Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION

[2015] CSOH 54

CA86/14

OPINION OF LORD WOOLMAN

In the cause

NHS 24

Pursuer;

against

CAPGEMINI UK PLC

Defender:

Pursuer:  Ellis QC:  Anderson Strathern LLP

Defender:  Duncan QC;  Brodies LLP

6 May 2015

Introduction
[1]        NHS 24 operates a medical advice service in Scotland.  It deals with almost 1.5 million enquiries each year.  Many of them are made “out of hours”, when the surgeries of general practitioners are closed.  NHS 24 relies heavily on information technology to provide the service.

[2]        In 2010 NHS 24 decided to obtain a new computer system.  Following a lengthy procurement exercise, it awarded the software contract to Capgemini UK Plc (“Capgemini”).  The parties signed a formal contract on 2 March 2012 (“the Agreement”).  It contains a highly technical specification for bespoke software.  The parties agreed that it would evolve after further negotiation and testing.  The revised specification would be encapsulated in a “Business Blueprint”.

[3]        The parties continue to collaborate on the design and installation of the new system.  However, they are in dispute in relation to two performance requirements.  One relates to the number of calls that the system can handle at any one time (“concurrent calls”).  The other relates to the period in which certain tasks are carried out (“response times”).  Both requirements were contained in the Output Based Specification (“OBS”) that NHS 24 issued at the outset of the negotiations.  Neither, however, was contained in the Agreement.

[4]        In the present action for declarator, NHS 24 contends that the omission of both requirements from the Agreement is an obvious error and that they have been incorporated by other documents.  Alternatively, NHS 24 seeks an order for rectification.  It maintains that the parties had a common intention to include both requirements.

[5]        NHS 24 accepts that it can only establish rectification by leading evidence.  It submits that if its construction arguments do not prevail at debate, I should remit all the averments for a proof before answer.

[6]        Capgemini seeks dismissal of the action.  It maintains that on a proper construction, neither performance requirement was incorporated.  It also argues that there is no relevant case of rectification.

[7]        During the course of the discussion, counsel focused on the issue of response times.  The issue of concurrent calls occupied less attention.

Background
[8]        NHS 24’s goal is to provide sound advice, while maintaining patient confidence.  The service operates as follows.  On receipt of a call, the adviser types the patient’s details into a file on a computer monitor.  The system software then prompts the adviser to ask a series of questions, each one determined by the caller’s last answer.  Where appropriate, the adviser connects the individual to more specialist advice within the National Health Service.  In order that the system operates efficiently, NHS 24 considers it very important to have performance requirements for concurrent calls and response times.

[9]        NHS 24 appointed Deloittes LLP to act as its consultants and McGrigors LLP (later Pinsent Masons) to act as its solicitors in connection with the procurement of the new system.  In order to secure the optimum system, it decided to award separate contracts for the software and the hardware.

[10]      The Public Services Contracts (Scotland) Regulations 2006 governed the procurement exercise.  NHS 24 began the procedure by placing an advertisement in the Official Journal of the European Union.  A number of potential bidders responded by completing pre‑qualification questionnaires for the software contract.  NHS 24 chose to continue a competitive dialogue procedure with several of them.

[11]      On 20 September 2010 NHS 24 circulated various written materials and asked the bidders to outline their proposals.  The materials included the OBS, which is divided into 57 sections relating to general technical performance, each having the prefix “G.TP”.  The performance requirements for concurrent calls are found in section G.TP-018.  It specifies that the system should be capable of handling 600 calls at any one time, so that individual callers can be quickly connected to advisers, even when there is a high volume of calls.  The performance requirements for response times are found in section G.TP-027.  It specifies precise times within which certain tasks should be carried out.

[12]      On 29 October Capgemini sent its initial proposals to NHS 24.  It indicated that it would endeavour to meet the response times in G.TP-027.  It added, however, that some material factors lay outside its control.  They included the choice of hardware.  Capgemini was also uncertain how NHS 24 intended to measure performance.

[13]      NHS 24 short‑listed four bidders.  It met each of them to discuss their proposals.  Two companies withdrew at that stage.  That left Capgemini and the existing supplier, Clinical Solutions International Ltd, as the two remaining bidders.  On 17 June 2011 NHS 24 issued an Invitation to Submit a Final Tender.  Among the documents it provided was a version of G.TP-027 that did not contain any specific figures in relation to response times (“short G.TP-027”).

