England and Wales High Court (Chancery Division) Decisions

Vedatech Corporation v Crystal Decisions (UK) Ltd. & Anor [2002] EWHC 818 (Ch) (21st May, 2002)

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		21 May 2002

Mr Justice Jacob:

1. Although the events with which I am concerned happened in Japan, it is common ground that I should decide the matters in dispute by English law. The claimants, Vedatech, are a Japanese Company whose principal officer is Mr Mani Subramanian. Originally Vedatech used the services of solicitors and counsel, but when the going got too expensive it became necessary for Mr Subramanian to appear for his company. That he has done with considerable charm and ability. It cannot have been easy for one man, especially a man who lives abroad (Seattle) and whose business is mainly in Japan, India and the US to run a case such as this, especially against a large firm of solicitors and leading and junior counsel.
2. Besides representing Vedatech, Mr Subramanian was also its major witness. I found him honest. He did his best to be accurate about the facts, though there were occasions when his recollection of events differed from those of the Holistic witnesses. Moreover I think his perception of the actions and motives of Holistic, which he had developed in the years up to trial, were, to a large measure, erroneous. He rather agreed as much at the end of the trial, though in some post-trial submissions there was a tendency to revert to his earlier perceptions. I do not think, however, that in relation to any crucial point of fact there was a significant difference between the two sides.
3. Vedatech also called a Mr Yonekura who flew over briefly from Japan just for the purpose of giving evidence. His spoken English was good though not perfect and an interpreter was sometimes (rarely) used to assist. I found Mr Yonekura impressive and careful. I accept his evidence in so far as it related to matters within his knowledge. As far as his witness statement is concerned, he told me that it had been prepared for him in English but that he had personally checked it through. Again I accept it as far it relates to matters within his knowledge. However it turned out that Mr Yonekura had little direct knowledge of any of the matters in dispute so his evidence was of limited assistance. He did have knowledge of the difficulties for foreign companies of establishing a Japanese business and of the difficulties of finding suitable employees for the relevant kind of work.
4. Vedatech's only other witness was a Miss Minkler. She gave evidence by videolink from Seattle. I found that to be perfectly satisfactory, though Mr Robert Hildyard QC for Holistic did not completely agree. The expense of bringing such a minor witness here would have been disproportionate, even if, as was not the case, she had been willing to fly. Again it turned out that Miss Minkler had limited direct knowledge of matters in dispute and in the end I do not think her evidence was material, even though it was truthful.
5. The Defendants are an English company and its Japanese wholly owned subsidiary. At the relevant time (broadly the years 1995 and 1996) the English company was called Holistic Systems (UK) Limited. It was privately owned. A principal shareholder was Mr Derek Taylor, one of its co-founders. At the relevant time he was the Managing Director and made all key decisions. The Japanese subsidiary was formed in early 1966 and was then called Nihon Holistic KK. For present purposes I will call them collectively Holistic, only distinguishing between them where necessary. It was accepted at trial (but not before) that no distinction needs to be drawn as between the liabilities of the two companies. I understand that at an earlier stage in the proceedings some sort of point along those lines was being taken. Following a take-over by a large multinational (Seagate), their names were changed. Actually there were two name changes ending up with those appearing on the title of this action. Holistic UK has a counterclaim (Part 20 claim) against Vedatech.
6. Besides Mr Taylor, Holistic called a Mr Pyemont and a Mr Hood, each of whom gave oral evidence. In addition Mr Subramanian accepted the written evidence of a Mrs Preston so far as it went to the non-copyright issues in the case. Nothing turned on her evidence. And nothing, so far as the dealings between Vedatech and Holistic are concerned turned on Mr Hood's evidence: he never directly dealt with Vedatech, at least not on any relevant matter. It was Mr Pyemont who was Holistic's main witness. At the relevant time he was based in Singapore as Holistic's man in the Far East. Apart from two important meetings at which Mr Taylor was also present (September 1995, July 1966) all the dealings between Mr Subramanian and Holistic were through Mr Pyemont. I found him to be honest, though as he himself admitted, his memory was not good in respect of some detail. He readily agreed in his oral evidence in chief, for instance, that his witness statement gave some wrong dates about receipt by him of a draft agreement from Mr Subramanian. Mr Subramanian had been cross-examined on the basis that Mr Pyemont's witness statement was right and he was wrong about that, but it was Mr Subramanian who was right. Mr Pyemont also withdrew a rather important suggestion in his witness statement to the effect that there had been an agreement in December 1995 that the services of a Vedatech employee, Mr Sasaki, would be paid for. The significance of this emerges below.
7. Mr Subramanian is an American citizen who was trained in America as an engineer. After graduation in 1985 and working for a few years for various US software firms he developed an interest in Japan. From about 1988 he was based in Tokyo. He is fluent in Japanese and was so at the time of the events in question having learnt the language by then. In 1991 he formed Vedatech with a view to creating a business which, in a novel way, could assist US and European software companies to introduce their products to the Japanese market. He called his concept "Venture Village". The idea was that his company would help make sales of the product but would itself focus on support (training and service) from which the company would derive revenue. For the kind of software involved (large and complex) the latter revenue would be very substantial over the years.
8. Entering the Japanese market for this kind of product is particularly difficult. Getting appropriate staff is not easy or quick and all the more so where a team is required. Nor is persuading large Japanese companies to purchase the product, even where the product has proven success in the US and Europe. Moreover it was important that the product was properly adapted for the Japanese market generally ("localised") as well as tailored for the customer's particular requirements. Mr Subramanian was particularly well placed to carry out this exercise as a fluent Japanese speaker and engineer Westerner with management skills. By the mid-1990s his Japanese was so good that, according to Mr Yonekura, he spoke like a native. Thus he had a rare combination of talents.
9. In the early 1990s Vedatech successfully worked with two other foreign companies called i2 and QAD, introducing their products into Japan. From 1993 Vedatech also did work for a large Japanese company, OKI Electric. Mr Yonekura, one of the OKI employees also became a director of Vedatech in about May 1996.
10. Holistic had very a successful computer program called Holos. It had been successful in other countries. By 1995 they wished to introduce it into Japan. It was only in that year that a version of Holos (the "multibyte version") had been developed. Such a version is needed to display languages with large character-sets such as Japanese. Holistic recognised the difficulties of the Japanese market and, in particular, that simply setting up a subsidiary on their own would be expensive and difficult. They knew they needed assistance. After casting around for other ways they came into contact with Vedatech. I need not go into the early contacts between Mr Subramanian and Holistic. There was a brief contact between Mr Subramanian and Mr Pyemont in 1994 but nothing significant developed until about May 1995. Mr Pyemont and Mr Subramanian got in contact and discussed a number of possibilities as to the way in which matters might proceed. By August 1995 both parties considered it worth progressing further. So far as Holistic were concerned no other option than using Vedatech seemed viable, at least at the sort of prices they were prepared to pay. Mr Pyemont produced a memorandum dated September 6^th, a copy of which was sent to Mr Subramanian. Pages 7 and 8 of this document outline the current state of discussions. Things looked encouraging. Mr Taylor agreed to come to Japan, along with Mr Pyemont, to meet Mr Subramanian. It was Mr Taylor's first visit to Japan. The meeting took place over 13^th/14^th September 1995, with a dinner in the evening of the second day.
11. Mr Subramanian contends that a concluded binding oral agreement was reached at this 2-day meeting. He says the agreement is evidenced by a fax of 19^th September which Mr Taylor sent to Pyemont. This fax reads as follows:

"I thoroughly enjoyed our trip to Japan, you have done an excellent job in getting us this far. I promised to give you my understanding of what we "agreed" with Mani.

1. We would take space, "offices services" and some translation services of Vedatech and "pay as we go" for these services.

2. Vedatech would provide us with a technical resource at no charge. Once that technical resource became committed to fee paying work where Vedatech derived all (or 90%) of the fees they would replace that person again free of charge. I would assume this process continuing for at least 12 months unless we get up to speed earlier.

3. On the Sales front they need to help us get a sales manager again I assume they would not explicitly charge us for this.

