36. TAGlaw IP Conference Southampton 19 – 21 March 2010 BSkyB –v– EDS Lessons from an IT Project Disaster John Warchus – Partner, Clarkslegal LLP [email_address]
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53. TAGlaw IP Conference Southampton 19 – 21 March 2010 BSkyB –v– EDS Lessons from an IT Project Disaster John Warchus – Partner, Clarkslegal LLP [email_address]
Fraudulent Misrepresentation – Comments on Joe Galloway of EDS Although the Judge’s findings of fraud related to only one EDS former employee, Joe Galloway, he was the MD of the relevant part of EDS’ business bidding for the CRM system. The Judge described him as: “ the mastermind for EDS’ Response to the ITT ... he demonstrated an astounding ability to be dishonest and his credibility was completely destroyed by his perjured evidence over a prolonged period”. It is clear from the comments of the Judge that Mr Galloway was found not only to have misled BSkyB at the ITT stage, but that he also repeatedly lied during the giving of evidence at trial. Against this background, it is not surprising that on any matter of disputed fact, the Court invariably preferred BSkyB’s evidence to that of EDS.
Court’s Comments in relation to Repudiation “ However, I have come to the conclusion that, viewed objectively, neither the breaches alone nor the combination of breaches amounted to a repudiatory breach of the Prime Contract… The contemporaneous correspondence is inconsistent with that view and the delay to the milestones had not reached a stage where I consider that it amounted to a repudiatory breach. As I have said, most of the failures on behalf of EDS reflected delay in performance. In any event…there has been no acceptance of any repudiatory breach. An innocent party, faced with a repudiatory breach, has a choice. It can either elect to treat the contract as continuing or it can bring the contract to an end by acceptance of a repudiation. Unless and until a repudiation is accepted, the contract continues in existence…”
EDS’ Defence Based on the Contract’s Entire Agreement clause The relevant clause stated that the Agreement shall “ represent the entire understanding and constitute the whole agreement between the parties in relation to its subject matter and supersede any previous discussions, correspondence, representations or agreement between the parties …”
Court’s Comment on the Contractual Status of the Memorandum of Understanding “ Given the blanket ‘subject to contract’ statement at the head of the Memorandum of Understanding, I do not consider that EDS are correct to divide the document up and try to distinguish between the terms of one section and the others. The fact that EDS accept that the first and third sections are consistent with the ‘subject to contract’ rubric is, in my judgment, strong support for the general applicability of that principle to the whole document. On this basis, I consider that the whole of the signed Memorandum of Understanding was not a legally binding agreement when it was signed. What happened in this case is that the parties proceeded on the basis that there would be a new contract but that process failed to come to fruition, partly because the immediate need for a new contract faded because Sky took over EDS’ role as Systems Integrator. I consider that the parties proceeded on the basis that a new contract would be entered into but they failed to do so. It follows that the Memorandum of Understanding does not give rise to any full and final settlement, nor does it give rise to new warranty provisions.”
Court’s Comments on Mitigation “ I accept that there is a large gap between the effort and time which Sky took to complete the Actual CRM System and the effort and time which a competent, Alternative Systems Integrator might have taken to achieve that implementation. There are a number of reasons why that might have happened ... EDS has sought to rely on particular deficiencies but I do not consider that they have established a case that the additional costs were caused by Sky acting unreasonably and thereby failing to mitigate their loss. I do not consider that EDS can mainly rely on the gap between the effort and time which a competent, Alternative Systems Integrator might have taken and seek thereby to establish that Sky acted unreasonably. Sky acted reasonably in taking over as Systems Integrator and proceeded in an attempt to achieve go-live as soon as possible using EDS personnel and other external specialist resources. Inevitably there were problems in achieving go-live but that does not establish that Sky acted unreasonably.”
Fraudulent Misrepresentation – Comments on Joe Galloway of EDS Although the Judge’s findings of fraud related to only one EDS former employee, Joe Galloway, he was the MD of the relevant part of EDS’ business bidding for the CRM system. The Judge described him as: “ the mastermind for EDS’ Response to the ITT ... he demonstrated an astounding ability to be dishonest and his credibility was completely destroyed by his perjured evidence over a prolonged period”. It is clear from the comments of the Judge that Mr Galloway was found not only to have misled BSkyB at the ITT stage, but that he also repeatedly lied during the giving of evidence at trial. Against this background, it is not surprising that on any matter of disputed fact, the Court invariably preferred BSkyB’s evidence to that of EDS.
Court’s Comments in relation to Repudiation “ However, I have come to the conclusion that, viewed objectively, neither the breaches alone nor the combination of breaches amounted to a repudiatory breach of the Prime Contract… The contemporaneous correspondence is inconsistent with that view and the delay to the milestones had not reached a stage where I consider that it amounted to a repudiatory breach. As I have said, most of the failures on behalf of EDS reflected delay in performance. In any event…there has been no acceptance of any repudiatory breach. An innocent party, faced with a repudiatory breach, has a choice. It can either elect to treat the contract as continuing or it can bring the contract to an end by acceptance of a repudiation. Unless and until a repudiation is accepted, the contract continues in existence…”
EDS’ Defence Based on the Contract’s Entire Agreement clause The relevant clause stated that the Agreement shall “ represent the entire understanding and constitute the whole agreement between the parties in relation to its subject matter and supersede any previous discussions, correspondence, representations or agreement between the parties …”
Court’s Comment on the Contractual Status of the Memorandum of Understanding “ Given the blanket ‘subject to contract’ statement at the head of the Memorandum of Understanding, I do not consider that EDS are correct to divide the document up and try to distinguish between the terms of one section and the others. The fact that EDS accept that the first and third sections are consistent with the ‘subject to contract’ rubric is, in my judgment, strong support for the general applicability of that principle to the whole document. On this basis, I consider that the whole of the signed Memorandum of Understanding was not a legally binding agreement when it was signed. What happened in this case is that the parties proceeded on the basis that there would be a new contract but that process failed to come to fruition, partly because the immediate need for a new contract faded because Sky took over EDS’ role as Systems Integrator. I consider that the parties proceeded on the basis that a new contract would be entered into but they failed to do so. It follows that the Memorandum of Understanding does not give rise to any full and final settlement, nor does it give rise to new warranty provisions.”
Court’s Comments on Mitigation “ I accept that there is a large gap between the effort and time which Sky took to complete the Actual CRM System and the effort and time which a competent, Alternative Systems Integrator might have taken to achieve that implementation. There are a number of reasons why that might have happened ... EDS has sought to rely on particular deficiencies but I do not consider that they have established a case that the additional costs were caused by Sky acting unreasonably and thereby failing to mitigate their loss. I do not consider that EDS can mainly rely on the gap between the effort and time which a competent, Alternative Systems Integrator might have taken and seek thereby to establish that Sky acted unreasonably. Sky acted reasonably in taking over as Systems Integrator and proceeded in an attempt to achieve go-live as soon as possible using EDS personnel and other external specialist resources. Inevitably there were problems in achieving go-live but that does not establish that Sky acted unreasonably.”