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You are here: BAILII >> Databases >> England and Wales High Court(Technology and Construction Court) Decisions >> De Beers UK Ltd v AtosOrigin It Services UK Ltd [2010] EWHC 3276 (TCC) (16 December 2010) URL: http://www.bailii.org/ew/cases/EWHC/TCC/2010/3276.html Cite as: [2010] EWHC 3276 (TCC)

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Neutral Citation Number: [2010] EWHC 3276 (TCC)Case No: 2010-TCC25491

IN THE HIGH COURT OF JUSTICEQUEEN'S BENCH DIVISIONTECHNOLOGY AND CONSTRUCTION COURT

Royal Courts of JusticeStrand, London, WC2A 2LL

16/12/2010

B e f o r e :

MR JUSTICE EDWARDS-STUART____________________

Between:DE BEERS UK LIMITED

(Formerly: THE DIAMONDTRADING

COMPANY LIMITED) Claimant- and -

ATOS ORIGIN IT SERVICESUK LIMITED Defendant

____________________

Mr Simon Croall QC & Mr Yash Kulkarni (instructed byWedlake Bell) for the Claimants

Mr Christopher Lewis and Mr Peter Land (instructed byCharles Russell LLP) for the Defendants

Hearing dates: 4th October 2010 to 4th November 2010 ____________________

HTML VERSION OF JUDGMENT____________________

Crown Copyright ©

Mr Justice Edwards-Stuart:

Introduction

1. The Claimant in this action, to whom I shall refer as DeBeers ("DB") although at the relevant time its name wasthe Diamond Trading Company ("DTC"), probably needsno introduction. Unsurprisingly, this action arises out ofthe movement and handling of diamonds.

2. In about May 2006 DB entered into a joint salesagreement for 5 years with the Government of theRepublic of Botswana ("GRB") which included anundertaking by DB to move a major part of itsoperations, in particular what is known as the aggregationprocess, to Botswana (although it is not clear whether thisobligation was contractually binding). This undertakingcame about partly because Botswana produces about 25%of the diamonds handled by DB and partly because DBwished to make a contribution to the economy of theRepublic of Botswana. This transfer of operations wouldhave involved the development of a software system tosupport the diamond supply chain management and DBdecided also to take the opportunity at the same time toupgrade its existing software systems, which were out ofdate and often differed from department to department.

3. In April 2007 DB put the software contract out to tenderwith a view to selecting a shortlist of two potentialsuppliers from whom it would obtain a Best and FinalOffer ("BAFO") before finally entering into a contractwith one of them.

4. The Defendant, to whom I will refer as Atos, was one ofthe companies who responded to the invitation to tender.It was ultimately successful. However, at some pointduring the tender process DB decided to enter into apreliminary contract, known as the Initiation and AnalysisPhase ("IAP"), in order to give the chosen software

supplier an opportunity to investigate and analyse thebusiness requirements of DB so that it would be in abetter position to enter into a fixed price contract for theproject.

5. This duly happened and, by a letter of intent dated 11July 2007, Atos agreed to carry out the IAP. They did sobetween the end of June and October 2007, at the end ofwhich they entered into a fixed price contract for theproject in November 2007 ("the Contract").

6. Unfortunately things did not go well. In spite of attemptsby Atos to replace the weaker members of its team and tobring in additional senior managers and other staff,progress fell well behind schedule and this continueduntil March 2008 when Atos told DB that it would not beable to deliver the software by the end of June 2008, asthe Contract required, and would probably not be able todo so before mid October 2008. This was not acceptableto DB and protracted discussions ensued with a view toarriving at an acceptable revised programme, which theparties did in early April 2008.

7. In the meantime, on 3 March 2008 Atos issued its fourthinvoice, which DB failed to pay. It was for a sum a littlein excess of £320,000, and was due for payment at thebeginning of April 2008. The reason given by DB forrefusing to pay this invoice was its dissatisfaction withdelays and with the quality of the work being done byAtos. At the same time the senior management withinAtos had become very concerned about the substantialcost overruns on the contract.

8. By a letter dated 21 May 2008 Atos claimed that theprogress of the work had been delayed and obstructed bythe lack of co-operation from DB and by very significantincreases in the scope of the work and that, unless DBagreed to renegotiate the contract by 31 May 2008, Atoswould suspend all further work. Atos relied also on thenon-payment of the fourth invoice. Although, at DB'srequest, the deadline was extended to 6 June 2008, DBwas not prepared to negotiate on these terms and Atossuspended work at the end of the first week in June. Thework was never resumed.

9. In these proceedings each side is asserting that thetermination was the result of a repudiatory breach ofcontract by the other which it accepted. Which of them isright about this is the central issue in the case. Dependingon the outcome of that issue, there are consequential anddifficult issues of causation and quantum of damages.Both sides claim substantial sums.

The De Beers operation

10. Since DB's business concerns diamonds, for reasons ofsecurity it has always been anxious to ensure that itsinternal processes were kept confidential, with the resultthat different departments within the company operated ina series of organisational "silos" in which the particularbusiness processes involved were carried out in relativesecrecy. For the same reasons the company was reluctantto use third party consultants or service providers inrelation to matters such as IT systems. Historically,therefore, DB had developed its own IT systems using in-house resources and these tended to be configuredspecifically for each different department. The result wasthat instead of having what is known as an "end to end"system, many departments had their own bespokesoftware so that there were a large number of interfacesbetween different parts of the system and a good deal ofduplication. This was obviously inefficient.

11. Accordingly there was a strong case for updating andharmonising the DB IT systems throughout the company.Previously, in about January 2000, DB had engagedAccenture to redevelop its integrated stock managementsystems, but the project did not go well and after threeyears it was terminated without achieving most of itsobjectives. Accenture complained that the project hadgone badly because Accenture's team had not receivedsufficient cooperation from the relevant personnel withinDB, and so one of the lessons that came out of thisunsuccessful project was that DB came to recognise justhow unusual the nature of its business was and thedifficulty facing outside consultants who needed tounderstand it.

12. DB has a long connection with GRB and, as I havealready mentioned, in 2006 it decided to move itsaggregation process from London to Botswana.Aggregation is the process by which operators combineand blend batches of sorted uncut diamonds, some ofwhich have been extracted by DB in its own mines inBotswana and others of which have come from mineselsewhere in the world. The identification, classificationand valuation of the diamonds take place before they getto the aggregation process. This sorting and blendingprocess requires highly trained experts because there areover 16,000 different categories of uncut diamond basedon a stone's size, shape, quality and colour. This gives anindication of the sophistication of the operation. Theobject of aggregation is to ensure consistency andaccuracy in supply for DB's customers, who are known as"sightholders" (because they attend the "sights" or salesweeks at which the rough diamonds are sold).

13. The following description of the physical processeswhich take place along the Aggregation part of the supply

chain (or pipeline) is largely taken from Atos's openingsubmissions. For the purposes of this action it starts withthe diamonds which are already sitting in a local sortingoffice ("LSO"), to which they have been transported fromthe mine. The first module in the pipeline is "Export forAggregation": this covers the steps which need to betaken in order for the diamonds to be transported(exported) from the LSO to their destination forAggregation (which was to be Gaborone in Botswana).The next module, "Import for Aggregation", covers thesteps taken when the diamonds are received forAggregation. Having received the diamonds, the nextstage is described as "Rolling Management": here thediamonds from the different mines, which have beenimported for Aggregation, are aggregated or "rolled"together - a process which, as will now have becomeapparent, is not as simple as it sounds. After the stoneshave been aggregated, they are split up into the groupingsin which they will be presented to the sightholders forsale: this is known as "Splitting". It is common groundbetween the parties that "Splitting" was originally outsidethe scope of the Contract: it was introduced by means ofa change request. Once the diamonds have been split up(into boxes), they are then exported for the purposes ofthe sights which are to be held: this is "Export for Sight".The next module is "Import for Sight", which consists ofthe steps to be taken at the LSO (now a local sales office)when the boxes of diamonds are received. The final stagein the pipeline is the steps to be taken in order to preparefor and hold the sight, attended by sightholders from allaround the world, "Prepare and Hold Sight".

14. From an IT point of view one of the challenges of theaggregation process was that it required a system thatwould keep a precise check on the diamonds as theymoved through the process so as to ensure that no stonesare lost and would provide facilities for valuing the stones(or groups of stones) as they went on - as well asproviding a proper audit trail of the movements of thestones.

15. Although it was the decision to move the aggregationprocess to Botswana that may have provided the triggerfor a new IT system, DB says that a new IT system wasdesirable in any event because of the increasingobsolescence of and difficulty in maintaining its old"legacy" systems. The proposal to improve or replace anumber of its existing legacy systems and to reduceinformation bottlenecks became the EnterpriseApplication Integration Project ("EAI Project").

Description of roles and glossary of terms

16. For those unfamiliar with the software industry it may be

helpful to describe some of the principal actors involvedin designing and developing software and to saysomething about the language. I emphasis that these arelargely my own descriptions and they are not intended forany purpose other than that of making this judgmentintelligible.

17. First, there are business analysts ("BAs"), whose job it isto analyse the client's business and establish preciselywhat is involved in the processes under consideration.They need to have IT experience as well as the ability toextract and analyse the relevant information from thecustomer.

18. There are technical architects, whose role is to evaluatethe system in terms of its individual components and todesign the outline of the software. At the detailed level,this involves the design of programmes. At the macrolevel it involves looking at "services and systems in thelarge" (Mr Cotter's description, at Day 9, 105/16-17). Aperson performing the latter role would sometimes becalled an enterprise architect. Another design role isperformed by the systems analyst or engineer, who takesan overall view of how the system should work and whatshould be built (taken from Dr Thomas's evidence, at Day13, 67/20 - 68/7).

19. Finally, there are developers, who write the code, anddatabase designers, who designed the databases. Each ofthese might either be employed by the supplier or be anexternal consultant engaged for a particular project orperiod of time. The Atos project team included people inall these roles, both employed and consultants, except fora systems analyst or engineer (or, at least, until veryshortly before the contract was terminated).

20. On DB's side there were also in-house technicalarchitects and business analysts, as well as business orsubject matter experts, to whom Atos's business analystsneeded to speak in order to establish - or, as they wouldsay, to "capture" - the requirements of the processes. Likemany industries, the IT industry has its own jargon: forexample, in the IT industry it seems that people do notsee or know things, rather they have "visibility" of them.

21. The following glossary of terms and abbreviations istaken largely (and gratefully) from the glossariesprovided by the parties in their opening submissions (forease of reference a copy of this table is appended to thisjudgment). I will avoid using the less commonabbreviations where possible, but inevitably they willappear in documents that are quoted in this judgment.

AO Atos Origin (Atos)

BA Business Analyst

BAFO Best and final offer

CAB Change Control/Approval Board

CCP Change Control Process

CR Change Request

CUT Code and unit test

DA Detailed Analysis (in particular in the context ofchange requests)

EAI Enterprise Application Integration Project

EDS Enterprise Data Store

ER Elaboration Request

FPM Fixed Price Model(ling)

FRG Flexible Reporting Group

IAP Initiation & Analysis Phase

IA Impact Assessment (in particular in the context ofchange requests)

LSO Local sorting (or sales) office

MDL Master Data Library

NFR Non-functional requirement

PHS Prepare & Hold Sight

PID Project initiation document

PR Process Requirement

RAG RED AMBER GREEN

RDD Requirements Definition Document

RoMgt Rolling Management

SACs The South African countries: Botswana, Namibia &South Africa.

SAN Storage Area Network

SCMS Supply Chain Management System

SKU Stock Holding Unit

SME Subject Matter Expert

SOA Service Oriented Architecture

UAT User Acceptance Testing

UI User interface

WAN Wide Area Network

Agiledevelopment

An approach to software development that features aless formal description of the client's requirements atthe outset, with the software being developedthrough a high level of interaction between thesupplier and customer.

Iterativedevelopment

An approach to software development that involvesthe documenting of some requirements at the start ofthe project with development taking place throughan "iterative" process of production of developingsoftware and feedback from the client in ongoingcycles.

Waterfall The classical software development method: anapproach where all requirements are expected to beascertained to a low level of detail before anydevelopment effort takes place.

The witnesses who were called at the trial

22. It is convenient at this point to introduce the witnesses offact (although in reality many of them were experts intheir field), and the two experts, who were called at thetrial and to give my brief impressions of them aswitnesses. By way of a general observation, there was no-one who really had any very clear memory of any of themany messages, meetings or conversations referred to inthe documents to which he or she was taken. This ishardly surprising given that the relevant events occurred2½-3½ years ago and at a time when each of them wasvery busy.

23. As with many commercial disputes, therefore, it is thecontemporaneous documents that tell the most reliablestory, particularly those e-mails or minutes of meetingswhere there was little likelihood of their being composedfor the benefit of posterity. It is upon the contents of thesedocuments that I shall base the majority of my findingsof fact.

Mr McKendrick

24. Mr Bob McKendrick was the IT Development andDemand Manager of De Beers UK Ltd between about2005 and when he left the company on 30 June 2009,having been made redundant along with many othersfollowing the downturn in the diamond market followingthe global recession in 2008. He had been in the ITdepartment at DB since he joined the company in 1986.By way of background he is an IT professionalspecialising in applications development and delivery.

25. He had the day to day responsibility for overseeing theAggregation Project from a technical delivery standpoint.He reported to and worked closely with Jeremy Newell,who was then the Director of IT and Programmes. He

had made two witness statements for the purposes of theproceedings. The first was a very lengthy statementrunning to 115 pages and over 400 paragraphs; thesecond was a shorter statement made in response towitness statements served on behalf of Atos, which ran tosome 30 pages and over 60 paragraphs. His first witnessstatement took the form of a chronological commentaryon the documents and was really too lengthy and detailedto provide a digestible statement of his evidence. Witnessstatements in this form have frequently been the subjectof criticism by the courts, but I am reluctant to be overcritical in this case because I can readily understand thedifficulty of presenting his evidence in this case in anyother form. He was cross-examined over a period of 2½days and so the most relevant parts of his evidence wereboth given and tested during that time. I have had thebenefit of having a daily transcript of the evidence.

26. Given his role, it would be surprising if Mr McKendrickdid not have a strong emotional interest in the outcome ofthis litigation even though it is now over 15 months sincehe left the company. However, whilst there were passagesin his witness statement that were plainly the product ofreconstruction, rather than accurate recollection, I foundhim on the whole to be a careful and truthful witness.Where errors in his witness statement were pointed out tohim in cross examination, he was generally ready to agreethat this was so without any prevarication. I find that theprincipal issue which arises out of his evidence is theextent to which he (or others within DB) told the Atosrepresentatives of the extent of the lack of confidencewhich he said that DB had in Atos's performance andlack of understanding of the diamond handling processesthat went on within the DB supply chain, particularlyduring the Initiation and Analysis Phase.

27. This is neatly summarised in the following passageduring Mr McKendrick's lengthy but well directed cross-examination by Mr Christopher Lewis, who, togetherwith Mr Peter Land, represented Atos. On 7 October 2010Mr Lewis was asking Mr McKendrick about a "lessonslearned" document that was prepared by DB after thetermination of the contract:

Q. "Atos assumed that high levelrequirements would give them enoughinformation to understand businesscomplexity", and they were wrong about that,weren't they?

A. Yes.

Q. And De Beers knew that at the time, didn'tthey?

A. They knew it to a degree and flagged it.

Q. We differ, Mr McKendrick, on whether itwas flagged or not. That wasn't my question.

MR JUSTICE EDWARDS-STUART: Well,just put your question again, Mr Lewis,because you said "At the time". Preciselywhat time are you talking about?

MR LEWIS: At the end of the initiation andanalysis phase, at the end of August 2007and the beginning of September 2007.

A. There were concerns still within thebusiness as to whether or not Atos had fullyunderstood the depth of requirements. Therewere reassurances from Atos that they indeedhad understood fully the requirements.

Q. But that was because they assumed thatthe high level requirements would give themenough information to understand thatcomplexity?

A. But that is a failing, surely, on Atos'behalf, not De Beers.

Q. Who knew how complex the businessprocesses were?

A. De Beers.

Q. So if they knew that Atos wasmisunderstanding that, why didn't they tellthem?

A. But I think they did.

Q. That's where we differ.

28. Whilst he was generally familiar with the aggregationprocess, it emerged, perhaps unsurprisingly, that he didnot have a detailed knowledge of every step in theprocess.

Mr Newell

29. Mr Jeremy Newell was the Director of IT andProgrammes at DB at the relevant time. He wasresponsible for running DB's IT department whilst alsohaving responsibility for managing its businesstransformation programme. He was a member of DB'sExecutive Committee and he reported directly to MsVarda Shrine, the Managing Director. He joined DB in

September 2006, prior to which he had held a number ofsenior IT professional positions in other companies.

30. Although Mr Newell was not dealing with the project ona day to day basis, his office was close to that of MrMcKendrick and they probably discussed the projectseveral times most days.

31. I found Mr Newell generally to be a defensive andunforthcoming witness. There were occasions on whichhis evidence strained credulity. The most glaring exampleof this was given by one conflict between a passage in hiswitness statement in which he expressed views aboutAtos's competence and what he said in an ExecutiveCommittee meeting about six weeks later. In evidence hesaid this during cross-examination:

Q. And your point here was thatif Atos was only just starting tounderstand that, that was Atos'own fault?

A. Correct.

Q. Because their originalrequirements gathering exercisehadn't been good enough?

A. That's what I am saying here.

Q. And so you are reallyquestioning the competence ofAtos' original requirementsgathering exercise?

A. And ongoing.

32. The following day Mr Newell was asked about theminutes of an Executive Committee meeting held on 3April 2008 (Mr Newell had been sent a draft of theseminutes a few days later on which he had made someminor corrections). The minutes recorded Mr Newell hashaving said this:

"He commented that the issueswith the delay from Atos does[sic] not lie with theircompetence but with the projectelaboration process - movingfrom the concept to deliveryphase where, invariably,suppliers to DTC realise thatthey have under-estimated thecomplexity of DTC businessprocesses and the uniqueness of

our environment."

33. Mr Newell told the court that at the time of this meetingit was still his view that Atos had not been competent atcapturing DTC's requirements. He explained theapparently contradictory statement recorded in theminutes by saying that he wanted to give his colleaguesan impression of confidence in the programme and that itwas being managed properly. The most he would concedewas that the view he gave to the Executive Committeewas "subtly different" to his own view at the time.

34. Faced with evidence of this sort, and other less glaringexamples, I find myself reluctant to rely on evidencegiven by Mr Newell that does not accord with therelevant contemporaneous documents unless it appearsconsistent with the prevailing state of affairs at the time.It seemed to me that when he was giving evidence he wasoften at pains to commit himself as little as possible toany particular position.

Mr Aythora

35. Mr Jatin Aythora was employed by DB as a TechnicalSolutions Architect. He joined the company in February2005 with some eight years of experience in the ITindustry. For the five years prior to joining DTC he hadbeen employed by a company called KudosCommunication in the UK during which time he hadbeen involved in a project involving service orientedarchitecture ("SOA"). On that project he had been aprogrammer but had also carried out system design.Before his employment with Kudos he had worked for asoftware consultancy in India.

36. Mr Aythora came across as a confident witness who heldfirm views about software design. He told the court thathe had written two papers at an early stage in this projectfor the guidance of Atos. The first was "Domain Modelfor SOA: Realising the Business Benefit of ServiceOriented Architecture" and the second was "DTCEnterprise Architecture". In relation to the latterdocument Mr Aythora said this, in paragraph 9 of hiswitness statement:

"I also wrote a document called"DTC Enterprise Architecture"which contains a description ofhow technology would be usedto support the mission andbusiness of DTC's entireorganisation. It sets out howDTC's "vision" (as referred to inparagraphs 6 and 8 above) could

be achieved by developing anumber of new systems in orderto support the business. Thedocument contained keyinformation about what DTCwanted to achieve from atechnical perspective. It coveredall architectural components andoutlined DTC's standards andpolicies. It also outlined DTC'sexpectations. I first starteddeveloping the document in July2006. On 4 April 2007, DTCgave the document to a numberof its key suppliers to be used asa set of standards and abenchmark for them to buildsolutions on. I continued toamend and update the documentuntil 28 November 2007."

37. It transpired that this document had been largely lifted, inmany places word for word, from the National Institute ofHealth enterprise architecture, a document which hadbeen last updated on 16 May 2007, although first writtenseveral years earlier.

38. By the same token, Mr Aythora's "Domain Model forSOA" turned out to have been lifted, almost entirely wordfor word, from a white paper prepared by BEA called"Domain Model for SOA Realising the Business Benefitof Service Oriented Architecture". BEA Systemsdescribes itself as a world leader in enterpriseinfrastructure software and in providing standards-basedplatforms to accelerate the secure flow of information andservices. Mr Aythora said that this document was ineffect an industry standard. When asked earlier how hehad gone about preparing his document, he said that itwas based on his research on service orientedarchitecture. He was then asked what research he haddone, to which he replied that there were various sourceson the internet and named two sources in particular,neither of which was BEA.

39. Whilst I do not find that Mr Aythora said anything aboutthese documents that was actually untrue, the impressiongiven by his witness statement was that they weresubstantially the product of his own work. In fact, theyconsisted of little more than wholesale copying of othermaterials, which were then altered slightly to make itappear that they had been specifically written for DTC.

40. However, it is clear that Mr Aythora took a very closeand critical interest in what Atos was doing. He was not

slow to challenge Atos about its approach if it did notappear to conform with his notions of what ought to bedone and, as events showed, arguably too much so.

Mr Page

41. Mr Michael Page has been the Finance Director of DTCsince July 2004. With one particular exception hisevidence was largely uncontroversial. At paragraph 41 ofhis witness statement Mr Page stated:

"The SCMS Project remainsessential for DTC's business andDTC fully intends to implementit so that it is operational withinthe next 2 to 3 years (bearing inmind that the Project and itsimplementation may take about18 months itself)."

42. Mr Page said also that in the fourth quarter of 2008 thediamond market ground to a standstill. As a result themove of the aggregation project to Botswana waspostponed because of the state of the economy. It was notuntil July 2009 that DB was able to release a pressstatement reconfirming its intention to relocate theaggregation function to Botswana and announcing thatrelocation would take place by the fourth quarter of 2010.Mr Page agreed that by that time DB was sufficiently farout of the recession to restart the project. However, thedocuments showed that there was another reason whichprevented the move from going ahead. The relevantdocuments which showed this to be the case had beenheavily redacted on disclosure so as not to reveal whatthis reason was. I was told that it was somethingconfidential and highly sensitive. It was referred to inevidence as the "blank" issue and so I shall adopt thesame expression in this judgment.

43. In paragraph 39 of his witness statement Mr Page saidthis:

"DTC intends to recommence theaggregation project from whereit left off. Unfortunately DTC isunable to predict with authoritywhen this will be becausealthough the market hasimproved, the economy is suchthat decision on timing cannotyet be finalised. But it is verylikely that the process of movingaggregation to Botswana willcommence in the first quarter of

next year, 2011."

After Mr Page had been taken by Mr Lewisthrough the relevant documents about the"blank" issue, there was the followingexchange (Day 6, 109/11 - 110/9):

"Q. Now, that can't be, can it,Mr Page, a fair representation ofthe reasons why there have beenfurther delays to movingaggregation?

A. At the time that this witnessstatement was made, the issuewhich was causing the particularblockage had not at that stagedeveloped to an extent that itappeared that it was going to bea serious ongoing problem. Itwas - I certainly felt that it was,an issue that was capable ofresolution, and certainly in Mayof 2009 we were by no meansout of the woods in terms of theeffects of the recession. OurSales had by no means recoveredto anything like previous levels.

Q. Why do you say May 2009?

A. Because that's when thewitness statement was made.No?

Q. No, it wasn't, Mr Page. Lookat the last page.

A. Ah, my error, I apologise.

Q. It's a pretty significant error,isn't it, Mr Page? Because wehave just seen the chronologygoing through, that the issue thatwas holding things up throughlate 2009 into early 2010 was theblank issue. So you must haveknown that it was that that washolding things up, and not therecession, when you made thiswitness statement in May 2010?

A. Well, I was suddenly awareof it, yes, of course I was.

A little later, there was the followingexchange:

"Q. The real reason why youwere not recommencing theaggregation project was theblank issue, wasn't it?

A. That remains a seriousobstacle today."

44. The first answer given by Mr Page in the aboveexchanges was indeed a surprising answer. In directcontrast to what had been said in his witness statement,Mr Page was forced to concede that the issue which washolding up the relocation of the aggregation project wasnot the recession, but the confidential "blank" issue towhich I have already referred.

45. Mr Page was then questioned about whether there wasany budget for the renewal of the SCMS project andwhether he had seen a single piece of paper indicating aplan to start that work within the next 12 months or so.He accepted that there was neither.

46. In the end, it became abundantly clear that, as at May2010 when Mr Page made his witness statement, therewas no prospect whatever of the SCMS project becomingoperational within the next 2 to 3 years. Since, as MrLewis pointed out in cross examination, Mr Page hadsaid that implementation of the project would take about18 months, it would have to start between November2010 and November 2011 in order to achieve completionwithin 2 to 3 years. Given that at the time of the trial(October 2010) there is not a single piece of evidence tosuggest that DB proposes to resurrect this project in thenear future, Mr Page's evidence on this aspect in hiswitness statement was at best an extreme case of wishfulthinking and, at worst, simply untrue. At a later stage ofthis judgment I will deal with the repercussions of this onthe question of damages.

Mr Culshaw

47. Mr Simon Culshaw was the first witness called on behalfof Atos. He is currently the Head of Private SectorSystems Integration at Atos, but at the time of thisproject he was the Delivery Director. He has worked inthe IT industry for over 17 years.

48. On the whole I found Mr Culshaw to be a candid andtruthful witness. Indeed, his veracity was not reallychallenged at any point during his cross examination.However, his recollection of the precise sequence ofevents was not always good and his evidence was

effectively confined to commenting on the contents of thecontemporaneous documents.

49. One aspect of his evidence which I did find surprisingconcerned the Atos counterclaim, for the preparation ofwhich Mr Culshaw was responsible. He was cross-examined about a claim in the schedule where it wasalleged that between September and December 2007 (thatis 3 months, as he confirmed) the two Atos BusinessAnalysts, Mr Adelman and Mr Figoni, had wasted morethan 50% of their time as a result of the non-availabilityof key DB personnel. Mr Culshaw said that he was notaware of this at the time and that the estimate has beenbased on what he was told later. I have to say that I findit extraordinary that the two business analysts could havehad 50% of their time wasted over a three month periodwithout there being any contemporaneous report of it, orthat Mr Culshaw, as Delivery Director, did not knowabout it. In the light of the view that I had formedgenerally of Mr Culshaw as a witness, I was surprisedand a little troubled that he had been prepared to supportsuch an improbable claim.

Mr Adelman

50. Mr Ralph Adelman was the Lead Business Analyst on theAtos team. He has worked in the IT industry for over 40years, initially as a programme designer and, from 1976,as a business analyst. I found Mr Adelman to be atruthful witness. He was particularly candid in relation tothe Initiation and Analysis Phase, the programme forwhich he regarded as too short with the result that heexpected that what Atos would produce during that periodwould be neither complete nor accurate.

Mr Cyril

51. Mr Frederick Cyril joined the project on 17 September2007, initially as a process coordinator working with theBusiness Analysts team. He was a straightforward witnesswho was clear and articulate. His evidence was largelyunchallenged.

Mr Cotter

52. Mr Joseph Cotter was Technical Architect on the project,which he joined in September 2007. He was an EnterpriseArchitect, that is to say that he was concerned with thelarger issues relating to the design of the software ratherthan with detailed coding. He was not involved in theInitiation and Analysis Phase, but joined the project inSeptember 2007.

