HP ordered to pay Ó200m within two weeks in interim damages ruling

The High Court has ordered HP to pay BSkyB. which ownstelevision network Sky, £200 million in interim damages to settlethe court case it lost last week over a contract tendering process,according to press reports.

that the damages must be paidwithin 14 days, by 17th February.

"[HP] shall make an interim payment on account of the damages towhich the claimants are entitled in the amount of £200m by 4.30pmon Wedneday 17 February 2010," it quotes trial judge Mr JusticeRamsey as ruling.

EDS was found guilty of fraudulent misrepresentation in the waythat it won a contract from Sky to build a customer relationshipmanagement system. HP has since acquired EDS and is seekingpermission to appeal the ruling.

The High Court found that while EDS's sales processes in generaldid not involve fraudulent misrepresentation about how much thesystem would cost and how long it would take, as Sky had claimed,it did rule that one EDS employee was dishonest in his claims abouthow long it would take.

That meant that HP could no longer rely on a cap on itsliability to Sky contained in the contract it had signed with thebroadcaster. The Court has now told it to pay £200m within afortnight while it calculates the final damages.

One IT lawyer said that this was bad news for HP and meant thatthe ultimate damages would be even higher .

"This envisages losses to be in excess of £200m because it isunlikely that the judge would make a lower award than £200m when hegives full judgment as this would mean there would have to berepayment by BSkyB," said of Pinsent Masons, the law firm behindOUT-LAW.COM.

McIlwaine said that companies in HP's position would usuallyseek to negotiate a settlement once a court's ruling had been givenbut before final damages had been calculated. He said, though, thatthe High Court's interim damages award will make this a difficultprocess for HP.

"This gives an incredibly tight window for the parties to reacha settlement," he said. "HP might try to settle by offering not toappeal the decision, giving Sky certainty that it would not beoverturned. In return they would try to reduce the damages but theyare unlikely to reduce it much below the £200m."

McIlwaine said that a negotiated settlement would at least giveHP the opportunity to pay the damages through a series of scheduledpayments rather than in one massive block.

The case was keenly watched by IT providers who worried that itmight result in standard sales processes being defined asfraudulent by the courts. The ruling's focus on one individual,though, reduced its impact, experts said.

It was widely anticipated that a finding in favour of BSkyBwould trigger a large-scale review of sales processes. However,given the emphasis in the judgment on the dishonest conduct of oneman, and that only one of the five allegations of fraud against EDSsucceeded, the ramifications for the IT industry may be lesssignificant than expected," said McIlwaine when the ruling waspublished. "Importantly there were no findings in Mr JusticeRamsay's judgment of more systemic or widespread internal failuresor recklessness in relation to EDS's sale processes."