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Case No: CHANF 1999/0622/A3
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION Mr Justice Park
Royal Courts of Justice
Strand, London, WC2A 2LL
Friday 25 February 2000
B e f o r e :
LORD JUSTICE WALLER
and
LORD JUSTICE MUMMERY
- - - - - - - - - - - - - - - - - - - - -
|
ANSYS
INC
|
Claimant/Appellant
|
|
-
and -
|
|
|
LIM
& anr
|
Defendants/
Respondents
|
- - - - - - - - - - - - - - - - - - - -
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
- - - - - - - - - - - - - - - - - - - - -
S Mortimore Esq QC, Mr L Tamlyn (instructed by Edge & Ellison for
the Appellant)
M Rosen Esq QC, Mr A Gourgey (instructed by Nicholson Graham & Jones
for the Respondents)
- - - - - - - - - - - - - - - - - - - - -
Judgment
As Approved by the Court
Crown Copyright ©
LORD JUSTICE WALLER:
Introduction
Ansys Inc (Ansys) were the sole owner of the copyright in certain computer
software (the software). Under what was termed an "international distribution
agreement" dated 1 December 1994 (the 1994 agreement) Ansys authorised
Structures and Computers Limited (SCL) to distribute the software, and agreed
to enter into tri-partite standard licence agreements (the licences) between
themselves, SCL and the customers. The 1994 agreement was terminated as from
31st December 1996.
It is common ground that for the period of the agreement, the licence fees
payable under the licence agreements were payable to SCL in their own right,
and that SCL had no obligation to account for those fees to Ansys. SCL's
obligation was to pay what were termed license payments under clause 2.3 of the
1994 agreement. That obligation was not contingent on SCL receiving payment
from the customer; SCL had an obligation to pay even if no licence fee had been
received from the licensee. In practice the licence payments were some 65% of
the sums received from the licensees. SCL had full discretion (apart from one
circumstance which does not affect the matter) in the fixing of the fee with
the licensee, and the difference retained by SCL remunerated SCL for the work
done in selling the licence, and its advisory and support work.
The question which arises on this appeal, relates to licence fees received by
SCL after termination of the 1994 agreement. Ansys contends that after
termination SCL were not entitled to continue to invoice the licensees of the
licences entered into pre-termination, and in so far as it did so, that SCL
received the fees as trustees for Ansys. On that basis Ansys alleges that Lim
Thuan Khee and his wife Tan Tiat Eng (the respondents) who were officers of SCL
were constructive trustees to the extent they assisted in the misappropriation
of the funds representing those fees.
The respondents allege that the position post-termination was no different from
that during the currency of the main agreement. They submit that any claim
Ansys might have is a claim in debt against SCL, and that in so far as there
may have been any misappropriation, SCL now in liquidation has a claim against
the respondents.
Mr Mortimore QC for Ansys has concentrated on seeking to establish a
proprietary remedy for obvious reasons. But, as will appear, that has led him
to make submissions on the construction of the 1994 agreement contrary to what
one might otherwise have expected. Equally, in order to defeat the proprietary
claim, Mr Rosen QC for the respondents has suggested constructions of the
contract that in other circumstances it is unlikely that SCL would have made.
One thus has to guard against "concessions" on construction from either
side.
Preliminary Issues
Jacob J identified three preliminary issues, resolution of which would be
likely to dispose of the action. Park J tried those three issues, and by a
judgment dated 19th May 1999 ruled, putting the matter broadly, that
the position was no different post-termination than it had been during the
currency of the main agreement. He held that SCL did not hold any fees
post-termination in trust for Ansys, and that thus there could be no question
of the respondents being constructive trustees.
He also ruled that the law of Pennsylvania was the law applicable to the
resolution of the issues. As to that there is no argument that the law of
Pennsylvania is the proper law of the main agreement and the licence
agreements. It is accepted furthermore by both sides that that law's approach
to construction is the same as English law. The issue as to which law applies
only has relevance if the point of construction is decided in favour of Ansys,
and if Ansys were to demonstrate that as a matter of English law SCL held the
post-termination fees on trust. SCL would then wish to argue, that as regards
the creation of any trust, even if English law did reach the result that SCL
held the post-termination fees in trust, under Pennsylvanian law that would not
be the result, and that Pennsylvanian law is the appropriate law by which to
judge that issue.
