Unisys and Royal London sacrifice millions to settle IT's
longest-running court battle
Unisys and one of its largest insurance customers, Royal London,
have decided to write off millions of pounds in legal fees by
withdrawing from a marathon IT dispute days before the court's
judgement was due.
In ending what lawyers say is the longest court battle in the
history of the UK IT industry, Unisys and United Assurance, part of
Royal London, forestalled a judgement which could have left one of
them with larger losses.
By agreeing to pay their own legal costs, which total millions of
pounds, they avoid the possibility of losing the judgement and
paying all the costs and any damages awarded by the judge.
The costs are so large because the litigation has lasted nearly two
years, culminating in an unusually long, 31-day, hearing in the
High Court's Technology and Construction Court.
The legal teams included four Queen's Counsels. During the hearing,
thousands of case papers filled rows of box files which stretched
almost the length of the courtroom.
But the ending of the dispute has left United Assurance, with the
same mixture of Bull and ICL systems it had wanted to replace
nearly three years ago, when it announced in early 1999 that a new
integrated system would cut costs and improve the service to
clients. The system comprised Sequent Unix-based hardware running
Unisys' flagship insurance product Unisure and an Oracle database.
But in August 1999 United ended the contract and in February 2000
it sued Unisys for misrepresentation, claiming the Unisure system
was not scalable and not capable of meeting expected volumes of
business.
United sought to recover from Unisys £14.8m spent on the project,
comprising internal costs of about £1m, £12.6m paid to Unisys and
more than £1m paid to third parties such as BT, Best People,
Compuware, Cap Gemini, Rand and Constellar.
Many of the legal arguments centred on whether Unisys had given
specific contractual undertakings on the performance of Unisure. A
key issue was whether Unisys had a contractual duty to ensure that
Unisure was able to batch process, in one night, direct debits for
200,000 policies.
Jeffrey Gruder, United's QC, conceded in court that the contract
had not contained a detailed provision on how many direct debits
the system should process in a given period.
Still, insisted Gruder, it did contain a performance obligation. He
said, "We were presented with the prospect of a system which could
only handle 25,000 direct debits in an overnight batch. This
bombshell was presented to us about six weeks before go-live date
of phase one."
Nicholas Dennys, QC for Unisys, said it had been unnecessary to
include a performance requirement on batch processing in the
contract as "it would be a matter that would be developed by
agreement between the parties". He added that United had not
identified the volume of work the system would ultimately need to
handle.
Judge David Wilcox questioned whether, in the thousands of
documents relating to the system, there was any direct performance
specification for the volume of work to be processed by an
overnight batch run.
One factor in the unexpected settlement of the dispute is that,
since United issued the writ, Royal London has acquired Scottish
Life, a happy Unisure user. In a joint statement following the
settlement, Unisys and Royal London said they had withdrawn their
legal claims "for the sake of this important commercial
relationship, and in recognition of their mutual intention to grow
the relationship between Unisys and Royal London Group". Neither
would comment on the terms of the settlement.