Michaelmas Term
[2017] UKPC 40
Privy Council Appeals
No 0067 of 2016 and 0073 of 2016
JUDGMENT
Paymaster (Jamaica) Limited and another (Respondents) v
Grace Kennedy Remittance Services Limited (Appellant) (Jamaica)
Paymaster (Jamaica) Limited (Appellant) v Grace Kennedy Remittance
Services Limited and another (Respondents) (Jamaica)
From the Court of Appeal
of Jamaica
before
Lord Sumption
Lord Carnwath
Lord Hughes
Lord Hodge
Lord Briggs
JUDGMENT GIVEN ON
11 December 2017
Heard on 24 October 2017
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Appellant/Respondent
B St Michael Hylton
QC
Courtney A Bailey
Kevin O Powell
(Instructed by
Myers Fletcher and Gordon)
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Respondent/Appellant
(Paymaster (Jamaica) Limited)
Charles Hollander
QC
Denise Kitson QC
(Instructed by
Jones Day)
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Respondent (Paul
Lowe)
Vincent A Chen
Leonard Green
Sylvan Edwards
(Instructed by
Blake Morgan LLP and Landmark Law Solicitors)
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LORD HODGE:
1.
This appeal concerns the ownership of the copyright in a computer
program and also allegations of breach of confidence.
2.
Paymaster (Jamaica) Ltd (“Paymaster”) was a start-up company,
incorporated by Ms Audrey Marks, who was a resident of Jamaica and the United
States of America, to develop in Jamaica a multi-payment agency system which
allowed consumers to pay their bills to various utility companies and other
payees in one branch or kiosk. She had developed the idea of introducing such a
system in Jamaica in 1994 while in the United States after she paid an overdue
telephone bill from a kiosk in a shopping mall, using a service which
guaranteed that her account would be updated on the following day. While bill
payment services already existed in Jamaica to enable customers to pay one
payee company and payments could also be made through commercial banks, her
plan was to develop a facility in Jamaica for the payment of many client
companies which would pay her company a fee for the provision of those
services.
3.
In 1994 Paymaster employed a consultant, Dr Maurice McNaughton of
Jamaica Online Information Services Ltd (“JOL”), to assist it in developing its
multi-payment agency concept by identifying the tasks for which software would
be designed. This involved (a) a network linking all of the collection outlets
to a head office, (b) multi-client cashiering software at the collection
outlets and (c) head office software to collect and consolidate payment
information from the outlets at the end of each operating shift. In about April
1995 JOL commissioned Mr Paul Lowe (“Mr Lowe”), a computer programmer, to
prepare a suitable program. Mr Lowe’s business was the development of software
for monetary transfers. He had developed a cashiering program which collected
payments for a single company directly, called CSSREMIT, which he marketed to
companies in Jamaica, the Cayman Islands and Tortola BVI and to agencies of the
Government of Jamaica. Mr Lowe’s business practice was to modify his basic CSSREMIT
program to meet the specific needs of each client and, retaining his copyright,
to grant the client a non-exclusive licence to use the program as so modified.
Mr Lowe granted Paymaster a non-exclusive licence to use CSSREMIT for the
multi-payment program which he developed at Paymaster’s request and expense.
Paymaster used the modified program to operate its business.
4.
The software for the multi-payment agency concept involved (a) a branch
function which enabled a customer to settle bills from different companies from
one location or branch and (b) a head office function by which data from that
branch were transmitted to an intermediary which collated the data and
transmitted the correct data and payments to each of the client payee
companies.
5.
In about March 1996 Paymaster showed its business plan to Mr Brian
Goldson, the managing director of Grace Kennedy Remittance Services Ltd
(“GKRS”), on a confidential basis when it was seeking investment in its
proposal. Later Paymaster showed GKRS a copy of a second business plan. GKRS
was an agent in Jamaica of a Jamaican subsidiary of Western Union Corporation,
a United States corporation which provided electronic bill-payment and money
transfer services in the United States and several other countries. Ms Marks
and Mr Goldson discussed the possibility of investing in Paymaster but those
discussions stalled as a result of delays in the development of the Paymaster
business after JOL withdrew from the project and certain utility companies
withdrew from the testing of the system. After further discussions in 1998,
GKRS decided not to invest in Paymaster. In the meantime, Paymaster set up
various outlets and incurred expense to Mr Lowe for improving and rectifying
the software. Over time Paymaster won contracts with several utility companies
and sought to increase the number of its branches in order to expand the
availability of its services to the public and win new client companies.
6.
