BSkyB Ltd and Another v HP Enterprise Services UK Ltd and Another
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr. Justice Ramsey,The Hon Mr Justice Ramsey: |
| Judgment Date | 26 January 2010 |
| Neutral Citation | [2010] EWHC 86 (TCC) |
| Docket Number | Case No: HT-06-311 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 26 January 2010 |
[2010] EWHC 86 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Hon. Mr. Justice Ramsey
Case No: HT-06-311
Mr Mark Howard QC, Mr Alex Charlton QC, Mr Alec Haydon, Mr Fionn Pilbrow and Mr Matthew Lavy (instructed by Herbert Smith LLP ) for the Claimants
Mr Mark Barnes QC, Mr Alan Gourgey QC, Ms Zoe O'Sullivan and Mr Stephen Tudway (instructed by DLA Piper ) for the Defendants
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Index
| A: GENERAL BACKGROUND AND INTRODUCTION | 9 |
| Introduction | 9 |
| Sky Customer Relationship Management | 10 |
| Brief Chronology | 11 |
| The Parties | 14 |
| EDS' Consortium Partners | 15 |
| Arthur Andersen | 15 |
| B: THE MAIN DOCUMENTS | 17 |
| The ITT | 17 |
| The EDS Response | 19 |
| The Letter of Intent | 24 |
| The Prime Contract | 24 |
| The Deed of Guarantee | 30 |
| The Letter of Agreement | 31 |
| The Memorandum of Understanding | 32 |
| C: THE EVIDENCE | 35 |
| Sky's Witnesses of Fact | 35 |
| Witnesses called | 35 |
| Sky witnesses not called | 39 |
| EDS' Witnesses of Fact | 40 |
| Witnesses called | 40 |
| EDS witnesses not called | 44 |
| Credibility of Witnesses | 45 |
| Joe Galloway | 45 |
| Gerard Whelan | 62 |
| John Chan | 62 |
| Tony Dean | 62 |
| Steve Leonard | 63 |
| Scott Mackay | 63 |
| Andy Waddell | 63 |
| Expert Evidence | 63 |
| IT Expert Evidence | 63 |
| Customer churn expert evidence | 66 |
| Call avoidance expert evidence | 68 |
| Quantum expert evidence | 69 |
| D: THE LAW OF DECEIT AND NEGLIGENT MISREPRESENTATION | 71 |
| The Law on Deceit | 71 |
| The law of negligent misstatement or misrepresentation | 76 |
| E: ISSUES OF CONSTRUCTION OF DOCUMENTS | 87 |
| Introduction | 87 |
| The Entire Agreement Clause | 87 |
| EDS' submission | 87 |
| Sky's submission | 88 |
| Analysis | 89 |
| Clause 7.2 of the Prime Contract | 95 |
| Limitation and exclusion of liability: Clause 20 of the Prime Contract | 96 |
| Clause 20.2 | 97 |
| Clause 20.5 | 98 |
| Scope of Settlement in the Letter of Agreement | 99 |
| Introduction | 99 |
| EDS' submissions | 99 |
| Sky's submissions | 100 |
| Analysis | 100 |
| THE MEMORANDUM OF UNDERSTANDING | 103 |
| Introduction | 103 |
| Did the Memorandum of Understanding constitute a binding agreement? | 104 |
| Background to the Memorandum of Understanding | 106 |
| The 6 March 2002 phone call | 109 |
| The signing of the Memorandum of Understanding on 26 March 2002 | 110 |
| Subsequent conduct | 112 |
| F: CLAIMS FOR NEGLIGENT MISSTATEMENT OR MISREPRESENTATION | 116 |
| Introduction | 116 |
| EDS' Submissions | 116 |
| Sky's Submissions | 117 |
| Analysis | 119 |
| The Contractual framework | 120 |
| Claims Under the Misrepresentation Act 1967 | 123 |
| G: THE CASE ON MISREPRESENTATIONS | 125 |
| Introduction | 125 |
| Initial Representations | 125 |
| Resources, time and cost | 125 |
| Resources | 127 |
| The Greater Resources Representation | 130 |
| The Lesser Resources Representation | 139 |
| The Ready to Start Representation | 144 |
| Misrepresentation as to Time | 146 |
| Misrepresentation as to Cost | 148 |
| Time and Cost: Representations in the Response and Letter of 5 July 2000 | 149 |
| Falsity of the Representations Prior to the Letter of Intent | 153 |
| The Process of Estimating for the Response | 155 |
| The cost estimate | 155 |
| Sky's case on cost prior to the Letter of Intent | 162 |
| The estimate of time | 170 |
| Knowledge and Intent: Misrepresentation as to time prior to Letter of Intent | 176 |
| Analysis | 177 |
| Inducement and Reliance | 186 |
| Time and Cost: Representations in Late 2000 | 187 |
| Background to the planning session on 11 October 2000 | 188 |
| The planning session on 11 October 2000 | 190 |
| Joe Galloway's visit on 12 October 2000 | 190 |
| Events subsequent to the 12 October 2000 plan produced by Joe Galloway | 194 |
| Falsity of the representation as to time prior to the Prime Contract | 198 |
| Knowledge and Intent | 198 |
| Inducement and Reliance | 201 |
| Representation as to cost prior to the Prime Contract | 205 |
