If you can't nail Mike Lynch with fraud claim, judge asks HPE, can he score a win over you?

Meanwhile US megacorp tells court that Mike bungled his counterclaim

Autonomy Trial Ex-Autonomy CEO Mike Lynch’s counterclaim against HPE, amid their ongoing legal battle over HP's ill-fated $11bn acquisition of Autonomy in 2011, will fail – because it was filed against the wrong legal entity, HPE’s barrister boldly claimed in court this afternoon.

Stating that Lynch’s £121m ($160m) counterclaim was in actual fact against Autonomy, regarding statements made in 2012 by Hewlett Packard regarding its $8.8bn writedown of the merger, barrister Laurence Rabinowitz QC told the High Court: “All in relation to statements made by HP. Not Autonomy.”

In other words, it was claimed Lynch was, effectively, sued by HP's Autonomy in the aftermath of the acquisition, however, his counterclaim to Autonomy alleges HP defamed him. Thus, it is claimed, he is suing one entity for words said by another, up with which the English legal system will not put.

Legally speaking, Lynch is being sued by the company that inherited Autonomy’s assets, ACL Netherlands BV, with HPE and some of its other corporate presences supporting that lawsuit – though HPE is leading the actual litigation.

Even so, Rabinowitz told Mr Justice Hildyard, the trial judge, Lynch only filed the counterclaim because HPE and Autonomy had sued him first: “Dr Lynch brought no claim in two years; he wouldn’t have brought a claim except for the fact a claim was brought against him. When a claim was brought against Dr Lynch by Autonomy, that brought about a problem... Dr Lynch couldn’t counterclaim against Autonomy for defamation.”

Lynch’s counterclaim for $160m states that Hewlett Packard, as it was called in 2012, made statements about his handling of Autonomy in the years immediately before the buyout which damaged Lynch’s post-Autonomy business, Invoke Capital Partners. It is said by Lynch that 11 separate statements from HP caused Invoke to lose out on deals valued at around $160m, of which “between $126m and $130m” was supposed to flow into Lynch’s piggy bank.

“What one finds, my lord, in this counterclaim is an allegation that there was a breach of contract by Autonomy, that Autonomy was negligent and that Autonomy has acted in breach of the Data Protection Act 1998,” Rabinowitz told Mr Justice Hildyard. “All in relation to statements made by HP, not Autonomy. Your lordship will also have noted that Dr Lynch does not suggest any of these breaches have in fact caused him any loss directly.”

If HPE loses, can Lynch scrape a win?

Separately, the judge revealed a little more of his thinking about the case following this morning’s questions about HPE’s legal argument that Autonomy’s accounting may have been creative but not deliberately deceptive.

“If,” Mr Justice Hildyard asked Rabinowitz, “you succeed in showing it was inappropriate accounting but failed to demonstrate it was fraudulent, would the counterclaim survive?”

Rabinowitz replied: “No, I think what we’re saying is that it was fraudulent.”

Patiently, the judge tried again:

Put it in layman’s terms. Dr Lynch is cross that he’s been accused of dishonesty and fraud. And he feels he should have recompense for that. If you were to show that the accounts were misleading, nevertheless that he – that you failed to show he was dishonest in that process, would the counterclaim still succeed?

Rabinowitz shook his head: “It would fail anyway as a matter of law, as those statements were made by HP and not Autonomy,” adding: “My lordship will have noticed Dr Lynch says very little about HP’s post acquisition integration of Autonomy.”

In written submissions, HPE said Lynch’s “desire to focus on the period following the acquisition – as distinct from the preacquisition period during which the fraud was perpetrated – is itself telling. It is equally instructive that Dr Lynch is yet to explain the relevance of these post-acquisition matters to the issues that fall to be determined by the Court in these proceedings.”

Tomorrow sees the start of Lynch and Hussain’s cases defending themselves against HPE’s accusations, the court having risen early after the end of HPE’s opening statements this afternoon rather than start a new strand late in the legal day. The trial continues. ®

Bootnote

Someone who was less than enthusiastic about this afternoon's proceedings snored out loud halfway through, being clearly heard throughout the courtroom.

While Rabinowitz and Mr Justice Hildyard pointedly ignored it and carried on, suddenly all the half-asleep lawyers and the army of flacks and reporters at the back of the room began looking around like meerkats, hunting to identify the somnolent culprit. Sadly your correspondent was too far away to see who it was, though it came from the general direction of Lynch and Hussain's legal teams.

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