The judge further ruled on a third issue which would have arisen if he had
taken a different view on the main issue, but it is unnecessary to refer
further to that aspect since he ruled in favour of Ansys and there is no
cross-appeal.
Issue on Appeal
This accordingly is primarily an appeal against the judge's ruling as to the
proper interpretation of the contracts, and his conclusion that the
post-termination fees were not held in trust for SCL. These issues the judge
decided against Ansys in accordance with English law on the basis that
Pennsylvanian law and English law did not differ.
If that view were right it would be unnecessary to explore Pennsylvanian law or
whether Pennsylvanian law was the appropriate law by which to be decide the
"trust issue".
My conclusion is that the judge was right in the views he took as a matter of
English law, (save in a respect which does not alter his conclusion). Thus it
is unnecessary to examine Pennsylvanian law or whether that law is the
appropriate law by which to decide the "trust issue".
Discussion
The judge gave a full and comprehensive judgment with most of which I would
agree. I hope it will not seem discourteous if I thus attempt to deal with the
matter more shortly.
I can start by saying that although it may be that the respondents have behaved
reprehensibly in failing to comply with certain court orders, and although the
sums involved are high, in agreement with the judge, I do not think that such
conduct of the parties, nor the history of litigation nor any of the various
court orders, helps in deciding what to my mind is the first and critical point
- a point of construction of the 1994 agreement. It is common ground:
1. that the 1994 agreement was lawfully terminated on 31st December
1996;
2. that although Ansys contended by letter addressed to SCL dated
3rd January 1997 that SCL were not entitled to invoice licensees
from January 1997 onwards, SCL did continue to invoice for licence fees, and
licence fees continued to be paid to SCL by licensees after 31st
December 1996;
3. that by letters dated between 5th and 7th February
1997 (the example with our papers at tab 12 is dated 6 February 1997) Ansys
gave notice to all licensees that all existing licences should be administered
by Ansys Europe, and that all payments under those licences should be made to
Ansys Europe;
4. that court proceedings were instituted by both SCL and Ansys, which resulted
in orders that SCL should continue to collect fees and pay the sums into
accounts pending the determination of the actions between Ansys and SCL;
5. that sums were collected by SCL but although some moneys were paid into the
accounts, in breach of the court orders several hundred thousand pounds were
not , and those are the sums that Ansys wish to claim from the respondents;
6. that SCL went into administration, and the actions between Ansys and SCL
were settled on 3rd December 1997 on the basis of payments of the
monies that were in the accounts to Ansys, and on the basis that Ansys Europe
would be entitled to collect the fees to the extent that they remained
outstanding; and
7. that there was thus no novation of the licence agreements removing SCL as
a party, and replacing SCL with any other party.
Mr Mortimore also commenced his submissions conceding thus that even after
termination of the 1994 agreement, SCL were the only party who could give a
valid discharge to the licensees. That submission was modified at one stage to
draw a possible distinction between fees paid to SCL before the licensees had
the letters of 5th to 7th February. Mr Mortimore
suggested that those letters were a notice of an assignment which, at this
stage of the argument, Mr Mortimore was seeking to argue had taken place. I
will come back to that in a moment.
It seems that SCL continued to give support to the licensees post-termination.
Ansys submits that if that support was given it was not given pursuant to any
obligation continuing to exist under the licence agreement at least from the
moment when licensees received the letters dated between 5th and
7th February from Ansys. Ansys submit that SCL were continuing to
give support because they were contending that the main agreement had not been
terminated. Who is right would depend on the proper construction of the
licence agreements, unassisted by the conduct of the parties. I doubt whether
resolution of this issue helps to determine the key issue i.e. whether Ansys
can establish a proprietary claim to the fees collected post-termination.
