St Albans City and District Council (Plaintiff v International Computers Ltd (Defendant
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE NOURSE,LORD JUSTICE HIRST,SIR IAIN GLIDEWELL |
| Judgment Date | 26 July 1996 |
| Judgment citation (vLex) | [1996] EWCA Civ J0726-13 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | QBENF 94/1521/C |
| Date | 26 July 1996 |
[1996] EWCA Civ J0726-13
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(Mr Justice Scott Baker)
Royal Courts of Justice
Strand
London WC2
Lord Justice Nourse
Lord Justice Hirst
and
Sir Iain Glidewell
QBENF 94/1521/C
MR C DEHN QC, MR T. LAMB QC and MR A TOUEY (instructed by Messrs. Masons, London EC1) appeared on behalf of the Appellant Defendant.
MR R MAWREY QC (instructed by M Lovelady LLB, Solicitor to St Albans City and District Council) appeared on behalf of the Respondent Plaintiff.
Friday, 26th July 1996
On 3rd October 1994, in a judgment reserved after a ten day trial in July of that year, Mr Justice Scott Baker awarded the plaintiffs, St. Alban's City and District Council, damages of £1,314,846 against the defendant, International Computers Ltd., and judgment was entered accordingly. The basis of the award was that the defendant had breached its contract to supply the plaintiffs with a computer system to be used in their collection of community charge by providing faulty software which significantly overstated the relevant population of their area and thus caused them to suffer a loss of revenue. The defendant now appeals to this court.
The judge's judgment is reported at [1995] FSR 686. All references to the judgment are references to it in that report. The material facts and many of the judge's findings are set out between pp.688 and 696. It is unnecessary to restate them at length, although reference will necessarily be made to them in the course of dealing with the arguments advanced in this court.
The essence of the problem was that the faulty software caused the total figure for the relevant population of the plaintiffs' area extracted from the computer on 4th December 1989 to be stated at 97,384.7, whereas it ought to have been 94,418.7. Thus there was an overstatement of 2,966. That meant that when, at the end of February 1990, the plaintiffs came to calculate the amount needed to defray their budgeted expenditure, they proceeded on the footing that they had a larger number of chargepayers to call on than they in fact had. So they set the charge at a lower figure than they would have done had they known the true number. In the result, their community charge receipts for the year 1990/91 were £484,000 less than they ought to have been.
That was not the plaintiffs' only loss. They suffered a small reduction (£14,000) in revenue support grant. Their real and substantial additional loss was in having to pay an extra £1,795,000 by way of precept to the Hertfordshire County Council, which was only partially offset by a reduced contribution to the "safety net" (£259,000) and an increase in the receipt from the national non-domestic rate pool (£865,000).
The figures for the plaintiffs' loss, as agreed before the judge, were as follows:
|
| £ |
| Increased precept to County Council | 1,795,000 |
| Reduced revenue support grant | 14,000 |
| Reduced contribution to "safety net" | (259,000) |
| Increased receipt from national non-domestic rate pool | (865,000) |
| Reduced Community Charge receipts | 484,000 |
| Total net income loss | 1,169,000 |
| Interest loss 1990/91 | 73,509 |
| Interest loss 1991/92 | 72,377 |
| Total | £1,314,846 |
The losses thus fell into two different categories. There was the £484,000 which the plaintiffs did not receive for community charge in 1990/91. There was also the extra £685,000 net which they had to pay out, i.e. £1,795,000 plus £14,000 less £259,000 and £865,000. The distinction between the two categories is of importance on the question of damages.
The issues argued before and decided by Mr Justice Scott Baker are summarised in the holdings which appear in the headnote to the report at pp. 687–688. In this court the defendant's appeal has been argued by Mr Conrad Dehn QC, who did not appear below. In an opening which lasted for nearly three and a half days he raised several new arguments, including one which went to the heart of the contract between the parties. Some of his arguments overlapped, particularly in relation to construction and breach on the one hand and causation, failure to mitigate and remoteness on the other. The convenient course is to take the various issues still in dispute, so far as practicable in the same order as the judge, and to deal with Mr Dehn's arguments as they affect each issue.
