The High Court has issued its ruling in the case of Capita Business Services Ltd v IBM United Kingdom Ltd [2023] EWHC 2623 (Comm).
The dispute arose in the context of an agreement between Capita and IBM. Under the contract, Capita subcontracted the provision of certain IT-related services to IBM. These included services for the provision of “the Relevant Service” (including middleware and various applications). Schedule 2 to the agreement included the following term (Condition 2):
“Capita is awaiting the [client] to commission work to replace the [Relevant Service], and contract for the ongoing Managed Service of such, and it is assumed that this replacement [Relevant Service] will be operational on or before 30 August 2023. As such the Contractor’s obligations for the Managed Services relating to the current [Relevant Service] shall cease at that time. Further, any requirement for the Contractor to design and/or build and/or implement such a replacement [Relevant Service], and/or to operate such replacement [Relevant Service], shall be handled pursuant to the Change Control Procedure and at Capita’s expense, whether the impact is against the Managed Service, or the IT Upgrade Programme, or other work commissioned by Capita, or a combination thereof.”
The issue between the parties was whether IBM’s “obligations for the Managed Services relating to the current [Relevant Service]” ceased when any replacement service became operational, or on 30 August 2023, even if (as proved to be the case) the replacement [Relevant Service] was not operational by that date.
Inevitably, both Capita and IBM contended that their interpretation of Condition 2 was plain and clear on the language of the clause. The judge was more convinced by IBM’s arguments. In particular, he accepted IBM’s argument that the use of the word “assumption” rather than “expectation” was significant, saying that it is language frequently used to describe the basis on which the parties are contracting. While there are many contexts in which assumptions are merely a present view which can be revisited – a “working assumption” for example – there was no language addressing the consequences of revisiting that assumption in Condition 2.
Capita also relied on clauses 4.5 and 5 of the main terms, and paragraphs 5.1 to 5.14 and 5.28 of Schedule 2. It was accepted that in the period up to 30 August 2023, the effect of those provisions was to oblige IBM to support the Relevant Service. Capita contended that, in the absence of any contractual provisions which expressly limited or curtailed the ambit of the obligations in the period after 30 August 2023, it must follow that those clauses continued to oblige IBM to support the Relevant Service after that date. The judge was not convinced by this.
Finally, both parties sought to support their arguments by reference to considerations of business common sense. In this case, the judge said that the language and contractual context of Condition 2 clearly supported IBM’s construction, and any appeal to the allegedly uncommercial consequences of that construction would have to be particularly compelling.
Therefore, the judge was satisfied that the wording of the clause was significantly more consistent with IBM’s suggested interpretation than with Capita’s.