Construction
As the judge pointed out the case is concerned not just with the main
agreement, but also with the trilateral licence arrangements between Ansys, SCL
and the licensees. There were furthermore two different types of licence
agreement the "Paid-up program" under which a lump sum was paid at the outset
for use of the software indefinitely, but in addition periodic payments were
made for maintenance and support; and the "Lease program" under which licence
fees were paid over the period of the licence which was capable of lasting
indefinitely. In return for those fees the licensee was entitled to use the
software, and to receive without further payment maintenance and support.
The judge identified ten essential features of how the main agreement and the
licence agreements operated which were not in issue before us in the following
terms:-
"(1) SCL was responsible for identifying licensees and persuading them to
enter into licence agreements, either under the Lease program or under the
Paid-up Program.
(2) Although there were a few constraints prescribed by ANSYS on the level of
licence fees, the basic position was that SCL negotiated and fixed the licence
fees (and, in the case of Paid-up Programs, the fees for maintenance and
support).
(3) When a licensee agreed terms a tri-partite licence agreement was entered
into between ANSYS, the Licensee and SCL.
(4) Under the tri-partite licence agreement the software licence was granted
to the licensee directly by ANSYS. SCL did not enter into the chain of title
to the software.
(5) The licence fees, under either the Lease Program or the Paid -up Program,
and the fees for maintenance and support under the Paid-up Program, were
payable by the licensee to SCL. It is entirely clear, and is accepted by
ANSYS, that while the 1994 distribution agreement was in force, SCL received
all those fees as its own property. It did not receive them as any form of
agent or trustee for ANSYS.
(6) For each licence which was entered into SCL was liable to pay "licence
payments" to ANSYS. These licence payments have to be distinguished from the
"licence fees". The licence fees were payable by the licensees to SCL, as
described in (5) above, and when paid they were SCL's money. The licence
payments were payable by SCL to ANSYS. Further, SCL's obligation to make a
licence payment was not conditional on SCL receiving the associated licence fee
from the licensee. If the licensee failed to pay the licence fee to SCL, SCL
still had to pay the licence payment to ANSYS.
(7) An exhibit to the 1994 Agreement set-out the levels of and due dates for
licence payments. The details do not matter. The broad effect was that in
most cases the licence payments were 65 per cent of the licence fees. I
repeat, however, that, if the licence fee was 100 but the licensee failed to
pay it to SCL, SCL still had to pay the licence payment of 65 to ANSYS.
(8) SCL undertook, both to ANSYS and to the licensees, that it (SCL) would
provide maintenance and support to the licensees. To enable it to do so it was
entitled to receive various technical documents from ANSYS, and also to be
provided by ANSYS with a second line support service.
(9) SCL was required to bear all its own expenses.
(10) Both the 1994 agreement and the licence agreements were governed by the
laws of Pennsylvania. The 1994 agreement also provided that neither ANSYS nor
SCL was to make any claims against the other except under the laws of
Pennsylvania."
As the judge rightly identified it is of course the termination provisions of
the 1994 agreement and the licence agreement, which are critical. He
emphasised, as must be right, that one important feature of the licence
agreements is that there is no term in those agreements which either
automatically brings them to an end on termination of the 1994 agreement nor
which automatically brings about a novation which would take SCL out of the
tri-partite agreement and replace with either Ansys or some distributor other
than SCL.
By Clause 11(i) of the licences it is provided that "This agreement may be
modified only by a written amendment executed by duly authorised officers or
representatives of Ansys and Licensee, and Distributor if such modification
effects the obligations of Distributor under this agreement." Mr Mortimore
contended that that provision provided for Ansys and the licensee to agree a
modification, which would allow a different distributor to be named as the
person to receive payment of fees. He suggested furthermore that, so far as
the obligations of SCL were concerned, Ansys had the right under Clause 4(b) to
alter those obligations. Clause 4(b), amongst other things, provided "Support
will be provided by Distributor until notice from Ansys to Licensee". Mr
Mortimore submitted that that provision entitled Ansys to send a notice
informing the licensees that support would now be provided by someone other
than SCL so as to alter the right the licensee had as against SCL, and the
obligation of SCL to the licensee. Indeed it is submitted that the letters of
5th to 7th February as summarised above had that
result.
