Wright Hassall LLP v Horton Jr & Anor

On an application under CPR 3.4 or CPR 24, the court must distinguish between defects in the pleading and the evidential question whether the pleaded case has a real prospect of success. A return of allotments records a corporate act; it does not itself allot shares. Breach of articles requiring pre-emption before an allotment does not invalidate the allotment where the statutory provision preserves its validity. An assignment of patent rights in signed writing is effective without consideration. A fiduciary breach does not automatically forfeit remuneration. Forfeiture depends on the nature and seriousness of the breach, including whether it involves dishonesty, bad faith, or conduct going to the whole contract.

Wright Hassall LLP v Horton Jr & Anor was a solicitor-and-client fee claim. The defendants sought to set off a substantial negligence counterclaim concerning advice about company shares, intellectual property rights and an alleged conflict of interest. The claimant applied to strike out the defence and counterclaim under CPR 3.4 or, alternatively, for summary judgment under CPR 24.

The central issues were the legal effect of Companies House returns, statutory pre-emption rights, assignments of patent rights, and the consequences of an alleged fiduciary breach.

1. Application and standard. The application was determined under CPR 24, with the pleaded facts taken as pleaded or accepted unless the prospect of proving them was fanciful. A real prospect is realistic, not fanciful, as explained in Swain v Hillman [2001] 1 All ER 91.
2. Form 88(2) claim. Filing a return of allotments merely notifies the Registrar that a corporate act has occurred. It does not itself allot shares. The purported allotment to the Investors was not void merely because the articles’ pre-emption provision had not been followed: Companies Act 1985, s 80(10), preserved its validity. The defendants could at most have asserted a 50% interest and could not credibly have seized control of Sigma. Summary judgment was granted on this head.
3. Intellectual property claim. Mr Horton, as inventor, initially owned the invention under Patents Act 1977, s 7(3). The employer provisions in s 39 could not vest ownership in Adeptias. Section 36 could affect co-ownership of an application, but did not prevent Mr Horton transferring his own invention rights. Section 30 required signed writing, not consideration, for a valid legal assignment. Re Casey’s Patents [1892] 1 Ch 104 concerned equitable assignment and did not establish a consideration requirement. The counterclaim had no real prospect of success.
4. Conflict of interest. Even assuming an arguable breach of fiduciary loyalty, remuneration is not automatically forfeited. The authorities, including Keppel v Wheeler [1927] 1KB 577, distinguish serious dishonesty or bad faith from breaches which do not go to the whole contract. The alleged conduct caused no loss and was at most trivial and harmlessly collateral. Summary judgment was granted on the conflict claim. The parties were invited to agree the resulting order.