As the world evolves in the realms of technology and innovation, so the number of disputes will rise. CIS General Insurance, the insurance branch of the Co-operative Group (CISGIL), took on IBM in a £130m dispute over claims it was behind the failed implementation and operation of a major cloud-based insurance platform for the Co-op.
The case arrived at the door of CMS finance disputes senior associate Kushal Gandhi (now a partner), who was part of a team led by head of international arbitration Guy Pendell.
Gandhi, who acted for IBM UK from day one, says that he remembers the very first email and piece of work for the case. His team worked closely with IBM’s head of legal, UK & Ireland Emma Wright and litigation lead counsel, Europe, Middle East & Africa Kurt von Poelnitz.
Gandhi describes it as “very much a one team approach – which made the challenge easier to surmount. It meant that each one of us was contributing at our best.”
CISGIL had secured IBM’s services in 2015 for the supply of a new IT system and for system management for a term of ten years. In April 2016, there was a breakdown of relations between the parties, leading to a contract termination.
Each side blamed the other in a case that intrigued software providers and corporates alike; what should happen when technology fails and how can risks be managed?
CISGIL’s claim was in respect of wasted costs and damages arising out of the termination of the £50m contract, as well as other secondary claims. IBM, on the other hand, pointed at CISGIL’s non-payment of an approx. £2.9m invoice.
Gandhi says that one of the technical sticking points was the “scale and magnitude of disclosure” and how CMS overcame that using an innovative solution.
“We demonstrated the skills that we have developed in house – by the team led by Kevin Bannon, CMS Evidence – and we were able to put together a technology assisted review. We were able to convince the court that this was the right course of action on this case, despite the opposition. I am convinced that technology assisted review is here to stay in the UK disputes space.”
CMS was one of the first UK law firms to use adopt Relativity – the platform/tool used by CMS’s in-house document management team, CMS Evidence to interrogate data. At the time of the dispute, the disclosure exercise included the largest-ever TAR (involving the largest data set that Relativity had ever seen).
The use of CAL in this dispute set a new standard for how CMS handles large disclosure exercises, with the use of CAL now being the default.
When he joined CMS as a trainee in 2007, Gandhi had never intended to go into litigation – he was instead determined to become a banking lawyer. Nonetheless, as part of his training contract he had to do a litigation seat and was fortunate to complete it under Pendell’s supervision.
“Such is destiny. The financial crisis happened in 2008. When I came to qualification the banking sector looked very different,” Gandhi says. The stars had aligned. Gandhi was able to maintain his interest in the finance sector – the disputes he has been involved in over the years have had a financial or technology aspect to them and his practice area now is predominantly in the finance and fintech space.
On previous cases that he has found interesting and challenging, Gandhi refers to the huge sale of a distressed asset, worth nearly $1bn. CMS was involved from day one, from the pre-action phase and took it all the way to an arbitration hearing which the team won. It was challenged and then dismissed.
“On the case, Guy and I made a bet,” Gandhi recalls. “I remember speaking to Guy in the late hours of one evening near the date of the hearing. I said, ‘if we can win this then we can win anything.’ Rather foolishly I laid that bet, and my forfeit was that I would have to perform on CMS Has Talent – a charity event that we used to do. Lo and behold, we won, and Guy is not one to not hold you to your bets. He held me to my bet.
“Fortunately, I had good teammates and other associates – including David Bridge, Louise Boswell (both of whom are now my fellow partners), Lisa Fox, Amy Wilkinson and a few others – who I managed to rope into this performance, so I wasn’t left on my own. We did a Bollywood dance, which I choreographed, and we practiced and performed in the office. In the end, we won the People’s prize. To this day, the running joke is still ‘if we could have won that, then we can win anything’.”
These experiences, Gandhi contends, have formed and shaped his career and kept him motivated.
He brought this resolve to the IBM case. Although the Court found that IBM had wrongfully terminated the contract, it did not accept Co-op’s claim for £128m wasted expenditure. In this instance the Court decided that “wasted expenditure” meant the same thing as “loss of profit, revenue and savings”, which were expressly excluded in the contract and therefore Co-op could not recover these losses.
The overall result meant CISGIL recovered only 10 percent of the value of its claim. The successful defence of the wasted costs claim on the basis of the limitations of liability for loss of profit, revenue and savings, represented an important judgment on a developing issue.
It was also significant: at a human level – for those individuals being accused of wilful default and of failing to deliver; at an institutional level – for IBM’s UK business, as this case took up significant resources with time and costs affecting the profit and loss for the business; at a global organisation level – given the significance of the case and quantum involved.
Since the case closed, Gandhi has been promoted to partner (May 2020) and he has been working on developing the fintech and crypto disputes practice with fellow partner Vanessa Whitman.
“In my new role as partner, I am also now getting more exposure than I ever did to the business side of things and the entrepreneurial side. Making partner in the midst of the pandemic wasn’t how I had ever imagined making it into the partnership. But all my colleagues and management here at CMS has been incredibly supportive. I feel very lucky to be among the ranks here at CMS.”
About Kushal Gandhi
2020-present: Partner, CMS
2014-2020: Senior associate, CMS
2009-2014: Associate, CMS
2007-09: Trainee solicitor, CMS
Who’s Who: the CMS team
Leading: Guy Pendell with Kushal Gandhi
Supported by: Lee Gluyas (partner), Stephanie Woods, Michaela Potter, Rachel Ormsby (senior associates), Zoe Homer, Louise Pearce, Laura Cairns, Francesca Knight (associates) and Emma Rodrigues (paralegal). Further support was provided by many CMS trainees and paralegals.
CMS Evidence Team: Kevin Bannon (head of CMS Evidence) and Jacqueline Dennee (senior e-disclosure consultant).