Disclosure and Barring Service v Tata Consultancy Services Ltd (A Company Registered in Mumbai, India)

Hearing Date: 13 March 2025

Approved Judgment

This judgment was handed down remotely at 10.30am on 4 April 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

Introduction

On 4 December 2012, the appellant, the Disclosure and Barring Service (“DBS”) entered into a written agreement with Tata Consultancy Services Limited, the respondent (“TCS”), to take over the manually intensive business-as-usual Disclosure and Barring processes, whilst building in parallel a new system to modernise those processes and replace its previous paper-based regime with a digital one. As is often the case with IT modernisation projects, this one did not go well.

TCS brought a claim against DBS for £125 million odd. DBS defended the claim and maintained a counterclaim which at one point was said to be worth over £100 million. The various disputes between the parties took a full term to try, in the Autumn of 2023. In a judgment running to 824 paragraphs ( [2024] EWHC 1185 (TCC)), Constable J (“the judge”) decided a large number of issues which eventually led to a net payment by DBS to TCS of just under £5 million 1. When granting leave to appeal on the single issue identified below, I described the judgment as “magnificent”. The closer acquaintance with it necessitated by this appeal has not led me to modify that description.

DBS sought permission to appeal on two grounds. The first was concerned with a short issue of construction, namely whether clause 6.1 of the Agreement created a condition precedent, breach of which prevented DBS from being able to recover £1.592 million by way of what were called Delay Payments (akin to liquidated damages). The second was concerned with the calculation of the Volume Based Service Charges (“VBSC”). I concluded that DBS had no real prospect of success on the VBSC issue and refused permission to appeal on that ground. Accordingly, this appeal is concerned solely with the proper construction of clause 6.1 of the Agreement.

The Relevant Clauses of the Agreement .

For present purposes it is only necessary to set out the relevant parts of clauses 5 and 6 of the Agreement. They deal primarily with the parties' rights and obligations in the event of delay. Clause 5 was in these terms:

“5. IMPLEMENTATION DELAYS — GENERAL PROVISIONS

5.1 If, at any time, the CONTRACTOR becomes aware that it will not (or is unlikely to) Achieve any Milestone by the relevant Milestone Date it shall as soon as reasonably practicable notify the AUTHORITY of the fact of the Delay or potential Delay and summarise the reasons for it.

5.2 The CONTRACTOR shall then submit a draft Exception Report to the AUTHORITY for its approval not later than five (5) Working Days (or such

other period as the AUTHORITY may permit and notify to the CONTRACTOR in writing) after the initial notification under clause 5.1.

5.3 The draft Exception Report shall give the AUTHORITY full details in writing of:

5.3.1 the reasons for the Delay;

5.3.2 the actions being taken to avoid or mitigate the Delay;

5.3.3 the consequences of the Delay;

5.3.4 if the CONTRACTOR claims that the Delay is due to an AUTHORITY Cause, the reason for making that claim.

5.4 The AUTHORITY shall not withhold its approval of a draft Exception Report unreasonably. If the AUTHORITY does not approve the draft Exception Report it shall inform the CONTRACTOR of its reasons in writing, promptly following its decision to withhold approval and the CONTRACTOR shall take those reasons into account in the preparation of a further draft Exception Report, which shall be resubmitted to the AUTHORITY within five (5) Working Days of the rejection of the first draft.

5.5 Whether the Delay is due to an AUTHORITY Cause or not, the CONTRACTOR shall make all reasonable endeavours to eliminate or mitigate the consequences of the Delay.

5.6 Where the CONTRACTOR considers that a Delay is being caused or contributed to by an AUTHORITY Cause the AUTHORITY shall not be liable to compensate the CONTRACTOR for Delays to which clauses 7 or 8 apply unless the CONTRACTOR has fulfilled its obligations set out in, and in accordance with, clauses 5.1, 5.2 and 5.3…”

The second part of clause 5, between sub-clauses 5.8 – 5.12 was concerned with TCS's obligation to serve a draft Correction Plan either when it became aware that it would not achieve a Milestone Date, or if it had failed to achieve a Milestone Date. An express link to DBS's Non-Conformance Report (“NCR”), explained in greater detail in clause 6, was provided by clause 5.10. That said:

“5.10 The draft Correction Plan shall be submitted to the AUTHORITY for its approval as soon as possible and in any event not later than eight (8) Working Days (or such other period as the AUTHORITY may permit and notify to the CONTRACTOR in writing) after the initial notification under clause 5.1 or the issue of a Non-conformance Report.”

