Quinn Infrastructure Services Ltd v Sullivan & Os

In claims for overcharging, the claimant must first prove the alleged overpayment or loss before the court addresses the separate causes of action. Software ownership and licensing may be inferred from the commercial circumstances. The customer must prove that a licence fee exceeded a reasonable charge.

For completed software development, the COCOMO II model may be used as the primary valuation method. Relevant legacy code may be included, subject to deductions for non-chargeable material. An arbitrary additional uplift is inappropriate where the model’s factors and multipliers have been properly applied.

A third-party reimbursement which causally relates to the defendant’s work avoids the claimant’s loss. Money paid conditionally for third-party licences may be recoverable in unjust enrichment when retained after the charges cease to be payable.

The claimant, formerly the first defendant’s employer, brought claims arising from alleged excessive charges for software development, licensed software and portal-hosting services. It advanced claims in restitution, breach of contract, fiduciary duty, deceit, procuring breach of contract and unlawful means conspiracy.

The central issues were ownership of the licensed products, the reasonableness of licence fees and development costs, whether BT payments avoided loss on the Auto-Emulation claim, and whether sums paid for unused portal licences had been unjustly retained.

1. Disposition. The licensed-products and development-products claims failed, subject to the separate BT portal claim. The third defendant was liable to repay £76,066.14 for unjust enrichment. Claims for the same sum against the first and second defendants failed.
2. Licensed products. The second to fourth defendants owned the licensed products until their sale to the claimant. The relevant circumstances included speculative development, payment of development costs by the defendants, retention of the products on their servers, payment of third-party costs by them, unchallenged payment of licence invoices, the failed research-and-development tax claim and the later sale. The absence of a formal licence agreement was fact-sensitive and did not outweigh those matters.
3. Once ownership was established, the claimant had to prove that the licence fee exceeded what a reasonable supplier would charge. It failed to do so. The licensed-products claims therefore failed, including the tortious claims because damage was essential to them.
4. Development costs. The proper valuation started with the completed software and used the COCOMO II model as the primary method. Relevant legacy code had to be considered, but a 25 per cent discount was required for non-chargeable material. A further arbitrary 20 per cent uplift was rejected. The agreed contractor rate of £450 per day was adopted because the defendants had not proved entitlement to the higher consultancy rate.
5. Auto-Emulation. The claimant’s receipts from BT reimbursed the development cost and had a direct causal connection with the alleged loss. They were not collateral benefits. The Auto-Emulation claim therefore failed because the loss had been avoided.
6. BT portal. The third defendant was enriched by retaining sums paid conditionally for Microsoft/MyCRM licences that were disabled and no longer payable. Retention was unjust. The claim succeeded against the third defendant in unjust enrichment only.