In 1999 Mr Lowe approached GKRS with a proposal to grant a non-exclusive
licence of the CSSREMIT software which he had developed for Paymaster and to
customise it to meet GKRS’s needs. After negotiations, Mr Lowe gave GKRS a
non-exclusive licence to use the program. Using this software GKRS entered the
market for the provision of a multi-payment agency system in Jamaica in
competition with Paymaster in about April 2000.
7.
Paymaster contended that both GKRS and Mr Lowe had infringed its
copyright in the software which Mr Lowe had prepared for it. In August 2000
Paymaster obtained an interlocutory injunction restraining GKRS and Mr Lowe
from using the software. GKRS has not used that software since being enjoined
against so doing. The software, which was a DOS-based program, has long since
become obsolete and both Paymaster and GKRS have operated their businesses
using different software. Notwithstanding that, the dispute has not been
resolved.
8.
Paymaster has advanced three claims. First, it seeks damages from GKRS
and Mr Lowe for breach of copyright. Secondly, it seeks damages from Mr Lowe
for breach of confidence on the basis that the software which he licensed to
GKRS contained references to Paymaster’s business. Thirdly, Paymaster seeks
damages from GKRS for breach of confidence on the allegation that GKRS used
Paymaster’s business plan, which had been shown to it on a confidential basis,
to develop its competing business.
9.
After a seven-day trial, Jones J issued a judgment in 2010 in which he
rejected each of Paymaster’s claims. Paymaster had initially pleaded that it
had the copyright of the program because it had designed the multi-payment
program. But after evidence had been led which established Mr Lowe’s authorship
of the program, Paymaster’s counsel submitted that a term should be implied
into its contract with Mr Lowe that Paymaster would own the software which Mr
Lowe created for it. Counsel adopted this stance because section 22(1) of the
Copyright Act 1993 provides that the author of a protected work is the first
owner of any copyright in that work unless there is an agreement to the
contrary. Jones J rejected a pleading point raised by the defendants, holding
that Paymaster had pleaded enough about its contract with Mr Lowe to allow it
to argue for an implied term. But he held that no such term could be implied
into the contract. He referred to the guidance which Lightman J gave in his
nine-point legal test in Robin Ray v Classic FM Plc [1998] 25 FSR 622,
641-644 and cited five factors which pointed against the implication of such a
term. First, Mr Lowe’s business model was to modify his software for particular
clients but to keep ownership and control of the modified product by giving his
customer a licence to use the product, as he had done in this case. Secondly,
Mr Lowe had not used any copyright material belonging to Paymaster in creating
the multi-payment software: the idea of the multi-payment agency and the
specified requirements for the software which JOL had prepared on Paymaster’s
behalf did not enjoy copyright. Thirdly, Mr Lowe alone had written the program.
Fourthly, Mr Lowe’s business was to create software for the bill payment
industry by updating his CSSREMIT software, from which it could be inferred by
the custom of the trade that he would retain the copyright and give licences to
his clients. Fifthly, Mr Lowe did not give the source code of either the
pre-existing CSSREMIT or the added multi-payment software to Paymaster,
enabling him to control any amendment of the software and Paymaster did not
claim ownership of the source codes until it sought an injunction in legal
proceedings.
10.
In relation to the claim of breach of confidence against GKRS, Jones J
referred to the three requirements for the tort which Megarry LJ set out in Coco
v A N Clarke (Engineers) Ltd [1968] FSR 415. He held that the first two
requirements were met because Paymaster’s business plan contained confidential
information and GKRS had received the information in circumstances which
imported an obligation of confidence. He held (para 80) that Paymaster’s
business plan was confidential because it was a novel one and demonstrated
significant preparation. But he held that Paymaster had failed to prove the
third requirement, namely that GKRS had used the information in that plan to
Paymaster’s detriment. He accepted as credible Mr Goldson’s evidence and found
as fact that GKRS had conducted its own research into a multi-payment business
by sending an employee, Marcia Chon Tong, to the United States for a year to
study the business in 1997/1998, that GKRS had located a software provider
overseas and then used Mr Lowe in the process of two years’ preparation and
planning. He also relied on an exhibit which Ms Powell, who was Mr Goldson’s
successor as managing director of GKRS, had produced, which he described as
exhibit 2, which showed in tabular form a comparison between Paymaster’s
business plan and the businesses operated in Jamaica by Western Union and GKRS.
11.
Jones J did not discuss the breach of confidence claim against Mr Lowe
in any detail. He accepted that the demonstration program which Mr Lowe gave
GKRS contained Paymaster’s name, the location of certain of its branches and the
names of certain client companies but said that the claim did not stand up to
scrutiny. Jones J also rejected Paymaster’s claim of passing off and Paymaster
did not pursue that claim on appeal.
12.
