Ericsson AB v EADS Defence & Security Systems Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Akenhead |
| Judgment Date | 22 October 2009 |
| Neutral Citation | [2009] EWHC 2598 (TCC) |
| Docket Number | Case No: HT-09–407 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 22 October 2009 |
[2009] EWHC 2598 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Before: The Honourable Mr Justice Akenhead
Case No: HT-09–407
Alex Charlton QC and Matthew Lavy (instructed by Clyde & Co) for the Claimant
Michael Douglas QC and Simon Henderson (instructed by Eversheds LLP) for the Defendant
Hearing dates: 19 October 2009
Mr Justice Akenhead:
Introduction
EADS Defence and Security Systems Ltd (“EADS”) is the British subsidiary of a Dutch company; EADS supplies and provides defence, security and public facility systems. EADS was appointed in about 2007 by the Secretary of State of the Department for Communities and Local Government (“CLG”) to provide an emergency communications system to the Fire and Rescue Service in England, known as FiReControl. This was intended to be a significantly more efficient system than is currently in place and would involve a much quicker and more coordinated response to emergency calls to the Fire Services.
Ericsson AB (“Ericsson”) is a Swedish company which amongst other things develops and provides telecommunication systems and services.
By a written agreement dated 20 June 2007 (“the Agreement”), EADS employed Ericsson on a sub-contract basis to develop and supply software and provide related support services. Ericsson agreed to supply the Initial Supplied Software (“ISS”) which was or was based on a software system owned by Ericsson known as CoordCom. This system was to be a key element in the overall systems and would coordinate and manage the response of the emergency services.
There are two applications before the Court, the first issued on 12 October 2009 by Ericsson seeking to prevent EADS from terminating the Agreement at least before an adjudication commenced by Ericsson has run its course or until trial or further order and the second issued by EADS on 13 October 2009 which seeks an order preventing Ericsson from taking any further steps in the adjudication and seeking a declaration that any decision would be invalid.
I will address the issues between the parties in relation to the two sets of applications, namely the injunction to prevent termination prior to the outcome of adjudication and secondly whether any adjudication on the issue can proceed at all. I will first set out relevant terms of the Agreement followed by a relatively brief analysis of the evidence and the facts.
The Agreement
This was an agreement by which the parties had to have regard to Milestones, 14 in number, as set out in Schedule 4. By Clause 6.1, Ericsson undertook to:
“… ensure that each Milestone shall be successfully met by the relevant Milestone Date, to the extent it is not delayed or prevented by any event beyond its reasonable control or by any act or mission [sic] (including any delay or failure) of EADS or by a Force Majeure Event or a Relief Event or Compensation Event. There shall be no liability on Ericsson for failure to meet any Milestone or Milestone Date, other than the Milestones numbered 3 and 5 as defined in the Milestone Table.”
It is Milestone 5 which is currently at the centre of the disputes between the parties. It involves the release of the ISS and the contractual delivery date is said in Schedule 4 to be 7 January 2009. Clause 21.1 requires Ericsson upon becoming aware that it will not or is unlikely to be able to meet a Milestone Date to give notice to that effect to EADS. Clause 23 contains in effect an extension of time provision for delays caused by amongst other things Relief or Compensation Events. There are requirements for Ericsson to notify EADS of any such Events shortly after it has become aware that they have caused or are likely to cause delay; it is at least arguable (Clause 23.6) that no or limited relief is available if these notification provisions are not complied with by Ericsson.
Clause 25 makes provision for liquidated damages for failure of Ericsson to meet Milestones 3 and 5:
“25.1 Subject to Clause 25.2, if Ericsson fails to meet Milestones numbered 3 and 5… by the relevant Milestone Date it shall be liable to pay to EADS upon demand the sum of money specified in Schedule 4 as liquidated damages in respect of each Business Day of the Liquidated Damages Period. Such payment shall be in full and final settlement of and exclusive compensation for Ericsson's liability for all losses, liabilities, damages, costs and expenses arising from, out of or in respect of such delay incurred or suffered by EADS for the period up to and including the end of the Liquidated Damages Period. If the cause of such delay has not been rectified at the expiry of the relevant Liquidated Damages Period, EADS shall be entitled subject to the provisions of Clause 19 to any remedy available to it for all losses, costs, damages or expenses incurred as a result of such delay accruing after the end of the Liquidated Damages Period.
