“396. Having read the contemporaneous documents and having listened carefully to the factual witnesses, it is clear that by July 2017 both parties were resigned to abandonment of the project. Both parties retained legal teams and tried to manoeuvre themselves into a position where they could extricate themselves from the MSA with minimum damage. A high-risk strategy was adopted on both sides; the AG5 milestone payment, a modest sum in relation to the high value of the overall project, was the vehicle used to bring the project to an end.”
“All losses, liabilities, damages, costs and expenses including reasonable legal fees on a solicitors/client basis and disbursements and reasonable costs of investigation, litigation settlement, judgment, interest.”
“23.4 Notwithstanding clause 23.3, the Customer shall if proven and without prejudice to its other rights and remedies, be entitled to recover as direct loss: (a) incremental cost of implementing and performing workarounds; (b) the reasonable cost of (i) running a procurement exercise; (ii) the reasonable, incremental costs of procuring substantially similar replacement or alternatives services or systems in substitution for the Services for the remainder of the committed Term of the Agreement; in both cases on termination by Customer of the Agreement under clauses 26.2(a) and 26.2(b); (c) the cost of replacing tangible goods tangible or materials lost, stolen or damaged (or the value of those goods or materials where they are not replaceable) caused by a failure of the Supplier and/or its Contractors to provide the Services in accordance with Agreement; or (d) the costs of restoring Customer Data and/or any Software lost, damaged or corrupted by the Supplier, and in both cases by reloading from the last back up required to be taken by the Supplier.”
“…The ultimate aim of interpreting a provision in a contract, especially a commercial contract, is to determine what the parties meant by the language used, which involves ascertaining what a reasonable person would have understood the parties to have meant.”
“…The exercise of construction is essentially one unitary exercise in which the court must consider the language used and ascertain what a reasonable person, that is a person who has all the background knowledge which would reasonably be available to the parties in the situation in which they were at the time of the contract, would have understood the parties to have meant. In doing so, the court must have regard to all the relevant surrounding circumstances. If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other…where the parties have used unambiguous language, the court must apply it.”
“15. When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to "what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean", to quote Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd[2009] UKHL 38 ,[2009] 1 AC 1101 , para 14. And it does so by focussing on the meaning of the relevant words, in this case clause 3(2) of each of the 25 leases, in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the lease, (iii) the overall purpose of the clause and the lease, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party's intentions. In this connection, see Prenn at pp 1384-1386 and Reardon Smith Line Ltd v Yngvar Hansen-Tangen(trading as HE Hansen-Tangen)[1976] 1 WLR 989 , 995-997 per Lord Wilberforce, Bank of Credit and Commerce International SA (in liquidation) v Ali[2002] 1 AC 251 , para 8, per Lord Bingham, and the survey of more recent authorities in Rainy Sky, per Lord Clarke at paras 21-30.”
“…In striking a balance between the indications given by the language and the implications of the competing constructions the court must consider the quality of drafting of the clause…”
“one starts with the presumption that neither party intends to abandon any remedies for its breach arising by operation of law, and clear express words must be used in order to rebut the presumption.”
“The court is unlikely to be satisfied that a party to a contract has abandoned valuable rights arising by operation of law unless the terms of the contract make it sufficiently clear that that was intended. The more valuable the right the clearer the language will need to be.”
“It seems to me that a plaintiff in such a case as this has an election: he can either claim for loss of profits; or for his wasted expenditure. But he must elect between them. He cannot claim both. If he has not suffered any loss of profits- or if he cannot prove what his profits would have been- he can claim in the alternative the expenditure which has been thrown away, that is, wasted, by reason of the breach.”
“An award of compensation for breach of contract serves to protect three separate interests. The starting principle is that the aggrieved party ought to be compensated for loss of his positive or expectation interests. In other words, the object is to put the aggrieved party in the same financial position as if the contract had been fully performed. But the law also protects the negative interest of the aggrieved party. If the aggrieved party is unable to establish the value of a loss of bargain he may seek compensation in respect of his reliance losses. The object of such as award is to compensate the aggrieved party for expenses incurred and losses suffered in reliance on the contract. These two complementary principles share one feature. Both are pure compensatory principles. If the aggrieved party has suffered no loss he is not entitled to be compensated by invoking these principles. The application of these principles to the present case would result in an award of nominal damages only.”
