IBM United Kingdom Limited v LZLabs GmbH & Ors [2025] EWHC 998 (TCC)

[2025] EWHC 998 (TCC)Case No HT-2021-000363
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (KBD)
Venue Royal Courts of Justice, Rolls BuildingDate 24 April 2025
London, EC4A 1NL
Before
Mrs Justice O’Farrell DBE
Between
IBM UNITED KINGDOM LIMITEDClaimant(1) LZLABS GmbHDefendants(2) WINSOPIA LIMITEDDefendant(3) LZLABS LIMITEDDefendant(4) MARK JONATHAN CRESSWELLDefendant(5) THILO ROCKMANNDefendant(6) JOHN JAY MOORESDefendant
Nicholas Saunders KC, Matthew Lavy KC, Fred Hobson KC, Henry Edwards & Alex Taylor (instructed by Quinn Emanuel Urquhart & Sullivan UK LLP) for ClaimantMark Vanhegan KC, Thomas Ogden, Jaani Riordan & George McDonald (instructed by Clifford Chance LLP) for DefendantsReading date: 7 th April 2025Hearing Hearing dates: 8 th, 9 th& 10 th April 2025
JUDGMENTThis judgment was handed down by the court remotely by circulation to the parties’ representatives by email and released to The National Archives. The date and time for hand-down is deemed to be 24 April 2025 at 10.30am
[1]On 10 March 2025 the Court handed down judgment for the Claimant against the First, Second and Sixth Defendants, dismissing the claims against the Third, Fourth and Fifth Defendants [2025] EWHC 532 (TCC) (“the Judgment”).[2]For the reasons set out in the Judgment, the Court’s key findings were as follows: i) The Second Defendant (Winsopia) was in breach of the ICA. ii) The First Defendant (LzLabs) and the Sixth Defendant (Mr Moores) unlawfully procured breaches of the ICA by Winsopia. iii) The First, Second and Sixth Defendants were liable for the tort of unlawful means conspiracy. iv) The claims against the Third Defendant (LzLabs UK), the Fourth Defendant (Mr Cresswell) and the Fifth Defendant (Mr Rockmann) failed. v) IBM validly terminated the ICA and associated agreements pursuant to the terms of the ICA or at common law. vi) The claims were not contractually time-barred or statute-barred for limitation.[3]This is the Consequentials Hearing following hand down of the Judgment. The matters that arise for determination by the Court concern: i) the ambit and terms of any injunctive relief against the First, Second and/or Sixth Defendants; ii) disposal and directions in respect of the quantum trial; iii) whether any declaratory relief should be granted; iv) costs, including whether there should be any stay of payments; v) the Defendants’ application for permission to appeal; vi) whether there should be a stay in respect of any of the injunctive relief granted.[4]The Claimant relies on the sixteenth witness statement of Gregory Pantlin dated 1 April 2025.[5]The Defendants rely on the following witness statements: i) the twenty-eighth witness statement of Kate Scott dated 1 April 2025; ii) Ms Scott’s twenty-ninth statement dated 3 April 2025; iii) the fifth witness statement of Thilo Rockmann dated 1 April 2025; iv) Mr Rockmann’s sixth statement dated 7 April 2025; v) the fifth witness statement of Jan Jaeger dated 1 April 2025; vi) Mr Jaeger’s sixth witness statement dated 7 April 2025; vii) the first witness statement of Markus Liebenberg dated 1 April 2025; viii) the fifth witness statement of John Moores dated 1 April 2025; ix) Mr Moores’ sixth statement dated 7 April 2025; x) the first witness statement of Bryant Burke dated 1 April 2025; xi) Mr Burke’s second statement dated 7 April 2025; xii) the first witness statement of Stefan Hartweg dated 2 April 2025; xiii) the first witness statement of Elizabeth Wilkerson dated 1 April 2025.

