Ken MacLean QC and Zoe O’Sullivan, instructed by Nabarro, successfully defended Openbet Retail Limited (formerly Alphameric Leisure Limited) against a claim brought by Matchbet claiming £65 million in damages for the alleged breach of a software development and licensing agreement (“SDLA”). This was a resounding victory in which the defendant succeeded on every issue, including its counterclaim. The judge, Henderson J, described the claim as “dishonest” and brought “in bad faith” and awarded the defendant its costs of the entire action on the indemnity basis.
The defendant, Alphameric, is the market leading supplier of electronic point of sale and display systems (‘EPOS’) to high street betting shops. The claimant, Matchbet, had developed betting exchange software which it hoped to launch on the market in competition with Betfair, but lacked funding. Alphameric agreed to lend Matchbet £250,000 to develop the software in return for an exclusive licence to market the program to its bookmaker customers. The parties worked together to develop and market a prototype based on Alphameric’s in-shop systems, but none of the bookmakers showed any real interest in it. Matchbet purported to terminate the agreement, claiming that Alphameric had repudiated its supposed obligations to “integrate” the software with its own systems and market the resulting product. In fact, disclosure and cross-examination revealed that Matchbet was secretly negotiating with Alphameric’s main commercial competitor and had engineered the termination because it thought that it would get better investment opportunities elsewhere and wanted to free itself from its exclusive commitments to Alphameric.
Henderson J held that the SDLA contained no express terms which required Alphameric to integrate the Matchbet software with its EPOS and display systems or to market the integrated system, and that there was no basis for implying terms to the same effect. The claim therefore failed at the first hurdle, but the judge went on to consider the issues of breach, causation and loss.
The judge held that Alphameric was never in repudiatory breach of the SDLA. On the contrary, it was Matchbet which repudiated the agreement by its “cynical and opportunist” termination, whose purpose was to enable Matchbet to avoid having to repay its loan to Alphameric and to enable it to pursue other opportunities free from its exclusive obligations to Alphameric.
The judge also found that Matchbet had failed to prove that a single bookmaker would have entered into a licence agreement for the Matchbet exchange. The evidence of Matchbet’s betting expert was “profoundly unsatisfactory”. Matchbet was answerable for the shortcomings of its expert, which also justified an award of indemnity costs. By contrast, the evidence of Alphameric’s betting expert was “impressive and helpful”.
The judge also rejected a quantum meruit claim by Matchbet for work done on the betting exchange on the basis that it was “as devoid of merit as the termination itself.” He gave judgment for Alphameric on its counterclaim to recover its loan to Matchbet.
In a highly critical follow-up judgment on costs, Henderson J held that Matchbet’s pursuit of a claim which it knew from the outset had no proper foundation was dishonest and was sufficient of itself to justify an award of indemnity costs. Matchbet had also set out to mislead the court by deliberately suppressing relevant evidence in its Witness Statements, leaving the truth to be elicited in cross-examination. The judge said that the case was a “paradigm case” for ordering Matchbet to pay the costs of the action on the indemnity basis.
Matchbet did not seek permission to appeal.