“55. I am not therefore persuaded that the right to choose or elect between claiming damages on an expectancy basis or on a reliance basis indicates that there are two different principles at work. Both bases of damages are founded on, and are illustrations of, the fundamental principle in Robinson v Harman, for the reasons explained by Chief Judge Learned Hand in L. Albert & Son v Armstrong Rubber Co., by Berger J. in Bowlay Logging v Donmar Limited, by all members of the High Court of Australia in The Commonwealth of Australia v Amman and by the English Courts in C&P Haulage v Middleton and CCC Films v Impact Quadrant Films Limited. Thus, notwithstanding my unfeigned respect for any opinion of Professor Treitel, I am unable to accept that there are two principles, rather than one, governing the law of damages for breach of contract… 59. This appears to be true and is the reason why both parties accepted that there was no binding authority as to the question which the Court has to decide. However, in circumstances where, for the reasons I have given, the weight of authority firmly suggests that an award of reliance damages is governed by the principle in Robinson v Harman I consider that to award substantial damages, measured by wasted expenditure, where the Owners have, as a result of the Charterers' breach, been able to trade the vessel at the higher market rates and have "more than recuperated" their loss, would be wrong in principle. Such an award would place the Owners in a better position than they would have been in had the contract been performed. Moreover, damages for breach of contract are intended to compensate for loss suffered and the Owners have, as a result of their own efforts to mitigate their loss, suffered no loss. To ignore the benefits received by the Owners as a result of their action to mitigate their loss would be contrary to the principles established by British Westinghouse.”
“Claim for Wasted Expenditure 186. ITC's alternative claim is for its net expenditure incurred as a result of entering into the Agreement. The basis on which wasted expenditure can be recovered as damages for breach of contract was considered by Teare J in Omak Maritime Ltd v Mamola Challenger Shipping Co[2011] 1 Lloyd's Rep 47 . In his masterly judgment Teare J has shown that awarding compensation for wasted expenditure is not an exception to the fundamental principle stated by Baron Parke in Robinson v Harman (1848) 1 Ex 850 at 855 that the aim of an award of damages for breach of contract is to put the injured party, so far as money can do it, in the same position as if the contract had been performed, but is a method of giving effect to that fundamental principle. That conclusion must logically follow once it is recognised, as it was by the Court of Appeal in C & P Haulage v Middleton[1983] 1 WLR 1461 , that the court will not on a claim for reimbursement of losses incurred in reliance on the contract knowingly put the claimant in a better position than if the contract had been performed. 187. The advantage of claiming damages on the 'reliance' basis is not that the claimant can recover expenditure which would have been wasted even if the contract had been performed but that, where such a claim is made, the burden of proof lies on the defendant to show that the expenditure would not have been recouped and would have been wasted in any event: see CCC Films (London) Ltd v Impact Quadrant Films[1985] QB 16 . In this regard the English courts have adopted the approach stated by Learned Hand CJ in L Albert & Son v Armstrong Rubber Co 178 F 2d 182 (1949): "We cannot agree that the promisor's default in performance should under this guise make him the insurer of the promisee's venture; yet it does not follow that the breach should not throw upon him the duty of showing that the value of the performance would in fact have been less than the promisee's outlay. It is often very hard to learn what the value of the performance would have been; and it is a common expedient, and a just one, in such situations to put the peril of the answer upon that party who by his wrong has made the issue relevant to the rights of the other." 188. The "common expedient" referred to by Learned Hand LJ reflects a general theme which runs through the law of damages. On the one hand, the general rule that the burden lies on the claimant to prove its case applies to proof of loss just as it does to the other elements of the claimant's cause of action. But on the other hand, the attempt to estimate what benefit the claimant has lost as a result of the defendant's breach of contract or other wrong can sometimes involve considerable uncertainty; and courts will do the best they can not to allow difficulty of estimation to deprive the claimant of a remedy, particularly where that difficulty is itself the result of the defendant's wrongdoing. As Vaughan Williams LJ said in Chaplin v Hicks[1911] 2 KB 786 at 792: "the fact that damages cannot be assessed with certainty does not relieve the wrong-doer of the necessity of paying damages for