Injunctive relief

[6]The relief sought by each party is set out in a composite draft Order handed up to the Court on 8 April 2025. The issues that arise are: i) the terms of the order for delivery up and destruction in respect of the mainframe and the ICA Programs licensed to the Second Defendant under the ICA; ii) whether the Court should grant any injunctive relief, prohibiting the First, Second and/or Sixth Defendants from marketing or selling the SDM and requiring them to terminate all existing contracts for the sale of, licensing of, or any services relating to, the SDM; iii) whether the Court should grant any injunctive relief, prohibiting the First, Second and/or Sixth Defendants from using or relying on any information derived from breach of the ICA; iv) whether the Court should order notification requirements in respect of other licences for IBM mainframe software. i). ICA Programs[7]It is common ground (as set out in the Defendants’ skeleton as to the form of order at paragraph 18) that the Second Defendant will submit to an order not to make any further use of the ICA Programs and for delivery up/destruction of the ICA Programs and associated equipment, subject to preservation of all materials pending final disposal of the proceedings in this jurisdiction and the proceedings in Texas, USA. Further, it is agreed that the Second Defendant should be permitted to instruct its solicitors to carry out and facilitate searches and disclosure for the purpose of such proceedings. Mr Liebenberg, Senior Solutions Engineer of the Second Defendant (formerly Quality Assurance Engineer of the Third Defendant), set out in his witness statement the steps taken to decommission the mainframe, data and other infrastructure, now held by Azamour Solutions Limited. Paragraph 2 of the draft Order is agreed, subject to the following points.[8]First, the definition of “ICA Program” is not agreed. In line with the findings in the Judgment at [161]-[175], Paragraph 1(1) of the Order should read:
““ICA Program” shall mean any program in the Agreed List of ICA Programs licensed to the Second Defendant annexed to this Order, including, for the avoidance of doubt, any constituent part thereof.”
[9]Second, the parties disagree on the words used in Paragraph 2(3). The words “the aforesaid” (and not “these”) should be inserted before “proceedings” in lines 1 and 5 to clarify that reference is to the proceedings defined in Paragraph 2(1).[10]In line with the findings of wrongful procurement of breach in the Judgment at [845]-[936], particularly in circumstances where the Second Defendant has not yet delivered up all copies of ICA Programs, Paragraph 3 of the Order should read:
“Each of the First and Sixth Defendants shall be prohibited from procuring directly or indirectly any further use by the Second Defendant of any ICA Program.”
[11]Following the findings of technical breaches in the Judgment (see summary at [838]-[844]) and termination of the ICA at [980]-[987], I reject the Defendants’ submission that the scope of the orders for delivery up of the ICA Programs should be limited to those parts that were the subject of the transfer breaches or await 90 days after the final disposal of the UK and US proceedings. The definition of “Relevant Material” in Paragraph 1(2) should be deleted and Paragraph 4 of the Order should read:
“Each of the First Defendant, Second Defendant and Sixth Defendant shall by 16 July 2025 deliver up to the Claimant, or instruct Azamour (or another independent third-party custodian agreed by the parties or determined by the Court if not agreed) to destroy, all copies of any ICA Program in their possession or control, save that: (1) Destruction of ICA Programs by the Second Defendant is subject to paragraph 2 above. (2) Each of the First and Sixth Defendants may provide a copy of any ICA Program in their possession or control to Azamour (or another independent third-party custodian agreed by the parties or determined by the Court if not agreed) for safekeeping, to be held on the same basis as the Archive Copies are held as set out in paragraph 2 above.”
[12]Given the nature and extent of the technical breaches found, the period over which they occurred and the findings of deliberate concealment in the Judgment at [1022]-[1072], the Claimant is entitled to an order that the destruction of copies of ICA Programs should be supervised by an independent forensic IT firm as set out in its draft of Paragraph 5 of the[13]There is agreement in principle that there should be certificates confirming compliance with the order for destruction. Given that there has been a ten-week trial at which all parties had full opportunity to address any relevant factual inquiries, I consider that the additional order sought by the Claimant, requiring further information as to any others who possess, or have possessed, the ICA Programs is unnecessary, potentially oppressive and insufficiently clear. Paragraph 6 of the Order should read: “Each of the First Defendant, Second Defendant and Sixth Defendant shall, within 30 days after destruction as set out in paragraphs 4 and 5 above, provide a sworn statement (in the case of the corporate defendants, acting through an appropriate officer or director) confirming compliance with paragraph 4 above and providing a full list of all ICA Programs delivered up or destroyed (as the case may be).” ii). SDM[14]The Claimant seeks injunctive relief against the First, Second and Sixth Defendants, prohibiting marketing, sale or dissemination of the SDM, to protect the Claimant against future harm, to deprive those Defendants of the fruits of their unlawful conduct and to prevent further ongoing breaches of provisions of the ICA which survive termination.[15]The Defendants’ position is that the proposed injunction in relation to the SDM is disproportionate in circumstances where the agreed expert evidence was that source code from the ICA Programs was not reproduced in the SDM. No injunctive relief should be granted; alternatively, any order should be limited to the materials found in the Judgment to have been sent by the Second Defendant to the First Defendant in breach of the ICA (“the Relevant Material”) and should not extend to existing customers. Further, they should be permitted to continue to develop, market and sell a modified version of the SDM, that it is said would provide support limited to customer applications that were recompiled from the customer’s source code (“the Remediated SDM”).[16]Section 37(1) of the Senior Courts Act 1981 clarifies that the High Court may by order, whether interlocutory or final, grant an injunction in all cases in which it appears to the court to be just and convenient to do so.[17]There is no challenge to the Court’s jurisdiction over the Defendants in respect of the dispute.[18]Once jurisdiction is established, the power of the Court to grant injunctions as a matter of principle is unlimited: Convoy Collateral Limited v Broad Idea International Limited [2023] AC 389 (PC) per Lord Leggatt (with whom Lord Briggs, Lord Sales and Lord Hamblen JJSC agreed):
“[52] The proposition asserted by Lord Diplock in The Siskina and Bremer Vulkan on the authority of North London Railway was that an injunction may only be granted to protect a legal or equitable right. There can be no objection to this proposition in so far as it signifies the need to identify an interest of the claimant which merits protection and a legal or equitable principle which justifies exercising the power to grant an injunction to protect that interest by ordering the defendant to do or refrain from doing something. In Beddow v Beddow (1878) 9 Ch D 89, 93, Jessel MR expressed this well when he said that, in determining whether it would be right or just to grant an injunction in any case, “what is right or just must be decided, not by the caprice of the judge, but according to sufficient legal reasons or on settled legal principles”
. As described above, however, within a very short time after The Siskina was decided, it had already become clear that the proposition cannot be maintained if it is taken to mean that an injunction may only be granted to protect a right which can be identified independently of the reasons which justify the grant of an injunction. … [57] As an exposition of the court’s equitable power to grant injunctions, it would be difficult to improve on the following passage in Spry, Equitable Remedies, 9th ed (2014), at p 333: ” “The powers of courts with equitable jurisdiction to grant injunctions are, subject to any relevant statutory restrictions, unlimited. Injunctions are granted only when to do so accords with equitable principles, but this restriction involves, not a defect of powers, but an adoption of doctrines and practices that change in their application from time to time. Unfortunately there have sometimes been made observations by judges that tend to confuse questions of jurisdiction or of powers with questions of discretions or of practice. The preferable analysis involves a recognition of the great width of equitable powers, an historical appraisal of the categories of injunctions that have been established and an acceptance that pursuant to general equitable principles injunctions may issue in new categories when this course appears appropriate.” This passage (stated in the same terms in an earlier edition of Spry’s book) was quoted in Broadmoor Special Hospital Authority v Robinson [2000] QB 775, para 20, by Lord Woolf MR, who described it as succinctly summarising the correct position. It was again quoted and endorsed as a correct statement of the law by Kitchin LJ (with whom Briggs and Jackson LJJ agreed on this point) in Cartier [2017] Bus LR 1, para 47. The Board would likewise endorse it.” “The powers of courts with equitable jurisdiction to grant injunctions are, subject to any relevant statutory restrictions, unlimited. Injunctions are granted only when to do so accords with equitable principles, but this restriction involves, not a defect of powers, but an adoption of doctrines and practices that change in their application from time to time. Unfortunately there have sometimes been made observations by judges that tend to confuse questions of jurisdiction or of powers with questions of discretions or of practice. The preferable analysis involves a recognition of the great width of equitable powers, an historical appraisal of the categories of injunctions that have been established and an acceptance that pursuant to general equitable principles injunctions may issue in new categories when this course appears appropriate.”[19]Of course, even where the court has power to grant an injunction, such relief is equitable and always discretionary, based on established principle: Wolverhampton CC v London Gypsies and Travellers [2024] AC 983 (SC) per Lord Reed PSC, Lord Briggs JSC and Lord Kitchin (with whom Lord Hodge DPSC and Lord Lloyd-Jones JSC agreed):
