Sprint Electric Ltd v Buyer's Dream Ltd
| Jurisdiction | England & Wales |
| Judge | Hacon |
| Judgment Date | 24 July 2020 |
| Neutral Citation | [2020] EWHC 2004 (Ch) |
| Date | 24 July 2020 |
| Docket Number | Case No: HC-2017-001837 |
| Court | Chancery Division |
[2020] EWHC 2004 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
HH JUDGE Hacon
(Sitting as a Deputy High Court Judge)
Case No: HC-2017-001837
Michael Hicks (instructed by Moore Blatch LLP) for the Claimant
Jaani Riordan (instructed by Blake Morgan LLP) for the Defendants
Hearing dates: 14–15, 18 and 20–21 May 2020.
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
HIS HONOUR JUDGE Hacon
Introduction
On 30 July 2019 Richard Spearman QC, sitting as a Deputy Judge of the Chancery Division, handed down judgment in two related proceedings. The first, which Mr Spearman called “the Source Code Claim”, was a claim for the breach of two contracts concerning computer source code. In the second (“the Unfair Prejudice Claim”), the second defendant (“Dr Potamianos”) contended that the affairs of both the claimant (“SEL”) and its parent company Sprintroom Limited (“SRL”) had been conducted in a manner prejudicial to his interests.
Dr Potamianos succeeded in the Unfair Prejudice Claim and was found to be entitled to a buy-out order relating to his shares in SRL.
In the Source Code Claim, SEL was largely successful. Mr Spearman found that in breach of contract the defendants had failed to provide SEL with particular versions of the source code of software called “PL/X”. There were other findings of which only one is relevant here. One of the contracts in dispute contained schedules, including Schedule No. 200815 which required the first defendant (“BDL”) to amend software called the “JL/X” software so that it would function on new computer hardware. Mr Spearman found that BDL had failed to do this.
On 28 September 2018 Mr Spearman ordered the defendants to deliver up to SEL specified versions of the PL/X source code. This was done on 11 October 2018.
Mr Spearman also ordered an inquiry as to damages, including that suffered by SEL by reason of (a) the failure of the defendants to provide SEL with the PL/X source code when it should have done and (b) the failure of BDL to provide SEL with amended JL/X software.
This is the trial of the inquiry as to damages.
Representation
Michael Hicks appeared for SEL, Jaani Riordan for the defendants. I am grateful to both counsel for their presentations of the issues.
Terminology
Mr Spearman gave a helpful guide to some of the terms he used, which will also appear in this judgment:
“9. This judgment uses the following terminology:
(1) Computer programs of the kind in issue in the present case are written and edited by the author in human readable form. This is known as ‘source code’. In the present case, some of the source code is written in high-level programming language, and some of it is written in low-level programming language (called ‘C’ and ‘assembly language’ or ‘assembler’ respectively). Source code comprises text files which are intelligible to a suitably skilled person and contain step-by-step instructions defining particular algorithms, and it may be divided into a number of separate modules or libraries, each dealing with a different algorithm or related group of algorithms. (It is SEL's case that in order to enhance, modify or fix bugs in the program it is in practice essential to have access to, and the right to edit, the source code.)
(2) The form of the program which can be run on the target computer is known as 'object code. A computer program known as a ‘compiler’ is used (possibly in conjunction with other procedures) to turn source code into object code, which is machine-readable and consists of binary numbers as opposed to text. Source code and object code are different forms of a computer program.
(3) A ‘Hex File’ is one form in which object code can be stored. A device known as a ‘programmer’ is used to take the Hex File and to transfer and store it in the appropriate component of the target computer system on which it is to be run. The component may be a memory chip or the memory of the micro-computer itself, depending on the design of the target computer system. A Hex File may be loaded on to production equipment, and used by customers, independently of, and without any need to store or to access, the source code. In addition, aspects of the program, including many site-specific parameters, can be configured by users without the need to modify the source code. However, access to the source code is needed if it is thought necessary or desirable to make changes to the underlying logic of the computer program.
(4) The term ‘software’ embraces intangible program code and associated data. This term is used to distinguish such materials from the computer ‘hardware’. Software which is stored permanently in components on an electronic circuit board may be referred to as ‘firmware’. In this case, Hex Files are firmware.
(5) The small computer which forms part of the SEL hardware is referred to in the documents and by the witnesses as a ‘microcontroller’ or ‘microprocessor’ (the technical differences between the two do not matter for present purposes).
(6) ‘Intel’ and ‘Microchip’ are rival manufacturers of microcontrollers.”
Background facts
SEL makes and sells electric motor drives. These are devices which control the speed, torque and direction of rotation of an electric motor. They may be designed to operate either DC or AC motors and in the latter case will also control the frequency of the current supplied to the motor.
