HT-2021-000363 - [2025] EWHC 532 (TCC)

The pleaded case is that LzLabs UK assisted LzLabs in procuring breaches of the ICA by Winsopia. It is recognised that assisting in a breach of contract can amount to inducement where the defendant joins in with the conduct of the primary contract-breaker so as to make him an accessory to the breaking of the contract: Kawasaki per Popplewell LJ at [23]. The difficulty in this case is that there is very little evidence as to the activity of LzLabs UK in connection with the established technical breaches.

LzLabs UK was incorporated in September 2015 as a wholly owned subsidiary of LzLabs to provide a UK-based LzLabs QA team. Mr Cresswell and Mr Rockmann were appointed as directors. Mr Cresswell explained that there were three teams at LzLabs UK: the sales team, headed up by Mr Gray; the marketing team headed by Dale Vecchio; and the QA team, headed up by Graeme Hollinger. Mr Hollinger reported to Mr Durand, who was based in France, and Mr Durand reported to Mr Cresswell.

The role of the QA team at LzLabs UK was to identify the aspects of the SDM that needed to be tested, write the appropriate tests, supervise their execution and track progress of the same. Initially, LzLabs UK was housed in the same office as Winsopia. Subsequently, LzLabs UK employees were permitted to visit Winsopia’s premises. Although there was a separate office at Winsopia, consisting of meeting rooms which were set aside for LzLabs UK employees, accessed via a separate entrance, there was a common toilet facility that was shared by both companies, as was the common room and coffee station.

There is evidence that strict separation between LzLabs UK and Winsopia was not maintained. On 31 January 2017, in the course of a discussion regarding a response to DR2199 and Mr Bray’s explanation that he did not know how to test the program in question, Mr Viebrock, then a QA engineer at LzLabs UK, stated:

“May have one of the guys slide over and just do a cursory look (over someone's shoulder, of course).”

It is clear from this conversation that Mr Viebrock was aware that it was not permitted for the LzLabs UK employee to work on the Winsopia side but intended to circumvent the rules by looking over the Winsopia employee’s shoulder.

This approach, whereby the distinction between QA staff and developers was not adhered to in practice, was referred to by Mr Bleach of LzLabs UK in his email dated 4 December 2019:

“My understanding of the important - vital - divide between Development and QA is that we in QA never write code which becomes part of SDM. This is what enables me to visit Winsopia every week, enables me to talk them through any problematic DRs (no Legal representative present!), to look over their shoulders as the use z/OS.”

This was echoed by Christian Wehrli of LzLabs, who stated in an e-mail dated 29 March 2019:

“Unfortunately we can't have access to the Winsopia mainframe. And even accessing customer mainframes is a bit tricky. So far the only solution is on site education at customers (that's also how I learnt it BTW), sitting next to the customer and looking over the shoulder.

For educational purposes it's possible to visit Winsopia and have somebody walk through it, you can't just use the mainframe.”

The above exchanges undermine the defendants’ case that there was compliance with the clean room procedures. However, it does not provide support for IBM’s allegation that LzLabs UK induced any breach of contract by Winsopia. Direct communications between LzLabs UK and Winsopia, or looking over the shoulder of Winsopia’s employees whilst they were working, do not without more amount to a breach of the ICA. There are references to LzLabs UK employees, such as Mr Althen and Mr Vitale, in the email exchanges concerning identified scrubbing failures but their role appears to have been concerned to stop the practice, rather than facilitating or intending any breach. I note that a number of the original allegations relating to third party access to the mainframe (including by LzLabs UK QA engineers) were abandoned by IBM or not supported by the factual/expert evidence.

As a result, there is insufficient evidence on which to make a finding that there was persuasion, encouragement or assistance by LzLabs UK which had any causative effect on Winsopia breaching the terms of the ICA. Thus, IBM has failed to establish the required elements of inducement or intention.