England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		23/11/2009

Mr Justice Field:

1. This judgement follows on from the judgement already delivered in these proceedings reported at [2009] EWHC 2734 (Comm) ("the first judgement") and should be read in conjunction therewith.
2. In addition to the issues determined in the first judgement, Burton J ordered that the following further issues should be tried:

7. Can Centrica (in principle) recover for the cost of Hardware under clause 15.4.3 of the Amended JPA?

8. Does the release in Clause 27.4B(c) of the Amended JPA preclude Centrica from bringing any claim for breach by Accenture of the obligation to specify Hardware pursuant to paragraph 2.1.1 of Schedule 10 to the Amended JPA?

9. Is Centrica entitled to make requests for Hardware after 28 February 2007? If not, is Centrica otherwise entitled to purchase Hardware after 28 February 2007 under the Amended JPA?

10. If Accenture has unreasonably withheld or delayed consent to a request by Centrica for Hardware in breach of paragraph 1.4 of Schedule 10 to the Amended JPA, is Centrica (in principle) entitled to recover the cost of that Hardware as damages for breach, or as reimbursement under paragraphs 5.3 and/or 5.4 of Schedule 3 to the Amended JPA?

3. The relevant provisions of the Amended JPA (in pertinent part) are:

Recital (D)

Accenture has represented that it has expertise and skill advising on the acquisition of computer hardware and software, systems integration and maintenance, project management and the provision of services envisaged by this Agreement and Centrica has already engaged Accenture to provides (sic) its services in the past. The parties have since discussed and negotiated the implementation of the Jupiter Project and prior to the signature of this Agreement, Accenture has performed services for Centrica in relation to the Jupiter Project under various arrangement letters…

Clause 1.1

"Further Services" means the services specified in Schedule 2.2;

"Services" means: (i) the System Development, Integration and Implementation Services, the Maintenance Services, the Competitive Advantage Services, the Innovation Services, Data Migration Services, Training and any other services provided by Accenture to Centrica under this Agreement prior to 31 March 2006; or (ii) in relation to the period beginning 31 March 2006 shall mean the Further Services where appropriate;

Clause 2.5

[Accenture shall, by integrating the Software and Hardware as part of the System and by developing the System, ensure that the Business Capabilities are met (unless otherwise agreed in accordance with the procedure set out in Clause 3) and are capable of delivering the Benefits. DISCHARGED SAVE FOR WARRANTY.]

Clause 10

Acquisition of Hardware and Software

The Parties shall comply with the procurement guidelines in Schedule 10.

Clause 11

Charges and Payment

11.1 …

11.2 Invoices

The Parties shall comply with the invoicing and payment obligations set out in Schedule 3.

Clause 21 Term and Termination

21.1Term

Subject to the rights of termination contained in this Agreement, the Agreement shall take effect from the Commencement Date and shall continue until 28 February 2007 or such time as the Services (including, for the avoidance of doubt the correction of any Fundamental Defects notified by Centrica pursuant to Clause 15.4.3) are completed, whichever is the later, unless extended by written agreement.

Clause 27.4B Release

(a) ….

(b) Release of Accenture: Centrica and each of its affiliates hereby release Accenture, and each of its respective subsidiaries, divisions, parents and affiliated corporations or partnerships, and each of their directors, officers, shareholders, agents, employees, partners, representatives, attorneys, successors and assigns, from the Released Claims.

(c) Released Claims: For purposes (sic) of this Agreement, "Released Claims" shall mean any and all rights, claims, demands, damages, debts, losses, obligations, liabilities, costs, expenses, actions, rights of action, and causes of action, of any kind or character whatsoever, based on any legal theory whatsoever, including but not limited to tort, contract, misrepresentation, rescission, intentional misconduct, or statute, including claims or potential claims in any way resulting from, arising out of, or in connection with the Agreement, whether known or unknown, suspected or unsuspected, accrued or unaccrued, based upon facts occurring at any time prior to the 31 March 2006 or which hereafter may be claimed to arise out of any action, inaction, event, or matter based upon facts occurring prior to 31 March 2006 and shall for the avoidance of doubt include the following historic disputes (as more particularly described in Appendix 1 to Schedule 3)….

provided, however, that Released Claims shall not include: (i) Accenture's obligations to provide the Services set out in Schedule 2.2, (ii) amounts to be paid by Centrica in accordance with Clause 11.1, (iii) obligations to indemnify set out in Schedule 18, or (iv) any right accruing to Centrica now or in the future to pursue the warranty provisions in Clauses 5.2.2, 7.1.3, 7.1.4 and 15.2 to 15.4 hereof (the "Warranty Provisions"), in relation to a Release or Deliverable under a Release, is expressly reserved.

