- High Court considers wasted costs and damages arising from the termination of an agreement for IT system (CIS General Insurance v IBM UK)
- What are the practical implications of this case?
- Wasted costs
- Equitable set-off
- What was the background?
- What did the court decide?
- Case details
TMT analysis: A recent High Court decision on Cooperative Insurance Services (CIS)’s £130m breach of contract claim against IBM held that CIS could recover certain costs incurred as a result of IBM’s breach of contract. However, the majority of damages claimed were excluded after a thorough consideration of whether losses described as ‘wasted costs’ would fall under the exclusions of a limitation of liability clause. In this case, although CIS presented its quantum of losses in relation to expenditure it had incurred, the court found ‘the loss…suffered by CIS as a result of IBM’s repudiatory breach comprised the savings, revenues and profits that would have been achieved had the IT solution been successfully implemented…CIS is entitled to frame its claim as one for wasted expenditure but that…does not change the characteristics of the losses for which compensation is sought’. As ‘loss of profit, revenue [and] savings’ were expressly excluded by the master services agreement (MSA)’s limitation on liability provision, CIS’s claim for wasted expenditure in this regard failed. The court further held that the damages awarded to CIS could be offset by IBM’s successful counterclaim for an unpaid invoice. This article examines the court’s decision and considers relevant points for practitioners. Written by Hamish Corner, partner and Paul Nightingale, senior associate at Shoosmiths LLP.
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