his breach of contract." Accordingly the court will attempt so far as it reasonably can to assess the claimant's loss even where precise calculation is impossible. The court is aided in this task by what may be called the principle of reasonable assumptions – namely, that it is fair to resolve uncertainties about what would have happened but for the defendant's wrongdoing by making reasonable assumptions which err if anything on the side of generosity to the claimant where it is the defendant's wrongdoing which has created those uncertainties… 190. It seems to me that the (rebuttable) presumption that the claimant would have recouped expenditure incurred in reliance on the defendant's performance of the contract is an illustration of this approach. Parties in normal circumstances contract and incur expenditure in pursuance of their contract in the expectation of making a profit. Where money has been spent in that expectation but the defendant's breach of contract has prevented that expectation from being put to the test, it is fair to assume that the claimant would at least have recouped its expenditure had the contract been performed unless and to the extent that the defendant can prove otherwise. 191. Applying this approach to the present case, ITC has not attempted to discharge the burden of showing what financial return Yam Seng would have made if ITC had not been in breach of contract. It is reasonable to suppose that if ITC had made all the Manchester United products available in accordance with the timetable promised and had shipped all orders promptly, Yam Seng would have made more sales than it in fact did. What the proceeds of such sales would have been and whether they would have been sufficient to defray Yam Seng's expenditure including its expenditure on marketing and promoting the fragrance is impossible for me to determine. ITC has not put forward any estimate of what loss, if any, Yam Seng would have suffered in those circumstances and I am unable to make such an assessment.”
“58. A claim for wasted costs can be explained as compensation for the loss of the bargain based on a rebuttable presumption that the value of the contractual benefit must be at least equal to the amount that the claimant is prepared to expend in order to obtain such benefit. That presumption applies equally to cases of non-pecuniary benefit where the claimant does not expect or aim to make a profit: Omak (above) at para. [56].”
“61. However, that does not preclude the Trust from recovering damages to compensate for the loss of a functioning EMR system. That was a contractual benefit to which the Trust was entitled and of which it has been deprived by ATOS's alleged breach. The rebuttable presumption that the value of that loss is at least equal to the Trust's expenditure does not transform the claim for loss of the EMR system into a claim for loss of any additional benefits that would flow from use of the EMR system. 62. ATOS's submissions wrongly assume that any "contractual benefit" which is presumed to at least equal the value of the expenditure must represent profits, revenues or savings. In most commercial cases, there would be such a defined financial benefit that would be expected to defray the costs incurred and render the bargain financially viable. However, that is not the case where the contractual benefit is non-pecuniary. In those cases, the anticipated benefit is not a financial gain that could defray the costs incurred but rather a non-pecuniary benefit for which the claimant is prepared to incur such costs. In cases where a party does not expect to make a financial gain, it is the non-pecuniary "benefit" that is assigned a notional value equivalent to at least the amount of expenditure. 63. In this case, regardless whether the EMR system was anticipated to produce any profits, revenue or savings, the Trust would have the use of the EMR system as a contractual benefit. The claim for wasted expenditure is based on a rebuttable presumption, not that the EMR system would produce revenues to defray such expenditure, but rather that the use of the EMR system was worth at least the expenditure incurred. 64. ATOS has identified the internal costs of staff at the Trust as a particular head of damage that falls within the exclusion in clause 8.1.3(a) because it is pleaded that those resources would otherwise have been employed in beneficial work for the Trust. Reliance is placed on the Aerospace, Azzurri and Admiral cases as support for the proposition that on a proper analysis such internal costs are claims for lost revenue. However, those cases were concerned with the costs of diverted staff resources incurred after and as a consequence of the relevant breach or other wrong, in order to remedy the damage suffered. As such, they were properly characterised as lost revenues caused by the breach. They can be distinguished from the internal staff costs in this case, which form part of the costs incurred in performing the Contract. As such, they fall to be dealt with in the same way as the other wasted costs.”