Schedule 2.2

The Further Services

1 General

Accenture shall provide the following Services to Centrica:

1.1.1 Data Cleansing Services as described in Paragraph 2; and

1.1.2 Maintenance Release Development Services as described in Paragraph 3.

Schedule 3

5.3 Where such costs of Hardware and Third Party Software purchased as part of a Release are less than the projected price for such Hardware and Third Party Software set out in the Statement of Release Requirements for that Release, Centrica shall pay to Accenture 95% of the difference between the projected price and the amount paid in respect of Hardware, to be invoiced on the 28th January 2007 and paid by 28 February 2007. Where such cost of Hardware and Third Party Software purchased as part of a Release exceeds at any time the price for such Hardware and Third Party Software set out in the Statement of Release Requirements for that Release, Accenture shall reimburse Centrica such excess by 28 February 2007, on receipt of a written invoice by Centrica, such invoice to enclose a copy of the relevant invoice of the third party vendor of Hardware and Third Party Software for which Centrica requires reimbursement in whole or in part.

5.4 Where such costs of Hardware and Third Party Software for the Project (adjusted for any payments made under section 5.3) are less than £118.867 million as amended by the CVN process (when assessed at the end of the Warranty Period for Release 3 and including any payment made to Accenture under section 5.3), Centrica shall pay to Accenture 95% of the difference between £118.867 million as amended by the CVN process and the amount paid in respect of Hardware, within 30 days of receipt of an invoice in respect thereof from Accenture. Where such cost of Hardware and Third Party Software (including any payments made pursuant to 5.3 above) exceeds £118.867 million as amended by the CVN process, Accenture shall reimburse Centrica such excess within 30 days of written demand by Centrica, such demand to enclose a copy of the relevant invoice of the third party vendor of Hardware and Third Party Software (or Accenture as the case may be) for which Centrica requires reimbursement in whole or in part.

Schedule 10

1.4 For the avoidance of doubt, Centrica may not purchase Hardware and Software that is to be drawn down from the remaining Hardware and software budget of £6.43M as set out in Section 5.5 of Schedule 3, unless it has first obtained the written consent of the Accenture Client Partner, such consent not to be unreasonably withheld or delayed.

….

2.1 Accenture will:

2.1.1 specify to the JPG the Hardware and Third Party Software to be used in the Project, in order to meet the Business Capabilities.

4. "JPG" is the Joint Procurement Group. The words in italics in the above provisions were introduced by the Jupiter Programme Contract Amendment No.1.
5. The scheme under Schedule 3 of the JPA was that there should be a budgeted sum of £118.867 million pounds for Hardware and if the outturn for Hardware was in excess of this sum, Accenture should make a payment to Centrica, and if the final figure was less Centrica should make a payment to Accenture. By the time of the Jupiter Programme Contract Amendment No.1 the budgeted figure for Hardware was £6.43 million.

Issue 7

Can Centrica (in principle) recover for the cost of Hardware under clause 15.4.3 of the Amended JPA?

6. Mr Vos QC for Accenture argued that Schedules 3 and 10 created a completely separate self-contained regime so far as concerns Hardware costs and accordingly there was no right to damages under Clause 15.4.3 for breaches of contract involving Hardware. In the alternative, if there was such a right under Clause 15.4.3, the measure of recovery was limited to the Time and Material Basis specified in that clause.
7. I am unpersuaded by Mr Vos's primary submission. In my opinion, the provisions in Schedules 3 and 10 do not evince a contractual intention that if there is a fundamental breach of warranty founded on a failure to specify adequate or otherwise appropriate Hardware, there should be no right to damages under Clause 15.4.3. As to Mr Vos' alternative argument, I have already held in the first judgement (paras 70-76) that damages for Fundamental Defects where Accenture has not taken the prescribed steps under Clause 15.4.3 are at large at common law. Accordingly, my answer to Issue 7 is Yes.

Issue 8

Does the release in Clause 27.4B(c) of the Amended JPA preclude Centrica from bringing any claim for breach by Accenture of the obligation to specify Hardware pursuant to paragraph 2.1.1 of Schedule 10 to the Amended JPA?

8. The question is whether the obligation to specify Hardware under paragraph 2.1.1 of Schedule 10 or a claim for breach of that obligation falls within the wording of Clause 27.4B(c) down to the proviso, and if so, whether it is within the words of the proviso. In my judgement, it is manifest that the obligation on Accenture to specify Hardware continued as a binding obligation after the inception of the Jupiter Programme Contract Amendment No.1 down to the end of the term of the Amended JPA. It is also clear that a claim for breach of the paragraph 2.1.1 obligation is only released if it is "based upon facts occurring at any time prior to 31 March 2006 or which hereafter may be claimed to arise out of any action, inaction, event, or matter based upon facts occurring prior to 31 March 2006". Thus, since a claim for breach of paragraph 2.1.1 is not within the proviso, where the facts constituting a breach of paragraph 2.1.1 occurred before 31 March 2006 the claim is released, but where the relevant facts occurred after that date the claim is not released.
9. In the course of argument, Miss Tolaney submitted that a claim for breach of paragraph 2.1.1 would not be a released claim insofar as the facts and matters relied on also constitute a breach of Accenture's restated warranties in the Amended JPA. In my opinion, a claim is either for a breach of warranty or for a breach of paragraph 2.1.1. It follows that a breach of paragraph 2.1.1 must stand on its own two feet so far as Clause 27.4B(c) is concerned. And as I have held, such a claim is not excluded by Clause 27.4B(c) unless the relevant facts occurred before 31 March 2006.
10. Miss Tolaney also argued that a breach of paragraph 1.4 of Schedule 10 would not be excluded by Clause 27.4B(c) since both provisions were introduced at the same time. Whether a claim under paragraph 1.4 is excluded by Clause 27.4B(c) is not a question ordered to be determined in this trial. If it had been, I would have upheld Miss Tolaney's submission.