53. Mr Cotter was a rather expansive witness, being rather

inclined to treat any question as a prompt for a shortspeech on the topic in question instead of giving a directanswer. He made no secret of the fact that he held strongviews on certain issues, and tended to be somewhatpartisan in his approach. Where he gave evidence of fact,I did not consider that his evidence could always berelied on.

Mr Roberts

54. Mr Matt Roberts is a Design and Developer Lead withinthe Application and Life Management Practice at Atos.He was the development team lead responsible for boththe UK and the India development teams on this projectand he reported directly to the Project Manager. He hadover 10 years experience of developing Microsoftapplications in a commercial environment, and morerecent experience as a team leader and project manager.

55. I found Mr Roberts to be an articulate and truthfulwitness and one on whose evidence I felt able to rely.

Mr Cunningham

56. Mr David Cunningham is a Principal Technical Architectwith Atos. As a TA9, he was at the highest level oftechnical architect within the Atos structure. He has hadover 40 years experience in the IT industry, and has beena technical architect for the last 15 years. It is clear thathe is held in high regard within Atos in relation to ITmatters. He was brought into the project in early May2008 to assess the position in relation to the quality of thesoftware and to make recommendations as to the wayforward.

57. I found Mr Cunningham to be a careful witness whoseevidence, in the event, was not really challenged. I acceptit.

Miss Morgenstern

58. Miss Ursula Morgenstern is the Senior Vice President forEnterprise, Finance and Transport for Atos. She waspromoted to this position in September 2007 havingformerly been Head of Enterprise, Financial Services andTransport for Systems Integration. She joined Atos in2002, when KPMG consulting was acquired by Atos. Shehas been in the IT industry for over 15 years, and wasformerly a business analyst and project manager. As thisbrief career history indicates, she is clearly a person ofdrive and ability.

59. She became closely involved in the project towards theend of March 2008 when things had started to go badlywrong. Her immediate subordinate (at least, in the context

of this project) was Mr Ieuan Jones who had become theHead of Enterprise, Financial Services and Transport inSystems Integration following her promotion. Reportingto Mr Jones was Mr Mike Isaacs, who had been broughtin as a supernumerary project manager, effectively abovethe existing (but outgoing) project manager, Mr KenMcGuirk, (Mr Simon Culshaw also reported to MrIsaacs).

60. Another person reporting directly to Miss Morgensternwas Mr Paul Bray, who in October 2007 took over asHead of Enterprise, Finance and Transport. In this role heassumed the responsibility for the delivery of this projectin place of Miss Morgenstern.

61. It was clear from her evidence as a whole that MissMorgenstern had few, if any, direct dealings with themembers of the project team on the ground. Herinformation about what happened or had been happeningon the ground was derived from her subordinates, inparticular Mr Isaacs (Day 11, 106/17-19). This made herevidence in relation to what was happening in this projecton the ground of somewhat limited value.

62. However, on matters in relation to which she was able togive direct evidence, for the most part I did not find herevidence to be of very great help. In fairness to her, Imust record that although English was obviously not hermother tongue, her level of command and understandingof English appeared to be very high as one would expectof someone in her position. The main difficulty with herevidence was her occasional unwillingness or inability toanswer a question directly and concisely. To illustrate thepoint I take the following passage from her evidence,when she was being cross examined about a letter whichshe had received from Mr Newell of DB on 5 June 2008.In the letter Mr Newell had said that the commercialproposal put forward by Atos on 2 June was beingreferred to DB's executive committee on 5 June (the daybefore the deadline imposed by Atos expired) and that hewould respond to her more fully when the committee hadconsidered the position; he then concluded the letter bysaying that he saw no point in having a discussion thefollowing day. The exchange was as follows:

Q So, what Mr Newell wassaying is this is not necessarilythe final word on the subject. Doyou see that? The message fromDe Beers to Atos is that DeBeers have yet to consider it atexecutive committee level andhe will respond to you once theexecutive committee have

considered it.

Now, if, Miss Morgenstern, youhad been interested in doing acommercial deal and would havebeen prepared to negotiate acommercial deal and extend timeto do so, then the natural thingfor you to do then would be toextend the period of time beforethe suspension bites in to hearwhat the executive committeehave to say, wouldn't it?

A. I must say I cannot recall my-- how I read that paragraph, orhow I read that sentence. Theonly thing I recall from that timeis that I assumed we would havetalked again the day after and wewould have got an understandingof what went on in the projectboard, so -- yes, I can see thatthat -- how that sentence reads,but I must admit I cannotremember how I read it becauseif I read it like that, somehow inmy mind I'm saying: yes, theyhave accepted the position andthey will tell us later on whatthey will do.

63. In addition, Miss Morgenstern was very keen toemphasise the fact, as she saw it, that right up until Apriland May 2008 DB was still changing its requirements.She would make this point insistently whenever a suitableopportunity presented itself. I felt that in this respect shewas acting more as an advocate for Atos's case, ratherthan as a witness of fact. However, I did not find her tobe in any way an untruthful witness and, when pressed,she was usually prepared to concede a point.

Mr Bray

64. Mr Paul Bray who was, as I have said, the Head ofEnterprise, Finance and Transport, was the last factualwitness called by Atos. I found him to be a candid andstraightforward witness, who was willing to concedepoints against the interests of Atos if he felt that theywere justified. In relation to those matters of which hehad direct knowledge I found him to be a reliablewitness.

65. However, like Miss Morgenstern, his knowledge of what

was happening on the ground was largely, if not wholly,derived from others. His primary source of informationwas what he described as "high-level" information givento him by Mr Isaacs (Day 11, 130/19). So, in his casealso, I found his evidence on the details of what washappening on the ground of relatively little value.

Dr Gifkins

66. Dr Michael Gifkins was called by DB. I have to say that Idid not find his evidence particularly cogent, since manyof his conclusions appeared to rest on very limitedmaterial. Whilst he wrote some long and detailed reports,it became clear during cross-examination that many of hisconclusions were impressionistic, rather than beingfounded on careful analysis. His credibility was nothelped by the fact that he reached few, if any, conclusionsthat were unfavourable to his client, DB, partly as a resultof his firmly held view that the commercial risk under theContract rested with Atos.

Dr Thomas

67. Dr Martyn Thomas was the expert called by Atos. On thewhole I found him to be an impressive witness, althoughthere were two or three occasions in his oral evidencewhen I thought that he came a little close to espousing hisclient's cause rather too enthusiastically. However, unlikeDr Gifkins, he was prepared to reach conclusions onparticular issues that were adverse to the case of the partyinstructing him.

The decision to have new software

68. In March 2007 DB's Executive Committee decided toengage the services of an external IT supplier to designand deliver the software for the aggregation and EAIprojects. At that stage the projects were to be put out totender separately. Atos put in its initial response to therequest for proposal in relation to aggregation on 30 April2007 and, in relation to EAI, on 4 May 2007.

69. However, subsequently (probably in early April 2007 -the evidence is not very clear on this), the EAI Projectwas integrated with the aggregation project, and theresultant project became known as the Supply ChainManagement System ("SCMS").

70. The upshot of the tender process was that four suppliersput in bids, or rather Best and Final Offers ("BAFOs"),for the combined project. Atos was the successfultenderer. It submitted its BAFO in the sum of £2,965,868on 1 June 2007.

71. As a result of the ensuing discussions between DB and

Atos it was agreed that, before the SCMS contract wasfinally let, Atos would be retained under a separateagreement to carry out the Initiation and Analysis Phase("IAP"). The formal instruction for this was in a letterfrom DB dated 11 July 2007. The work was to be carriedout between 25 June and 17 August 2007. The services tobe provided included the preparation of RequirementsDefinition Documents ("RDDs") for the businessfunctions specified, together with high level design forboth parts of the project. More significantly, the IAP gaveAtos the opportunity to appraise the project generallybefore finally committing itself to a price for the maincontract. It was intended that the requirements would becaptured down to detailed analysis level (according to MrAdelman).

The Initiation and Analysis Phase

72. Unfortunately, the IAP was not a great success. Theoutcome was that the business requirements werecaptured at a high level only and were necessarilyincomplete as a result. The reason why the IAP did notachieve its aims is not a matter for decision in thisjudgment. However, very shortly it seems that there weretwo main problems: first, Atos did not allow sufficienttime or resources to achieve what was required and,second, DB's business users did not know exactly whatthey wanted and so the workshops that were set up toenable Atos's business analysts to identify therequirements turned out to be unstructured discussiongroups in which much time seems to have been spent bythe DB users in trying to establish what they required aswell as identifying to the Atos business analysts whatthose requirements were to be.

73. One particular aspect of the IAP was that the DB businessusers reported that they were unimpressed by the Atosteam. Since none of the DB business users who attendedthese workshops gave evidence, it remains unclearprecisely what grounds formed the basis of the criticismsof Atos. In one sense, it probably does not matter becausethe perception, whether justified or not, is what wasrelevant so far as the relationship between the parties onthe ground was concerned.

74. At an early stage during the IAP DB decided to retainKPMG to keep a watching brief. On 20 August 2007KPMG produced a report which concluded, amongstother things, that Atos was not sufficiently proactive andwas responding to major issues only after they had beenflagged up by DB. A few days later, on 24 August 2007,DB gave a presentation to members of the Atos seniormanagement at which the perceived weaknesses in Atos'sperformance were set out. In particular, in separate notes

that were sent to Atos later the same day, specificcriticisms were made of certain members of the Atosteam, including the project manager, Mr Wong, the leadbusiness analyst, Mr Adelman, and the technicalarchitect, Mr Connor. A rather surprising aspect of thiswas that the criticisms of, at least, Mr Adelman werenever fed back to him. I regard this as a failure by themanagement within the Atos team: it was certainly not forDe Beers to pass on these criticisms, as Mr Culshawagreed. When Mr Adelman gave evidence he said that hehad no idea that these criticisms have been made,although he could understand why it was that the DBbusiness users may not have been satisfied with theoutcome of the workshops.

75. However, steps were taken by Atos to remedy thesituation as described to them. Mr Wong, the projectmanager, was replaced by Mr McGuirk in October orNovember; during September a more senior architect, MrCotter, was brought in to reinforce the design side, and aworkshop/requirements process facilitator was brought in,Mr Cyril. In addition, an EAI designer, Mr Cowell, and aProgramme Director, Mr Noon, were also added to theteam at around the same time. Mr Adelman remained inpost, but a third business analyst, Mr Brown, joined theteam in September.

76. In practice, the IAP continued beyond the original enddate of 17 August and effectively ran on into October2007 and merged with the start of the work under themain Contract.

The course of the work under the Contract

1 October to 31 December 2007

77. Between October and the end of December 2007 thework under the Contract got off to a slow start. Theidentification of slippage in the provision and gatheringof functional requirements first appeared in an Atosinternal Project Status Report dated 7 November 2007.The summary in this report recorded that five requirementareas had some form of delay, but this was said to haveno impact on the next iteration schedule. One processrequirement ("PR"), Container Management, was in delayand this was said to have potential impact on the Phase 1schedule and was therefore under investigation. It seemsthat in the case of that PR, and some of the others thathad fallen behind, the delay was probably caused by alack of decision information from the DB users.

78. A further report, covering the period 29 October to 9November 2007 described the position in much the sameterms. One issue identified was that information in

relation to export for aggregation was missing from theusers in the South African Countries ("SACs").

79. At a Project Steering Committee Meeting (this was ajoint DB/Atos committee) held on 14 November 2007 theproblem of the missing information from the SACs wasraised again and a need to take action was identified. Afurther problem that was recorded was missinginformation in relation to finance requirements. However,it was noted that Mr McKendrick, of DB, was to beinformed of "any future availability issues of staff thatcould affect the plan". This suggests that there was aproblem with the availability of key DB users, althoughthe latter was not being raised in very strong terms.

80. The Information Pack for the Steering Group Meeting tobe held on 23 November 2007 showed the project to be inred status. It noted that the project was "Significantlybehind schedule on 7 core requirement areas. Urgentaction is being taken to push requirements through thedevelopment life cycle to make up lost ground". Sixreasons were identified as to why the 7 requirement areaswere behind schedule. Two of these referred to the lackor late provision of information from the DB businessusers, and one was the availability of DB staff. The otherthree reasons were matters that were primarily withinAtos's control, such as activities taking longer thanexpected owing to complexity or the identification of newrequirements that were "in scope" but which requiredfurther elaboration.

81. On 23 November 2007, Mr Mike Isaacs, who was thenoverseeing the management of the project on the Atosside, sent an e-mail to the project manager, Mr McGuirk,identifying the areas upon which the Atos team needed tofocus. Whilst the e-mail is not inconsistent with the factthat delays were being caused by the lack of timelyinformation from the DB users (for example, the openingwords of the first paragraph were "if [DB] aren'tdelivering ensure you have KPMG on your sideunderstanding the issues - e.g. if Jeremy can't control allthe stakeholders required to deliver and approve thebusiness requirements . . ." ), the principal focus of themessage was on potential shortcomings within the Atosteam and what steps should be taken to remedy them.

82. An Information Pack for a Steering Group Meeting on 12December 2007 (which covered the period 12 - 23November 2007) included the following extract in itsExecutive Summary:

"Significantly behind schedule on7 core requirement areas due to:

• Identification of newrequirements that are in scopebut require further elaboratione.g. Container Managementfunctional area

• Amendments to requirementsstill being advised by thebusiness e.g. Export forAggregation still not naileddown despite start in I1. SAC"

(My emphasis)

83. A further Information Pack for the Steering GroupMeeting on 12 December 2007 (which covered the period26 November to 7 December 20007) included thefollowing extract in its Executive Summary:

"Further action needed to makethe kind of productivity leaprequired including:

• Freezing all functionalrequirements by end of Jan2008. (We are simply not gettingrequirements nailed downquickly enough. We mustcontinue the rapid decisionmaking workshops through NewYear and this will requiresignificant businesscommitment - plans to beconfirmed with Pat over the nextfew days)

• Streamlining development(already doing this wherepossible, but renewed focusrequired on building as much ofthe detailed specificationalongside the analysis isnecessary)

• Further tuning of deliveryapproach in terms of design anddelivery of "pipeline" vs"foundation" processes. Thismay include bringing some AOIresource on-shore. (Visas /Spaceetc will need consideration)

• Revision of the Plan in linewith the activities above andfurther review to identify any

additional actions.

Non-functional requirements stillRED status, but progress isbeing made and expectation isthat workshop today will drivefinalisation.

Splitting Process has been hadassessed and it is clear that thiswill be a significant project in itsown right. Impact Assessmentexpected at the end of this weekfor review."

(My emphasis)

84. I think that the reference to "business commitment" in thepassage emphasised refers to commitment by DBbusiness users (because "Pat" is a reference to DB's PatMeredith). Although in cross examination Mr Culshawsaid that availability of resources was not seen as a keyissue or risk by 12 December 2007 (Day 8, 74/12-21), ifone goes through the table in the report that sets out thedetails of the activities during the period under reviewand progress achieved, it can be seen that there areseveral items where the reason for the delay is given assomething for which DB is responsible. For example,against Valuation Requirements it is noted that "DTC/AOresource availability. DTC Resource availability is theknock on effect from delays in completing other RDDs.Also AO new starter and staff sickness". This suggests aswell that there was a problem with resource availabilityon Atos's part also. In relation to matters for which DBwas responsible, examples are PR 6, Export forAggregation, where the entry for DTC action reads "TRto provide documentation requirements for SACs(originally requested early August) - 20/11 (to ensure16(3) delivery) (OVERDUE) Now due followingworkshops in week commencing 10/12", and PRs 41-44,where the entry for the reason for delay reads "Delayedstart through DTC decision on MDL/Data Warehousecausing subsequent delay. No overall impact that needsmonitoring". However, there are many entries where theessential action is shown as being due from Atos. On thebasis of this document alone it is not possible to infer therelative importance, in terms of either delay to the projectas a whole or cost, of the matters for which DB wasresponsible as against the matters for which Atos wasresponsible.

85. On 10 December 2007 there was a quality gate meeting inrespect of the Container Management processes (PRs 49-52, and 55) at which it was concluded that the system

testing had been passed. This was the completion ofsystem testing for Phase 1, which was Key Milestone 2and triggered the second stage payment under thecontract. Although DB's case as pleaded and opened wasthat Milestones 1, 2 and 3 had not been fully completed,by the end of the evidence it was not seriously disputedthat Milestone 2 was successfully achieved on 10December 2007. Indeed, in its closing submissions DBsaid that the debate as to "whether Milestones 2 and 3 hadbeen met do not matter".

86. At about the same time Atos had begun to realise that itwould no longer be possible to deliver the software usingan iterative approach as had been the original intention. Itresolved, and agreed with DB at a meeting held on 18December 2007, that delivery would be in the form of a"Big Bang" at the end of June 2008, which meantadopting a waterfall approach to the delivery of thesoftware. In order to achieve this it was decided that Atoswould capture all DB's business requirements by earlyFebruary 2008 through a series of "fast trackrequirements gathering workshops" during January andFebruary 2008.

87. On 2 January 2008 Atos gave a presentation for theinduction of six new business analysts who had beenbrought in to strengthen the team. The organisation chartcontained in the presentation shows that there werealready three business analysts in the team, in addition toMr Adelman, so this brought the number of businessanalysts on the Atos side up to 10. The presentation waslargely explanatory and gives very little indication of thereasons for the delay that had resulted in the need for somany additional business analysts.

88. The witness statements also provide fairly limited insightas to what was causing the delay to the project during thisperiod. Mr Adelman's statement contained the followingpassages:

"81. A significant issue thatimpacted the project was the factthat the DTC resources weretime constrained or unavailable.Mike Smith, Geoff Tomkins andSteve Isted were the "businessexperts" who had the detailedknowledge of the applicationprocess, however they were oftenengaged with their day-to-dayroles and as such were unable tocommit sufficient time to theproject. Mike and Geoff wereoriginally not part of the project

team. Geoff had detailedknowledge of the diamondhandling processes and moresignificantly the data that wasused to enable and control theseprocesses. Mike Smith was theonly person with a complete viewof the existing systems as well asdetailed knowledge of the legacysystems.

82. Steve Isted was often simplyunavailable to attend meetingsand as a consequence somemeetings had to be cancelled.

83. . . .

84. Mike Large resigned fromDTC or around the middle ofSeptember 2007. Mike Large hadpreviously worked in the DTCbusiness and understood theprocesses well, he was also avery enthusiastic and hard-working member of the analysisteam. This meant that when heresigned there was a gap in bothknowledge and effort."

89. Whilst these passages make it reasonably clear that theunavailability of key personnel within DB caused Atosdifficulties, as one would expect, it really provides noindication at all of the extent of the difficulties which thispresented, still less the amount of delay or time wasted asa result. In relation to some issues Mr Adelman gave anestimate of the additional time that he considered that hehad spent on them because of the alleged failings of DBeither to provide information or to decide what theywanted. However, he did not do so in the case of Atos'scomplaint about the lack of availability of DB keypersonnel, either in his statement or in evidence.

90. The only evidence about the amount of time wasted bythe unavailability of key DB personnel was given by MrCulshaw, but he accepted that his estimate, prepared inMarch 2008, was based on what he was told by others -because there were no timesheets that provided details ofthe work that any particular person was doing at aparticular time (beyond identifying the project on whichhe or she was working - see Day 8, 93/11-15) - and thathe was unaware of the extent of the problem at the time(Day 8, 100/17 - 101/21).

91. The witness statement of Mr Cyril, who joined the projecton 17 September 2007, contained the following passages:

"9. Around the middle ofDecember 2007, I recall thatAtos was becoming increasinglyaware that the task of capturingrequirements could not beundertaken only by the two BA'sand I was therefore asked bySimon Culshaw and KenMcGuirk to assume the role ofTeam Lead for the requirementsteam.

10. . . .

11. Broadly my role consisted of:managing the BA team resourcesand allocation of project tasks;facilitating team meetings;inducting new members of theteam; updating and monitoringthe BA aspects of the projectplan; coordinating the compilingproject status information inrespect of the BA team for inputinto documents such as theSteering Committee Packs andreporting to Ken McGuirk, theAtos Project Manager.

12. In an internal meeting thattook place before Christmas2007 with Ken McGuirk, SimonCulshaw and myself, wediscussed the fact that therequirements gathering exercisewas not progressing as well as itshould have been due to the factthat DTC had still not finalisedits business requirements and ithad not fully scoped what thenew system needed to be able todeliver. At this meeting, Isuggested a change in approachand proposed that we suggest toDTC that both parties commit toa focused process and period inwhich to ensure that allrequirements were captured inone go."

92. Whilst in these paragraphs Mr Cyril clearly raises the

issue of DB's failure to finalise its requirements, he saysnothing about difficulties being caused by the lack ofavailability of key DB personnel. The reason for this isprobably that he did not assume the role of the leader ofthe business analysts until early December 2007 (see Day9 86/3-7). He accepted in evidence that the discussion towhich he referred to paragraph 9 of his statementprobably took place at a meeting in early December.Again, as with Mr Adelman's statement, these passagesprovide little indication of the extent of the delay causedby the matters raised or the additional cost to Atos.

93. In his witness statement Mr Roberts, who was thedevelopment team lead on this project, said, at paragraph12:

"It is my recollectionthat Atos hadallocated time andresources to attemptto capture the NFRs,however they werehindered by the factthat the DTCbusiness team weretoo busy on otherissues to be able toaddress this issueproperly. Theproblem ofcapturing therequirements wasmade worse by thefact that a number ofkey users and otherinformation thatDTC was requestingfrom its businessunits across Africawas not fixed. It ismy understandingthat because of theseissues that DTC tookthe decision tocapture the NFRrequirements itself."

94. NFRs are non-functional requirements. These cangenerally be described as consequences of the functionalrequirements. For example, the number of users whoneed access to a particular system or the bandwidthrequired, are non-functional requirements. Functionalrequirements, by contrast, are the business processesthemselves: in other words, what the operatives actually

do on the ground during the application process arefunctional requirements. During the period underconsideration in this part of the judgment, October toDecember 2007, the business analysts were concentratingprimarily on establishing the functional requirements. Ingeneral, identification of the non-functional requirementsfollowed this. It is therefore not clear from paragraph 12of Mr Roberts's statement, to what period he is referringbut it is unlikely that it was much before December 2007.

95. It is apparent from this summary that neither the evidencenor the documents provide a very clear explanation ofwhy it was that the project fell behind during this periodor any reliable evidence as to the amount of time wastedby the unavailability of key DB personnel. As to thecauses of delay, four reasons appear to be the most likely.First, Atos did not have enough business analystsworking on the requirements gathering exercise (and, to alesser extent, the same may have been true on DB's side).Initially, during the IAP, DB had had two businessanalysts working with the Atos BA team: Suzie Law andMike Large. Mr Adelman said that he had a goodworking relationship with Mike Large, but with SuzieLaw it was "problematical" and not a good workingrelationship (Day 9, 17/19-21). Unfortunately, Mr Largeleft the project in September 2007 and, after a shortinterval, was replaced by Mr Brown.

96. The second likely reason for the lack of progress was theunavailability of the relevant key personnel within DB.There is plenty of evidence to the effect that there wereproblems with DB staff attending workshops andgenerally being available to provide information. Thiswas because many of the key people with knowledge ofthe business processes simply did not have the time tomake themselves available. This was probably the resultof a lack of direction from the senior management of DB,but - subject to one point - the precise reason for itprobably does not matter. The one point is the possibilitythat the Atos business analysts did not give enough noticeof when they wanted to see people or wanted them toattend meetings or workshops. Mr Culshaw accepted thatthis probably happened in some instances (see Day 8,78/1-16).

97. The third likely reason is the extended time taken toestablish DB's requirements because the complexity ofthe processes had not been fully appreciated at the outsetby Atos. The fourth likely reason is that in certain areasDB had not made up its mind as to what it wanted.

98. Fortunately, it is not necessary for me to consider whichof these causes of delay may have been dominant orcritical because, as I will explain shortly, in early April

2008 DB agreed to a revision of the programme whichput back the dates for delivery of the software. Althoughthere was no express agreement to this effect, I find thatthis agreement effectively compromised any mutualclaims for delay up to about the middle of March 2008.

The effect of the unavailability of key DB personnel up to31 December 2007

99. At this point I propose to digress to consider Atos's claimin respect of the loss of time caused by the unavailabilityof DB's key staff during this period. Mr Culshawprepared a quantum table, which set out, by reference tothe various heads of claim being put forward by Atos, thetime allegedly lost by Atos as a result of that particularhead of claim. In relation to the failure to make availablethe key staff, Mr Culshaw's table showed that, betweenSeptember and December 2007 (he said that "Septemberto December" meant a three month period), 67 man daysof business analyst time were lost. This was the time ofMr Adelman and Mr Figoni, and it was claimed that theformer lost 33 man days and the latter 34 man days. Thisrepresented about 50% of their time over the three monthperiod. As I have already noted, these estimates wereprepared in March 2008 and represented, according to MrCulshaw, the best recollections of Mr Adelman and MrFigoni. However, as pointed out above, Mr Adelmangave no evidence in relation to the figure that related tohim. Mr Figoni was not called as a witness. When he wasbeing asked about the claim for the time wasted by thebusiness analysts, which he had earlier described as a"high level estimate", Mr Culshaw said this (Day 8,100/3-18):

MR JUSTICE EDWARDS-STUART: What percentage ofMr Adelman's time do you thinkwas wasted in this way?

A. Quite a significant amount,from what I was told.

MR JUSTICE EDWARDS-STUART: Fifty per cent?

A. Yes.

MR JUSTICE EDWARDS-STUART: But that's anastonishing amount of time, justwasted?

A. I think it was a fairly largeamount of time, yes.

MR JUSTICE EDWARDS-STUART: But surely if that hadbeen the case, one would haveseen that in emails week onweek, wouldn't one? Youwouldn't have tolerated, as thedelivery director, having twochaps idle for 50 per cent of theirtime without making an almightyfuss about it, [would] you?

A. Well, I didn't make analmighty fuss about it, because Ididn't know the extent of it at thetime.

100. As I indicated during this passage, I find it very hard toaccept that two business analysts could have lost 50% oftheir time during this three month period without MrCulshaw, the development director for the project, beingaware of it or there being any written complaint to DBabout the enormous amount of time that was beingwasted as a direct result of the non-availability of keystaff. Passing references in reports or minutes of meetingsto difficulties caused through the unavailability of keypersonnel are not, in my view, consistent with a loss oftime on the scale claimed by Atos in respect of MrAdelman and Mr Figoni during the last three months of2007. Mr Culshaw accepted that this was an estimatemade on the basis of information that he was given somemonths after the relevant period.

101. I am prepared to accept that some time must have beenlost, because it is clear that DB did not make its keypersonnel available as it should have done and this musthave caused some time to be wasted, but on the materialbefore the court I cannot accept that for Mr Adelman andMr Figoni it was anything like as high as 50% of theirtime during this period. I consider that a figure of 20%would be more consistent with the evidence as a whole.For the relevant period - the last 13 weeks of 2007 - thiswould amount to 26 man days for these two businessanalysts.

