- Bookmark
- Share
- CaseIQ
Lish v The Northern Block Ltd & Anor
Factual and Procedural Background
The Appellant is a designer of typefaces who worked with Company A between 2012 and 2022 under a Distribution Agreement dated 20 September 2012 (the "2012 Agreement") under which the Appellant was described as "the Licensor" and was to receive 60% of sales by way of royalties. The parties dispute whether the Appellant was an employee of Company A. The parties agree there was an informal variation in about March 2015 (the "2015 Variation") but disagree as to its terms: the Appellant says she moved to a fixed monthly payment with a year-end true-up; the Defendants say she forewent royalties in exchange for an increased salary plus a small annual bonus. Two contemporaneous emails from the Defendant recorded a salary-based arrangement and that any excess royalties would be paid as a year-end bonus.
The Appellant gave notice terminating the 2012 Agreement in May 2022, effective 20 September 2022. After termination Company A continued to exploit typefaces, leading to dispute over copyright ownership and alleged unpaid royalties. On 1 November 2022 the Appellant commenced proceedings in the County Court (the "Newcastle Claim"), principally for copyright infringement and related remedies; there was no claim for unpaid royalties prior to termination in the pleaded claim. The Defendants' Defence to the Newcastle Claim reproduced the Defendant's 2015 emails and pleaded that the Appellant had accepted the new salary arrangement.
In May 2023 the Appellant served a Part 36 offer to settle the Newcastle Claim acknowledging ownership of certain intellectual property and proposing other settlement terms. On 12 May 2023 the Defendants served a draft Amended Defence and Counterclaim which included an allegation that Company A had ceased paying royalties after December 2015; the Appellant says she first appreciated the unpaid royalties issue when that draft pleading was served and sought disclosure of accounts. The Defendants refused, and on 13 June 2023 the Defendants accepted the Part 36 offer, settling the Newcastle Claim. The Appellant estimates unpaid royalties at about £300,000; the Defendants estimate no more than £50,000.
On 22 March 2024 the Appellant commenced the present proceedings advancing three claims: (i) unpaid royalties under the 2012 Agreement ("the Unpaid Royalties Claim"); (ii) copyright infringement in eight typeface designs not in issue in the Newcastle Claim ("the Infringements Claim"); and (iii) an alleged failure to comply with the settlement agreement ("the Neusa Next Claim"). The Defendants applied to strike out the Unpaid Royalties Claim and the Infringements Claim as an abuse of process; a Deputy High Court Judge struck both claims out as abusive but rejected that the Unpaid Royalties Claim had been compromised by the settlement agreement. The Appellant appealed the striking-out of the Unpaid Royalties Claim and the Infringements Claim; the Court of Appeal allowed the appeal in respect of the Unpaid Royalties Claim and dismissed it in respect of the Infringements Claim.
Legal Issues Presented
- Whether the Unpaid Royalties Claim is an abuse of process in light of the settlement of the earlier Newcastle Claim.
- Whether the Infringements Claim is an abuse of process because it could and should have been raised in the Newcastle Claim and its pursuit undermines the finality of the settlement.
- Whether the Deputy High Court Judge erred in principle or fact in concluding the two claims were abusive, including alleged errors relating to notice, diligence and prejudice to the Defendants.
Arguments of the Parties
Appellant's Arguments
- The Unpaid Royalties Claim was not pleaded in the Newcastle Claim and was therefore not compromised by acceptance of the Part 36 offer; it is a distinct contractual claim with different issues and remedies.
- The Part 36 offer settled the claims then pleaded; it did not and could not have been taken to settle an unpleaded claim that crystallised only after service of the Defendants' proposed amended pleading.
- The Appellant took reasonable steps to investigate once she was put on notice and was stonewalled by the Defendants' refusal to provide information; she did not have prior knowledge sufficient to render bringing the new claim abusive.
Respondents' Arguments
- The Unpaid Royalties Claim and the Infringements Claim could and should have been raised in the earlier proceedings; bringing them now is an abuse of process under Henderson v Henderson and related authorities.
- The Defendants contended the settlement of the Newcastle Claim produced admissions or concessions (notably as to copyright ownership) which prejudiced their position and negotiating stance in relation to further claims arising from the same arrangement.
