Update: Court rules in favour of BSkyB in £700m dispute

A judge has found in favour of BSkyB following a £700m legal battle with EDS over a failed IT system.

A judge has found in favour of BSkyB following a £700m legal battle with EDS over a failed IT system.

It is the first time that a judge has found in favour of the claimant in a case of this scale and is likely to cause reverberations for months to come.

The judgement, which runs to 460 pages, is expected to prove the most important yet for the IT services sector. It follows a five-year battle between the two companies over a failed customer relationship management (CRM) system.

The case is the most expensive legal dispute in the history of the IT industry. BSkyB's costs in the three years from 2007 to 2009 ran to £40m, and EDS is believed to have spent a similar amount.

The full judgement, which is likely to be released tomorrow, means that the limits imposed in the contract on liability between the two parties no longer stand. And the liability now faced by EDS and HP is theoretically unlimited.

Lawyers for law firm Herbert Smith, acting for BSkyB, said the damages from the judgement would come to a minimum of £200m. The judge will hear arguments in February to settle the figure.

BSkyB is claiming about £700m in damages from EDS - many times the value of the original system. It alleged - and the judge, Justice Vivian Ramsey, has accepted - that EDS's bid team made fraudulent misrepresentations to win the business to supply and install CRM software to run BSkyB's new contact centre.

HP, which now owns EDS, said it would seek permission to appeal against the decision. A spokesman said, "We are pleased the court dismissed the majority of the allegations made. While we accept the contract was problematic, HP strongly maintains EDS did nothing to deceive BSkyB."

BSkyB's contract with EDS contained limits on how much EDS could be liable to pay in damages. But BSkyB argued that fraudulent misrepresentation sets aside these limits, leaving EDS facing potentially unrestricted damages, including loss of profit or expected benefits and indirect losses.

EDS denied the allegations during the court hearings, attributing the project cost and time overruns to the undefined scope of BSkyB's requirements.

Its QC Mark Barnes said during the dispute, "The main problem with this project was that it was wholly unspecified. Sky knew that it wanted a super-dooper CRM system, but had little more idea of what it wanted or needed."

Since court hearings ended in 2008 after about nine months, the judge has spent about 15 months determining, among other issues, what constitutes a fraudulent misrepresentation.

"This is a legacy issue dating back to the EDS business in 2000, which HP inherited when it acquired EDS in 2008," an HP spokesman said today. "As the world's largest technology company, HP has built a solid reputation based on strong governance and adherence to the highest ethical standards."

Lawyers believe that some of the main findings of the judge could set precedents even if the case goes to appeal.

Rob McCallough, partner at Pinsent Masons' outsourcing technology and communications group, said it could be a "landmark decision", which could give rise to suppliers reviewing sales techniques and what is presented to customers in terms of their capabilities, products and services."


Judge has technical expertise 
The judge in the case of BSkyB versus EDS may make history for the length of time - about 15 months - it took to reach a judgment.

But judge Sir Vivian Ramsey is among the judges most qualified to preside over a technology dispute, because of his background in civil engineering.

He has a degree in Engineering Science from Oxford, has worked with Ove Arup in London and Libya, and has handled arbitrations as far afield as Papua New Guinea.

He was appointed a QC in 1992 and a High Court Judge in the Queen's Bench Division in 2005.

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