Legislation
(Edited and posted by
John Antell)
Sale of Goods Act 1979
Supply of Goods and Services Act
1982
Unfair Contract Terms Act 1977
Civil Procedure Rules
CPR Part 60 - Technology and
Construction Court Claims
PD-60 - Technology and Construction
Court Claims
PD - Protocols
Pre-Action Protocol for Construction
and Engineering Disputes
Court Guides
Technology and Construction Court Guide (2nd edition)
Case Law
Arbitration
Halki Shipping v
Sopex Oils
[1997] 1 WLR 1268
Expert Witnesses
Anglo Group Plc v Winther Brown &
Co. Ltd.
[2000] EWHC Technology 127 (8 Mar, 2000)
TeCSA (Technology and Constructions Solicitors Association)
Expert Witness Protocol (Version 2)
Computer Contracts: Litigation Overview
Last updated 26 Feb 2006
Disputes or differences between suppliers and their customers are
disturbingly common. In an article entitled "Runaway Projects" that
appeared on its website in 2000, KPMG reported that 83% of a group of
companies that it had surveyed at the end of the 1990s had experienced
some sort of runaway project, that is to say, a computer systems project
that had failed significantly to meet its objectives. Of course, only a
small fraction of those runaways actually ends in litigation but
proceedings had been threatened in 20% of the cases surveyed.
First Requirement - consult an Expert early
The first requirement of anyone involved in a runaway is to seek competent and objective professional advice on what went wrong and what, if anything, can be done to put it right. That usually involves retracing the steps that should have been taken by a systems analyst before the contract was entered. KPMG found that the first 3 of the top 5 causes of project runaways were failure to specify the project objectives fully, bad planning and estimating and the customer's unfamiliarity with the technology. Often there is a technical or commercial solution satisfactory to both parties that a competent systems analyst can identify.
The priority at this stage is to seek such a solution rather than to make a case for compensation. For that reason, advice should be sought from an expert who is used to specifying and supplying systems rather than one who spends a disproportionate amount of time giving expert evidence in court. The danger of instructing an expert who is focussed on litigation rather than technology is illustrated by Anglo Group Plc v Winther Brown & Co. Ltd. [2000] EWHC Technology 127 (8 Mar, 2000) where the evidence of the customer's expert, who had taken a confrontational stance from the start and exaggerated his client's case, was completely disregarded. Useful guidance on selecting and instructing an expert is to be found in the TeCSA Expert Witness Protocol (Version 2)
Making
a Claim
As the KPMG statistics mentioned above suggest, it is only in a small
proportion of cases that a technical or commercial solution does not exist
or one or other party fails to consider it. In those circumstances the
parties should look to their contract to see what provision is made for the
resolution of disputes. An arbitration clause is usually binding on the
parties even in circumstances where it would have been possible under
previous legislation to apply for summary judgment on the grounds that there
was no real dispute or difference (see
Halki Shipping v Sopex Oils
[1997] 1 WLR 1268). It has recently become fashionable to insert elaborate
clauses requiring disputes to be referred up the management chains of both
parties and thereafter to an expert for neutral evaluation before either
party resorts to litigation. Where such provisions exist they should be
tried but the court will refuse to stay proceedings if they are likely to
waste time and lead nowhere as in Halifax Financial Services Ltd. v
Intuitive Systems Ltd. [1999] 1 All ER Comm.
Pre-Action Negotiations
Although there is not yet a pre-action protocol for computer supply
disputes,
para 4.1 of the Practice
Direction - Protocols provides:
"In cases not covered by any approved protocol, the court will expect the parties, in accordance with the overriding objective and the matters referred to in CPR 1.1(2)(a), (b) and (c), to act reasonably in exchanging information and documents relevant to the claim and generally in trying to avoid the necessity for the start of proceedings"
Moreover, the Pre-action Protocol for Construction and Engineering Disputes, while not expressly including computer supply disputes, provides guidance as to how pre-action negotiations should be conducted.
Aim of
the Construction and Engineering Protocol
The general aim of the Protocol is to ensure that before court
proceedings commence:
"(i) the claimant and the defendant have
provided sufficient information for each party to know the nature of the
other’s case;
(ii) each party has had an opportunity to consider the other’s case, and to
accept or reject all or any part of the case made against him at the
earliest possible stage;
(iii) there is more pre-action contact between the parties;
(iv) better and earlier exchange of information occurs;
(v) there is better pre-action investigation by the parties
(vi) the parties have met formally on at least one occasion with a view to:
- defining and agreeing the issues between them; and
- exploring possible ways by which the claim may be resolved;
(vi) the parties are in a position where they may be able to settle cases
early and fairly without recourse to litigation; and
(vii) proceedings will be conducted efficiently if litigation does become
necessary."
Letter
of Claim
Para 3 of the Pre-action
Protocol requires the claimant or his solicitor to each proposed defendant
(if appropriate to his registered address) a copy of a letter of claim that
contains the following information:
(i) the claimant’s full name and address;
(ii) the full name and address of each proposed defendant;
(iii) a clear summary of the facts on which each claim is based;
(iv) the basis on which each claim is made, identifying the principal
contractual terms and statutory provisions relied on;
(v) the nature of the relief claimed: if damages are claimed, a breakdown
showing how the damages have been quantified; if a sum is claimed pursuant
to a contract, how it has been calculated; if an extension of time is
claimed, the period claimed;
(vi) where a claim has been made previously and rejected by a defendant, and
the claimant is able to identify the reason(s) for such rejection, the
claimant’s grounds of belief as to why the claim was wrongly rejected;
(vii) the names of any experts already instructed by the claimant on whose
evidence he intends to rely, identifying the issues to which that evidence
will be directed.
