Software supplier Fujitsu NZ was ordered to pay Corrections $3.8 million for wasted expenditure after the 2019 cancellation of Fujitsu’s contract to manage a proposed integration of Corrections staff rostering schedules into its existing SAP payroll system. The High Court ruled Fujitsu in turn is entitled to recover up to $1.8 million from its subcontractor, software supplier Dassault Australia, after the court heard evidence of deliberate misrepresentations by Dassault of its ‘Quintiq’ system and its subsequent behaviour in hiding ongoing problems from both Corrections and Fujitsu.
Dassault’s deceptive behaviour was exposed in nearly three weeks of evidence before the High Court in Wellington including evidence of: manipulation of data in a product presentation; arch use of terminology for ‘customisation’ as against ‘configuration’ in light of Corrections demand for an ‘out of the box’ solution; attempts to slyly re-scope the project while hiding from both Corrections and Fujitsu where problems were going to arise, and; allegations Dassault destroyed key documents when the project imploded.
Back in 2017, Corrections called for registrations of interest to supply software for its rostering system, covering some 6000 staff spread across eighteen operational sites. It specifically required a product that was flexible, scalable and integrated with its existing payroll system.
A contract was signed in 2018 with Fujitsu New Zealand Ltd, which had teamed up with Australian software supplier Dassault. A strong selling point had been a demonstration of Dassault’s proprietary Quintiq system. This presentation demonstrated selected case studies of employee data showing seamless integration of Corrections rostering system with its payroll. Unbeknown to both Corrections and Fujitsu, Quintiq software had been adjusted to specifically accommodate ten of the individual case studies demonstrated. Internal emails within Dassault signalled potential downstream problems from this use of ‘dodgy data.’
In response to direct questions from Corrections, Dassault represented its product as requiring no ‘customisation’ to operate functionally; no significant changes were needed. Later, bidding for an increase in the contract price, Dassault said increased work was needed to ‘configure’ the software in order to accommodate Corrections diverse staff schedules.
Evidence was also given of Dassault hustling for pre-payment of an upfront fee licencing use of its Quintiq product over protestations from Corrections that it wanted to see the product in operation before committing to the fee.
Justice Cooke ruled Dassault had misrepresented its product.
Fujitsu was ordered to pay Corrections $3.8 million for breach of contract. As head contractor it was responsible for the failures of sub-contractor Dassault. The product delivered did not meet contract requirements to integrate seamlessly with Corrections’ SAP payroll system.
Fujitsu’s separate action against Dassault was partially successfully. Justice Cooke ruled Dassault was liable both for misrepresentation under the Contract and Commercial Law Act and for misleading and deceptive conduct under the Fair Trading Act.
Contracts between the two contained exclusion clauses limiting liability for any damages. Justice Cooke used powers in the Fair Trading Act to override Dassault’s standard clause limiting liability to one hundred thousand euro. Dassault should not be allowed to keep the $1.8 million licence fee charged Corrections, he said. This fee was paid for a product which was not in use and did not provide the service promised.
The $1.8 million fee paid by Corrections includes a margin Fujitsu added when on-selling the licence to Corrections. Fujitsu can recover from Dassault a lesser figure; the dollar amount Fujitsu actually paid Dassault.
Corrections v. Fujitsu New Zealand Ltd – High Court (8.12.23)
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