am not convinced that Mr Brewer confused the two things. Secondly, the amount spent by Mr Brewer for storing the chattels was significantly less than the amount he received, and should not have received, in March and June 1993. Mr Kime said that it is inappropriate to carry out a detailed accounting exercise before deciding whether there is sufficient unconscionability to justify an estoppel, and I see the force of that. However, whether one approaches the matter on a broad brush or rough and ready approach, or whether one looks at the figures in detail, the answer appears to me to be clear: Mr Brewer spent significantly less money on the chattels than he received from Dr Farmer in respect of the IP rights, and it is therefore difficult to see how the unconscionability can fairly be said to arise on this ground.
119. Quite apart from this, I do not see any sensible basis for fixing Dr Farmer with the alleged unconscionability on this basis: there is nothing to suggest that he believed or had good reason to believe that Mr Brewer was paying for the storage of the chattels because he was receiving money in respect of the IP rights.
120. It is right to mention that Mr Kime also relies on the fact that Mr Brewer invested "hundreds of thousands of pounds" in CIL and says that this should be taken into account on the question of unconscionability. I do not agree. There is no nexus whatever between the events giving rise to the alleged estoppel and Mr Brewer's investment of money. Perhaps that is best illustrated by the fact that Mr Brewer's investment all took place well before 1993, and, indeed, at least so far as I am aware, before 1991.
121. It is right to say that Mr Brewer may well face further difficulties in relation to his claim based on estoppel against Dr Farmer. First, when the centrally relevant events took place in the first half of 1993, it appears from his evidence that Dr Farmer was unaware that CIL had been wound up. Given that that essential fact must have been known to Mr Brewer, and was apparently kept from Dr Farmer (and I accept that that may very well not have been for any wrongful purpose) it seems to me that there is a real argument to the effect that it would be wrong to treat Dr Farmer as fixed with any estoppel, given that there was a potentially very important fact which was known to Mr Brewer and not known to Dr Farmer, and which Mr Brewer arguably should have communicated to Dr Farmer, on the basis that, had he done so, Dr Farmer may well not have been prepared to make the payments to Mr Brewer. This is particularly forceful bearing in mind that I think that Mr Brewer had the money paid over to him, rather than to CIL, in March and June 1993, because CIL was not merely in difficulties, but because it was being wound up. This leads me to a second additional possible reason for defeating the estoppel, namely that the reason Mr Brewer had the money paid to him rather than to CIL was for that reason, and Dr Farmer was probably aware of it, at least to the extent that he believed that Mr Brewer wanted the money paid to him, because if it was paid to CIL, Mr Brewer might well not get the benefit of it. I do not rest my conclusion on either of these two points, because they were not really argued, but it is right to mention that they may (and I emphasise "may") provide additional reasons as to why the estoppel does not run.
122. Section 9. THE DISCLAIMERS AND THE CHATTELS
123. The disclaimers
124. The first disclaimer gives rise to difficulties, in that, at least on its face, it is not quite clear what purported to disclaim. On one view, given that it refers to the Brewer action between Dr Farmer and Mr Brewer, it could be a reference to disclaiming all the assets the subject matter of that claim, i.e. both the chattels and the IP rights. However, that is not what it says, and if correct, the argument would deprive the second disclaimer, executed on the same day, of any effect. The intention of the second disclaimer appears to me to be tolerably clear, at least taken on its own: it is to disclaim any interest CIL had in the chattels, but, particularly in light of the words in brackets, the liquidator was anxious that the disclaimer did not extend to any of the IP rights. In my judgment, the proper way of reconciling the two disclaimers is that, in the first disclaimer, the liquidator was disclaiming, on behalf of CIL, the opportunity of being involved in the proceedings between Dr Farmer and Mr Brewer, and, in the second disclaimer, he was disclaiming any interest CIL had in the chattels, but not disclaiming any interest it had in the IP rights.
