Photobooth Props Limited & Anor v NEPBH Ltd & Ors

Where a party fails to attend trial, the court may proceed in its absence under Civil Procedure Rules 1998, rule 39.3, having regard to the overriding objective and the interests of justice. A judgment given in the party’s absence may be set aside only if the requirements in rule 39.3(5) are satisfied.

On the balance of probabilities, an informal transaction may constitute a sale of an entire business where the parties’ communications and surrounding evidence establish that intention. Representations made during negotiations may become contractual terms. A party who transfers intellectual property as part of a business sale may be liable for subsequent unauthorised use, breach of contract and copyright infringement. Joint liability may arise where defendants jointly participate in the relevant torts.

The claim concerned the sale of a photobooth-printing business and related assets. The claimants alleged misrepresentation, breach of contract and copyright infringement arising from the transaction. They contended that the sale included intellectual property, domain names, stock and equipment, together with an obligation not to compete.

The defendants initially defended the claim but failed to comply with case-management directions and notified the court shortly before trial that they would not attend or offer a defence. An earlier interlocutory judgment by Recorder Kimbell KC, [2022] EWHC 750 (IPEC), had narrowed the issues and left disputed ownership and infringement questions for trial.

The court therefore had to determine whether the trial should proceed in the defendants’ absence and, if so, the scope of the transaction, the contractual effect of the representations, ownership and transfer of copyright, infringement and joint tortfeasor liability.

1. Trial in absence. The court proceeded with the trial under rule 39.3 because the defendants had failed to comply with case-management directions, had provided no trial evidence or disclosure, and had expressly declined to offer a defence. This was the course most consistent with the overriding objective and the interests of justice. Any application to set aside would have to satisfy rule 39.3(5), including promptness, a good reason for non-attendance and a reasonable prospect of success.
2. Contract and representations. On the balance of probabilities, the transaction was for the entirety of the business discussed between the parties. Representations that the business and its assets could be sold, that the claimants would receive the assets needed to operate it as a going concern, and that the seller would not compete became terms of the oral contract. The contract was partially evidenced in writing.
3. Assets and copyright. The contract included the specialist printer, relevant domain names, stock and intellectual property rights in the designs sold through the business. Copyright in almost all relevant designs was owned by the defendants or Mr Michael Quinn and was transferred to the second claimant. Subsequent unauthorised use infringed the second claimant’s rights. The court could not find that designs allegedly owned by third parties had been transferred, but found fraudulent misrepresentations and breach of warranty concerning those designs.
4. Liability and relief. The defendants were jointly liable as joint tortfeasors. Liability was determined for copyright infringement, breach of contract and misrepresentation. An enquiry as to damages was directed. The claimants were awarded their costs, subject to separate summary assessment, and were permitted to apply for the IPEC costs cap to be disapplied in light of the defendants’ exceptionally poor conduct.

This was a first-instance liability judgment. The judgment records earlier interlocutory proceedings, including the decision of Recorder Kimbell KC dated 1 April 2022, reported at [2022] EWHC 750 (IPEC), which determined applications and narrowed the issues for trial.