The Royal Devon and Exeter NHS Foundation Trust v Atos it Services UK Ltd
| Jurisdiction | England & Wales |
| Judge | Mrs Justice O'Farrell |
| Judgment Date | 31 August 2017 |
| Neutral Citation | [2017] EWHC 2197 (TCC) |
| Docket Number | Case No: HT-2016-000208 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 31 August 2017 |
[2017] EWHC 2197 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mrs Justice O'Farrell DBE
Case No: HT-2016-000208
Alex Charlton QC (instructed by Clarion Solicitors Ltd) for the Claimant
Zoe O'Sullivan QC (instructed by CMS Cameron McKenna Nabarro Olswang LLP) for the Defendant
Hearing dates: 4 th May 2017
On 7 November 2011 the claimant ("the Trust") entered into a contract with the defendant ("ATOS") for "the provision of health record scanning, electronic document management and associated services" ("the Contract").
The system comprised Mobius Clinical Electronic Medical Records ("EMR") Desktop, an application developed by a third party sub-contractor, Fortrus Limited, running in an internet browser and communicating via Adobe LiveCycle software, which provided workflow, electronic forms and record management, Kodak Capture software for scanning documents and an electronic document management system and repository called Laserfiche.
The Contract Price was £4,939,207 and the term of the Contract was 5 years.
The Trust was unhappy with the performance of the system when it was introduced in 2012. Although various modifications to the software were provided by ATOS, the Trust remained dissatisfied and in September 2014 it invoked the contractual dispute resolution process.
In November 2014 the Trust served a contractual notice of material breach in respect of the alleged failure by ATOS to remedy defects in the system.
On 21 April 2016 the Trust served a notice on ATOS, terminating ATOS's services under the Contract.
In these proceedings the Trust seeks damages in the sum of approximately £7.9 million for breach of contract.
The Trust's case is that it is entitled to claim damages for wasted expenditure consequent on its acceptance of ATOS's repudiatory breach. Although the Contract contains a provision limiting the liability of the parties, such provision is unenforceable for ambiguity or uncertainty.
ATOS's case is that such damages for wasted expenditure are expressly or impliedly excluded by the Contract, as lost profits, business, anticipated savings, or indirect or consequential loss or damage. Further, any damages are subject to the liability cap in the Contract, which is valid and enforceable.
On 17 February 2017 Mr Justice Coulson ordered that the above disputed issues of construction in respect of recoverable damages should be tried as preliminary issues.
ATOS denies any liability in respect of the alleged breaches and the sums claimed are disputed. However, it is agreed that, for the sole purpose of these preliminary issues, the court should assume that the Trust could establish its case on both liability and quantum.
The Issues
The agreed preliminary issues are as follows:
Issue 1 – wasted expenditure claims
i) Whether as the defendant contends, the defendant is under no liability in respect of each of the claimant's claims to recover wasted expenditure made in paragraphs 102 to 110 of the Particulars of Claim because:
a) liability for each such claim is expressly or by necessary implication excluded by the terms of clause 8.1.3(of the Contract; and/or
b) the claims represent an illegitimate attempt to evade the effect of that clause by seeking recovery of heads of loss which are expressly excluded by the clause
OR
ii) whether, as the claimant contends, clause 8.1.3(a) of the Contract does not exclude and is no bar to the claims it makes for wasted expenditure on a reliance loss basis.
Issue 2 – Limitation of liability
iii) What is the meaning and effect of the limitation of liability at clause 8.1.2(b) of the contract and paragraph 9.2.2 of Schedule G?
iv) Whether, as the claimant contends, the limitation of liability at clause 8.1.2(b) of the Contract and paragraph 9.2.2 of Schedule G is ineffective and it is entitled to a declaration to that effect
OR
v) whether, as the defendant contends, the limitation of liability at clause 8.1.2(b) of the contract and paragraph 9.2.2 of Schedule G is effective, and if so, what is its meaning and effect.
The contract – relevant provisions
Contractor's Obligations
Under the Contract, ATOS agreed to:
i) design the System and Services;
ii) develop and install electronic document management ("EDM") software, and provide associated software maintenance and support services; and
iii) provide document scanning services.