125. If the effect of the first disclaimer has resulted in CIL not being a party in these proceedings, it is to be regretted. As indicated, I was concerned about determining the extent to which arrangements between all or any of Dr Farmer, EMI, Mr Brewer, and CIL can be said to fall foul of Section 127 or can be said to be in breach of trust or give rise to a trust, and I have real doubts about the desirability of deciding such issues without CIL or the liquidator being a party to these proceedings. Fortunately, the point is now academic, as CIL has been made a party.
126. In these circumstances, neither of the disclaimers appears to me to affect my conclusion that the IP rights are beneficially owned by CIL, rather than by Mr Brewer or Dr Farmer. So far as legal title is concerned, Dr Farmer is obviously the proprietor in law of the registered designs, because he is registered as such. It appears to me that he also remains the legal proprietor of the unregistered designs: although not addressed fully on that issue, I consider that they did not automatically vest back in CIL as a result of the loan having been repaid in full or as a result of any further recovery of the loan being barred by limitation. A formal reassignment is statutorily required.
127. The chattels
128. In so far as CIL was the beneficial owner of the chattels, it appears to me that the effect of the disclaimers would have been to vest that beneficial ownership in the Crown as bona vacantia in the normal way. Given that, on any view, it may be arguable that CIL had beneficial ownership of at least some of the chattels, I suppose that it may be said that I should not determine any question of ownership without giving the Crown an opportunity to be joined. That appears to me not merely to be the counsel of perfection, but to be positively unrealistic. Quite apart from that, I do not see why I cannot determine the ownership of the chattels as between the parties to this litigation, on the basis that any decision I reach cannot bind the Crown, as it is not a party.
129. Many of the chattels are, and have been since the end of 1991, in the effective possession of Mr Brewer. Indeed these are the chattels I have referred to as set out in paragraph 3 of Dr Farmer's Amended Particulars of Claim. Mr Brewer is not able to rely upon the Limitation Act 1980 as against Dr Farmer, because these proceedings were brought against him somewhat less than six years thereafter. As against CIL, Mr Brewer is prima facie able to claim the benefit of the Limitation Act 1980, because he has had possession of the chattels for more than six years since CIL went into liquidation (since when his duties as a director were effectively determined). While, as I have said, the effect of the second disclaimer might be said to result in the beneficial ownership of the chattels vesting in the Crown as bona vacantia, it seems to me, in these circumstances, much more realistic (and indeed right in law) to conclude that, subject to Dr Farmer's rights, they should be treated as owned by Mr Brewer. As I have said, he has had them in his possession for more than eight years, he has incurred liabilities in respect of them, he wants to keep them, the only other potential beneficial owner is CIL, neither CIL nor its liquidator has made any claim in respect of the chattels, or received any acknowledgement in respect of the chattels, from Mr Brewer over the past eight years, the liquidator has gone so far as to disclaim any interest in the chattels, and there is no suggestion of the Crown wishing to have any interest in the chattels.
130. Accordingly, while it is not open to me to say that, as against the Crown, Mr Brewer is the owner of the chattels, it seems to me that, subject to considering any argument which Dr Farmer might have, Mr Brewer should be treated as the beneficial owner of the chattels so far as the parties before me are concerned.
131. The first argument Dr Farmer has in relation to these chattels, given the conclusions I have reached, is that he has, even as against Mr Brewer, the legal ownership of the chattels because they were transferred to him on 23rd January 1991, and he has never transferred them back. Assuming in his favour that is a good argument, I do not think it takes his case any further so far as his claim against Mr Brewer is concerned. In light of my conclusion in the previous paragraph, even assuming that Dr Farmer still has the legal ownership of the chattels, it is no more than a bare legal ownership, because they were transferred to him as security for the loan, and there is nothing more due under the loan. Having considered the beneficial ownership of the chattels as between Mr Brewer and CIL, it seems to me that, subject to Dr Farmer's possible bare legal ownership of the chattels and any lien he may have, Mr Brewer is the beneficial owner of those chattels, and therefore Dr Farmer's case against him cannot succeed in so far as it relates to the chattels.
