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The Co-operative Group, which operates 1,100 stores across the UK and runs the Co-operative Bank, has accused a judge of "inventing evidence" during an £11m legal battle with computer services company ICL.
The Co-op, which is seeking damages from ICL following the failure of a critical electronic point of sale (Epos) project last week, pressed the court of appeal for a retrial, citing unfairness and serious irregularities in the original hearings.
The Co-op was forced to pay ICL, now part of Fujitsu Services, £1.2m in "uplift fees" in January this year, after judge Richard Seymour concluded that the firms had begun a project to harmonise till systems across Co-op stores without agreeing a contract.
In a controversial ruling, the judge decided Co-op managers had lied in court and had deliberately attempted to scupper the Epos project because they had a "festering grievance" with ICL's performance on a contract with the Co-op's funeral business.
The failure of the Globalstore till system was a serious blow to the Co-op, which regarded it as a key plank in the planned merger of the Co-operative Services Group and the Co-operative Wholesale Society to form a single UK-wide supermarket chain.
The project was also critical for ICL, generating £25m of turnover. The supplier regarded the Co-op as one of its biggest customers in the UK, court documents revealed.
Barrister Christopher Carr, acting for the Co-op, told the court of appeal that Seymour, the original trial judge, had constructed an elaborate conspiracy theory to explain the Co-op's behaviour when there was little evidence to support it.
He said the judge had drawn the "highly improbable" conclusion that Co-op managers were prepared to place the biggest merger in the Co-operative movement for 140 years at risk because of a grievance over ICL's performance on a project for a subsidiary.
This was never part of ICL's case, and was not tested in cross-examination during the original hearings. It was mentioned in only four sentences among thousands of pages of transcripts, Carr told the court.
Carr claimed that the judge became convinced that the Co-op only agreed to buy ICL's Globalstore system to avoid paying uplift fees of just under £1m on an existing contract between Co-operative Retail Services and ICL.
"The judge thought CWS was so concerned about the prospect of paying £870,000 that the only reason they entered into the deal was in the hope of absolving CRS of this liability. The benefits of Globalstore were as nothing to CWS, and the only thing that influenced them was the desire to escape penalties," he said
In fact, the Co-op had agreed to go head with the project because ICL had convinced the firm that it represented good value for money and would give the supermarket chain the single modern Epos system it needed, Carr said.
He added that the judge's conspiracy claim made no financial sense given that the penalty fees represented only a fraction of the project cost. The Co-op had already paid ICL £1.8m for systems it could not use by the time the retailer terminated the contract.
ICL and the Co-op had different expectations of the project, the court heard. ICL assumed it would deliver code containing errors and would work with the Co-op to debug it. But the Co-op expected error-free software.
The Co-op raised concerns about the quality of ICL's software and pressed ICL to agree penalty clauses, but negotiations failed. The retailer pulled out of the project in January 2001, only two months before ICL was due to deliver the final version of the software.
The case continued as Computer Weekly went to press.
Diary of the case
10 March 2000
The Co-operative Group gives the go-ahead for a multimillion-pound Globalstore Epos project. ICL is asked to develop a unified point of sales system by March 2001.
31 May 2000
Co-op IT director Keith Brydon tells colleagues that the Co-op's chief executive is "intent on getting his pound of flesh from ICL". The Co-op wants ICL to agree penalty clauses if it fails to deliver on time.
8 January 2001
Testing reveals hundreds of bugs in the ICL software. ICL and the Co-op agree a series of "hot fixes" and version releases to address them.
19 January 2001
Brydon and his staff confront the ICL Global Store team with a long list of complaints. Brydon says he has no confidence in ICL and wants guarantees backed by cash and a refund on the money already spent.
29 January 2001
The Co-operative Group writes to ICL terminating the contact.
The Co-op files a claim against ICL for £11m in damages.
The Co-op case is thrown out by the Technology and Construction Court. The judge concludes ICL and the Co-op did not have a proper contract. He claims senior Co-op managers were motivated by malice against ICL and accuses them of lying in court. The Co-op applies for an appeal.
At appeal, the Co-op claims the judge invented evidence, ignored other evidence, and reached highly improbable conclusions.