- The Defendants argued the Appellant had notice or ought to have been on inquiry about unpaid royalties earlier and failed to use reasonable diligence.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Henderson v Henderson | Seed authority for abuse of process principle that later actions may be struck out as an abuse where they attempt to re-litigate matters that should have been raised earlier. | The court treated this as the foundational form of abuse of process invoked by the Defendants and applied the established approach derived from the authority. |
| MW High Tech Projects UK Ltd v Outotec (USA) Inc [2024] EWCA Civ 844, [2024] 4 WLR 85 | Comprehensive recent review and summary of abuse of process principles to be applied. | The Court relied on the summary of principles in MW High Tech as agreed guidance for applying the Henderson/Johnson line of authorities. |
| Johnson v Gore Wood & Co [2000] UKHL 65, [2002] 2 AC 1 | Leading authority: later claims may be an abuse if they should have been raised earlier; courts must apply a broad merits-based judgment and abuse is rare unless the later claim amounts to unjust harassment. | The Court treated Johnson as the leading statement of the law and applied its merits-based balancing approach to decide whether the new claims constituted abuse. |
| Dexter v Vlieland-Boddy [2003] EWCA Civ 14 | Summarises practical points including burden of proof, comparative likelihood of abuse against same or different defendants, and that not every matter capable of being raised earlier should have been. | The Court applied the Dexter summary (i–vi) as part of the framework for assessing abuse and for evaluating the reasonableness of pursuing later claims. |
| Aldi Stores Ltd v WDP Group plc [2007] 1 WLR 1260 | Approval of the Dexter summary and support for finality in litigation in abuse cases. | The Court cited Aldi as approving Dexter and for the general emphasis on finality and judicial restraint in interference on appeal. |
| Orji v Nagra [2023] EWCA Civ 1289 | Settlement is equivalent to final resolution and it can be abusive to seek to circumvent a settlement by bringing fresh claims; abuse can arise even where earlier proceedings were settled rather than litigated to judgment. | The Court treated Orji as supporting the proposition that settlement can give rise to abuse if later claims seek to reopen what was resolved by settlement, and applied this principle when analysing the Infringements Claim. |
| Stuart v Goldberg Linde [2008] EWCA Civ 2 | On the relevance of a claimant's failure to use reasonable diligence; lack of a general duty to investigate before bringing proceedings but diligence may be relevant in context and the onus remains on the defendant to prove abuse. | The Court referred to Stuart when considering whether the Appellant had failed to use reasonable diligence in ascertaining the unpaid royalties and whether that could justify striking out. |
| Aldi v WPP | Statement on appellate review: there can be one correct answer on abuse, but appellate courts should be reluctant to interfere unless the judge erred in principle, omitted material factors, or reached an impermissible conclusion. | The Court used this test when considering whether to interfere with the Deputy Judge's findings on abuse of process. |
Court's Reasoning and Analysis
The Court of Appeal reviewed the Deputy Judge's reasoning and the applicable abuse-of-process framework derived from the authorities above. The Deputy Judge had accepted that the Unpaid Royalties Claim had not been pleaded in the Newcastle Claim and therefore had not been compromised by the settlement; nonetheless he concluded the Unpaid Royalties Claim was abusive on two alternative bases: (a) that the Appellant ought reasonably to have been on notice of the underpayment earlier (findings at [79]-[80]) and (b) that by settling the Newcastle Claim without preserving the unpaid royalties claim the Appellant had effectively prejudiced the Defendants because they had made admissions in settlement that handicapped their position (findings at [81]-[82]).
The Court of Appeal analysed four asserted errors in the Deputy Judge's reasoning in relation to the Unpaid Royalties Claim and found material errors in the judge's analysis at [81]-[82]. The appellate court concluded (inter alia) that the Unpaid Royalties Claim is a distinct contractual cause of action concerning a different time period and different remedies from the Newcastle Claim; that the Defendants had been aware of the issue (from pre‑settlement correspondence) and made no factual admissions in settlement that were material to the contractual issues; and that it was not reasonably open to hold that the Appellant should have withdrawn the Part 36 offer or otherwise repleaded prior to settlement. The Court further found that the Deputy Judge's alternative factual findings at [79]-[80] (that the Appellant ought to have been on notice and failed to take steps) were not properly open to him on the evidence and that some of those findings relied on hindsight or on matters that did not necessarily amount to putative notice.
Applying the Johnson/Dexter framework and the appellate standard of review, the Court held that striking out the Unpaid Royalties Claim would be unjust and amounted to a denial of justice; there was no sufficient showing of unjust harassment or oppression to justify striking out that distinct contractual claim.
As to the Infringements Claim, the Court of Appeal concluded that the Deputy Judge's reasoning was sustainable. The Appellant admitted awareness of the additional infringement claims prior to settlement and deliberately did not include them in the Newcastle Claim for pragmatic reasons, did not alert the Defendants to their preservation before settlement, and by accepting the Part 36 terms the Defendants had reasonable grounds to suppose they were settling all copyright claims. Pursuing the additional infringement claims post‑settlement therefore undermined the finality of the settlement and amounted to unjust harassment of the Defendants; the strike-out of the Infringements Claim was upheld.
Holding and Implications
CORE RULING: The Court of Appeal allowed the appeal in respect of the Unpaid Royalties Claim and dismissed the appeal in respect of the Infringements Claim.
Implications:
- Direct effect: The Unpaid Royalties Claim is reinstated and may proceed; the Infringements Claim is struck out as an abuse of process and remains dismissed.
- The decision applies established abuse‑of‑process principles rather than creating new precedent; it emphasises the need to distinguish distinct contractual claims that were not pleaded or compromised by prior settlement from claims that were known and deliberately not reserved before settlement.
Alert