102. However, Atos's claim under this head during this periodis not confined to the time of Mr Adelman and MrFigoni. Time lost by other members of the Atos team,together with further time of Mr Adelman, is claimed asfollows, but unfortunately in the case of these employeesthe claim is not divided between the years 2007 and 2008(apart from 38 hours that fell exclusively in 2008, which Ihave excluded). I summarise the figures (man days) inthe table below:

Name Role(andactivity)

Period Timelost

Developers/Designers Oct 07 -Jun 08

145 145

MrRoberts

DevelopmentManager

Oct07 -Jun08

30

MrGathercole

Designer Oct07 -Jun08

15

Mr Cowell Designer Oct07 -Jun08

15

Mr Cotter EnterpriseArchitectWorkshops andmeetings todiscuss NFRs+ chasingNFRs + reworkfor securityand audit

Oct07 -Jun08

20

MrPhilpott

SeniorDeveloperDitto

Oct07 -Jun08

23

Mr Cowell SeniorDeveloper Ditto

Oct07 -Jun08

14

MrGathercole

SeniorDeveloper Ditto

Oct07 -Jun08

13

MrAdelman

BusinessAnalyst Ditto

Nov07 -Jun08

3

Mr Brown BusinessAnalyst Ditto

Nov07 -Jun08

7

Mr Cowell Lead Designer Re-design

Nov07 -Jun08

5

MrGathercole

Lead Designer Ditto

Nov07-Apr08

5

Mr Lally SeniorDeveloperRecode

Nov07-Apr08

20

MrAdelman

BusinessAnalystWorkshops,meetings,chasingrequirements

Nov07 -Jun08

5

MrAdelman

BusinessAnalystWorkshops,meetings,chasingrequirements

Nov07 -Jun08

8

Total: 328

103. If the above figures are simply adjusted pro rata to coverthat part of the period that fell within 2007, and excludingMr Adelman (because I have already concluded that histime lost would not have exceeded 13 hours during thisperiod) the figures would become:

Name Role Period Timelost

Developers/Designers Oct -Dec07

100 100

MrRoberts

DevelopmentManager

Oct -Dec07

10

MrGathercole

Designer Oct -Dec07

5

Mr Cowell Designer Oct -Dec07

5

Mr Cotter EnterpriseArchitectWorkshops andmeetings todiscuss NFRs+ chasingNFRs + reworkfor securityand audit

Oct -Dec07

7

MrPhilpott

SeniorDeveloperDitto

Oct -Dec07

8

Mr Cowell SeniorDeveloper Ditto

Oct -Dec07

5

MrGathercole

SeniorDeveloper Ditto

Oct -Dec07

5

Mr Brown BusinessAnalyst Ditto

Oct -Dec07

2

Mr Cowell Lead Designer Re-design

Oct -Dec07

2

MrGathercole

Lead Designer Ditto

Oct -Dec07

2

Mr Lally SeniorDeveloperRecode

Oct -Dec07

10

Total: 161

104. Of those named in the table above who gave evidence,namely Mr Roberts and Mr Cotter, neither said anythingin either his witness statement nor his oral evidence aboutthe extent to which his time had been wasted by theunavailability of key DB personnel, whether in 2007 or atall.

105. When Mr Culshaw was being asked about themethodology used to put together his quantum table,albeit in the particular context of the claim in relation toview process requirements, he said this (at Day 8, 93/90 -94/5):

A. Yes. So -- but I just want totry to be clear. The estimates thatwe put together just estimated "Itwill require this amount ofadditional work to do thisrequirement". The estimatewasn't then split down into"Well, that's already happenedand that's still to come", it wasjust one estimate. What I --

MR JUSTICE EDWARDS-STUART: I see, so you didn'tconsider any particularindividual or the hours any

particular individual had spent,but you simply said thedifference between case A andcase B one would expect toinvolve X hours work?

A. Yes, that's correct.

106. Whilst I can understand that this could be one method ofestimating the amount of additional work that a particularnew requirement would have involved, it is not clear tome how this approach could be adopted in relation toestimating the time wasted as a result of theunavailability of DB employees, if indeed it was theapproach adopted. It seems to me that the only way ofputting together a claim in respect time wasted as a resultof the unavailability of the relevant personnel would beeither by reference to contemporaneous notes ortimesheets or, possibly, by way of evidence from thoseinvolved as to how much of their time they thought hadbeen wasted. In addition, it might, I suppose, be possibleto lead evidence from certain witnesses by way of asample, from which figures could be extrapolated to givean estimate of time wasted by other employees who werenot called, but not even that has been done by Atos inthis case. In any event, any such method of extrapolationruns the risk that it may include time that was lost orwasted through a lack of a proper understanding of DB'srequirements.

107. Accordingly, I find that Atos's claim for time wasted bymembers of its team during this period (other than thetwo business analysts) has not been established toanything like the extent claimed. However, I am preparedto accept that time was lost by the Atos staff as a result ofthe non-availability of key employees of DB but, in theabsence of any more cogent evidence, I am not preparedto find that it was more than about 20% of the timeclaimed, or about 32 man days for the members of staffother than Mr Adelman and Mr Figoni.

108. Consequently, any claim that Atos might have in respectof the unavailability of key DB personnel during thisperiod would, in my judgment, be limited to the 26 days(in total) that I consider were probably wasted by MrAdelman and Mr Figoni plus a further 32 days for theremainder of the Atos team, making 58 days in all.

1 January to 1 May 2008

109. The new year began with an intensive programme of fasttrack requirements gathering workshops which it wasintended would be completed by 8 February 2008. AnAtos internal progress report dated 5 February 2008 noted

"Strong progress with Fast Track Requirementsworkshops. On target to get sign off of core functionalareas by 8/2". DB appeared to share this view (asreflected in an e-mail from Mr Newell to Mr Culshawdated 25 February 2008). However, the report continued:

"Build phase is not progressingto plan. [Atos India] havedelivered a number of moduleswhich are now in system test, butcore pipeline process areas havenot started due to a need toreview technical architectureissues as a result of elaboratedrequirements. These must beresolved in order to provide aclear template to build theremaining pipeline processes.Action required now to build acommunication pack for theclient re causes of delay, optionsaround a revised deliverytimeline and propose commercialmanagement of theimplications."

110. On 19 February 2008 DB issued a document describingthe Non-Functional Requirements for the SCMS project.However, there were still important requirements of allaspects of the project that remained unresolved. First, anda running sore for some time, were DB's undefinedfinance requirements. In addition, workshops on DB'sinvoice tracking requirements were still being held in midMarch 2008. In an e-mail dated 18 March 2008 MrMcKendrick wrote "I think that the Impact Assessmentwill yield a hefty price tag - which to my mind Financeshould stump up for if we determine that it is allnecessary". DB's finance requirements were not resolveduntil well into April 2008, if then.

111. Second, was the addition of Splitting: although the partieshad agreed to include Splitting as an additionaldeliverable under the contract, and a price of £415,000had been agreed, by the end of March 2008 the formalChange Request had not been signed off and its impactwas still under review. Third, were the requirements inrelation to Large Stones, which still needed informationfrom DB.

112. But one of the other major problems facing Atos in midFebruary 2008 was that the fast track requirementsgathering workshops had thrown up many more processrequirements than Atos had envisaged. Not only did thisgenerate a lot of work by way of further development, but

also Atos had begun to realise that it was likely to havean impact on the design of the technical architecture. As aresult, both parties appreciated that this, together with theother outstanding matters that I have mentioned, waslikely to put the present programme in jeopardy.

113. On 7 March 2008 Atos presented a revised plan to DBwhich showed delivery by 17 October 2008. The plancontained three fire breaks of one week each by way ofcontingency against overrun. The grounds put forward byAtos were that the elaborated requirements had revealedsignificantly more complex and intricate businessprocesses than it had originally envisaged. Atos said thatthere had been a huge increase in overall scope becausethe original 65 PRs had risen to 128 PRs, or 106 PRsexcluding Splitting. It was said also that there had beensignificant technical design changes that had resulted inthe need to re-code various modules. In short, Atos wasasserting that the combined effect of these changes wasthat it had "to fundamentally revisit" its design, build andtest plans. During the discussions at this presentation itbecame clear that Splitting was a key module because itwas on the critical path to completion.

114. DB was not prepared to accept this revised plan and so itsubsequently asked Atos to separate the delivery ofpriority modules from the delivery of non-prioritymodules, which became known as bundles 2 and 3,respectively. What DB wanted was to have bundle 2 (the"Gold" bundle) delivered as close as possible to 30 June2008.

115. Atos presented its revised plan on 28 March 2008. Thisfocused solely on the Gold Bundle and showed a deliverydate for that bundle of mid-August 2008. However, muchof the contingency in the earlier plan had been removedand, in particular, the second phase of Splitting, whichwas effectively driving the end date, contained nocontingency at all. In addition, there were 5 CRs neededfor bundle 2 which had been approved for detailedanalysis and which would have to be completed to fit inwith the mid August delivery date if the plan was to beachieved. It was agreed that three outstanding CRs(Intelligent Scanning, Finance Requirements and InvoiceTracking) would not be included in bundle 2.

116. In an e-mail dated 1 April 2008 headed "WithoutPrejudice and Subject to Contract" Mr Newell told Atosthat DB was prepared to accept the proposed revised planfor the delivery of the Gold bundle, saying that it was notideal but that DB had little choice. DB made it clear thatits acceptance of the revised plan was subject to theacceptability of the revised plan for bundle 3.

117. That revised plan was presented to DB by Atos on 4April 2008. The delivery date for bundle 2 remained atmid August 2008 as before, but the delivery date forbundle 3 was pushed back to 27 October 2008. Inpresenting the plan Atos stated that "Although the plancontains some contingency in most modules the timelinefor both Bundle 2 and Bundle 3 are challenging . . .Splitting does not contain any contingency in Part 2 ofBundle 2".

118. At about the same time, in early April 2008, DB engagedthe services of an external consultant, Mr Casey Charlton,to review the quality of the software that had beendeveloped to date by Atos. He did this in conjunctionwith Mr Aythora. Although Mr Charlton only arrived on7 April, he and Mr Aythora very quickly produced adocument entitled "SCMS Initial Architectural and CodeReview" on 9 April 2008.

119. In his witness statement Mr Roberts said that the Atosteam was told that Mr Charlton was a specialist in unittesting and that he had been recruited by DB to assistAtos and DB in this area. He said that DB had not givenAtos any warning that it intended to carry out anarchitectural and code review and, as a result, he said thatthe report gave an unrepresentative and inaccurate viewof the code base and the architecture, although heaccepted that the work that Atos had undertaken by thedate of the review was neither complete nor in a finalstate. He felt that DB, in carrying out this review withoutany prior consultation with Atos, broke a previously goodrelationship between the Atos development team and theDB technical team. His evidence about this finds somesupport in the comment made by Atos in its draftresponse to the Architectural and Code Review, dated 20April 2008, that:

"The Atos Origin anddevelopment team is perplexedthat such a review could havebeen commenced and initialresults published with littlereversion to the Atos Origintechnical management and theAtos Origin Architect."

120. When Mr Aythora was asked about this, he said that hebelieved that he told the Atos team that Mr Charlton hadbeen recruited to review the coding standards of theproject. When asked whether that is what he nowbelieved or what he actually remembered, he said that hedid not remember saying that specifically but he said"that was the purpose of recruiting him, and that's what Ibelieve I said". He did not agree that the involvement of

Mr Charlton damaged the relationship between DB andAtos: he said that he believed that they had a very goodrelationship throughout the project (Day 6, 39/17 - 43/5).

121. Following the issue of the Architectural and Code Reviewthere were various meetings between the Atos team andMr Charlton and Mr Aythora. Mr Roberts said in hiswitness statement that he had hoped that in thesemeetings they would have understood further the pointsbeing made and could have attempted to counter them ina non-aggressive manner. However he said that MrCharlton held "dogmatic and immovable views" on manyof the points raised within the document and was eitherunable or unwilling to understand the position putforward by the Atos designers and developers. On thispoint, the evidence of Mr Roberts received some supportfrom Dr Thomas, who, in a rather outspoken passage inhis evidence, described Mr Charlton as a "polemicist for aparticular style of system design" (Day 13, 123/3-4).

122. It was following these discussions that Atos prepared thedraft response to which I have already referred. Howeverthey decided against sending the document to DB as itwas felt that this was more likely to aggravate thesituation rather than help it.

123. The Architectural and Code Review covered three mainareas: the build process, the technical architecture and thecode quality. Very broadly, the Atos response contendedthat the build process either met the DB guidelines or wason course to do so; agreed in general terms with the areasthat needed to be addressed in respect of the technicalarchitecture (but said that activities were already in handto deal with these points); and disagreed with theobservations about the code quality.

124. In cross examination Mr Roberts was shown thefollowing extract from an e-mail that he sent on 14 April2008 to Mr Charlton and Mr Aythora:

"The extremely ambitious plan isto have all of these elementsimplemented by COB Friday18th April. There are a couple ofthings that have prompted this.There was a review from Caseyaround our code base. Many ofhis comments weren't far fromthe mark, but hopefully what weproduce next week will be a bitcloser to what we expect todeliver. The second point whichis more important to me is thatwe need to get all the devs

[developers] up and running andI believe if we can createsomething as a template willstart producing output relativelyquickly."

He explained that the phrase "his commentsweren't far from the mark" was in fact pastedin from a document prepared by hiscolleague Mr Gathercole, and so the wordswere not his own. However, he went on toagree that code quality was an issue that Atoshad not been hiding from, and that heaccepted that Atos had not been meeting thecode quality targets over the period betweenJanuary and April 2008, but that that was amatter of which DB was well aware (Day 10,77/3-9).

125. Another reason given by Mr Roberts as to why Atos didnot send its draft response on the Architectural and CodeReview to DB was that matters were being overtaken byevents. Whilst the discussion about the Review was goingon it had been decided to set up some workshops to dealwith the question of the reference architecture. The term"reference architecture", as it was being used in thiscontext, referred to a discrete sample of code thatreflected the design decisions that had been taken to date.It was a very thin functional slice of code intended toshow the technical, rather than the functional, decisions.In effect, Atos was being pressed to demonstrate that itcould produce code of an appropriate quality that wouldmeet the requirements of the contract.

126. On 24 April 2008 Mr Newell sent an e-mail to Mr Isaacsraising various concerns of DB about software quality,and in particular about the technicalarchitecture/framework. Mr Newell suggested that it wasessential for Atos "to embed improvements into the widerUK and AOI teams without delay if the rest of the projectis to be delivered to quality and to plan". The referenceto AOI was to Atos India.

127. The information pack for the Steering Group Meeting on30 April 2008, which covered the period from 14-25April 2008, recorded in the Executive Summary:

"• The delivery plan especiallyBundle 2 remains high riskwhilst the reference architectureremains un-finalised and thechange baseline is still notcomplete

• Bundle 2 end date requiresinvestigation to understandimpact as a result ofincorporating Gold required CRsand delay due to s/warchitecture activity."

128. The reference to "delay due to s/w architecture activity"was a reference to the actions required in the light of theArchitectural and Code Review. About six weeks or sobefore this, or perhaps a little earlier, Miss Morgensterndecided to become more closely involved with theprogress of the project. She was very concerned about thedispute over the quality of the software - she said that itwas something that she had not come across before on aproject of this sort - and she felt that expert advice wasrequired. She therefore called upon the services of one ofAtos's most senior technical architects, Mr DavidCunningham.

129. At this point it is probably helpful to jump forward a fewweeks to the issue of Mr Cunningham's report on 22 May2008. The report was entitled "The DTC Problem" andconsisted of two pages. Whilst Mr Cunningham said inevidence that in some places in the report he exaggeratedfor effect, because the report was intended for internaldistribution only, he did not seek to resile from the thrustof any of the comments or criticisms contained in thereport. I set out below the relevant extracts from it:

"DTC was originally intended to bedeveloped agile-style. To this end, the teamwas organised into BAs who would definethe requirement, and then a pool of devs whowould be organised into teams to buildelements of the solution incrementally, withthe project beyond the requirementsdefinition set up SCRUM-style; all supportedby an architect and a few key designer/devs.This is all very DSDM as an approach, andcan work fine in the right context, and ofcourse with the right customer.

It became apparent that this wasn't going towork. This is for several reasons.

• The application is much largerthan was originally thought, interms of function points.• The application is much moreintegrated and complex than wasoriginally thought: a huge end-to-end multi-country workflow,with many of the same business

concepts and sub-processespopping up at many points in theworkflow and many "wrinkles" inthe detail of the processes..• At contract signature therequirements were high-level.Detailed requirements weredefined in January 2008 andsigned off in February, and onlythen were the maintainabilityand extensibility requirementsexpressed in PR69/71 apparent..• The customer is demanding,particularly on the technicalside, and this did not fit wellwith an agile approach to build.

Accordingly the decision was taken to movetowards a much more waterfall-styleapproach. However, this was not reflected inthe team organisation, or in the definition ofthe artefacts to be produced. As soon as Iarrived I observed that the build teamorganisation was still reflecting the BAs,being effectively divided into functional silos.This was not appropriate given the pointsabove, and we have started "specialising" soas to be able to provide the specific systemsupport such a large and complex systemrequires. So for example, we now have adedicated workflow team building thepatterns and mechanisms that will be neededby the functional developers so as to build ontop of Windows Workflow Foundation. Weare in the process of setting up a dedicatedUI team to do the same for Smart ClientSoftware Factory and Composite UIApplication Block. And more of the same willcertainly follow; I see the need to pull theBAs and devs into integrated teams.

However, the workflow work in particular(which is well under way) has exposed amassive gap. We have signed-off businessfunctional requirements, courtesy of the BAs.We have a team of devs ready to build tothose requirements. We have a number ofarchitects and key designers busily defininghow the devs are to build the system(defining the architecture, that is to say). Butwe have no definition of what system is to bebuilt: how the workflows in the variousfunctional areas interact, exactly whatbehaviour in each functional area is to be

allocated to the client and what to the server,exactly what messages are passed betweenclient and server, and so on.

In short, what is missing is systems analysis.This seems to be something of a lost art(within Atos Origin at any rate), and I am ata loss to understand why. To build a systemof this size and complexity it is an essentialactivity, and doing it now will undoubtedlypay for itself in the long term and addressmany painful risks. But of course, it casts thecurrent plan into outer darkness and willundoubtedly go down like a bucket of coldsick with DTC. Note also that this will haveimplications for both sides of the V-model:testing as well as analysis.

. . .

What specifically do we have to do now? Weneed to create a Systems analysis team,combining perhaps two of the best BAs (weknow who we want), an architect, and ifpossible a Systems analyst withmanufacturing process experience . . . Weneed to re-plan to account for this team andactivity. We need to plan for and startissuing analysis artefacts from this team assoon as possible in order to get the dev teamis rolling (that it is, we don't have to doeverything before we can do anything).

130. It is important to remember that this was effectively areport to the Project Manager, Mr Isaacs, and was not adocument intended for eyes outside Atos and certainlynot, I imagine, for production in court. I bear these pointsin mind, but the fact remains that on any reading thereport discloses a project that was in considerabledisarray from the design and development point of view.Mr Cunningham confirmed that his recommendations inthe last paragraph from the extracts quoted above werebased on the analysis and thinking recorded in theprevious paragraph quoted. It is clear, therefore, thatwhilst it may be an exaggeration to describe therecommendations made by Mr Cunningham as ones thatwould cast "the current plan into outer darkness", thechange in approach advocated by Mr Cunningham wouldcause some significant delay to the delivery date. It is notclear whether this delay was factored fully into therevised programme that was submitted at the end of May2008, but I rather doubt it. In any event, the evidence as awhole suggested that the delay that would result from theimplementation of Mr Cunningham's proposals might be

measured in months rather than weeks (in an internal e-mail dated 22 May 2008, Mr Roberts said that once asystems analyst had been brought on board Atos wouldthen need about another 2 months in order to completethe relevant work).

131. Reverting back to the narrative, in early April 2008 Atoscommissioned an "in-flight Review", whose purpose was"to determine if the project management approachesbeing used is [sic] adequate to deliver the "Gold Bundle"on time and to budget, and to recommend changes wherenecessary". The report was based on interviews duringthe third week of April 2008 with the Project manager,Mr McGuirk, and three other key members of the Atosteam. The report was fairly critical (although one mustremember that it was intended for Atos eyes only) andnoted that the latest plan assumed 100% efficiency (sothat no one could take unplanned leave, go sick, etc), anda 30% increase in Atos India staff over the next 6 weeks.It noted also that at that stage there had been no "detailedindependent review of software architecture, developmentmethodology, coding standards etc" (that, of course, wasthe exercise that was about to be carried out by MrCunningham). The programme was described as a "VERYaggressive plan".

132. The findings stated that there was "hands off" interactionwith the offshore development (Atos India) and thatneither the project manager nor the test manager hadvisited India. It recorded that Atos India was reportingRED consistently. Whilst the report noted someshortcomings on DB side, such as a "lack of continuity ofclient involvement", the report did not reflect the extentof the difficulties that Atos were encountering with DBas subsequently described in the witness statements.However, that may be because the object of the reportwas to focus on Atos's performance, rather than theconditions under which it was operating.

133. On 21 April 2008 a Mr Dailey, of Atos, sent a copy ofthe In-flight Review to, amongst others, MissMorgenstern. He described the short term actions that hadbeen agreed as follows:

"• replacement for currentproject manager

• assignment of experiencedsoftware architect

• detailed review of existing planto understand estimates behindvarious activities . . .

• review of developmentapproach and quality of codebeing produced

. . .

Longer term action is to look athow to address contractmanagement and the proficiencyof DTC ProgrammeManagement"

134. Whilst the In-flight Review may have concentrated on theperformance of the Atos team, it was clear that by earlyApril 2008 the members of the Atos team werecomplaining internally about the "significantly morecomplex and intricate business process than originallyenvisaged", in that there were originally 65 PRs and thatthese had now increased to 128 PRs (or 106 excludingSpitting).

135. In evidence Mr Roberts agreed that, as late as May andinto June, Atos India was still complaining aboutoutstanding architecture decisions that had by thenbecome critical (Day 10, 89/16-22).

The workflow engine

136. Another problem that had surfaced by the beginning ofMay 2008 was the question about the use of a workflowengine. A workflow engine, described crudely, is a toolwhich helps to configure the various steps in a systemand which assists both in the development of the systemitself and the running of the system once developed.Broadly speaking, the developers of the software caneither write the workflow engine themselves as a bespokesystem or use an off-the-shelf workflow engine, such asMicrosoft Windows Workflow Foundation. A furtherpossibility is for the developers to take an off-the-shelfworkflow engine and modify it by adding code around it.

137. It was explained to me that for a fairly simple system it isoften easier and cheaper to write one's own workflow,rather than use an off-the-shelf engine. Apparently this isfairly common in straightforward supply chain systems.

138. However, Schedule 2 to the contract (paragraph 2.3)specifically required Atos "to use Microsoft WorkflowFoundation to create the workflow and process flows" ofthe system. Nevertheless, in November 2007 Atosbrought in a Microsoft architect, Morgan Skinner, whowas a workflow specialist, in order to advise it aboutwhether or not to use an off-the-shelf workflow engine inthe light of DTC's requirements as they were seen to beat the time. There was a meeting attended by a Mr David

Cowell, an Atos workflow specialist, and Mr Skinner. MrRoberts and Mr Aythora joined the meeting towards itsend and were told that Mr Skinner had advised that anoff-the-shelf workflow engine was not required.According to Mr Roberts, Mr Aythora agreed to this. MrAythora did not accept this: he said that, whilst he agreedthat there was a recommendation that a workflow enginewould not be required, that recommendation was actedupon by Atos without any approval of DB.

139. Mr Aythora's position, although not taken in his witnessstatements, was that by developing its own workflowengine Atos was taking a technical risk and addingunnecessary development work, thereby increasing thedevelopment effort and taking longer.

140. In fact the decision proved to be unfortunate because inabout late February 2008, following the Fast TrackRequirement Workshops held in January and February2008, Atos realised that the extent of the complexity ofthe system meant that a workflow engine would need tobe incorporated into the software architecture, so itdecided to reverse the earlier decision and to useWindows Workflow Foundation.

141. On this issue, I prefer the evidence of Mr Roberts. Iconsider that Mr Aythora must have been aware at thetime that as a result of the meeting in November 2007Atos intended to write its own workflow engine contraryto the provision in Schedule 2. I find it unlikely in theextreme that Atos would have gone ahead with a decisionto write its own workflow engine in breach of an expressprovision in the contract unless it thought that DB hadagreed to this course. Even if, contrary to the evidence ofMr Roberts, Mr Aythora did not expressly agree to thecourse that Atos was proposing to take but, knowing whathad been decided upon, simply decided to say nothingand to wait and see what happened - which is rather whathis evidence suggested, I would conclude that DB mustbe taken to have waived any right to object to Atostaking that course.

142. Mr Roberts said in his witness statement, and I have noreason to doubt it, that the introduction of a workflowengine at this late stage in the project had a major impacton the development of the architecture of the system. Infact, the final decision to introduce a workflow enginewas taken following the arrival of Mr Cunningham inMay 2008 (see Day 10, 149/5).

143. However, I find that the fact remains that the reason forthe late choice of workflow engine arose out of Atos'sinitial lack of understanding of the complexity of DB'sprocesses. I am also inclined to think that Atos should

probably have become aware of the need for a workflowengine rather sooner than it did, but the evidence does notenable me to reach a positive conclusion about this.

The events from 1 May 2008 up to the termination of thecontract

144. On 2 May Mr Newell sent another e-mail to Mr Bray toinform him that DB would not be paying Atos's invoicefor Key Milestone 4 because Atos's performance was "farfrom satisfactory". He went on to say that "I will not bepaying any other invoices until such time that Atos hasdemonstrated that the project is being delivered to planand to quality". Mr Bray responded to say that he hadforwarded the email to Nikki Ash, who was the persondealing with commercial issues within Atos, saying, "Inmy mind, there is a time for a commercial discussion butit isn't right now".

145. On 6 May Mr Newell met Mr Bray to review progress.By this stage Atos had arranged for Mr Cunningham tojoin the project, in the circumstances that I have alreadydescribed. In an e-mail sent shortly after that meeting, MrBray reported Mr Newell as saying that he had no faith inthe revised plan, which had no credibility within DB.

146. On the afternoon of 16 May Mr Bray had a furtherconversation with Mr Newell, the substance of which heset out in an e-mail later that day in the following terms:

• He was extremely perturbed byNikki's call and sounded reallyshocked we would considertermination. I also think hedoesn't know what to expect nowbecause Nikki didn't talk abouttimescales under which we mightterminate (as we had agreed).He has really taken thispersonally and said "theprospect of being let downseriously by Atos only for us tothen terminate is unbelievable".The man is clearly concernedabout his job and his credibility;

• He said that the over-run incosts is very definitely not alldown to DTC and that AO wouldhave a hard job proving that thescope is more complex than firstenvisaged and planned;

• . . . He told me that if we are

able to continue to build theirconfidence over the next 2-3weeks and we can come up witha viable plan which we jointlyagree and we can guarantee wecan deliver, he is not averse to adiscussion with us about money.He did also say, however, that itwon't be anything like the largenumbers Nikki mentionedyesterday as he would not payfor our failures and anyadditional money that is agreedwould have had to be contingenton delivery;

. . .

• We agreed I would go and seehim next Thursday afternoon(time to be agreed). He wasconcerned he might receivenotice of termination beforethen. I told him that I believedthat was an unlikely outcome.

• He asked me if there isanything he could do to help topersuade AO to give this a littlemore time. I said I would getback to him on this. I agree thatI would be available by phoneMonday-Wednesday if he wantedto talk."

(Original emphasis)

147. Nikki Ash was a member of Atos's commercial team whowas primarily concerned with the financial implicationsof the project from Atos's point of view. Two importantpoints emerge from this e-mail, the contents of whichboth Mr Newell and Mr Bray were prepared to accept asaccurate. First, it is quite clear that Atos wascontemplating termination, not just suspension, and hadcommunicated that to DB. This is apparent from the factthat Mr Bray himself used the word "terminate" - he didnot use it only in the context of what Nikki Ash wasreported to have said to Mr Newell. Second, it shows thatDB was prepared to have a commercial discussion withAtos with a view to DB making some additional paymentto Atos, albeit not at the levels for which Atos mighthave hoped. Whilst DB clearly felt that the contractualresponsibility for the present situation rested primarilywith Atos, I find that DB would have been prepared to

make some extra contractual payment to Atos in order tosee the project through.

