HP damned by Autonomy civil ruling and posthumous Mike Lynch statement

HP brought a UK civil action alleging that it had been forced to write down the value of Autonomy by $8.8 billion following acquisition after claiming it had been misled over the true value of the business.

A judgement in a UK civil action held well before the US hearing was finally published today and shows that HP was off the mark by 80 per cent in its assessing the downside backlash of the deal.

Mr Justice Hildyard today ruled that the Lynch estate in fact owed HP around £730 million. And he delivered a scathing assessment of HP in the process.

While national media are speculating that the settlement, if upheld, would ruin the Lynch estate, that takes no account of a likely appeal.

Dr Lynch told me after his victory in the US criminal trial that the UK civil court verdict would be appealed in any event. Now his representatives are saying that a decision on whether to appeal Mr Justice Hildyard's decision will be definitively taken later this year.

They have also released a statement written by Dr Lynch before his passing and updated by his representatives on receiving today's ruling.

The Lynch statement reads: “Today’s High Court ruling reflects that HP’s original $5 billion damages claim was not just a wild overstatement - misleading shareholders - but it was off the mark by 80 per cent. HP acquired Autonomy for $11.6bn and today's judgment is a view that Autonomy’s actual value was not even 10 per cent below the price HP paid. This result exposes HP’s failure and makes clear that the immense damage to Autonomy was down to HP's own errors and actions.

“An appeal process will be considered later this year. The English civil case included hearsay evidence from the US, and we were never able to question or cross-examine those witnesses. This is in direct contrast to the rights of defendants in the US legal system. When in the US criminal trial we were able to cross examine the relevant witnesses, a very different story emerged. Why is the English legal system so trusting?”

The Lynch estate also issued a quote taken from a section of Mr Justice Hildyard's quantum (damages) ruling issued today. It reads: “I consider that HP's claim was always substantially exaggerated: and I have concluded that there is more than a grain of truth in Dr Lynch's submission ... that when ... HP announced that it was writing down the value of Autonomy by $8.8 billion and attributed some $5 billion to alleged fraud, the figure was not based on a detailed analysis.

“Rather, it was predominately calculated by reference to the perceived need to reduce the carrying value of some of HP's assets in order to take account of the diminution of HP's market capitalisation following a fall in HP's share price; and (to quote Dr Lynch's written closing) "Autonomy was lined up to take a disproportionate hit."

Dr Lynch and his daughter Hannah, aged 18, were among seven people who died when the Bayesian super yacht sank off the coast of Sicily. While circumstances that led to the tragedy remain under investigation, there is speculation that representatives of some of the victims and surviving crew may seek damages from the Lynch estate.