Mr Justice Hildyard has handed down judgment in the proceedings brought by Hewlett-Packard against Dr Lynch and Mr Hussain arising out of Hewlett-Packard’s acquisition of Autonomy (a FTSE 100 software company) in 2011, having previously released a summary of his conclusions on 28 January 2022. Hewlett-Packard claimed that it was induced into acquiring Autonomy by dishonest statements and omissions in Autonomy’s published information, and other fraudulent misrepresentations made personally by Dr Lynch (the former CEO of Autonomy) and Mr Hussain (the former CFO of Autonomy).
The ten-month trial of the claims concluded in January 2020. The Judge recorded that he believed it to be “amongst the longest and most complex in English legal history”. The parties’ written closing submissions exceeded 5,000 pages in total. The Judgment, excluding schedules and appendices, runs to over 1,200 pages, which the Judge recognised “may well be unparalleled”.
Mr Justice Hildyard found that the Hewlett-Packard claimants had "substantially succeeded", and reached clear conclusions on the civil liability of Dr Lynch and Mr Hussain for fraud under s 90A of the Financial Services and Markets Act 2000 (“FSMA”), common law and the Misrepresentation Act 1967.
The judgment addresses a number of aspects of FSMA that are likely to be of significant interest to practitioners, this being the first case to have come to trial in the English courts that addresses liability under s 90A and Schedule 10A of FSMA. These are addressed in paragraphs 432-539 of the judgment. In particular, the judgment addresses:
1. the concept of “published information” and how that applies to transcripts of earnings calls (paragraphs 449-459);
2. the extent to which an issuer can be liable in respect of statements that were not known to be false by a person discharging managerial responsibility, in circumstances where that person knew that other statements in the published information were false (paragraph 477);
3. the requirements for establishing reliance in claims under s 90A and Schedule 10A of FSMA (in particular where the purchaser of the issued securities is a newly-incorporated SPV), and the so-called “presumption of inducement” that applies in fraud cases (paragraphs 478-516);
4. the extent to which losses can be calculated on a “no transaction” basis, applying the “Smith New Court” measure, which the Judge noted gave rise to “novel and difficult issues” that had not previously been tested (paragraphs 524-539).
The judgment also gives detailed consideration to the test for establishing de facto or shadow directorship and the scope of the fiduciary duties owed by such individuals (paragraphs 3512-3542).
Quantum will be determined in a later judgment.
The judgment is available here.
Laurence Rabinowitz QC, Conall Patton QC, Emma Jones, James Fox and Ben Zelenka Martin appeared for Hewlett-Packard at the trial (together with Patrick Goodall QC and Max Schaefer), instructed by Toby Robinson and Andrew King of Travers Smith LLP.