Court Case on Failed BPO: CGI versus Staalbankiers

On 18 January 2017, the Amsterdam District Court issued a judgment in a high-end dispute on a failed BPO between Staalbankiers and CGI Netherlands (previously known as Logica).

In 2010, CGI won an outsourcing tender to manage and transform the back office of the banking platform of Staalbankiers. This transformation involved the transfer of the legacy platform of the existing supplier, Centric, to the Thaler software of the Belgian supplier Callatay & Wouters. The contract was entered into until 2018.

Excessive claims from both sides

In early 2012, the transformation had failed miserably. CGI already received EUR 14,1 million, although the platform was still not running on the Thaler software. In August 2013, after it had received a notice of default, Staalbankiers lost faith in a positive outcome of the project. CGI filed a court claim of EUR 8 million for missed turnover and performed activities. This amount is higher than the agreed upon Exit for Convenience. Staalbankiers in return claimed restitution of the EUR 14,1 million,  plus damages of EUR 10 million for error (dwaling), deceit (bedrog) and not meeting the duty of care.

The court’s judgement

The verdict shows that the BPO failed due to a combination of various factors: (i) disentangling of the existing platform was far more complex than had previously been estimated, (ii) Centric allegedly refused to cooperate, and (iii) the Thaler software could not be deployed by CGI due to contractual agreements between Callatay & Wouters and Centric.

The judge ruled that both parties owed nothing to each other. Two arguments were decisive for this.

Both parties are to blame

It takes two to tango. The judge ruled that CGI, as the IT expert, should, even unsolicited, have warned Staalbankiers in advance against the use of Thaler and of the associated risks. Further, CGI should have warned Staalbankiers during the project to stop it. Hence, the judge expects a strong and active advisory role of the IT supplier, if it also acts as the IT expert. This is in line with the leading Brinker case from 1986 of the Dutch Supreme Court.

But Staalbankiers doesn´t get off scot-free either. The judge blamed Staalbankiers for tendering a project, despite the involvement of Boer & Croon and GARS, that was de facto impossible to achieve.

Tacitly termination by mutual consent (stilzwijgende beëindiging met wederzijds goedvinden)

The court established (in paragraph 4.23) that neither party dissolved the agreement (geen ontbinding). However, the court drew a far reaching conclusion: the contract was (at least partially) tacitly terminated by mutual consent (stilzwijgend beëindigd met wederzijds goedvinden). Reasons: “That already for quite some time, CGI has not executed the Agreement by not delivering BPO services, and Staalbankiers has accepted that (and has made no payments). It can therefore be concluded from the actions of the parties that the Agreement (at least partially) was tacitly terminated by parties´ mutual consent at some moment in time.

In other words, the factual behaviour of both parties (stopping the work and the acceptance thereof), does not constitute suspension (opschorting) of the project, but termination (beëindiging) of the contract.

This has far reaching consequences for both parties: according to the court their claims for payment and damages were turned down. The court supported (in paragraph 4.24) this decision as follows: “The agreement did not provided a provision for compensation (underlining by AED) in case of termination by mutual consent.’’ In other words, since CGI did not offer to fulfil its obligations under the contract, and Staalbankiers accepted this, both parties lost their right to compensation.

The question remains whether the court actually “needed’’ the described construction of termination by mutual consent. Since both parties were held responsible for the failure of the project, it seems possible to turn down the claims for compensation from either party, regardless of whether the contract was still in place or not.

Both parties have until 18 April 2017 to appeal the verdict.

 

Source: ECLI:NL:RBAMS:2017:228

Back to the overview