SEL was incorporated in September 1987 by Edwin Prescott (“Mr Prescott”) and David Van Der Wee (“Mr Van Der Wee”). Mr Prescott acted as SEL's Technical Director and Chairman with responsibility for product design, testing, technical literature and customer technical support. Mr Van Der Wee managed everything else.
By 1996 SEL had expanded its range from just analogue drives to include digital drives. A digital drive is controlled by a computer which like other computers consists of hardware, here in the form of a microcontroller, and software. The software determines how the microcontroller operates and causes information to be displayed to users.
Dr Potamianos was known to Mr Prescott and Mr Van Der Wee as someone who could help SEL acquire expertise in digital drives, which had been the subject of his PhD thesis at Nottingham University. In a letter dated 20 September 1996 Mr Prescott offered Dr Potamianos the post of Head of Research and Development at SEL. The letter explained the tax advantages of Dr Potamianos setting up a service company through which his services could be provided, mirroring the service companies set up by Mr Prescott and Mr Van Der Wee. On 11 March 1997 BDL was formed as Dr Potamianos' service company and on 8 May 1997 BDL entered into a contract for services with SEL (“the 1997 Contract”). On 26 May 1999 Dr Potamianos became a director of SEL and was given the title “Research and Development Director”.
On 27 March 2000 SEL and BDL entered into a second contract for services agreement (“the 2000 Contract”).
From May 1997 Dr Potamianos had sole responsibility for the development of software to be used in SEL's digital drives. The first range was launched in 2001, known as the “PL/X” range. Following the launch and until 2015 Dr Potamianos worked on successive improvements to the PL/X software. This was manifested in the market by new versions of SEL's digital drives being released from time to time. They had the updated object code compiled from the successive versions of the source code developed by Dr Potamianos.
The hardware used for the PL/X range, the microcontrollers, were bought from Intel Corp (“Intel”), the well-known Californian manufacturer of computer hardware. In 2006 Intel announced its intention to discontinue the relevant microcontrollers, so SEL turned to Microchip Technology Inc (“Microchip”), a manufacturer based in Arizona, as an alternative source. This required Dr Potamianos, through BDL, to modify the PL/X software.
Microcontrollers are mounted on motor control boards and witnesses spoke of SEL's software or firmware being on the Intel or Microchip “board” or “platform”. The first SEL drives on the Intel platform were released in February 2000, using object code compiled from version 2.11 of the PL/X source code.
The numbering of the successive versions of the PL/X source code was chosen by Dr Potamianos. Not every new version resulted in the marketing of drives with a new corresponding source code. Only if a modification gave rise to a significant operational advantage was a new version of the drive released to customers.
In 2007 there was a restructuring of the ownership of SEL. Until that year Mr Prescott and Mr Van Der Wee had been equal shareholders. Mr Van Der Wee said that he wished to retire, so in July 2007 Mr Prescott bought his shares and became sole shareholder. On 24 July 2007, at a meeting of the board of directors of SEL comprising Mr Prescott and Dr Potamianos, it was resolved that 40% of the shares in SEL were to be issued to Dr Potamianos.
On 30 May 2012 SRL was incorporated with Mr Prescott and Dr Potamianos as directors. It was to act as a holding company for SEL. On 1 November 2012 Mr Prescott and Dr Potamianos transferred their shareholdings in SEL to SRL and they became, respectively, 60% and 40% shareholders in SRL.
Although Intel had announced in 2006 the discontinuance of the Intel boards used by SEL they remained available for some time. In October 2012 SEL released drives using the new v.5.23 software;...
To continue reading
Request your trial
-
Aristides George Potamianos v Edwin John Prescott
...of Mr Lock and Mr Kelly under a third head, and £3,250 under some further heads (see Sprint Electric Ltd v Buyer's Dream Ltd & Anor [2020] EWHC 2004 (Ch) at [285]) (“the Source Code Quantum Judgment”). The precise amount of liability was left to be determined at a later hearing to deal wit......
-
Sprint Electric Ltd v Buyer's Dream Ltd
...Code Quantum Trial”). This resulted in a judgment of His Honour Judge Hacon: see Sprint Electric Ltd v Buyer's Dream Ltd & Anor [2020] EWHC 2004 (Ch). On 12 November 2020, HHJ Hacon assessed SEL's damages in the sum of £23,730 (plus interest of £2,578.44) and fixed the sum payable by SEL t......
-
Recorded Picture Company Ltd v Alfama Films Production
...in the form of the loss of a chance. I recently considered the law on loss of a chance in Sprint Electric Ltd v Buyer's Dread Ltd [2020] EWHC 2004 (Ch) at [71]–[121]. I will quote only the summary: “[117] The loss of a chance approach to the assessment of damages for breach of contract app......