25.2 For the purposes of this Clause 25 (Liquidated Damages), if and to the extent that a delay is demonstrated by Ericsson to have been caused by an event beyond its reasonable control or by any act or omission (including any delay or failure) of EADS or by Force Majeure or a Relief Event or Compensation Event, the liquidated damages shall be avoided or reduced pro rata accordingly. No liquidated damages shall be payable or due unless EADS is able to demonstrate to Ericsson that EADS has incurred and paid out liquidated damages to the Authority under the Principal Agreement and such payment has been made as a result of Ericsson's delay. EADS shall only be entitled to deduct liquidated damages due under Clause 25.1 from Charges owed to Ericsson under this Agreement (and which relate to non-Services Charges) and in no other way.
25.3 Both Parties acknowledge that any liquidated damages specified in Schedule 4 (Milestones) do not exceed a genuine pre-estimate of the loss likely to be suffered by EADS…”
There is an issue between the parties as to whether the Liquidated Damages entitlement is the exclusive remedy available to EADS during the Liquidated Damages Period, which is 15 Business Days or three weeks.
Provision is made for termination including in Clause 28 voluntary termination by EADS on three months notice, albeit that this is subject to compensation being payable. Clause 29 enables EADS to terminate where there has been a “Material Default”, which is “any material breach [by Ericsson] of its obligations under this Agreement”. Clause 29.3 states:
“The following Clauses shall apply where there is a Material Default…
29.3.2 …EADS shall be entitled to either (i) serve notice of default requiring Ericsson to remedy the Material Default referred to in such notice of default (if the same is continuing) within such period as may be reasonable in the circumstances (which time period shall in any case be at least …15 Business Days of the date of receipt of such notice of default)…For the purposes of determining a reasonable timescale for the purposes of this Clause, EADS must take into account the actual impact of the Material Default on the availability of the FiReControl Services to members of the public.”
Clause 29.4 enables EADS to terminate the agreement in its entirety by notice if “the Material Default notified in a notice of default served under Clause 29.3.2…is not remedied before the expiry of the period referred to in that Clause…”
There are provisions for “Changes” to be implemented. Clause 11.1 sets up a Change Control Procedure and Clause 11.2 provides that no change is to be of any effect if it does not comply with the Schedule 16 Procedure.
Clause 16 provides for confidentiality in a number of respects. Clause 16.3 states as follows:
“Unless otherwise required by any relevant law (but only to that extent), Ericsson shall not…make or permit or procure to be made any public announcement or disclosure (whether for publication in the press, the radio, television screen or the internet or any other medium) of its involvement in this Project or any matters relating to it, without the prior consent of EADS. Where such announcement refers to Ericsson, EADS shall consult with and obtain the consent of Ericsson to such announcement or disclosure, unless the announcement is due to material breach of this Agreement by Ericsson.”
Clause 19.1 provides for limitations of liability for each party:
“Subject to [various exceptions], in no event shall either Party be liable to the other Party under this Agreement for:
a) loss of production, loss of profit, loss of use, loss of business or market share, loss of data… loss of revenue, loss of anticipated savings or any other economic loss, whether direct or indirect; or
b) any special, indirect, incidental or consequential damages,
whether or not the possibility of such damages could have been reasonably foreseen and whether or not actually contemplated by the Parties and whether as a result of or arising from breach of contract, warranty or tort (including negligence) or otherwise.”
Clause 19.2 provided that, subject to certain exceptions, the maximum aggregate liability of either party was to be “limited to 125% of the Charges paid or payable in the Contract Year prior to the Contract Year that the event or cause giving rise to the relevant claim arises”.
The Dispute Resolution clause is Clause 31:
“31.1: Any dispute arising in relation to any aspect of this Agreement shall be resolved in accordance with this Clause 31 (Dispute Resolution).
31.2: If a dispute arises in relation to any aspect of this Agreement, Ericsson and EADS shall first consult in good faith in an attempt to come to an agreement in relation to the disputed matter.
31.3: If Ericsson and EADS...
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