The Court of Appeal (Harris JA, McIntosh JA and Lawrence-Beswick JA
(acting)) rejected Paymaster’s appeal on breach of copyright and on its claim
for breach of confidence against Mr Lowe. It allowed the appeal against the
judge’s finding that GKRS had not acted in breach of confidence, holding that
GKRS had used Paymaster’s business plan. The Court of Appeal also allowed Mr
Lowe’s cross appeal that Paymaster had by obtaining the interim injunction
caused him loss by compelling him to terminate his contract with GKRS and lose
the benefit of a service contract with it.
13.
In reaching these conclusions the Court of Appeal in a lengthy judgment
given by Harris JA discussed the parties’ submissions on the many grounds of
appeal which Paymaster advanced. But it is sufficient for the purposes of this
appeal for the Board to summarise the court’s reasoning briefly. In relation to
the breach of copyright claim, Paymaster, recognising that it had only a
licence for the CSSREMIT program, sought to argue that it owned copyright in
“the additional functionalities in the CSSREMIT program”. The Court of Appeal
rejected the defendants’ renewed pleading challenge to Paymaster’s case that
there was an implied term assigning the copyright to it. But the court rejected
that case after considering Paymaster’s challenges in considerable detail. In
summary, the Court of Appeal upheld the judge on the first, second, third and
fifth grounds to which the Board referred in para 9 above. The Court of Appeal
qualified the fourth ground by holding that there was no evidence to support
the custom of trade of which Jones J had spoken. The Court also rejected
Paymaster’s contention that it owned part of the software; Paymaster’s pleaded
case was that it owned all of the software and it had never asserted joint
ownership of the complete multi-payment software.
14.
The Court of Appeal overturned the judgment of Jones J on Paymaster’s
claim against GKRS for breach of confidence. The Court agreed with Jones J as
to the applicable law and the questions to be resolved. It held that GKRS had
received two versions of Paymaster’s business plan. The Court of Appeal took a
different view from Jones J on what gave the business plan its confidential
status. The Court held (paras 198-199) that it was the business concept of a
multi-payment system, which was a novelty in Jamaica, which had the necessary
quality of confidentiality. The court agreed with Jones J that the plan had
been given to GKRS in circumstances importing an obligation of confidence.
Where the Court disagreed with Jones J was in its finding that GKRS had used
the plan to Paymaster’s detriment. In a brief discussion (paras 203-211 of its
judgment) the court inferred that GKRS had used Paymaster’s business plan to
create its own. The court referred to Mr Goldson’s evidence that GKRS had sent
an employee to the United States for a year and had developed its own marketing
plan. It referred also to Ms Powell’s exhibit 2. But the court found it
astonishing that Mr Goldson had produced with his affidavit a marketing plan
which post-dated the commencement of the legal proceedings in an effort to show
that GKRS’s marketing plan emanated from its own research. That plan referred
to cooperation with two companies which were incorporated in late 2000 after
GKRS had commenced its multi-payment agency business. Further, the court
asserted that exhibit 2 revealed “a preponderance of similarities between
Paymaster’s business plan and that of GKRS”. The court stated that the process
governing the multi-payment system was embedded in the software which Mr Lowe
licensed to GKRS and “the concepts and ideas detailed in the multi-payment
system” were available to GKRS only. From these factors the court inferred that
GKRS had used Paymaster’s plan to create its own.
15.
The Court of Appeal rejected the claim of breach of confidence against
Mr Lowe on the basis that GKRS had obtained Paymaster’s business plan directly
from Paymaster and not from Mr Lowe. The Court did not discuss Paymaster’s
allegation of Mr Lowe’s use of confidential information within the computer
program.
16.
The Court of Appeal gave GKRS and Paymaster final leave to appeal to the
Board on 6 June and 1 July 2016 respectively.
Discussion
17.
The Board addresses, first, the copyright claim and secondly the claim
of breach of confidence against GKRS before turning to the claim of breach of
confidence against Mr Lowe.
(i) Ownership of
copyright
18.
Section 6 of the Copyright Act 1993 provides for the subsistence of
copyright in original literary works and includes within literary works a
computer program. Section 22(1) of the 1993 Act provides:
“Subject to the provisions of this
section, the author of a protected work is the first owner of any copyright in
that work unless there is an agreement to the contrary.”
Paymaster, having failed to establish its authorship of the
multi-payment agency software, recognised that it had to establish such an
agreement. Paymaster’s contract with Mr Lowe was oral and informal. As there
had been no discussion as to the ownership of the multi-payment agency
software, Paymaster sought to prove that there was an implied term of the
contract which provided for the assignment by Mr Lowe of the copyright in the
software.
