BSkyB v EDS: Avoiding 'Joe Galloway' Syndrome

The long running case between British Sky Broadcasting ("Sky") and Electronic Data Systems, now HP Enterprise Services ("EDS") has now finally been decided in a decision that has taken 15 months alone for the judgement to be released.

In his recent 468 page judgment, Mr Justice Ramsay of the London Technology & Construction Court (a division of the English High Court) recently ruled that major IT and outsourcing provider EDS was partially liable to Sky in relation to the failed implementation of a new customer care or "CRM" system. Sky are now anticipated to be awarded damages in excess of £200 million. We summarise the facts and the outcome of the case below.

The Facts

Following an extended tendering process, in November 2000 Sky entered into a CRM implementation contract with EDS to refresh their subscriber and customer relationship systems. The implementation services under the contract were priced at initially £48 million and the contract had a liability cap of £30 million.

EDS committed to deliver a system which would "go live" in July 2001 for a baseline budget of £47.6 million. The implementation did not go as planned and the contract was renegotiated twice, in July 2001 and March 2002, when Sky took over as lead integrator. Sky alleged that by March 2002 EDS had repudiated the contract and it was effectively terminated. It was claimed that the CRM system was finally completed (by Sky) in 2006 at an approximate cost of around £265 million.

In August 2004, Sky issued proceedings against EDS, claiming in aggregate around £700 million under various heads of loss.

Because the contract contained a limitation of liability clause which would otherwise have constrained its ability to recover contractual damages at large, Sky not only alleged breach of contract, but also in the tort of deceit (ie for fraud) and for negligent misstatement under the Misrepresentation Act 1967.

The Judgment

Deceit

The Court found that EDS did not make fraudulent representations with respect to having sufficient resources, or in the estimate of costs in providing the system.

However EDS was found to be fraudulent in the timescales it provided Sky as it did not carry out a proper analysis of the time it would require to deliver the system and it had no reasonable grounds for its representations. The key factor in the judge's decision was the credibility and evidence provided by or in relation to the lead on the EDS side of the project, EDS managing director Joe...