“[19] Like any judicial power, the power to grant an injunction must be exercised in accordance with principle and any restrictions established by judicial precedent and rules of court. Accordingly, as Lord Mustill observed in Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334, 360-361: “Although the words of section 37(1) [of the 1981 Act] and its forebears are very wide it is firmly established by a long history of judicial self-denial that they are not to be taken at their face value and that their application is subject to severe constraints.”
Nevertheless, the principles and practice governing the exercise of the power to grant injunctions need to and do evolve over time as circumstances change. As Lord Scott observed in Fourie v Le Roux at para 30, practice has not stood still and is unrecognisable from the practice which existed before the 1873 Act. … [21] It has often been recognised that the width and flexibility of the equitable jurisdiction to issue injunctions are not to be cut down by categorisations based on previous practice. In Castanho v Brown & Root (UK) Ltd [1981] AC 557, for example, Lord Scarman stated at p 573, in a speech with which the other Law Lords agreed, that “the width and flexibility of equity are not to be undermined by categorisation”. To similar effect, in South Carolina Insurance Co v Assurantie Maatschappij “De Zeven Provincien” NV [1987] AC 24, Lord Goff of Chieveley, with whom Lord Mackay of Clashfern agreed, stated at p 44:
“I am reluctant to accept the proposition that the power of the court to grant injunctions is restricted to certain exclusive categories. That power is unfettered by statute; and it is impossible for us now to foresee every circumstance in which it may be thought right to make the remedy available.”
In Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd (para 19 above), Lord Browne-Wilkinson, with whose speech Lord Keith of Kinkel and Lord Goff agreed, expressed his agreement at p 343 with Lord Goff’s observations in the South Carolina case. In Mercedes Benz AG v Leiduck [1996] AC 284, 308, Lord Nicholls of Birkenhead referred to these dicta in the course of his illuminating albeit dissenting judgment, and stated:
“As circumstances in the world change, so must the situations in which the courts may properly exercise their jurisdiction to grant injunctions. The exercise of the jurisdiction must be principled, but the criterion is injustice. Injustice is to be viewed and decided in the light of today's conditions and standards, not those of yester-year.” [22] These dicta are borne out by the recent developments in the law of injunctions which we have briefly described. They illustrate the continuing ability of equity to innovate both in respect of orders designed to protect and enhance the administration of justice, such as freezing injunctions, Anton Piller orders, Norwich Pharmacal orders and Bankers Trust orders, and also, more significantly for present purposes, in respect of orders designed to protect substantive rights, such as internet blocking orders. That is not to undermine the importance of precedent, or to suggest that established categories of injunction are unimportant. But the developments which have taken place over the past half-century demonstrate the continuing flexibility of equitable powers, and are a reminder that injunctions may be issued in new circumstances when the principles underlying the existing law so require.” “Although the words of section 37(1) [of the 1981 Act] and its forebears are very wide it is firmly established by a long history of judicial self-denial that they are not to be taken at their face value and that their application is subject to severe constraints.” “I am reluctant to accept the proposition that the power of the court to grant injunctions is restricted to certain exclusive categories. That power is unfettered by statute; and it is impossible for us now to foresee every circumstance in which it may be thought right to make the remedy available.” “As circumstances in the world change, so must the situations in which the courts may properly exercise their jurisdiction to grant injunctions. The exercise of the jurisdiction must be principled, but the criterion is injustice. Injustice is to be viewed and decided in the light of today's conditions and standards, not those of yester-year.”
[20]In Wolverhampton the Supreme Court considered and rejected the principle relied on by the Defendants, that an injunction must be founded on an existing cause of action against the person enjoined, by reference to Lord Diplock in Siskina at p. 256:
“[43] There has been a gradual but growing reaction against that reasoning (which Lord Diplock himself recognised was too narrowly stated: British Airways Board v Laker Airways Ltd [1985] AC 58, 81) over the past 40 years, culminating in the recent decision in Broad Idea [2023] AC 389, cited in para 17 above, where the Judicial Committee of the Privy Council rejected such a rigid doctrine and asserted the court’s governance of its own practice. It is now well established that the grant of injunctive relief is not always conditional on the existence of a cause of action.”
[21]When considering whether to exercise its power to grant injunctive relief, the Court must have regard to factors such as the adequacy of damages and utility of the order sought. Damages may be awarded in substitution for an injunction: Jaggard v Sawyer [1995] 1 WLR 269 (CA) per Millett LJ at pp.284-287. The Court’s power to award damages in substitution of an injunction involves an exercise of discretion, which as a matter of principle, should not be fettered: Coventry v Lawrence [2014] AC 822 per Lord Neuberger PSC at [101]-[121].[22]In this case, the Claimant has established multiple infringements of its legal rights by the First, Second and Sixth Defendants over a period of eight years as set out in the Judgment. Although the Defendants correctly point out that the experts did not find evidence of direct copying of ICA Program code in the SDM, the Court found numerous instances where reverse engineering, misuse of ICA Program code and other breaches of the ICA were used to develop or improve performance of the SDM. As a result of those breaches, the SDM is tainted; any use of the SDM gives rise to ongoing infringement of the Claimant’s rights under the ICA (fruits of breach of the licence terms and the surviving restrictions in clause 4) and/or damage by way of lost customers. The stated purpose of the SDM is to disrupt the mainframe market and entice mainframe customers to transfer their mainframe applications to the SDM. In those circumstances it would not be just to confine the Claimant to its remedy in damages, which would be very difficult to ascertain and quantify.[23]The evidence in support of the suggestion by Mr Rockmann, that the modules relating to material sent by the Second Defendant to the First Defendant in breach of the ICA (“the Relevant Modules”) could be removed from the SDM to produce alternative software that will not support any mainframe applications compiled and link-edited on a mainframe with IBM compilers (the Remediated SDM), is woefully inadequate. Mr Jaeger’s account is a very high-level summary and has been produced too late to enable the Claimant to consider and respond to the technical efficacy of the proposal. Having rejected in the Judgment Mr Jaeger’s evidence as to the sources of information he claimed were used to develop and improved the SDM, his unsupported, bare assertion that the fruits of the infringement will be removed is not a credible proposal. Even if the Defendants produced evidence supporting their assertion that a large proportion of the SDM is unquestionably non-infringing, it would still be incumbent on them to establish how the tainted parts could be separated from the untainted parts and how that process could be verified to the Claimant’s satisfaction. The current proposal that the First, Second and/or Sixth Defendants should be able to market and sell the Remediated SDM without any verification or supervision does not provide any security for the Claimant, which has established its case following trial.[24]I reject the Defendants’ suggestion that any injunction in relation to the SDM should be limited to the United Kingdom. The acts of reverse engineering took place in the UK but the resulting misuse of ICA Program code took place within and outside the UK. Further, the restrictions on marketing and selling the SDM would be circumvented easily if those Defendants could simply operate with impunity from Switzerland or another jurisdiction.[25]For those reasons, it is just and proportionate to grant the Claimant an order prohibiting marketing or sale of the SDM, or any services derived from or reliant on the SDM, as set out in Paragraph 7(1) of the draft Order, and for an order prohibiting dissemination of the SDM to others as set out in Paragraph 7(2).[26]It follows that the Claimant is entitled to the relief set out in Paragraphs 7(3) and (4) of the draft Order, requiring the Defendants to terminate existing contracts for the sale of, licensing of, or any services relating to, the SDM and provide a statement verifying compliance. However, having regard to the evidence submitted by Mr Rockmann and Mr Hartweg in respect of existing customers who would suffer disruption to their businesses if their contracts were to be terminated, it would be appropriate to provide for a run-off period of 10 months from the date on which the injunction is effected (see below regarding the application for a stay pending any appeal).[27]The First, Second and Sixth Defendants should have liberty to apply to vary Paragraph 7 of the draft Order in the event of a material change in circumstances as set out in Paragraph 8 of the draft Order. iii). Information derived from ICA breaches[28]I consider that it is just and proportionate to grant the relief set out in Paragraph 9 of the draft Order, prohibiting the First, Second and Sixth Defendants from using or relying on information derived from breaches of the ICA. This order is appropriate given the findings of liability against those Defendants. It is a matter for those Defendants to ensure that they do not use or rely on such information having breached the terms of the ICA and/or procured such breaches. iv). Notification requirements[29]I decline to order the notification provisions sought by the Claimant in Paragraphs 10 and 11 of the draft Order, regarding other existing or future agreements in relation to the licensing of IBM mainframe software. Such orders are unnecessary, overreaching in effect and oppressive. Disposal and Quantum[30]Disposal of the claim should be as set out in the draft Order without the Claimant’s additions.[31]The Claimant shall serve full particulars of its claimed loss in a statement of case on quantum by 30 May 2025.[32]The parties shall liaise with the Court to fix a case management conference for the purpose of giving directions for the Quantum Trial.