I do not myself feel that these arguments on the construction of the licence
take Mr Mortimore very far on his quest for a proprietary remedy, even if they
were right. Firstly it is difficult to think that it was the letters of
5th to 7th February, even if they altered the obligation
as to support, which could make the difference between Ansys having a
proprietary claim and not having one; indeed Mr Mortimore's submission did not
seek to make that distinction. The alteration of the support obligation would
not alter the nature of the obligation of a licensee to pay fees to SCL.
Secondly, there was in fact no agreed modification of the licence agreements
during the relevant period post termination, while the fees were being
collected by SCL. Thus whatever Clause 11(i) means, it was not utilised.
Thus, under the licence agreement the licensees were still, post termination of
the main agreement, bound to pay fees to SCL, and SCL (unless there was an
assignment of which they had notice) was the only entity which could give a
valid discharge to the licensee.
The money, which came from the licensees to SCL, was thus simply the discharge
of a debt as between SCL and the licensee, as it was prior to termination. It
is not in any sense the money of Ansys at the time of payment, and would not be
so unless either by agreement or conduct as between Ansys and SCL it
must be held to be so after it has been received by SCL.
Pre-termination it is clear that as between Ansys and SCL money received from
licensees was not to be in any sense "held for Ansys". By Clause 2.3 SCL did
not have an obligation to "account" for fees received. It had an obligation to
pay licence payments as computed by exhibit B, and SCL'S "obligation to pay
license payments to Ansys is not conditioned on [SCL] receiving payment from
the customer."
It is I think important to recognise
(1) that the 1994 agreement did attempt to deal with the situation
post-termination (see for example clauses 10.5, 10.6 and 19.7 which expressly
provided for survival of certain clauses post-termination); and
(2) that it is not suggested that some contractual arrangement was reached
either expressly or by conduct distinct from the 1994 agreement. It seems to
me therefore that if SCL is to hold the fees paid post-termination in any
different character to those held pre-termination, it must be in truth only by
virtue of that being the proper construction of the provisions of the 1994
agreement. One of Mr Mortimore's arguments is that because by the terms of the
1994 agreement there is no provision expressly dealing with the collection of
fees post-termination, the issue must be decided outside the contract albeit in
the context of the contract. That might be a possible line of argument if the
1994 agreement prevented SCL collecting the fees under the licences, and
transferred or assigned the rights to Ansys. But if, as I understood was Mr
Mortimore's main argument, it is accepted that SCL has the right to collect
fees, and to give a valid discharge for them, I find it difficult to
contemplate that that does not take place pursuant to the termination
arrangements under the 1994 agreement. If that is so the capacity of SCL to
hold those monies must also be analysed by reference to that agreement.
It is thus the terms of the main agreement, on which, in my view, in agreement
with the judge, resolution of the issue between the parties turns. Does it
prevent SCL collecting the fees as a debt due to it? Does it provide for an
assignment of the fees by SCL to Ansys? Does it provide that SCL must hold
those fees for Ansys?
Mr Mortimore by the conclusion of his submissions was, I think, putting the
matter in alternative ways. On either way of putting his argument he focused on
the following aspects of the main agreement.
1. by clause 19.7, clause 2.3 is not one of the terms expressed to survive
termination. Thus he submitted there is no obligation on SCL post-termination
to pay licence payments to Ansys;
2. clause 10.5(a) cannot be construed so as to re-insert clause 2.3 in so far
as post-termination fees are concerned, as the judge sought to do.
Thus, he submitted, the agreement does not provide any basis on which SCL is
bound to pass on any part of the fees they collect. [This is an example of a
rather surprising submission, which makes a concession so far as Ansys is
concerned which it seems to me that in different circumstances and without the
intervention of liquidation it might not make].