“By way of an initial comment, it is a little difficult to see how O’Farrell J’s decisions in the CIS case and in the Royal Devon case can both be correct. Put in simple terms, the claimant in the Royal Devon case was entitled to recover its wasted expenditure because that amounted to a claim that it did not get the very “thing” for which it contracted i.e. a functioning “EMR system”, and that was a benefit not covered by the references in the exclusion clause to “loss of profits” or “savings” etc. But equally, on the hypothesis that it was left with no part of the IT system, the claimant in the CIS case did not get the very “thing” it contracted for i.e. a functioning IT system, and that too was a benefit not covered by the references in clause 23.3 to “loss of profits” or “savings” etc. No doubt the NHS Trust’s ultimate aim in the Royal Devon case was not to make “profits” as such, but one would like to think even an NHS Trust might be interested in being financially efficient so that the “benefit” of the EMR system might be said to lie in the “savings” to be obtained through its use…”
“Subject to clauses 23.2, 23.3 and 23.6 the Supplier’s aggregate liability to the Customer Group: a) for the Implementation Services, shall be limited to 150% (one hundred and fifty percent) of the Charges paid and/or would have been payable by the Customer if the Implementation Services had been performed in full and there had been no claims or deductions; b) for the indemnity at clause 24.1 (Data Protection), shall be limited to£5,000,000 (five million pounds); c) for the indemnity at clause 24.2 (Regulatory Fines), shall be limited to£3,000,000 (three million pounds); d) for each SOW for Programme Related Services and/or Additional Services: i) with a duration of up to and including 12 months, shall be limited to 150% (one hundred and fifty percent) of the Charges paid or payable in relation to the relevant SOW; and ii) With a duration of over 12 months, shall be limited to the greater of: A) 125% (one hundred and twenty five percent) of the projected charges for the 12 months charges at the date it is signed; or B) 125% (one hundred and twenty five percent) of the total Charges paid and/or would have been payable in the 12 (twelve) month period immediately preceding the first clause of action arising. e) Arising otherwise under and/or in connection with this Agreement shall be limited to the greater of: i)£15.7 million (fifteen million seven hundred thousand pounds); or ii) 125% (one hundred and twenty-five percent) of the total Charges paid and/or would have been payable for the Managed Services in the 12 (twelve) month period immediately preceding the first cause of action arising. f) for Wilful Default, the limit of Supplier’s total liability in clauses 23.5(a), 23.5(d) and 23.5(e) (as applicable) shall be extended by an additional 50% (fifty percent) The provisions of this clause 23.5 shall operate as separate and additional liability limitations to all other limitations of liability in this clause 23.5 and clause 23 and any liability for any matters listed in this clause 23.5 shall not form part of any calculation of whether the limits of liability under any other provision of this clause 23 have been reached.”
“In consideration of the performance of the Services, the Customer shall pay the Supplier the Charges as set out in and/or as calculated in accordance with schedule 5 (Charges), which shall be invoiced at the times and in the manner specified in schedule 5 (Charges).”