The first step is to identify the material terms of the contract into which the parties entered on 24th December 1988. This process is not as simple as might have been expected since the contract was expressed to consist not only of the plaintiffs' invitation to tender dated June 1988 and the defendant's tender dated 18th July 1988, but of seven other documents as well. I propose to refer only to those provisions which are directly material to the arguments advanced in this court.
The invitation to tender. Under the heading "Applications software—general requirements", the plaintiffs' invitation to tender stated that they required the development and replacement of a large number of systems. Reference was made to the various systems in order of priority, financial information and community charge being the two which were listed as priority one; see clause 3.2E. Under the sub-heading "Tried and tested software", it was stated that software should as far as possible be based on a package tried and tested in a local authority environment and that tailoring of software to meet requirements should be completed before installation and payment. The most important provision of the invitation to tender, indeed the contractual provision to which the arguments in this court were mainly directed, was contained in clause 1.1 of the "Community charge and non-domestic rates, Statement of user requirements" under the sub-heading "Introduction and objectives":
"The Council invites tenders from a pre-selected list of suppliers for the provision of a computerised system for Community Charge and Non-Domestic rates. This is necessary to cope with the requirements of the Local Government Finance Bill currently proceeding through Parliament. As the Bill has not yet received the Royal Assent, and a large number of Statutory Instruments/Regulations have still to be laid before Parliament, prospective suppliers will be expected to give a firm commitment to provide a system to cope with all the Statutory Requirements for registration, billing, collection and recovery and financial management of the Community Charge and Non-Domestic Rates; including Community Charge Rebates."
Clause 5 of that statement, under the sub-heading "Register content", noted that the legislative requirements were not yet complete, but stated that the 16 data items thereunder listed might be included in the requirements for the content of the register "subject to addition/amendment as a result of the continuing Parliamentary process". Clause 15 under the sub-heading "Collection fund" stated that payments out of that fund would include precepts issued to the charging authority, and non-domestic rating contributions.
The defendant's tender. Chapter 1 of the defendant's tender was entitled "Management summary". Under the sub-heading "The ICL solution" the products which were said to meet the plaintiffs' requirements were listed, including:
"COMCIS, a comprehensive solution for Community Charge being developed in conjunction with English Authorities …"
In response to clause 3.6E of the invitation to tender (tried and tested software) it was stated that all applications software proposed had been tried and tested within Local Government environments:
"with the exception of Community Charge (under development)".
In the introduction to chapter 5 of the defendant's tender entitled "Community charge and non-domestic rates" it was stated that part of the defendant's very clear strategy in its development to community charge was:
"To develop a system using a 70 strong development team, which meets fully the legislative requirements, and which is easy to use and operate."
Later it was said that in summary the plaintiffs had the opportunity not only to implement the best system for community charge, but also:
"to input into the development process in order to be sure that this product meets your specific requirements."
In response to clause 5 of the plaintiffs' statement of user requirements (register content), the defendant's tender stated:
"The register will contain the data items necessary to meet at the very least the legal requirements plus any other fields the User Design Group deem advantageous. The system is planned to handle all debits.
All other requirements will be met."
Clause 9.5.7E stated that the defendant was unable to provide performance guarantees. Clause 10.6.2E stated:
"Implementation plans, due to changing legislation, are relatively fluid. However ICL is committed to provide a full system by April 1990 with the canvass register on stream in the last quarter of 1988. Individual plans are being produced as customers commit to the ICL solution."
The tender contained a statement headed "ICL statement", which stated that the defendant warranted that the equipment and programmes supplied would conform with their relevant product descriptions and would be of merchantable quality, but that:
"none of the statements contained in this document constitutes representations for which ICL can accept liability and St. Alban's must satisfy themselves that the...
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