4. Mani and/or Mutah [sic - this is a reference to Muto] (or whoever else) should be available on an as and when basis to help us (you initially), with sales i.e. introducing opportunities, going drinking, clearing obstacles.

5. In exchange they get a percentage of the Software revenue going from 20-25-30% initially down to 2-3% in say eighteen months or 2 years and maybe down to 0% in say 3-5 years (when their consulting business should be substantial).

6. We must not allow them to be the sole third party consulting firm just the opportunity to be the first and hence the inside track.

7. Nehon [sic] Holistic would be 100% subs of Ltd (tax and other advice allowing).

That's essentially it clearly Nehon Holistic must have a plan that generates the appropriate profits in the medium haul and generates cash for growth like any other of our businesses."

12. It is common ground that it was agreed that following the meeting Mr Subramanian and Mr Pyemont were to produce a draft agreement. Actually each promised to do so but did not. Both Mr Subramanian and Mr Pyemont are now sorry that they did not complete the task. A partial attempt was made in October to do some work on Mr Subramanian’s computer. In the end it could not print out the work that had been done. A further effort was made in December when Mr Subramanian sent a draft agreement to Mr Pyemont. Mr Pyemont responded in January with many comments (many generated by Messrs Taylor and Hood) on Mr Subramanian’s draft. Later attempts at reaching an agreement were also made, but they all failed.
13. As I have said, it is Mr Subramanian’s contention that there was a fully-fledged oral agreement reached on 13^th/14^th September 1995. Holistic say there was no such thing. There was merely a non-binding agreement on a number of points in principle but nothing amounting to a complete agreement. All there was was an agreement as to some of the structure of a future agreement. I have no doubt that Holistic are right about that. The terms proposed by Mr Subramanian were not all agreed. Moreover many of the terms provisionally agreed were too vague or uncertain to amount to a binding agreement. I do not go into much detail about this. It is sufficient to mention just a few points:

(a) The fax itself shows that Mr Taylor did not think a binding agreement had been reached. He puts the word "agreed" in quotes.

(b) And in any event some of the terms he sets out, terms which would be important in a concluded bargain, are insufficiently precise. Take for instance the clause about royalties. It does not set out exactly what these are to be or for how long. Only a range of parameters is mentioned. An enforceable bargain would have to be precise about this.

(c) There were many other obviously important terms which would be necessary for a reasonably well-defined bargain. Mr Taylor mentioned some in his witness statement:

"Nor given the general nature of our visit, was there sufficient time to discuss, let alone conclude, agreement on such matters as the term of the relationship, basis for termination, cancellation fees or non-solicitation agreements, all of which would be crucial elements of any such agreement"