Issue 9

Is Centrica entitled to make requests for Hardware after 28 February 2007? If not, is Centrica otherwise entitled to purchase Hardware after 28 February 2007 under the Amended JPA?

11. Mr Vos submitted that the Amended JPA terminated on 28 February 2007 pursuant to Clause 21.1, so that after that date Accenture was under no obligation to consider requests for Hardware. The extension of the term until the Services were completed, including the correction of a Fundamental Defect under Clause 15.4.3, did not mean that the agreement was extended generally but only in respect of the completion of the Services and correction of a duly notified Fundamental Defect.
12. Mr Vos also relied on those parts of paragraph 5.3 of Schedule 3 that required the difference due either to Accenture or Centrica to be reimbursed by 28 February 2007. This made it clear, he submitted, that all requests for Hardware must have been made before 28 February 2007.
13. Miss Tolaney contended that the Amended JPA continued after 28 February 2007 because Accenture was under an obligation to rectify the Fundamental Defects notified in the Notification Letter. There was no reason why an accounting from an existing and specified budget should not be undertaken after 28 February 2007. She also relied on the absence in paragraph 5.4 of Schedule 3 and paragraph 1.4 of Schedule 10 of any requirement on Centrica to seek reimbursement for Hardware prior to 28 February 2007. In her submission, Accenture's construction was uncommercial: if it were right, Accenture could delay giving a decision on a request for consent until after 28 February 2007 and thereby deny Centrica a claim under paragraph 5.3 or 5.4.
14. In my judgement, Mr Vos' submissions are correct. In respect of claims made under paragraphs 5.3 and/or 5.4 of Schedule 3, the request for consent to the purchase of the Hardware in question has to have been made prior to 28 February 2007. I say this because in my view it is clear that the overall scheme is that there should be a reconciliation before 28 February 2007 and the parties are accordingly obliged to work within that framework. Even if the Amended JPA continued for some purposes whilst Accenture was under a duty to rectify notified Fundamental Defects, the intention of the agreement is that requests for consent under paragraph 1.4 of Schedule 10 have to have been submitted before 28 February 2007.
15. Was Centrica otherwise entitled to purchase Hardware after 28 February 2007? So long as a request for consent was made prior to 28 February 2007, if the requested consent was unreasonably withheld or delayed, Centrica would in my opinion be entitled to purchase Hardware after 28 February 2007 and to claim in respect thereof under paragraphs 5.3 and 5.4 or for damages if a claim for a Fundamental Defect is established under Clause 15.4.3. The parties cannot have intended that Accenture should be allowed to avoid a claim under those paragraphs by delaying a decision on a timeous request until after 28 February 2007. If a request for consent was not made prior to 28 February 2007 and Hardware was bought after 28 February 2007, Centrica might have a claim for damages for a Fundamental Defect in respect of the cost of the Hardware, but it would not, for the reasons I have given, have a claim under paragraph 5.3 or paragraph 5.4.

Issue 10

If Accenture has unreasonably withheld or delayed consent to a request by Centrica for Hardware in breach of paragraph 1.4 of Schedule 10 to the Amended JPA, is Centrica (in principle) entitled to recover the cost of that Hardware as damages for breach, or as reimbursement under paragraphs 5.3 and/or 5.4 of Schedule 3 to the Amended JPA?

16. This issue has already been answered. Both sides accept the general rule that where a contract provides that consent is to be requested and not unreasonably refused, the other party is entitled to continue without that consent if it is unreasonably withheld. Thus, provided the request was made before 28 February 2007, if the consent were unreasonably refused, Centrica would have a right to be reimbursed out of the Hardware Budget under paragraph 5.3 and/or 5.4 of Schedule 3. Centrica would also be able to recover the cost of the replacement Hardware as damages if it could establish a claim for a Fundamental Defect under Clause 15.4.3.

Conclusions

17. For the reasons I have given I answer issues 7 to 10 as follows:

Issue 7: Yes.

Issue 8: No, in respect of claims based on facts that occur after 31 March 2006.

Issue 9: No. If a request made prior to 28 February 2007 is unreasonably withheld Centrica is entitled to claim under paragraphs 5.3 and/or 5.4 of Schedule 3 notwithstanding that the Hardware is purchased after 28 February 2007. Centrica would also be able to recover the price of the new Hardware as damages if it could establish a claim for a Fundamental Defect under Clause 15.4.3.

Issue 10: Yes. If a request made prior to 28 February 2007 is unreasonably withheld, Centrica is entitled to claim under paragraphs 5.3 and/or 5.4 of Schedule 3 notwithstanding that the Hardware is purchased after 28 February 2007. Centrica would also be able to recover the price of the new Hardware as damages if it could establish a claim for a Fundamental Defect under Clause 15.4.3.