Co-Operative Group Ltd v International Computers Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Tuckey |
| Judgment Date | 19 December 2003 |
| Neutral Citation | [2003] EWCA Civ 1955 |
| Docket Number | WCase No: A1/2003/0261(A) A1/2003/0261 |
| Court | Court of Appeal (Civil Division) |
| Date | 19 December 2003 |
[2003] EWCA Civ 1955
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIS HONOUR JUDGE SEYMOUR Q.C.
TECHNOLOGY & CONSTRUCTION COURT
Royal Courts of Justice
Strand,
London, WC2A 2LL
Lord Justice Tuckey
Lord Justice Rix and
Lord Justice Jonathan Parker
WCase No: A1/2003/0261(A) A1/2003/0261
Christopher CARR Q.C. and Richard MAWREY Q.C. (instructed by Ashurst Morris Crisp) for the Appellants
Henry CARR Q.C. and Jacqueline REID (instructed by Baker and McKenzie) for the Respondents
This is the judgment of the court to which we have all contributed.
Introduction
In April 2000 Co-operative Retail Service Limited (CRS) which owned about 460 retail grocery stores merged its business with that of Co-operative Wholesale Society Limited (we will call it CWS before and after merger) which owned about 650 stores. In these proceedings CWS claimed damages against ICL of about £11m. for repudiatory breach of contract and misrepresentation arising out of a project in which it was contended that ICL had agreed to supply a software system to integrate the IT systems in the CRS stores with those in the CWS stores. After a 20 day trial in the Technology and Construction Court His Honour Richard Judge Seymour Q.C. decided that there was no contract between CWS and ICL, but if there had been a contract it had not been breached or repudiated by ICL. The misrepresentation claim failed because there was no contract, but if there had been a contract it had not been induced by any representation made by ICL. He also held that the damages claim had been substantially overstated; on the most generous assessment it did not justify the cost of pursuing the claim. In short, CWS suffered a comprehensive defeat.
CWS' main ground of appeal is that the trial was unfair because in his judgment the judge made adverse findings about the motives of CWS' senior managers, the credibility of its witnesses and the competence of its advisors which were unfair, unjustified and not suggested by ICL. These findings tainted the whole of his judgment. The injustice to CWS can only be remedied by ordering a re-trial, however regrettable that may be. Alternatively CWS say that the judge's conclusion that there was no contract was wrong.
ICL does not seek to support some of the judge's findings. Nevertheless it says that those findings do not taint the judge's key findings of fact which are fatal to CWS' claim. There will therefore be no point in having a re-trial. The judge's finding that there was no contract can be supported for the reasons he gave, but even if he was wrong it makes no difference to the result because of the terms of the contract which CWS now accepts.
We remind ourselves at the outset, that the allegation of unfairness is a very serious one. In Inner West London Coroner ex. p. Dallaglio [1994] 4 AER 139 Sir Thomas Bingham, Master of the Rolls said (at 162a) :
It not infrequently happens that judges find themselves called upon to criticise, sometimes in strong terms, parties or witnesses appearing before them. The subject of such criticisms are apt to complain that the judge was prejudiced or biased against them. But such criticisms will carry no weight for the appellate court provided the criticisms were based on material properly before the judge in that case and were not, in the light of that material, inappropriate. In such a case there is no element of extraneous prejudice or predilection and hence, in the eyes of the law, no question of bias.
More recently in Cairnstores Limited v Hassle [2002] EWCA Civ. 1504 this court said that the correct question was whether the losing party could establish that it did not receive a fair trial, not whether, as a disappointed litigant, it believes that the trial was unfair.
Outline facts and issues
Fairness is a "big picture" issue. To understand the substance of the criticism of the judge it is first necessary to give an outline of the facts leading to the dispute and the issues.
ICL needs no introduction. In mid-2000 it made an assessment that CWS was one of its top five retail accounts world-wide which had generated revenue of more than £25m. in the previous year.
