Chadwick & Ors v Lypiatt Studio Ltd & Anor

Where a sole-trader business is transferred to a company, the transfer may include the tangible property and beneficial copyright interests used in that business, even without formal delivery or a written copyright assignment, if the parties’ intention and subsequent conduct establish an agreement to assign.

A company director may also be an employee. The question is determined by evaluating the relationship as a whole, including control, integration into the business, equipment, financial risk, tax and national insurance arrangements, and the parties’ understanding. Copyright in artistic works made by an employee in the course of employment belongs initially to the employer under the applicable statutory provision.

The Company sought declarations that it owned the tangible property and copyright in hundreds of works created by Lynn Chadwick, both before and after the Company began trading in 1973. The claim arose from a dispute between the Artist’s executors and his daughter, Sophie Chadwick, concerning the ownership of the works and associated intellectual property.

The principal issues were whether the Artist’s pre-1973 sole-trader stock had been transferred to the Company; whether the beneficial interest in pre-existing copyright had been assigned despite the absence of a written assignment; and whether the Company owned post-1973 works and copyright because the Artist was its employee.

1. Pre-trading tangible property. The evidence established an agreement and intention to transfer the entire trading business, excluding Lypiatt Park and its land and buildings. The transfer therefore included all unsold works forming part of the Artist’s stock, regardless of their type or whether they appeared on later stock lists. The Company acquired title to that property.
2. Pre-existing copyright. Transfer of a physical artwork did not itself transfer copyright. Legal title to the pre-existing copyright had not passed because the required written assignment was absent. However, the parties’ arrangements, the purpose of incorporation, the Company’s subsequent exploitation of the works, and the absence of royalties or any separate licence established an agreement to assign the copyright. That agreement operated as an equitable assignment. The Company therefore held the beneficial interest and could require the estate to assign the legal title.
3. Post-trading tangible property. After the Artist ceased trading as a sole trader, the works were produced for the Company’s business, using Company materials and resources, and were treated as Company stock. The Company owned the tangible property in those works.
4. Employment status and post-trading copyright. Applying the authorities, employment status required an evaluation of the relationship as a whole rather than a mechanical focus on control. The Artist was consistently treated by himself and the Company as an employee. The payslips, national insurance records, pension documents, accounts, board minutes, provision of equipment, absence of personal profit or loss, and integration into the Company’s business supported that conclusion.
5. The Artist made the post-1973 works in the course of his employment. The Company was therefore the first owner of copyright under section 4(4) of the Copyright Act 1956 and subsequently section 11(2) of the Copyright, Designs and Patents Act 1988. The Company succeeded on its claim in its entirety. The form of order, costs and permission to appeal were adjourned for further submissions.