Aggregating Fundamentals

November 13, 2009

Accenture, the IT consultancy group, suffered a defeat on all of the preliminary issues in a judgment handed down on 6 November in GB Gas Holdings Limited v (1) Accenture (UK) Limited, (2) Accenture SCA, (3) Accenture International SARL, (4) Accenture Inc [2009] EWHC 2734 (Comm).

Centrica is claiming nearly £200m in relation to the alleged failure of the IT customer billing system which was to be created and installed by Accenture. 

In a complex series of preliminary judgments by Mr Justice Field, one element stands out. The contract stated that once Centrica had provided notice to Accenture of any ‘fundamental’ defect in the system, Accenture was obliged to take reasonable steps to fix the problem.  Centrica claimed that it had notified Accenture of a fundamental defect but Accenture had refused to take any steps in response.  Accenture argued that no single ‘fundamental’ breach had occurred and they were therefore not liable.  Centrica claimed that a series of lesser breaches could be aggregated to form a ‘fundamental’ breach.  Mr Justice Field agreed with Centrica. 

Commenting on the judgment, Peter Clough, head of disputes at Osborne Clarke, said:

‘One of the important points to note about this case is that IT suppliers can be liable for claims for fundamental breach arising from the cumulative effect of a series of faults, each of which could look relatively minor in isolation.  The majority of systems will of course be inter-linked so that a defect in part of the process could affect another part, snowballing into a more serious issue.

Accenture were partly caught out by the use of the words “and/or” in the definition of “fundamental breach”.  This judgment reinforces the careful considerations that need to be given when negotiating IT contracts. It will be interesting to see what other issues arise on this matter at the full trial.’