His submission then is that it would be absurd to contemplate that SCL should
be entitled to receive the licence fees but have no obligation to make payments
of any sort to Ansys and in that context he referred to clause 10.6 which
provides as follows:-
"In the event of termination or expiration of this Agreement for any reason,
ANSYS and [SCL] will work co-operatively together and with any new distributor
appointed for the Territory to transfer purchase orders, licence agreements,
and any Support obligations and to resolve any other issues which may arise
from the termination or expiration of this Agreement. If [SCL] has not
materially breached any provisions of this Agreement and has paid all amounts
owed to ANSYS, ANSYS and [SCL] will negotiate in good faith to determine an
equitable payment to [SCL]. Such payment will be equal to a portion of the
lease and maintenance fees collected during the twelve (12) month period
immediately following the Termination Date for licenses entered into by [SCL]
and ANSYS on or before the Termination Date. [SCL] shall make no claims for
compensation under this section or any other provision of this Agreement or
under any law in the event ANSYS has terminated this Agreement for good
cause."
Mr Mortimore's submission based on clause 10.6 is then either that by the first
sentence there is an assignment of all fees by SCL to Ansys, in which event SCL
holds the fees in trust for Ansys if it collects them; or even if there is no
assignment, in the context of clause 10.6 pending conclusion of the transfer of
the licence agreements, SCL is not entitled to collect the fees for itself and
the circumstances in which SCL invoiced for and received fees makes it
unconscionable for SCL to retain any part of those fees. Equity, he submitted,
would impose a constructive trust on SCL, and hold that SCL holds the whole of
the fees in trust for Ansys. He referred us to two authorities which he
suggested supported this submission Neste Oy v Lloyds Bank Plc [1983] 2
LLR 658 and re Japanese Leasing (Europe) plc (unreported, Mr N Warren QC
sitting as a Deputy Judge of the High Court 30 July 1999).
He further submitted that it was important to recognise that the equitable
payment contemplated compensates SCL for the twelve month period as if SCL had
not received any fees during that period. That indicates that it was
contemplated that SCL would not be collecting the fees post termination for
themselves. He suggests that any result other than one or other of the results
contended for by him, would lead to the absurdity that SCL would be entitled to
refuse to negotiate in accordance with clause 10.6 so as to give itself the
right in perpetuity to 35% of the licence fees collected from the licensees.
Mr Rosen submitted that the first sentence of clause 10.6 simply is not
consistent with an assignment. It envisages co-operation in bringing about a
state of affairs. He suggested that in any event the point had never been
pleaded or argued on this basis previously. He further submitted that until
there was a novation the licence agreements continued to exist and there was
nothing in the 1994 agreement that prevented SCL carrying on with its rights
and obligations under the licence agreements. He further submitted that the
judge was correct in concluding that SCL would be bound to make licence
payments as previously under Clause 2.3 by virtue of the language of Clause
10.5 (a).
He submitted that the equitable payment provision was probably unenforceable in
law, but even if it was he suggested it was workable on the following lines.
If co-operation produced a handover of licences to a new distributor, the
equitable payment would simply take into account what SCL had received in the
meanwhile and what it was not going to receive up to the end of twelve months.
If co operation produced no result prior to the end of twelve months, then SCL
received the fees and paid licence payments. He accepted that SCL in such a
situation might be liable in damages if it was deliberately dragging its feet
in refusing to co-operate in transfer. He further suggested that even if SCL
did not receive the fees after termination, Ansys would have the right to look
to SCL under clause 2.3 for licence payments until co-operation had achieved
the transfer of the licences to a new distributor.[This is an example of a
concession being made by Mr Rosen which in different circumstances one can
envisage SCL would not make having regard to the fact that clause 2.3 did not
survive termination.]
Clause 10.6 is not a happily drafted provision. But ANSYS cannot rewrite the
clause or ask the court to do that for it. One can see that it might have been
possible to provide in the 1994 agreement, (with of course corresponding
provisions where necessary in the licence agreements), that on termination of
the 1994 agreement:-
1. all licence agreements would be transferred to a new distributor;
2. between termination and the finding of the new distributor all fees would be
collected for the benefit of Ansys and the new distributor, and all obligations
of SCL under the licence agreements would be carried out by Ansys;
3. a payment would be made to SCL of a specific proportion of the fees
collected over the 12 months from termination or as fixed by some independent
third party.