14. What was "agreed" at the meeting was too imprecise to form a concluded bargain. Moreover I do not think there was any intention at that time to create a contract without further negotiation leading to a written document. Thus I must reject Mr Subramanian’s claim based on an overriding concluded oral contract.
15. That is not to say that result of the meeting was nothing at all. On the contrary there was sufficient empathy for the parties to start work together. And one of the important general features of the prospective agreement decided at the meeting, formed part of the basis for that co-operation. Mr Taylor had been concerned that Holistic would be paying for everything (all of Vedatech's employees, a proportion of the rent of Vedatech's premises, translation costs) and that Vedatech would not be assuming any risk even though it would eventually get consulting revenues from purchasers of Holos. To meet that, after some reflection, at the evening dinner, Mr Subramanian offered to provide an engineer at Vedatech's cost. This was something of a breakthrough in that if he had not agreed to this, I think the negotiations would have broken down. But that is not the same thing as saying that there was a complete agreement. There was not.
16. So, following this meeting the parties began to work together from about the beginning of October. Mr Subramanian and Mr Pyemont discussed costs and Vedatech found and provided suitable employees, both on the sales side and on the technical side for the introduction of Holos into Japan. The first person so provided was Mr Muto, who was obviously a good salesman. There was some discussion about payment for him. It seems common ground that the appropriate figure for which he could be costed out would be 1.5m yen per month. There had been discussion about the provision of other people. Vedatech engaged or used three other employees, Mr Sasaki, Mr Sato and later Miss Takayama. No agreement about any rate of pay for them was made at the time. At the time, in accordance with the expected contract, Vedatech was providing services at its own risk. Holistic provided training in the Holos product - this was required both for the salesman and the engineers.
17. It was also agreed that Holistic would pay the proportion of Vedatech's rent attributable to the occupation of the Vedatech employees who were dedicated to work on Holos. In about December Vedatech moved to a prestigious building called the Landmark from their previous, rather cramped, premises. The personnel allocated to Holos, along with perhaps some from Mr Subramanian, did a good job. The first sale was achieved to a major Japanese company, Hitachi, in about February 1996. This was earlier than initial expectations. Sales to the first major Japanese company were particularly important. It is common ground that once you have managed to persuade one major Japanese company to purchase a product of this sort, it is much easier to persuade others. Mr Yonekura called this phenomenon "Yoko-Narabi" ("side to side").
18. Vedatech also did a good job on localisation. The Holos product as it stood was not suitable for Japan. It was necessary to prepare suitable interfaces in the Japanese language. Even with the multibyte version a lot of care was needed - there is not always a one-to-one correspondence between English and Japanese words. For instance the English word "account" might be translated into one of four different Japanese words, depending on context. Vedatech helped with all that. The translation services were dealt with separately, but always within the envisaged context of a complete agreement. Nearly all the fees for this translation work have been paid. I think there is about 300,000 yen outstanding.
19. It was Vedatech, not Holistic, who invoiced Hitachi for the first sale of Holos. Hitachi paid the whole of the money over to Vedatech, some 23m yen. Vedatech are still holding on to that money, though Mr Subramanian recognises that in principle it should be paid to Holistic subject to deductions of an appropriate fee . His reason for not handing the money over is quite simple: in his view Holistic owe Vedatech more. I understand that Holistic never formally raised an invoice in respect of this 23m yen, but there is no doubt that both sides knew about the matter and, at the time, regarded the money as due in principle.
20. As I have said, the sale was made by Vedatech rather than by Holistic. Two reasons were offered for this. One, that Holistic had not actually got a bank account and so it was convenient to use Vedatech’s and, secondly, that by doing the operation this way the sale could, in the books of Holistic, be moved to the next accounting year, a process called ‘sandbagging’. There may have been a bit of both in this. In the end I do not think it matters. Mr Subramanian, at one point was disposed to say that there was something not quite right about the transaction but in the end, quite properly, he accepted that it did not matter one way or the other. Vedatech owe the money. Any question of commission is bound up with the unjust enrichment claim and its quantification.
21. Vedatech had some cash flow difficulties in the summer of 1996. At least one of the four "Holistic" employees was complaining about the late payment of a bonus. It is not surprising that Vedatech had such difficulties. It was not a large company. A helpful schedule produced by Mr Subramanian shows how if all the services which he had been providing for Holistic were costed out, by May even allowing for the receipt of the Hitachi money, Vedatech was well out of pocket.
22. In May Mr Muto had some discussions with Mr Pyemont in which he raised the question of the possibility of the employees moving over to work directly for Holistic. By this time (in about February) Nihon Holistic had been formed, though it had no premises or employees. Also in May Holistic themselves were engaged in the process of being sold to a very large American corporation called Seagate – a process that had been underway for some time, though unbeknownst to Mr Subramanian. That transaction took place in June. When news of it came out, Mr Subramanian thought that this would be good for Vedatech because with the resources of a big company it would be possible to sell much more Holos product in Japan.
23. Mr Subramanian attaches some importance to the fact that Mr Taylor's remuneration from the sale of Holistic depended in part on achieving US$32m sales in the financial year 1996-7. He had formed the idea that the sandbagging was part of this and also a desire in Holistic to take over the Vedatech employees. Both these are misconceptions - misconceptions which, along with suggestions of fraud, Mr Subramanian wholeheartedly withdrew after Messrs Pyemont and Taylor gave evidence. I am sorry to say there was some resurrection of the point in his post-trial submissions. It is a particularly unfortunate part of this case (indeed of the whole relationship between the parties) that misconceptions on both sides have bedevilled things. Thus Holistic suggested that Mr Subramanian has a propensity to litigate. He was cross-examined briefly and ineffectually about some other cases he is involved in in the US. But nothing emerged even faintly suggesting that there was anything unreasonable in his conduct. So far as the dispute between Holistic and Vedatech is concerned actually it seems that it was Holistic who opened litigation hostilities by means of a Japanese lawsuit.
24. Again each side suggested the other side was not merely in default of disclosure but deliberately so. Again there was nothing in this. In particular, so far as Mr Subramanian is concerned, it was suggested he had withheld some e-mails from some employees. He said it was his practice in those days, when computer memory was limited, to delete e-mails from his own computer. They should have been retained on the company server but, when the employees left, the e-mails could not be found. Miss Minkler gave hearsay confirmation of this, her source not being Mr Subramanian but the IS (Information Systems) manager. I understand that the Court of Appeal suggested this case ought to be mediated. I agree - a good and fair mediator can, amongst other things, help a party to get a proper perspective on its own case - he or she can help remove misconceptions which either or both sides may have about the other. There is room for mediation of the next stage of this case.
25. I return to the history. In May some, at least, of the four Vedatech employees working virtually full-time on Holos became discontented at Vedatech. This may partly be due to Mr Subramanian's management and partly due to the fact that at least one of them (Miss Takayama) felt she should be paid more. The details do not matter. Whatever the reason Mr Muto (who seems to have been the leader) mentioned the unhappiness to Mr Pyemont and suggested the employees might work directly for Holistic.
26. Mr Pyemont, whilst registering this interest, did not actively encourage it. On the contrary, both as to then and later into July and early August, I am satisfied that it was not Holistic's wish to take over the employees. There were, however, obvious problems for the prospects of Holos sales: if the employees left completely the very good team assembled by Vedatech would be lost.
27. Eventually there was a 2-day meeting on 24^th and 25^th July. The meeting was mainly a result of the take-over by Seagate. Mr Taylor went round the world trying to reassure local companies that much would go on as before. The meeting was part of that but was also intended to try and reach an agreement with Vedatech. Shortly after his arrival, Mr Taylor and Mr Pyemont were "buttonholed" by two or perhaps three of the four employees who asked for a private meeting. This took place in a coffee shop. The employees expressed dissatisfaction with Vedatech and said they wanted to work for Seagate, the new owners of Holistic. Both Mr Taylor and Mr Pyemont gave evidence of this meeting. Though their recollection differed slightly and neither of them was sure exactly which of the four employees were present I am satisfied that that was the overall message conveyed.
28. The next day Messrs Taylor and Pyemont met Mr Subramanian. There is a bit of a dispute as to what was said. Mr Subramanian thinks that Mr Taylor threatened to take the employees. Messrs Taylor and Pyemont agree that the problem of their dissatisfaction was discussed and that the possibility of Seagate employing them directly or on a loan basis was raised. They deny that any "threat" was made. Mr Subramanian characterised the dispute about the employees as "who pushed who?”
29. I do not think the dispute matters. In particular it is now settled that fault (if that is what the dispute goes to) is irrelevant to a claim in unjust enrichment (see e.g. per Lord Goff in Lipkin Gorman v Karpnale [1991] 2 AC 548 at p.578). Probably the root of the dispute lies in differences in perception. Any possibility of losing the employees and the benefit, which the work and risk of the last 9 months or so had created, would have alarmed Mr Subramanian. So he may well have perceived mention of direct employment as a threat. On the other hand I am satisfied that Mr Taylor did not want to take on the employees willy-nilly - there was no deliberate plan to push Vedatech aside. Particularly telling on this point are some post-July e-mails between the employees and Mr Pyemont. For instance on 8^th August Mr Pyemont wrote to Mr Sasaki saying that Vedatech were opposed to Holistic employing staff and he hoped he could get Mr Subramanian's consent to this. Mr Sasaki was to some extent holding a gun at Mr Pyemont's head: in effect he said "I am leaving Vedatech anyway, offer me a job immediately or I will go elsewhere."
30. More significant about the July meeting is that it is common ground that Mr Subramanian claimed that the employees each had restrictive covenants preventing them from working for Holistic. This forms part of the basis of the claim for inducing breach of contract, to the details of which I will return.
31. Attempts were made to resolve the dispute but they did not work. The employees left Vedatech at about the end of August and were hired by Nihon Holistic. So far as they were working on maintenance and servicing of Hitachi they apparently simply carried on as before. I say "apparently" because this was not an issue strictly arising at this stage. It is fair to describe the position over this period as "a mess". Mr Subramanian did so in a letter of 27^th August where he summarised his views and proposed open terms of settlement. The letter acknowledged the debt of 23m yen due from the sale of Holos to Hitachi. It sought to quantify the cost of providing staff and added some other matters. The total figure suggested to be due to Vedatech was 57m yen. In addition Mr Subramanian wanted a number of other terms including royalties on future revenues. A letter of 30^th August put the figure at 60m yen - again with continuing royalties. A similar letter of September 9^th was much to the same effect. Mr Pyemont rejected this by a letter of 13^th September accompanied by a draft settlement agreement which put the amount owing to Vedatech (including allowing for the Hitachi 23m yen) at 20.5m yen. At this stage the parties were still trying to have some sort of long-term relationship. I do not go on with the details of this. What is important to observe is that Vedatech did provide figures which it said were the costs or fees for the services it had provided thus far. It even invoiced for these or most of them. But it only did so in the context of claiming that it was entitled to further benefits by way of royalties or profit shares or the like. So I do not accept that Vedatech simply identified a price for the services as a freestanding matter. The prices were within a context of expecting more.
32. Save for the position as regards the employees' contracts and the claim for inducing breach of these, I believe I have stated all the essential facts. A number of other issues were raised during the course of the case but I do not think any of them matter - it would only prolong this judgment unnecessarily if I were to go into them and resolve unimportant issues of fact to no purpose.
33. However before turning to consider the legal effect of all this I must say something about what exactly I must decide. For by an order of Lightman J of 9^th May 2001 issues as to the quantification of Vedatech's various claims and any disclosure relating thereto were deferred. A split trial having been ordered it did not seem to me to be appropriate to accede to Mr Subramanian's application at the outset of the trial for a reversal of that decision and an adjournment. Although I can resolve a number of the issues, there is an inevitable problem which means that a further trial on quantum is inevitable - unless the parties can settle, if not on their own then with the help of a first class mediator. The problem is this: that one of the claims, that for unjust enrichment, stands virtually admitted. I say "virtually" because it is not formally admitted on the pleadings that there is any claim under this head, or that if there is, there is claim which exceeds in value what is owed under the Part 20 claim for 23m yen. The best I can do, therefore, is to give some guidance as to the principles upon which this claim is to be quantified. That is what I propose to do. At the hearing this is what the parties asked me to do, although Mr Subramanian somewhat resiled from this in a late written submission. I do not think it constructive to leave quantum over completely at large when some of the principles have been argued.
34. As to what I must decide, the points appear to be as follows.

(a) Whether there was an oral contract;

(b) Whether there is a claim in copyright infringement and in particular whether there is any separate claim for an account in respect of sales of localised Holos in Japan;

(c) Whether there is a claim for exemplary damages for any cause of action;

(d) Whether a claim for an account lies along the lines of AG v Blake [2001] 1 AC 268;

(e) Whether there is a good claim for a quantum meruit or unjust enrichment;

(f) Whether there is a claim for the tort of unlawful interference with contractual relations.

I have already answered (a) - there was no oral contract. With that claim falls (d).

