Rights to designs made by director and sole shareholder of companies - director trading design business through companies - design rights held by designer in trust for companies

Ultraframe (UK) Ltd v Fielding and others: CA (Lords Justice Waller and Longmore and Sir William Aldous): 12 December 2003

A designer, who was the director and 100% shareholder of a few companies, designed conservatory components and developed the components business through his companies, all of which subsequently failed.

In July 1997 after he had been disqualified from acting as a company director he traded in the name of another company, N, vesting its shares in his nominees' names.

In December 1997 he was made a bankrupt.

He acquired another company, S, through his nominee shareholder and caused the component designs to be assigned by N to S.

In June 1998 the shares in N and S were assigned to the defendants.

The designer's trustee in bankruptcy brought proceedings against the defendants, to assert that the designs belonged to the designer, and assigned the cause of action to the claimant.

The judge gave judgment for the defendants, holding that the designs belonged to the companies.

The claimant appealed.

Andrew Hochauser QC, Simon Mortimore QC, Adrian Speck and Martin Griffiths (instructed by Eversheds, Manchester) for the claimant; David Oliver QC and Iain Purvis (instructed by Addleshaw Goddard, Manchester) for the defendants.

Held, dismissing the appeal, that in the context of company law the appropriation of the company assets by a director owning a 100% share would not be considered the bona fide distribution of the company's profits and would constitute a reduction of the company's capital without the sanction of the court; that, since the designer had made the design when he was a director of the companies, he held any design rights in trust for the companies through whom he was operating the business at the time he had created the design.