148. On 21 May Mr Newell received a letter from MissMorgenstern which asserted that the reasons for theslippage in the timetable were due to various causes forwhich DB was responsible, together with the assertionthat there had been a significant increase in project scope.This was the first time that some of these complaints hadbeen put in writing. The terms of the remainder of thatletter need to be set out in full:

"The cumulative effect of theabove is that the Project hasnow fundamentally changedfrom the original contractedterms in terms of scope, time tocomplete and cost and we aretherefore entitled to require aformal variation to the contractto deal with these changes…

Accordingly, whilst Atos Originremains fully committed to workwith DTC to continue to delivera successful Project, we feel thatwe will not be in a position to doso unless we both agree, as amatter of urgency, a formalvariation to the Agreement,reflecting the new reality of theProject, the changes which haveoccurred so far and DTC'scommitment to increase the levelof funding for the Project andprovide further payments to Atosbeyond those set out in theoriginal Agreement.

You have advised us that youhave a programme review boardon 29th May 2008 in which youare yourselves considering thefuture of the project. I would askyou to call me to discuss thecontents of this letter prior toyour internal meeting as I mustadvise that in the event we areunable to reach an agreementwith DTC by the close ofbusiness on 30th May then AtosOrigin will have no alternativebut to suspend all work on theProject.

In addition, DTC is currentlywithholding payment of amilestone payment to the value£324,462 which was due to bepaid upon sign off of the projectrequirements. I have beenadvised that DTC has no basisfor withholding payment of thismilestone given that the paymentmilestone trigger (projectrequirements sign off) has beencompleted. I would be gratefultherefore if you would arrangefor payment of this outstandinginvoice without delay."

(My emphasis)

The reference to the non-payment in the lastparagraph was to DB's non-payment of theinvoice in respect of Key Milestone 4.

149. On 22 May Miss Morgenstern and Mr Bray met MrNewell and Mr McKendrick in DB's offices, but themeeting was not very productive and the DBrepresentatives did little more than listen to what MissMorgenstern had to say. Mr Newell said that the reasonwhy the meeting was short was because DB needed tounderstand what the cost and time implications weregoing to be before they could really have a meaningfuldiscussion (Day 5, 82/8-11).

150. On 23 May Atos provided DB with a further revisedproject plan, which showed that the software would bedelivered in two bundles, the first on 22 December 2008and the second on 17 April 2009. As Mr Newellsubsequently indicated in an e-mail to Miss Morgenstern(on 28 May 2008), these dates were of concern to DBgiven the importance of timely delivery of the project tothe Government of Botswana.

151. On 27 May (the following Tuesday), following a meetingearlier that day, Atos submitted a revised plan givingslightly improved delivery dates of 19 December 2008and 18 March 2009. It is not entirely clear what activitieswere driving the end dates on this new plan, but CRswere one of the factors identified, and these includedCRs 37 and 38, which related to changes to the corefunctions as a result of Splitting. One of the assumptionscontained in the Splitting CR was that the core SCMSprocesses would not need to be changed or would need tohave only minor changes in order to accommodateSplitting. Mr McKendrick did not dispute, although he

did not expressly accept, that there had to be changes tothe core functions of the SCMS processes in order toaccommodate Splitting (see Day 4, 19/3-11).

152. In the meantime, on the same day, Mr McKendrick hadsent an e-mail to Miss Morgenstern requestingconfirmation that any suspension would not take placeuntil close of business on 6 June. He mentioned also thatDB was awaiting the financial proposal from Atos fortaking the project to completion, saying that he assumedthat this would take into account the most recent versionof the programme. Miss Morgenstern replied the sameday, 27 May, as follows:

"As you are aware I wrote toyou on 21st May 2008 in relationto the Project. In that letter Iinformed you that Atos Originwould have no alternative but tosuspend all work on the Projectwith effect from 30th May 2008unless Atos Origin and DTCentered into a variation toAgreement covering the mattersreferred to in the letter.

I understand that DTC's SteeringCommittee, which oversees theProject within DTC, will notmeet until 4th of June 2008.Taking this into account andfollowing our conversation I canconfirm that Atos Origin is nowprepared to extend the deadline,for suspension, previously set at30th of May 2008, to 6 June2008.

Regarding the financialproposal, Paul and myself willhave high level figures with us atour meeting on 29 May 2008based on the revised plan."

(My emphasis)

153. On 29 May Messrs McKendrick and Newell met Mr Brayand Miss Morgenstern to discuss Atos's letter of 21 May2008. This was a fairly short meeting and DB asked forwritten confirmation of the figures that were discussed inrelation to Atos's financial proposal to continue work onthe project. On the same day Mr Newell wrote to Atosexpressing DB's concerns over the latest proposeddelivery plan.

154. On 30 May Mr Newell wrote to Miss Morgenstern to saythat Atos was not entitled to suspend work and that DBexpected Atos to perform its obligations in accordancewith the Contract. He wrote:

"Like you, I have a desire to seethis Project completed, but I amhaving difficulty inunderstanding how thattranslates to a proposal tosuspend work from (a reviseddate of) 6th June? Whilst we areaware of your wish torenegotiate the terms of thecontract, Atos does not have anyright to suspend work on theProject and this will only causefurther delay from Atos' alreadyrevised delivery date for theProject of 18th August and 27th

October. Our project team isready and available to work withyour development team and it iswholly unacceptable for you towaste our time by threateningsuspension

Your demand for payment of£324,462 is disputed. Atos hasnot fully delivered the KeyMilestones for Phase 1, forwhich you have already receivedpayment in full. In thecircumstances, DTC is entitled towithhold further paymentspending resolution of thedispute.

You claim that the delays andcost overruns are attributable towork that is not your fault andwhich is outside the scope ofcontract. We disagree. You havenot given us any specificexamples of the complaints listedin your letter, which makes itdifficult for us to respond, butyou have never given us noticeof our failure to perform ourcontractual obligations (as thecontract requires).

We do not understand how there

can have been an increase in theProject scope when Atos hasavailable to it and has beenusing and controlling the changecontrol process. We expect youto deliver the Project inaccordance with theSpecification and the contract."

155. As I have already noted, the point about Atos not havingdelivered the Key Milestones for phase 1 was not a goodone, and by the conclusion of the trial it had effectivelybeen abandoned. There was no justification for DB'srefusal to pay the invoice. It was done, as I find, simplyto put pressure on Atos.

156. On 2 June 2008, Miss Morgenstern replied setting out theterms that Atos expected DB to agree before 6 June 2008if DB wanted to avoid Atos's suspension of work. This e-mail included the following passages:

"Our estimate is that the totalcost to complete would be anadditional £4.6Million over andabove the original contract valueof £2.9Million. This figurerepresents our estimate of thecosts to complete without their[sic] being any element of profitin Atos Origin's charges.

There are a number ofassumptions that underpin thisestimate including:

• The businessrequirements are asset out inRequirementsDefinitiondocuments thatrepresent thebaseline afteranalysis on 8thFebruary 2008, andall changesapproved at 2ndJune 2008 and donot change. [TheRDDs were thenlisted.]

• The currentversion of DS-

SY003, Aggregationand EAIArchitectureBlueprint, isaccepted as meetingDTC EnterpriseArchitecture (AR-EA002) and the SOADomain Model (AR-EA001) and anyfuture changes toAR-EA002 and AR-EA001 shall besubject to changecontrol. Alloutstanding issuesneed to be finalizedand agreed as partof any commercialsettlement includinga clearunderstandingbetween both partieshow the acceptancewill be achieved.

• Theimplementation plandated 23rd May2008 (DTC replanv0.4) is accepted asthe baseline plan.

Without any admission ofliability we are willing tocomplete the project on a timeand materials basis at our owninternal standard rates (i.e. theserates would not anticipate anyelement of profit being paid tous). Our offer to complete theproject on this basis is subject tothe following:

• DTC's agreementto waive any claimthat it may haveagainst us inrelation to ourdelivery to date

• Our agreeing withDTC a detailedchange control note

modifying the termsof the contract torecord the newpricing structureand recordagreement of theapplicable rates andthe full scope of thecontract as nowagreed. We wouldalso need toincorporate allpricing assumptionsand deal with anyother matters thathave arisen betweenus and which needclarification.

• Payment of theoutstandingmilestone paymentthat DTC iswithholding to bemade prior toexecution of thechange controlnote."

157. On 4 June 2008, Miss Morgenstern wrote to Mr Newellto confirm that Atos's position had not changed and thatAtos would suspend work on the project on 6 June 2008at 5pm in the absence of DB's consent to a formalvariation of the Contract.

"In the meantime we regret thatour position as outlined in ourletter of 21st May has notchanged. Accordingly as set outin that letter we believe we areentitled to suspend the continuedprovision of the services shouldwe be unable to come to acommercial resolution with youby 5pm on June 6th 2008 andfurther on the basis of nonpayment of the outstandingissued invoice.

Accordingly unless we are ableto come to a commercialresolution of the issues AtosOrigin will suspend all work onthe Project with effect from 5pm

on June the 6th 2008."

(My emphasis)

158. On 5 June 2008 Mr Newell wrote back saying that Atoswas not entitled unilaterally to change the contract whilstthreatening to suspend work if DB did not agree to itsterms.

"It appears to us that you aredemanding a wholesalerenegotiation of the contract,abandoning our originalagreement. We are staggered byyour cynicism by demandingthese payments at such a criticalstage in the Project timetable –the point when the Project oughtto have been delivered for useracceptance testing.

As you know, I met with TheDTC Project board this week todiscuss your proposal. You willnot be surprised to hear that myrecommendation was to rejectyour proposal not only becauseof the huge monetaryimplications and the failure tomeet our deployment schedule,but also because I doubt AtosOrigin's ability to deliver theProject even to the new datesyou propose. Due to theseriousness of myrecommendations and theimplications this has on TheDTC's entire business plan, theProject board has referred theissue to the ExecutiveCommittee. I will thereforerespond to you more fully whenour Executive Committee hasconsidered its position.

In the meantime, I do not think itappropriate that we have ourtelephone call tomorrow, but Iwill be in touch soon with TheDTC's response."

(My emphasis)

159. On 6 June 2008, Atos sent a further letter confirming that

it would be instructing staff to suspend work on theproject that afternoon unless a commercial agreementcould be reached. The letter was in the following terms:

"As you are aware, we havemade it clear that we have noalternative other than tosuspend work with effect from5pm 6th June 2008, unless acommercial settlement on theproject can be achieved. It isAtos Origin's objective tocontinue with the Project basedon a revised approach agreedbetween us.

We asked for a full statement ofyour position following our letterof 21st May 2008. You have notprovided such a statement norgiven any indication that you arewilling to make any contributionto the increased costs.

By reason of the matters set outin our letter of 21st May 2008Atos Origin cannot be expectedto continue with the Projectunless a revised agreement isentered into.

You now say that the matter hasbeen referred to your ExecutiveCommittee. You do not say whenthat Committee is either meetingnor whether it will be in aposition to make a definitiveconclusion on the matter. Youhave been fully appraised ofAtos Origin's position for severalweeks, which has given youample time to seek Executiveapproval.

Unless you can confirm theExecutive Committee will meettoday and make such a decision,we will have no alternative otherthan to suspend. To this end, wewill be giving instructions to ourstaff this afternoon. We willissue a further notice whensuspension has actually takeneffect.

Keith Wilman, our UK CEO, isavailable through today for adiscussion on the matter."

(My emphasis)

160. In line with this, at the end of the day on Friday 6 June2008 Atos's project staff suspended work and handed intheir security passes to DB staff. Thereafter, no-one fromthe Atos project team attended DB's premises on thefollowing Monday (9 June 2008) to continue work on theproject.

161. On 9 June 2008 Mr Newell received a letter from MissMorgenstern confirming that Atos had indeed carried outits threat and had suspended work on the project:

"As set out in our letters of 21st

May 2008 and 6th June 2008, ithas been Atos Origin's intent toreach a revised Agreement withDTC which would address allissues in respect to the changesin specification, timescales andcosts. We are disappointed thatDTC did not make any responseto our proposals in regard tosuch a revised Agreement.

It is unreasonable to expect AtosOrigin to continue to work onthe project without having suchfundamental contract principlesagreed between us and withoutany commitment to payoutstanding sums due. We gaveDTC ample notice to enableDTC to consider its commercialposition and reach agreementwith Atos Origin.

Accordingly, as advised in ourletters of 21st May 2008 and 6th

June 2008, there is now noalternative but for the project togo into suspension. We note onFriday 6th June 2008 you tooksteps to put this process intoeffect. By this letter we confirmthat the project is now suspendedand Atos Origin's staff haveceased work.

We would be happy to discusswith you the basis for theresumption of our services onceyour executive committee hasmet and considered our proposal(as you mentioned it would inyour letter of 5th June)."

162. In response, Mr Newell wrote to Atos's General Counselaccepting Atos's renunciation of the contract and thusbringing the contract to an end.

"The position that UrsulaMorgenstern has adopted incorrespondence and AtosOrigin's suspension of workclearly show that Atos Origindoes not intend to comply withthe existing contract. Atos Originis attempting, unilaterally, toforce us to accept a wholesalechange to the agreement andrefusing to perform at all unlesswe accept. This is a repudiationof the contract. In thecircumstances, we hereby acceptthis repudiation and terminatethe contract."

163. The final shot in this exchange was Miss Morgenstern'sletter to Mr Newell of 10 June 2008, which was in thefollowing terms:

"Atos Origin denies it hasrepudiated the contract. Up to6th June 2008, Atos origincontinued to work on the projectnotwithstanding that it hadaltered substantially in terms ofscope, timescales and costs.

Atos origin has behavedreasonably throughout. Yourreference to demands by Atosorigin were, in fact, commercialproposals which reflected thechanged circumstances. Theywere issued as the basis of anegotiation which would haveenabled the project to continue.

In our letter to you of 9th June2008 we made it clear that,following suspension, we were

available for discussionsconcerning the project and itsrestart, subject to reachingagreement on revised terms.However, by your actions on 6th

June 2008 and in your letter of9th June 2008 you have made itknown that you do not intend toproceed with the project beingdelivered by Atos origin. Yourassertion that Atos origin hasrepudiated the contract isinvalid, but in the circumstancesAtos origin has no alternativesother than to consider it isdischarged from any furtherperformance of the project."

The reasons for the delay and additional work carriedout during 2008

164. I consider that there were four, possibly five, majorreasons for the delays and additional work that wascarried out between 1 January and 6 June 2008. They areas follows:

(1) Change Requests that were a true changein the scope of the work, such as, forexample, Splitting.

(2) Additional work that resulted fromelaboration of the original high levelrequirements, but which did not amount tochanges in scope.

(3) Failures and delays by DB in finalisingcertain requirements, in particular the financerequirements.

(4) Errors or shortcomings in the design ofthe system, in particular the lack of propersystems analysis or engineering, and delaysin producing the reference architecture and inmaking the decision about the workflowengine. And, possibly,

(5) Lack of effective communication betweenAtos and Atos India.

Delay

165. As I have already noted, the March/April re-plan showedthat the second phase of Splitting was driving the finaldelivery date. The final version of the Impact Assessment

for Splitting was submitted on 20 December 2007.Following the acceptance of the revised plan, the CR forSplitting was updated. In a covering e-mail dated 1 April2008, attached to which was the updated CR, MrCulshaw wrote to Mr McKendrick as follows:

"Please find attached theupdated CR for Spitting. I havechanged the following in thisversion to bring it in line withcurrent plans:

1. Timescales- I have suggestedrevised timescales based on thecurrent view of the plan.

. . .

4. LDs - I have amended the LDsto be payable against the fixedprice (£415,000) less any unusedcontingency, as you requested.They are payable if we miss theFinal Acceptance Date which, inaccordance with the Timescalessection, I have suggested isexpected to be by the end ofOctober 2008 and is, in anycase, to be agreed by DTC andAO by the end of April.

Please let me know if you haveany questions. Otherwise, Iwould be grateful forconfirmation that this is nowagreed and I will ask Ken toliaise with you with regards togetting this signed physically."

166. On 2 April 2008 the RDD for the set of processes withinSplitting was reissued by Atos. The document runs toover 100 pages and indicates the very high degree ofcomplexity of the Splitting processes. On the same daythere was an exchange of e-mails between Mr Culshawand Mr McKendrick, in the course of which Mr Culshawsaid that he did not think that it would be appropriate totie in the LDs for Splitting to bundle 2. The exchangeconcluded with Mr McKendrick agreeing to a suggestionfrom Mr Culshaw that "we tie LDs to the delivery date ordates which we will agree to agree by end of April".

167. I have not been directed to, and I have been unable tofind for myself, any document recording a discussion andagreement about the dates by reference to which LDs

would run in relation to Splitting. On 27 May 2008 Atossubmitted a further revised programme which showed thedelivery dates for bundles 2 and 3 being put back to 19December 2008 and 18 March 2009, respectively. A fewdays before that, on 23 May, Atos sent DB twodocuments showing the drivers for bundle 2 and bundle3. These showed that one of the factors driving thecompletion of bundle 2 was implementing workflow andanother and more significant factor, was the developmentof CRs. In addition, Atos had included further drivers tobundle 2 in the form of 80% utilisation of manpower andadditional contingency of 10-15%. For bundle 3, theprincipal driver was the development of CRs, togetherwith similar allowances for contingency as were made forbundle 2.

168. Taking the documents that I have summarised above as awhole, I conclude that Splitting, or at least the CRsassociated with it, probably remained a principal driver tocompletion of both bundles 2 and 3 in all the programmesprepared up until the end of May 2008. I find also thatthere was never any agreement in relation to theapplication of LDs in relation to Splitting. Whilst it isclear that the price for Splitting, £415,000, had beenagreed, the implications of the CR in relation to time hadnever been agreed. Accordingly the time for completionof Splitting was at large, that is to say that Atos's onlyobligation in relation to delivery of Splitting was toachieve it within a reasonable time.

169. This conclusion renders it unnecessary to consider othercauses of delay for this purpose because they were, in myjudgment, at best only concurrent causes of delay andwould therefore attract no liability in the form of LDsprovided that they were achieved or delivered no laterthan the delivery of the relevant Splitting modules.However, the other causes of delay have to be consideredbecause they are relevant to any claim by Atos for losscaused by delay.

Entitlement to additional payment

170. Whilst I have found that the CRs in relation to Splittingwere probably on the critical path to the completion ofboth bundles 2 and 3, that does not imply that they werethe only causes of delay that were on the critical path.Other causes of potentially critical delay, if takentogether, for which Atos was alone responsible were: theadditional work that resulted from elaboration of theoriginal high level requirements, but which did notamount to changes in scope; the errors or shortcomings inthe design of the system (as summarised by MrCunningham), together with the delay in making thedecision about the workflow engine; and, possibly, the

lack of effective communication between Atos and AtosIndia.

171. In addition, as I have mentioned, there were other causesof delay, such as the delay in providing DB's financerequirements, for which DB was responsible. There hasbeen no analysis of the critical delays to the project, andso I must do my best to assess what delays were in truthdriving completion of both bundles 2 and 3.

172. I consider that the delays caused by the need to introducea workflow engine and to implement therecommendations made by Mr Cunningham would haveamounted together to about an additional 2 months to theprogramme shown in the March/April re-plan.

173. I consider that the ongoing process of elaboration of DB'sunderestimated requirements (i.e. changes in depth thatwere not changes in scope) would, by mid-May 2008,have added a further 4 weeks - at least - to theMarch/April programme.

174. Finally, I consider that the March/April programme wasnever achievable in the first place because it relied on100% performance by the members of the Atos team, sothat there was no allowance for sickness or holidays, andbecause it carried no contingency. These two factorsalone probably meant that it was over optimistic by atleast a month, so that the true completion date for bundle2 would not have been earlier than mid September, andpossibly later, not mid August 2008, and the truecompletion date for bundle 3 would have been not beforethe end of November 2008.

175. The effect of these assessments is that the delays forwhich Atos was responsible would have resulted in adelivery date for bundle 2 of about mid December 2008(in other words, 3 months from mid September 2008)irrespective of any delays caused by failures on the partof DB or by true changes in scope.

176. I conclude, therefore, at least so far as bundle 2 isconcerned, that both Splitting and causes for which Atoswas responsible were driving the completion date. Inother words, each party was responsible for critical delaysto completion that were operating concurrently. Upon theevidence available I am not able to distinguish betweenthe causes of the delay to bundle 2 and the causes of thedelay to the completion of bundle 3. I therefore reach thesame conclusion in relation to bundle 3.

177. The general rule in construction and engineering cases isthat where there is concurrent delay to completion causedby matters for which both employer and contractor are

responsible, the contractor is entitled to an extension oftime but he cannot recover in respect of the loss causedby the delay. In the case of the former, this is because therule where delay is caused by the employer is that notonly must the contractor complete within a reasonabletime but also the contractor must have a reasonable timewithin which to complete. It therefore does not matter ifthe contractor would have been unable to complete by thecontractual completion date if there had been no breachesof contract by the employer (or other events whichentitled the contractor to an extension of time), becausehe is entitled to have the time within which to completewhich the contract allows or which the employer'sconduct has made reasonably necessary.

178. By contrast, the contractor cannot recover damages fordelay in circumstances where he would have sufferedexactly the same loss as a result of causes within hiscontrol or for which he is contractually responsible.

179. This means, that as things stood out as at the date oftermination, Atos would have been entitled to anextension of time until about mid December 2008 inrelation to bundle 2, but would not have been entitled torecover from DB the prolongation costs consequent uponthe delay up to that date. For the reasons given, I am notsatisfied that the result in relation to the completion dateof bundle 3 was any different.

180. Thus when considering DB's loss, to which I will turnlater in this judgment, DB is not entitled to the benefit ofany sum in respect of an accrued liability on the part ofAtos for LDs and Atos is not entitled to a deduction inrespect of any claim for prolongation costs.

The correct approach to the construction of theContract

181. Before I turn to consider the terms of the contract, Ishould remind myself of the correct approach to theconstruction of its terms. It is well established that acommercial contract must be read as a whole and in thecontext of the events that gave rise to it. In ReardonSmith Line Ltd v Hansen-Tangen [1976] 1 WLR 989, at995-996, Lord Wilberforce said:

"No contracts are made in avacuum; there is always a settingin which they have to be placed.The nature of what is legitimateto have regard to is usuallydescribed as "the surroundingcircumstances" but this phrase isimprecise: it can be illustrated

but hardly defined. In acommercial contract it iscertainly right that the courtshould know the commercialpurpose of the contract and thisin turn presupposes knowledgeof the genesis of the transaction,the background, the content, themarket in which the parties areoperating."

Lord Wilberforce also went on to say, at page 996:

". . . when one is speaking ofaim, or object, or commercialpurpose, one is speakingobjectively of what reasonablepersons would have in mind inthe situation of the parties."

182. More recently, in Investors Compensation Scheme Ltd vWest Bromwich Building Society [1998] 1 WLR 896, at912-913, Lord Hoffmann said, in respect of the factualmatrix, that:

"Subject to the requirement thatit should have been reasonablyavailable to the parties . . . itincludes absolutely anythingwhich would have affected theway in which the language of thedocument would have beenunderstood by a reasonableman."

183. By contrast, in relation to what the court may not takeinto account, in Prenn v Simmonds [1971] 1 WLR1381,Lord Wilberforce summarised the position as follows:

"In my opinion, then, evidenceof negotiations, or of the parties'intentions, and a fortiori of [theclaimant's] intentions, ought notto be received and evidenceshould be restricted to evidenceof the factual background knownto the parties at or before thedate of the contract includingevidence of the "genesis" andobjectively the "aim" of thetransaction."

184. In this case the parties would have been aware of theevents leading up to the making of the contract including

the tender process, the Best and Final Offer ("BAFO")made by Atos and the implementation of the IAP.

185. More specifically, the parties must be taken to haveknown, because the business analysts on both sides soonformed a view to that effect, that the time available forthe IAP was insufficient; indeed, Atos's lead businessanalyst, Mr Ralph Adelman, thought that it was probablyabout half the time required. Further, as Mr Adelmanfairly accepted, Atos was aware at an early stage duringthe IAP that the level 5 process plans provided by DBwere in many respects inaccurate and were not a reliablestarting point (Day 9, 9/25 - 10/5).

186. Mr Adelman accepted that he appreciated that therequirements that would be produced as a result of theIAP would be at a high level only, would not reflectaccurately or fully DB's business processes and wouldtherefore be incomplete. That was the effect of hisevidence on Day 9, 11/11-22, and at 30/20 - 32/14. MrAdelman said that he communicated his concerns toAtos's project manager, who was then Mr Wong. MrWong's reaction was that they would just have to makeassumptions which, as Mr Adelman accepted, meant thatAtos took the risk that those assumptions might prove tobe wrong.

187. For its part, DB had concerns at the conclusion of theIAP that Atos still might not have grasped the complexityof DB's processes. The position is probably bestsummarised by the following extracts from the cross-examination of Mr McKendrick. In the first, MrMcKendrick was being asked about the position as at 3October 2007 (Day 2, 129/17-24):

MR LEWIS: We saw earlier theconcerns which the De Beersbusiness had that Atos wastrivialising its businessrequirements. Had the De Beersbusiness by this point in time gotto the stage where it wascomfortable that Atos was nolonger trivialising its businessrequirements?

A. I think it fair to say that theyhad improved their situation interms of understanding, yes.

Then, a little later (Day 2, 134/21 - 135/13),but referring to a slightly earlier point intime, is the exchange that I have already setout above, but which I repeat below for ease

of reference:

MR LEWIS: At the end of theinitiation and analysis phase, atthe end of August 2007 and thebeginning of September 2007.

A. There were concerns stillwithin the business as to whetheror not Atos had fully understoodthe depth of requirements. Therewere reassurances from Atos thatthey indeed had understood fullythe requirements.

Q. But that was because theyassumed that the high levelrequirements would give themenough information tounderstand that complexity?

A. But that is a failing, surely,on Atos' behalf, not De Beers.

Q. Who knew how complex thebusiness processes were?

A. De Beers.

Q. So if they knew that Atos wasmisunderstanding that, whydidn't they tell them?

A. But I think they did.

Q. That's where we differ.

188. It seems to me that a reasonable organisation in Atos'sposition in October 2007 would have appreciated thefollowing: that Atos had only captured DB's requirementsat a high level, in other words in fairly broad terms only,and that it was likely that a significant amount ofinformation leading to further detailed requirements - butwithin the scope of the high level requirements - wouldemerge during the detailed analysis stage. It would followthat this was an element of risk that would have to bereflected by including provision for an appropriatecontingency when the final price for the contract wasbeing negotiated.

189. On DB's side, it must have been appreciated that, whilstAtos had had the benefit of the IAP in which to acquire agood understanding of the complexity of DB's business, ithad probably not done so to the extent that DB hadhoped and anticipated would have been the case. It is not

possible to conclude on the basis of the evidence beforethe court what, if anything, DB said to Atos about this. Ihave already referred to the presentation given by MrMcKendrick at a meeting on 24 August 2007 at whichDB raised concerns about the strength and calibre ofseveral members of the Atos team, including the projectmanager, Mr Wong, and the lead business analyst, MrAdelman. For present purposes, it does not matterwhether those considerations were justified although, as amatter of fact, amongst other changes, Mr Wong wasreplaced as project manager about a month later and anew technical architect, Mr Cotter, was brought in tostrengthen the design side of the team. What is importantis that I consider that DB was on notice of the fact thatthe IAP had not fully achieved its objective and that Atosmight still not have grasped the full complexity of DB'sprocesses.