CRS was an existing customer of ICL when in June 1999 it entered into an agreement (the CRS agreement) to harmonize the IT in its stores. This agreement did not anticipate the merger but was expressed to cover all types of business transactions with ICL in connection with the overall CRS IT strategy. It was subject to ICL's contract conditions which contained a number of exclusion and limitation of liability clauses. It incorporated a binding contract for the installation of ICL's ISS 400 EPoS system by a fixed date followed by the delivery and development of a stock management programme in three further phases. EPoS means electronic point of sale (the till). The stock management programme is part of the in-store back office system. This system receives information from the till and communicates with the retailer's central system. The CRS agreement contemplated that the back office system would be developed from ICL's Globalstore. Globalstore was a basic application which had to be customised, but ICL claimed that it could be more easily adapted to a customer's requirements than other applications. Under the CRS agreement CRS was to pay discounted prices for the installation, but if the agreement was terminated before all four phases of the binding contract had been completed it would be liable to pay enhanced prices (penalty). In the event the first phase of this contract was completed on time and the second phase was underway at the time of the merger. If the agreement was terminated before the remainder of the work had been carried out penalty of about £1m. would become payable. In the event the judge gave judgment for this amount against CWS on ICL's counterclaim.
CWS was also an existing customer of ICL. Its stores were served by an ICL ISS 300 EPoS system and a back-office system called Vision (the product of a company called PCMS) which was connected to CWS' central system. There were other contracts between CWS and ICL including one relating to CWS' funeral business, but the detail of such contracts was not explored at trial.
Planning for the merger began in the latter half of 1999. Integration of the IT systems in the CRS and CWS stores was obviously required so that the stores could offer the same facilities, be managed through the same central system and economies of scale could be achieved. CWS ran a loyalty scheme which gave customers discounts (dividend) on certain purchases. CWS' systems kept the dividend account for each customer and also provided in-store banking facilities. Such facilities (functionality) were not available in the CRS stores. The intention was that they should be.
ICL and PCMS made presentations to CWS as to how integration could best be achieved. Two options emerged: the first, involving PCMS but still with considerable ICL content, was to install ISS 300 and Vision in the CRS stores; the second was to extend the development of Globalstore with ISS 400 already installed in the CRS stores so that these systems would provide the same functionality (including dividend) as those available in the CWS stores. ICL said that this system could be ready for installation in the CRS stores within 5 months of sign-off by CWS of its functionality requirements specification (FRS). It would cost approximately £12m.
In March 2000 CWS opted for ICL's Globalstore solution. In the meantime ICL had agreed that if the merger went ahead the CRS agreement would be cancelled without penalty provided a new contract could be negotiated to reflect the new project.
Work on the new project started however before any new contract had been agreed. CWS paid ICL approximately £2m. for the work which they did. There were contract negotiations between March and September but terms were never agreed. The main sticking point was CWS' insistence upon liquidated damages for delay and ICL's refusal to agree any such term. Nevertheless at trial CWS' primary case was that one could spell out an entirely new contract (the CWS agreement) made in March or April 2000 from the conduct of the parties. This was an ambitious contention since the evidence filed on behalf of CWS showed that the contract negotiations were inconclusive. ICL's primary case on the other hand was that work on the new project was done under the CRS agreement.
Work on the new project continued until 29 th January 2001 when CWS wrote to ICL saying "ICL's repeated failure over the best part of a year to deliver on time to spec product" had led CWS to lose confidence in ICL "to the point that the limited time we have at our disposal will not be best spent in giving ICL further opportunities to rescue the Globalstore project from its present low point". CWS reverted to the PCMS solution and installed ISS 300 with Vision in the CRS stores. These proceedings followed in which CWS alleged that ICL had repudiated the CWS agreement which it had been induced to enter by misrepresentations as to Globalstore's suitability for the project.
We have been taken through a very limited amount of the voluminous documentation (we are told there are fifty lever arch files) created in the course of this major project. It obviously gives scope for each party to say (as they did, and as is usually the case in IT disputes) that what went wrong was the fault of the other party. ICL's short answer to CWS' allegation of repeated...
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