Clause 6 was in these terms:

“6. DELAYS DUE TO CONTRACTOR DEFAULT

6.1 If a Deliverable does not satisfy the Acceptance Test Success Criteria and/or a Milestone is not Achieved due to the CONTRACTOR's Default, the AUTHORITY shall promptly issue a Non-conformance Report to the CONTRACTOR categorising the Test Issues as described in the Testing Procedures or setting out in detail the non-conformities of the Deliverable where no Testing has taken place, including any other reasons for the relevant Milestone not being Achieved and the consequential impact on any other Milestones. The AUTHORITY will then have the options set out in clause 6.2.

6.2 The AUTHORITY may at its discretion (without waiving any rights in relation to the other options) choose to:

6.2.1 issue a Milestone Achievement Certificate conditional on the remediation of the Test Issues, or the non-conformities of the Deliverable where no testing has taken place, in accordance with an agreed Correction Plan; and/or

6.2.2 if the Test Issue is a Material Test Issue, refuse to issue a conditional Milestone Achievement Certificate as specified in clause 6.2.1 then escalate the matter in accordance with the Dispute Resolution Procedure and if the matter cannot be resolved exercise any right it may have under clause 55.1 (Termination for Cause by the AUTHORITY); and/or

6.2.3 require the payment of Delay Payments, which shall be payable by the CONTRACTOR on demand, where schedule 2–3 (The Charges and Charges Variation Procedure) identifies that Delay Payments are payable in respect of the relevant Milestone. The Delay Payments will accrue on a daily basis from the relevant Milestone Date and will continue to accrue until the date when the Milestone is Achieved in accordance with the Correction Plan.

6.3 Where schedule 2–3 (Charges) does not identify the payment of Delay Payments in respect of a Milestone the AUTHORITY reserves its rights. Otherwise Delay Payments are provided as the primary remedy for the CONTRACTOR's failure to Achieve the relevant Milestone Date and it shall be the AUTHORITY's exclusive financial remedy except where:

6.3.1 the AUTHORITY is otherwise entitled to or does terminate this Agreement for the CONTRACTOR's Default or for Force Majeure; or

6.3.2 the failure to Achieve the Milestone exceeds a period of six months.”

At trial, it was DBS's case that, by reason of the wording of clause 5.6, TCS had to comply with clauses 5.1 to 5.3 in order for TCS to claim compensation for Delays attributable to an ‘AUTHORITY Cause’. By the same token, it was TCS's case that DBS's entitlement to recover Delay Payments pursuant to clause 6.2.3 was conditional on DBS's compliance with the substance of clause 6.1, and in particular the obligation to provide NCRs.

During the course of argument, we were also taken to schedule 2–3, because there was a suggestion by Mr Croall KC that they showed that DBS's entitlement to Delay Payments was unqualified by reference to clauses 6.1 and 6.2. However, since (as he accepted) the only way to those schedules was via clause 6.2, and therefore clause 6.1, the schedules added nothing to the argument as to whether clause 6.1 was a condition precedent or not. I do not therefore set out the schedules.

The Judgment

Having set out the authorities on conditions precedent, and summarised the relevant principles at [74], the judge found (at [75]–[81]) that TCS's potential entitlement to claim both loss and expense pursuant to clause 7.4, and general damages at common law for delays, as defined, was subject to their compliance with the regime at clauses 5.1 – 5.3. Those paragraphs of the judgment explained what claims were precluded by TCS's failure to comply with this condition precedent, and what claims remained unaffected by that non-compliance.

Similarly, the judge found that DBS's right to claim Delay Payments pursuant to clause 6.2.3 was conditional on DBS's compliance with clause 6.1. He rejected the claim because DBS had failed to comply with clause 6.1: in particular, they had failed to serve any NCRs at all ([82]–[99]). In more detail:

(a) The judge explained why an NCR was not, as DBS had submitted, “largely redundant in that it need only identify that the...