Declaratory relief

[33]CPR 40.20 provides that the Court may make binding declarations whether or not any other remedy is claimed. The power to grant declaratory relief is discretionary; when considering whether to grant such relief, the Court should take into account justice to the claimant, justice to the defendant, whether the declaration would serve a useful purpose and whether there are any other special reasons why the court should or should not grant the declarations: FSA v Rourke [2001] EWHC 704 per Neuberger J at pp.5-6; Office Depot International (UK) Ltd v UBS Asset Management (UK) Ltd [2018] EWHC 1494 (TCC) per O’Farrell J at [46]-[49]; BNY Mellon v Essar Steel India Ltd [2018] EWHC 3177 (Ch) per Marcus Smith J at [21].[34]Both parties pleaded declaratory relief as to termination of the ICA. The declaration sought by the Claimant, namely, that it lawfullyterminated the ICA by reason of the notice of termination dated 24 February 2021, logically follows from the Court’s finding in respect of a disputed issue between the parties. Therefore, there is no injustice to the Defendants. It serves a useful purpose in providing a public statement as to the Claimant’s right to terminate the ICA, particularly for any potential or existing customers of the Defendants. On that basis, the Court considers that it would be appropriate to grant that declaration.[35]The Court declines to grant the other declarations sought by the Claimant. The declaration as to deliberate and systematic breaches of the ICA lacks clarity and the declaration as to the consequence of termination is unnecessary.