[14]      Capgemini wrote to NHS 24 on 29 July and made three points about response times.  First, it repeated its view that there were too many unknowns to give any firm assurance on exact times.  Second, it suggested that the matter could be addressed during the design phase of the project.  Third, it provided information about the response times it had achieved in other contracts.

[15]      NHS 24 noticed that the final tender documents referred to short G.TP-027.  On 4 August it sent an email to both bidders, seeking to clarify its position.  It stated that the final contract should include the full version of the performance requirement with target times (“long G.TP-027”).  It invited them to revise their bids if they thought it necessary.  Capgemini chose not to do so.  Its reply of 8 August was along similar lines to its email of 29 July.

[16]      At the end of August 2011, NHS 24 appointed Capgemini to be the preferred bidder.  The parties then entered into detailed negotiations about the terms of the contract.  Different teams worked on different parts of the draft Agreement.  In order to facilitate matters, McGrigors set up an extranet, which is a type of digital document vault.  It enabled the parties and their advisors to consult the draft contract terms and any proposed amendments in a convenient and secure manner.

[17]      The negotiations continued between August 2011 and March 2012.  Capgemini draws attention to three points that it regards as significant in that period.  First, the document lodged in the extranet in relation to response times was short G.TP-027.  Second, an IT specialist employed by NHS 24 referred to the same version of the document in two emails that he sent to Capgemini in January 2012.  Third, at a meeting in late February 2012, Capgemini rejected a proposal that it should be obliged to provide specific response times.

The key contractual provisions
[18]      The parties signed the Agreement , known as “the Provision of Lot 1 Services”, on 2 March 2012 at the Glasgow offices of McGrigors.  It comprises two volumes.  Volume 1 contains 67 clauses, together with a schedule of 31 parts (four of them blank).  Volume 2 contains Part 1 of the Schedule, which is the technical specification as it then stood.

[19]      McGrigors considered that paper “bibles” of the Agreement would be too unwieldy to use.  Accordingly, they distributed compact discs with an electronic version of the text.  Recital C sets out the general purpose of the Agreement:

“NHS 24 has concluded that it is expedient for the purpose of … the discharge of its functions to enter into this Agreement, which sets out the terms and conditions upon which [Capgemini] shall provide the information technology services”

[20]      As is standard in commercial contracts, clause 1 contains a lexicon.  It defines a number of terms, which interlock with one another.  Among the most important are “the Specification”, “the Transition Plan”, “the Transition Key Milestones”, “the Business Blueprint”, and the “Technical Solution”.  They are best explained by considering clauses 6, 10 and 14, which form the spine of the Agreement.  Those provisions delineate Capgemini’s obligations and the manner in which it must provide the new system.

[21]      Clause 14 requires Capgemini to meet and satisfy the Specification.  It is to be found in the Schedule Part 1 and contains a host of performance requirements, standards, targets and government guidelines.  Capgemini undertakes its task by carrying out the Services, which include the Transition Services.

[22]      Clause 6 provides further guidance.  Capgemini must carry out the Transition Services in accordance with the Transition Plan in the Schedule Part 17.  In effect it is the contract timetable and contains 11 Transition Key Milestones (“TKMs”).  By the end of each TKM, Capgemini must have provided certain items and services, known as “deliverables”.  On the successful completion of each TKM, NHS 24 issues a certificate entitling Capgemini to payment.

[23]      The key document in the evolution of the software is the “Business Blueprint”, which is defined as:

“the set of documents which will be developed and agreed between the parties in accordance with Clause 10 and which is intended to refine the Specification and confirm the detailed design requirements which the Contractor will use to build the Technical Solution”

[24]      In terms of Clause 10, Capgemini must develop the Business Blueprint in collaboration with NHS 24 and BT (10.1).  NHS 24 begins the process by updating the list of software requirements and standards (10.2).  When the Business Blueprint is successfully completed, the parties agree that it (10.3):

“(a)    … shall be treated as an accurate representation of the agreed Technical Solution and shall, together with any documents expressly referred to in the Business Blueprint (including any traceability matrix used to link the Business Blueprint to the contents of Schedule Part 1 (Specification)), constitute a full description of the Specification; and

(b)     the Contractor shall build the Technical Solution in accordance with the Business Blueprint.”

