Write-off ends insurer's 31-day court challenge

Unisys and Royal London sacrifice millions to settle IT's longest-running court battle

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.

Read more on IT legislation and regulation