Electronic Data Systems Ltd v National Air Traffic Services & Anor

In a claim for wasted expenditure, a party may plead that the expenditure would have been wasted in any event because the contract would have been terminated before the project was completed, regardless of the alleged breach. That issue goes to causation. The plea need not identify the precise date or grounds of the hypothetical termination where it is confined to termination before completion and alleges that recoupment would thereby have been denied. Permission to amend should be granted where the particulars raise an arguable inference, are not embarrassing, and the case is not doomed to fail.

Electronic Data Systems Ltd appealed from the refusal by His Honour Judge Toulmin QC in the Technology and Construction Court on 30 November 2000 to permit an amendment to its reply and defence to counterclaim.

The underlying dispute concerned a PFI agreement for the development of an air traffic control system. National Air Traffic Services and NATS (En Route) Ltd had terminated the agreement for alleged breach and counterclaimed for wasted expenditure. EDS sought to plead that NATS had already decided to terminate the agreement and would have done so before completion in any event. The central issue was whether that case was sufficiently particularised to be arguable.

Dyson LJ gave the first judgment, and Lord Justice Peter Gibson agreed. The appeal was allowed.

1. Nature of the proposed plea. Properly understood, the proposed amendment alleged that, even without the termination on 14 July 2000 for EDS’s alleged breach, NATS would have terminated the agreement before the FDPS2 project was completed. The expenditure would therefore have been wasted in any event. The plea was relevant to the causation of NATS’s alleged loss.
2. Sufficiency of particulars. EDS was not required to plead the precise date or grounds on which NATS would have terminated. It was sufficient to allege termination at some time before completion in a manner that would have denied NATS the possibility of recouping its expenditure. The proposed particulars raised an arguable inference that NATS would have terminated in that way.
3. The court rejected the contention that the pleading had to identify which contractual termination route would have been used or whether termination would have occurred before or after the operational date. Those matters went to the merits and could be investigated at trial. The amendment was sufficiently clear and was not embarrassing to NATS, whose witnesses had knowledge of the relevant facts.
4. The case was not doomed to failure. No prejudice from lateness was alleged, and the amendment was not said materially to increase the length or cost of the trial. Permission to amend was therefore appropriate.

• Court of Appeal (Civil Division)—appeal allowed and permission granted for EDS to add the proposed paragraph 17.
• High Court of Justice, Technology and Construction Court—His Honour Judge Toulmin QC refused permission to amend on 30 November 2000.