De Beers UK Ltd v Atos Origin It Services UK Ltd

A party repudiates a commercial contract only where, viewed objectively in all the circumstances, its conduct clearly shows an intention to abandon and refuse further performance. A demand to continue on materially different terms may satisfy that test, even if the party remains willing to complete the project on its own terms.

In a complex software project, whether detailed requirements constitute a change in scope is transaction-specific. Requirements that elaborate documents existing at contract formation are not necessarily changes merely because they prove more complex than anticipated.

Where employer and contractor cause concurrent delay, the contractor may obtain an extension of time but cannot recover prolongation loss caused by the delay. Damages for substantial non-delivery may include the reasonable cost of procuring replacement services, although unincurred internal costs require proof that they will be incurred.

De Beers engaged Atos to develop and supply a software system supporting its diamond supply-chain operations. The project encountered delay, complex and incompletely captured requirements, disputes over change requests, concerns about software quality and disagreement over payment.

Atos demanded a substantial commercial variation, including additional payment and a waiver of claims, and stated that it would suspend work unless agreement was reached. Atos suspended work on 6 June 2008. De Beers accepted that conduct as a repudiation and terminated the contract.

The court determined whether either party had repudiated the contract, which changes were chargeable, the effect of concurrent delay, the proper construction of the contractual limitation and change-control provisions, and the damages recoverable by De Beers.

1. Repudiation by De Beers. De Beers’s refusal to pay a milestone invoice was a breach but was not repudiatory. Its other alleged breaches, individually or collectively, did not show an intention not to be bound. De Beers’s removal of Atos’s access passes was a sensible response to Atos’s stated intention to withdraw its staff and was not repudiatory.
2. Repudiation by Atos. The correspondence showed that Atos would suspend work unless De Beers accepted a commercial variation. Atos’s proposal to complete on a time-and-materials basis and subject to a waiver of claims was materially inconsistent with performance of the existing contract. Its willingness to complete the project on different terms did not amount to willingness to perform the contract. Atos therefore repudiated the contract, and De Beers validly accepted the repudiation.
3. Delay and scope. The contractual requirements had to be assessed against the documents existing when the contract was made. Detailed elaboration of high-level requirements was not, without more, a change in scope. A proposed general test based on a reasonable minimum solution was unsuitable for this unusually complex and unique business; the appropriate assessment was transaction-specific. Splitting and certain other additional functionality were genuine changes.
4. Concurrent delay. Delays caused by both parties operated concurrently. Atos was entitled to a reasonable extension of time, but could not recover prolongation costs where it would have suffered the same loss from causes for which it was responsible. De Beers could not recover liquidated damages for the relevant period.
5. Damages. De Beers could recover the reasonable cost of upgrading its legacy system and the reasonable cost of procuring a replacement system. It failed to prove that a replacement system would probably be procured, but the court held that actual procurement or a present intention to procure was not a precondition where replacement services were reasonably required. Internal costs of a replacement project were not recoverable without proof that they would be incurred. The claim for savings and additional interest failed for lack of evidence.
6. Disposition. Judgment was entered for De Beers for net damages of £1,412,715, subject to adjustment for notional interest, with the parties to address any unresolved interest issues.

First-instance judgment in the High Court (Technology and Construction Court). No prior appellate decision is stated in the judgment.