35. As to (c) (exemplary damages) it is not necessary to consider its availability in principle for any of the alleged causes of action, though I observe in passing that English law only allows such claims in very circumscribed classes of case. Even in those cases such damages can only be had when the defendant has behaved in some sort of disgraceful way - a deliberately wilful breach of the claimant's rights is the usual sort of thing. That is not the case here. Mr Subramanian accepted, having met and questioned Messrs. Taylor and Pyemont in the witness box, that some of his earlier perceptions were wrong: that both witnesses were fair. As I have said this case is a result of a muddle, of a failure to get a proper agreement in place.
36. Early on in the trial I decided to defer consideration of the copyright claim. There was a bit of a dispute as to how much Vedatech employees had contributed to the localised version of Holos for Japan and whether as a consequence there was something in the nature of a joint copyright. In the end I do not think it matters. I say that because it is impossible to envisage any rational basis for an arrangement under which Vedatech were ever to have any intellectual property rights in Holos. True they helped produce a localised version. Even if that resulted in a fresh copyright (which Holistic deny, but which I could not decide without hearing evidence) it makes no commercial sense for Vedatech to have any rights which it could assert against Holistic or its customers. Vedatech largely invoiced and were paid for translation work on Holos. There may be other work too (identifying bugs, modifying interfaces to work with customer software) but the value of all this is subsumed within the quantum of the quantum meruit/restitution claim. Thus part of that claim relates to the fact that Mr Sasaki's services were provided by Vedatech free on the basis that Vedatech were to assume some risk. Those services may have included work contributing to localised Holos or its interface. Whether they did or not adds nothing to the quantum - for it is the provision of those services as such, partly at Vedatech's risk, which is the relevant matter. Accordingly I hold that there are no separate copyright considerations and that there is no point in considering these further.
37. That leaves quantum/meruit or unjust enrichment and tortious interference with employees' contracts. I will take the latter first, for even if the tort is not established, Mr Subramanian claims that the "taking" of the employees is a matter which falls to be considered when considering the quantum of the quantum meruit or unjust enrichment.
38. Vedatech's case is that its employees each had contracts containing valid restrictive covenants preventing them from working for Holistic, that Holistic knowing that to be so, went ahead nonetheless to take the employees on, thereby inducing them to breach their contracts.
39. First then, did the employees have restrictive covenants at all? There is no doubt that Miss Takayama did, for she signed a document called a "Non Disclosure Agreement" shortly after she became employed. It contains the following term:

"Non-Compete

For a period of two (2) years from the date of this agreement, (a) Consultant agrees not to engage in any business or business activity that is in direct competition with that of Corporation, (b) agrees not to be employed directly or indirectly, in a full-time or contract or part-time basis by a direct competitor of Corporation, and (c) agrees not to be employed directly or indirectly, in a full-time or contract or part-time basis by either customers of Corporation or by direct competitors of customers of Corporation (a list of such customers of Corporation can be agreed to on a periodic basis, but will include and not be limited to qad.inc (California, USA), (12 technologies, Texas, USA), Holistic Systems (UK), Triumph International (Japan), Triumph International (Hong Kong), Triumph Group of Companies (Europe), their parent companies and the worldwide subsidiaries, branch offices and affiliates of all the preceding). Consultant specifically agrees that Consultant will not engage in businesses directly in competition with Corporation, especially based on Confidential information obtained from Corporation and shall not solicit customers for business in competition with Corporation, especially based on gaining information on such customers and related opportunities that would be considered Confidential information as per this agreement. Specifically, Consultant agrees not to engage in business in competition with Corporation that involves products and services for which Consultant receives Confidential information or training from Corporation."

40. Whether or not it is invalid is not very important - for although Holistic did employ her for a short while, when they learned of the contract they felt they could not continue and paid her off. She was a rather innocent pawn in the dispute. In the end I do not think her position matters one way or the other.
41. I turn to the other three employees, Messrs Muto, Sasaki and Sato. Mr Muto was a salesman, the other two engineers - engineers who nonetheless had some contact with customers or potential customers at the engineering or training level. I heard most about Mr Muto. Mr Subramanian told me that when he was employed, Mr Muto was given a draft document to sign. It was called a "Consulting Agreement." The document is in English. It is in very small print and is nearly four pages long. Mr Subramanian told me it was drafted for him by some lawyers in Seattle. It certainly is in complex language. Clause 8 reads:

SECTION 8.0: CONFIDENTIALITY AND NON-COMPETE AGREEMENT

Inasmuch as Consultant will acquire or have access to information (including but not limited to all of Corporation’s corporate communications – meetings, memorandums, and documents (verbal, spoken or written) – both internal and relating to Corporation’s business with its Customers and Competitors – Competitors refer to both competitors of the Corporation and those of Customers of the Corporation) that is considered to be of confidential and of secret nature, Consultant shall hold all such confidential information in strict confidence, and shall not otherwise use or disclose to third parties any such confidential information, both during the term of this contract and for a period of ten (10) years from the date of termination of this contract. For a period of one (1) year from the date of termination of this contract and during the term of this contract, Consultant agrees not to perform services directly or indirectly for any of the Corporation’s Customers or Competitors (Competitors refers to both competitors of the Corporation and those of Customers of the Coroporation [sic]) that have any relation to the Projects that Corporation is engaged in during the term of this contract. A detailed list will be included in Employee’s actual exit interview, but shall at minimum include qad.inc (Carpinteria [sic - I take it should say "California"]), I2 technologies (Dallas), Holistic Systems (UK), Baan (Holland), SAP (Germany) and all of their worldwide offices, branch offices, subsidiaries, sales channels, etc. Any exceptions to this rule needs to be agreed upon mutually in writing. Consultant agrees to execute this document at the time of separation from the Corporation. Consultant agrees that any violation of these conditions will make Consultant liable for a penalty of JPY10M or an amount determined by a Japanese Court of Law, whichever is larger. Consultant agrees that at all times during the term of this contract, and for a period of ten years from the termination of this contract, he will represent the Corporation in a positive and professional manner, and at no times will Consultant undertake actions that are harmful to the interests of the Corporation.

42. The misprints rather suggest no-one ever really read this cloud of words. Mr Muto never signed the document. Mr Subramanian said that Mr Muto wanted a copy of it in Japanese before he would sign but that it was explained to him. Not surprisingly there is no written record of what that explanation was. A Japanese copy was never prepared but Mr Muto commenced employment all the same.
43. On 26^th June 1996 Mr Muto signed a one page "Compensation Plan" document. This was in English but is a much simpler document than the unsigned document. No-one suggests anything turns on this document.
44. After the July meeting, when it was apparent that Mr Muto would probably be leaving, he was asked to sign a Non-Disclosure Agreement ("NDA"). The body of this document referred to an Appendix A but not an Appendix B or C. Mr Muto signed the NDA and Appendix B on 13^th August. He did not sign Appendix C. The evidence is silent as to why - whether it was never annexed or if it was the failure was deliberate or accidental remains a matter of speculation. So far as is relevant the NDA itself contains a verbose clause preventing misuse of confidential information. Bits of the clause make no sense (e.g. references to patents and trade marks as being "information of confidential and proprietary nature"). I pass that by because it does not matter. Appendix B says:

"For a period of two (2) years from the date of this agreement,

(a) Consultant agrees not to engage in any business or business activity that is in direction competition with that of Corporation, especially businesses similar to that of the Vedatech Venture Village operation, (exceptions can be made to this by both Parties agreeing to such exception in writing only).

(b) agrees not to be employed directly or indirectly, in a full-time or contract or part-time basis by a direct competitor of Corporation, and

Consultant specifically agrees that Consultant will not engage in businesses directly in competition with Corporation especially based on Confidential information obtained from Corporation and shall not solicit customers for business in competition with Corporation, especially based on gaining information on such customers and related opportunities that would be considered. Confidential information as per this agreement. Specifically, Consultant agrees not to engage in business in competition with Corporation that involves products and services for which Consultant receives Confidential information or training from Corporation."

45. The unsigned appendix C says:

"For a period starting with the current date to December 31, 1996, Consultant agrees not to be employed directly or indirectly by Holistic Systems. of the United Kingdom or its subsidiaries and affiliates, including but not limited to Nihon Holistic Systems K.K., or Seagate Software of Vancouver, Canada (or its subsidiaries and affiliates), except as per agreement between Corporation and Holistic Systems of the United Kingdom, and by explicit permission from the Corporation in writing."

46. Finally, just before he left, Mr Muto on August 28^th, signed an "Exit Interview" document. This was just a page long. It contained the following provisions:

"As a former Vedatech consultant, you will continue to be obligated not to use or disclose the confidential business information of Vedatech to which you have had access during your consulting with Vedatech. For a period of one year after signing this Exit Interview, you agree not to perform services directly or indirectly for any of the Corporation's Customers or Competitors that have any relation to the Projects that Corporation is engaged in during the term of your contract.