19.
In order to imply a term into a contract one must show that the term is
necessary to give the contract business efficacy in the sense that without it
the contract would lack commercial or practical coherence: Marks and Spencer
plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2016] AC 742,
para 21 per Lord Neuberger. Jones J and the Court of Appeal concluded that a
term assigning the copyright of the software could not be implied into the oral
contract between Paymaster and Mr Lowe. The Board agrees for the following
reasons.
20.
First, the Board considers that the assignment of the copyright of the
complete multi-payment agency software would be inconsistent with Mr Lowe’s
pre-existing business model, which involved his maintaining control over the
products which he created for his clients. Unless the court could conclude that
the underlying purpose of the informal oral arrangement was to give Paymaster
exclusive use of the software which Mr Lowe had produced, there is no basis for
implying any term into the agreement to give it business efficacy.
21.
Secondly, even if such a purpose could be ascertained, Paymaster has not
shown that an assignment of copyright would have been the contractual solution
which would without doubt have been preferred over an exclusive licence to use
the software. In Philips Electronique Grand Public SA v British Sky
Broadcasting Ltd [1995] EMLR 472, 482, Bingham MR stated:
“The question of whether a term
should be implied, and if so what, almost inevitably arises after a crisis has
been reached in the performance of the contract. So the court comes to the task
of implication with the benefit of hindsight, and it is tempting for the court
then to fashion a term which will reflect the merits of the situation as they
then appear. Tempting, but wrong. … [I]t is not enough to show that had the
parties foreseen the eventuality which in fact occurred they would have wished
to make provision for it, unless it can also be shown either that there was
only one contractual solution or that one of several possible solutions would
without doubt have been preferred.”
In Trollope & Colls Ltd v North West Metropolitan
Regional Hospital Board [1973] 1 WLR 601, a case concerning a detailed
written building contract, Lord Cross of Chelsea stated (613-614):
“[W]hat the respondents are asking
the court to do is, in effect, to rectify the clause by the addition of some
words which will make it accord not indeed with the actual intention of the
parties but with the intention which the respondents say must be imputed to
them. In such a case, as I have always understood the law, it is not enough for
the party seeking to have the words varied to say to the court, ‘We obviously
did not mean what we have said, so please amend the clause so as to make it
read in what you think is the most reasonable way.’ He must establish not only
that the parties obviously did not mean what they said but also that if they
had directed their minds to the question they would obviously have framed the
clause in the way for which he contends.”
It is significant in the Board’s view, that the
multi-payment agency software was commissioned for Paymaster to use in its
business. There was no proposal that Paymaster’s business would involve the
sale of the software to others. It was therefore not necessary that Paymaster
should own the copyright. If it had been an implicit part of Paymaster’s
arrangement with Mr Lowe that it would have exclusive use of the multi-payment
agency software, an exclusive licence of that software and an obligation on Mr
Lowe to preserve that exclusivity by upholding his copyright might have
sufficed. It cannot be said without doubt that the assignment of copyright
would have been preferred.
22.
Thirdly, there is no clarity as to what is the work the copyright of
which Paymaster asserts was assigned to it. This is unsurprising as Paymaster’s
pleaded case was that it was the author of the multi-payment agency software in
its entirety and it only argued a case of a contractual assignment of the
software after evidence had been led at the trial. As a result, Paymaster never
set out in written pleadings the precise term which it wished to be implied
into the contract. It is not disputed that Mr Lowe gave Paymaster a
non-exclusive licence of his CSSREMIT program, which would be wholly
inconsistent with any arrangement to assign the copyright of the whole program
to Paymaster, if certain functionalities in the program were treated as a
separate program. But there appears to have been no exploration in evidence of
whether and if so how the additional functionalities which Mr Lowe added onto
his CSSREMIT program could be separated from that program. In particular, the
head office software which Mr Lowe produced for Paymaster depended for its
operation on its compatibility with the software which he developed for the outlets
where customers would pay their bills.
23.
Fourthly, it is not now asserted that any of the material which
Paymaster, or JOL as its agent, gave Mr Lowe was copyright material and was
included in the multi-payment agency software. In Robin Ray v Classic FM Plc
[1998] 25 FSR 622, 642 Lightman J identified the use of pre-existing work of
the client which was itself entitled to copyright protection as a pointer
towards the necessity of an assignment of copyright in the contractor’s work.
That pointer is absent in this case.
24.