Costs

[36]The Claimant’s position is that it is the successful party and, as such, it seeks an order that the First, Second and Sixth Defendants pay the Claimant’s costs of the liability proceedings on a joint and several basis, such costs to be subject to detailed assessment on the indemnity basis if not agreed.[37]The Defendants’ position is that the Claimant’s costs should be reduced to reflect the issues which it lost and the Sixth Defendant should not be liable for costs prior to the date of his joinder. Further, having lost its claims against the Third, Fourth and Fifth Defendants, the Claimant should pay the costs of the Third Defendant on the standard basis, and the costs of the Fourth and Fifth Defendants on the indemnity basis.[38]The Court has discretion as to whether costs are payable by one party to another, the amount of those costs and when they are to be paid: CPR 44.2(1).[39]The general rule is that the unsuccessful party will be ordered to pay the costs of the successful party, although the Court may make a different[40]CPR 44.2(4) provides that in deciding what (if any) order to make about costs, the Court will have regard to all the circumstances, including:(a) the conduct of all the parties; and(b) whether a party has succeeded on part of its case, even if that party has not been wholly successful.[41]CPR 44.2(5) provides that the conduct of the parties includes:(a) conduct before, as well as during, the proceedings and in particular the extent to which the parties followed any relevant pre-action protocol;(b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;(c) the manner in which a party has pursued or defended its case or a particular allegation or issue; and(d) whether a claimant who has succeeded in the claim, in whole or in part, exaggerated its claim.[42]The Court may make an issue-based costs order but, before doing so, will consider whether it is practicable to make an order limiting the costs payable to a proportion of the overall costs: CPR 44.2(6) & (7). i). Claimant’s costs[43]The Claimant obtained substantial findings of fact and law in its favour against the First, Second and Sixth Defendants. The Claimant should be regarded as the successful party against each of those Defendants and is entitled to recover its costs against them.[44]The Claimant abandoned or failed to prove its case in respect of 11 out of 51 pleaded technical breaches. The fact that a party has not won on every issue is not, of itself, a reason for depriving that party of part of its costs. In civil litigation, especially complex litigation such as the present case, any winning party is likely to fail on one or more issues in the case, as observed by Coulson J (as he then was) in: Murphy & sons Ltd v Johnston Precast Ltd [2008] EWHC 3104 (TCC) at [10].[45]In this case, the Claimant won on every category of reverse engineering pleaded. It also succeeded on the key contract construction arguments, unlawful procurement of breach, unlawful means conspiracy, contract termination and limitation issues. In those circumstances, it would not be appropriate to make an issue-based costs order or a proportionate reduction in costs merely to reflect the fact that the Claimant was not successful on every last issue.[46]The Claimant seeks an order that the First, Second and Sixth Defendants should be jointly and severally liable for the costs of the proceedings. The Defendants submit that each of those Defendants should be liable for a proportion of the costs and that the Sixth Defendant should only be liable for the costs of the claim against him from the date of his joinder in November 2023.[47]The claims for breach of the ICA and procurement of such breaches against the First, Second and Sixth Defendants were intertwined and found to arise out of an unlawful means conspiracy. The Sixth Defendant adopted in his pleaded Defence the substantive defences raised by the other Defendants. They presented a common position on the key issues at trial, relying on the same factual and expert evidence. Therefore, a joint and several costs order against each of the First, Second and Sixth Defendants is appropriate. ii). Defendants’ costs[48]The claims against the Third, Fourth and Fifth Defendants failed. The Defendants seek an order that the Claimant should be liable for the costs of those Defendants. That is opposed by the Claimant.[49]The Third Defendant is not entitled to any costs order in its favour. It was a wholly-owned subsidiary of the First Defendant, it shared its legal representation and did not put forward any separate position in its pleaded Defence, evidence or submissions from that relied on by the First, Second and Sixth Defendants. Additionally, as noted in the Judgment, the evidence and submissions in relation to the Third Defendant were sparse, indicating that negligible costs were incurred in its defence.[50]The Fourth and Fifth Defendants each prepared separate Defences but adopted and repeated the substantive Defences of the First to Third Defendants. They shared the same legal team and presented a common position with the other Defendants. At trial they relied on the same factual and expert evidence as the other Defendants. The Fourth and Fifth Defendants each relied on an additional, discrete defence, namely, Said v Butt, based on their role as directors in the Second Defendant, a defence on which they were successful. As successful Defendants, they do not have to share any liability for the Claimant’s costs in the litigation. However, the costs properly attributed to the Said v Butt issue would have been relatively minimal. Furthermore, they were far outweighed by the costs of the substantive issues on which findings were made against the Fourth and Fifth Defendants, including specific breaches of the ICA, unlawful procurement, unlawful means conspiracy, termination of the ICA and deliberate concealment, issues that gave rise to liability on the part of the other Defendants. In those circumstances, it would not be appropriate to make any costs order in their favour, or to deprive the Claimant of a proportion of its costs against those other Defendants.[51]For the avoidance of doubt, the Claimant is entitled to an order that the First, Second and Sixth Defendants shall be jointly and severally liable to pay the Claimant’s costs of the proceedings in relation to issues of liability with such costs to be subject to detailed assessment if not agreed. iii). Basis of assessment[52]The Claimant seeks an order that its costs should be subject to a detailed assessment on the indemnity basis relying on the following factors: i) The Defendants deliberately concealed the facts giving rise to this claim over a decade of development of the SDM from around 2013. ii) The Second Defendant’s failure to comply with the Claimant’s audit request was improper (a breach of the ICA) and resulted in the scope of disclosure and the factual investigations in the case being unnecessarily onerous and extensive in scale. iii) The nature and extent of the underlying wrongdoing which brought about the need for these proceedings included(i) breaches which were found to be deliberate and “systematic and widespread”: see Judgment [914];(ii) an unlawful means conspiracy between the Defendants; and(iii) conduct which formed part of a pattern of behaviour on the part of Mr Moores and his companies against IBM. iv) The Defendants consistently sought to frustrate the disclosure of documents which would reveal their breaches. v) The Defendants adopted an attritional and scorched earth approach to these proceedings, with the Defendants contesting every conceivable point, however unmeritorious. vi) As against Mr Moores, the Court is invited to have regard to his (double) deletion of emails within his Gmail account, which (although not addressed in the Judgment) was addressed in the Claimant’s written closing at section F2 and is in the Claimant’s submission relevant to the question of costs.[53]The Court retains a wide discretion to order costs to be assessed on the indemnity basis, where the conduct of the relevant party is unreasonable to a high degree or otherwise out of the norm: Excelsior Commercial and Industrial Holdings Ltd v Salisbury Hammer Aspeden & Johnson [2002] EWCA Civ 879 per Lord Woolf LCJ at [31] and Waller LJ at [34]-[39].