Wallis v Learonal (UK) Plc

On an application for permission to appeal, the question is whether there is a realistic, rather than fanciful, prospect of success. An appellant faces a difficult struggle where the first-instance decision rests substantially on oral evidence and witness reliability. Permission may nevertheless be granted where the evidence and subsequent correspondence provide a properly arguable basis for an oral agreement. The absence of a subject to contract qualification may support an arguable case on intention to create legal relations. These observations determine permission only and do not decide the contractual merits.

Mr Karl Wallis applied for permission to appeal from an order made on 8 May 2002 by His Honour Judge Kershaw QC in the Mercantile Court at Manchester, dismissing his action against Learonal (UK) Plc. He alleged that, at a meeting on 16 November 1998, an oral contract was made concerning an invention for producing printed circuit boards. The alleged terms included a £50,000 payment, payment of patent expenses, a royalty of 3 per cent of worldwide gross sales and an interim annual payment. The trial judge heard the principal witnesses and concluded that no binding or sufficiently complete agreement had been made, while finding agreement on some matters. The issue before the Court of Appeal was whether the proposed appeal had a realistic prospect of success.

Lord Justice Clarke, sitting alone, granted permission to appeal, albeit with reluctance.

1. Permission threshold. The relevant question was whether Mr Wallis had a realistic prospect of succeeding on appeal. That meant a prospect other than a fanciful one.
2. Assessment of oral evidence. The trial judge’s conclusion depended significantly on his assessment of the reliability of Mr Wallis and Mr Whitlaw, who were the only people present at the alleged meeting. That made any appeal an uphill struggle, because an appellate court is slow to interfere with such findings. It did not, however, make the proposed appeal fanciful.
3. Arguable contractual terms. The evidence gave rise to a sufficient argument that the parties had agreed that Learonal would pay £50,000 forthwith, meet the patent fees and pay 3 per cent of worldwide gross sales in return for the transfer and use of the relevant patent. It was also arguable that later correspondence concerned the implementation of the patent transfer rather than the formation of the agreement. The case concerning the interim payment was weaker, since the amount may not have been agreed at the meeting.
4. Intention to create legal relations. The arrangement was never expressed to be subject to contract. Mr Whitlaw accepted in cross-examination that he had not stated that qualification. This provided an arguable basis for challenging the trial judge’s conclusion that there was no intention to create legal relations.
5. Further steps and costs. An approved copy of the trial judgment was desirable because part of the reasoning was missing from the available copy. A transcript of Mr Robey’s potentially relevant evidence was also desirable. Mr Wallis was warned that, if the appeal failed, he would be liable for the respondent’s costs, and was advised to obtain counsel.

Formal order: permission to appeal granted.

• Court of Appeal (Civil Division): On an application for permission to appeal, granted permission in [2002] EWCA Civ 1267 .
• High Court of Justice, Queen’s Bench Division, Mercantile Court: His Honour Judge Kershaw QC dismissed the claimant’s action by order dated 8 May 2002.