[25]      NHS 24 cannot reject the Technical Solution after the successful completion of TKM 9, which is the stage of user acceptance testing (10.4).

Draft minute of amendment
[26]      In May 2012, an NHS 24 employee noticed that part of the text of the Agreement on the compact disc was upside down.  He looked further and discovered that some sections of the specification were absent, including G.TP-018 and G.TP-027.  NHS 24 asked McGrigors to investigate.  They confirmed that the principal Agreement had the same errors, which they attributed to the rush to assemble all the documents for signature on 2 March.

[27]      Clause 58 states that any variation of the Agreement must be in writing.  McGrigors prepared and circulated a minute of amendment to cure the perceived mistake.  On receipt of the draft, NHS 24 pointed out that it still referred to short G.TP-027.  McGrigors then circulated a further draft, but did not revise it to refer to long G.TP-027.  NHS 24 did not notice that the correction it had requested had not been made and it executed the minute in that form.  Capgemini did not sign it.  The Agreement has therefore not been varied.

The performance of the contract – TKM 2 and TKM 3
[28]      The TKMs each have a shorthand description.  TKM 1 is described as “Start Blueprint”;  TKM 2 as “End of High Level Design”;  and TKM 3 as “End of Blueprint”.

[29]      Capgemini provided various deliverables for TKM 2, including:  (a)  Business Blueprint (D0001), and (b)  traceability matrix v2.5.  On 10 July 2012, NHS 24 issued a completion certificate for TKM 2.

[30]      Capgemini provided various deliverables for TKM 3, including (a)  Technical Blueprint (D0006), and traceability matrix v3.  Counsel agreed that v3 and v2.5 are in identical terms on the key points.  NHS 24 issued a completion certificate for TKM 3 on 29 January 2013.

An obvious mistake?
[31]      NHS 24’s submissions have a central theme.  It contends that the Agreement, as modified by the Business Blueprint, contains an obvious mistake.  A reasonable person seized of the facts, including the background circumstances, would regard it as “patently nonsensical” for NHS 24 to enter into a software contract without detailed performance requirements in respect of response times and concurrent calls.  That would be contrary to commercial sense.  Mr Ellis emphasised that this was a question of construction.  NHS 24 did not seek to imply G.TP-018 and G.TP-027 into the Agreement.

[32]      In Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 (at paragraphs 21 to 25), Lord Hoffmann stated that the correction of an obvious mistake is part of the process of construction.  It is not a separate branch of the law.  It involves looking at the relevant background in each case:

“All that is required is that it should be clear that something has gone wrong with the language and that it should be clear what a reasonable person would have understood the parties to have meant.”

[33]      I begin by observing that the court is slow to hold that parties have made linguistic mistakes in formal documents.  Looking at the terms of the Agreement itself, in my view a reasonable person would have been struck by an important fact.  The Specification was not a static document.  In due course it would be replaced by the Business Blueprint, following a prescribed sequence of events.  They would negotiate further in the light of the revision of the requirements and further software testing.  In that context, the omission of detailed performance requirements at the outset is not surprising.  A reasonable person would not have concluded that something had gone wrong with the language.  Instead, he or she would have thought that this was something yet to be agreed.

[34]      Commercial sense is really a different shade of the same argument.  I accept that NHS 24 intended the two performance requirements to be part of the final contract.  Equally, however, Capgemini did not intend to be bound by requirements that it could not meet.  That was not in its commercial interests.  It could result in Capgemini being in breach of contract and being unable to purge its breach.  I therefore conclude that approaching the matter from the perspective of commercial sense does not yield a different construction.

[35]      NHS 24 founds strongly upon the parties’ prior communications.  It maintains that they are part of the background circumstances that would have been known to the reasonable person.  There is a formidable obstacle to that approach.  Clause 61 is a comprehensive “entire agreement” provision.  It stipulates that the Agreement “supersedes all prior representations, communications, negotiations and understandings”.  Further, the parties agreed that that they did not rely on “any statement or representation” before entering the Agreement.  Clause 61 therefore excludes consideration of such matters:  Contract (Scotland) Act 1997 section 1(3).