After leaving the company, you agree not to solicit any current employees or consultants of the Corporation in any way whatsoever. You agree to abide by all parts of your Non-Disclosure Agreement, both in letter and spirit. Please review these continuing obligations in your Non-Disclosure Agreement of August 13, 1996, a copy of which you acknowledge having received during this interview.

This letter and your Non-Disclosure Agreement of August 13, 1996 together set forth the entire agreement between you and Vedatech, and supersede any previous oral or written agreements between you and Vedatech. We thank you, and wish you the best in the future."

47. What then was Mr Muto's contract position? Was there a restraint? If there was, what was it?
48. I think it is not shown that Mr Muto was bound by any of the possible documents. I look at it from the point of view of the employer/employee situation. If an employer wishes to impose a restrictive term in an employee's contract it is up to him to do it. And the onus lies on him to prove that a contract of employment, containing the term, was made. Let me begin with the first contender, the unsigned Consultancy Agreement. Because it was unsigned, acceptance of its terms would have to be by some other route. Two are possible, first the oral explanation which was given and secondly acceptance by conduct. But both have problems in this case.
49. The problem with the oral explanation route is one just does not know what was really said to Mr Muto. The document, as I have said, is long and in small type. It is difficult to imagine anyone just reading out a translation of the document. Moreover the language is legalese of a high order. You would have to be very fluent in both Japanese and English to convey its full meaning. The fair inference is that no more than its general import was conveyed, not its exact terms. I am prepared to accept that Mr Muto was told that there was some sort of restriction, but not what it was exactly. That he thought there was some sort of restriction is somewhat corroborated by Mr Yonekura. He had a discussion with Mr Muto just after the July 1996 meetings, so before any exit interview or his signature of the NDA and its Appendix B. In that meeting Mr Muto told Mr Yonekura that he had a restriction about not working for customers. That is not the same thing as knowing exactly what the restriction was.
50. Moreover, look at the position from Mr Muto's point of view. English was not his native tongue. He probably had reasonable, especially technical, English though I gather his spoken English was not all that easy - Mr Subramanian said his English "was not that good" (Day 2 p.13). Even a person whose mother tongue is English would find the document difficult - almost verging on the incomprehensible. In those circumstances it was entirely reasonable for him to ask for a Japanese translation - he was in effect saying "I cannot and do not accept these complicated and detailed terms until I can be sure I know what they mean". His conduct in accepting employment meanwhile cannot be taken as an unequivocal acceptance of the terms of this document - especially of those terms which could only take effect after his employment terminated.
51. Mr Subramanian accepted he was to blame for not getting the Japanese contract done:

"at that period I personally, probably, was not very attentive to contracts, which is why I am here after all these years" (Day 2 p.33)

But not getting it done means, to my mind, that it did not bind Mr Muto.

52. When one turns to the NDA and appendix B further problems arise. There is a preliminary problem - this is not a contract of employment at all. It is a leaving agreement or at least an agreement in preparation for leaving. Any restraint it imposes for the first time must be viewed quite differently from a restraint accepted when employment is commenced. In particular its reasonableness must be viewed differently. But before that there is a first question - whether there is any contract at all. What is the consideration? I can find nothing. The agreement purports to be in the form of a Consultancy - but everyone knew Mr Muto was going. I do not think the document has any legal effect.
53. Even if that were wrong, however, I cannot think any restraint upon competition could be validly imposed at that stage. Its reasonableness has to be judged as between the parties and as regards the public. It is not reasonable to impose on a leaving employee, for the first time, a restraint which was not in his employment contract. He took the job on the basis that he would have freedom as to future employment when he left. That freedom cannot be taken away as the employee passes through the exit door.
54. Finally there is the added complication that the restraints sought to be imposed by the NDA are not exactly the same as in the original unsigned Consultancy. Nor is the NDA consistent with the Exit Interview. And the unsigned appendix B is different yet again - particularly in holding Mr Muto under a restraint preventing work for Holistic only until the end of the year. Any employee faced with this mass of complicated, inconsistent and contradictory documents would not know where he was supposed to stand. If that is the case, then he is not bound by any of them. And that is all the more so given an employee whose command of English is not "that good."
55. That being so it is strictly not necessary to go further but I will do so briefly. Mr Hildyard argued that even if the restraint in the unsigned consultancy agreement was part of Mr Muto's employment contract it would be void as being in unreasonable restraint of trade. I will deal with the point briefly. The first question is one of construction of the convoluted language. I repeat the key words:

"For a period of one (1) year from the date of termination of this contract and during the term of this contract, Consultant agrees not to perform services directly or indirectly for any of the Corporation’s Customers or Competitors (Competitors refers to both competitors of the Corporation and those of Customers of the Coroporation [sic]) that have any relation to the Projects that Corporation is engaged in during the term of this contract. A detailed list will be included in Employee’s actual exit interview, but shall at minimum include [identified companies].”

56. Mr Hildyard submits that this clause simply prevents the employee for working for Vedatech's customers or competitors. Of course, if he is right, the clause is manifestly too wide whatever its term, see e.g. Kores v Kolok [1959] 1 Ch 108. No employer has a legitimate interest in simply preventing his ex-employees from working for competitors. There must be more - a protectable interest such as confidential information or trade connections.
57. However I do not think that Mr Hildyard is right. The mist of words is tied down by the words "that have any relation to the Projects that Corporation is engaged in during the term of this Contract." I think the meaning conveyed by the clause is more limited, notwithstanding that Mr Hildyard may be grammatically correct. I think the meaning is that the employee will not work for customers or competitors on the same projects or related projects as were being worked on by Vedatech.
58. Even that meaning might be too wide in another context. If Vedatech had been a substantial company working on a wide variety of projects most of which had nothing whatever to do with the work done by the employee it would be too wide - stopping the employee on working on things with which he had had no previous concern. But Vedatech was a small, closely-knit, firm. There was some actual cross-linking of work on different projects (for instance at one point Mr Sasaki was briefly taken off working for Holistic to work on i2, to the annoyance of Holistic even though they were not paying for Mr Sasaki). So I do not think the field of the restriction was too wide.
59. Nor do I think the term of one year is unreasonably long. It is true that in the computer business things change fast. But not I think so fast that what Vedatech were seeking to protect could necessarily be protected with a term much shorter. What they were trying to protect was the building up of a small team to introduce software into Japan - the Venture Village concept. This would involve risk and expense as well. The concern was that once the team was built up and established the "customer" would take the team and the benefit of the work. To prevent that, and to ensure that the customer could not make do meanwhile, a year seems reasonable. I am aware that Mr Taylor expressed a view about 6 months being enough for a quarantine period. On the other hand Mr Yonekura, who initially had thought the restrictions "too strict" came to the view that a year was justified for the sort of business conducted by Vedatech. Mr Taylor's views were not, as I understood them, specifically directed at that sort of business - and in any event he had virtually no understanding of local Japanese conditions.
60. So, if the term had been part of Mr Muto's contract, it would have been valid. It does not follow that Holistic would be liable for the tort of procuring its breach. To prove the tort it must be shown that the defendant both knew of the contract and intended to interfere with its performance (see per Lord Diplock, giving the only speech in Merkur Island v Laughton [1983] 2 AC 570 at p. 608). Here the problem in the way of Vedatech is the state of knowledge of Holistic, specifically that of Mr Pyemont.
61. As I have said he was told by Mr Subramanian in July that the employees had restrictive covenants. But no details were given. Before he took Mr Muto on he asked him about the position. Mr Muto sent a fax on the 4^th September. It said "I send Vedatech NDA" and had annexed the NDA he had signed on 13^th August. That included the unsigned Appendix C (i.e. that specifically aimed at not working for Holistic until the end of the year). He did not send his Exit Interview or the original, unsigned Consultancy Agreement. The fax has a hand-written addition "PS I don't have contracts with Vedatech" signed, apparently by both Mr Sato and Mr Sasaki. In addition the employees (save for Miss Takayama) clearly had no written contract.
62. Mr Pyemont took legal advice. He was advised that there was a problem about Miss Takayama, but not the others. They received formal offers of employment on 7^th October, though they had gone to work directly for Holistic at the beginning of September.
63. Did Mr Pyemont have the requisite knowledge? I think the answer is clearly no. He had asked the employees about the position - they (save for Miss Takayama) said there was no contract. Mr Subramanian had asserted otherwise but, at a time and in a situation where one might reasonably have expected him to produce any written contracts upon which he relied, none were produced. Mr Pyemont might have gone back to Mr Subramanian to press him for the details to back up his assertion. He did not, but in my opinion given all the circumstances, there was no blame in that. This was not a case where Mr Pyemont was deliberately not asking about a contract because he had good grounds to suppose there was one - he was not "blind-eyeing". The authorities show that if a procurer of breach does that he is taken to have knowledge of the contract, see Emerald v Lothian [1966] 1 WLR 691 at p.700 (per Lord Denning MR). That was not Mr Pyemont's state of mind at all. He was in a muddle. He put it this way:

"it is such a mess that I did what I felt was the right thing at the time and I am sure I could have done much better but I am not exactly sure how I would have known."

