Arguments between British Gas and Accenture in the IT supplier’s preliminary High Court appeal are likely to be only a small picture of the full force of debate that will appear during their civil trial.
That is the verdict of legal and IT industry observers who said that, unless the parties were to settle the £182 million lawsuit before it reaches trial in October 2011, tough cross-examination in court could bring a raft of difficult issues to the fore.
The lawsuit concerns a troubled SAP-based customer system implementation by Accenture, which British Gas took over from the supplier in 2006. British Gas alleges that errors in the system caused large billing problems and that 770,000 frustrated customers left the company directly as a result of the problem. Accenture denies the claim, saying the utility had signed off the system design and fully tested it before going live, and the problems emerged under its own management.
A written judgement last week on Accenture’s pre-trial appeal rejected nine of the IT supplier’s 10 arguments. But Accenture succeeded in having a key preliminary judgement overturned, with the judge stating there was an important difference between system errors that caused problems to British Gas, and those that "could" result in problems. This may affect judgement on whether the errors are considered within Accenture’s warranty period.
Alan Owens, partner at law firm Morrison & Foerster, said that the pre-trial judgements were only setting the context of the forthcoming trial.
“These are skirmishes about the framework in which the trial will take place,” he said. “Judges only allow these sorts of appeals in order to speed up the actual trial."
“If it does get to trial, and no settlement is made first, the big battles will take place when people are in the witness box.”
British Gas would be “pleased” that the early judgements show it has correctly interpreted key points on the original contract, Owens said, except over the issue that was overturned in Accenture's favour.
But he added: “This does not show the any of the scale or the outcome of the battle. This is law for lawyers. Wait for the witnesses and the real factual problems between the parties will come out.”
The court case would be difficult for both sides, Owen warned, with extensive discovery work and witness preparation ahead. “You have to take people off their day jobs months before appearing in the witness box. If the companies are sensible, they will have made provision for this when the problems were brewing so they have people and information ready.”
Disputes between suppliers and customers are “common”, he said, but “not many” reach court. “Contracts tend to have dispute escalation processes, so that in many cases things are worked out. Added to that, arbitration is still common.”
Martyn Hart, chairman at industry body the National Outsourcing Association, said he expected that with some early issues clarified and the fourteen months that remain before the trial, it was “likely” the parties could reach a settlement if they were willing to.
But he agreed that any trial would bring a raft of issues to the fore. “The court will want to examine the contracts and the early specifications, to start with,” he said. While Accenture was contracted to design the system, as well as implement it, it is not yet apparent how precisely British Gas set specifications.
“In the case of an outsourced design and implementation, the design responsibility tends to be pushed out to the supplier, and all you specify is the outcome. This could lead the customer to attack on several fronts: the design of the system, the actual implementation, and what it expected of Accenture in terms of remedying problems.”
Accenture is expected to argue that British Gas, extensively tested, approved and signed off the system, and that problems that emerged nearly two years after the utility took over the system are British Gas’ own responsibility.
Many of the early arguments have covered whether smaller errors can be grouped together to constitute a “fundamental breach” of warranty, an argument upheld by the judge. Both Hart and Owens agreed that this was a “reasonable" point of view, arguing that many customers experienced small problems that added up to create more serious disruption.
Accenture did however establish in its appeal that there was a difference between an error that "causes" problems and one that was "likely" to cause problems. It is expected that the supplier may use this to argue that it is not liable for some problems that took place outside the warranty period. Accenture’s responsibility, or lack thereof, to fix the problems, and what steps it took, are then likely to be a major point of contention.