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You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> Astrazeneca UK Ltd v International Business Machines Corporation [2011] EWHC 306 (TCC) (22 November 2011) URL: https://www.bailii.org/ew/cases/EWHC/TCC/2011/306.html Cite as: [2011] EWHC 306 (TCC) |
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QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
ASTRAZENECA UK LIMITED |
Claimant |
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- and - |
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INTERNATIONAL BUSINESS MACHINES CORPORATION |
Defendant |
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Jeffery Onions QC and Simon Henderson (instructed by Herbert Smith LLP) for the Defendant
Hearing dates: 1-3 November 2011
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Crown Copyright ©
Mr Justice Ramsey :
Introduction
The MSA
Clauses of the MSA
"AstraZeneca and [IBM] each have the rights and obligations allocated to it in Schedule 22 (Termination Assistance and Exit) in relation to preparation for, and the consequences of, expiry or termination (in whole or in part) of [the MSA]."
Schedule 22
"[IBM] must provide AstraZeneca with Termination Assistance during each Exit Period in accordance with the terms of this Schedule, the Exit Plan and the IT Transfer Plans applicable to the Terminating Services."
"12.1 If Terminating Services are provided by using shared infrastructure and the associated Systems and Third Party contracts are not transferable to the Successor Supplier which cannot reasonably take on provision of those Terminating Services before the Extended Termination Date ("Shared Services") then, if so requested by AstraZeneca:
12.1.1 [IBM] shall no less than thirty (30) days prior to the Extended Termination Date provide AstraZeneca with an irrevocable and unconditional offer open to acceptance within thirty (30) days to continue to provide those Shared Services on a transitional basis for no more than twelve (12) months following the Extended Termination Date to AstraZeneca and the Successor Supplier;
12.1.2 the Shared Services shall be offered on the commercial terms on which [IBM] provides similar services to or for its customers of a similar size to AstraZeneca based on the volume and nature of the services to be provided (including terms as to charges and limitations on [IBM's] liability); and
12.1.3 AstraZeneca or the Successor Supplier may elect at their discretion to accept [IBM's] offer of Shared Services."
Schedule 22A
"For any area of the Services that is provided using [an IBM] shared infrastructure, i.e. not dedicated solely for the purposes of AstraZeneca, a suitable working solution is required at the Transfer Date.
It is recognised that those Services provided using a shared infrastructure may require specific plans to transfer.
For the services using [IBM's] shared infrastructure, the following information is required: ..."
"Should it not be possible for AstraZeneca to transfer the Shared Services to a Successor Supplier before the Transfer Date, [IBM] will, if requested, continue to provide the Shared Services on the terms set forth in paragraph 12 of Schedule 22 of the Master Services Agreement."
"the period commencing on the first day of the Exit Period and continuing until all responsibilities to be transferred pursuant to the Exit Plan and IT Transfer Plan have been assumed by AstraZeneca."
The Issues
The approach to the construction of the MSA
"In my opinion, the conclusion reached below attaches too much weight to what the courts perceived as the natural meaning of the words of the third sentence of clause 7.6, and too little weight to the context in which that sentence appears and to the scheme of the Security Trust Deed as a whole. Lord Neuberger was right to observe that the resolution of an issue of interpretation in a case like the present is an iterative process, involving "checking each of the rival meanings against other provisions of the document and investigating its commercial consequences" (para. 98, and also 115 and 131). Like him, I also think that caution is appropriate about the weight capable of being placed on the consideration that this was a long and carefully drafted document, containing sentences or phrases which it can, with hindsight, be seen could have been made clearer, had the meaning now sought to be attached to them been specifically in mind (paras. 100-1). Even the most skilled drafters sometimes fail to see the wood for the trees, and the present document on any view contains certain infelicities, as those in the majority below acknowledged (Sales J, paras. 37-40, Lloyd LJ, paras. 44, 49-52 and 53, and Rimer LJ para. 90). Of much greater importance in my view, in the ascertainment of the meaning that the Deed would convey to a reasonable person with the relevant background knowledge, is an understanding of its overall scheme and a reading of its individual sentences and phrases which places them in the context of that overall scheme. Ultimately, that is where I differ from the conclusion reached by the courts below. In my opinion, their conclusion elevates a subsidiary provision for the interim discharge of debts "so far as possible" to a level of pre-dominance which it was not designed to have in a context where, if given that pre-dominance, it conflicts with the basic scheme of the Deed."