And it is not surprising he was in a muddle - for things were indeed in a muddle. If he had been given clear sight of a signed contract things very probably would have been very different - as one can see from the case of Miss Takayana.

64. Thus far I have particularly dealt with the position of Mr Muto. So far as Messrs Sato and Sasaki are concerned they are not materially different. Again neither of them had formal written contracts of employment. Mr Sasaki (but not Mr Sato) had a draft Consulting Agreement which he never signed. It is said things were explained to them, but for the reasons I have given in the case of Mr Muto that is not good enough. There are the same problems about the NDA and exit agreements, save that Mr Sasaki did sign Appendix B of the NDA. There does not even seem to have been an Appendix C.
65. In the result the claim for procuring breach of the employees contracts is not made out. There is also a claim about procuring breach of Vedatech's contract with Hitachi. Again this is not made out. What happened in fact (so far as Mr Subramanian asserts) is that the employees, when they went over to Holistic, just went on supporting Hitachi as though the contract had been transferred to Holistic. That may well be right. For reasons I give below that seems to me to be a matter to be considered in relation to the quantum of the quantum meruit or unjust enrichment claim.
66. And it is to that claim I finally turn. It is upon this claim which Mr Subramanian has placed most reliance. Broadly the battle lines are as follows. Holistic accept that they should pay for the services of the four Vedatech employees who worked on Holos. So far as Mr Muto is concerned they say the agreed fee was 1.5m yen a month. For the others the appropriate rate is rather less than that, Muto being a salesman and as such worth rather more than engineers and trainers. Holistic also accept that they should pay for translation services - the price of which was agreed. These have largely been paid though I understand there is a small amount outstanding. Further any appropriate share of rent whilst the employees were working on Holos should by paid. (Actually I am not sure whether any such rent is said or admitted to be due). That, say Holistic is all. They add that these amounts are roughly what the parties themselves agreed - which is the best guide as to what should be proper measure for a quantum meruit. Vedatech say not so. They say they can reach into the value created by the four employees when they were working for Vedatech. That value which would take into account some part of the future earnings from Holos in Japan both by way of future sales and future profits from servicing and training.
67. I turn to consider the principles. Although they are not really in doubt any more that does not mean they are easy to apply. First then the general principle. It is summarised in Goff and Jones, "The Law of Restitution", 5^th Edn. (1998) at p.15:

"A close study of the English decisions, and those of other common law jurisdictions, reveals a reasonably developed and systematic complex of rules. It shows that the principle of unjust enrichment is capable of elaboration and refinement. It presupposes three things. First, the defendant must have been enriched by the receipt of benefit. Secondly, that benefit must have been gained at the plaintiff's expense. Thirdly, it would be unjust to allow the defendant to retain that benefit."

To similar effect is what Lord Clyde said in Banque Financière v Parc [1999] 1 AC 221 at p.237:

"Without attempting any comprehensive analysis, it seems to me that the principle requires at least that the plaintiff should have sustained a loss through the provision of something of for the benefit of some other person with no intention of making a gift, that the defendant should have received some form of enrichment, and that the enrichment has come about because of that loss."

See also Lord Hoffmann at p.234.

68. So, one is not looking for an implied contract, an implied promise to pay. That is an older view of the principle - really a legal fiction. One is looking for the three italicised elements in the quotation from Goff and Jones, benefit, at the plaintiff's expense, and unjust.
69. All three elements are undoubtedly present in this case. Vedatech undertook work for the benefit of Holistic. Holistic got the benefit of that work and it would be unjust for it to have it for nothing. To be fair Holistic have always recognised that it would be unjust for them to have the benefit of Vedatech's work for nothing. The real question is what should they pay.
70. Most helpful in the present case is to look at what the courts have done in closely analogous cases. These are cases of work done "in pursuance of" incomplete contracts - work done where the parties have made some sort of loose arrangement too vague to be capable of amounting to an enforceable bargain but where, nonetheless the work done by one side has been for the benefit of the other. I will go to a few.
71. In William Lacey v Davis [1957] 1 WLR 932 a firm of builders were asked to tender for some rebuilding of war damaged property. Apart from preparing normal estimates for the work, they were specifically asked to and did prepare calculations and estimates for negotiating a claim with the War Damage Commission. Barry J held that although a contract for the work was never awarded to the defendants, they should be paid for the "extra" work done on the calculations and estimates. Putting aside the theory which justified the decision (implied contract) the amount awarded was "a reasonable price for the services." The assessment of these was essentially on a time and labour basis, though a bit rough and ready. Barry J made about a 30% deduction from an amount claimed by reference to professional scales. Note that the plaintiff did not seek remuneration on the basis of some sort of share in the profits made by the defendant from use of the plaintiff's work. It was a "time and materials" claim and award.
72. In British Steel v Cleveland Bridge [1984] 1 All ER 504 the plaintiffs were asked by the defendants to make some cast-steel nodes. There were contractual negotiations but no contract emerged, though both sides had expected one to be finalised. The plaintiffs delivered the nodes. When the defendants did not pay, the plaintiffs sued on a quantum meruit. Robert Goff J held the claim succeeded and that the defendants should pay a reasonable price for the work done at their request. The result is hardly surprising. I suppose the real point of the case was the defendant's failed counterclaim for late delivery - which is irrelevant here.
73. Next I turn to a case where there was no recovery, Regalian Properties v LDC [1995] 1 WLR 212. The plaintiff property company offered to buy some land "subject to contract". In the mutual belief that there was going to be a contract, the plaintiffs got architects to prepare plans and got planning permission. Much of that was done at the defendant's behest. The cost in professional fees was about £3m. But then the bottom fell out of the property market so the plaintiffs did not enter the anticipated contract. They sued for the work they had done and failed. This is not surprising. The work was of no benefit to the defendants. Rattee J held that the claim was merely for "expenditure made for the purpose of enabling Regalian to obtain and perform the expected contract." Because the background against which Regalian had had the work done was "subject to contract" the risk of there never being a contract all lay with Regalian.
74. Some of the reasoning, but not the result, of Regalian has been criticised, see Virgo, The Principles of the Law of Restitution, 1999 Edn. p.364. The criticism relates to Rattee J's reliance upon the "subject to contract" state of affairs when the expenditure was made by Regalian. It is said that this is inconsistent with Chillingworth v Esche [1924] 1 Ch 97. In that case money had been paid as a deposit for a "subject to contract" sale of land. The deal never went through. The Court of Appeal held the deposit could be recovered. Analysing it through restitutionary eyes one can see why - there are the 3-fold elements of benefit, at the plaintiff's expense and unjustness. It is noteworthy that the Master of the Rolls endorsed the question asked by Hamilton LJ in Bayliss v Bishop of London [1913] 1 Ch 127at p. 140:

"The question is whether it is conscientious for the defendant to keep the money, not whether it is fair for the plaintiff to ask to have it back."

The principle of unjust enrichment is in large part founded on conscience. Can the receiver of a benefit in all conscience hang on to it without paying? If he cannot, then he is unjustly enriched.