“1.2 This schedule sets out the Charges and/or the methodology for calculating the Charges applicable to this Agreement together with certain financial related rules and processes that apply to the calculation, invoicing and payment of the Charges… 11.1 All invoices under this Agreement must be addressed to the following address (unless agreed otherwise in writing by the Customer): (a) by email to purchase2pay@cfs.coop, simultaneously copied by email to gifinancialreportingteam@co-operative.coop; or (b) via post to The Co-operative, GI Invoice processing, 6th Floor Angel Sq, Manchester M60 OAG and simultaneously copied by post to GI Financial Reporting 10th Floor Angel Sq, Manchester M60 OAG… 11.3 The Supplier shall submit hard copy invoices to the Customer together with the invoice back-up in soft copy form, unless otherwise agreed by the parties. Invoices shall be submitted to such authorised representative as may be appointed or as may be agreed between the Supplier and the Customer from time-to-time. 11.4 Unless otherwise agreed by the parties, each Supplier invoice shall: (a) reflect and support the pricing and financial provisions set out in this schedule 5 (Charges); (b) quote the relevant Statement of Work identifier and the unique Customer purchase order number; (c) clearly show the basis of the Charges including the calculations used to establish the Charges for time and material Statements of Work and the relevant payment milestone for fixed price Statements of Work; and (d) provide a summary of the Charges incurred each month separately for each Statement of Work; 11.5 Unless otherwise set out in a Statement of Work, the Supplier shall invoice the Customer in respect of the Charges to which it is entitled under the Agreement within 180 days of the date on which the Supplier completes the relevant Milestone identified in the relevant Statement of Work. Any Charges which are not invoiced within this timeframe shall not be recoverable by the Supplier. The parties agree that this paragraph 11.5 shall not apply in cases where there is a dispute between the parties relating to Charges including the applicability of taxes and the parties agree that the timeline for invoicing shall be subject to extension in such cases… 11.7 Unless the Customer disputes an invoice in good faith in accordance with paragraphs 11.11 and 11.12 of this schedule 5 (Charges), the Customer shall pay correctly prepared invoices properly submitted in relation to payments to be made under this Agreement within seven (7) Business Days of receipt…(My emphasis) 11.10 An invoice from the Supplier in relation to any part of the Charges is deemed not to have been correctly prepared if the Supplier has failed, in relation to that invoice and the supporting relevant documentation to be provided in relation to that invoice, to meet the relevant requirements for an invoice as set out in this schedule 5 (Charges). 11.11 If, at any time, the Customer acting in good faith disputes an invoice or an amount shown in an invoice delivered by the Supplier, the Customer shall pay the undisputed amount (if any) of the invoice within the period required under paragraph 11.7 above. The Customer shall within seven (7) Business Days of receipt of an invoice notify the Supplier in writing if it disputes any element of the invoice with details of the amounts (Disputed Amount) and reasons for disputing the relevant part of the invoice. 11.12 Provided the Customer has given the notice in paragraph 11.11, the Customer may withhold payment of, and meet with the Supplier to discuss, the Disputed Amount, and will request at such meeting any additional details that it may need to verify the accuracy of the Disputed Amount within ten (10) Business Days of notifying the Supplier of the Disputed Amount. The Supplier shall comply with each such request from the Customer for additional information. If within (10) Business Days after the date on which the Customer has received the additional details requested from the Supplier, the Disputed Amount has not been agreed, then the Customer and the Supplier shall resolve the matter in accordance with the dispute resolution process set out in schedule 19 (Dispute Resolution) of this Agreement.”
“Please can this invoice be resubmitted with the correct Purchase Order Number quoted on it. We cannot accept this invoice for payment without a Purchase Order Number quoted on the invoice.”
“324. Firstly, IBM is correct that Ms Clough did not challenge CISGIL’s underlying liability in respect of the AG5 milestone payment; nor did she challenge IBM’s entitlement to submit an invoice for the milestone; nor did she challenge the amount invoiced; nor did she assert any of the technical defects subsequently relied on by CISGIL that the Court has dismissed as unmeritorious. Ms Clough rejected the whole of the AG5 invoice on one ground alone, that was the absence of a purchase order number. I accept CISGIL’s submission that under paragraph 11.11 of Schedule 5, that was sufficient notification for the purposes of placing the AG5 invoice in dispute. 325. IBM’s submission that Ms Clough did not dispute the invoice is simply wrong. Ms Clough asked for the invoice to be re-submitted with the correct purchase order number quoted but she also stated that: “We can not accept this invoice for payment without a Purchase Order Number quoted on the invoices”
“345. IBM’s construction is clearly correct to the extent that paragraph 11 of Schedule 5 provided a complete and mandatory code for disputing the validity or content of an invoice. If, contrary to the Court’s finding above, CISGIL had failed to dispute the AG5 invoice within seven days of receipt, it would have been precluded from challenging IBM’s contractual entitlement to payment. However, the Court must also address the question as to whether CISGIL could nonetheless assert an equitable right of set-off against any such contractual entitlement to payment; that is, whether the right of set-off was excluded on a proper construction of the MSA”
“As to paragraph 55.2: had the project been successful, it would not have resulted in any increase in the claimant’s profitability or revenues; consequently the principle of law to which the claimant refers has no application.”