The System is defined in Clause 1.1.48 as:
"the combination of Hardware and Software working together to deliver the function and performance specified in the Contractor Undertakings. Any part of the System may be separately identified as a Sub-system."
The Services are defined in Clause 1.1.40 as:
"the services to be provided under this Contract, including but not limited to the Implementation and Scanning Services and the Support Service."
Clause 2.1 sets out the obligations on the part of ATOS:
"The Contractor shall meet the Contractor Undertakings contained in schedule A, and shall fulfil all its obligations under the Contract in accordance with the timetable in schedule E in consideration of payment by the Authority of the Contract Charges."
Schedule A contains a performance specification and general requirements in respect of the System and Services to be provided by ATOS.
Clause 3.1.1 provides:
"The Contractor shall perform its delivery and installation obligations under the Contract according to the timetable contained in schedule E …"
Schedule E contains a schedule of key deliverable milestones and contractual dates to be achieved by ATOS, including:
i) Milestone IM1 — "Contract Signature" – the planned date was 4 November 2011;
ii) Milestone IM7 – "Early Adopter Go Live (Speciality 2)" – by 5 October 2012 – the key deliverables included satisfactory completion of the clinical user trial and completion of the early adopter specialities roll out; the Trust dependencies included availability of resources to support the roll out;
iii) Milestone CD8 – "Post Go Live Verification & Integration III" – 45 days after go live from successful acceptance – by 7 December 2012.
Trust's obligations
Clause 2.2 sets out the obligations on the part of the Trust:
"The Authority shall pay the Contractor the Contract Charges, and shall perform its responsibilities under the Contract including, but not limited to, those specified in schedule D (Authority's responsibilities), in compliance with the Contractual Dates set out in schedule E."
Charges are defined in Clause 1.1.10 as:
"the charges as set out in schedule G."
Clause 7.1.1 states:
"The Authority shall pay the Contractor the Contract Charges, as applicable, and any other valid charges that may become due, according to the payment schedule contained in schedule G."
Schedule G provides that the total Charges payable during the term of the Contract should not exceed the Total Contract Price of £4,939,207 (excluding additional services).
Schedule G contains a payment schedule, rates and charges for additional services, and rates applicable to changes.
Breach and Termination
Clause 3.1.3 states:
"Any actual or anticipated material delay or failure by either party shall be notified to the Project Board and managed in accordance with the recommendations of the Project Board. Both parties shall use all reasonable endeavours to mitigate the impact of such delay regardless of cause."
Clause 3.1.4 states:
"Subject to clause 3.1.3, delay or failure solely caused by the Contractor to meet any Contractual Dates contained in the timetable in schedule E, shall be subject to the provisions of clause 8.3 (delays)."
Clause 8.3.1 states:
"If the Contractor fails to meet any Contractual Date specified in the timetable contained in schedule E, both parties shall use all reasonable endeavours to mitigate the impact of such delay, and as required under the provisions of clause 3.1, it shall be liable to:
(a) reimburse the Authority for all proven losses, costs, damages and expenses incurred by the Authority by reason of such delay."
Clause 8.3.2 states:
"Clarification
"(a) The provisions of sub-clause 8.3.1(a) above shall apply to delay by the Contractor in meeting any Contractual Dates, notwithstanding the previous application of such provisions to delay or failure by the Contractor to meet any other Contractual Dates.
(b) The Authority acknowledges that the Contractor's ability to meet its obligations under the Contract according to the timetable in schedule E may depend on the Authority likewise meeting its obligations, including those specified in schedule D. Consequently, insofar as the Contractor is prevented from fulfilling any of its obligations as a direct result of a delay solely caused by the Authority it shall not be liable to the Authority for such failure and sub-clauses 3.1.3 and 3.2.1 shall apply."
Clause 8.6 states:
"Except as otherwise expressly provided by the Contract, all remedies available to the Contractor or the Authority for breach of the Contract are cumulative and may be exercised concurrently or separately. The exercise of any one remedy shall not be deemed an election of such remedy to the exclusion of other remedies."
Clause 10.2 states:
"Either the Authority or the Contractor may at any time by notice in writing to the other party terminate the Contract as from the date of service of such notice whenever any of the following events occurs:
10.2.1 there is a breach by the other party of any provision hereof which expressly entitles the non-breaching party to terminate the Contract; or
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