In 2015, CIS General Insurance (later renamed Soteria) contracted IBM to implement and maintain a new IT system over ten years. The project faced significant delays, with IBM projecting completion lags of 18 and 31 months for different phases. A dispute arose in 2017 regarding a license payment of £2.9 million, which the client refused to process without a purchase order number.
IBM terminated the contract in July 2017, citing non-payment of an undisputed sum. However, the court ruled the termination unlawful because the client had formally disputed the invoice. While the client was found to be in breach for withholding the purchase order, the court deemed their position to be held in good faith, invalidating IBM's grounds for immediate contract termination.
The court awarded the client £80.6 million for wasted expenditure, representing costs incurred on the failed project that became useless due to the breach. This figure was calculated based on a contractual liability cap of 150% of the payments made or due, totaling £83.5 million, minus the outstanding debt of £2.9 million. The ruling clarifies that liability exclusions for lost profits do not necessarily cover wasted project costs.
