Tactus Holdings Limited v Philip Mark Jordan & Ors
[2024] EWHC 399 (Comm)
Dr Faramarz Shayan Arani & Ors v Cordic Group Ltd
27 January 2023
[2023] EWHC 95 (Comm)
High Court
A company bought another company's software but found out the software illegally used someone else's data. The court sided with the buyer and made the sellers pay for the problems caused by the illegal data use.
Key Facts
- •Cordic Group purchased the entire issued share capital of Cordic Limited for £10,937,971.
- •Cordic Limited's software, CDS, used an address database partly compiled using Royal Mail's PAF data via Arc en Ciel licences.
- •The dispute centers on whether Cordic Limited used PAF data to create or modify an existing database, breaching the Arc en Ciel licence.
- •Cordic Group alleged fraudulent breach of warranty by the Sellers (Dr Arani, Mr Griffiths, Dr Zolghadr).
- •The SPA contained a clause (6.4.3) exempting time-barred warranty claims if arising from fraudulent acts or wilful misconduct.
- •Cordic Limited entered administration in May 2022.
Legal Principles
Measure of damages for breach of warranty in a share sale agreement is the difference between the Warranty True value and Warranty False value.
Lion Nathan Ltd v C-C Bottlers Ltd [1996] 1 WLR 1438
Valuation of assets should be based on a hypothetical, reasonable willing buyer and seller.
The Hut Group Ltd v Nobahar-Cookson [2014] EWHC 3842 (QB)
Quantum should not be unduly affected by hindsight.
MDW Holdings Ltd v Norvill [2022] EWCA Civ 883
Breach of warranty would arise out of fraud if the Sellers knew warranties were false, gave them without belief in their truth, or were reckless.
Derry v Peek (1889) 14 App Cas 337
Dishonesty is assessed by the standards of ordinary, reasonable people.
Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67
Wilful misconduct requires intentional or reckless wrongdoing.
National Semiconductors (UK) Ltd v UPS Ltd [1996] 2 Lloyd’s Rep 212
Importance of contemporaneous documents, limits of human memory, and utility of cross-examination in fraud cases.
Gestmin SGPCS SA v Credit Suisse (UK) Ltd [2013] EWHC 3560 (Comm); Simetra Global Assets Ltd v Ikon Finance Ltd [2019] EWCA Civ 1413; Armagas Ltd v Mundogas Ltd [1985] 1 Lloyd’s Rep 1
In assessing licence fees payable, the measure of damages reflects hypothetical negotiations between a willing licensor and licensee. Where an established licence fee exists, it's typically taken as the relevant figure.
One Step Support Ltd v Morris-Garner [2018] UKSC 20; General Tire & Rubber Co v Firestone Tyre & Rubber Co Ltd [1975] 1 WLR 819
Outcomes
Cordic Group's Part 20 claim succeeds against all three Sellers.
The court found breaches of warranty, committed fraudulently or with wilful misconduct, due to the Sellers' knowledge of and misleading responses to Royal Mail's inquiries regarding the illegal use of PAF data. The time bar did not apply due to clause 6.4.3.
Damages awarded to Cordic Group: £3.5 million.
This represents the total impairment to the Warranty True value of the shares, calculated by considering historic liability to Royal Mail and future licence costs after applying appropriate discounts for claim and litigation risk.