In conclusion, while Paymaster expended considerable sums of money in
developing its business proposition and in commissioning Mr Lowe to produce the
software to give effect to that proposition and to modify the software after
testing, the Board finds no scope for implying the term into the informal
contract between Paymaster and Mr Lowe for which Paymaster has argued. With
hindsight, Paymaster may consider that it should have sought in its contract to
prevent Mr Lowe from using the multi-payment agency software in his business by
marketing it to others and that it should have secured the ability to enforce
or to require Mr Lowe to enforce the copyright against third parties. But it
did not do so.
25.
Having come to this view, the Board does not need to address the
pleading point that Paymaster should not have been allowed to argue for an
implied term. There was no suggestion that the defendants had been prejudiced
by the absence of written pleadings on this point. It suffices to say that the Board
would have been reluctant to disagree with the judge and the Court of Appeal on
a matter of practice in the Jamaican courts.
(ii) The claim of breach
of confidence against GKRS
26.
The next question is whether the Court of Appeal was correct to overturn
the finding of Jones J that GKRS had not used Paymaster’s business plan when
setting up its business in competition with Paymaster.
27.
Jones J accepted Mr Goldson’s evidence that GKRS had spent about two
years developing the idea of introducing a multi-payment system into Jamaica.
The evidence of Mr Goldson, which Jones J accepted as credible, included (a)
that GKRS was familiar with the multi-payment business through its connection
with Western Union, (b) that GKRS had sent Marcia Chon Tong, one of its managers
in Trinidad, to New York for one year in late 1997 or 1998 to study that
business and to advise on how the business would operate, including its
software needs, (c) that GKRS had located an overseas supplier to provide it
with the needed software, but had also obtained assistance from a local owner
of software (ie Mr Lowe) and (d) that GKRS rolled out their business product
called “BillExpress” after two years of preparation and planning.
28.
As the Board has stated in para 14 above, the Court of Appeal in paras
203-211 of its judgment disagreed with Jones J’s assessment of the evidence in
its discussion of this point. In so doing the Court of Appeal appears to have
relied on three things, which the Board discusses below. First, it expressed
astonishment that Mr Goldson had produced as documentary evidence of GKRS’s
preparations, a marketing plan which post-dated the commencement of the
litigation. Secondly, it considered the document which the Board has called “exhibit
2” revealed a preponderance of similarities between Paymaster’s business plan
and GKRS’s operation. Thirdly, it held that the process governing the
multi-payment system was contained in the software which GKRS obtained from Mr
Lowe. From those three things the Court of Appeal inferred that GKRS used
Paymaster’s business plan to create its own. The Court of Appeal (at para 211)
concluded that “Paymaster’s concepts and ideas in respect of the multi-payment
model were private” and that GKRS had used that information to Paymaster’s
prejudice.
29.
The Board is mindful of the constraints on an appellate court when
called upon to review the findings of fact of the judge at first instance who
has heard and seen the witnesses give oral evidence in court. In Thomas v
Thomas [1947] AC 484 the House of Lords and more recently in McGraddie v
McGraddie [2013] 1 WLR 2477 and Henderson v Foxworth Investments Ltd
[2014] UKSC 41; [2014] 1 WLR 2600; 2014 SC (UKSC) 203 the United Kingdom
Supreme Court have given guidance on the circumstances in which an appellate
court may interfere with the findings of fact by a trial judge. In Thomas v
Thomas, 487-488 Lord Thankerton stated:
“[T]he principle … may be stated
thus: I. Where a question of fact has been tried by a judge without a jury, and
there is no question of misdirection of himself by the judge, an appellate
court which is disposed to come to a different conclusion on the printed
evidence, should not do so unless it is satisfied that any advantage enjoyed by
the trial judge by reason of having seen and heard the witnesses, could not be
sufficient to explain or justify the trial judge’s conclusion; II. The
appellate court may take the view that, without having seen or heard the
witnesses, it is not in a position to come to any satisfactory conclusion on
the printed evidence; III. The appellate court, either because the reasons
given by the trial judge are not satisfactory, or because it unmistakeably so
appears from the evidence, may be satisfied that he has not taken proper
advantage of his having seen and heard the witnesses, and the matter will then
be at large for the appellate court.”
In Henderson (para 67) Lord Reed stated:
“in the absence of some other identifiable error,
such as (without attempting an exhaustive account) a material error of law, or
the making of a critical finding of fact which has no basis in the evidence, or
a demonstrable misunderstanding of relevant evidence, or a demonstrable failure
to consider relevant evidence, an appellate court will interfere with the
findings of fact made by a trial judge only if it is satisfied that his
decision cannot reasonably be explained or justified.”
The Board itself has recently given similar guidance in Beacon
Insurance Co Ltd v Maharaj Bookstore Ltd [2014] UKPC 21; [2014] 4 All ER 418, paras 11-17 and in Central Bank of Ecuador v Conticorp SA [2015] UKPC 11; [2016] 1 BCLC 26, paras 4-8.