75. Mr Hildyard relies on William Lacy and British Steel to support his proposition that in these failed contract quantum meruit/unjust enrichment cases what matters is what the claimant put in. If it has been of no benefit to the defendant, he gets nothing. If it has been of benefit, he gets in effect no more than a fee or time and materials claim. Mr Hildyard analysed the problem in terms of risk allocation. Unless and until there is a contract, the provider of services or materials takes the risk that there will be no contract. So whilst he may be reimbursed for what he put in, if it was of benefit to the other party he cannot get more.
76. I do not agree. The concept of unjust enrichment (which is a better term than the Latin tag quantum meruit) is wider and more flexible than that. It depends upon all the circumstances. What the provider of the materials/services put in is part but not all of these. Insofar as he incurs expenditure merely in preparation of a hoped-for contract, he takes all the risk of that being wasted (as in Regalian). But if he does more, and that more is of benefit to the other party and the other party willingly accepted the benefit, then the party which took the benefit must pay for it. Otherwise it will have been unjustly enriched. The amount depends on all the circumstances. These particularly include the positions taken by the parties in the failed negotiations for a contract - they give some guide to the value of the benefit. Often a fee on the basis of time will appropriate - as it was in William Lacy. But things may be different where a party provides a benefit on the express basis that he is to have some "share in the action."
77. This, I think, emerges from the important case of Way v Latilla [1937] 3 All ER 759. Mr Way was the manager of a gold mine owned by a company in the Gold Coast Colony. He had a salary of £5,000, 3% of the profits and some further emoluments. He had met Mr Latilla whilst in London. They entered into a vague arrangement about obtaining further concessions near the mine managed by Mr Way. The arrangement was in Mr Way's words "we could both make a bit if I was successful in obtaining any vacant ground of a suitable nature." Mr Way found a concession and was encouraged by Mr Latilla to proceed ("I will protect your interest"). On the faith of that Mr Way proceeded. In due course the concession was obtained. Mr Latilla formed a small company which obtained the concessions. In the end Mr Latilla, through the company, made very large profits.
78. Mr Way first put his case in contract, saying that there was a concluded agreement that he would get an interest in the concession. The trial judge held that there was a contract and that Mr Way's reasonable share was about 3% of Mr Latilla's profits, namely £30,000. That view was rejected by the Court of Appeal - a contract whereby someone is to get an undefined share is just too vague. The Court of Appeal held that Mr Way could only have damages assessed on a fee basis. The absence of a contract was upheld by the House of Lords. But then, in the principal speech, Lord Atkin went on to say:

"But, while there is, therefore no concluded contract as to the remuneration, it is plain that there existed between the parties a contract of employment under which Mr Way was engaged to do work for Mr Latilla in circumstances which clearly indicated that the work was not to be gratuitous. Mr Way, therefore, is entitled to a reasonable remuneration on the implied contract to pay him quantum meruit."

79. I put aside the now-obsolete language of "implied contract" and "quantum meruit". The point is that Mr Latilla had to pay for the services rendered. It is upon how that was evaluated that importance attaches. This is what Lord Atkin said:

“My Lords, this decision [i.e. of the Court of Appeal] appears to me to ignore the real business position. Services of this kind are no doubt usually the subject of an express contract as to remuneration, which may take the form of a fee, but may also take the form of a commission share of profits, or share of proceeds calculated at a percentage, or on some other basis. In the present case, there was no question of fee between the parties from beginning to end. On the contrary, the parties had discussed remuneration on the footing of what may loosely be called a “participation,” and nothing else. The reference is analogous to the well known distinction between salary and commission. There are many employments the remuneration of which is, by trade usage, invariably fixed on a commission basis. In such cases, if the amount of the commission has not been finally agreed, the quantum meruit would be fixed after taking into account what would be a reasonable commission, in the circumstances, and fixing a sum accordingly. This has been an everyday practice in the courts for years. But, if no trade usage assists the court as to the amount of the commission, it appears to me clear that the court may take into account the bargainings between the parties, not with a view to completing the bargain for them, but as evidence of the value which each of them puts upon the services. If the discussion had ranged between 3 per cent on the one side and 5 per cent on the other, all else being agreed, the court would not be likely to depart from somewhere about those figures, and would be wrong in ignoring them altogether and fixing remuneration on an entirely different basis, upon which, possibly, the services would never have been rendered at all. That, in fixing a salary basis, the court may pay regard to the previous conversation of the parties was decided by the Court of Exchequer in 1869, in Scarisbrick v Parkinson (1869) 20 LT 175, where the terms of an agreement, invalid under the Statute of Frauds, were held to be admissible as evidence in a quantum meruit. This seems to me to be good law, and to give effect to a principle which has been adopted regularly by the courts not only in fixing remuneration for services but also in fixing prices, sums due for use and occupation, and, indeed, in all cases where the court has to determine what is a reasonable reward for the consideration given by the claimant. As I have said, the rule applied in fixing the amount of the remuneration necessarily applies to the basis on which the amount is to be fixed. I have therefore no hesitation in saying that the basis of remuneration by fee should, in this case, on the evidence of the parties themselves, be rejected and that Mr Way is entitled to a sum to be calculated on the basis of some reasonable participation.”

80. Lord Wright was to the same effect:

“It is, however, clear on the evidence, that the work was done by the appellant and accepted by the respondent on the basis that some remuneration was to be paid to the appellant by the respondent. There was thus an implied promise by the respondent to pay on a quantum meruit, that is, to pay what the services were worth. My difference with the Court of Appeal turns on a narrow issue, which is whether the quantum meruit should be determined on the footing of a fee as for professional services, or on some other footing. The Court of Appeal took the former view. I cannot, however, with respect, find, on the whole of the evidence in the case, and, in particular, on the discussions between the parties, any sufficient reason for accepting that view. The services of the appellant were, I think, outside the range of his duties as mining engineer, and were those of an agent for purchase, who suggests to his principal a transaction, and negotiates and completes it for him. While it is not unknown that such services should be remunerated by a fee if it is expressly or impliedly so agreed, this is by no means necessarily, and would not generally be, the case. The idea of such a fee being excluded, it follows that the question of the amount to which the appellant is entitled is left at large, and the court must do the best it can to arrive at a figure which seems to it fair and reasonable to both parties, on all the facts of the case."

81. Again, of course, Lord Wright speaks in the language of the time – implied contract and quantum meruit but nothing turns on that. What matters is that he, like Lord Atkin, rejects the fee basis for assessment.
82. That defeats Mr Hildyard's proposition that a claim for unjust enrichment can only be based on a fee or time and/or materials basis. The basis in Way was a "reasonable participation." That was so because it was that sort of basis which had been contemplated by the parties.
83. It is instructive to see how Lords Atkin and Wright then dealt with the approach to quantum - to the amount. Lord Atkin said of the "reasonable participation":

"What this should be is a task primarily to be undertaken by the trial judge. He did make an alternative award, and arrived at the sum of £5,000. I see no reason to differ from this. It is true that there is evidence that Mr Latilla made very large profits. On the other hand, this amount was very favourably affected by this country's financial policy in respect of gold, which was altered some time after the services were rendered. Mr Way does not profess to have discovered the line of reef on which the concessions lay, and some of them at least were in respect of abandoned workings. These concessions had to be financed for some years, and other interests had to be satisfied. Mr Way had no reason to contemplate even a participation based on a percentage of profits. A transfer of a substantial number of shares would have been an adequate satisfaction of any contemplated obligation on Mr Latilla's part. I think that the sum of £5,000 which the judge appears to have arrived on consideration of all the necessary factors would be a reasonable remuneration in all the circumstances."

84. Lord Wright said:

"One aspect of the facts to be considered is found in the communings of the parties while the business was going on. Evidence of this nature is admissible to show what the parties had in mind, however indeterminately, with regard to the basis of remuneration. On those facts, the court may be able to infer, or attribute to the parties, an intention that a certain basis of payment should apply. This evidence seems to me to show quite clearly that the appellant was employed on the basis of receiving a remuneration depending on results. If he had been unsuccessful, he would have been entitled to no more than his expenses, but the respondent had led him to believe that, if the concessions he obtained were valuable, his remuneration would be on the basis of some proportion of their value. The realisation of that value was removed from the actual services by the lapse of time (during which large sums of money were expended and adventured), and by many contingencies, and therefore the proper proportion may be comparatively very small, though the fruits of success were very large. The precise figure can be only a rough estimate. If what the court fixes is either too small or too large, the fault must be ascribed to the parties in leaving this important matter in so nebulous a state.”