The first pre-condition in paragraph 12.1 of Schedule 22 of the MSA
AstraZeneca's submissions
"Computer centres that [IBM] owns and/or leases in provision of Services shall meet the requirements of the Infrastructure Qualification Guideline 3-G25-1-XIS and will be audited by [IBM] annually. AstraZeneca shall also be entitled to carry out audits of all computer centres used in the provision of services. These Audits may include items such as controls of the physical environments which shall include requirements as to the spacing, electrical supplies, raised floors, humidity sensors, fire detection/suppression, water sensors, environmental monitoring, alarms systems and physical security are in compliance with Policies, Standards, Procedures and Guidelines."
"For security and regulatory compliance reasons, AstraZeneca requires that certain elements of its infrastructure are entirely separate from infrastructure used by any third party.
[IBM] shall ensure that all of the servers and storage devices (including storage arrays and storage area networks) used to provide Services to AstraZeneca are used exclusively to provide Services to AstraZeneca, and that no such servers or storage devices can be accessed, used or modified by any third party (including without limitation any other customer of [IBM]).
[IBM] shall ensure that all physical networking equipment and plant equipment (including cabling) used to provide the Services to AstraZeneca is used exclusively to provide the Services to AstraZeneca or is securely segregated into virtual segments which are used exclusively to provide the Services to AstraZeneca. [IBM] must ensure that no third party (including without limitation any other customer of [IBM] to whom [IBM] provides services using shared physical networking equipment or plant) is able to access, intercept, modify, block or otherwise interfere with any communications transmitted or received by AstraZeneca via networking equipment or plant equipment used in the provision of the Services."
"The Operating System, Storage and Facilities Services are represented in the diagram below to illustrate the infrastructure building blocks required to deliver against the business and Service requirements (including Service Levels) of the Applications they are running."
"The following table describes some of the characteristics of the four classes of Applications that shall be hosted using the Hosting Services. A particular class of Application may be hosted on more than one category (see Operating System, Storage and Facilities Services below) of Hosting Service as different elements of the infrastructure that supports the Application may require different Availability, recovery and performance characteristics."
"[IBM] and AstraZeneca shall provide the facilities required by the Operating System Hosting and Online Storage Services. [IBM] shall also provide facilities for AstraZeneca to house server and storage services managed by AstraZeneca or other third party suppliers. The requirements for this Service include providing management of floor space, power, HVAC, VESDA etc. The descriptions below are summaries of the descriptions that can be found in AstraZeneca data centre resilience requirements documents..."
(1) Category 1 WDC - World Class Data Centre;
(2) Category 2 RDC - Regional Data Centre;
(3) Category 3 LSR - Local Server Room; and
(4) Category 4 NC - Network Closet.
"[IBM] shall provide to AstraZeneca for each item of equipment and other physical assets pertaining to the provisions of the Terminating Services the following information:
...
g) whether it is shared with other customers or [IBM] itself
h) what it would cost to desegregate its use from others if shared...
i) what it would cost to replace that part needed by AstraZeneca..."
IBM's submissions
"All Services delivered from platforms that are shared with other clients of the Supplier shall be listed in the Exit Plan together with a strategy for separating the services from the shared platform and handing a Service to AstraZeneca that could be operated by AstraZeneca without impacting [Business As Usual]."
Decision
"AstraZeneca in accordance with best practice, requires its chosen Supplier to enter into an agreed Exit Plan at the same time as it enters into the MSA so that all commercial matters can be resolved at a time when the relationship is on a stable footing."
Transferability
AstraZeneca's submissions
"all computer hardware, firmware, middleware, protocols and software and other hardware, peripheral equipment, networks, communications systems and other equipment of whatever nature;"
"[IBM] shall provide to AstraZeneca for each third party contract pertaining to the Terminating Services, including but not limited to contracts in respect of software, software support, hardware, hardware maintenance, telecommunications, disaster/recovery, contractors, leases, pertaining to the Services whether between AstraZeneca and each third party or between [IBM] and each third party the following information:..."
IBM's submissions
Decision
The Scope of the request for Services
AstraZeneca's submissions
IBM's submissions
Decision
The duration of IBM's obligation to provide Termination Assistance
AstraZeneca's submissions
"the period commencing on the first day of the Exit Period and continuing the (sic) until all responsibilities to be transferred pursuant to the Exit Plan and IT Transfer Plans have been assumed by AstraZeneca."
"the assistance [IBM] is obligated to provide pursuant to this Schedule is order to transfer responsibility for delivery, performance and management of the Terminating Services, including the services described in the Exit Plan or any IT Transfer Plan."
"[IBM] must provide AstraZeneca with Termination Assistance during each Exit Period in accordance with the terms of this Schedule, the Exit Plan and the IT Transfer Plans applicable to the Terminating Services."
IBM's submissions
"[IBM's] obligation to deliver the Services does not cease on the Termination Date. [IBM] must continue to deliver the Services in accordance with this Agreement up to and including the date that is the end of the Exit Period."
