what's in the news

The Court of Appeal has just upheld the first instance decision in GB Gas Holdings –v- Accenture.  GB is a trading company owned by Centrica.

The case concerned a defective IT system known as Jupiter, appropriately enough since Jupiter is a gas giant. Like the name suggests, everything about this case was of gigantic proportion. If you issue 5 million bills a month, as Centrica do, then an automated billing system is more than just a good idea. It was, as the Court found, of critical importance to Centrica.

The system had defects (and an interesting discussion for another day is that the Court of Appeal accepted that a series of material breaches of the same provision of the agreement could amount to a fundamental breach).  The automated billing system generated, for example, up to 18 million unnecessary exceptions in December 2007 – meaning the automated billing to a customer was suspended and required manual intervention.

The case is interesting because Accenture had sought by the contract to exclude “indirect or consequential” loss.  The High Court had held that major claims by Centrica were direct losses resulting from the defective system even though Accenture argued that they were indirect.  Compensation payable to customers, gas distribution charges payable to Centrica’s suppliers, additional borrowing charges and even stationery and correspondence costs in updating customers were all held to be direct losses.  The Court of Appeal upheld the High Court’s decision and it is particularly notable that ex gratia payments to customers caused by Accenture’s failure to supply the billing system were not regarded as indirect losses either.

Why does this matter?  Contracts often seek to exclude indirect or consequential loss and this case highlights the risk that even such a provision may not catch the types of loss that the parties might have expected.  Maybe it is time to bite the bullet, as some have been suggesting, and adopt a more modern style of drafting by setting out clearly what losses are, as well as those which are not, intended to be recoverable in the event of a breach of the terms of the contract.  That is of course if the parties can bring themselves to consider a breach and what the consequences are likely to be.

For further information relating to the services provided by Pitmans, please visit the Pitmans Dispute Resolution website or contact our team direct.

Tim Clark 
tclark@pitmans.com
+44 (0) 118 9570 264