The Jamaican High Court has awarded significant damages, equivalent to approximately US$4+ million, to a software programmer. The bulk of the award? Interest!
Background to the matter
In Paymaster (Jamaica) Ltd. v Grace Kennedy Remittance Services Ltd. (mirror), the underlying grouse of the claimant was that it had copyright in a computer program that it had engaged one of the defendants – a software developer – to create. The claimant also complained that when the developer tried to sell the software to a competitor of the claimant – the other defendant – a breach of confidence occurred.
The matter came alive when an ex parte injunction (when you apply to the court without telling the other side that you are doing it) was granted against the developer in the year 2000. That is over 20 years ago; when humans still used curios like this and the Billboard chart was dominated by what have since become a series of karaoke favourites.
Eventually, the matter was decided by the High Court in favour of the programmer and the other defendant (the claimant did not own the copyright to the software; there was no breach of confidence by the software developer or the competitor to the claimant). This High Court decision was made in 2010, 10 years after the injunction was granted. The High Court’s decision was partially overturned by the Court of Appeal (no copyright ownership, but there was a breach of confidence by the claimant’s competitor) in 2015.
The matter eventually made its way to the Privy Council – the final court of appeal for Jamaica. The Privy Council basically read the Court of Appeal’s determination on the breach of confidence issue and concluded:
The Privy Council’s decision was handed down in 2017. We are now 17 years deep in litigation at this point. Stay with me.
Having held that the claimant had no copyright in the software and that there was no breach of confidence, the Privy Council’s decision meant that the matter had to revert to the High Court to determine damages. The High Court came back with its decision in 2020. That’s 20 years worth of litigation (so far)!
High Court damages decision
The High Court was asked to determine the amount of damages due to the developer flowing from an undertaking in damages given by the claimant when it obtained the injunction in 2000. For this to make sense, it is necessary to explain both injunctions and undertakings.
An injunction is an order from a court forcing someone to either do something (mandatory injunction) or to refrain from doing something (prohibitory injunction). The claimant in the Paymaster matter obtained a prohibitory injunction to prevent the software developer from selling the software to anyone else. Injunctions, like the kind obtained in the Paymaster matter, typically last until the dispute is determined at trial.
Simply put, undertakings are promises to do something. Undertakings typically arise in the context of injunctions. The party asking the court for the injunction will usually be asked to give the undertaking in return for the court granting the injunction.
A party giving an undertaking in damages to a court essentially agrees that, if the matter goes to trial and they lose, they will pay any damages due to the other party. This is significant, as injunctions are often granted at the beginning of court proceedings and typically prevent parties from engaging in activities that would otherwise be beneficial to them (for example, operating a business, leasing property or purchasing shares) until the dispute between the parties is settled at the trial.
Why are undertakings a good idea you ask? Keep in mind that injunctions tend to stay in place until the court has had an opportunity to determine the underlying dispute between the parties at trial. The idea behind the undertaking is this: if someone is prevented from doing something that was beneficial to them for a period of time and it turns out there was no good reason to have prevented them from doing it, then it is only fair (equitable) that they are compensated for the loss of the beneficial activity they were prevented from engaging in.
What the court found
The High Court in Paymaster conducted its enquiry and concluded that the developer should receive damages of J$282,259,386.80 (approximately US$2,025,512.363). The Court also determined that interest should be awarded and…. (cheap pun alert!)… this is where it gets interesting. The judge concluded that the programmer should also get interest on the damages award from August 25, 2000 to June 11, 2020. Yes, you read that right, just under 20 years worth of interest at 6% per annum!
In essence, the judge awarded interest on damages from the time of the injunction to the date of its determination. By my maths, that translates to J$335,463,347.93 (US$2,407,316.9950). As you can see, the interest on the damages award was more than the award itself.
Bespoke software solutions are actually still fairly popular at the enterprise level in the Caribbean. This means that circumstances are ripe for this kind of claim between other developers and clients to occur. Thankfully, there are a number of ways to minimise the circumstances which led to the unfortunate Paymaster litigation in the first place. I have included some of them in this note.
If you are unable to stave off this kind of litigation, the Paymaster decision holds a significant lesson, whether you are a software developer or hired one. If one of the parties has secured injunctive relief, it is important to explore practical means of resolving the underlying claim quickly.
The Paymaster case demonstrates that the longer the matter drags on, the greater the potential exposure to substantial interest for the losing claimant. Effectively, the longer the litigation continues, the less commercially pragmatic it becomes to fund it. Also, if a party obtains an injunction, but subsequently loses the substantive claim after many years, that exposure to interest on damages, in addition to legal fees and cost awards will be sizeable. Depending on the circumstances, this could prove financially ruinous.
Exploring options for short-circuiting litigation include prioritising genuine settlement talks or sending the matter to mediation. If those options aren’t viable, it may be useful to see about getting the claim determined by the court expeditiously. Many jurisdictions have mechanisms in their court rules that allow for speedy-trials. Discuss with your lawyer whether this may be appropriate for your matter.