132. The second argument raised by Dr Farmer is that Mr Brewer has not in fact had these chattels in his possession. In my judgment, that is a bad point. The chattels with which I am dealing at the moment are all chattels which Mr Brewer has either had in his possession or are chattels in respect of which he has arranged for the storage and has, indeed, paid for the storage. It seems to me that, where a person who is no longer an effective director of a company (because it has gone into compulsory liquidation) arranges for chattels to be stored to his personal order and subject to his personal directions, and he personally pays for the storage, then they are in his possession, and time starts running in his favour. It is fair to say that, in this case, CIL may very well have had an argument that it is not open to Mr Brewer to rely upon his possession of the chattels for more than six years under the provisions of the Limitation Act 1980, bearing in mind his fiduciary duties to the Company, even though it had gone into compulsory liquidation. However, it does not appear to me that I need to decide that point, because it is an issue which could only arise as between CIL and Mr Brewer, and it is clear that CIL does not wish to take the point; whatever else may be the effect of the disclaimers, it is clear that the Liquidator does not wish to maintain any interest whatever in the chattels, and it therefore follows that he must have abandoned any such argument against Mr Brewer. I cannot see how, in those circumstances, it would be open to Dr Farmer to raise the point.
133. Thirdly, Dr Farmer points out that for part of the six year period, these chattels may actually have been stored in the name and order of EMI or Dr Farmer. The evidence on this point is very detailed, and was only presented to the Court by Dr Farmer in writing after the final hearing (at which CIL was added as a party, and, more importantly, it was intended that all outstanding points should be raised). At first, I was very concerned about this, because it seemed to me that it would be unfair to ignore Dr Farmer's arguments and the evidence in support of them, even though they were raised so late in the day, but it would be even more clearly unfair to rely upon that evidence and those arguments without giving Mr Brewer an opportunity to reply. Either course was unpalatable: the first seems a little harsh bearing in mind that Dr Farmer has been a litigant in person throughout the hearing, and the latter would, I think, inevitably involve a detailed further hearing relating to chattels which I suspect are not worth very much.
134. In the event, I do not think that I need to determine these issues. The essential points in relation to this aspect are as follows. As between CIL and Mr Brewer, there appears to me no real doubt but that Mr Brewer morally, and, indeed, legally, should be treated as the owner of the chattels. Secondly, as between Dr Farmer and Mr Brewer (and indeed as between Dr Farmer and CIL, subject to the disclaimer) there are only two real bases upon which Dr Farmer can claim any title to the chattels. The first is on the basis that he was a mortgagee; that is true as far as it goes, but, for the reasons I have already given, the mortgage debt was fully repaid, or in the alternative is no longer recoverable due to limitation, but the right to redeem the chattels still remains. Accordingly, that argument does not get Dr Farmer anywhere (and it also disposes of any attempt he may make to rely upon limitation in relation to the chattels). The second basis upon which Dr Farmer could claim an interest in the chattels is that he or EMI have paid for their storage. In so far as he or EMI have done so, it seems to me that he is reasonably entitled to claim a lien on the chattels. In my view, there is simply no basis, either in law or in commercial common sense, upon which he can claim any further interest in the chattels, whether against CIL or Mr Brewer. In those circumstances, it appears to me that the right course in relation to the chattels, at least as between the parties to this litigation, is to conclude that Mr Brewer is entitled to them, but that Dr Farmer has a lien over them in relation to the amount that he or EMI reasonably spent in paying for their storage. If Dr Farmer and Mr Brewer cannot agree that amount, then it will have to be referred to the Master. So far as I can see, there is no need for any investigation as to the amount spent by Mr Brewer on storage for these chattels, because, subject to Dr Farmer's lien, Mr Brewer is, in my judgment, the owner of the chattels.
