Jan 2010 Financial News

Ruling in Paymaster/Grace case by March

Jan 28, 2010

SUPREME Court judge Roy Jones is expected to hand down a decision in the copyright infringement/breach of contract claim brought by Paymaster Jamaica Ltd against GraceKennedy Ltd and software developer Paul Lowe, by March -- a landmark, precedence-setting ruling that could reshape the way corporate Jamaica henceforth treats with contracts and other issues related to intellectual property.

Jones announced the time commitment in the Supreme Court in December, days before the attorneys representing the three litigants began presenting their final written and oral arguments, bringing tantalisingly closer to closure, the case that began meandering through the court system ten years ago, but which many believe may traverse the local judiciary all the way to the Privy Council in the UK, before either side can ultimately claim victory.

Paymaster, which pioneered the current incarnation of the bills payment industry within Jamaica, is seeking a five-point ruling against Grace and Lowe -- for copyright infringement, breach of contract, breach of confidence, inducing breach of contract, and passing off -- all related to the creation of Grace's subsidiary Bill Express in 2000, and Lowe's role in facilitating the launch by selling to the competitor, a software over which Paymaster claims ownership rights.

Grace's team, headed by two of Jamaica's well-known attorneys, John Vassell QC and Michael Hylton QC; as well as the lawyer representing Lowe, Vincent Chen, built their defence around the central legal premise that Lowe, as the author of the computer program used by Paymaster to launch its business, had the ownership right to sell the software to Grace, or whoever he chose.

In a nutshell, the basic claim as presented in the various affidavits, and as emerged during trial, is that Paul Lowe, having been commissioned and paid to develop a computer programme with specific functionalities to enable Paymaster's founder, Audrey Marks to launch her bills collection agency, modified an existing cashiering software to achieve this end.

Evidence was also presented that in addition to the modified programme, Paymaster required a higher-level software to fulfil its unique business model, and that Lowe was commissioned and paid to build this new programme, this time from scratch, and with a different set of source codes.

Paymaster provided the instructions for the creation of the software and paid for the debugging and testing. But once it was perfected, Lowe sold the software to GraceKennedy with very minute modification, enabling this company to fast-track the launch of its subsidiary Bill Express in 2000 in direct competition against Paymaster.

In 2000, Paymaster secured an injunction against Grace, barring its subsidiary from using the computer software and other elements that Paymaster claimed to be part of its business plan.

Throughout the trial in October and December, the defence lawyers sought to challenge the factual, legal and evidential bases for the claims made by Mark's company: that Grace was guilty of breach of confidence in using information in her firm's business plan that it had been provided in confidence; that the defendant had induced Lowe to breach its contract with the bills collection agency; and that its subsidiary Bill Express was visually and operationally designed to trick the public into believing that it was another Paymaster agency; and that Lowe himself as Paymaster's software developer was guilty of breach of contract in his dealing with Bill Express.

In the absence of any written agreement between Lowe and Paymaster spelling out the ownership rights in the software, and faced with a legal presumption -- as vigorously proffered by Grace's and Lowe's attorneys -- that ownership resided with Lowe as the author, Paymaster's lead attorney, and Jamaica's foremost constitutional lawyer, Dr Lloyd Barnett, evoked the legal principle of an 'agreement to the contrary', that is to say, that there was an implied agreement that Paymaster would be the owner of the software.

In addition to citing numerous authorities to defend Paymaster's right to argue an 'agreement to the contrary' as the basis for claiming ownership to the disputed software, Barnett -- assisted by attorney Denise Kitson instructed by the firm Grant, Stewart, Phillips & Co -- spelled out what they said were practical and contextual evidence that Paymaster had met the legal test for its claim. Among the evidence they cited:

* Paymaster developed the original business concept and provided continuous instructions and consultation for the project;

* Paymaster incurred "considerable costs in time and money" in testing and debugging the program for which Lowe was paid;

* Paymaster assumed all the financial, reputational and operational risks for the software for which it neither demanded indemnity against losses, nor did Lowe offer any;

* It was recorded and evidence presented in court that Lowe himself at a meeting with Paymaster, "acknowledged that in the circumstances in which the programme had been created, it was exclusively Paymaster's property"; and

* That Lowe himself at a meeting on June 21, 2000 proposed that Paymaster's ownership in the programme should be limited to the unique functionalities that it had commissioned, rather than be extended to the entire software. This would enable Lowe to license his base software to his customers.

But Grace's attorneys -- Hylton and Vassell -- told the court that the implied agreement being argued by Barnett was not part of Paymaster's original pleading, and that the claimant should therefore be disallowed from relying on this legal consideration. They, too, cited authorities to support their contention for the court to close the door to this legal avenue.

"To support its claim to the title to the copyright (Paymaster) would have to be relying on an assignment by Paul Lowe or an implied term in the agreement with Paul Lowe that Paul Lowe would assign the copyright to Paymaster or on an equitable title founded in some way on the law of trusts," wrote the defence attorneys. "Paymaster has not put forward its claim upon any of these bases and cannot now raise them or any of them. Not even in the opening of Paymaster's counsel have any of these matters been mentioned. The case Paymaster has pleaded is that it is owner of the legal title in the software based upon its creation of it."

