The recent case of PE Ltd Petitioner has highlighted the importance of full and frank disclosure to the court in ex parte hearings.
Ex parte hearings are those where only one party appears. In such cases the appearing party has a duty of full and frank disclosure to the court regarding any matter capable of impacting the decision. The Court of Session decision in PE Ltd Petitioner illustrates the scope of this duty.
1. PE Ltd Petitioner
The Petitioners obtained a section 1 order under the Administration of Justice (Scotland) Act 1972 (the “1972 Act”). This enabled them to take possession of a code allegedly copied and published by two former employees (the Respondents) on a public software sharing platform called GitHub. The Petitioners claimed that the Respondents had infringed copyright and breached confidentiality by uploading code to GitHub and through developing competing software.
After this order had been granted, the Respondents sought to recall the order. They also asked for the recovered materials to be returned to them and for the petition to be dismissed. They claimed that the Petitioners had failed in their obligations to the court to disclose factors material to the proceedings.
The court held that the duty of full disclosure is crucial in ex parte applications. It was found that there were three key non-disclosures of the Petitioners:
- That the code published on GitHub was “functionally identical” to the Petitioners’ source code.
- Describing the code published on GitHub as “identical” to the Petitioners’ code.
- Describing the software demonstrated by the Respondents in an online video as a ‘facsimile’ of the Petitioners.
These were held to be misrepresentations and inaccuracies, with Lord Lake finding that they undermined the basis for granting the section 1 order under the 1972 Act. The order was subsequently recalled, and the Petitioners ordered to return and destroy the recovered materials. The petition was dismissed with an award of expenses granted to the Respondents. Lord Lake refused to consider the case de novo (anew).
2. What does this mean for ex parte hearings?
There was no dispute regarding whether there was a duty of full and frank disclosure owed to the court in ex parte hearings. Lord Lake emphasised that the court must be furnished with all the relevant material including any points of dispute to ensure that the interests of the absent party are protected. This duty always exists however the requirement may increase where the absent party’s rights are at risk of infringement if the order sought is granted, as it had been here.
The judgment highlights the absolute and wide scope of the duty of full and frank disclosure particularly when it comes to ex parte cases. Lord Lake here refused to consider the matter de novo on the basis that a party should not benefit from their wrongdoing and that it was imperative that the court did not undermine the importance of full disclosure in ex parte proceedings.
A similar decision was reached in McAllister, Petitioner in 2024. Here an order appointing an interim judicial factor to a business was recalled on the basis that the duty of full disclosure had not been met and the court similarly refused to consider the matter de novo. The case of PE Ltd Petitioner again shows the court considering the duty of full and frank disclosure to have a broad scope which cannot be undermined even in instances of urgency.
Where there is non-disclosure or misleading statements, even if inadvertent, this can lead to a recall of orders and refusal to reconsider the matter.
3. IP considerations for businesses
This case shows how intellectual property issues of innovation, ownership and confidentiality can escalate into litigation before the court. It also demonstrates the importance of businesses clearly defining the scope of ownership of any code developed, and implementing robust confidentiality policies to protect their key intellectual property rights.
Businesses should have clear policies in place to protect their intellectual property rights, and should consider the following:
- Ensure that IP ownership is clearly defined: employment contracts should explicitly state the ownership of code developed during employment..
- Control access to code repositories: code should be stored on company managed platforms and access permissions should be monitored.
- Clear records: businesses should keep clear records of their IP, in order that there is a clear paper trail which can be referred to in litigation if required.
- Confidentiality: it is important to include clear confidentiality obligations in employment contracts, which continue post-termination.
The case of PE Ltd Petitioner underscores the necessity of full and frank disclosure when seeking a section 1 order under the 1972 Act. From an intellectual property perspective, businesses should make sure that they have all of their ducks in a row to ensure that they are in the best position possible if a dispute concerning IP ownership arises.
If you would like to speak to one of our experts about protection of your intellectual property rights, please get in touch with a member of the IP, Technology & Data team or your usual contact at Brodies.