30.
Mr Hollander QC for Paymaster submits that the Court of Appeal was
entitled to reverse the trial judge’s findings of fact because Mr Goldson’s
evidence had been wholly undermined on cross-examination and the trial judge
had failed to take that into account. The Board disagrees with both
propositions.
31.
In relation to the first proposition, there was evidence, which the
Board discusses below, to support GKRS’s case which was not challenged on
cross-examination. Mr Goldson’s evidence was criticised in at least two
respects. First, Mr Goldson gave evidence that he did not recall seeing the
Paymaster business plan, but the judge found that GKRS had received the
business plan. Secondly, Mr Goldson in his first affidavit presented GKRS’s
marketing plan as part of the company’s preparation for starting the
multi-payment business. But, when challenged by Ms Marks’ second affidavit, he
conceded in his second affidavit that the marketing plan to which he had
referred in his first affidavit was produced in the second half of 2000 after
GKRS had commenced its multi-payment agency business. It therefore could not
vouch GKRS’s preparatory work before starting the business. The Board accepts
that these points could weaken the reliability of Mr Goldson’s evidence but it
is not persuaded that those matters were sufficient to undermine his
credibility, where there was other evidence which corroborated important parts
of his evidence.
32.
In relation to the second proposition, the judge might have acknowledged
in his judgment GKRS’s failure to produce internal documentation from 1998 and
1999 in order to vouch its assertion that it prepared for the launch of its
bill payment product over two years. He might have explained why he accepted
GKRS’s evidence about its preparations, notwithstanding the absence of such
documentation. But, as there was otherwise sufficient evidence to establish
GKRS’s case, the judge’s failure to acknowledge the absence of certain documentary
evidence cannot be equated with a failure to consider relevant evidence.
33.
The Board is persuaded that the Court of Appeal erred in overturning
Jones J’s conclusions on the case against GKRS for breach of confidence both
because it has not been demonstrated that the judge disregarded relevant
evidence or otherwise was plainly wrong in his assessment of the evidence and
because the evidence on which the Court of Appeal relied does not support its
conclusion. In the Board’s view there was evidence before the judge which
entitled him to reach the conclusion which he did and there was not sufficient
contrary evidence to allow the Court of Appeal to make the inferences which it
did. The Board has reached this view for the following seven reasons.
34.
First, there was evidence that the idea of an independent multi-payment
system was not novel even though it had not been developed in Jamaica until
Paymaster established its business. Both Mr Goldson and Ms Joan-Marie Powell,
who was his successor as managing director of GKRS, gave evidence that
commercial banks in Jamaica were already collecting money for utility
companies. Bill collection services already existed in other countries such as
the United States and Canada, including services for multiple payees, such as Western
Union’s Quick Collect system in the United States. Ms Marks did not deny the
existence of such bill collection systems overseas. Her evidence was that her
model was better than most bill collection services because Paymaster used
software to obtain data from and send data to the payee clients whereas most
collection systems at that time did not have such software.
35.
Secondly, there was no evidence to undermine Mr Goldson’s contention
that Marcia Chon Tong had spent a year in the United States in late 1997 or
1998 studying various money services, including the multi-payment agency
business, and identifying a potential software provider. On the contrary, there
was corroboration of Mr Goldson’s evidence of Marcia Chon Tong’s work in the witness
statement of Joan-Marie Powell, who also confirmed that she had identified a
United States company, BEST Inc, which was a software provider in the money
services business, as a possible provider of software for GKRS’s multi-payment
agency business. GKRS had been working with BEST Inc to customise its program
when Mr Lowe offered to license his program to GKRS. Mr Goldson gave evidence
that GKRS demonstrated both programs to prospective customers. Joan-Marie
Powell also explained that GKRS had used BEST Inc’s CEMSUP program after it was
enjoined against using Mr Lowe’s program and had replaced CEMSUP in 2004 with a
more advanced program called “Navigator” which had been developed by a company
in Florida.
36.
Thirdly, GKRS already had a platform in Jamaica from which to launch its
new service. It did not need to study and use Paymaster’s business plan to
create a network of collection outlets. GKRS in its role as Western Union’s
agent in Jamaica already had a branch network in stores and other outlets from
which people could use Western Union facilities to transfer money and pay the
bills of companies based overseas. It was able to use that network to establish
its multi-payment service alongside its existing service. It was also able to
use marketing techniques which it used to promote its existing services. That
is not to say that the establishment of a domestic multi-payment system did not
require changes to be made to GKRS’s operations. The paying customer paid for
the Western Union’s services, such as Quick Pay, in which GKRS was involved.