190. One of the reasons for this state of affairs, which wasknown to both parties and recorded in contemporaneousdocuments (see, for example, the project status reportdated 16 July 2007, at D21/50), was that the workshops inwhich the business requirements were to be gathered byAtos during the IAP were fairly unstructured affairs, withsome of the users on the DB side disagreeing amongstthemselves as to precisely what the business required interms of its detailed processes and a large number ofissues emerging. The problem was exacerbated by thefact that the Atos business analysts never saw the relevantprocesses in operation on the ground: it was suggestedmuch later (internally by DB) that it would have been agood idea if they had attended some sort of diamondfamiliarisation course before embarking on the IAP. Inshort, by the time when the contract was made bothparties would have been aware that the IAP had notproved as successful as it should have been.

191. In my judgment, Atos went into this contract with itseyes at least half open, in the sense that it knew or shouldhave known that it had not acquired a good grasp of thedetail of DB's diamond sorting and aggregating processesand that consequently a great deal of work remained to bedone in the way of gathering the detailed requirements,with consequent implications for the development of thedesign - both in terms of time and resources. However, assubsequent events showed, it is clear that it seriouslyunderestimated this risk, a problem that I suspect mayhave been compounded by an additional factor, namelythat those responsible for the commercial negotiation ofthe contract did not liaise very thoroughly with Atos'sproject manager and business analysts who had beeninvolved in the IAP. However, since there was very littleevidence before the court as to the manner in which thefigures were put together when the final contract price

was being negotiated, I can make no positive findingsabout this.

192. It seems to me that DB acted reasonably in agreeing tothe IAP, which was done in order to give Atos areasonable opportunity to understand DB's businessbefore committing itself to the contract. This was not acontract of the utmost good faith and I consider that areasonable business organisation in the position of DB,having indicated some of its concerns about Atos'sperformance during the IAP, was entitled to leave Atos toassess the risk for itself, to put forward a price thatincluded a realistic contingency in case the project shouldprove much more complex than was apparent from theinvestigations to date and, if it could do so, to negotiateany variation of the terms of the proposed contract inorder to reduce its exposure should it turn out that DB'sbusiness was much more complex than Atos hadoriginally anticipated.

193. However, DB should have learned from the IAP that itwas absolutely essential that those of its employees whopossessed the detailed knowledge of the various areas ofthe business would have to be made available to Atos asa matter of priority, and not simply as and when theycould find the time. It would also have been aware, if forno other reason because it was obvious, that Atos hadlittle or no control when it came to gaining access to DB'semployees or process information. DB should haveappreciated that, without considerable impetus andmanagement of resources on its part, access by Atos tothe relevant subject matter experts within the DBorganisation was never going to be satisfactory. Iconsider that certain provisions of the Contract need to beread and applied with this in mind, because Atos shouldnot be expected to have to make an inordinate number ofrequests to DB in order to gain access to any particularsubject matter expert.

The Contract

194. The Software Development and Supply Agreement ("theContract") was signed on 2 November 2007 (although thedocument is dated 1 November). However, the ProjectPlan was not agreed until 16 November 2007. For thepurposes of this judgment it probably does not matterwhether the Contract was in fact concluded on 2 or 16November 2007.

195. In this section of the judgment I will set out the relevantparts of the main provisions of the Contract, togetherwith my conclusions as to how they are to be construed(where this was in issue).

196. Clause 1 (the interpretation clause):

Specification(s) means the detailedfunctional and/or technical specifications(including the Custom SoftwareSpecification) and performance criteria forthe Commissioned System as furtherdescribed in Schedule 2, as may be updatedpursuant to the terms of Schedule 1 orotherwise amended pursuant to clause 5 fromtime to time;"

197. Clause 2:

2. PROVISION OF THE SERVICES

2.1 Subject to the terms of this Agreement(including the assumptions and dependenciesset out in Schedule 12), and in considerationfor the Price to be paid by the Customerunder this Agreement, the Supplier will:

2.1.1 perform the Services anddeliver the Deliverables inaccordance with Schedules 1 and3, the PID, the Project Plan, theSpecifications and the terms andconditions of this Agreement;

2.1.2 procure, deliver and installthe Commissioned System on theHardware as provided inSchedule 1;

2.1.3 create and maintain aProduct Log.

2.2 The Supplier will carry out itsobligations under this Agreement inaccordance with the timetable set out in theProject Plan.

2.3 The parties agree that the CommissionedSystem and the Application DevelopmentServices will roll out using a phasedapproach in accordance with the ProjectPlan, with the delivery of the variousDeliverables and completion of each phasebeing marked as Milestones which will bereflected accordingly in the pricing structurecontained in Schedule 9. Unless identified asa Key Milestone Date the dates contained inthe Project Plan are intended for planningand estimating purposes only and are notcontractually binding.

2.5 Notwithstanding the above, and for theavoidance of doubt, the parties agree that theSupplier will not incur liability and any datesquoted in the Project Plan for delivery of anypart of the Services or Deliverables shall beextended by a reasonable period, if suchdelay is caused by (i) any act or omission ofthe Customer, its servants or agents; or (ii)any cause beyond the Supplier's reasonablecontrol. To the extent that the Suppliersuffers loss or incurs extra costs, due to thescope of the Services or Deliverables beingincreased or the Project Plan beinglengthened by reason of such a delay orfailure by the Customer to comply with anyof its obligations contained in thisAgreement or any of the assumptions ordependencies stated in Schedule 12 not beingmet the Supplier may charge the Customerfor any such loss or extra cost, provided itagrees to use reasonable endeavours tomitigate such loss or extra cost and that theextent of such loss or extra cost is agreedthrough the Change Control Procedure.

2.6 The Supplier shall provide the Servicesand supply the Commissioned System inaccordance with the reasonable directions ofthe Customer's Project Manager as given tothe Supplier in accordance with the terms ofthis Agreement (provided always that suchdirections do not entail the provision ofservices which are outside the scope of theSupplier's obligations under this Agreement,unless agreed pursuant to the ChangeControl Procedure).

198. I pause here to consider clause 2.5 a little further. In myjudgment, for the purpose of construing it, the clausemust be broken down as follows:

Notwithstanding the above, andfor the avoidance of doubt, theparties agree that the Supplierwill not incur liability and anydates quoted in the Project Planfor delivery of any part of theServices or Deliverables shall beextended by a reasonable period,if such delay is caused by (i) anyact or omission of the Customer,its servants or agents; or (ii) anycause beyond the Supplier's

reasonable control.

To the extent that the Suppliersuffers loss or incurs extra costs,due to

(1) the scope of the Services orDeliverables being increased or

(2) the Project Plan beinglengthened by reason of such adelay or

(3) failure by the Customer tocomply with any of itsobligations contained in thisAgreement or

(4) any of the assumptions ordependencies stated in Schedule12 not being met

the Supplier may charge theCustomer for any such loss orextra cost, provided it agrees touse reasonable endeavours tomitigate such loss or extra costand that the extent of such lossor extra cost is agreed throughthe Change Control Procedure.

I think that it was common ground that thefirst part of the clause is essentiallyconcerned with time and the second part withentitlement to money. When broken down inthis way it can be seen, contrary to thesubmissions of DB, that the second part isvery wide ranging. The words that I have setout after (3) are apt to embrace any breach ofcontract, as well as compliance with theassumptions or dependencies. Further, MrSimon Croall QC who, with Mr YashKulkarni, appeared for DB, submitted thatAtos cannot recover any money under thesecond part of the clause simply because theProject Plan has been lengthened by a causebeyond its control. However, I consider thatthe clause says exactly the opposite. If theProject Plan is lengthened as a result of acause that is beyond Atos's reasonablecontrol and Atos suffers loss as a result (inthe form of delay costs), Atos can recoverthat loss under the clause.

199. Another result of this analysis, which may at first seem

curious, is that any claim for breach of contract must bechannelled through the Change Control Procedure.However, I consider that what this really amounts to is aform of dispute resolution procedure that should befollowed before either party embarks on litigation. If itwere otherwise, DB could effectively stifle any claim forbreach of contract by the simple expedient of refusing toagree it within the Change Control Procedure. I considerthat if the parties cannot agree the amount of the loss orextra cost there will be a dispute which can be referred tolitigation. The court would then assess the amount of theloss or extra cost in the usual way applying the wellestablished principles for claims for breach of contract inthe context of this contract.

200. Clause 3 provides:

"3.1 The parties acknowledge that theCustomer may require or the Supplier mayidentify, Additional Services to be providedby the Supplier during the term of thisAgreement.

3.2 Such Additional Services, if within thescope of the Project, shall be agreed betweenthe parties pursuant to the Change ControlProcedure. However, if such AdditionalServices are outside the scope of the Project,the parties shall use reasonable endeavoursto agree the terms for such AdditionalServices.

3.3 . . ."

Interestingly, neither of the parties referred tothis clause in the course of their submissions.However, I consider that it is of some interestbecause it suggests that some types ofadditional work, whilst falling within thescope of the project, can neverthelessconstitute a change. It follows from this thatwhen considering what type of additionalwork constitutes a change one mustdistinguish between the "scope of theServices or Deliverables" (clause 2.5) beingincreased, on the one hand, and the "scope ofthe Project" (clause 3.2) being increased, onthe other.

201. Clause 5:

"5.2 The parties acknowledge that not allChanges requested by Customer orrecommended by the Supplier shall

automatically be chargeable or imply anincrease or reduction in the Price and anyfinancial implications resulting from aChange shall be assessed and agreed as partof the Change Control Procedure…

5.3 The Supplier shall not be entitled tocharge for Changes required to incorporateany services, functions and responsibilitiesnot specifically described in or detailed inthe Schedules but which are reasonablyrequired for the proper performance andprovision of the Services described therein.

5.4 The Customer may request the Supplier(and the Supplier may recommend) to supplyAdditional Services from time to time. SuchAdditional Services shall be classed as a"Change" for the purposes of this Agreementand, subject to the Customer and theSupplier signing a change control note("CCN"), the Supplier will provide theAdditional Services to the Customer from theeffective date of the CCN. Unless otherwiseagreed in writing, the agreed AdditionalServices will become part of the Services.

5.8 The Supplier shall not be entitled tocharge for Changes required to incorporateany services, functions and responsibilitiesnot specifically described in or detailed inthe Schedules but which are reasonablyrequired for the proper performance andprovision of the Services described here in.

5.8 The parties shall bear their own costs inconnection with the preparation of alldocumentation and negotiation of Changes.

5.9 Where the Supplier reasonably believesthere is a justifiable reason to increase thePrices as a result of a Change it will supplyto the Customer the following informationwith the Change Request to justify the basisof the increase:

5.9.1 an initial analysis of thereasons why the Supplierbelieves its cost will bematerially impacted by theChange and any applicablesupporting documentation,including an analysis of anyalternative solutions utilising

existing Supplier resources;

5.9.2 details of proposed one-offcharges and/or changes to thePrice based on the above; and

5.9.3 any other relevantinformation, includinginformation justifying anyproposed one-off charges orchanges to the Price and anybase data and chargingassumptions reasonably requiredby the Customer to verify suchproposed changes.

5.10 Following consideration of the ChangeRequest, together with the information set outin 5.9.1-5.9.3 submitted by the Supplier, ifthe Customer agrees that there is a justifiablereason to increase the price, the parties shallagree a fair and proportionate increase tothe Price. In the event the parties cannotreach agreement on such fair andproportionate increase, the provisions ofclause 27 (Dispute Resolution) shall apply."

Additional Services were defined as meaning "additionalservices to be provided by the Supplier as agreedbetween the parties pursuant to the Change ControlProcedure". I will discuss these provisions in more detailwhen considering the Change Requests.

202. Clause 6, which concerned DB's obligations, required DBto:

"6.1.2 promptly provide thesupplier with accurate andcomplete information concerningits operations and activitiesrelevant to the Project andanswers to queries, decisionsand approvals required by theSupplier in connection with theProject as the Supplier mayreasonably require.

6.1.3 provide the [Customerhardware identified in (theArchitecture Blueprint)]" (wordsin brackets are incorporated byreference to Clause 1.1 andSchedule 6).

6.1.7 provide the Supplier with

appropriate access to the LegacySystem and Data of theCustomer in order to enable theSupplier to perform itsobligations under thisAgreement.

6.1.9 ensure that the staff itassigns to the project haveappropriate skills and experiencefor the tasks to which they areassigned. The Supplier'sPersonnel shall have a right ofaccess to the Customer's staff atall reasonable times throughoutthe duration of this Agreementas is necessary solely for thepurposes of the Project.

. . .

6.2 The Supplier will notify theCustomer as soon as practicableif it becomes aware that theCustomer is not complying withits obligations under thisAgreement including theCustomer Inputs. If any suchfailure is likely to impact on aKey Milestone Date the Suppliershall notify the Project SteeringCommittee as soon aspracticable. Provided theSupplier duly notifies inaccordance with this clause 6.2,if any Key Milestone is notachieved on or before therelevant Key Milestone Date asa result of such failure by theCustomer, the Key MilestoneDate shall be varied inaccordance with the ChangeControl Procedure."

203. Clause 7.2:

"7.1 If the Supplier fails to meet anymilestone or other date specified in Schedule9 as being a date that if missed could giverise to an LD Credit (an "LD Trigger Date")(as the same may be extended under theother provisions of this Agreement) (a"Delay") then, to the extent that such Delayresults from reasons directly connected to or

arising from the Supplier's acts or omissionsand its provision of the Services andDeliverables under this Agreement, theSupplier shall pay late delivery credits to theCustomer in the amounts set out in part 3 ofSchedule 9 ("LD Credits").

7.2 To the extent that a Delay is caused byany act or omission of the Customer then,without prejudice to the Supplier's obligationto endeavour to meet the original LD TriggerDate and otherwise mitigate the effect ofsuch Customer acts or omissions, the LDTrigger Date shall be adjusted accordinglyand the LD Credits shall only becomepayable if such adjusted LD Trigger Date isnot met."

204. Clause 12:

"12.1 In consideration for the satisfactoryperformance of the Services, the Price shallbe payable to the Supplier in the amountsand at the times set out in Schedule 9, suchtimes reflecting the Key Milestones identifiedin Schedule 9…

12.4 Undisputed invoices shall be payable bythe Customer within 30 days of receipt ofeach invoice. If the Customer reasonablyconsiders that any portion of an invoicesubmitted by the Supplier is not due andpayable in accordance with the terms of thisAgreement the Customer shall be entitled towithhold payment of the disputed portion ofthe invoice without prejudice to any otherrights or remedies it may have, pendingresolution of the dispute in accordance withthe Dispute Resolution Procedure.

12.5 Without prejudice to the Supplier's anyother right or remedy, any amount which ispaid to the Supplier later than the date onwhich such sum first became due andpayable under this Agreement (for thepurposes of this clause, the 'Due Date') shallbe paid together with interest at HSBC plcbase rate, from time to time plus 2%,calculated from and including the Due Dateup to but excluding the actual payment dateand the supplier reserves the right, withoutliability to suspend the performance of theServices and the delivery of the Deliverablesunder this Agreement until such time the due

amounts are paid to the Supplier.

12.6 The Customer may set-off any amountdue and payable by the Supplier to theCustomer under this Agreement against anyamount due and payable by the Customer tothe Supplier provided that the Customer hasgiven the Supplier three (3) Business Daysnotice of such set-off and a reasonableopportunity to discuss the same."

205. Clause 23:

"23.1 Nothing in this Agreement shallexclude or limit any person's liability for (a)fraudulent misrepresentation, willful [sic]misconduct or deliberate default…

23.3 Except as provided in Sub-clauses 23.1and 23.2 above, each party's total aggregateliability to the other…under this Agreementincluding (but not limited to) liability forbreach of contract, misrepresentation(whether tortious or statutory), tort(including but not limited to negligence) orbreach of statutory duty, shall not exceed thegreater of 150% of the Price or £3,893,547.

23.4 Subject to clause 23.1, neither partyshall be held liable for loss of profits (savethat this shall not exclude the Customer'sobligation to pay the Price due for Servicesprovided hereunder), goodwill, revenue,production, real or anticipated savings,business, use or contracts, nor for anyindirect, consequential or incidentaldamages, arising out of its failure to meet itsobligations under this Agreement even if theparty has been advised of the possibility ofsuch loss or damages and whether or notsuch loss or damages are foreseeable."

206. I can deal with the point that arises under this clause quiteshortly, because I have formed a clear view as to whatthe clause means. The question is what is meant by"deliberate default". The way in which clause 23.1 isdrafted would suggest that "fraudulent misrepresentation","wilful misconduct" and "deliberate default" are listed indescending order of culpability, as Mr Croall submits.This appears to me to be the case. Fraudulentmisrepresentation obviously involves dishonesty. Wilfulmisconduct refers to conduct by a person who knows thathe is committing, and intends to commit a breach of duty,or is reckless in the sense of not caring whether or not he

commits a breach of duty (see Romer J Re City EquitableFire Insurance Company Ltd [1925] 1 Ch 407).Deliberate default means, in my view, a default that isdeliberate, in the sense that the person committing therelevant act knew that it was a default (i.e. in this case abreach of contract). I consider that it does not extend torecklessness and is therefore narrower than wilfulmisconduct (although the latter will embrace deliberatedefault).

207. I therefore reject Mr Croall's submission to the effect thatthe expression deliberate default embraces any deliberateconduct (as opposed to something done accidentally orinadvertently) that happens to result in a default, whetheror not that was intended. Although I have no difficultywith this as a concept, I find it quite hard to envisagesuch conduct in the context of a contract such as this one.I therefore prefer the submissions of Mr Lewis on thispoint. I consider that the inclusion of deliberate default,whilst having a sensible meaning, was probably the resultof drafting caution.

208. I will deal with the application of this clause to the factslater on in this judgment.

209. Clause 31.2:

"No relaxation, delay, forbearance orindulgence of either the Customer and theSupplier in exercising or enforcing nor anyfailure by either the Customer and theSupplier to exercise or enforce any rightconferred upon it by this Agreement shall bedeemed a waiver of any such right or operateso as to bar the exercise or enforcementthereof at any time or times thereafter."

210. Schedule 1:

"2.3 Each project phase as described in theProject Plan will include the provision of thefollowing Services:

(a) detailed analysis;

(b) low level design;

(c) code and unit test; and

(d) system integration and user acceptance("UAT") testing.

3.2.1 The Supplier shall work closely with theCustomer's business user representatives torefine and further detailed [sic] the

requirements set out in the Specifications(Schedule 2) during the Detailed Analysisphase.

3.2.2 The Supplier shall further analyse andcapture details of requirements includingbusiness rules, algorithms and logical datamodel identified in the Specification.

3.2.3 The Supplier shall analyse anddocument additional non-functionalrequirements and the logical specification ofexternal integration of the CommissionedSystem…

3.2.5 The Supplier shall deliver as aDeliverable an elaborated requirementsdefinition document that has been reviewed,finalised and agreed with the Customer."

211. Schedule 2:

"The Commission System will be delivered inaccordance with the Specifications set out inthe documents referred to in Section 1 belowas the same may be enhanced or clarified bythe Detailed Design.

1. REQUIREMENTS, DESIGNGOVERNANCE AND TEST STRATEGYDOCUMENTS (THE SPECIFICATIONS)

AN-RQ001 Tolerance Engine Requirements

. . .

DS-SY003Aggregation andEAI ArchitectureBlueprint (the"ArchitectureBlueprint")

I pause to comment here that the words inthe opening paragraph above "as the samemay be enhanced or clarified" accord withthe reference in section 3.2.1 above whichrequires Atos to "refine and further detail therequirements set out in the Specifications".There is a dispute between the parties as towhat this schedule means. Mr Croall pointedout that there are no version numbers givenin this list, which is consistent with the factthat they are "living" documents in that sensethat they would be developed as the project

progressed. The importance of this is that, onDB's case, the obligation on Atos is todevelop whatever system is required tosupport the requirements as reflected by thefinal versions of each of these documents:the versions that existed at the time when thecontract was made are, in effect, irrelevant.

212. In my judgment, the documents referred to in Schedule 2must be the ones that existed at the time when thecontract was made, otherwise the phrase "as the samemay be enhanced or clarified" would make no sense.Atos is therefore right to submit that whether or not anew process or step in a process is to be regarded as achange must be considered against the state of theserequirements documents at the time when the contractwas made. However, the words "as the same may beenhanced or clarified" indicate that the ultimaterequirements were not frozen in the version in which theyexisted when the contract was made and would verylikely be different.

213. Schedule 12:

"2.1 The Customer will work with theSupplier to identify any dependencies that theProject has on other projects or work beingcarried out by the Customer or on behalf ofthe Customer. The Customer will usereasonable endeavours to ensure that thesedependencies are managed and scheduled ina way that the timescales in the Project Plannot delayed."

2.2 Those Customer Personnel assigned tothe project will be empowered to makedecisions in a timely manner according to theagreed project timeline."

2.3 The Customer will provide fullyfunctioning test platforms which will includethe AS400 and legacy systems required forthe purposes of testing EAI. The Customerwill prepare and populate the legacy systemswith required test data that resemble the dataon the production systems. The parties shallagree the level to which such data will bedesensitised. The Customer provisionedlegacy testing environment(s) will beavailable in accordance with the baselineProject Plan set out in Schedule 7."

2.6 The Customer will ensure regular access,as reasonably requested by the Supplier, to

its development and business analystresources throughout preparation time forrequired test cases."

2.16 The Customer will provide all hardwareand peripherals to be integrated with theCommissioned System and required fortesting in accordance with the baselineProject Plan set out in Schedule 7."

2.18 The Customer will make available keyCustomer staff throughout the projectlifecycle, including business userrepresentatives, technical specialists andsubject matter experts, as reasonablyrequested by the Supplier."

2.19 The Customer will provide access toCustomer legacy systems (excluding pre-production and production but includinglegacy systems applicable to Botswana, UK,Namibia and South Africa) and data to theSupplier project team throughout thedevelopment and testing cycles."

2.21 The Customer will provide technicaldocumentation and such other informationand artefacts reasonably required by theSupplier for the purpose of interpretation onall Legacy Systems in accordance with thebaseline Project Plan set out in Schedule 7."

214. By way of comment only, I should add that the parties inthis case rely only on the terms of the Contract. There areno claims in misrepresentation or for rectification.

The law relating to repudiation

215. One of the classic statements of the law in this area isfound in the opinion of Lord Wilberforce in FederalCommerce v Melina Alpha (The "Nanfri ") [1979] AC757, at 778, where he said:

"I shall not set out at any lengththe numerous authorities onanticipatory breach: this is oneof the more perspicuousbranches of the law of contractand the modern position is clear.The fault of the critical questionmay differ slightly as it is put inrelation to the varying situations:

". . . an intimation ofan intention to

abandon andaltogether to refuseperformance of thecontract. . ." or"evince an intentionno longer to bebound by thecontract . . . "(Freeth v Burr(1874) LR 9 CP 208,230, per LordColeridge CJ) .

"I do not say that itis necessary to showthat the party allegedto have repudiatedshould have anactual intention notto fulfil the contract.He may intend infact to fulfil it, butmay be determinedto do so only in amanner substantiallyinconsistent with hisobligations, and notin any other way"(Ross T Smyth & CoLtd v T D Bailey,Son & Co [1940] 3All ER 60, 72, perLord Wright) suchas to deprive "thecharterers ofsubstantially thewhole benefit whichit was the intentionof the parties . . .that the charterersshould obtain fromthe furtherperformance of theirown contractualundertakings" (HongKong Fir ShippingLtd v KawasakiKisen Kaisha Ltd[1962] 2 QB 26, 72,per Diplock LJ).

"To constituterepudiation, thethreatened breach

must be such as todeprive the injuredparty of a substantialpart of the benefit towhich he is entitledunder the contract . .. Will theconsequences of thebreach be such thatit would be unfair tothe injured party tohold him to thecontract and leavehim to his remedy indamages . . .?"(Decro-WallInternational SA vPractitioners inMarketing Ltd[1971] 1 WLR 361,380, per BuckleyLJ).

The difference in expressionbetween these two lastformulations does not, in myopinion, reflect a diversion ofprinciple, but arises from and isrelated to the particular contractunder consideration: theyrepresent, in other words,applications to different contract,of the common principle that, toamount to repudiation a breachmust go to the root of thecontract."

216. In my judgment, one does not have to look any furtherthan this for authority. However, a recent decision of theCourt of Appeal is of relevance to the facts of this casebecause it deals expressly with the relevance of thecontemporaneous subjective views of the parties to thecontract. It is Eminence Property Developments Ltd vHeaney [2010] EWCA Civ 1168. Etherton LJ, withwhose judgment Sullivan and Mummery LJJ agreed,summarised the effect of the leading authorities in thefollowing terms:

"61. I would make the followinggeneral observations on all thosecases. First, in this area of thelaw, as many others, there is adanger in attempts to clarify theapplication of a legal principle

by a series of propositionsderived from cases decided onthe particular facts. Instead ofconcentrating on the applicationof the principle to the facts ofthe case in hand, argument tendsto revolve around the applicationof those propositions, which, ifstated by the court in an attemptto assist in future cases, oftenbecome regarded as prescriptive.So far as concerns repudiatoryconduct, the legal test is simplystated, or, as Lord Wilberforceput it, " perspicuous". It iswhether, looking at all thecircumstances objectively, that isfrom the perspective of areasonable person in the positionof the innocent party, thecontract breaker has clearlyshown an intention to abandonand altogether refuse to performthe contract.

62. Secondly, whether or notthere has been a repudiatorybreach is highly fact sensitive.That is why comparison withother cases is of limited value.The innocent and obviousmistake of Mr Jones in thepresent case has no comparisonwhatever with, for example, thecynical and manipulativeconduct of the ship owners inThe Nanfri.

63. Thirdly, all the circumstancesmust be taken into account in sofar as they bear on an objectiveassessment of the intention ofthe contract breaker. This meansthat motive, while irrelevant ifrelied upon solely to show thesubjective intention of thecontract breaker, may be relevantif it is something or it reflectssomething of which the innocentparty was, or a reasonable personin his or her position would havebeen, aware and throws light onthe way the alleged repudiatoryact would be viewed by such a

reasonable person. So, LordWilberforce in Woodar (at p.281D) expressed himself inqualified terms on motive, not bysaying it will always beirrelevant, but that it is not, ofitself, decisive."

The alleged repudiatory breach by DB

217. Atos relies on the following grounds as constituting arepudiatory breach or, taken together, repudiatorybreaches of the contract by DB:

(1) The catalogue of breaches pleaded inAppendix 1 to the Defence andCounterclaim;

(2) DB's breach of clause 12 of the Contractby failing to make payment in respect of KeyMilestone 4;

(3) DB evincing an intention that it wouldnot abide by, or DB's failure to abide by,Atos's contractual right to extensions to theKey Milestone Dates and increased sumsunder or for breach of the Contract; and/or itsevincing an intention that it would notcomply with the Change Control Procedureso as to grant Atos extensions to the KeyMilestone Dates and increased sums under orfor breach of the Contract; and/or

(4) Mr Newell's conduct on the afternoon of6 June 2008 in requiring the return of allidentification and access cards held by Atos'sstaff.

218. The first ground, the catalogue of breaches pleaded inAppendix 1, begs further analysis because the matters setout in the Appendix are a combination of acts that aresaid to constitute breaches of contract and acts that aresaid to give rise to entitlement under the contract.Paragraphs (1)-(3), (19), (21)-(27) of the Appendixconcern entitlement under the contract. Paragraphs (28)-(31) set out further consequences of the breaches orentitlements set out in the preceding paragraphs. Inrelation to paragraphs (7)-(15) and (17), the amountsclaimed are either nil or, in two cases, less than £20,000.These, whether taken by themselves or with others, arenot a promising springboard for an allegation ofrepudiatory breach of contract. Accordingly, I considerthat all these paragraphs can be ignored for the purpose ofanalysing the effect of the alleged breaches of contract by

DB.

219. As to the remaining allegations, I consider that, whethertaken individually or collectively, they fall far short ofconduct amounting to a repudiatory breach. I say that forthree principal reasons, without having to analyse them inany detail.