135. Finally in relation to the chattels, there was an argument about what I might call "the Seaskate chattels". When Dr Farmer's particulars in claim against Mr Brewer were amended, reference to the Seaskate chattels was deleted, which, to my mind, pretty clearly indicated that Dr Farmer was not claiming any interest in the Seaskate chattels. For reasons best known to his legal advisers, Mr Brewer retained reference to the Seaskate chattels in his Amended Defence and Counterclaim. Although it can be argued, and indeed was argued by Dr Farmer, that in these circumstances ownership of the Seaskate chattels remained in dispute, it seems to me that on a fair reading of the pleadings it did not. Given that the issue was whether Dr Farmer owned certain chattels (and certain IP rights) it seemed to me that, by deleting the Seaskate chattels from his originating pleading, Dr Farmer was indicating that he was not seeking to put the Seaskate chattels in issue. That is not surprising because they were not referred to in the January 1991 correspondence so far as I can see. Very regrettably, because the last thing I want to do is to encourage any further proceedings over chattels which I suspect have very little, if any, value, I am bound to say that I think that it would be unfair on Dr Farmer if, due to the unsatisfactory state of the pleadings (which is really the fault of Mr Brewer's advisers) Dr Farmer were prevented by issue estoppel from raising any question of the ownership of the Seaskate chattels due to this conclusion. It is equally fair to Mr Brewer to say that, owing to Dr Farmer's deletion of the Seaskate chattels from his originating pleading, it was not unnatural for Mr Brewer not to have dealt with the Seaskate chattels in his evidence.
136. In these circumstances, the least unjust result in relation to the Seaskate chattels is to conclude that:

The issue of the ownership of the Seaskate chattels is not before me, has not been the subject of full evidence, and should therefore not be determined;

However, I am deciding not to determine this issue at Mr Brewer's invitation, and am only prepared to accede to that invitation on the basis that Dr Farmer is not estopped from raising the ownership of the Seaskate chattels at a later date;

Because of the potentially very small value of the Seaskate chattels, Mr Brewer must have the concomitant right to have any claim by Dr Farmer relating to the Seaskate chattels struck out or dealt with very summarily, and I must emphasise in the strongest possible terms that Dr Farmer (and indeed Mr Brewer) would be very ill-advised to start proceedings relating to the Seaskate chattels unless those proceedings are really worth pursuing.

137. Section 10. CONCLUSION
138. I propose to deal first with the design rights. Dr Farmer is the registered proprietor of the registered designs, and, therefore, subject to the question of whether I should order someone else to be substituted as proprietor, he has the right to claim legal ownership of the registered design rights as against Mr Brewer and as against RTK. It is contended on behalf of Mr Brewer that Dr Farmer holds the registered design rights on trust for Mr Brewer; it is contended on behalf of RTK (and, now, CIL) that Dr Farmer holds the registered design rights on trust for CIL. For the reasons I have given, I reject Mr Brewer's contentions in this connection, and I accept the submission on behalf of RTK (and CIL). Until CIL became a party, it may not have been strictly necessary or even appropriate for me to determine RTK's contention. However, now that CIL is a party, I can and should decide the issue: Dr Farmer holds the design rights on trust for CIL. However, as Dr Farmer is the registered proprietor, it appears to me that he has title to bring proceedings, in that capacity, at least against someone who has no beneficial interest in the design rights and in particular, against Mr Brewer and RTK. Accordingly, at least subject to the rights of the beneficial owner, CIL, (e.g. to stay the proceedings, to seek to be substituted as proprietor of the design rights and/or to ensure that any damages recovered by Dr Farmer are held for it), Dr Farmer's actions are properly constituted so far as the design rights are concerned.
139. On behalf of RTK, Mr Hicks submitted that I should order that the design rights registrations be transferred to CIL. I doubt that I would have had jurisdiction to make such an order in the absence of CIL or its liquidator, and, even if I would have done, it would not have seemed to me appropriate to do so. It would have been for the liquidator to decide whether or not he wished to seek a definitive ruling that the registered design rights are held on trust for CIL and/or an order substituting CIL as the registered proprietor. Now that the Liquidator is a party, I understand he wishes me to make such an order: I see no reason why I should not do so. However, Dr Farmer claims to have incurred some expenditure (which may well only be slight) in connection with his trusteeship of the IP rights. He can recover that before he has to effect the transfer, to the extent that he can establish the expenditure and its reasonableness.
