Case No. IP-2018-000182

34.It was common ground that estoppel by convention arises whenever two parties act, or negotiate, or operate a contract, each to the knowledge of the other, on the basis of a particular belief, assumption or agreement – in such a situation, they are bound by their belief, assumption or agreement: see Halsbury’s Laws, Volume 47 (Estoppel) at 368. I was also taken to helpful passages in First National Trustco (UK) Ltd and Anor v Kevin Page and Ors [2019] EWHC 1187 (Ch) per Joanna Smith QC sitting as a Deputy High Court Judge, where Ms Smith noted that estoppel by convention requires it to be unjust or unconscionable to hold the parties to their bargain (at paragraphs 100 to 114). 35.I have found that the Agreement is not legally binding on the parties. If I am wrong in that, IFL submitted that Volumatic is precluded by estoppel by convention from asserting that the Agreement is legally binding, because both parties acted, to the knowledge of the other, as if the Agreement was not binding on them and it would be unconscionable to allow Volumatic to resile from that now. 36.In relation to the notion of its being unjust or unconscionable to hold the parties to their bargain, IFL submitted that it had suffered prejudice as follows: (a)IFL/DFL conducted their business on the basis that the Agreement was not legally binding, and it would be inequitable now to assert otherwise; (b)Having discovered that Mr Bonné’s pre-Agreement representations of “millions” of Pouches was false, IFL/DFL could have explored their own remedies at the time, if Volumatic had said then that the Agreement was binding; (c)DFL has improved the Pouch at the request of Volumatic, and would have requested a fee, but for its understanding that it owned the intellectual property; and (d)IFL is now having to defend a claim based on the parties’ intentions in 2005, some 14 years ago, and it suffers prejudice as a result. 37.Volumatic submitted that the two main features of estoppel by convention are missing. First, it said there was no common assumption of fact or law which must be communicated by words or conduct so as to “cross the line” (see First National Trustco at paragraph 100). Certainly, Volumatic submitted, there were ongoing negotiations, including, it said, to vary the terms of the Agreement. But there was no common assumption, and no communication by words or conduct which crossed the line. True it was that Mr Amos did not correct Mr William’s email reference in 2010 to an “agreement in principle”. But that, said Volumatic, does not go far enough. 38.Second, Volumatic said the element of unfairness or injustice that makes it unconscionable to go back on the assumption is missing here. Volumatic disputed the claim about the improvements to the Pouch on the basis that (a) they were de minimis and (b) Volumatic is not asking for an assignment of rights in the improvements. 39.I have found above that the Agreement merely records the consensus of the parties at the Warwick Meeting – and I have found that that is how they behaved following the signing of the Agreement. It was not treated as a binding agreement. No-one sought to enforce its terms. No-one called for, or provided, the £20,000 referred to. Volumatic did not call for an assignment of the patents. The 10p per Pouch aim was never achieved. The royalty rates fluctuated, without reference to the Agreement. It was not until late 2016 that either party suggested that the Agreement was binding. In my judgment, this is sufficient to create an estoppel by convention. There was, in my judgment, a common assumption communicated by conduct which “crossed the line” – both parties acted on the basis that the Agreement was not legally binding, and it would now be unfair, unjust and unconscionable to go back on that shared assumption. I find, and do so clearly, that the prejudice submitted in paragraphs 36 (a) and (d) above is made out. I say more below in relation to the prejudice summarised in paragraphs 36 (b) and (c). I accept that the five factors set out by Briggs J (as he then was) in Revenue & Customs Commissioners v Benchdollar Ltd [2010] 1 All ER 174 and the four factors set out by Joanna Smith QC at paragraph 113 of First National Trustco have been made out on the facts of this case. Parties who act for 10 or more years on one legal basis cannot then turn around and suggest something contrary to that basis. Therefore, had I found that the Agreement was binding, I would have found that Volumatic is now estopped by convention from asserting its terms.