Hewlett-Packard Liable for Deceit in Landmark UK Decision

Following a nine-month trial, Hewlett-Packard (HP) was found to have committed the tort of deceit or fraudulent misrepresentation and the tort of negligent misrepresentation, and to have effected a breach of contract, all in connection with a £50 million contract to develop a customer relationship management system for BSkyB, a satellite broadcaster. In November 2000, HP (then EDS) agreed to provide an operational system within nine months. The system was eventually completed by BSkyB at an estimated cost of £265 million in March 2006. In the Technology and Construction Court of the England & Wales High Court, Justice Ramsay found that HP had no reasonable basis for committing to the nine-month timeframe. He found the conduct of the HP senior manager who handled the negotiations, whose “credibility was completely destroyed by his perjured evidence over a prolonged period”, went beyond gross carelessness and was dishonest. The finding of deceit prevented HP from relying on a limitation of liability clause which capped contractual liability (not tort liability) at £30 million; as a result, when final rulings on liability are made, HP will likely be ordered to pay damages in excess of £200 million, those familiar with the case predict. The Court held that an entire agreement clause, which provided that the contract superseded any previous representations, meant merely that such representations were not part of the contract, but did not mean that they were of no legal effect. In order to produce the latter effect, the contract would have required language expressly withdrawing such representations and taking away from BSkyB any right to rely on them. Justice Ramsay’s reasons for judgment, which exceed 400 pages in length, were released about a year and a half after the completion of the trial. The total legal fees are thought to exceed £70 million. HP has said that it will appeal. Given the value of the contract and of the amount of damages awarded, the legal fees charged, the lengthy time period that has elapsed since 2000 and the likelihood of an appeal, many observers wonder whether the parties considered using a form of alternative dispute resolution that might have brought the dispute to an end more quickly, at less cost and with much less public disclosure. For the full reasons for judgment in BSkyB Limited v HP Enterprise Services Limited [2010] EWHC (TC) 86, see: http://www.bailii.org/ew/cases/EWHC/TCC/2010/86.html For related news and commentary, visit: http://business.timesonline.co.uk/tol/business/law/article7005260.ece; and http://tinyurl.com/yzffjp4 Summary by: Tom Feather