220. First, at no stage prior to the letter of 21 May 2008 didAtos put any complaint in writing about breaches ofcontract by DB, let alone under clause 25 which dealswith termination and material breach. The most that Atosput forward by way of protest in relation to potentialbreaches of contract by DB, was the occasional mentionat meetings of the Steering Group of the unavailability ofDB key personnel. The documents suggest that this wasraised more as a point of irritation, rather than as aserious breach of contract.

221. Second, the overwhelming message from Atos conveyedby the contemporaneous documents from November 2007onwards was that the detailed process requirements wereproving to be far more extensive and complicated thanAtos had envisaged at the outset. That was not a claim ofbreach of contract, rather it was directed at laying theground for claims under the contract in respect ofchanges to the scope of the work. It cannot be dressed upas a claim that DB wrongfully refused to agree changerequests, because relatively few change requests were putforward until much later on in the life of the Contract.

222. Third, the March/April re-plan effectively gave Atos anextension of time, if not money. The implicit acceptanceby DB that Atos had valid claims for an extension of timeis in my view inconsistent with conduct on its part thatcould be said to be repudiatory.

223. However, in case I am wrong about this, I will considerthe remaining claims for breach of contract very briefly:

(5) Paragraph (5). This concerns allegationsthat DB failed to manage properly variousaspects of the project such as, for example,the EDS. The sum claimed is about £59,000.These are all fairly technical points and, evenif established, would come nowhere nearamounting to a repudiatory breach ofcontract.

(6) Paragraph (6). This concerns allegationsthat DB did not meet its obligations inrespect of the core SCMS until January 2008when the Fast Track Requirements Gatheringworkshops began, and that it failed to

provide the business requirements for thefinance department until April 2008, both ofwhich resulted in a number of consequencesset out under the paragraph. The sum claimedis a little under £300,000. The first allegationrelates mainly to delay, but Atos wascompensated for that delay by DB'sagreement to the March/April re-plan. Iaccept that the delay in resolving therequirements for the finance department wasa breach of contract by DB, but it was aminor matter in the context of the project asa whole. In my view, the conduct that is thesubject of these allegations falls way short ofconduct amounting to a repudiatory breach.

(7) Paragraph (16). The allegation here is thata number of key DB resources were severelytime constrained or unavailable. The sumclaimed is about £110,000. I have alreadyfound that some aspects of this claim havebeen seriously overstated. I consider that itcomes nowhere near being conduct that isrepudiatory.

(8) Paragraph (18). This is a claim for delayin respect of the provision of technicaldocumentation in respect of the LegacySystems and testing. The sum claimed isabout £23,000. There is nothing here thatamounts to repudiatory conduct.

(9) Paragraph (20). This is an allegation thatDB provided Atos with business processeswhich were incomplete or lack sufficientdetail for Atos to be able to carry out itsdetailed analysis, low-level design andsubsequent stages of work. It appears torelate primarily to the level 5 process mapsthat were provided to Atos during the IAP,and this is confirmed by the witnessstatement of Mr Adelman. I do not see howthis can constitute a breach of contract whenthe events relied on took place well beforethe contract was entered into.

(10) Paragraph (22). Since I have ruled outthe claim under paragraph (20), this relatesentirely to the consequences of allegedchanges in scope, not to breaches of contract.

224. Even if these claims are taken together, I consider that theconduct that is alleged to have given rise to them, even ifproved, falls well short of constituting a fundamental

breach of contract amounting to a repudiation of it.Further, there is no evidence that at any stage DB wasevincing an intention not to be bound by the contract. Forthe most part it believed that the matters complained ofwere the responsibility of Atos, and not of DB. In that itmay have been mistaken, but that does not make itsconduct repudiatory.

225. I turn now to the next breach, the failure to pay theinterim payment due in respect of Key Milestone 4. Inmy view, whilst this was a clear breach of contract, itwas not a repudiatory breach. In withholding this moneyfor the reasons that it did, I do not consider that DB wasevincing a general intention not to be bound by the termsof the contract. It is also relevant, but by no meansconclusive, that by clause 12.5 of the contract Atos wasgiven the specific right to suspend work in the event ofany failure by DB to pay a sum that was due under thecontract. However, the non-payment of this amountprobably constituted a material breach within themeaning of clause 25.2, so that Atos could haveterminated the contract if the breach persisted for 30 daysafter Atos had served a notice requiring DB to remedythe breach and pay the money. Atos never served such anotice.

226. In relation to the third breach, I have to confess that I amnot entirely clear what Atos means by its allegation thatDB evinced an intention that it would not abide by Atos'scontractual right to extensions to the Key MilestoneDates and increased sums under or for breach of theContract and/or that it evinced an intention that it wouldnot comply with the Change Control Procedure. Asalready pointed out, DB did in fact extend the date fordelivery when it agreed the March/April re-plan. Whilst itis true that DB generally took the line that Atos was notentitled to the majority of the change requests that itmade, it did accept some of them and its rejection of theothers was, as DB saw it, a position that it was entitled totake under the terms of the contract. I consider that thereis no evidence to support the allegation that DB was notprepared to comply with the Change Control Procedure:to the extent that it took a different view to Atos as tohow this procedure should be operated, that did notevince an intention not to be bound by the terms of thecontract - on the contrary, it was purporting to rely onthose terms (even if wrongly). I can find nothing in theseallegations that supports the claim that DB was inrepudiatory breach of contract in respect of this ground.

227. Finally, Atos relies on Mr Newell's conduct on theafternoon of 6 June 2008 in requiring the return of allidentification and access cards held by Atos's staff. Iregard this point as hopeless. By that afternoon it was

quite clear that there had not been and were not going tobe commercial discussions of the type that Atos had saidwere to have taken place by 5 pm that day. Atos hadmade it abundantly clear that, failing such discussions, itsstaff would be withdrawn from the project that evening.Mr Newell's decision to withdraw their passes in thosecircumstances was no more than an acceptance of theinevitable and a sensible precaution. It must beremembered that DB was an organisation dealing in veryhigh value items and for whom security was a very highpriority.

228. Accordingly, for all these reasons I reject Atos's claimthat DB repudiated the contract.

The alleged repudiatory breach by Atos

229. It is quite clear to my mind from the terms of thecorrespondence that I have already set out that at no stagewas Atos purporting to exercise its right under clause12.5 to suspend work until payment of the invoice. Themessage that came across loud and clear in thecommunications from Atos between 21 May and 6 June2008 was that the work would be suspended unless DBagreed to enter into an appropriate commercial agreementwith Atos by 5 pm on 31 May, subsequently extended to6 June 2008. In my view this is abundantly clear from theterms of the letters of 21 May and 4 June 2008. Inparticular, the final paragraph of the latter was in thefollowing unambiguous terms:

"Accordingly, unless we are ableto come to a commercialresolution of the issues AtosOrigin will suspend all work onthe Project with effect from 5 pmon June the 6th 2008."

230. In my judgment, the demands made by Atos, particularlyin the e-mail of 2 June 2008, did not reflect itscontractual entitlement and, in putting them forward, itwas not undertaking to continue to perform the Contract.For a start, what Atos was willing to do was "to completethe project on a time and materials basis at our owninternal standard rates". That is an expression of anintention to complete the work on different terms, notupon the terms originally agreed. Second, this offer wasitself subject, amongst other things, to DB's agreement towaive any claim that it may have against Atos in relationto Atos's delivery to date. That also was something uponwhich Atos had no right to insist.

231. The fact that Atos repeatedly asserted its willingness andwish to complete the project is neither here nor there.

There is a very significant difference between beingwilling to complete a project, and being willing to fulfil acontract. Atos may have been genuinely prepared to dothe former, on its own terms, but that was itselfinconsistent with a willingness to do the latter. Even if,contrary to this finding, Atos was in fact privatelyprepared to continue to perform the contract, thatintention was never communicated to DB; nor would areasonable person in DB's position have understood thatto be the case.

232. However, at paragraphs 196 and 197 of his ClosingSubmissions, Mr Lewis made the following submission:

"196. . . . Alternatively, if [Atos]was, on the facts of the case,contractually entitled to dosomething short of what it did,then DB must show that thedifference between what [Atos]did and what it was contractuallyentitled to do deprived it ofsubstantially the whole benefit ofthe Contract.

197. If [Atos] was entitled tosuspend pursuant to clause 12.5of the Contract, then it wasentitled to suspend "until suchtime the due amounts are paid"to it. When, on the facts of thiscase, would that have been? Theclear answer . . . is that DB hadno intention of paying anyfurther sums to [Atos] until itdemonstrated that it wasdelivering to plan (and toquality) and (on the facts of thecase) that was not going tohappen. It was not going tohappen in relation to theMarch/April re-plan because (inthe reported words of MrNewell, that would have taken amiracle) and it was not going tohappen in relation to any otherre-plan because DB showed nointention of agreeing to any suchre-plan (or even making acounter-proposal to [Atos])."

233. In my judgment, the principal defect in this ingenioussubmission is that it is based on speculation. I considerthat the best evidence of DB's intentions in relation to

making any further payment to Atos is reflected in whatMr Newell said to Mr Bray on 16 May 2008 - assummarised in Mr Bray's e-mail of that date, the relevantterms of which I have set out at paragraph 146 above. Ihave little doubt that if Atos had threatened to suspendwork until the outstanding invoice was paid, DB wouldhave paid it without further argument. Even if DB haddecided to call Atos's bluff, and wait until it actuallysuspended work before making the payment, I considerthat it would have made the payment immediately thesuspension of work took place.

234. I have reached this conclusion partly because, as a matterof commercial reality, I very much doubt whether DB'smanagement would have been prepared to play for suchhigh stakes and risk losing the contract, and partlybecause, having seen and heard him, I did not considerMr Newell to be the sort of man who would take the veryserious step of continuing to withhold payment of theinvoice in those circumstances. He would haveappreciated exactly what was at stake.

235. Further, I have doubts as to whether Atos would havebeen prepared to suspend work simply because anoutstanding invoice had not been paid. The evidencefrom the Atos witnesses showed that if work wassuspended for any longer than one week it would becomevery difficult to put the project back into motion. Bysuspending work for anything more than a few days Atosmight well have put itself in a position where it could notresume work on the project without incurring furtherdelay and significant cost. Whilst the outstandingpayment was not insubstantial, being some £350,000, to acompany of Atos's size the possible benefit of achievingimmediate payment might well not have been worth therisk that any protracted suspension of work would carry. Ifind it difficult to believe that Atos and its lawyers didnot consider the option of exercising the right underclause 12.5 to suspend work until the outstanding invoicewas paid. I am sure that they did consider this option, butI suspect that Atos did not pursue it for the reasons that Ihave given.

236. For these reasons I am left in no doubt whatever that, byits conduct between 21 May and 6 June 2008, Atosevinced a clear intention not to be bound by the contractany further and thereby repudiated it. That repudiationwas accepted by DB in its letter of 9 June 2008.

The test for assessing a valid Change Request

237. This was a strongly contested issue. In his first report DrMartyn Thomas dealt with the question of increases inscope in the following terms:

"53. There are two types ofchange that may increase thescope of work in a project.

54. The first type are changesthat introduce functionality thatwas clearly outside the scope ofthe project when it was planned,and which may even have beenexplicitly stated to be out ofscope.

55. The second type are changesthat add scale or complexity tothe work that was legitimatelyenvisaged on the basis of thestated requirement, but that donot extend the requiredfunctionality into wholly newareas. These changes are oftencontentious because thecustomer may have understoodthe complexity from the start ofthe project and assumed that thesupplier did too and based anyestimates and plans on thisunderstanding, whereas thesupplier may legitimately haveunderstood the requirement to besomething far simpler than itsubsequently transpires that thebusiness actually needs.

56. . . .

57. One test for this second typeof scope increase could be to ask"is there a reasonable solutionthat meets the stated high levelrequirement, and at asignificantly lower cost or effortthan the minimum solution thatwould meet the businessrequirements as revealed by adetailed analysis?". If theanswer is "yes", then theadditional complexity is a scopechange of the second type,described above at paragraph55, and if it is material it shouldbe the subject of formal changemanagement."

238. Both experts agreed that Dr Thomas's paragraphs 53-55

correctly represented the position. These two differenttypes of scope increase are sometimes referred to aschanges in breadth and changes in depth, respectively.Changes in breadth are, effectively by definition, truechanges in scope. The difficulty in this case is that it isaccepted that many of the changes are changes in depth,and not changes in breadth: where there were clearchanges in breadth, such as in relation to Splitting, DBhas accepted that Atos is entitled to claim additional costunder the terms of the contract. Changes in depth aresometimes referred to as "scope creep".

239. I can understand how Dr Thomas's test might work if it isapplied to a business model that is fairly well understood,such as time recording and billing in a firm of, say,solicitors or accountants, where there might be a"minimum solution" that could meet high levelrequirements that involved relatively straightforwardprocesses but which would not meet a more elaborate setof requirements.

240. The difficulty here, as more than one Atos witnessaccepted, is that DB's operations are unique. It seems tome, therefore, that Atos (or any other supplier) was not ina position to form a legitimate view as to what DB wouldrequire or what might constitute a reasonable minimumsolution. For these reasons I cannot accept, in the contextof this case at least, that Dr Thomas's test is likely toprove an appropriate one for anything other than the moststraightforward changes.

241. It seems to me that the only test must be one that is casespecific to this particular transaction. If a businessprocess that DB says it requires can fairly be said to fallwithin the activity described in one of the documents (the"RDDs", which include the Architecture Blueprint) listedon the first page of Schedule 2 then, in my judgment, it islikely to be within the scope of the RDDs. For example,the process of Splitting (by which aggregated diamondsare split up into a number of boxes) obviously did not fallwithin the activities described in any of the RDDs, whichis why it became the subject of an agreed ChangeRequest.

The individual claims in relation to changes

242. I will address Atos's various claims more or less in theorder in which they are set out in Appendix 1 to theDefence and Counterclaim (but ignoring those for whichno sum is claimed). The numbers in the headings whichfollow reflect the paragraph numbers in Appendix 1.

The differences between South African countries (SACs)(1)

243. Paragraph 1.1 of Schedule 12 provided that there wouldonly be "minor configurations and customisation" toaddress the requirements of DTC International, DTCLondon, DTC Botswana, DTC South Africa and DTCNamibia.

244. I mention below various PRs in which there arereferences to differences in documentation and practicesof the various SACs, not only between each other butalso between themselves and London and DBInternational.

245. In relation to the differences between the SACs, MrAdelman said the following in his first witness statement:

"15. The perception following the trip toBotswana that there were no significantdifferences between the country'srequirements was reflected in the assumptionset out in the agreement between DTC andAtos (the "Contract"), i.e. that only a minorconfiguration and customisation was neededto address DTC International, DTC London,DTC Botswana, DTC South Africa and DTCNamibia requirements.

16. In practice, there were extensive andsignificant differences between the practicesand processes of the SACD users, whichresulted in additional work to capture theserequirements.

17. The customisation required for the SACsimpacted across the entire project. It wascertainly not just a case of there being adifference in the format of documentationthat was required. In some instances,particular aspect of the process were notrequired for a particular country, for anexample the Prepare Packets and PackagingGoods requirements did not apply toBotswana.

18. In other cases, the process was the same,but the way in which the task was carried outwas different, for example in Botswanagoods were not packed in Trunks Liners andPackets, instead they were to be moved inpots and tins."

246. Mr Adelman said that at some stage in early 2008 he wasasked by the Project Manager to record the differencesbetween the SACs that had become apparent during thefast-track requirement workshops and he set these out on

a spreadsheet. Mr Adelman estimated that he spent 15-16days in dealing with the differences between the SACs.In cross-examination Mr Adelman's evidence on thisissue was not shaken and I accept it.

247. I consider that, taking the evidence as a whole, there wasa breach of the assumption in relation to the differencesbetween the SACs. Atos claims that almost 450 man dayswas a spent dealing with the differences between theSACs. I strongly suspect that these hours include timespent dealing with all differences between the SACs, andnot just the differences that are outside the scope of thecontractual assumption. I regard it as virtually impossibleto arrive at the calculated figure to reflect the value ofAtos's claim under this head, but I am confident that theclaim has been significantly overstated.

248. Doing the best I can in the light of all the evidence thathas been given, I consider that a figure of about 200 mandays would be more appropriate. I include within thisfigure all claims by Atos in respect of the differencesbetween the SACs, even if they have been made in adifferent place in the Defence and Counterclaim. In termsof value, I assess this claim at somewhere between£125,000 and £150,000.

The assumption in relation to network bandwidth (2)

249. I consider that this was an item of expenditure that Atoswould have incurred in any event, for one reason oranother. On 13 September 2007 there was an internalAtos meeting attended by, amongst others, Mr Connor,the Technical Architect, in which he explained:

". . . that key decisions over howmuch the A and EAI architecture(modules) resides down southand how much in the UK, isdependent on the outcome of avisit by Atos to the Microsoftfacility in Reading, scheduled forthe 11th Oct, when Atos will [be]carrying out network tests,which will identify the requiredbandwidth."

250. When Mr Cotter was asked about this in crossexamination, all he could say was that Mr Connor musthave got it wrong and was very overoptimistic to thinkthat such tests could be carried out at that stage of thedevelopment of the software. I do not find this a verysatisfactory explanation.

251. The claim is in respect of tests that were carried out in a

performance laboratory in February 2008. About thesetests, Mr Roberts said (at Day 10, 98/22 - 99/2):

"A. Now, what I am saying hereis that if the architecture wasgoing to change with areasonably fundamental changeto having a workflow enginerather than a piece of code, thenreally we should go back andrevalidate that the performancewas acceptable and it didn'tnecessarily slow down the usersaccess."

252. In the light of this material, I consider that Atos's claimunder this head is unsustainable.

The introduction of the EDS (3)

253. The Enterprise Data Store was introduced by DB inDecember 2007. At paragraph 60 of his first witnessstatement Mr Aythora said this:

"In order to assist [Atos] and tomake it easier for [Atos] tointerface with other parts of theLegacy Systems and reduce theintegration complexity of theProject, in December 2007 [DB]decided to create a centralrepository known as theEnterprise Data Store ("EDS").One of the benefits of EDS wasthat, rather than having to buildinterfaces to lots of existingcomponents, [Atos] would onlyhave to create one datainterface. Another benefit wasthat the data formats could bestandardised. The creation ofthis "data warehouse" was asubstantial piece of workinvolving consolidating andtranslating data from a varietyof sources. The development ofEDS by [DB] was to take placeover a number of months. Thefirst set of deliverables wasaddressed by January 2008 andwork on EDS was generally donein a collaborative and timelyfashion between [DB] and[Atos]."

254. Mr McKendrick's evidence was to similar effect. He said,in his first witness statement, at paragraph 165:

"At around this time [December2007], [DB] and [Atos] wereworking together to define theEDS data model and to ensurethat the reference data wassufficient for the purposes of[Atos's] system testing. [Atos]had to inform [DB] what wasrequired in order that theirrequirements could beincorporated into EDS."

Neither Mr Aythora nor Mr McKendrick was cross-examined about either of these paragraphs. This was,perhaps, not surprising, because Dr Thomas hasconcluded that the introduction of EDS was not a breachof DB's obligations (1st report, paragraph 353).

255. On 3 January 2008 a Mr Dmitri Gryzlov, of Atos, sent aninternal e-mail to announce the coming into operation ofthe EDS and explaining how it would work. A reply fromAtos India the following day thanked him for theinformation and noted that the main challenge would beto simulate the environment for the EDS in India inexactly the same way as it was configured in the UK, sothat code written by Atos India during the developmentphase would work seamlessly in the testing environmentduring the testing phases without unnecessary codechanges.

256. In support of this claim Atos has not identified anycontemporaneous document in which there was anycomplaint by Atos to the introduction or operation of theEDS. However, in his oral evidence Mr Cotter said thathe thought that the introduction of the EDS was a tacticalploy by Mr Aythora to enable certain functionality to bedelivered more quickly, and that it was an expedient stepwhich would ultimately have increased Atos's effortwhilst producing a very clumsy system (Day 10, 40/10-14 and 41/1-4).

257. Mr Cotter was then shown an e-mail dated 16 May 2008from Mr Gryzlov to a large number of addressees,including Mr Cotter himself, in which he wrote:

"Dear all,

After numerous discussionsbetween [DB) and [Atos]architects, it has been finallydecided that EDS reference

tables from now on will beresiding inside the SCMSdatabase.

I have already created the EDStable structures inside SCMS -please use them in your newstored procedures henceforth . . .

. . .

Please let me know, if you haveany concerns or queriesregarding this change."

258. In a short reply on 20 May 2008 Mr Cotter wrote:

"A small clarification.

Copies of the EDS tables willreside in SCMS.

EDS is still owned by [DB] andare responsible for mastering thedata."

259. Faced with this, Mr Cotter was eventually driven to saythat he remembered going to speak to Mr Gryzlov, whosat just across the room from him, and explaining to himthe ramifications of the change. I do not accept thisevidence. It may be, as it turned out, that the EDS wasmore of a hindrance than a help, but whether or not thatwas the case (which I do not need to decide), I am quitesatisfied that it was introduced with the knowledge andagreement of Atos (or, at least, not in the face of anyobjection) and that DB's purpose in setting it up was thatgiven by Mr Aythora.

260. Accordingly, I find that the introduction of the EDS wasnot a breach of contract and does not give rise to anyclaim by Atos.

The changes in relation to finance requirements (4) and(6)

261. I have already mentioned that the issue of DB's financerequirements was a running sore throughout most of theproject. DB's finance department either did not know orwould not make up its mind as to what it wanted.

262. At paragraph 221 of his first witness statement MrMcKendrick said:

"On 11 February 2008 Liz Allansent a meeting invitation to

discuss the finance requirements,and, in particular, howstatements of account were to berecorded. After all of myprevious discussions and now,having "missed" the deadline for8 February 2008, it was clearthat the finance requirementswould be a change request and,most likely, chargeable."

A little later, at paragraph 237, he said, referring to lateFebruary 2008:

"By this time I was concernedabout the approach taken by thefinance team. It seemed to methat they were assisting in tryingto make the SCMS systemaccommodate changes whichwere not part of the originalscope and, even though we hadgiven [Atos] clear instructionsthat they should proceed on thebasis of the contract, this issuedid not seem to be closed. I wasworried that [Atos's] focus wasbeing diverted from more urgentwork."

263. In fact, the requirements of the finance department werenot signed off until 9 April 2008 and, possibly, not eventhen. I do not think that it was really in issue that theconduct of DB's finance department in insisting in havingcertain finance requirements included in the SCMS andin taking so long to finalise them was a breach ofcontract, in particular a breach of clause 6.1.2. The sumclaimed under this head is about £17,000. This is inaddition to the claim under CR 013.

The failure by DB in relation to the management of thedependency on the EDS and other matters (5)

264. There were originally three elements to this claim. Thesecond of these, in relation to Box Creation, is now nolonger pursued. Unfortunately, this makes any assessmentof the value of this claim difficult because the amount oftime spent on Box Creation is not separately identified inMr Culshaw's quantum schedule SWC 2 although one canisolate 8 man days spent by Mr Figoni.

265. It is also unclear to me how much of the time claimed initem 5 of the quantum schedule is attributable to theintroduction of EDS, rather than just the management of

the dependency on EDS.

266. For reasons which will become clear, I do not considerthat it is necessary to embark on the exercise of carryingout a detailed valuation of this claim (if, indeed, such ispossible on the material available) because it is sufficientto note that there is a disputed claim under this head, thetrue value of which is probably in the region of £25,000-£30,000.

DB's failure to meet its obligations with regard to coreSCMS (6)

267. In spite of its title, this is the claim in respect of theunavailability of the DB staff (as Mr Culshaw explainedin paragraph 69 of his 1st witness statement). I havealready dealt with this claim in so far as it relates to theperiod up to the end of 2007. However, in relation to2008 I consider that it is very difficult to make a sensiblevaluation of this claim because it is impossible todisentangle the additional time spent because of furtherelaboration of the requirements (being changes in depthwhich I do not consider to be increases in the scope ofthe work for which DB is liable under the contract) andthe additional time spent on matters for which DB maybe liable.

268. Of the total number of hours claimed for item 6 in MrCulshaw's quantum schedule, which is 433 man/days intotal, I consider that 205 man/days is attributable to 2008(328-161+38 - see paragraphs 102-104 above). This is alittle under 50% of the claim under this head with acorresponding claimed value of the order of £150,000.

269. I do not consider that I have sufficient information toform a view as to what proportion of this £150,000represents recoverable claims by Atos, but in the light ofmatters considered in this judgment I consider that thishead of claim could properly have had a value attributedto it of between £50,000 and £100,000.

The failure to provide regular access to its developmentand BA resources (9)

270. This claim is for 20 man days spent during March 2008and by four BAs: 5 man days apiece by Mr Adelman andMr Figoni, and a further 10 days by two other BAs.

271. In a document prepared by Atos at the end of February2008 entitled "DTC Positioning Document", Atosprepared a summary of potential claims that it consideredcould be made against DB. The first issue which wasconsidered directly attributable to DB was described as"Target operating model not sufficiently defined". This

was broken down into the following subheadings:

(1) Delays to decision-making.

(2) Volatility in decision making.

(3) Scope creep (65 original processrequirements identified in October 2007. ByJanuary this had grown to over 100).

(4) Constraints on input from key DTCresources

(5) Operating model differences betweenterritories greater than initially represented

(6) Delays in provision of vital information

(7) Unilateral and un-communicated changesto architectural elements causing AO rework.

272. The final section of the document was headed "Issues notdirectly attributable to DTC (but which have impactedAO delivery/costs/effort). The one item shown here wasthat the volume of business analysis was greater thanforecast, in that whilst 2 BAs were planned, 10 wererequired. In evidence, Mr Cyril said that this entry in thedocument had been prepared by Mr Adelman, as hadother entries in the document which had Mr Cyril'sinitials, FC, against them.

273. One such entry was under the heading "Scope creep",where Mr Adelman had written:

"Other than those which arealready the subject of a CR, I donot see any of these being as aresult of scope creep. They werejust not included as a result ofinadequate time spent onplanning and estimating."

This comment accords very closely with the view that Ihave already reached in relation to the claim for changesin process requirements. In addition, it appears to be thebasis for Mr Adelman's conclusion that the significantincrease in the number of BAs was a cost that Atosshould bear itself.

274. I consider that Atos does not have a claim for the cost ofthe additional eight BA's that were brought into theproject. In my judgment, the need for nearly all of thoseadditional BAs arose because Atos had significantlyunderestimated the complexity of DB's processes and theresponsibility for that underestimate is one that, very

broadly, must be borne by Atos (save for those caseswhere there was a genuine increase in scope). If Atos hadappreciated the complexity of DB's processes from theoutset, I consider that it would have substantiallyincreased its planned resource of BAs - if not up to atotal of 10, probably by a further 4 or 5. If these extraBAs had been introduced from the outset, then I doubt ifa further 7 or 8 BAs would have been required in January2008.

275. I consider that Atos probably has a claim under this head,because it was put to extra cost by the lack of readyaccess, but I would not assess it as being worth more than£20,000. This head of claim is closely connected withthat under (16), and I have borne this fact in mind.

The failure to provide a list and specification of devicesand peripherals (15)

276. This is a claim for some 26 man days in the sum of about£20,000. 50% of the time claimed is for BAs, and 50%for designers. The comments that I have made in relationto the previous claim largely apply to this claim also.

277. I consider that Atos probably does have a claim underthis head, because I am satisfied that there were delays byDB in providing the relevant information, although ifAtos had had additional BAs on the project from theoutset, a substantial part of the amount claimed under thishead would have been part of the project cost. The claimis again for just under £20,000, and I assess it is having avalue of about £10,000.

