EDS and BSkyB legal costs could reach £45m

The combined legal costs of a dispute between British Sky Broadcasting and EDS over a customer relationship management system are expected to approach £45m – almost as much as the orginal £48m price for the project.


This makes it one of the biggest IT-related disputes in recent history in terms of legal costs.

Stephen Castell an expert witness in IT litigation – who is not involved in the BSkyB case against EDS – said he was “astonished” at the size of the legal costs.

On a single day at the High Court last week there were more than 20 people on the legal benches, including three QCs. The case is expected to last more than six months.

The hearing takes place at High Holborn in an unusually large courtroom which is a satellite of the High Court in The Strand. In the court are about 700 “A4” box files comprising material such as expert reports, contracts, claimant notebooks, correspondence, EDS internal standards, response to the Invitation to Tender and witness statements.

One logistical difficulty for both sides is that the project dates back about seven years and some of the witnesses no longer work for BSkyB or EDS and are being flown in from various parts of the world. The first witness for BSkyB who lives and works in Australia has had the ordeal of his father’s serious illness and has been unable to come to England in the immediate future.

BSkyB filed a claim against EDS in August 2004 but it has taken more than two years for the case to reach the High Court. It began this month with BSkyB outlining its claim against EDS for £709m, a figure which includes lost benefits.

Opening the case BSkyB’s Queen’s Counsel Mark Howard said: “This is a case about deceit…Sky allege that, during the course of a competitive tender, EDS represented they had the resources, proven technology, and methodology to enable them to deliver the solution within a certain timescale and cost… The representations are alleged to have been made dishonestly in order to win the business.”

Howard said: “The simple fact is that Richard Freudenstein [then Sky’s Chief Operating Officer] would never have chosen EDS and recommended their selection to Tony Ball [Sky’s Chief Executive Officer] had EDS not falsely represented their capability to deliver the system in the stated time and at the stated cost …”

The prime contract between Sky and EDS contained a damages cap of £30m. Howard said that Sky accepts that in order to recover the damages claimed against EDS deceit must be proved.

For EDS, QC Mark Barnes said: “We suggest it is an artificial claim designed to overcome the difficulties that Sky face under their contracts and to allow them to claim absurd and extravagant amounts of damages.” He said the “main problem with this project was that it was wholly unspecified”.

He added: “Sky knew it wanted a super-dooper CRM system but had little more idea of what it wanted or needed.” He said Sky’s case is “so ambiguous and slippery that it is difficult at any one time to know at any one time what exactly one is having to deal with.” EDS strongly denies deceit, dishonesty or misrepresentation.

The case continues.

Links:

BSkyB and EDS face £45m combined legal bill

BSkyB sues “dishonest” IT group for £709m

EDS legal team hits at BSkyB claim

Forbes.com coverage of BSkyB EDS legal case

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