Sky wins landmark 'fraudulent misrepresentation' ruling, HP vows to appeal

Software supplier EDS, which was acquired by HP in 2008, has been found liable for fraudulent misrepresentation. The ruling by Mr Justice Ramsey, which at almost 500 pages is among the longest ever, is due to become available shortly. HP has said that it will seek leave to appeal.

Broadcaster BSkyB claimed that EDS had been deceptive in overselling its Customer Relationship Management (CRM) system, by describing the system as "proven leading-edge technology" when it was not, by overstating its capabilities in relation to resources and implementation methodologies and by understating the amount of time and cost that would have been required to implement the system. The £48 million deal was signed in 2000 and relations between the companies broke down shortly afterwards.

EDS had argued that BSkyB was unsure as to its requirements and made numerous changes making it difficult for EDS to deliver.

It is understood that BSkyB's claim of fraudulent misrepresentation has been upheld and four other claims have been rejected. OUT-LAW had not had sight of the judgment at the time of writing.

Because of the finding that at least one misrepresentation was made fraudulently, rather than negligently, the contractual caps on liability will not apply, according to an IT litigation expert.

Although the contract value was £48m, BSkyB claimed damages in excess of £700m. A decision on the amount of the damages to be awarded is expected to follow. BSkyB has said that it expects to recover at least £200m. It has been reported that legal costs exceeded £70m.

David Barker, an IT disputes specialist with Pinsent Masons, the law firm behind OUT-LAW.COM, said: "The outcome of this case has been heralded as a potential turning point for the IT and outsourcing industry. Just how significant the case may be will become clearer once the full judgment has been published. A possible impact is that IT suppliers will need to review their sales processes to avoid the risk of similar claims in the future."

HP said in a statement: “This is a legacy issue, dating back to the EDS business in 2000, which HP inherited when it acquired EDS in 2008.  We are pleased the Court dismissed the majority of the allegations made. While we accept that the contract was problematic, HP strongly maintains EDS did nothing to deceive BSkyB.  HP will be seeking permission to appeal."

"As the world’s largest technology company, HP has built a solid reputation based on strong governance and adherence to the highest ethical standards,” it said.

BSkyB said: "Mr Justice Ramsey found that EDS had lied to Sky in order to secure a contract as part of the company’s investment in a new customer relationship management system."

"Sky anticipates that EDS will be liable to pay Sky an amount of at least £200m," it added.