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

The pleaded case is that LzLabs, LzLabs UK, Mr Cresswell, Mr Rockmann and/or Mr Moores procured the breaches of the ICA. It is alleged that each and every breach by Winsopia of the ICA was undertaken at the direction, instruction or request of LzLabs (with the assistance of LzLabs UK), Mr Cresswell, Mr Rockmann and/or Mr Moores, each of whom knew and intended that the breaches should occur, or were reckless as to the same.

It is alleged that Mr Cresswell and Mr Rockmann are liable for procuring breaches of the ICA by virtue of their capacity as directors of Winsopia. It is said that they knew that Winsopia had acquired an IBM mainframe and entered into the ICA for the purposes of developing and operating the SDM and that Winsopia intended to reverse assemble, reverse compile or otherwise reverse engineer parts of the software or to allow others to do so. It is alleged that it is inconceivable that they did not review the terms of the ICA and appreciate that the proposed activities amounted or would give rise to breach of its obligations, or they were reckless in respect of the same.

Further, it is alleged that Mr Moores, the ultimate beneficial owner of LzLabs, Winsopia and LzLabs UK, exerted control over the corporate defendants, so that they followed his instructions in relation to the development of the SDM. It is said that Mr Moores directed and coordinated the development of the SDM, participating in the detail of its development, testing and marketing. In so doing, Mr Moores gave instructions and took steps that knowingly and intentionally induced and/or facilitated breaches of the ICA.

The allegations of wrongful procurement of breach of the ICA are denied. The defendants’ case is that Winsopia and LzLabs went to considerable lengths to maintain operational separation, to establish and follow formal processes for the exchange of information and documents and to monitor and segregate communications between them, in order to ensure that the provision of services by Winsopia to LzLabs was at all times fully compliant with the ICA.

Reliance is placed by the defendants on the clean room process. The Services Agreement between LzLabs and Winsopia provided that the Codes of Conduct would prevail in all cases and must be complied with by both parties at all times. The Codes of Conduct imposed restrictions to ensure separation of the work by LzLabs and Winsopia and respect for third party intellectual property rights, including restrictions on communications between Winsopia staff and LzLabs, restrictions on access by LzLabs to Winsopia’s premises and the mainframe, and external legal oversight. Pursuant to the DR procedure, a request from an LzLabs developer for information or documents from Winsopia could only be made and responded to via a supervised response procedure. Any response given by Winsopia to such requests was stored and processed in an electronic DR system. Pending review by external lawyers, responses were redacted as necessary, to ensure that they did not contain any materials whose supply to LzLabs would be prohibited by the Code of Conduct, including any ICA Program or part thereof.

The defendants’ case is that they relied reasonably and in good faith on the clean room processes and thereby believed that Winsopia would not breach any of its obligations under the ICA. LzLabs UK did not exist until 23 September 2015 and did not assist Winsopia in relation to the acts giving rise to breach of the ICA. Mr Cresswell believed at all material times that all activities undertaken by Winsopia complied with the terms of the ICA and there was never any activity of which he was aware which he thought might have breached the ICA. Mr Rockmann did not in his capacity as a director and executive officer of Winsopia ever direct, instruct or request Winsopia or any of its employees to engage in any activities that amounted to or gave rise to breaches of the ICA. Mr Moores did not know of or intend any breach of the ICA to occur nor was he reckless about any such breach. He did not instruct or take steps that knowingly and intentionally induced and/or facilitated breaches of the ICA. At all times, Mr Moores understood Winsopia to be acting in compliance with the ICA and the applicable law.

Further, Mr Cresswell and Mr Rockmann each rely by way of defence on the principle in Said v Butt [1920] 3 KB 497, namely: (i) they were officers and/or employees of Winsopia; (ii) they were acting in good faith in the performance of their duties to Winsopia; and (iii) they were acting within the scope of their authority in respect of the activities of Winsopia about which complaint is made.