BSkyB has won a landmark court ruling in what has become one of the largest commercial cases of the last decade, involving legal costs estimated at £70million. The satellite broadcaster had made the claim against an information technology supplier, Electronic Data Systems (EDS), in 2004, accusing the company of deceit and misrepresentation during the tender process to win a £50 million contract. EDS, which has since been taken over by Hewlett-Packard and renamed HP Enterprise Services, is liable for damages of at least £200million.

The contract involved the designing and building of an advanced customer relationship management (or CRM) system for BSkyB to be used in their customer contact centres in Scotland. There were several companies involved in the tender process but in the end EDS was awarded the contract, with the project budgeted to cost £48million and estimated to take 9 months to deliver. By 2002 however, EDS had lost favour with BSkyB after delays and cost overruns and they were removed from the project. BSkyB went on to complete the implementation of the CRM system themselves at a cost of £265million.

BSkyB's main claim in the case was that the EDS team involved in the tender process dishonestly made false representations about the company's capacity and ability to deliver the project within the proposed budget and timeframe. As a result of relying on EDS's misrepresentations, BSkyB argued they were fraudulently induced to award them the contract, which they say they would have otherwise awarded to PricewaterhouseCoopers who they believe would have successfully implemented the project earlier and at a lower cost overall.

Mr Justice Ramsey, sitting in the Technology and Construction Court in London, drew particular attention to EDS's representation that they had carried out a proper analysis of the time needed to complete the project and that they reasonably believed they could deliver it within 9 months. It transpired that no such analysis had been carried out and there were therefore no reasonable grounds for believing that the project could be completed within that time scale. He also found that EDS had made other negligent misrepresentations during the negotiation period and that they were in breached of contract.

Although the contract had including a cap on liabilities of £30 million, the judge awarded a much larger sum which will reach at least £200million on the basis that the liability cap did not limit liabilities for fraud.

Katharine Kimber, Head of the Commercial Litigation department at Wilson Nesbitt solicitors in Belfast, commented that “the decision has important implications for any company involved in a tender process, especially for the technology, outsourcing and consulting industries and for the clients of firms in those sectors. The ruling highlights that any representations need to be made on the basis of facts and analysis. Contractors should be wary of pitching for large IT projects that are beyond their capabilities as there could be considerable legal consequences where they are unable to deliver.”

The Commercial Litigation department at Wilson Nesbitt offers advice to business and private clients on a wide range of disputes. To speak to one of the team call 0800 840 9295 or email business@wilson-nesbitt.com .

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