Case No. IP-2018-000182

). Neither party relies on any contract concluded that day. (g)Following the Warwick Meeting, Volumatic and IFL each produced a document which sought to capture their understanding of the consensus that had been reached. IFL produced a draft of what was to become the Agreement, which was sent on 6 February 2005, but not received at that time. Meanwhile, Volumatic sent to IFL/DFL an email dated 7 February 2005 setting out what appear to be notes of the meeting. That email, headed “Minutes from our meeting” mirrors much of what eventually appeared in the Agreement, albeit in greater detail, and includes the following: “This represents a summary of the proposed agreement – it will require legal input to finalise – this will be completed in April in order to delay the legal fee expenditure. In the meantime DFL ([Mr Williams]) and Volumatic ([Mr Bonné]) will sign this letter/email hence agreeing the intent to go ahead in this form”. (h)There were further attempts by IFL to send the email first sent on 6 April 2005, but it was not successfully received by Volumatic until 13 April 2005. The metadata on IFL/DFL’s document suggest that it was produced by or reviewed by a firm of solicitors. (i)Shortly before the Agreement was signed by both parties, Mr Bonné said to Mr Williams that Volumatic would be ordering 10 million Pouches per year (or possibly that orders would be “in the millions”). The exact words exchanged are now not known, but Volumatic concedes that a conversation to that effect took place at about this time. Mr Williams suggested in his oral evidence that he understood that the 10 million Pouches per year figure would be achieved within a year. (j)In the event, on or around 5 May 2005, both parties signed the Agreement. It is necessary to set out the terms of the Agreement in full. As the Agreement includes Stages 1 to 4 within Stage 1, to avoid the confusion caused by having two stage 2s and two stage 3s, I have renamed as “sub-stages” those which fall under Stage 1: “Further to our recent meeting at the Warwick Hilton, on Thursday 3rd February 2005, I am writing to confirm the terms of the agreement that have been reached regarding the proposed acquisition of IFL’s new designs and invention, and the development of a working prototype for a secondgeneration cash pouch that potentially may offer new technical and commercial benefits. Stage 1: Development of workable sample. At Volumatic’s request, DFL will develop a prototype sample from test tooling in order to review the commercial viability of pouch 2. DFL will paid by Volumatic for this work against PO’s on the following basis: [Sub-]Stage 1: Create final specifications and modelling US$6,000 (to be off-set against previously paid activity) [Sub-]Stage 2: Creation of full engineering drawings of proposed design – compatible with Volumatic system, cost estimate, and quote for prototype tooling. US$6,000 [Sub-]Stage 3: Create prototype tooling, run samples and evaluate and modify to meet agreed specification. US$4500 [Sub-]Stage 4: Successful trial via UK retailer and sign off of commercial sample, final quote for 1 x 40ft and quote for production tooling US$4500 Stage 2: Assignment of Intellectual Property Rights. On mutual acknowledgement of the completion of stage 4 IFL will assign all property rights for pouch 2 subject to a noted charge based on Volumatic honouring the terms below in full, on the following basis: 1.A 10 year royalty payment on the basis of US$0.005 per unit sold regardless of manufacture and sales territory. 2.An immediate payment of £20,000 to IFL, which will be offset against future royalty payments until cleared. 3.DFL will have the rights to exclusive manufacture of pouch 2 under the terms detailed in ‘Supplier Agreement’ below. Stage 3: Supplier Agreement. For a 10 year period (an initial 2 years then automatically renewable for a further 8 years), DFL will be the exclusive manufacturer of pouch 2 subject to the following conditions: 1.The unit price delivered to the UK is less than 10p (inc US$0.005 royalty) per unit. 2.Product QA meets an agreed specification. 3.Agreed delivery schedules are met. 4.Payments for goods will be on the basis of 50% with order and 50% on proof of shipment. 5.At all times any tooling which has been paid in full for will remain the property of Volumatic Omal Ltd. It is recognised that these terms of agreement represent what has been agreed by both party and will form the basis of the formal legal document required as part of the assignment of IFL’s intellectual property rights for the Pouch 2 to Volumatic Omal Ltd.” (k)It was common ground that the parties contemplated further, more formal documentation. It is also common ground that at the time the Agreement was signed, the parties had completed Sub-Stage 1 of Stage 1 and were well on the way to completing Sub-Stage 2 of Stage 1. (l)The Agreement provides under the heading “Stage 2: Assignment of Intellectual Property Rights” for the “mutual acknowledgement of the completion of [Sub-]Stage 4”. It is common ground that this was never expressly done. But it is also common ground that the design work contemplated in Stage 1 was completed, and the payments mentioned there were made, albeit that it took more than two years – significantly longer than had been contemplated by the parties. In December 2007, Volumatic ordered a container of 240,000 Pouches. A second container of 240,000 Pouches was ordered on 21 December 2008. (m)Since then, Volumatic has been ordering Pouches from DFL, and it has not ordered Pouches from anyone else. Uptake on the CCi was initially slower than both parties expected, but by 2015, 2.3 million Pouches were being ordered annually. Pouch prices changed from time to time – the 10p price per Pouch referred to in the Agreement was never achieved: the price per Pouch always exceeded 10p. The royalty rate also fluctuated, but was always above the rate set out in the Agreement. It is also common ground that the £20,000 payment set out in Stage 2, paragraph 2 was never made as a lump sum cash payment. (n)Further correspondence was sent between the parties in the years since the Agreement was signed: (i)On 19 March 2007, IFL/DFL emailed Volumatic asking for an update on the status of “the supply agreement”. Volumatic responded on 23 March 2007 “[Volumatic] is working on this – no date at the moment”. (ii)On 22 November 2007, Volumatic emailed IFL/DFL after a further meeting, setting out “the issues we discussed to form the basis for an ongoing manufacturing and royalty agreement”. The email further stated “[t]hroughout the process I have tried to remain true to the spirit of the development agreement dated 5th May 2005 but as I explained, I have significant reservations about entering into a 10 year exclusive supply agreement”. (iii)On 15 December 2008, IFL/DFL wrote to Volumatic saying “For a number of reasons I think it is time to finally consign the 10p price point to history”. (iv)In April 2009, further discussions took place. Volumatic provided to IFL/DFL a draft supply agreement which provided for a five-year term, and payment terms different to those in the Agreement. This draft was 27 pages long. (v)On 17 July 2009, Mr Williams sent an email to Mr Amos saying: “I have had no contact from your legal agent regarding assigning the Patents”. (vi)On 6 August 2009, Volumatic sent IFL/DFL a set of documents to assign the intellectual property in the Pouch. The documents did not provide for a charge over the intellectual property. These documents were meant to sit together with a 5-year supply agreement. None of the documents was ever executed. (vii)On 6 November 2009, Volumatic sent further drafts of long form agreements to IFL/DFL – these were also for a 5 year term. (viii)On 10 May 2010 there was correspondence marked “without prejudice”, but which HHJ Hacon found not to be so at the Case Management Conference in this action on 2 April 2019. In the correspondence, IFL/DFL suggested a 12year royalty period. Mr Williams referred to the Agreement as “our agreement in principle”, and this was never challenged by Volumatic. A further draft agreement, on different terms again, was circulated in June 2010. (ix)On 5 November 2010, Mr Williams wrote again to Volumatic, noting “that the £20,000 payment is in effect consigned to history”. (x)On 31 January 2012, Volumatic emailed IFL/DFL saying “we need to put some meat onto the bones of several plans/proposals we have discussed in the past … I would also like to get the supply agreement back on the table. It has to be in both our interest to get the trading relationship on a clear and unambiguous footing before we move into the next growth phase”. Mr Williams responded, agreeing with the need to have “a more formal agreement in place”. (xi)On 16 March 2012, Volumatic emailed IFL/DFL, making reference to “the points to be carried forwards into a formal agreement between Volumatic and DFL/IFL”. That email expressly noted that whilst “there are elements of the Agreement that neither side can deliver I still believe that it best captures the substance of what both companies hoped to achieve”. Volumatic’s proposal included a 5 year exclusive supply agreement. (xii)Negotiations continued in 2013. In 2014, a proposal for Volumatic to buy IFL/DFL was explored, but not ultimately acted upon. (xiii)Discussions were revived again in December 2015 – Mr Amos wrote to Mr Williams on 22 December 2015 “[a]s we discussed our trading relationship is effectively governed by the contract that you and Duncan signed back in May 2005, which can be summarised as follows…”. Mr Amos noted that the assignment had not taken place, and that the 10 year exclusive manufacturing agreement was “outstanding”. The email noted Volumatic’s desire to formalise the terms discussed 10 years before into a more formal document. (xiv)Volumatic emailed IFL/DFL on 18 October 2016 – that email includes the comment: “I cannot go to the board saying that I see any other options to bring this to a negotiated conclusion which will no doubt result in me being asked to find other methods of bringing this to closure. Inevitably this will result in us involving our legal team looking at the direct enforceability of the 2005 agreement”. (xv)Further discussions followed in late 2016, in 2017 and 2018, including without prejudice discussions. (o)A pre-action letter was sent on 20 June 2017 and these proceedings were commenced nearly 18 months later on 9 November 2018. (p)Volumatic and DFL continue to trade with each other.