EDS "misrepresention" in BSkyB case - some comments by judge

| No Comments
| More

Below is a summary of the case of BSkyB versus EDS. Below that are excerpts from the 468-page judgment in the case.

**

A judge in a £709m legal case over a failed CRM system says that if EDS had not made misrepresentations to Sky, then Sky would have engaged another company, PriceWaterhouseCoopers.

The finding is in a 468-page judgment which was emailed to interested parties last night. The judgment comes at the end of a five year court battle in which BSkyB sued EDS for £709m.

EDS - now owned by HP - had argued that its liability under the contract was capped at £30m. But a judge has found in favour of BSkyB's claim that misrepresentation by EDS removed the cap on EDS liability, leaving EDS with potentially much higher damages to pay.

At a new hearing in February the judge Sir Vivian Ramsey will hear arguments by both sides on the size of damages. As well as fraudulent misrepresentation, the judge found that EDS was in breach of contract.

Herbert Smith, BSkyB's lawyers, say that EDS will be liable to pay at least £200m in damages. But EDS says that the judge dismissed the majority of allegations made by BSkyB.

HP said: "While we accept that the contract was problematic, HP strongly maintains EDS did nothing to deceive BSkyB."

HP is seeking permission to appeal. Its lawyers believe that a finding that there had been misrepresentation by one of EDS's witnesses - there were 27 from its side who gave evidence  - is not evidence of a culture of deceit within the company. It does not accept there was fraud at any level of the company.

EDS had about 60 people in the bid process, including senior staff and representatives of consortium partners. The company rejects any suggestion that one individual had the influence to render the entire process fraudulent.

EDS had argued during the case that BSkyB was vague about what it wanted and that it kept changing requirements.  

In his judgment, Sir Vivian Ramsey said there had been "deceit" by EDS through an employee who "dishonestly made those representations knowing them not to be true".


The representations were made both before the selection of EDS and before the signing of the Prime Contract.

BskyB issued the invitation to tender for a CRM system in March 2000. The judgment on 26 January 2010 is nearly 10 years later. In between was a five year court battle costing about £80m for the two sides. The judge took about 15 months to issue his findings.

It's unlikely that many other users and suppliers will want to go though years of legal argument to prove or disprove misrepresentation. But the outcome of the case has already sent waves of surprise through the IT legal and supplier community. 

**


Below are parts of the 468-page High Court judgment which was issued last night to interested parties:

"The Invitation to Tender was dated 17 March 2000. In the title, it described the project as being "The Build and Implementation of a World Class Contact Centre for BSkyB and the further retrospective fitting of environment, culture, process and technology to existing sites." The intention was to build the new contact centre and then carry out work fitting out the existing call centres in Scotland at Carnegie Campus, Dunfermline and Kirkton Campus, Livingston."

**

"..In relation to the time between the Letter of Intent and the Prime Contract, EDS
misrepresented that they had carried out a proper analysis of the amount of
elapsed time needed to complete the initial delivery and go-live of the contact
centre and that they held the opinion that, and had reasonable grounds for holding
the opinion that they could, and would, deliver the project within the timescales
referred to in the Contract.

"Those representations were made by EDS based on deceit by [an employee] who
dishonestly made those misrepresentations knowing them not to be true.

"The representations were made both before the selection of EDS and the Letter of
Intent and also in October 2000 prior to the signing of the Prime Contract.

"They were intended to be relied on by Sky to induce them to select EDS and enter into
the Letter of Intent and then subsequently to induce Sky to enter into the Prime
Contract.

"Sky did rely on those misrepresentations and was induced to select EDS, enter into the Letter of Intent and the Prime Contract. EDS is accordingly liable to Sky in deceit for fraudulent misrepresentation."

**

"I have found in summary that:

"1) EDS is liable in deceit to Sky for the misrepresentations which were made
both at the time of the ITT and at the time of the conclusion of the Prime
Contract as to elapsed time and that these were relied on by Sky in EDS
being selected as Systems Integrator, being engaged under the Letter of
Intent and being awarded the Prime Contract.

"(2) EDS is liable for negligent misstatement and/or misrepresentation under
the Misrepresentation Act 1967 in respect of misrepresentations in 2001
that they had developed an achievable plan, which had been the product of
proper analysis and re-planning.

