SCI Games Ltd. v Argonaut Games Plc & Ors

On a summary judgment application, the court asks whether the claim has a real prospect of success. It does not conduct a mini-trial or finally resolve arguable issues of fact and law.

A contract may be implied where this is necessary to give business reality to the parties’ dealings and to create enforceable obligations. Common control between companies does not itself determine their respective contractual rights and obligations.

A company alleged to have taken over performance of another company’s contractual obligations may be liable for unlawful interference where its conduct is arguably inconsistent with the original contract. Whether administrators are protected from personal liability for procuring a breach may also require trial, particularly where the relevant extension of the Said v Butt rule remains unsettled.

SCI Games Ltd contracted with Argonaut Games Plc for the development of a computer game. Although the agreement required Plc to perform the development work, the work was undertaken by Argonaut Software Ltd, a related company under common directorship.

After Software entered administration and Plc failed to place source code in escrow or deliver development materials, SCI terminated the agreement and sought relief for unlawful interference with its contractual relations. The administrators retained or controlled the relevant materials.

The second to fourth defendants applied for summary judgment under CPR rule 24.2. The third and fourth defendants alternatively sought strike-out under CPR rule 3.4(2)(a). The central issues were whether an implied contract between Plc and Software was arguable, whether Software’s conduct could constitute unlawful interference, and whether the administrators could be personally liable.

1. Summary judgment test. The second to fourth defendants had to establish that SCI had no real prospect of succeeding. The test is negative and does not permit a mini-trial. The court considers the merits only so far as necessary to decide whether the claim has sufficient merit to proceed.
2. Implied contract. There was a real prospect that a trial court would imply an agreement between Plc and Software. The alleged transfer of performance, the common directorship, the payment arrangements and the parties’ apparent understanding made it arguable that Software had undertaken to perform Plc’s obligations and respect SCI’s contractual rights, including the termination provisions. The “officious bystander” and “business reality” principles supported that conclusion.
3. Unlawful interference. It was at least arguable that Software’s refusal to deliver the materials, despite knowing of Plc’s obligations, was conduct inconsistent with SCI’s rights and caused or contributed to a breach of the termination provisions. The claim therefore had a real prospect of success.
4. Administrators. The court declined to resolve summarily whether the rule in Said v Butt should protect administrators in a tripartite situation where the company in administration was not itself party to the breached contract. The authorities showed that the scope of the rule remained arguable. The administrators’ knowledge of the agreement and their refusal to deliver the materials also made personal liability a matter for trial.
5. The third and fourth defendants’ possible reliance on statutory protection under section 234(3) and (4) of the Insolvency Act 1986 was not pleaded and, in any event, required investigation at trial. The applications were dismissed.