Ansys Inc v Lim & Anor

Termination of a distribution agreement does not, without more, convert fees collected under continuing customer licences from contractual receipts into trust property. The court must construe the distribution agreement and the licences together. Where the customer remains obliged to pay the distributor, and the distributor remains able to give a valid discharge, receipt of the fees is ordinarily payment of the distributor’s debt rather than receipt of the software owner’s money.

Co-operation and negotiation provisions concerning transfer of existing licences and an equitable payment do not themselves amount to an assignment or impose a trust. An obligation to account after termination may arise through an implied contractual term or restitution for unjust enrichment, while preserving a debtor-creditor relationship. Such an obligation does not, without express language, create a constructive trust.

Ansys Inc owned copyright in computer software and appointed Structures and Computers Limited (SCL) as distributor under an international distribution agreement dated 1 December 1994. SCL entered into tripartite licences with customers, collected licence fees as its own money, and paid defined licence payments to Ansys.

The distribution agreement was terminated on 31 December 1996. The customer licences continued, SCL continued collecting fees, and no novation or agreed modification transferred the payment rights to Ansys. After SCL entered administration, Ansys brought claims against its officers, alleging that post-termination fees were held on trust and that they were constructive trustees for assisting a breach of trust.

Park J held that the post-termination position was no different from the position during the agreement and that no trust arose. The central issue on appeal was whether the contracts created a proprietary trust claim rather than merely a debt, damages or restitutionary claim.

1. Appeal dismissed. Waller LJ delivered the principal judgment, with Mummery LJ agreeing. The respondents were awarded their costs at the standard rate, and leave to appeal was refused.
2. The customer licences did not automatically terminate when the distribution agreement ended. Nor did termination automatically novate the licences or remove SCL as a contracting party. The licensees therefore remained obliged to pay SCL, which remained able to give a valid discharge.
3. Before termination, the fees paid to SCL were its own property. SCL’s obligation was to pay licence payments to Ansys, and that obligation was not conditional on SCL receiving the corresponding customer fees. The parties’ relationship was therefore debtor and creditor, not trustee and beneficiary.
4. Clause 10.6 contemplated co-operation and negotiation concerning the transfer of licences and an equitable payment to SCL. Its language was not that of an assignment, an embargo on SCL collecting fees, or a declaration that collected fees were held for Ansys. The court could not rewrite the provision to produce those consequences.
5. Clause 2.3 was not preserved by clause 19.7, and clause 10.5(a) was not an apt mechanism for keeping it alive. Nevertheless, continued collection of fees could give rise to an implied obligation to pay Ansys 65 per cent, or another reasonable sum, or to restitution for unjust enrichment. That possible obligation remained personal and did not create a trust over the fees.
6. Mummery LJ agreed that it was unnecessary to decide the precise source or amount of any continuing payment obligation. The absence of a trust defeated the pleaded claim against the respondents for dishonest assistance in a breach of trust.

1. Court of Appeal (Civil Division) — Appeal from the decision of Park J dismissed. No neutral citation for the High Court decision is stated.
2. High Court of Justice, Chancery Division — Park J, by judgment dated 19 May 1999, held that post-termination fees were not held on trust for Ansys and that the constructive-trust claim could not proceed.