Pinewood Technologies Asia Pacific Ltd v Pinewood Technologies plc is an English case between Pinewood Technologies, a UK developer of a dealer management system (DMS) for motor dealerships and then a subsidiary of Pendragon plc, and an unrelated Hong Kong company that resold the Pinewood DMS in Asia. The reseller (PTAP) claimed about USD 312.7 million, saying Pinewood failed to develop the software for its markets. In October 2023 the court granted Pinewood reverse summary judgment on almost all of the claim because the reseller agreements excluded the types of loss claimed, and gave Pinewood judgment for unpaid fees.[1]
Background
Under reseller agreements dated 28 July 2017 and 8 January 2019, PTAP was appointed exclusive reseller of the Pinewood DMS, under a non-exclusive licence, in Hong Kong, Guam, Thailand, Macau, the Philippines and Vietnam, and later Japan. PTAP paid Pinewood monthly fees, in US dollars or Thai baht, in proportion to the number of DMS user accounts it provided to its customers. Clause 8.10 required these fees to be paid in full “without withholding, deduction or set-off”.[1]
Clause 10.5 required Pinewood to keep PTAP advised of releases, to make necessary changes so that the DMS met the legal requirements of the territory, and to use best endeavours to meet vehicle manufacturers’ franchise standards. Clause 16.2 excluded liability for, among other things, loss of profit, revenue or business and “any costs or expenses … incurred in reliance on this Agreement”, and clause 16.3 capped liability at the yearly average of the user account fees invoiced.[1]
The dispute
PTAP alleged that Pinewood’s failure to deliver development items disrupted customer contracts and that no dealership in Japan was able to go live. It claimed about USD 312.7 million, made up of at least USD 7.2 million of wasted expenditure and lost profits under both agreements, plus incidental costs of about USD 896,535 for building its own reports to meet Vietnamese accounting standards. Pinewood relied on clause 16 and counterclaimed for unpaid fees of USD 212,105 and THB 15,517,413. PTAP sought to argue that clause 16 and clause 8.10 were Pinewood’s written standard terms and failed the reasonableness test of the Unfair Contract Terms Act 1977.[1]
Decision or outcome
Mrs Justice Joanna Smith decided the applications on 13 October 2023:[1]
- Not standard terms. The draft agreement had gone back and forth, both sides had legal advice and some of PTAP’s changes had been accepted, so the agreement was not on Pinewood’s standard terms, even though clauses 8.10 and 16 themselves were not negotiated. The amendment to plead the Unfair Contract Terms Act was refused.
- Exclusion clause applied. There is no principle that exclusion clauses cannot apply to non-performance or repudiatory breach. The claims for lost profits and reliance expenditure fell within clause 16.2, and the agreements were not left without content because PTAP’s core rights as exclusive reseller were specifically enforceable. Reverse summary judgment was granted on the claim except for the incurred costs, which were direct losses outside clause 16.2 but subject to the cap in clause 16.3.
- No set-off. Clause 8.10 covered equitable set-off, so Pinewood was entitled to summary judgment on its counterclaim for the unpaid fees.
The court ordered PTAP to pay the fees with interest and a payment on account of costs. The Court of Appeal refused permission to appeal on 7 December 2023. In March 2024 the court extended PTAP’s time to pay to 1 June 2024, with its remaining claim to be struck out if it did not pay.[2]
Significance for software licensing and SAM practice
Reseller and partner agreements for software often combine per-user fees owed to the developer with promises about updates and localisation. This case shows that broad exclusions of lost profit and reliance costs, together with a no set-off clause, can leave a reseller paying fees in full while having little remedy for the developer’s alleged failure to develop the product.[1]
Lessons learned
- Exclusion clauses covering loss of profit and reliance costs can remove almost all of a reseller’s claim against the software developer, even for non-performance. A claim of about USD 312.7 million was reduced to incidental costs subject to a cap.[1]
- A no set-off clause means fees for user accounts must be paid in full while a dispute with the vendor continues. Pinewood obtained summary judgment for the unpaid fees.[1]
- Negotiating some clauses of a vendor’s draft can take the whole agreement outside the standard terms protection of the Unfair Contract Terms Act 1977. The court held that the agreement as a whole was negotiated.[1]
- Obligations to keep software compliant with local law or OEM standards need their own remedies if they matter commercially. The court noted they could be enforced by specific performance, but damages for lost business were excluded.[1]