However the parties to the 1994 agreement did not so provide, and apparently
wanted something more flexible. Clause 10.6 thus contemplates a negotiation,
and co-operation. That simply is not the language of assignment nor is it the
language of placing an embargo on SCL from collecting fees pending the
conclusion of the co-operation. The equitable payment is simply something to
be negotiated in good faith, and the guidance to its quantum does not specify
by whom the fees will have been collected. The words do not exclude the
collection by SCL, and do not provide that if collected they will be held for
Ansys.
I accept that at first sight the equitable payment appears to contemplate that
a new distributor will be appointed as from the date of termination, and that
with co-operation the license will have been transferred as from that date, so
that the equitable payment is then assessed by reference to what the new
distributor receives during the first twelve months after termination. But if
that does not happen, what then?
In that situation the licences continue and SCL would be the entity entitled to
be paid and to collect the fees and the licensee, if he pays SCL, is doing so
under the licence agreement which he still has with SCL.
What, if any, obligation does SCL owe to Ansys in relation to fees under the
1994 agreement post-termination?
Mr Rosen accepts that SCL must owe some obligation and cannot simply take all
the fees for itself and that must be a correct starting point.
I have to say that I am not persuaded that the route suggested by Mr Rosen, and
adopted by the judge, is correct. The judge held that clause 2.3 was in effect
kept alive by clause 10 .5(a). I find that notion difficult basically for two
reasons. Firstly the wording of clause 10.5(a) "All sums owed by the (SCL) to
ANSYS will be due and payable under the payment terms as specified herein" do
not seem to me apposite to keep alive clause 2.3. Secondly, under clause 2.3
SCL has an obligation to pay licence payments whether or not it receives
fees from the licensees. Mr Rosen, in the interests of his clients, was
prepared to suggest that SCL would be so obliged, but in my view SCL would have
a strong argument for saying that that obligation did not continue once clause
2.3 did not survive termination, as it is clear that it does not by virtue of
clause 19.7.
I however find it equally difficult to contemplate that as between SCL and
Ansys the debtor creditor relationship changes into a relationship of a trust
without some express language to that effect.
I believe the correct route for imposing on SCL an obligation to pay ANSYS is
either via an implied term or via a restitutionary remedy which may come very
much to the same thing as implying a term. If that is the correct approach,
certainly it could not be said that it was necessary to imply a term that the
whole sum should be held for Ansys nor would a remedy to prevent unjust
enrichment contemplate requiring a payment of all the fees, because such an
obligation would seem prima facie unfair on SCL who on this basis will on any
view have incurred the administration expenses of collecting the fees, and
would further be likely to be providing support to licensees at least for a
period. That seems to me to give further support to the conclusion that the
relationship is not one of trust under which SCL are holding monies of Ansys.
It seems to me that the term to be implied would be to the effect that on
receipt of fees SCL would be obliged to pay 65% to Ansys or such reasonable sum
as the circumstances prevailing at the time of receipt required. A
restitutionary remedy to prevent SCL being unjustly enriched would provide an
obligation of a similar nature. The key point is that the relationship between
SCL and Ansys would remain that of debtor/creditor as it was prior to
termination. The relationship would not be that imposed by a constructive
trust.
Conclusion
I would dismiss the appeal.
LORD JUSTICE MUMMERY
I agree.
The question is : did SCL hold upon trust for Ansys the licence fees collected
by them after 31 December 1996 from licensees under the continuing "Leased
Program" licences marketed and supported by them during the currency of the
1994 Distribution Agreement (the Agreement). If there was a trust, then it may
be possible for Ansys to succeed in their claim against Dr Lim and Mrs Lim for
assisting in a breach of that trust by SCL. If, however, there was no trust,
the claim against Dr Lim and Mrs Lim, as dishonest accessories in a breach of
that trust by SCL, must fail.