[54]In this case, the first three factors relied on by the Claimant simply concern the basis for the Defendants’ underlying liability. Although the court has found against the First, Second and Sixth Defendants, including deliberate concealment, audit failure and multiple breaches of the ICA, most of the arguments deployed in defence could not be said to be so unreasonable as to take the Defendants’ conduct outside the norm. The last three factors relied on by the Claimant concern the approach taken by the Defendants to the litigation. This was hard-fought, technically complex litigation, in which numerous points were taken on both sides, both sides were critical of the other’s disclosure and every point was argued to the bitter end. Against that backdrop, it would not be fair to penalise one side over the other and I do not consider that an indemnity basis of costs is appropriate. iv). Payment on account of costs[55]The Claimant’s costs total approximately £45.3 million. The Claimant seeks a payment on account of its costs. It is agreed for the purposes of the interim payment analysis that just over £2.7 million approximately is already the subject of other cost awards made earlier in the proceedings. That leaves a balance of approximately £42.5 million. The Claimant seeks an on account payment of 55%, a sum of just over £23 million.[56]The Defendants accept that the Claimant is entitled to a reasonable amount as a payment on account but submits that the amount is excessive and should be in the region of £17 million: i) The information provided by the Claimant is inadequate and deprives the Defendants of a proper opportunity to scrutinise the costs; in particular, there is no breakdown of the costs in phases and scant description of the work carried out. ii) There has been no deduction of the costs relating to the unsuccessful claims against the Third, Fourth and Fifth Defendants, which are estimated by Ms Scott to be £6.1 million, based on the costs incurred by the Defendants. iii) There is a high degree of uncertainty as to what may be recovered on detailed assessment; the Defendants would wish to challenge items such as solicitors’ hourly rates, the size of the legal teams and deployment, experts’ fees and counsel’s fees.[57]CPR 44.2(8) provides that where the Court orders a party to pay costs subject to detailed assessment, it will order that party to pay a reasonable sum on account of costs, unless there is good reason not to do so.[58]Where the amount of costs is to be assessed on the standard basis: i) the Court will only allow costs which have been reasonably incurred and are reasonable in amount, resolving any doubt in favour of the paying party: CPR 44.3(1)&(2); and ii) the Court will only allow costs which are proportionate to the matters in issue: CPR 44.3(2).[59]In assessing the reasonableness of the incidence and amount of the costs incurred, the Court will have regard to all the circumstances, including the conduct of the parties, the value of the claim, the importance of the matter to the parties, the complexity of the issue, and the skill, time and effort spent on the litigation: CPR 44.4.[60]The court has discretion as to the amount of any order on account of costs. What amounts to a reasonable sum will depend on all the circumstances of the case, taking into account factors such as those identified in Excalibur Ventures v Texas Keystone [2015] EWHC 566 per Clarke LJ:
“[23] What is a reasonable amount will depend on the circumstances, the chief of which is that there will, by definition, have been no detailed assessment and thus an element of uncertainty, the extent of which may differ widely from case to case as to what will be allowed on detailed assessment. Any sum will have to be an estimate. A reasonable sum would often be one that was an estimate of the likely level of recovery subject, as the costs claimants accept, to an appropriate margin to allow for error in the estimation. This can be done by taking the lowest figure in a likely range or making a deduction from a single estimated figure or perhaps from the lowest figure in the range if the range itself is not very broad. [24] In determining whether to order any payment and its amount, account needs to be taken of all relevant factors including the likelihood (if it can be assessed) of the claimants being awarded the costs that they seek or a lesser and if so what proportion of them; the difficulty, if any, that may be faced in recovering those costs; the likelihood of a successful appeal; the means of the parties; the imminence of any assessment; any relevant delay and whether the paying party will have any difficulty in recovery in the case of any overpayment.”
[61]In this case, there has been no costs budgeting and the seven-page costs summary prepared by Mr Pantlin contains a very high-level overview of the general categories and amounts incurred. The criticism made by the Defendants is justified. I do not accept the Defendants’ suggestion that £6.1 million should be assumed to be the irrecoverable costs in respect of the failed claims against the Third, Fourth and Fifth Defendants; as I stated above, I consider such costs to be minimal as a proportion of the overall costs. However, at least some of the other points which the Defendants indicate they would wish to challenge are likely to result in material reductions to the recoverable costs following a detailed assessment.[62]The recoverable costs on a detailed assessment will result in a substantial sum due to the Claimant. Having regard to the size, complexity and duration of the litigation, and the vast amounts of documentary, factual and expert evidence deployed in a ten-week trial, the overall figures identified do not appear to be disproportionate to the claims. The paucity of information available to the Court at this stage indicates that a cautious approach should be taken to a broad-brush assessment of the likely level of recovery of these costs.[63]Taking the above matters into account, I consider that a reasonable sum on account of costs is £20 million. v). Stay and/or staged payments[64]The Defendants seek an order that payment of the interim payment on account in excess of £380,405 (c. USD 500,000) within 21 days should be deferred or stayed until after the final disposal of the appeal. Evidence has been provided by Mr Moores, Mr Burke and Mr Rockmann in support of their position that the First, Second and Sixth Defendants would be unable to pay the interim payment on account, which could lead to insolvency and/or bankruptcy and stifle any appeal.[65]The Claimant opposes that application on the grounds that the evidence of impecuniosity is inherently implausible, there has not been full and frank disclosure, the evidence that has been produced suggests that the Sixth Defendant does have substantial resources and that funds could be borrowed or raised from investors.[66]CPR 44.7 provides that a party must comply with an order for the payment of costs within 14 days of the judgment or order, or such other date as the court may specify.[67]CPR 52.16 provides that unless the appeal court or the lower court orders otherwise, an appeal shall not operate as a stay of any order or decision of the lower court. The Court has an inherent power to stay its order until the Court of Appeal has disposed of an appeal or application for permission to appeal.[68]In Hammond Suddard Solicitors v Agrichem International Holdings Ltd [2002] C.P. Rep. 21 (CA) Clarke LJ stated at [22] that whether the court should exercise its discretion to grant a stay will depend upon all the circumstances of the case, but the essential question is whether there is a risk of injustice to one or both parties if it grants or refuses a stay.[69]Cogent evidence is required but, if a losing party established that an order for payment of costs would stifle an appeal, that would be grounds for a stay pending appeal: Goldtrail Travel Ltd v Onur Air Tasimacilik AS [2017] 1 WLR 3014 (SC) at [15]-[18] & [23]-[24].[70]The evidence produced by the Defendants indicates that they do not have the funds immediately available to satisfy the interim costs payment. However, the Sixth Defendant has substantial assets that could be realised in order to meet the payment, or used to raise additional funding (even allowing for identified existing liabilities), although I accept that it could take some time to raise the necessary funds. In those circumstances, I consider that it would be appropriate to allow the Defendants additional time to make the payment, to avoid the injustice of stifling any appeal. I recognise that the Claimant will suffer from being kept out of sums that I have found are due but that is the lesser injustice in this case, particularly having regard to the overall duration of these proceedings, commenced in 2021.[71]For those reasons, I order that the First, Second and Sixth Defendants should pay £20 million on account of costs by 1 October 2025.

