Don’t delay in documenting your disruption: court considers IT sourcing disputes and relief notices

The Court of Session in Edinburgh recently considered a dispute between an IT contractor supplying services to the Edinburgh City Council and its sub-contractor. The judgement highlights some interesting take-homes about the importance of documenting any delays in the provision of services by a supplier, along with the underlying cause of the delay. Good contractual governance mechanisms may also be helpful here.

In a preliminary hearing the Court considered arguments relating to the causes of the IT project delays and whether the sub-contractor (Agilisys Limited) was entitled to relief from delay under relevant relief notices. Agilisys was engaged by contractor CGI IT UK Limited (CGI) to perform a sub-contract as part of the council’s digital transformation programme.

CGI blamed Agilisys for the delays, however Agilisys terminated the sub-contract and claimed damages, because of what it considered to be CGI's repudiatory breaches of the sub-contract.

The Court criticised the arguments put forward by CGI about the cause for the delays noting that "contemporaneous documentation" was "the best evidence" to assess whether the delays lay with Agilisys. CGI failed to provide any evidence of this kind to support its claims, instead relying on retrospective testimonies from witnesses.

The judge noted that “the position put forward by CGI witnesses in the course of the proof was: there were a significant number of very serious, longstanding and repeated failures by Agilisys to meet their obligations in terms of the sub-contract. […] If CGI were genuinely being hampered by failures on the part of Agilisys to fulfil its obligations I would have expected to see a consistent picture of such issues being raised with Agilisys in the contemporaneous documentation. I believe that is particularly so given the very serious effect which CGI said these failures were having on the implementation of the two projects.”

CGI argued that its lack of contemporaneous evidence could be explained by the partnership approach it said it followed in working with Agilisys, because it did not "attribute and document fault", and because it was "interested in moving ahead with the contract".

In looking at the circumstances surrounding the relief notices Lord Bannatyne concluded that CGI had breached its obligations to Agilisys under the sub-contract, and that there had been no breach or contribution to the breach by Agilisys. Lord Bannatyne also found that the breaches by CGI caused, or were reasonably likely to cause Agilisys to fail to achieve the milestone dates set out in the project implementation plan by the relevant completion date.

Comment: The judgement highlights the importance of maintaining a full paper trail where the provision of services by a supplier are falling behind schedule. Always document reasons for the delay (do not delay preparation of documentation - contemporaneous notes are valuable and the best evidence in any later claim).

This also highlights the benefits of ensuring that any material services contracts of this nature include robust governance and escalation procedures to ensure that any delays are reported to relevant individuals of the right seniority, both on the customer and supplier side. The parties should also consider formal contractual processes for the issuance of remediation or warning notices if service levels or timescales are not met.

The Court will consider whether Agilisys was entitled to terminate the contract at a later date.

For more information please contact Christina Fleming on +44 (0)20 7427 1022 or at christina.fleming@crsblaw.com.