The legal relationship between Ansys and SCL was contractual. It was governed
both by the Agreement and by the standard form tripartite software licences
sold by SCL to licensees pursuant to it. The licences contain express terms
for the payment of licence (or "lease") fees by the licensee. The Agreement
contains detailed express terms governing the payments to be made by SCL to
Ansys during the currency of the Agreement. It also contains express
provisions spelling out the obligations of the parties after the termination of
the Agreement.
The question whether any licence fees collected by SCL are subject to a trust
for the benefit of Ansys depends on the construction of the express and implied
terms of the Agreement and the licences under which the licence fees were
payable for the use of the Ansys computer software. The language of the
relevant parts of the contractual documents must, of course, be read in the
context of the object of the transactions and the surrounding circumstances in
which they were made.
Adopting that approach I would reject the trust analysis for the following
reasons:-
1. It is common ground that before 31 December 1996 there was no trust of
licence fees collected by SCL from the licensees. The licensees were under an
obligation to pay the licence fees fixed by SCL to SCL. SCL were not under an
obligation to transmit the fees collected by them to Ansys or to keep them
separate from their own assets. Their obligation was to make "licence
payments", as defined in the Agreement, to Ansys. That obligation was not
conditional on SCL receiving licence fees from the licensees.
2. It is also common ground that the termination of the Agreement did not
affect the contractual obligation of the licensees under the terms of the
licences to continue to pay the fees to SCL. SCL could still give a good
discharge to them for those fees. The payment provisions in the licences
could have been modified by agreement to provide that the fees were to
be paid by the licensees to Ansys after the termination of the Agreement. But
they were not modified. They continued in force unaffected by the termination
of the Agreement.
3. Clause 10 of the Agreement contains the principal provisions spelling out
the contractual consequences of the termination of that Agreement. SCL were
obliged to discontinue immediately the marketing of the computer software and
to return to Ansys property belonging to them. As for the existing licence
agreements, all that is said in clause 10.6 is that Ansys and SCL "will work
co-operatively together and with any new distributor appointed" to transfer
them. This loose aspirational language is not apt to create an assignment,
either in law or in equity, to Ansys or to anyone else of the benefit of the
existing licences or of the right to payment of licence fees collected under
them. There is nothing in clause 10.6 divesting SCL of their contractual
entitlement to continue to collect those fees or to change the character of
those fees once collected by SCL into trust monies. The reference in the
latter part of the clause to the negotiation in good faith between the parties
in the specified circumstances for an "equitable payment" to SCL equal to a
portion of the fees collected during the 12 months following termination does
not alter this position. The clause does not identify expressly who is to
collect the fees. It does not follow that from the fact that an equitable
payment may be negotiated in favour of SCL, calculated as a portion of the fees
collected, that (a) the licence fees paid or to be paid by the licensees to SCL
were transmuted on the stroke of midnight on New Year's Eve 1996 into the
beneficial property of Ansys; or (b) that SCL were not entitled to continue to
collect the fees; or (c) that, if they continued to collect, them they did so
in a new, but unstated, capacity of trustee or agent for Ansys.
4. The absence of a trust of the licence fees in favour of Ansys does not
mean that SCL ceased on 31 December 1996 to be under any obligation to make any
payments to Ansys. Although Clause 2.3 applied only during the term of the
Agreement and was not preserved in the event of termination by clause 19.7, Mr
Rosen accepted, indeed asserted, that SCL were liable to make payment. He
identified the obligation in Clause 10.5(a). The judge accepted that argument.
In my view it is more likely that the obligation to make payment arises from
either (a) an implied term that continued collection of the licence fees by SCL
from the licensees carried with it a continuing obligation to make the licence
payments stipulated in the Agreement or, at the very least, a reasonable
payment or (b) unjust enrichment. It is unnecessary to decide this point in
order to dispose of the trust argument. Mr Mortimore QC was clear in his
contentions that nothing short of a trust of the licence fees would be of any
value or interest to Ansys in the circumstances of this case. A claim in debt,
damages or restitution against SCL would not enable Ansys to make a direct
claim against Dr and Mrs Lim of the kind pleaded in this action.
Order: Appeal dismissed with Respondents costs, to be assessed at
standard rate. Leave to appeal refused.
(Order does not form part of the approved judgment).
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