Application for permission to appeal

[72]The Defendants seek permission to appeal in respect of the draft grounds dated 3 April 2025. The draft identifies 49 grounds, with 165 separate paragraphs of alleged errors in the Judgment and is supported by a skeleton running to 41 pages.[73]The test for permission to appeal is set out in CPR 52.6, namely, where: i) the court considers that the appeal would have a real prospect of success; or ii) there is some other compelling reason for the appeal to be heard.[74]I refuse permission to appeal because the grounds do not identify any errors of law or principle, or findings of fact that were not open to the Court on the evidence. i) Grounds 1 to 7 in Section (A) raise alleged errors in the Court’s understanding or application of the Software Directive but fail to identify specific errors of law or principle in the Judgment, which sets out the relevant legislation, case law and principles at paragraphs [214] to [270]. The reference to the recent Sony v Datel judgment of the CJEU does not assist because it is not binding, was not relied on by the parties, and does not directly address the issues before the Court. ii) Grounds 8 to 15 in Section (B) seek to challenge points of construction of the ICA but do not identify any error in the Court’s approach or analysis. The material terms of the ICA are at paragraphs [64] to [75] and the analysis is at paragraphs [147] to [272] of the Judgment. iii) Grounds 16 to 35 in Sections (C), (D), (E), (F) and (G) are an attempt to challenge findings of fact on the technical breaches made by the Court having assessed the credibility and reliability of the witnesses who gave evidence against the contemporaneous documents deployed during the trial and the expert evidence. The technical breaches are considered and determined at paragraphs [273] to [844] of the Judgment. iv) Grounds 36 to 38 in Section (H) are a further attempt to challenge findings of fact as to knowledge and intention of the Defendants, based on the Court’s assessment of the credibility and reliability of the witnesses who gave evidence at trial. The case on unlawful procurement of breach is considered and determined at paragraphs [845] to [936] of the Judgment. v) Grounds 39 to 41 in Section (I) are a further attempt to challenge findings of fact as to the combination, knowledge and intention of the Defendants, based on the Court’s assessment of the credibility and reliability of the witnesses who gave evidence at trial. The case on unlawful means conspiracy is considered and determined at paragraphs [937] to [960] of the Judgment. vi) Grounds 42 in Section (J) and 46 in Section (K) seek to challenge the Court’s finding that there was damage for the purpose of unlawful means conspiracy at paragraphs [959] and [1119] of the Judgment but fail to identify any error of principle or law. vii) Ground 43 in Section (K) seeks to challenge the Court’s construction of clause 1.11.4 of the ICA but the arguments made were considered in the Judgment and rejected at paragraphs [991] to [1007]. The Defendants have not identified any authority in which a court at first instance, or on appeal, reached a different conclusion on a similar issue of construction. viii) Grounds 44 and 45 in Section (K) seek to challenge the Court’s findings of fact on deliberate concealment and knowledge, considered at paragraphs [1013] to [1118] of the Judgment, but do not identify any error in the legal principles set out and fail to engage with the detailed evidence set out in that part of the Judgment in support of the findings. ix) Grounds 47 to 49 in Section (L) seek to challenge the Court’s findings of fact on the audit and termination issues considered at paragraphs [961] to [987] of the Judgment but do not identify any error of principle or law.[75]The lengthy draft grounds of appeal are an attempt to re-litigate each and every substantive issue in the case by re-opening every adverse finding, in circumstances where the Court applied established principles of law to the facts of the case as determined on the factual and expert evidence following the 33-day trial.[76]It is accepted that the Software Directive is of general interest to the IT and IP industries but the draft grounds do not identify a significant point of legal principle that provides another compelling reason for the appeal to be heard.[77]For the above reasons, the appeal has no real prospect of success and permission is refused.