140. So far as the unregistered design rights and any copyright are concerned, I have not been fully addressed on the question of whether the position is the same as with regard to the registered designs, on the basis that it is up to CIL formally to redeem the mortgage of the unregistered design rights and copyright, or whether they have automatically become revested in CIL. If the former analysis is correct (as I consider that it probably is), then it appears to me that the position is precisely the same as in relation to the registered designs: Dr Farmer is the legal owner, but he holds those rights on trust for CIL, and should be ordered to transfer them to CIL, subject to the same points on expenditure as I mentioned on the registered design rights. On the other hand, if the latter analysis is correct then legal as well as beneficial ownership of the unregistered design rights and the copyright have become revested in CIL.
141. As to the chattels, subject to the Seaskate chattels (which I do not propose to deal with for the reason explained above) I determine that they are owned by Mr Brewer, albeit that they are subject to a lien in favour of Dr Farmer in relation to any costs that he has reasonably incurred in relation to their preservation, and in particular in relation to their storage. In the event of there being a dispute as to what expenditure Dr Farmer has reasonably incurred, the matter will have to be referred to the Master.
142. Finally, so far as the future conduct of these proceedings is concerned, it appears to me that, subject to the point last mentioned, the issues between Dr Farmer and Mr Brewer as to the ownership of the IP rights and the chattels has been determined: Dr Farmer is indeed the legal owner of the IP rights, but he is not more than the bare legal owner, and what happens now in relation to the proceedings (apart from costs) is more a matter for the Liquidator than for Dr Farmer. As to the chattels, although Dr Farmer is the legal owner, he holds them on trust for Mr Brewer, albeit subject to his lien, and, subject to any question relating to the determination of the amount of the lien, that concludes that issue.
143. So far as Dr Farmer's claim against RTK is concerned, it appears to me that Dr Farmer has established that he owns the RDV rights (in so far as they exist), but he is only the bare legal owner. As to what happens in relation to the RTK proceedings, it seems to me that that is more a matter for the Liquidator than for Dr Farmer, although I appreciate that Dr Farmer may have something to say about the costs.
144. As to the position between Dr Farmer and CIL, it seems to me that CIL is entitled to require Dr Farmer to transfer to it the IP rights, subject to any question of costs, and I understand that that is what the Liquidator wishes Dr Farmer to do.
145. One or two final matters. First, Mr Kime has criticised Mr Hicks for advancing arguments which were not really of interest to RTK, but were more of interest to Dr Farmer. It is right to record that I regard that criticism as unfair and misconceived. Although I appreciate that RTK may well regard Dr Farmer as potentially more friendly than Mr Brewer, the more important point is that Dr Farmer was not legally represented in these proceedings, and the issues between him and Mr Brewer raised, in some cases, difficult points of law. To my mind, it was entirely proper for Mr Hicks to put forward, albeit briefly (as he did), arguments of law which may have been open to Dr Farmer, but of which he, as a litigant in person, may have been unaware.
146. Secondly, Mr Kime was anxious to emphasise that Mr Brewer had a considerable interest in supporting the contention that CIL, rather than, for instance, Dr Farmer, owned the IP rights beneficially, and for that reason he advanced arguments to support that contention. Given that CIL was not a party until the last day of the hearing, and was then only represented by the Liquidator's partner, it seems to me perfectly proper that Mr Kime took the line that he did: the position is not very different from that which I have been discussing in the previous paragraph. However, I am obviously not in a position to decide whether, as Mr Kime contends, Mr Brewer is in fact by far the biggest creditor, and possibly the only substantial creditor, of CIL. Mr Aaron, and indeed Mr Hicks, suggest that the Inland Revenue may be a substantial, and indeed preferred, creditor. That is something I cannot and should not determine. However, I appreciate that it may well turn out that, particularly if Mr Kime's submission is correct on this point, then, as between Mr Brewer and Dr Farmer, the fact that I have held that the IP rights are beneficially owned by CIL may not be so much a neutral conclusion as a conclusion favouring Mr Brewer. That, however, is something to be determined at a later date.