Lowe's lawyer, Vincent Chen, joined Vassell and Hylton in arguing the case that a party relying on the existence of an implied agreement was required to plead clearly and unambiguously the particular facts and circumstances being relied upon to sustain such a claim.

The attorneys also cited authority whose test for implied agreement, they argued, Paymaster as a practical matter would fail, in the event that the court sustained its right to this defence.

For example, they claimed that there was no evidence that Lowe would assign the copyright in his programmes to Paymaster, "and thereby disable himself from ever having anything to do with those programmes again". They also told the court that in authoring the software, Lowe "made no use of any relevant underlying works of Paymaster in which Paymaster may have had copyright".

Moreover, Lowe, they argued, never surrendered the source codes of the software to Paymaster, a factor which "is inconsistent with an implied agreement for an assignment of copyright to Paymaster".

But Barnett responded that Lowe's retention of the source code was explained by his continued contract to undertake the software development and maintenance at Paymaster.

In addressing the bases for the claim to implied agreement, Barnett too, anchored his arguments on legal authorities, and argued that when Marks took action against Grace in 2000, the Civil Procedure Code applied, with the first basic principle that "facts not law were to be pleaded". Secondly, statements of fact not evidence were to be pleaded.

"Thus the inferences of law to be drawn from the pleaded facts need not be stated in the pleadings...where material facts are alleged it is not necessary to plead an implied warranty."

Barnett cited what he said were several instances of "material averments of facts" contained in Audrey Mark's affidavit -- to support the case that there was an implied agreement that the copyright to the higher-level software programme would belong to Paymaster.

Again, his assertions grounded in numerous authorities, Barnett asserted that under the new rules, the detailed witness statements were filed, and contained "all the evidential material on which the claimant relies. Accordingly, where any requirements for particulars have been satisfied by the witness statements, and absence of particularisation in the pleading is not material."

It is expected that the outcome of this case will illuminate key issues of Jamaica's 1993 Copyright Act, some of which are collateral to this case, while others are more germane. For example, the ruling should clarify for employers, whether they or their workers actually own the copyright in a range of assets over which the business owners by unchallenged convention, have long exercised ownership rights. Among them -- computer software developed by employees while on the job, graphic designs, newspaper stories, other literary works and so on.

To advance their case, Lowe's and Grace's attorneys have argued that Jamaica's 1993 Copyright Act basically shifted the presumption of ownership in these assets from the employer to the employee/author. If this argument is embraced by the courts, corporate Jamaica would begin scrambling to reconstruct their standard employment agreements, especially for those job functions that involve the creation of literary works, or generally those that fall within the ambit of the Act.

The arguments for and against the other four pleadings in the case evoked a firestorm of claims and counterclaims about the relative credibility of the ten witnesses who were called -- three by the claimant, five by the defence, and two experts.

Those called by Paymaster: its owner, founder and managing director Audrey Marks; its former chief information officer, Dr Maurice McNaughton; its former computer systems supervisor Aubrey Waugh. Grace called Brian Goldson, the former managing director of GraceKennedy Remittance Service, the direct parent of Bill Express; its current managing director, Joan Marie Powell; Michael McNaughton, the general manager of Bill Express; and Wayne Chen, CEO of Super Plus Food Stores, which in 2001 terminated its contract with Paymaster to operate within its store, and replaced it with Bill Express.

Paymaster called Dr Patrick Dallas, an information technology consultant as an expert witness, while Grace called Derrick Logan, an IT consultant as its expert witness.

Paul Lowe took the stand in his own defence.

During one of the more adversarial moments of the trial, Grace's lawyers tried to undercut Mark's credibility by painting her as an unreliable advocate for her own claim that she had supplied confidential information on her business to their client; and questioned the veracity of a whole range of information she provided -- from the fees that Paymaster collects from its clients; to the colours of its logos, and the precise wording of its slogans, to the nature of the discussions that Marks held with Grace's Goldson in the late 1990s.

Said Grace's lawyers: "It is submitted that Miss Marks was not a witness of truth and that in those cases where her evidence conflicts with the evidence given by other witnesses, the evidence of the other witnesses should be preferred."

In response, Barnett provided information and amplified Mark's assertions to defend the accuracy of her claims and evidence, and similarly attempted to undermine the primary witnesses who appeared for Grace.

Here is what he told the court in reference to Brian Goldson:

"On the matter on which he should have been able to assist the court, namely his receipt of the Paymaster business plan, despite its obvious importance as a potential business opportunity, he has asked the court to accept that he is unable to remember whether or not he had obtained the business plan, notwithstanding the fact that GKRS had previously issued memoranda to staff and to the media on this very issue. It is submitted that the court should reject his evidence as coming from a witness who has deliberately failed to tell the truth."

Though Lowe claimed on the witness stand that it was he who approached Grace for the sale of the software, Barnett, in pursuing the case against Grace for inducement to breach contract, nevertheless submitted to the court that it was Grace that initiated the business deal that led first to the injunction in 2000, and eventually the groundbreaking case now being adjudicated.


Source:
Jamaica Observer
Wednesday, January 27, 2010

http://www.jamaicaobserver.com/business/Paymaster-Grace_7358980