The failure to provide access and make available key DBresources (16)

278. This is a claim for a total of 130 man days wastedbetween January and June 2008. The sum claimed is justover £110,000. I have considerable reservations about themanner in which this claim has been assessed for thereasons that I have already given in relation to the claimfor time wasted between September and December 2007.

279. It is again very difficult to separate out time which hasreally been wasted from time that is really attributable tothe increased complexity of the requirements. In thesecircumstances the court can only make an informedassessment of the probable value of this claim, and myassessment is that it probably had a true value of between£25,000 and £50,000.

The failure to provide access to the Legacy Systems (17)

280. This claim is closely tied up with the following claim,claim 18, and it is convenient to deal with them together.

The sum claimed for both claims is a little under £30,000.

281. There is relatively little evidence on this claim and, givenits relatively modest value, I do not consider that itjustifies exploration in depth. I consider that the partieswould probably have attributed a value of between£15,000 and £20,000 to these two claims.

The failure to provide technical documentation in respectof the Legacy Systems (18)

282. I have dealt with this under the heading of the previousclaim.

The failure to provide business processes that werecomplete or contained sufficient detail (20)

283. This claim is in respect of the level 5 process maps thatwere inaccurate or incomplete. I reject this claim in itsentirety, because the inadequacy of the level 5 processmaps became apparent during the IAP and I cannot seehow Atos can found a claim on the basis of matters thatwere known to it at the time when it entered into theContract.

284. It seems to me that this is a clear example of a lack ofliaison between the Atos employees who wereresponsible for carrying out the IAP and the commercialside who were responsible for arriving at the estimate forthe contract price. In short, it was a failure of internalmanagement for which Atos has no one but itself toblame.

Changes to Process Requirements - PR 12(21)

285. The RDDs set out in Schedule 2 to the Contract eachcontained one or more Process Requirements ("PRs"),which in turn contain a succession of steps. Each steprepresented either an action by the operator (usuallyinteracting with the computer system in some way) orsomething done by the system itself. The PRs sometimesincluded alternative scenarios to deal with situations thateither did not occur often or might be unexpected.

286. PR 12 is part of the RDD known as Rolling ManagementRequirements. I take it separately from the other PRsbecause it was explored in some depth in the course ofthe evidence and is therefore a good PR to take by way ofexample. In version 1.0 of this document, which wasapproved on 10 October 2007, the Rolling Managementwas divided into four PRs: PR 11, PR 12, PR 13 and PR14. PR 12 was "Prepare and Layout Goods for Rolling".In version 1.0 PR 12 consisted of 16 steps, each onedescribed in a few lines of text. Steps 3 to 6 concernedre-pricing.

287. Following the fast track requirements gatheringworkshops in January and February 2008, version 2.0 wasissued on 5 February 2008. In this version PR 12 wasreduced to 12 steps: steps 3 to 6 of version 1.0 had beenremoved and were replaced by a new step 3 - "EstablishOutput Valuation IDs". However, the description againsteach step had been expanded enormously in version 2.0.As an example, Dr Thomas has pointed out that step 2went from four lines in version 1.0 to almost four pagesin version 2.0. Dr Thomas described version 2.0 as"substantially more complex than version 1.0 despitehaving the same number of steps". In fact, it did not havethe same number of steps: as noted above, there were 12steps in version 2.0, not 16. Dr Thomas said also that theactivities in PR 12 differed significantly between differentDTC entities in version 2.0, but not in version 1.0.

288. I do not wholly follow the last point made by Dr Thomas,because the only references that I can find in version 2.0to differences between different countries are in theAssumptions. Assumption 2 to the module as a wholereads as follows:

"Through the login (seeAssumption 1) the system can:

detect ifrolling isthereforebeing done ata specificEntity (i.e.:specific LSOor at DTC-Ilevel) andhence there isno need forthe user toenter/selectDTC-I or LSOas part of therollingprocess

ensure thatonlyDocumentsrelevant to thespecific LSOor DTC-I areavailablethrough RMSie: if rolling is

being done atSouth Africathen they areonlyselecting/rollingDocuments,and hencegoods, thatrelate to SouthAfrica and arenot picking upones forNamibia forexample. Thisis NFR 3.1.3."

Assumption 2 to PR 12 reads as follows:

"Within PR 12 the system cannotselect the default FRG Table asthese are different for DTC-I/LSOs (currently there is a FRGTable for DTC-I, one for LSO-South Africa, one for LSO-London for Canada and one forthe rest of the LSOs).

Note: This RDD describes theFRG Table/Levels and Groupsas they currently exist as it isunderstood that this will beretained in the new system."

289. It seems to me that what these are saying is that thesystem will detect whether the rolling is being done andwill therefore ensure that only Documents relevant to thatplace are available through the system, whereas the userwill have to select the FRG Table that is appropriate,rather than being able to rely on the system to select theappropriate table (because there is no similar matchbetween the appropriate FRG Table and the differentcountries). However, the point was made more clearly byMr Adelman in his first witness statement. He explainedthat a significant issue that had to be addressed was thedifferent way in which the rolling and weighingprocesses were carried out in the different DB entities.The question of the extent to which there were differentpractices in the South African Countries is an issue withwhich I deal elsewhere in this judgment.

290. The other point raised by Mr Adelman that is relevant toPR 12 was in relation to re-pricing. At a meeting on 21November 2007 Mr Adelman and Mr Figoni discussedthis topic with representatives from DB. The Discussion

Record contains the following entry:

2) Changing Prices

Prices may change at any pointin the cycle. When this occurs anew generation of the price bookwill be created and the selectedprice book for the current cyclewill be changed. Geoffsuggested that changing the pricebook, should result in automaticrevaluation of all of the stock.This was agreed to be moreappropriate than any need forspecific pipeline milestonerevaluations. As a consequence,the re-pricing requirement withinrolling management can beremoved. We discussed theprospective problem that goodsmay be allocated to a process ata time that the price book ischanged. Ralph stated that thestock recorded from the outcomeof the processes to which therewere allocations wouldautomatically be valued usingthe new price book. Weconsidered ways to ensure thatthis was not an issue but this willneed to be addressed in moredetail."

291. The effect of this, according to Mr Adelman, wasdescribed at paragraph 76 of his first witness statement asfollows:

"This significantly extended theanalysis period as Atos had toremove relevant steps in theprocesses and change the pricemaintenance and valuationrequirements. This impacted notonly on the Valuation processesbut also Rolling Managementand Prepare and Hold Sightwhich previously had re-pricingprocess steps."

292. However, the Requirement Notes for version 1.0 of PR12 contained the following entry against the subject ofFinancial Impact: "There is still a need to capture theimpact and required processing when goods are repriced.

Credit/Debit notes may be required and the BV of stocksamended accordingly". This referred to steps 3 to 6 ofversion 1.0 of PR 12 which were subsequently removed.It is not at all obvious, and I decline to infer, that theelaborated requirements for those steps would have beenany less complicated than those that were substituted inthe later versions of PR 12. Leaving aside the question ofwhether or not this change amounted to a change inscope, to which I turn in the following paragraphs, I amnot satisfied that this change actually increased theoverall work involved. It may have done, but there is noevidence of it.

293. The next question is whether the removal of steps 3 to 6in version 1.0 and their replacement by step 3 in version2.0 constitutes a change in the scope of the work requiredunder the contract. Before dealing with this, I should sayby way of introduction that PR 12, version 2.0, provides agood example of the complexity of DB's operations andthe skills required of the BA (in this case Jayne Koslow,apparently a highly regarded BA at Atos) who has toidentify and analyse (or capture) the relevant businessprocesses.

294. It illustrates also the practical difficulty of applying DrThomas's test in this case. No objectively reasonablesolution that would meet the high level requirement setout in version 1.0 has been identified (and, I suspect, isnot capable of being identified) that Atos couldlegitimately have thought would meet the RDD forRolling Management as it stood in PR 12, version 1.0, atNovember 2007.

295. I am therefore unable to understand how Dr Thomas hasapplied his own test to this PR, as he says he has done(see paragraph 443 of his first report: "Applying the testin paragraph 57 above . . ."). So far as I can tell, he hassimply compared version 2.0 with version 1.0 andconcluded, probably correctly, that the level of detail inversion 2.0 shows that the PR was very much morecomplex than was ever envisaged. However, I do notthink that this reasoning (if that is what it was) stands upto analysis. Version 1.0 was known to be at a very highlevel of generality because Atos had been unable toachieve more than this in the time available during theIAP. The fact that it was in headline form only in itselfprovides no clue to the actual level of detail that will befound to be contained within the identified steps whenfully analysed. Unless there is some identifiablereasonable minimum solution that a supplier couldlegitimately assume would meet DB's requirements, asset out in version 1.0, then the detailed requirements aseventually captured will be what they are, no more andno less. If, in those circumstances, Atos contracts to

provide a system that will support those detailedrequirements, whatever they turn out to involve, then -absent any contractual safeguards - it seems to me that ittakes the risk that they will turn out to be more, ratherthan less, complex than it had anticipated at the outset.

296. In the case of PR 12, I consider that version 2.0represents an elaboration of the requirements that hadbeen identified in headline form, in version 1.0, at thetime when the Contract was made and consequently thatthey do not represent a change in scope.

Changes to Process Requirements - other PRs (excludingSAC related PRs) (21)

297. The time available at the trial did not permit examinationof the PRs except on a sample basis. I have dealt with PR12 in some detail because that was a PR that was exploredat some length during the trial.

298. In relation to PRs 2, 4, 5, 6, 14, 15, 17, 18, 23, 26, 31, 36,37, 42, 53, 60 and 61, Dr Thomas has in each case carriedout a comparison between the complexity of the finalversion of the PR as against the version that was currentwhen the contract was entered into and, if the laterversion was found to be significantly more complex thanthe version that existed at the time when the contract wasentered into, Dr Thomas has concluded that the changesrepresented a change in scope. Although he says in eachcase that he has applied the test set out in paragraph 57 ofhis report, as was the case with PR 12, he has notidentified any lesser solution that would have met thehigh-level RDD that existed at the time when the contractwas made.

299. I am therefore left to conclude that what in truth DrThomas has done is no more than an analysis of relativecomplexity as reflected in the detail of the various stepsbetween the version of the PR in force at the time whenthe contract was made and the final version. For thereasons that I have given in relation to PR 12, I considerthat this of itself does not indicate that there wasnecessarily a change in scope. I am therefore not satisfiedthat, even applying the test proposed by Dr Thomas for achange in scope, any of these PRs would have met it.

300. In respect of PRs 31 and 42, Dr Thomas has noted thatthere was added functionality during the course of thework. In the case of PR 31, there is a brief DiscussionRecord dated 5 February 2008 in which it was confirmedthat the credit note should contain the same details as theinvoice and that it would be produced by the Buy Backprocess. It was noted that a further meeting would berequired with the relevant parties in order to discuss the

data captured in the invoices, with a view tostandardising this as much as possible. In his first witnessstatement, at paragraph 121.1, Mr Adelman said that therequirements in respect of PRs 23, 25, 26, 27 and 31"changed significantly" as a consequence of a number ofissues, which he lists. The only issue in the list thatappears to be relevant to PR 31 is: "Invoice and creditnote printing and timing options" and he cited by way ofexample the Discussion Record that I have mentioned.On the basis of this evidence and the Discussion Record,I am unable to conclude that what emerged on detailedanalysis of this PR amounted to a change in scope.

301. In relation to PR 42, Dr Thomas noted that the "MainSuccess Scenario" (which contains the steps) increasedfrom 9 to 19 steps between version 1.0 and version 1.5.In the Version Control Summary it was recorded thatversion 1.4 was produced on 22 November 2007"following walkthrough". This was the second walk-through for that PR, the first having been held inSeptember 2007. There is no reference to any DiscussionRecord. Mr Adelman, at paragraph 123.1 of his firstwitness statement, said that PR 42 was affected by thecomplexity of the SKU Selection Criteria for the newlycreated fixed price model, as recorded in a DiscussionRecord dated 9 November 2007. The latter documentdoes make the requirement more elaborate, but it seemsto me that the detailed complexity that may have emergedin version 1.5 was probably the result also of the walk-through in November 2007. This seems to me to be partof ordinary design development, and I can find nothing inthe material that I have seen that indicates that there wasany change in scope, even if there was addedfunctionality in respect of the SKU selection as DrThomas says.

302. In relation to PRs 3, 20, 21, 25, 27, 59, 62 and 63, DrThomas has concluded that there was no increase in scopeand accordingly I do not consider these PRs any further.

303. In relation to the PRs for Framework and for Export forAggregation, Dr Thomas failed to identify any relevantbackground for supporting information and was thereforeunable to reach any opinion as to whether the workclaimed should be properly considered to be a change.This was an entirely proper approach for an expert to takeand I, like Dr Thomas, can reach no conclusion on thisPR.

The introduction of new Process Requirements (19)

304. In relation to PR 68, although it was first created after thecontract was entered into (and therefore not included inSchedule 2), Dr Thomas said that "the need for a way to

maintain year, cycle and price book data was reasonablyforeseeable but this PR is more complex than wouldreasonably have been expected at the time of Contractsignature" (paragraph 407). It seems to me that if thisprocess was foreseeable from the outset, then the fact thatit proved more complex than envisaged is irrelevant. DrThomas has not said that there was any simpler way inwhich this process could have been carried out and so thealleged change does not satisfy his own test. I find that itwas not a change. The same reasons and conclusion applyalso to PRs 80, 126 and 127.

305. In relation to PR 72, Size Band Maintenance, Dr Thomassaid in his first report that this was not reasonablyforeseeable at the time when the contract was signed (atparagraph 411). However, in cross examination he saidthat it clearly fell within an area that was covered by oneof the RDD's and "therefore is, I would say, a depthchange rather than a breadth change" (Day 13, 105/16-20). He then agreed that it was a paradigm example ofone of the consequences of the failure to identify DB'srequirements in sufficient detail at the outset. In the lightof this evidence, I do not consider that this PR met DrThomas's own test for a change in scope. In my view, itfell within the scope of the initial requirements.

306. PR 75 was part of the Audit Requirements. Dr Thomasconsidered that the May 2008 version of PR 75 was notsignificantly different from the audit requirementdescribed in AN-RQ006 in August 2007 version, but hesaid that the latter showed substantially more complexitythan would reasonably have been expected from theArchitecture Blueprint. Again, it seems to me that if thisprocess was foreseeable from the outset, then the fact thatit proved more complex than envisaged is irrelevant. DrThomas has not said that there was any simpler way inwhich this process could have been carried out and so thealleged change does not satisfy his own test. I find that itwas not a change.

307. PRs 82-93 and 95 were part of the EnquiriesRequirements. This document was first created in January2008, well after the contract was entered into. Theserequirements were therefore not included in Schedule 2.Dr Thomas says that the Architecture Blueprint wouldhave indicated that some ability to make enquiries wasrequired, but that the specification at the time when thecontract was made would have allowed a significantlysimpler implementation than that defined in these PRs.Although Dr Thomas has not specified of exactly whatthe original scope would have consisted, it seems to methat he has followed the approach of his own test. Hisview is that about one third of the cost claimed wouldhave been incurred by Atos in any event in order to meet

the scope that they could legitimately have expected.

308. Since these PRs clearly did not form part of the RDDs setout in Schedule 2, in the circumstances I consider thatthey do constitute a prima facie change in scope.However, for the reasons given by Dr Thomas, I acceptthat some provision should have been made in relation toenquiries. I have no reason to conclude that Dr Thomas'sestimate of the quantum - about 65 man days - is not areasonable one and so I accept it. Since this isdevelopment work, applying Dr Thomas's rate of £270produces a value of about £17,500.

309. There are several PRs where the need for elaboration orchange arose as a result of processing differencesbetween the SACs that emerged on more detailedanalysis. I have dealt with these PRs separately (they arePRs 70, 71 and 74). In addition, Dr Thomas did notconsider PRs 69, 73 and 78 to be changes and so I do notconsider those further.

310. Of the three remaining claims in this category, the claimin respect of FWK (Framework) is, in the opinion of DrThomas, partly - to the extent of about one half - inrespect of work that would have been required in anyevent. Since the other half is justified on the basis of DrThomas's conclusions in relation to the other PRs, Icannot say that there is any significant element of it thatwould survive the findings that I have set out above. Itherefore attribute no value to this claim. The same goesfor the claim described as being in respect of "St Supp".As to the claim described as being in respect of "CM", DrThomas was unable to identify the basis for this claimand, accordingly, neither am I.

The Architectural and Code Review (23)

311. This claim is for a little under £100,000 for time spentduring April 2008 in preparing a formal response to DB'sArchitectural and Code Review. In fact, no formalresponse was ever submitted to DB. I note with someinterest that it includes 10 man days by Mr DavidCunningham during April 2008, which is before he hadeven been called in to investigate the state of thearchitecture.

312. I reject this claim in its entirety. Although I do notcondone the manner in which DB sprang this review ofthe technical architecture and coding upon Atos (aboutwhich I accept the evidence given on behalf of Atos),there is no doubt in my mind that, as at the beginning ofApril 2008, the state of the development of thearchitecture and of the coding was unsatisfactory, as MrCunningham's investigation in May 2008 clearly showed.

313. As to the claim for the time spent on workflowassessment, I have already considered the problem of theworkflow engine elsewhere in this judgment. I havealready concluded that the need to change to a workflowengine was the result of the initial failure by Atos toappreciate the complexity of DB's processes. Theassessment that had to be carried out in April 2008 wasthe direct result of this initial lack of understanding of theproject. For reasons that I have given elsewhere in thisjudgment, I consider that the contractual risk for thatrested with Atos.

Change Requests - Appendix 1, claim (24)

314. In this section of the judgment I will consider the 46Change Requests ("CRs") in respect of which Atos havemade claims against DB.

315. In respect of CR 011, CR 016, CR 021, CR 022, CR 023and CR 033, DB accepted that these were, in principle,chargeable, although no figure was agreed. DB submitsthat the figures claimed by Atos in this regard would nothave been the agreed figures: they say, correctly, thatthey would have undergone a process of negotiation asenvisaged by clause 5. However, had DB behavedproperly - as one hopes they would have done, I considerthat these CRs would have been valued and agreed inapproximately the amounts at which I have arrived in thetable below.

316. I accept that an appropriate method of considering howmuch the CRs would have been worth (once negotiated)might be to correlate - so far as one can - those particularCRs with how much ThoughtWorks was charging forproviding the same functionality (obviously save in thosecases where what is being claimed is not the developedfunctionality itself but rather detailed analysis).

317. It emerged from the cross examination of Dr Thomas thatin some cases this comparison suggested much higherfigures were being claimed by Atos then ThoughtWorksascribed to the same work. I bear this in mind whenassessing the value of the CRs.

318. Before turning to the individual CRs, I will, forconvenience, set out the relevant provisions of clause 5again:

"5.4 The Customer may request the Supplier(and the Supplier may recommend) to supplyAdditional Services from time to time. SuchAdditional Services shall be classed as a"Change" for the purposes of this Agreementand, subject to the Customer and the

Supplier signing a change control note("CCN"), the Supplier will provide theAdditional Services to the Customer from theeffective date of the CCN. Unless otherwiseagreed in writing, the agreed AdditionalServices will become part of the Services.

. . .

5.8 The parties shall bear their own costs inconnection the preparation of alldocumentation and negotiation of Changes."

Additional Services were defined as meaning "additionalservices to be provided by the Supplier as agreedbetween the parties pursuant to the Change ControlProcedure".

319. It seems to me that the application of these provisionsmay depend on which party initiates the CR. In theordinary course of events I consider that clause 5.8 mustapply in every case to the initial costs of the party whichhas initiated the Change. However, it does not follow thatit must also apply to the Supplier's costs in every casewhere the Supplier is asked to investigate theimplications of a potential Change or to prepare anImpact Assessment.

320. Schedule 10 to the Contract provided that the parties wereto follow the Change Control Process described in thedocument "Change Control Process Version: 1.0Baseline" dated 24 September 2007. This document is noteasy to understand, but under the heading "Initialacceptance and prioritisation" it says:

"The Change Request should contain sufficientinformation to allow the Change Control Board to assessthe importance, relevance and potential impact of theChange.

However, most changes willrequire detailed investigationbefore the Change ControlBoard can make a decision. Ifthe Change Control Boarddecides to authorise theinvestigation, it determines itspriority and records its decisionon the Change Request togetherwith any change in preferredRelease, where appropriate ..."

321. Under the heading "Management of Impact under thedirection of Change Control Board", the document says:

"The Change Control Board willmanage the impact analysis andoutcome proposals of ChangeRequests.

. . .

The Configurations Librarian(PNO) will assist in determiningthe items that require changing.However the Change Managershould ensure that no stone isleft unturned in identifying itemsthat may be impacted."

322. In his witness statement, Mr Cyril said that he revised thechange control process in conjunction with DB, in theform shown in a flowchart contained in the bundle, andthat the change control process had the following stages:

• Initial Evaluation: this would be referred tothe Change Control Board to evaluatewhether it was a change or not and, if so,whether it was something that should beinvestigated further by way of an ImpactAssessment.

• Impact Assessment: at this stage Atos wasto carry out a preliminary review of theChange in order to give a firm estimate forthe Detailed Assessment stage and thenindicative estimate in respect of the Design,Development and System Testing Stage.

• The Detailed Assessment/Detailed analysis:this was the detailed assessment of theproposed Change to be carried out by Atos.

323. It seems to me that the three stages of the process set outabove, save possibly for the first, do not fall within clause5.8 of the Contract. I consider that the costs that arereferred to in that clause are the costs of putting togetherthe initial Change Request and the time spent innegotiating the value of the change.

324. However, if the CR is not initiated by Atos, then it willonly incur costs in relation to the CR if it is specificallyrequested to carry out work on a possible CR by DB.Such a request would, in my judgment, be a request tosupply Additional Services under clause 5.4.

325. If, for example, DB asked Atos to carry out an impactassessment of the effect of a change that DB wasconsidering, then Atos would be entitled to be paid forthe work carried out in preparing that impact assessment.

326. I now propose to consider each of the CRs, apart fromthe two that are agreed (CRs 003 and 008), bearing theseprinciples in mind and the respective submissions of theparties (in particular the very helpful table that isappended to Atos's closing submissions), and Isummarise my conclusions in the following table.

CRNo

Observations Valuation

CR001

This CR was initiated by DB. It was subsequentlyovertaken by CR 003 and therefore closed. SinceDB requested the Impact Assessment, it shouldpay for the work carried out at its request whichwas subsequently rendered abortive. I accept that5 days work prior to termination is reasonable. Iaccept Atos's figure. There may have been somework after termination (possibly 8 days).

4,722

CR002

This CR was initiated by DB. It is confined tohalf a day's work for investigation only. Iconsider that this is reasonable and I acceptAtos's figure.

472

CR004

This CR was raised by Atos. The final claim isfor half a day's work for investigation only. Ivalue it at nil.

0

CR005

I consider that this was probably a legitimatechange. Whilst there would have been a need forperiodic re-calibration of scales, the need to do iteach morning and each afternoon might notreasonably have been foreseen. In an e-maildated 6 April 2008 Mr McKendrick appeared toaccept this. I accept Atos's figure (which is onlymarginally higher than the figure suggested byDB). There may have been some work aftertermination.

17,287

CR006

As for CR 004. 0

CR007

As for CR 004. 0

CR009

This has been valued by Atos at nil. 0

CR010

DB agreed that this IA needed to be carried out.Accordingly I consider that DB should pay forthe work that was done before the CR wasclosed. I accept Atos's figure. There would havebeen some work after termination (possibly 15days).

5,666

CR011

It was agreed that in principle this CR reflected achange in scope subject to value - which was notadmitted. The IA was carried out and assessedthe impact as 65 man days and 10 weeks delay.The IA is not a long document but went through

14,400

three versions. Dr Thomas says that no work wascompleted after the IA, yet the claim is for 1½days for the IA and 65 days thereafter. I can dono better than to accept the value suggested byDB of £14,400. There may have been some workafter termination.

CR012

The 1 day's work on this CR appears to havebeen requested by DB. I accept Dr Thomas'sfigure.

472

CR013

This is the CR for Finance Requirements. DBdisputes liability on the ground that it is excludedby cl 5.8. I reject this (for the reasons givenabove). I accept the estimate of Dr Thomas.There would have been some work aftertermination (possibly 44 days).

30,382

CR014

This CR is for Invoice Tracking. DB submits thatnothing is due because it was closed. However,the CR was requested by DB and a substantialamount of work was evidently carried out beforeit was decided to close it. In the draft IA dated 31March 2008, the impact was assessed at 45 mandays to capture the requirements and a further250 man days development and testing. Thisimplies that these were estimates of futureresources. The IA was closed on 2 April 2008, bywhich time it is self-evident that a further 45 dayswork (as claimed by Atos) could not have beencarried out. I do not accept the claim of 45 daysbut I consider that the preparation of this I musthave taken more than the 3 days shown as "IADays". I assess it at 15 days, or one third of theamount claimed.

15,110

CR015

This CR seems to have been initiated by Atos. Itis for half a day's investigation only. I thereforereject it for the reasons given above.

0

CR016

It is accepted that this is chargeable. In theabsence of a credible figure from DB (Dr Gifkinssuggests about £5,000 - which is too low), Iaccept the revised figure put forward by DrThomas. There may have been some work aftertermination.

15,074

CR017

Nil claimed. 0

CR018

Nil claimed. 0

CR019

DB has admitted a figure of £19,675, but Atosdoes not accept that this is a fair figure. Atos saysthat 25 days was agreed (at £19,675), but that itspent a further 26 days (Mr Ghalib). It is clearfrom the documents that substantial work wasdone and, since Dr Thomas has accepted a figureof 45 days all told, I accept that figure.

42,498

CR Atos was asked to proceed with an IA to ensure 1,417

020 that there was no impact. The 1½ days claimed isreasonable.

CR021

DB asked Atos to fast track this CR, but it wasthen put back to bundle 3. I accept Atos's figures.There may have been a little work aftertermination.

1,802

CR022

This CR is accepted by DB in principle, althoughno figure has been agreed. DB has put forward nocase as to the value of this CR, and I accept thereduced figure put forward in Atos's closingsubmissions. There would also have beensubstantial work after termination (which I assessat 125 days).

20,057

CR023

This CR is accepted by DB in principle, althoughno figure has been agreed. Again, DB has putforward no case as to the value of this CR, and Iaccept the reduced figure put forward in Atos'sclosing submissions. There would also have beensignificant work after termination (which I assessat 35 days).

20,768

CR024

Although this CR has been classed as an ER, theChange Control Board did ask for an IA on 14March before the CR was closed on 2 April 2008.I accept that there was 1 day's work.

944

CR025

Nil claimed. 0

CR026

Nil claimed. 0

CR027

This CR is related to the audit requirements forSplitting, so it is therefore outside the originalscope and I accept the reduced figure put forwardby Atos. There would also have been substantialwork after termination (50-60 days)

44,890

CR028

Nil claimed. 0

CR029

The documents show that DB strongly objectedto Atos's estimate of the development timerequired for this CR, but did not challenge that itwas a change. The claim includes 19 days thatwould have been post-termination work. I assessthis on the basis of the 13 days pre-terminationwork estimated by Dr Thomas. There may havebeen work post termination.

12,277

CR030

I can find no evidence that this work wasrequested by DB. I therefore value it at nil.

0

CR031

This CR was classified as an ER. Mr Culshawaccepted in evidence (Day 8, 114/3-25) that itwas agreed that the time that the designation"ER" indicated work that was not a change inscope, but an elaboration of the existing scope. Inaccordance with that agreement, I value this CR

0

at nil.

CR032

Although 1 day's work is claimed for this CR, Ican find no evidence that this work was requestedby DB. I therefore value it at nil.

0

CR033

This CR is accepted by DB in principle, althoughno figure has been agreed. DB has put forward nocase as to the value of this CR, and I accept theclaim for 1 day's work.

