Facts and figures

  • A six-year legal battle
  • 10-month trial (October 2007 – July 2008)
  • 109 days in court
  • Over 70 witnesses
  • Approximately 500,000 documents
  • Damages likely to exceed £200 million.

Background

In 2000 BSkyB Limited (Sky) retained Electronic Data Systems Limited (EDS) to design and build a Customer Relationship Management system, following a competitive tender process. Work started under a letter of intent in August 2000 and a contract was signed in November of the same year (the contract). The project was not a success and EDS was ultimately removed from the project with Sky taking over the system integrator role.

Decision

Mr Justice Ramsey found that EDS acted deceitfully in making dishonest representations during the tender process, falsely claiming that it had carried out a proper analysis as to the amount of time needed to complete the project (nine months), which had induced Sky to contract with EDS in preference to the other bidders.

Ramsey also found that EDS made further negligent misrepresentations during the course of the project which induced Sky to enter into an agreement to amend the contract.

EDS were also in breach of the contract having failed to use reasonable skill and care or conform to good industry practice. In particular EDS had failed to:

  • capture Sky's requirements
  • adequately resource the project
  • properly document the design and development process.

A number of issues relating to the quantification of damages still need to be determined at a later hearing before the judge. However, we understand that Sky expect damages to be awarded in excess of £200 million. EDS' contractual limitation of liability offers no protection against its liability for fraud.

Implications

We are in the process of analysing the judgment in order to better understand its potential impact. However, on any analysis, this is a landmark case which has implications for the IT industry and the way in which IT systems and services are bought and sold. We predict that parties will now pay even greater scrutiny to tender processes and pre- contract negotiations. As ever, 'honesty is the best policy' and the case underlines the importance, during the sales process, of not deliberately or carelessly overselling a system's capabilities or a supplier's ability to deliver.