The multi-payment system, which Paymaster adopted, involved the payee client
paying a commission for the services, although the model could also, and later
did, involve a charge to the paying customer. Further, it required the provider
of the service to have access to the payee client’s database in order to allow
the customer to ascertain the balance due on his or her account. It also
required the service provider to facilitate the transmission of data to the
different payee clients. Access to appropriate software was essential to the
system; and that is what Mr Lowe provided.
37.
Fourthly, the Board does not accept that exhibit 2 reveals a
preponderance of similarities between Paymaster’s business plan and the
multi-payment agency business which GKRS established. The document, which GKRS
had prepared, was a comparison of business of Western Union in Jamaica,
Paymaster’s 1996 business plan and GKRS’s multi-payment agency business in
2000. The GKRS model bore a very strong resemblance to the Western Union model
and differed from the Paymaster plan in terms of the number and location of
outlets, opening hours, the use of agents rather than employees, and the
charging of a set fee to the payees. Those matters which were similar to the
Paymaster model, such as locations in every parish, the collection of sums at
the front-end by tellers who issued receipts generated by the computer system,
and the possession of a comprehensive insurance plan, were equally similar to
the Western Union model, which GKRS would have known as Western Union’s agent.
In the Board’s view the document suggests that GKRS had drawn on its experience
as an agent of Western Union and its existing network and practices in that
capacity in creating its network for a multi-payment agency system. It did not
point to the use by GKRS of Paymaster’s business plan. The Court of Appeal
erred in so asserting.
38.
Fifthly, the contents of the business plan and the use which GKRS was
thought to have made of it were not explored in any detail in the evidence. In
para 190 of its judgment the Court of Appeal recorded the contents pages of the
two business plans. The summaries were very similar and it is sufficient to set
out the summary from the second business plan:
“Mission statement; establishment; background;
mission statement; service; Paymaster’s services target customer convenience;
reasonable rates attract client companies; service advantage to client
companies include: How Paymaster can best serve client companies; how it works
for you; the technology; security and insurance; fees; implementation schedule;
achievements; collections network architecture; how we operate; software;
Paymaster head office; Paymaster Head Office to client companies; locations,
Paymaster service capabilities.”
The Court of Appeal did not identify any particular
aspect of the business plans which GKRS used in breach of confidence. There had
been no exploration of such detail whether in the evidence of Paymaster’s
witnesses or in the cross-examination of GKRS’s witnesses. Instead the Court of
Appeal relied on GKRS’s use of the concept of the multi-payment model. It
stated (para 210):
“The process governing the
multi-payment system would have been embedded in the software which was in
GKRS’s possession notwithstanding [Mr Lowe’s] ownership of it. The concepts and
ideas detailed in the multi-payment system are of some value to Paymaster and
were available to GKRS only, as there is no evidence that anyone other than
GKRS was conversant with the contents of Paymaster’s business plan. Paymaster’s
name and logo appeared on GKRS’s computer system, in early 2000 when GKRS
commenced operation. In all the circumstances of this case, it is reasonable to
infer that GKRS used Paymaster’s plan to create its own. …”
In para 211 Harris JA concluded:
“I am firmly of the view that GKRS
made use of Paymaster’s business plan obtained in confidence and clearly took
an unfair advantage of Paymaster while it had it in its possession. …
Paymaster’s concepts and ideas in respect of the multi-payment model were
private and GKRS should have exercised special care not to have used the
information contained therein, prejudicially to Paymaster.”
The Board discusses the assertion that the concept was
confidential in para 40 below.
39.
The Court of Appeal also recorded (para 191) that Ms Marks had stated in
her affidavit of 25 August 2000 that the business plan which was sent to Mr
Lowe included among other things “Paymaster’s operational model, a description
of Paymaster’s network, and architecture, its expansion plan, its marketing
plan and important information on Paymaster’s programming and technology
personnel”. But if Mr Lowe received this material, there is no evidence that he
gave it to GKRS or that GKRS used such material in developing its service.
40.
Sixthly, the Court of Appeal nowhere specifies what were the concepts
and ideas which GKRS used in breach of confidence. It is not suggested that the
concept of a bill collection system funded by the payee was novel or
confidential. The idea of outlets located in supermarkets, shopping malls or
other commercial centres where people could go to transfer money or pay their
bills was not novel or confidential: Western Union already had such outlets in
Jamaica which enabled customers to remit funds overseas or to pay the bills of
an overseas supplier. The use of software to transfer data to the payee and
give receipts to the customer was similarly well-established. The development
of the software to enable Paymaster to process payments to multiple client
payee companies and give the customers information of the balances on their
accounts with the payees may well have been novel, at least in Jamaica. But
GKRS did not obtain that software from the written business plan. Unfortunately
for Paymaster, their contract with Mr Lowe left him free to provide the
software to others and to adapt it to their needs.
