BSkyB v EDS: SCL London Group Meeting Report

March 9, 2010

With apologies for the trite adaptation: ‘on the internet nobody knows that your dog has an MBA’ This salutary fact seems to have been a significant factor in undermining the EDS defence in its litigation with BSkyB and justifying the claims of fraudulent misrepresentation brought against the suppliers, as delegates to the joint SCL/Intellect event to discuss the recent judgment discovered last night.

The unlikely finding emerged in response to a question from the packed audience when James Farrell, a partner at Herbert Smith who had acted for the claimant, recounted their attempts to discredit one of the senior managers at EDS. Joe Galloway was MD of the EDS CRM Division and his CV boasted that he had an MBA from Concordia University in the US Virgin Islands. Suspecting that this was a fake degree paid for by the witness, Mark Howard QC cross-examined him further but the witness repeatedly denied the claims, embellishing his evidence with fantastic details of his attendance at the campus. But, as Mr Justice Ramsey describes in the judgment (at [178]), Mr Howard’s point was ‘effectively and amusingly demonstrated’ when he produced the MBA certificate from the same institution in the name of his dog, Lulu, together with a letter of recommendation for future employers. Not only that, Mr Justice Ramsey added, the dog had managed to get better marks than Mr Galloway. With this revelation, Galloway’s credibility as a witness was destroyed and he was dismissed by EDS during the course of the proceedings.

All highly amusing, but the fact that this witness was so critical to the outcome illustrates what seemed to be the consensus of the all the speakers, that the judgment is more fact-specific, and therefore less applicable to other cases, than many pundits expected. Jeremy Storey QC of 4 Pump Court opened the proceedings by providing a concise run down of the main points and claims in the case, emphasising that out of the five claims brought against EDS only one succeeded, which was that the supplier had fraudulently misrepresented how long it would take to implement the proposed system. Other factors added to the exceptional nature and outcome of the case. Most obvious is that such claims are unusual in the UK courts (in contrast to the US as meeting chair Rob McCollough pointed out) and that without such an obviously dishonest witness this one might not have succeeded: the systemic failures in EDS documentation do not seem to have been enough on their own. The amounts at stake and the possible lifting of any cap on claims if BSkyB succeeded in their claims also meant that it did not settle. So, in Jeremy’s view, no new law of deceit has been formulated though the judgment will have an effect in both generating a number of new claims in the short-term and hikes in supplier insurance premiums, reportedly up by 20-30% since the judgment.

Each of the panel members then contributed short comments on the possible lessons to be learnt before questions were invited from the audience. On a practical level, Peter Bowsher of Keating Chambers asked how IT was used to help manage the case. James Farrell, who had earlier described how the case generated 10,000 pages of expert reports, explained that there was an agreed ‘e-bundle’ alongside the traditional printed one (EDS alone had disclosed 200,000 documents) which contained hard-to-print items such as spreadsheets and MS Project files. Everyone, including the witnesses, had a laptop and could show relevant evidence to the court. PA Consulting had even been commissioned to devise a dummy version of the software that the unsuccessful bidder may have been able to provide.

Answering questions about the prospects of an appeal proved more difficult for the panel. The permission application is in preparation with any appeal, if granted, likely to take place in 2011. Nobody could comment on the possible grounds though Jeremy did add that it is an uphill task to appeal against the fact-finding of a TCC judge. One angle was raised by Geoff Mendelsohn of Nabarro who thought that the judge ‘had thrown mitigation out of the window’ and the methods for assessing quantum could also be examined.

More ruefully Paul Woodman, who works for an IT supplier, highlighted the fact that his company had often lost out to other suppliers because of their risk-averse time estimates. Peter Messer, from the Treasury Solicitors Department, agreed that the wrong side often wins and commented that Sky wanted the new system so desperately that they seemed blind to the unrealistic deadlines of the accepted bid. Ironically he also pointed out that, if a Government buyer accepts a bid for such a project that is higher than the competition, the fraud squad are called in.

With a possible appeal, and final assessments of damages to come (£200m has already been paid out in interim damages), this case is not yet laid to rest. While it may have less impact than anticipated, the mere fact that it got to court means that the judgment, all 2,350 paragraphs of it, makes for exemplary reading.

{b}David Chaplin is an SCL member and director of Bath Publishing, online law publishers.{/b}