Defendant's Response
The defendant has 14 days in which to acknowledge the letter of claim
under
para 4.1 of the Pre-Action
Protocol.
Preliminary Objection
If the defendant objects to the claim on the grounds that:
(1) the court lacks jurisdiction,
(2) the matter should be referred to arbitration, or
(3) the defendant named in the letter of claim is the wrong defendant,
it should make its objection known within 28 days of receipt of the letter
of claim (para 4.2.1). Failure to do so may be taken into account when the
court decides the question of costs but it will not prevent the defendant
from raising those objections at any time.
the
plaintiffs relied on Intuit's skill and judgment in selecting the software.
Letter
of Response
The defendant must also respond in writing within 28 days, or such other
period as the parties may reasonably agree up to a maximum of 4 months, if
it contests the claim on substantive grounds. Para 4.3.1 requires the
defendant to send a letter of response. to the claimant containing the
following information:
(i) the facts set out in the letter of claim which are agreed or not agreed,
and if not agreed, the basis of the disagreement;
(ii) which claims are accepted and which are rejected, and if rejected, the
basis of the rejection;
(iii) if a claim is accepted in whole or in part, whether the damages, sums
or extensions of time claimed are accepted or rejected, and if rejected, the
basis of the rejection;
(iv) if contributory negligence is alleged against the claimant, a summary
of the facts relied on;
(v) whether the defendant intends to make a counterclaim, and if so, giving
the information which is required to be given in a letter of claim by para 3
(iii) to (vi) of the Protocol;
(vi) the names of any experts already instructed on whose evidence it is
intended to rely, identifying the issues to which that evidence will be
directed
Should the defendant fail to respond within such time the claimant may
commence proceedings without further compliance with the protocol (para
4.3.2).
Claimant's Reply
The claimant has the same amount of time to respond to any counterclaim as
allowed to the defendant to respond to the letter of claim (para 4.4).
"Without Prejudice" Meeting
A "without prejudice" meeting should take place as soon as possible after
receipt by the claimant of the defendant’s letter of response, or (if the
claimant intends to respond to the counterclaim) after receipt by the
defendant of the claimant’s letter of response to the counterclaim. The aim
of such meeting is to agree what are the main issues in the case, to
identify the root cause of disagreement in respect of each issue, and to
consider whether, and if so how, the issues might be resolved without
recourse to litigation. If litigation is unavoidable, the parties should
consider what steps should be taken to ensure that it is conducted in
accordance with the overriding objective (para
5.2).
Identification of Issues
If the parties are unable to agree on a means of resolving the dispute
other than by litigation they should use their best endeavours to agree
(i) whether, if there is any area where expert evidence is likely to be
required, a joint expert may be appointed, and if so, who that should be;
and (so far as is practicable);
(ii) the extent of disclosure of documents with a view to saving costs; and
(iii) the conduct of the litigation with the aim of minimising cost and
delay;
thereby saving time and costs at the case management stage (para 5.5).
What
can be mentioned to the Court
Any party attending such meeting shall be entitled to disclose to the court,
that the meeting took place, when it took place and who attended it, the
identity of any party who refused to attend, and the grounds for such
refusal or if the meeting did not take place, why not; and any agreements
concluded between the parties (paragraph 5.6). These are matters that the
court can take into account under
CPR 44.3 when deciding costs.
Commencing Proceedings
A computer supply dispute is likely to involve issues or questions that are technically complex within the meaning of CPR 60.1 (3) and is therefore apt to be brought in that court. Para 3.2 of PD60 requires the claim form to be marked "Technology and Construction Court." There is now a TCC list in the Central London and other county courts attached to a High Court District Registry. If the claim is brought in the Royal Courts of Justice it will be assigned to a judge ("the assigned judge") who will have primary responsibility for its case management.
Case
Management
The court will fix a case management conference within 14 days of the filing
of an acknowledgment of service, the filing of a defence; or the date of an
order transferring a claim to a TCC, whichever happens first (para
8.1 of PD60). When the court notifies the parties of the date and
time of the case management conference, it will at the same time send each
party a case management information sheet and a case management directions
form.
Not less than 2 days before the case management conference, each party must file and serve on all other parties completed copies of the case management information sheet and case management directions for; and an application notice for any order which that party intends to seek at the case management conference, other than directions referred to in the case management directions form. Parties are encouraged to agree directions to propose to the court by reference to the case management directions form. Should any party fail to file or serve the case management information sheet and the case management directions form by the date specified, the court may impose such sanction as it sees fit and either proceed with or adjourn the case management conference.
The directions given at the case management conference will normally include the fixing of dates for any further case management conferences, a pre-trial review, the either the trial or the trial of preliminary issues.
Pre-Trial Review
When the court fixes the date for a pre-trial review it will send each party
a pre-trial review questionnaire and a pre-trial review directions form.
Each party must file and serve on all other parties completed copies of the
questionnaire and form not less than 2 days before the date fixed for the
pre-trial review. As with the case management conference, parties are
encouraged to agree directions to propose to the court by reference to the
pre-trial review directions form. At the pre-trial review, the court will
give such directions for the conduct of the trial as it sees fit.
Trial
Wherever possible the trial of will be heard by the assigned judge which may
take place at any place where there is a TCC judge available..