Stay

[78]The Defendants seek a stay of:(a) the orders for delivery up/destruction in respect of the ICA Programs; and(b) the orders for injunctive relief in respect of the SDM, pending final disposal of an appeal by any of the Defendants to the Court of Appeal (and any further appeals).[79]The general rule is that an application for permission to appeal does not act as an automatic stay on execution but the Court has power to grant interim protection to a party that has been unsuccessful at trial pending an appeal. Such stays are not granted automatically but may be granted where solid grounds are shown and subject to conditions in appropriate cases: Novartis AG v Hospira UK Ltd [2013] EWCA Civ 583 per Floyd LJ at [30]-[32] and HTC Corporation v Nokia Corporation (No.2) [2014] RPPC 31 (CA) per Patten LJ at [8], both of which adopted the principles for the grant or stay of injunctive relief pending appeal set out by Buckley LJ in Minnesota Mining and Manufacturing Co v Johnson & Johnson Ltd [1976] RPC 671 at p 676:
“It is not in dispute that where a plaintiff has at first instance established a right to a perpetual injunction, the court has a discretion to stay the operation of that injunction pending an appeal by the defendant against the judgment. On what principles ought such a discretion to be exercised? The object, where it can be fairly achieved, must surely be so to arrange matters that, when the appeal comes to be heard, the appellate court may be able to do justice between the parties, whatever the outcome of the appeal may be. Where an injunction is an appropriate form of remedy for a successful plaintiff, the plaintiff, if he succeeds at first instance in establishing his right to relief, is entitled to that remedy upon the basis of the trial judge’s findings of fact and his application of the law. This is, however, subject to the defendant’s right of appeal. If the defendant in good faith proposes to appeal, challenging either the trial judge’s findings or his law, and has a genuine chance of success on his appeal, the plaintiff’s entitlement to his remedy cannot be regarded as certain until the appeal has been disposed of. In some cases the putting of an injunction into effect pending appeal may very severely damage the defendant in such a way that he will have no remedy against the plaintiff if he, the defendant, succeeds on his appeal. On the other hand, the postponement of putting an injunction into effect pending appeal may severely damage the plaintiff. In such a case a plaintiff may be able to recover some remedy against the defendant in the appellate court in respect of his damage in the event of the appeal failing, but the amount of this damage may be difficult to assess and the remedy available in the appellate court may not amount to a complete indemnity. It may be possible to do justice by staying the injunction pending the appeal, the plaintiff’s position being suitably safeguarded. On the other hand it may, in some circumstances, be fair to allow the injunction to operate on condition that the plaintiff gives an undertaking in damages or otherwise protects the defendant’s rights, should he succeed on his appeal. In some cases it may be impossible to devise any method of ensuring perfect justice in any event, but the court may nevertheless be able to devise an interlocutory remedy pending the decision of the appeal which will achieve the highest available measure of fairness. The appropriate course must depend upon the particular facts of each case.”
[80]The principles to be applied were summarised by Floyd LJ in Novartis at [41] and also set out by Patten LJ in HTC at [9]:
“(i) The court must be satisfied that the appeal has a real prospect of success. (ii) If the court is satisfied that there is a real prospect of success on appeal, it will not usually be useful to attempt to form a view as to how much stronger the prospects of appeal are, or to attempt to give weight to that view in assessing the balance of convenience. (iii) It does not follow automatically from the fact that an interim injunction has or would have been granted pre-trial that an injunction pending appeal should be granted. The court must assess all the relevant circumstances following judgment, including the period of time before any appeal is likely to be heard and the balance of hardship to each party if an injunction is refused or granted. (iv) The grant of an injunction is not limited to the case where its refusal would render an appeal nugatory. Such a case merely represents the extreme end of a spectrum of possible factual situations in which the injustice to one side is balanced against the injustice to the other. (v) As in the case of the stay of a permanent injunction which would otherwise be granted to a successful claimant, the court should endeavour to arrange matters so that the Court of Appeal is best able to do justice between the parties once the appeal has been heard.”
[81]In this case, the Court has refused the Defendants permission to appeal on the basis that the appeal does not have a real prospect of success. Therefore, the starting point is that the Claimant is entitled to the benefit of the injunctive relief notwithstanding the Defendants’ stated intention to seek permission from the Court of Appeal. However, it is not conclusive and does not fetter the Court’s power to grant a stay to hold the ring pending the Defendants’ application for permission to appeal in the Court of Appeal. This Court must assess all the circumstances of the case, including the hardship that would be suffered by each side if the stay is refused or granted, so that the Court of Appeal is in a position to do justice between the parties following the permission hearing and/or substantive appeal hearing.[82]The injunctive relief that is ordered in respect of the SDM at Paragraph 7 of the draft Order will have a devastating impact on the business of the First Defendant, as it will undermine its financial viability, business strategy and market base. It will also cause disruption to existing customers of the First Defendant who currently have licences to use the SDM. In contrast, although the Claimant will be deprived of the injunctive relief for a further period of time, it will have the benefit of the Judgment and declaratory relief to support its market position. The application for permission to appeal is likely to be considered within a reasonable period. If there is no merit in any of the appeal grounds, the application will be dismissed and the injunction implemented; if permission is granted, the balance will lie in continuing the stay.[83]For those reasons, the injunctive relief set out in Paragraph 7 of the draft Order shall be subject to a stay pending the disposal of any appeal by any of the Defendants to the Court of Appeal, or further order by the Court of Appeal.[84]The delivery up / destruction orders set out in Paragraphs 2 to 6 of the draft Order already have built-in safeguards to preserve the materials and allow use in the ongoing proceedings. Therefore, no separate stay is required in order to do justice between the parties.[85]The prohibition on using information derived from breaches of the ICA set out in Paragraph 9 of the draft Order is separate from, and does not impinge on, marketing, selling or dissemination of the SDM. Therefore, no separate stay is required in order to do justice between the parties.

Order

[86]The Claimant is directed to draw up a revised draft of the Order to reflect the above rulings within 7 days of the hand down of this Judgment.

Order

“The destruction of copies of ICA Programs by the First Defendant, Second Defendant and Sixth Defendant shall be supervised by an independent forensic IT firm. The instructions and identity of said firm shall be agreed by the parties or appointed by the Court if not agreed and following submissions by the parties. The costs of said firm shall be borne by the relevant Defendants.” order: CPR 44.2(2).

Cited in 1 later judgment