| Summary as to Representations on Time and Cost | 206 |
| Liability in Respect of Representations: Liability of EDSC and Liability to BSkyB | 207 |
| Liability of EDSC | 207 |
| Liability to BSkyB | 209 |
| Representations as to Proven Technology and Risk | 211 |
| The Proven Technology Representation | 211 |
| The Significant Risk Representation | 218 |
| Representations as to Methodologies | 221 |
| Representation | 222 |
| Methodologies developed by EDS | 223 |
| Intention to use methodologies | 224 |
| Falsity | 225 |
| Availability of methodologies | 225 |
| Suitability of methodologies | 225 |
| Intention to use methodologies | 226 |
| Summary: Misrepresentation prior to the Letter of Intent and the Prime Contract | 228 |
| Further Representations before the Letter of Agreement | 228 |
| Resources | 229 |
| Summary on resources | 240 |
| Complexity and Completion | 241 |
| Planning | 247 |
| Cost | 255 |
| Summary | 258 |
| H: BREACH OF CONTRACT | 259 |
| Breach of Contract: Prior to Letter of Agreement | 259 |
| Breach of Contract: Post Letter of Agreement | 260 |
| Phase 1 Failures | 261 |
| Phase 1 defects | 261 |
| EDS' case | 264 |
| Analysis | 266 |
| Phase 2 | 267 |
| Summary | 281 |
| I: REPUDIATION | 282 |
| Introduction | 282 |
| Sky's case | 282 |
| EDS' case | 283 |
| Analysis | 284 |
| J: CAUSATION | 289 |
| Introduction | 289 |
| The Position at the bid stage in 2000 | 290 |
| The position at the Letter of Agreement in 2001 | 294 |
| K: LOSS AND DAMAGE | 300 |
| Introduction | 300 |
| Damages for misrepresentation prior to the Prime Contract | 300 |
| Damages for misrepresentation prior to the Letter of Agreement and breach of the Prime Contract prior to July 2001 | 301 |
| Damages for breach of the Prime Contract as varied by the Letter of Agreement | 302 |
| Misrepresentation Damages: Increased Cost Damages | 302 |
| Misrepresentation Damages: Lost Benefit Damages | 303 |
| The Effort and time to implement the CRM System | 303 |
| PwC from July 2000: Scenario B1 | 304 |
| ASI from July 2001: Scenario B2 | 306 |
| Issues arising from the different approaches | 308 |
| PA's Approach | 308 |
| PwC's Estimate | 308 |
| The Siebel Package | 311 |
| Sky's requirements and Siebel | 313 |
| The Demonstrator | 316 |
| Conclusion on Siebel Fit | 319 |
| Estimating effort from PA's function point count | 320 |
| Accuracy of the Function Point Count | 325 |
| PA's conversion from Function Points to effort | 326 |
| Robert Worden's approach | 331 |
| PwC System estimate | 332 |
| Avoidable cost analysis | 333 |
| Cross-checks | 336 |
| Analysis | 337 |
| Dr Worden's use of SLOC and CoCoMo II | 338 |
| Summary on the approaches of the IT experts | 343 |
| Conclusions on Time and Cost of PwC implementing the CRM Project using Siebel (Scenario B1) | 345 |
| Conclusions on Time and Cost of an ASI implementing the CRM Project (Scenario B2) | 348 |
| Damages for breach of the Prime Contract prior to July 2001 | 350 |
| Damages for breach of the Prime Contract as varied by the Letter of Agreement | 351 |
| L: MITIGATION | 353 |
| Introduction | 353 |
| Legal Principles | 353 |
| Issues of Mitigation | 355 |
| Sky's performance | 355 |
| The Standard of a Competent Systems Integrator | 357 |
| The time taken by Sky compared to the estimate for a CSI | 359 |
| The six complaints | 360 |
| De-scoping the three enhancements and failure to introduce interim Self Service | 363 |
| Earlier delivery of Self Service | 366 |
| Summary on Mitigation | 370 |
| M: BUSINESS BENEFITS | 371 |
| Introduction | 371 |
| The implementation of the Actual CRM System | 372 |
| Approach to the Business Benefits Claim | 373 |
| The 22 elements of functionality | 374 |
| Core Functionality | 375 |
| The three enhancements | 384 |
| Merlin: Elements 8 and 14 | 387 |
| Merlin Functionality | 388 |
| Functional Specification 5 Cross/Up-Sell | 389 |
| Summary | 397 |
| Merlin | 397 |
| Conclusion on Merlin | 398 |
| Self Service: Element 16 to 21 | 398 |
| Which elements of Self Service were within the scope of the PwC or ASI CRM Systems? | 400 |
| Case Management: Element 15 | 404 |
| N: LOST BENEFITS: CHURN RATE REDUCTION | 405 |
| Introduction | 405 |
| The scope of the dispute between the Churn Rate experts | 406 |
| Functionality of the CRM System compared to DCMS | 407 |
| The KMS | 407 |
| The Actual CRM System | 408 |
| Merlin |
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