Decision
Clause 75 of the MSA
"This Clause 75 (excusing causes) sets out:
(a) the only basis on which [IBM] shall be excused from liability for a failure to perform (or delay in performing) its obligations under this Agreement and the conditions to which that excuse is subject;…"
IT Transfer Plan
"one or more plans prepared by AstraZeneca for transferring some or all Services in the event of termination."
"7.1 AstraZeneca may prepare one or more IT Transfer Plans.
7.2 When an IT Transfer Plan is prepared, it shall:
7.2.1 define the process that AstraZeneca shall adopt internally to manage the Transfer and the project timetable that shall guide the Transfer;
7.2.2 be based on the template attached as Appendix A to this Schedule; and
7.2.3 not expand [IBM's] liabilities or obligations that are otherwise limited under this agreement (e.g. limitations on license rights at the end of the Term).
7.3 AstraZeneca shall provide a copy of each IT Transfer Plan to [IBM] promptly after it is prepared.
7.4 [IBM] shall prepare all drafts of each Exit Plan prepared subsequent to any draft of an IT Transfer Plan (as disclosed to [IBM]) to be consistent in all respects with that draft of the IT Transfer Plan subject to paragraph 8.2 below."
AstraZeneca's submissions
IBM's submissions
"AstraZeneca shall develop one or more IT Transfer Plans, supported by its key business and technology leaders, that set out potential Transfers."
"AstraZeneca shall set out the scope and terms of reference for any IT Transfer Plan required to establish its ongoing IT services requirements following a Transfer."
Decision
(1) AstraZeneca is under an obligation to provide an IT Transfer Plan under the MSA;
(2) IBM's obligations to provide Termination Assistance under Schedule 22A are not conditional on the provision of an IT Transfer Plan.
Fixed Fee for Termination Assistance
"the Termination Assistance of [IBM] as set out in this Exit Plan shall be provided for a fixed fee of £ [ ] ("Fixed Fee")."
Summary
(1) Issues 1 and 2: In relation to the first pre-condition in paragraph 12.1 of Schedule 22 to the MSA and AstraZeneca's Issue 1 and IBM's Issue 6:
The term "shared infrastructure" in paragraph 12.1 of Schedule 22 of the MSA includes the infrastructure in the form of equipment, systems and facilities at IBM's shared data centres which are used to provide Data Centre Facilities Services under the MSA. Those shared data centres include IBM's three World Class Data Centres at Southbury, Connecticut USA, Kista, Sweden and Singapore, as well as IBM's further data centre at Osaka in Japan.
(2) Issues 3 and 4: In relation to the second pre-condition in paragraph 12.1 of Schedule 22 to the MSA and AstraZeneca's Issue 3 and IBM's Issue 7:
In paragraph 12.1 of Schedule 22 of the MSA the phrase "associated Systems and Third Party contracts" refers to the Systems and Third Party contracts that are associated with the "shared infrastructure" rather than those associated with the relevant Terminating Services.
(3) Issue 5: In relation to paragraphs 12.1.1 and 12.1.2 of Schedule 22 to the MSA and IBM's Issue 10 (Part 1):
Any request under paragraph 12 of Schedule 22 from AstraZeneca for IBM to continue to provide Shared Services may be made either for all Shared Services or for particular Individual Services or for any Service, Service Component or Operating System instance.
(4) Issues 6 and 7: In relation to the duration of IBM's obligation to provide Termination Assistance and AstraZeneca's Issue 4 and IBM's Issue 2:
Subject to the provision for Shared Services in paragraph 12 of Schedule 22, IBM is not under any contractual obligation under the MSA to provide any Services to AstraZeneca after the Extended Termination Date and, in particular is under no obligation to provide Termination Assistance to AstraZeneca after that date.
(5) Issues 8B and 8C: In relation to the IT Transfer Plan and IBM's Issue 4 as amended (Part1 and Part 2):
(a) AstraZeneca is under an obligation to provide an IT Transfer Plan under the MSA;
(b) IBM's obligations to provide Termination Assistance under Schedule 22A are not conditional on the provision of an IT Transfer Plan.
(6) Issue 8D: In relation to the Fixed Fee for Termination Assistance and IBM's Issue 12 as amended:
The Fixed Fee was not conditional upon AstraZeneca producing an IT Transfer Plan or upon the Exit Period being defined under Paragraph 3.3 of Appendix 22 in the sense that, without those, IBM could not set a Fixed Fee. Rather, it was the intention of the parties that IBM would provide a Fixed Fee but that the Fixed Fee might change, depending both on the IT Transfer Plan and the actual length of the Exit Period.