Yesterday BSkyB won a major victory in the long-awaited ruling over their battle with EDS about fraudulent misrepresentations made to win a contract for BSkyB's IT system. This claim for over £700million has been eagerly anticipated, and will potentially have massive implications for the whole of the IT and outsourcing industry.
BSkyB sued EDS in 2004, claiming £709million in damages for allegations that in 2000 the EDS bid team fraudulently misrepresented its expertise and resources to win a tender to supply and install a customer relationship management ("CRM") system for BSkyB's new contact centre. The CRM system failed and BSkyB had to develop the system in-house.
BSkyB's claim of fraudulent misrepresentation has been upheld by the Technology and Construction Court but four other claims have been rejected.
Despite the contract only being worth £48million, BSkyB expects to recover at least £200million in damages. The Court's acceptance of the representations being fraudulent meant that the agreed contractual limits on liability are not applicable so damages can potentially be unlimited. A further hearing in February has been set to consider the amount of damages.
Hewlett Packard (who took over EDS in 2008) plans to appeal this decision due to the vast sums of money at stake, so it will be some time yet before the case finally concludes and the legal ramifications are fully known.
The IT supplier and outsourcing industry as a whole will have to review the sales cycle. Ill considered sales comments or unsupported claims in documents, no matter how informal, can now potentially be considered misrepresentations and give rise to unlimited liability.
The judgment, which runs to nearly 500 pages, was published last night.