[36]      Even if recourse can be made to the background, it does not assist NHS 24 to any great extent.  It is unable to point to any communication in which Capgemini undertook to meet the response times set out in long G.TP-027.  The emails received by NHS 24 were couched in the language of aspiration, not guarantee.  The discussion at the February 2012 meeting and the draft minute of amendment also tend to indicate that the position was fluid, rather than certain.

[37]      The correlative of there being no obvious mistake is that there is no obvious correction.  To require Capgemini to meet the requirements of long G.TP-027 and G.TP-018 would be to impose upon it obligations that are not present in the original Agreement.

Incorporation by later documents
[38]      Mr Ellis accepts that the Business Blueprint delivered at TKM 2 does not include G.TP-018 and long G.TP-027.  He submits, however, that they were incorporated by means of traceability matrix v2.5 and the Technical Blueprint.

The Technical Blueprint
[39]      I shall deal first with the Technical Blueprint.  I reject Mr Ellis’ argument that it is part of the Business Blueprint for two reasons.  First, it was produced several months after the parties had agreed the Business Blueprint.

[40]      Secondly, the Agreement is an intricate document in which the parties have taken pains to define their terms.  Yet they chose not to define the term “Technical Blueprint”, nor is it mentioned in clause 10.  To my mind that is highly significant.  Clause 10 circumscribes Capgemini’s obligations.  It must build the Technical Solution in accordance with the Business Blueprint.  To require it also to build the system in accordance with the Technical Blueprint would be to innovate upon the contract.  I see no warrant for construing the document in that manner.

[41]      Even if the Technical Blueprint does have contractual status, however, there is a further difficulty for NHS 24.  It only refers to short GTP-027.  Mr Ellis submits that this is another example of a drafting exercise gone awry.  He argues that the parties intended to refer to long GTP-027, because it is the only version that contains actual requirements.  For the reasons outlined above, I hold that there is no basis for expanding the meaning of the document in that way.

Traceability matrix
[42]      The exact status of the traceability matrix is unclear.  Its central role is to link the Business Blueprint to the Specification: clause 10.3(a).  That implies that it is a discrete document that does not itself impose obligations.  If that were the parties’ sole stipulation on the matter, the position would be straightforward.  Capgemini could satisfy its obligations by building the Technical Solution in accordance with the Business Blueprint and ignore the traceability matrix.

[43]      That is not, however, the full story.  There are two other important provisions relating to the traceability matrix.  First, it is part of the Specification:  clause 10.3(a).  Second, the Business Blueprint is defined as the set of documents “which is intended to refine the Specification and confirm the detailed design requirements which the Contractor will use to build the Technical Solution.”  The natural inference is that Capgemini must have regard to the traceability matrix in the context of such refinement.

[44]      I believe that it is necessary to hear evidence before coming to a final view on this point.  In remitting it for a proof before answer, I note two matters.  First, by the end of TKM 2, there appears to have been a measure of agreement about concurrent calls.  Traceability matrix v2.5 itself refers to G.TP-018 and Capgemini delivered another document (the Future Project Portal) stating that it was working toward a technical solution with the ability to handle 600 concurrent calls.  Second, v2.5 refers to short G.TP-027, and for the reasons already given, that presents a difficulty to NHS 24.

Rectification
[45]      In his written note of argument, Mr Duncan criticised the averments relating to rectification as being of doubtful relevancy and insufficiently specific.  He accepted, however, that evidence was necessary for a final determination.  At the end of the debate he took a stronger line.  He contended that the parties had no common intention, and the Agreement was incapable of being rectified.  Accordingly this branch of the case should also be dismissed.

[46]      I disagree and hold that NHS 24 has made out a relevant case in terms of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985.  It offers to prove that the parties agreed many matters in the months leading up to the execution of the Agreement, that they intended the signed document to reflect those matters, and that the two performance requirements were omitted because of a proofreading failure.  In my view it is best to explore those matters by way of a proof before answer.

Conclusion
[46]      I shall fix a by order hearing to discuss further procedure in the light of this opinion.  Meantime, I reserve all questions of expenses.