"(3) EDS were in breach of the Prime Contract both prior to and after the
signing of the Letter of Agreement and were in breach of the Prime
Contract, as amended by the Letter of Agreement, in March 2002 when
Sky took over as Systems Integrator.

"... On the basis of these findings it now falls for me to consider what loss was caused
to Sky. That raises a number of questions ..."

**

"If they [EDS] had not made that representation then they would have been bound to tell Sky, amongst other things, that they had not carried out a proper analysis of the time required to achieve go-live and were unable to say when go-live would be achieved.

"I consider that for Sky one of the major factors in choosing a Systems Integrator
was the need to achieve go-live within the timescale which had been announced to
the City in February 2000.

"If EDS had not been in a position to say that they could achieve that timescale and could not have given any timescale then, in my judgment, this would have dramatically affected Sky's perception of EDS' bid and EDS' competence in carrying out the project."

**

"EDS say that Sky considered that EDS' technology solution was judged to be the best fit with Sky's business plan. In terms of cost, EDS say that by 12 July 2000 there was little difference between the bids, with EDS having lower day rates than PwC [PriceWaterhouseCoopers].

"As to time, the delivery dates for go-live for PwC and EDS were comparable. EDS
accept that it is clear that time was important in the sense that, if EDS had proposed a longer timetable, that would have counted against it.

"In my view, had EDS not misrepresented the position, Sky would have had very strong grounds for moving to PwC who were offering go-live within the nine month period.

"The issue of costs would not, I consider, have been decisive. Indeed the costs fluctuated during the bid period and this does not seem to have been a major factor in deciding between EDS and PwC.

"The major factor would have been whether Sky would have proceeded with PwC and Siebel when there was a clear preference for Chordiant. The  evidence shows that PwC were not prepared to offer Chordiant.

"PwC had a business relationship with Siebel and given the aggressive way in which Siebel was promoting itself, I do not consider that PwC would have offered a solution using Chordiant."

**

"I consider that the time factor would have been so important that if EDS disclosed
the true position as to timescale then Sky would have moved to favour PwC much
more strongly.

"The position would not just have depended on Sky's view of the uncertain time but EDS' position on time would, in my view, have eroded Sky's confidence generally.

"With costs being effectively a neutral factor, given a choice of EDS with Chordiant with an uncertain time frame and PwC with Siebel and golive in nine months, in my judgment the preference would have moved to PwC.

"I have no doubt that Sky ... would have again tried to push PwC to accept Chordiant but that PwC would again have resisted that ...

"Given the choice between PwC with Siebel or no alternative to EDS, I consider it very likely that Sky would have chosen PwC."

**

"In terms of causation, if EDS had not made the misrepresentations to Sky prior to the
selection of EDS and the Letter of Intent, Sky would not have continued with EDS
but would have engaged PwC to implement the PwC CRM System using Siebel.

"Sky are entitled to recover losses caused by entering into the Prime Contract on the basis
of either the misrepresentations made prior to selection and the Letter of Intent or
prior to the Prime Contract. PwC would have implemented the PwC CRM System
with a total effort of 2794 man-months and would have achieved go-live on 1
February 2003.

"If EDS had not made the misrepresentations to Sky prior to the Letter of Agreement,
Sky would not have continued with EDS but would have engaged an Alternative
Systems Integrator to continue with the CRM project and implement the ASI CRM
System.

"An ASI would have implemented the ASI CRM System with a total effort of
4,749 man-months and would have achieved go-live on 1 February 2005.

"EDS are also liable for damages which represent damage for breach of the Prime Contract
prior to July 2001 and I find that damages should be awarded on the basis that the
wasted costs, being effort expended less useful work, are £16.3 million.

"Sky are entitled to damages for breach of the Prime Contract as varied by the Letter
of Agreement which should be based on the costs of the effort incurred by Sky after 6
March 2002 in reaching the stage of development that EDS would have reached if
they had expended the effort they had charged for in performing their obligations in
accordance with their obligations under the Prime Contract as amended."

Links:

The implications of the judge's findings - outsourcing and offshoring blog

Court rules in favour of BSkyB in £700m legal case - ComputerWeekly.com

EDS BSkyB dispute became IT's longest and most expensive court battle - ComputerWeekly.com

BSkyB wins legal case against HP - Wall St Journal

Leave a comment

Subscribe to blog feed

Archives

-- Advertisement --