85. So their Lordships held that although a figure had to be arrived at, there was no precision available because the parties had left things in a "nebulous state". Moreover there were many other factors at work which had to be borne in mind.
86. In this case the parties left things in an even more "nebulous state" than in Way. For the position is much more complex than in that case. Some of Vedatech's work was to be on some sort of fee basis (e.g. translation work and "rent") whilst other was work on Holos to be at Vedatech's risk with a future expectation of "participation". Part of the work involved the far from easy task of bringing together a team to sell and support Holos. That very team was in part to be paid for (Mr Muto) and part to be at Vedatech's risk (the others). Yet a further complication is that the "communings between the parties" envisaged some sort of participation in sales at some sort of rate of royalty and a direct entitlement to Vedatech to fees from clients for servicing and training. Clearly the parties expected that some of the benefit of the work lay in the future rather than in the early part of the entry into the Japanese market.
87. Mr Hildyard suggests that "participation" should be ruled out on another ground, namely that during, or at the end of, the muddled relationship, the parties themselves agreed or near agreed the price or value of those items. He says the evidence shows that pending the never-complete overall agreement there were limited agreements or arrangements whereby certain services were agreed to be paid for. Originally the allegation included Mr Sasaki's services from January, but Mr Pyemont withdrew that suggestion (in his witness statement) in his evidence in chief.
88. There are two problems with this submission. First one in principle. Mr Hildyard's exercise is essentially one of valuation of the proper remuneration for Vedatech's services - of the benefit which, if retained by Holistic without payment, would be an unjust enrichment. That is not what this hearing was about. On the contrary, Lightman J's order of 9^th May 2001 precluded investigation of the quantification of Vedatech's claims. So it would be unfair to determine, at this stage, what is essentially a quantification argument. Holistic asked for and obtained Lightman J's order despite Mr Subramanian's resistance. They must abide by it.
89. Secondly, however, the argument has problems on the facts. For although it is true that Vedatech by agreement did render invoices to Holistic, these cannot be viewed in isolation. The expectation of some sort of participation in return for risk, which was there from the outset at Mr Taylor's insistence, was never removed. Although at a comparatively late stage there was some discussion and indeed proposed invoicing for the employees' services it was always in the explicit context that Mr Subramanian was claiming other benefits. I do not think one can fairly say that during the year there were a set of ad hoc interim agreements which covered everything. I do not think the parties thought that at the time. Certainly Mr Subramanian did not. Nor did I understand Mr Pyemont so to suggest. Indeed when I asked him, the evidence went like this:

MR JUSTICE JACOB: The arrangement during the year, we can all look back on it and say was it or was it not a proper contract, but would it be right to say that there were many contracts being made during the year or really is it more difficult, is it an overall global position?

A. I think the key element is that it changed with time. It was a living --

MR JUSTICE JACOB: It was a fluid ongoing situation?

A. Yes. So the drive was to try and make it as fair as possible for both parties and for the employees, some of whom came out of this rather less well than what we had hoped.

90. Accordingly I hold that Vedatech are entitled to claim reasonable remuneration for the work that was done for Holistic. In principle, because Vedatech were asked to and did undertake risk as to success of Holos (and not merely risk as to whether there would be a contract) they are entitled to some reward if that risk proved beneficial. As in Way v Latilla the proper remuneration due is to be assessed not merely on a time basis but on time and success basis.
91. In so holding I take comfort from the fact that Mr Hood, a fair and able accountant appeared to accept that that made commercial sense. I asked him about the problem:

A. Well, Vedatech were in the business or they were alleging that they provided these people as consultants and so we were using their services as --

MR JUSTICE JACOB: No, you see, that was not the nature of the arrangement. They were partly consultants but they were partly risk sharers. That is why they were -- otherwise there would have been monthly billing for Muto, Sato, Sasaki and Takayama, [like] a straightforward hiring of a lawyer or an accountant but that was not ever the arrangement. Do you see what I mean? There was some provision which had not really been dealt with and they were providing it without an agreement.

A. Well that is perfectly true.

MR JUSTICE JACOB: And one might look at this and say actually what was being provided here was some risk and that would have to be a bigger value than simply straight payments, would it not?

A. Yes.

92. In so holding I think that the claim must be seen in a proper perspective. Vedatech are not to be put in the same position as if they had had a full contract, particularly one on the sort of terms it was asking for and which were unacceptable to Holistic. At one point Mr Subramanian suggested his claim could be valued at $US2-5m. That sounds disproportionate. After all Vedatech only worked for a year and not all the employees worked for a full year.
93. Mr Subramanian’s suggestions almost implied something in the nature of a proprietorial claim or a claim for an account of profits. There is no authority for that – Way v Latilla in particular is merely a case about how unjust enrichment is to be assessed.
94. One possible way of looking at things is to say overall what Vedatech contributed was a way into the very difficult Japanese market. That had some value. Quite how that might be measured is difficult to say, though I think that it would be helpful to know how much business (and profit) Holistic had in, say, the next two years (there is, fairly obviously, a "tapering off" as Mr Subramanian called it, so the period is a bit arbitrary). That business would clearly have included the taking over of any Hitachi contract (as to which there has been no disclosure) and other work of the same sort as well as sales to new customers. Vedatech's reasonable remuneration depends partly on that, though it should not expect the same sort of percentage or for anywhere near the same period as it sought in negotiation but did not get. Again it seems to me that in principle the fact that Vedatech put together a team which could readily be employed by Holistic is a relevant factor – it was part of the work which led to profit from Holos. Also prima facie relevant, if it is the fact, is that Holistic were able to take over Vedatech's Hitachi contract - Mr Subramanian asserted (and should be entitled to prove if he can) that this happened and moreover happened using Vedatech documentation to make the transition from Vedatech to Holistic seamless. Other relevant circumstances are the negotiations between the parties (as to which I suppose all the evidence is in) including any partial quantifications made at the time, and all monies received by Vedatech (from Holistic or Hitachi). Mr Subramanian also suggests that it would be relevant to consider what the market cost for the services provided by Vedatech might be. He suggests a comparison with what an equivalent service from Anderson might have been. I do not say he is right or wrong - that is part of the inquiry as to quantum which I cannot deal with now. All I can say is that consideration of that level of cost never formed part of the "communings between the parties" and, if it would have been as high as Mr Subramanian suggests, would almost certainly have been unacceptable to Mr Taylor.
95. When full information as to "all the circumstances" (per Lord Wright) is in, a judgment will have to be made. Neither side should expect anything like precision. Indeed given that the position is even more nebulous than that in Way the parties can expect no more than a very rough figure - an overall value judgment.
96. In the end I do not think I can usefully say any more at this stage about quantification of the claim. Each side must be permitted to adduce relevant evidence, insofar as the existing evidence does not cover any relevant point they wish to raise. At the end of the day, whatever it may amount to will have to be set off against Holistic's Part 20 claim for the 23m yen received by Vedatech for the sale of Holos to Hitachi.
97. All of Vedatech's claims, save that for unjust enrichment, are dismissed. The latter succeeds on the question of liability. There must be an inquiry as to the quantum of that claim. The Part 20 claim succeeds in principle, though the exact amount remains to be determined in the inquiry. Although I have not heard argument on the point, prima facie it would not be appropriate to allow Holistic to enforce any part of that claim until the inquiry is over: the quantum of the unjust enrichment claim may very well overtop it. Moreover it was Holistic who caused the split in time between adjudication of the two claims.
98. Following delivery of this judgment the parties are to liase over an appropriate form of order which will include directions as to the inquiry on quantum. How that is to be achieved and whether or not there should be a stay of further proceedings to enable a mediation are matters to be discussed immediately following judgment in open court.