41.
The Board recognises that a subconscious use of information obtained in
confidence as a springboard for activities detrimental to the person who made
the confidential communication may give rise to a claim of breach of
confidence, as for example in Seager v Copydex Ltd [1967] 1 WLR 923.
Conscious plagiarism is not a necessary component of the claim. But it is
necessary to identify the information which was so used.
42.
Seventhly, the Court of Appeal erred in its reliance on the use by GKRS
of the software which Mr Lowe provided to it under licence in support of the
assertion that GKRS used Paymaster’s business plan. That software was an
essential part of the multi-payment agency business as it provided the means by
which (a) data could be sent from a branch or kiosk to a head office for
processing, (b) customers could access their account balances at the branch or
kiosk and (c) the head office transmitted relevant information to each of the
service provider’s clients. The software was created in implementation of
Paymaster’s business plan. But as the copyright in that software belonged to Mr
Lowe, who was free to license others to use it, and he approached GKRS to do
so, GKRS’s use of the software does not support any inference that GKRS had
used Paymaster’s business plan in breach of confidence.
43.
In summary, therefore, (i) it was not contested that multi-payment
agency services existed overseas and could provide a model for use elsewhere;
(ii) at trial there was no overt challenge to the evidence of Mr Goldson and Ms
Powell that GKRS had researched the multi-payment agency business in the United
States in 1997-1998, nor did the Court of Appeal give any reason for impugning
that evidence; (iii) GKRS already had in place a network of outlets in Jamaica
through their agency contract with Western Union, which it used when it set up
its multi-payment agency; (iv) the document, exhibit 2, which GKRS produced,
supported the view that GKRS had modelled its new business network on its
existing agency for Western Union in Jamaica and the Court of Appeal erred in
holding otherwise; (v) it was not established that GKRS used any particular
element of Paymaster’s business plan, and Jones J was correct so to conclude;
(vi) instead the Court of Appeal held that the business concept of a
multi-payment agency system, which was a novelty in Jamaica, itself had the
necessary quality of confidentiality (paras 198-199) and that GKRS had used
Paymaster’s concepts and ideas (para 211) but the Board disagrees with those
conclusions; and (vii) the facts that Mr Lowe was able to give GKRS a licence
to use the software which he had developed for Paymaster and GKRS used that
software until enjoined from doing so do not mean that GKRS used Paymaster’s
business plan.
44.
The Board therefore is not persuaded that the Court of Appeal had a
sufficient basis to overturn Jones J’s acceptance of both Mr Goldson’s
credibility and the evidence which suggested that GKRS had used information
about multi-payment agency systems, which it obtained in the United States, and its existing network of agents and its business
practices, which it had developed when acting as agent of Western Union, to set
up its bill payments business.
(iii) The claim of breach
of confidence against Mr Lowe
45.
Paymaster no longer asserts that Mr Lowe gave its business plan to GKRS.
The only remaining claim for breach of confidence against Mr Lowe concerns the
pieces of information relating to Paymaster which were contained in the
software which he licensed GKRS to use. In its written case Paymaster asserts
that it was obviously wrong for Mr Lowe to provide a copy of the software “with
all Paymaster’s information there contained”. But the evidence shows that this
information was only (a) Paymaster’s name, (b) the names of three of
Paymaster’s clients and (c) the location of six of its branches. The
information was in the user manual which was delivered along with the software
which Mr Lowe provided GKRS. There is no suggestion that that information about
Paymaster was of any value to Mr Lowe or GKRS. The information in the user
manual was in illustrations of the operation of the system. Mr Lowe had the
copyright of that software. The Board is not persuaded that that information
was confidential or that Mr Lowe exploited it in any way. The claim against Mr
Lowe therefore fails.
The costs appeal
46.
In view of the Board’s decision on GKRS’s breach of confidence appeal it
is not necessary for the Board to consider at this time GKRS’s appeal against
the award of costs which the Court of Appeal made against it. The Board will
deal with that matter when it considers any submissions on costs following the
promulgation of its judgment.
Conclusion
47.
The Board therefore will humbly advise Her Majesty that the appeal by
GKRS in relation to the finding of breach of confidence should be allowed and
that Paymaster’s appeal in respect of both the ownership of copyright in the
software and also the claim for breach of confidence against Mr Lowe should be
dismissed. Parties are invited to make written submissions on the form of order
in relation to costs within 21 days of the handing down of this judgment.