944

CR034

As for CR 031 above. 0

CR035

As for CR 031 above. 0

CR036

I accept Mr McKendrick's evidence in his secondwitness statement that this was not a change. Itherefore value it at nil.

0

CR037

This CR is related to Splitting and I accept that itis a change. I accept the reduced figure putforward by Atos. There would also have beensubstantial work post termination of about 90days.

48,454

CR038

The claim by Atos includes substantial work thatwas to be carried out after termination. I havetherefore taken the value of the work carried outbefore termination, as assessed by Dr Thomas.There would also have been substantial work posttermination of about 120 days.

20,305

CR039

As for CR 031 above. 0

CR040

As for CR 031 above. 0

CR041

This CR was raised by DB. I accept that Atosshould be paid for half a day's work.

472

CR042

As for CR 041 above 472

CR043

I accept that this was a change for the reasonsgiven by Atos in its closing submissions (atparagraphs 308-313, 314). I accept the figuregiven by Dr Thomas. There would also have beenwork after termination (25 days)

11,932

CR044

I accept that this was a change for the reasonsgiven by Atos in its closing submissions (atparagraphs 308-313). I accept the figure given byDr Thomas. .There would also have been workafter termination (30 days)

13,583

CR045

As for CR 031 above. 0

CR046

As for CR 031 above. 0

TOTAL: 344,400

327. As I have noted above, in the case of several CRs therewould have been work, in some cases substantial work,during the unperformed period of the contract. It is notpossible to make a precise estimate, but doing the best Ican and allowing for some duplication I assess thatfurther work as being in the region of 500 man days or,adopting a crude composite rate, having a value of about£250,000. In other words, this is the additional cost thatwould have been incurred by DB if the Contract had notbeen terminated.

DB's loss

328. DB's claim, as pleaded, is made up of the followingcomponents:

The costs associated with the work which it carriedout in modifying its Legacy systems

454,459

DB's IT staff costs related to the ongoing support ofthe modified Legacy system during the period ofdevelopment, and the cost of participating in the building of areplacement system

1,100,399(423,522+676,877)

The costs associated with a replacement system (i.e.instead of that which would have been deliveredunder the Contract had it not come to an end), asfollows:

The cost of building the replacement system, basedon a quotation from a third-party supplier(ThoughtWorks)

3,946,425

DB's IT management costs in respect of the buildingof the replacement system

195,147

DB's business staff costs relating to the building ofthe replacement system

1,268,556

Travel and accommodation for DB overseas staffvisiting London

78,855

Travel and accommodation for DB London staffvisiting overseas DB operations

166,599

Loss of savings: DB claims that it has been deprivedof savings and process efficiencies which it wouldhave enjoyed using the SCMS functions whichwould have been present on the contracted softwarewhich AO should have provided

20,000

Additional interest charges arising from the need topurchase intakes 2 days early (based on a 10% rate ofinterest)

1,459,314

The claim for the upgrade of the legacy system

329. Following the termination of the contract on 6 June 2008DB took prompt steps to upgrade its existing legacysystem so that it would be able to support the move toBotswana. By that stage the financial crisis had notoccurred and DB's concern was to achieve the movementof the aggregation process to Botswana as soon aspossible after the end of December 2008. It was clearlynot going to be possible to procure a replacement systemfrom an alternative supplier within such a short time andso I accept that the reasonable course for DB to adoptwas to upgrade its legacy system so that it could operateon those until it could put in place the replacementsystem.

330. The modification to the legacy system took place betweenJuly 2008 and at the end of January 2009 and themodified system was delivered at the beginning ofFebruary 2009. I find that in taking this course DB actedreasonably to mitigate its loss. At the time when therelevant decisions were taken the financial crisis had notbroken and, by the time it did, the upgrade of the legacysystem was well underway. As I understood the position,Atos did not challenge DB's right to recover the costs ofupgrading the legacy system, subject of course todeducting the costs which it would have incurred in anyevent if the contract had not been terminated by Atos.

331. In addition to the cost of upgrading the legacy system,DB claims also the cost of supporting the legacy systemduring the period of development of the replacementsystem. The sum claimed under this head is £423,522,which is shown as a sub-component of item (2) in thesummary of the claim set out above. DB accepts that thisfigure should be revised downwards to £417,153. I amnot persuaded that this claim should be reduced further,as Atos contends, simply because DB's claim for the costof the staff working on the replacement system wasoverstated. This was not a new project with an externalconsultant, as the replacement system would have been,and so the considerations are not the same. I thereforeaccept the amount of the claim as currently put forwardby DB.

332. Atos's second argument against the recovery of thesecosts was that GB would have incurred costs insupporting the new replacement system instead.However, since, for the reasons given below, I have notawarded DB any damages for its own costs of supportingthe new system, this argument falls away.

333. DB's claim for the costs of supporting the legacy systemis a claim for costs that were actually incurred. They werea natural consequence of the breach and were, in my

view, reasonably incurred. Accordingly, I find that theyare recoverable.

The claims for the replacement system and the cost ofsupporting it

334. By the time of the trial DB had not entered into acontract for a replacement system, and, as I have alreadymentioned, the evidence established that DB had nopresent budget for this and had made no arrangements forany preliminary steps that it would need to take beforeprocuring a replacement system. The reason for this wasnot the financial crisis, the effects of which were nolonger preventing the move of the aggregation process toBotswana (Mr Page said that this ceased to be a factor bymid 2009: Day 6, 106/17-21), but the undisclosed "blank"issue to which I have already referred.

335. I asked Mr Page whether the "blank" issue was capable ofresolution as at May 2010, and he said "Well, I still don'tthink it's incapable of resolution, but it has become moreintractable as time has passed" (Day 6, 111/15-16).However, at the conclusion of his evidence Mr Page toldme that, based on many years of experience of dealingwith the GRB, he believed that the matter would beresolved next year when the renegotiations for therenewal of the sales contract were due to take place, butthat in the meantime DB was in no position to make plansto resurrect the move of the aggregation project until thisissue had been resolved (Day 6, 123/15 - 124/8).

336. Understandably, Mr Lewis protested at the course whichthe evidence had taken in relation to the "blank" issue andsubmitted that it put Atos in an impossible positionbecause, not knowing what the issue was, Mr Lewis wasquite unable either to explore or to mount a properchallenge to the evidence that had been given by MrPage. I have considerable sympathy with this submission.

337. It is for DB to prove its case, on damages just as much asliability. If it is DB's case, as it is, that the move of theaggregation project to Botswana will take place in theforeseeable future and that DB will procure a replacementsystem to support the SCMS project, then it is for DB toestablish on the balance of probabilities that this willhappen. There is no room for any presumption to thiseffect, and Atos is under no burden to rebut this part ofDB's case.

338. Put shortly, I find that the evidence establishes thefollowing:

(1) That since mid-2009 the reason why theaggregation project has not been moved to

Botswana is the "blank" issue.

(2) DB currently has no budget for the moveof the aggregation project to Botswana, andhas made no plans at all in contemplation thatthis will happen.

(3) The "blank" issue has been an intractableproblem for several years and continues to beso. Unless and until it is resolved there canbe no question of the aggregation processmoving to Botswana.

(4) The only evidence that the "blank" issuemay be resolved next year, and that the moveof the aggregation project will be resumed,comes from a very brief answer (to aquestion from the court) at the end of theoral evidence of Mr Page. It is not supportedby a single document.

339. Given the history of Mr Page's evidence on this topic, inparticular the thoroughly misleading evidence containedin his witness statement, I do not feel able to place anyconfidence on Mr Page's evidence that the "blank" issuewill be resolved next year. For this reason alone, I findthat DB has not discharged the burden of proving that themove of the aggregation project will go ahead and that itwill purchase a replacement software system to supportthe SCMS. I must make it clear that this is not a findingthat neither of these things will happen - they may or maynot - but simply a finding that it has not been proved thatthey probably will happen.

340. In any event I consider that it would be most unfair toAtos to draw any inferences from the evidence adverse toAtos since Atos is in no position, through no fault of itsown, to investigate the facts relating to the "blank" issue.DB has chosen, for what are no doubt perfectly goodcommercial and/or political reasons, to withhold theinformation about the "blank" issue. In thosecircumstances I do not think that it would be either rightor fair to draw inferences favourable to DB on this aspectof the case against the interests of Atos.

341. I should add, for the avoidance of doubt and in case itaffects any other aspect of the case, that the finding that Ihave just made does not imply a reverse finding, namelythat the aggregation project will probably not go ahead.On the state of the evidence I simply cannot make afinding either way, unsatisfactory though that is.

342. DB is claiming the cost of procuring a replacementsystem from ThoughtWorks. In the light of my finding

that it has not been established that it will probably do so,the question is whether it can nevertheless recoverdamages represented by the cost of procuring that system.If the answer to that question is yes, then furtherquestions arise in relation to the potential recovery ofsome of the associated costs, such as, for example, DB'sown management and support costs in respect of thebuilding of the replacement system.

343. I now turn to these questions. In Ruxley Electronics vForsyth [1996] 1 AC 344 - the case about the swimmingpool that was shallower than contracted for, but stillperfectly usable - Lord Jauncey said, at 358D:

"What constitutes the aggrievedparty's loss is in every case aquestion of fact and degree.Where the contract breaker hasentirely failed to achieve thecontractual objective it may notbe difficult to conclude that theloss is the necessary cost ofachieving that objective. Thus ifa building is constructed sodefectively that it is of no use forits designed purpose the ownermay have little difficulty inestablishing that his loss is thenecessary cost of reconstructing.Furthermore in takingreasonableness into account indetermining the extent of loss itis reasonableness in relation tothe particular contract and not atlarge. Accordingly if I contractedfor the erection of a folly in mygarden which shortly thereaftersuffered a total collapse it wouldbe irrelevant to the determinationof my loss to argue that theerection of such a folly whichcontributed nothing to the valueof my house was a crazy thing todo. As Oliver J said in Radfordv. De Froberville [1977] 1 WLR1262, 1270:

"If he contracts for the supply ofthat which he thinks serves hisinterests - be they commercial,aesthetic or merely eccentric -then if that which is contractedfor is not supplied by the othercontracting party I do not see

why, in principle, he should notbe compensated by beingprovided with the cost ofsupplying it through someoneelse or in a different way,subject to the proviso, of course,that he is seeking compensationfor a genuine loss and notmerely using a technical breachto secure an uncovenantedprofit."

However where the contractualobjective has been achieved to asubstantial extent the positionmay be very different."

344. That seminal statement of principle by Oliver J inRadford v. De Froberville has been approved by LordGoff and Lord Millett in Alfred McAlpine v Panatown[2001] 1 AC 518. In relation to the latter case Stadlen Jcommented, after an extensive review of the authoritiesin Van de Garde BV v Force India Formula One Team(formerly Spyker F1 Team) [2010] EWHC 2373 (QB), at484, that it

"is not authority for theproposition that it is aprecondition of recoveringdamages for failure to supplyservices to the claimant inbreach of contract that theclaimant must have purchased,or at least expressed an intentionto purchase, elsewhere theservices wrongly withheld."

345. Unlike the situation in Panatown, this is not a case wherethe claimant contracted for the provision of services to athird party. In this case, DB was buying the services foritself. If there is substantial non-delivery of thoseservices, as there was in this case at the date oftermination, then DB is entitled to recover the cost ofpurchasing elsewhere the services not provided, unless itwould be unreasonable of it to do so. Provided that itwould be reasonable for a person in the position of DB topurchase those services elsewhere, it does not matterwhether or not DB has an actual intention of doing so orhas not made up its mind whether or not to do so.

346. I have no doubt whatever that it would have been andwould be reasonable for DB to purchase elsewhere theservices that were not, but should have been, provided byAtos. It had, and still has, a genuine need for those

services.

347. However, in my view different considerations apply tothe costs that DB would have incurred by way ofpayments to its own employees during the developmentand implementation of the replacement system if it is notshown that it will ever purchase a replacement system. Ithink that there are two aspects to this.

348. First, these are costs of a type that DB would haveincurred in any event. Had the contract been performedby Atos, DB would have maintained its own team toservice the Contract in just the same way that it wouldhave had to maintain a team to service the replacementcontract if it had procured a replacement system fromanother supplier. So, on a broad approach, this appears tobe a head of loss that does not in truth arise.

349. Second, however, it may be argued, and it could beargued on the facts of this case, that the length of time forwhich DB would have had to service a replacementcontract would be longer than the balance of the period ofthe Atos Contract.

350. But even on this basis, I regard DB's own costs ofservicing a replacement contract as being qualitativelydifferent to the costs paid in respect of Atos's servicesbecause they do not form part of the services that Atosagreed to provide. As the authorities considered aboveshow, the innocent party is entitled to recover from theparty who has repudiated the contract the difference invalue between what the services in fact provided and theservices contracted for, and that is usually measured bythe cost of procuring the unperformed services fromanother supplier provided that it would have beenreasonable to do so. The services that DB provided toitself, by means of the time spent by its own employeeson the project, are not services that Atos contracted toprovide.

351. Whilst the need for additional services of DB's ownemployees to support the replacement contract is aforeseeable result of Atos's breach of contract (subject, ofcourse, to deduction of any costs that it would haveincurred in any event), it represents a potential loss that inmy judgment is only recoverable if it is actually incurredor if it is proved that it will, on the balance of probability,be incurred. This is for the simple reason that I havealready given, namely that the services of DB's ownemployees were never services that Atos contracted tosupply: the primary measure of damages against Atos fornon-delivery or non-supply is essentially represented bythe value of the services that were not supplied. That isthe measure of damages recoverable in a case of supply,

together with such other reasonably foreseeable losses asDB actually sustained (or has proved that it will sustain)as a result of the breach. (I use the expression"reasonably foreseeable" in this context as shorthand forthe various heads of loss that are properly recoverable inthis type of claim breach of contract.)

352. But there was also a refinement of this point. Mr Lewissubmitted that DB should give credit for the costs whichit would itself have had to incur had the Contractcontinued to completion. In my view, this point is basedon a fallacy, namely the assumption that such costs werenot incurred. DB's own resources that would have beendevoted to the project, had it continued, were its ownemployees, whom it continued to employ after thetermination. In the case of some employees, such as MrAythora and Mr McKendrick, they were made redundantin April and June 2009, respectively, the latter date beingthree months after bundle 3 should have been delivered. Ihave no doubt that they were made redundant becausethere was nothing left for them to do following thetermination and DB would, of course, have to pay themredundancy pay in addition to their salaries up to the datewhen they were made redundant. I am not satisfied thatthere is any saving here for which DB must give credit.

353. In relation to the loss of savings and additional interestcharges set out in items (4) and (5) in the summaryabove, DB adduced no evidence to support either of theseitems. They were pleaded in the Particulars of Claim,which was supported by the required statement of truth -in this case signed by Mr Page. These heads of loss werenot dealt with in the evidence of any of DB's witnesses.In its closing submissions DB submitted that these headsof loss were "supported by a statement of truth (and aretherefore in evidence) signed by Mr Page and he was notcross examined on these matters" (paragraph 285).

354. The short answer to this was given by Mr Lewis in hisfinal submissions. It is as follows. CPR 32.6(2) providesthat

"At hearings other than the trial,a party may rely on the mattersset out in

(a) his statement of case; or

(b) his application, notice if thestatement of case or applicationnotice is verified by a statementof truth."

Unfortunately, the punctuation in this rule has gone awry

and the comma should clearly be after "notice" and notafter "application". In addition, it is clear that the words"if the statement of case or application notice . . ." areintended to qualify both (a) and (b). The general rule isthat any fact which needs to be proved by the evidence ofwitnesses is to be proved at trial by their oral evidencegiven in public: CPR 32.2 (1). This is subject to anyorder of the court (which may be given under CPR 32.1).

355. In this case no order was made that would displace thegeneral rule and accordingly DB has failed to supportthese heads of claim with any evidence. It is clear thatboth heads of loss are ones that would have to be provedby the evidence of witnesses in the absence of agreementto the contrary or any admission. However, I considerthat the claim for savings would have failed in any eventbecause it is based on the assumption that DB wouldprove that the move of the aggregation process toBotswana would have occurred but for the termination.That is not the position.

356. Conclusions:

(1) DB is in principle entitled to recover thecost of building the replacement system. Ishall consider in the next part of thisjudgment what those costs should be.

(2) DB is not entitled to recover the costs setout in items (3)(b)-(e) in the summary set outin paragraph 328 above.

(3) DB is not entitled to recover the savingsor costs set out in items (4) and (5) of theabove summary.

The ThoughtWorks quotation

357. DB admits that it cannot recover the full amount claimedin respect of the ThoughtWorks quotation. DB acceptsthat the ThoughtWorks quotation should be reduced by£357,808 because it included two items, Invoice Trackingand Intelligent Hand Held devices, which were not withinthe scope of the Atos contract.

358. However, there was a dispute as to the amount of thisdeduction. I do not propose to lengthen this judgment bygoing into details of that dispute. It is sufficient to saythat, for the reasons given in paragraphs 266 and 267 ofDB's Closing Submissions, the percentage deduction(before allowing for overheads) should be 11.9%. Thisproduces a reduction of £447,261. As both sides accept,there should then be a further reduction from that figureto reflect the fact that overheads would not reduceproportionally.

359. Dr Thomas contended that 13.5% was the appropriatereduction to reflect overheads. DB contends that it shouldbe 20%, on the grounds that Atos claimed 25% by way ofoverheads. This is a matter of broad brush assessment.Doing the best I can, I would adopt DB's approach andreduce the figure by 20%, so that the amount to bededucted from the ThoughtWorks quotation is £357,808.

360. Atos submits also that the ThoughtWorks quotationshould be reduced by a further amount to reflect the factthat it was not a quotation submitted as a competitive bid.I reject this submission because DB, in order to mitigateits loss, took steps to obtain a quotation from analternative supplier as soon as possible in order to reducethe impact on the delay in delivery of the replacementsystem. ThoughtWorks was familiar with DB's processes,because it had been involved in developing the softwarefor certain discrete aspects of DB's business, and was in aposition to respond quickly. Had DB put the contract forthe replacement system out to tender, it would have takenmuch longer to obtain competitive quotations from otherpotential suppliers. In my judgment DB acted reasonablyin obtaining the quotation from ThoughtWorks.

361. Accordingly, I consider that DB is entitled to recover theamount of the original ThoughtWorks quotation less£357,808, namely £3,588,617.

DB's damages - summary

362. For the reasons that I have now given, I consider that DBis entitled to recover the following sums before givingcredit for costs that it would have incurred if Atos had notterminated the contract:

The costs associated with the work which it carriedout in modifying its Legacy systems (as amended byJSN1)

406,061(453,779- 47,718)

DB's IT staff costs related to the ongoing support ofthe modified Legacy system during the period ofdevelopment

417,153

The costs associated with a replacement system (i.e.instead of that which would have been deliveredunder the Contract had it not come to an end), asfollows:

The cost of building the replacement system, basedon a quotation from a third-party supplier(ThoughtWorks)

3,588,617

DB's IT management costs in respect of the buildingof the replacement system

Nil

DB's business staff costs relating to the building of Nil

the replacement system

Travel and accommodation for DB overseas staffvisiting London

Nil

Travel and accommodation for DB London staffvisiting overseas DB operations

Nil

Loss of savings: DB claims that it has been deprivedof savings and process efficiencies which it wouldhave enjoyed using the SCMS functions whichwould have been present on the contracted softwarewhich AO should have provided

Nil

Additional interest charges arising from the need topurchase intakes 2 days early (based on a 10% rate ofinterest)

Nil

TOTAL 4,411,831

363. There is no dispute that DB's damages must take accountof sums which it would have had to pay if the Contracthad been performed in full.

364. On any view, these include the following:

(1) The remaining Key Milestone payments(Key Milestones 4-8), totalling £1,622,311.

(2) The valuations of the two CRs in respectof which DB and Atos agreed the figure,namely CR 003 (£415,000) and CR 008(£11,805). In relation to CR 019, DBadmitted that £19,675 was payable, but Atosclaims it is entitled to more (I haveconsidered this CR above). The two agreedamounts total £426,805.

365. In addition, account must also be taken of the amount inwhich Atos's other unresolved or disputed claims wouldhave been either valued or compromised. To answer thisquestion it is not be necessary to make a detailed andprecise valuation of each such claim because theaggregate of such valuations would not necessarilyrepresent the amount at which the parties might haveagreed to settle all the claims in order to reach acompromise. It might have been more or less accordingto the commercial interests of and pressures on each ofthe parties at the time. I will consider the range of valuesand then reach a conclusion as to the amount of the likelycompromise.

366. I have already concluded that neither party wouldprobably have had a claim against the other in respect ofthe delays to completion. I would expect the parties tohave arrived at a similar conclusion, assuming that nountoward problems occurred and that bundle 2 was

delivered in about mid December 2008, and bundle 3 inabout mid March 2009, in accordance with theprogramme submitted on 29 May 2008. Accordingly, Ineed not consider this aspect any further.

The credit to be given for Atos's accrued and futureclaims under the Contract

367. In this section I will collect together the values that Ihave ascribed to Atos's various heads of claim:

Head of claim Paragraph Minimumvalue

Maximumvalue

SACs 248 125,000 150,000

Finance Requirements 263 17,000 17,000

EDS 266 25,000 30,000

Lack of access to DBpersonnel (Core SCMS)

269 50,000 100,000

Lack of access todevelopment resources

275 20,000 20,000

List of peripherals etc 277 10,000 10,000

Lack of key DB resources 279 25,000 50,000

Legacy Systems 281 15,000 20,000

New PRs 308 17,500 17,500

CRs 326 338,969 344,400

TOTALS: 643,469 758,900

368. The figures in this table represent, of course, anassessment of Atos's accrued and future claims as at thedate of termination. If the above claims stood on theirown I consider that the parties would probably haveagreed a value of about £700,000.

369. In addition, there is the further work on CRs posttermination, which would have been done if the Contracthad continued, which I have assessed as having a valueof about £250,000. Added to the figure in the previousparagraph produces a total of £950,000.

370. I have considered whether there should be added to thesefigures any further uplift to reflect additional claims thatmight have accrued and been agreed between the date oftermination and the end of the project, but I consider thatthis would be too speculative. Accordingly, the abovefigure of £950,000 represents my best estimate of the costthat DB would have incurred in order to settle Atos'sclaims, both accrued and post termination.

371. Thus the position in relation to the credits that must begiven by DB is as follows:

(1) The remaining payments under the Contract £1,622,311.

(4) The valuations of the two agreed CRs £426,805.

(3) The compromise of all other claims by Atos £950,000

_________

£2,999,116

372. Accordingly, DB's claim in respect of upgrading thelegacy systems and the ThoughtWorks system that I haveassessed at £4,411,831 must be reduced by £2,999,116,leaving a net claim for £1,412,715. From this sum mustbe subtracted some notional interest to reflect the fact thatall the sums that I have found due to Atos should havebeen paid some time ago.

373. In particular: the non payment of the sum in respect ofKey Milestone 4 should attract interest from 3 April2008; the other payments under the Contract shouldattract interest from the dates when they would probablyhave fallen due; and the £950,000 settlement figure withAtos should attract interest from the date by which it waslikely to have been agreed. I estimate this as 1 July 2009.

374. By contrast, DB is entitled to actual interest on thosesums that it has paid or incurred from the dates when theywere paid or incurred.

375. I will hear the parties on any questions of interest thatcannot be agreed.

The application of clause 23.1

376. Since I have reached the conclusion that the amount ofdamages for which Atos is liable is very much less thanthe limit imposed by clause 23.3 of the Contract, theapplication of the limit imposed by that clause isacademic.

377. However, I have reached a clear view of how the clausewould apply if it fell to be considered, so I shall state itbriefly. It is evident from its own internal documents, inparticular Mr Bray's e-mail of 16 May 2008, that Atoswas considering termination of the contract, not just asuspension of work. In that e-mail Mr Bray referred tohis conversation with Mr Newell earlier that day and thensaid:

"• He was extremely perturbedby Nikki's call and sounded

really shocked we wouldconsider termination. I also thinkhe doesn't know what to expectnow because Nikki didn't talkabout timescales under which wemight terminate (as we hadagreed). He has really taken thispersonally and said "theprospect of being let downseriously by Atos only for us tothen terminate is unbelievable".The man is clearly concernedabout his job and hiscredibility;"

378. As I have already mentioned, I regard it as significantthat Mr Bray used the word "terminate" not only whenrecording what Mr Newell had said but also in thecontext of what Atos was planning. It is clear to me thatby this stage Atos was intent on terminating the Contractif it could not negotiate a variation of its terms that wasacceptable to Atos. By this time Atos had been takinglegal advice for some time and it is most unlikely, as Ihave already found, that Atos did not consider the lessdramatic step of suspending work under clause 12.5 untilthe outstanding invoice had been paid. I consider thatAtos must have concluded that this would not achievewhat it wanted and that the only alternative was tothreaten termination, even though it could not havebelieved that it had any legitimate grounds for doing so.If, for example, Atos thought at the time when the letterof 21 May 2008 was being drafted that it was entitled toaccept a repudiatory breach of contract by DB, then Ihave no doubt that the letter would have been written invery different terms.

379. I find that during the period from 21 May to 6 June 2008Atos knew that the course upon which it had embarkedwould amount to a breach of contract. It committed thatbreach of contract deliberately and that amounted to bothwilful and deliberate default.

Afternote

380. It will be observed by those who are familiar with thedetails of this case that the amount of damages (subject toadjustment for notional interest) that are to be awarded toDB may well be less than the additional costs that Atoswould have incurred if it had continued to perform theContract to completion.

381. On the face of it, this is not a satisfactory result.However, this comes about because I felt unable toconclude that, as a matter of probability, DB will procure

a replacement system. This finding was really madeinevitable by the very unsatisfactory nature of theevidence about the true position in relation to the reasonswhy the Aggregation Project had not moved to Botswana.

382. At the conclusion of Mr Page's evidence I made it clearthat DB's refusal to disclose the true impediment to themove of the Aggregation Project to Botswana could wellprejudice its claim, because the court would be left in astate of almost complete ignorance of the true facts andtherefore might well not be in a position to make thenecessary assessment of future probabilities.Unfortunately, that is the conclusion that I was ultimatelycompelled to reach.

GLOSSARY OF TERMS ANDABBREVIATIONS

AO Atos Origin (Atos)

BA Business Analyst

BAFO Best and final offer

CAB Change Control/Approval Board

CCP Change Control Process

CR Change Request

CUT Code and unit test

DA Detailed Analysis (in particular in the context ofchange requests)

EAI Enterprise Application Integration Project

EDS Enterprise Data Store

ER Elaboration Request

FPM Fixed Price Model(ling)

FRG Flexible Reporting Group

IAP Initiation & Analysis Phase

IA Impact Assessment (in particular in the context ofchange requests)

LSO Local sorting (or sales) office

MDL Master Data Library

NFR Non-functional requirement

PHS Prepare & Hold Sight

PID Project initiation document

PR Process Requirement

RAG RED AMBER GREEN

RDD Requirements Definition Document

RoMgt Rolling Management

SACs The South African countries: Botswana, Namibia &South Africa.

SAN Storage Area Network

SCMS Supply Chain Management System

SKU Stock Holding Unit

SME Subject Matter Expert

SOA Service Oriented Architecture

UAT User Acceptance Testing

UI User interface

WAN Wide Area Network

Agiledevelopment

An approach to software development that features aless formal description of the client's requirements atthe outset, with the software being developedthrough a high level of interaction between thesupplier and customer.

Iterativedevelopment

An approach to software development that involvesthe documenting of some requirements at the start ofthe project with development taking place throughan "iterative" process of production of developingsoftware and feedback from the client in ongoingcycles.

Waterfall The classical software development method: anapproach where all requirements are expected to beascertained to a low level of detail before anydevelopment effort takes place.

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