The importance of St. Albans V ICL case

Published: 09th January 2005
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By David Callan
The case of St. ALBANS CITY & DISTRICT COUNCIL v INERNATIONAL COMPUTERS LIMITED of the mid Nineties set the precedent for subsequent cases involving the sale of software, both off the shelf and bespoke custom developed software. The case effectively shook the legal side of the software industry to its core and left companies in the industry rushing to their lawyers for advice.

Classification of software
The problem with disputes brought to the courts related to the sale of and use of software prior to the St. Albans v ICL case was the presence of some very important questions: are suppliers of software systems supplying goods or services? Clearly computer hardware is "goods" but what about intangible software, what is the legal status of software - goods or services? The aforementioned questions are some of the most debated in computer law.

The St. Albans v ICL case answered these questions in a roundabout way. The court said that a program by itself would not be "goods" whereas software delivered on "hard media" was, i.e. a standard software system incorporating software was protected by the UK Sales of Goods Act 1979.

The protection meant that in effect, packaged software should not contain any bugs which would render it unfit for its purpose. If the software was faulty, buyers could recover the cost of the system and any losses suffered as a result of the software failing.

St. ALBANS CITY & DISTRICT COUNCIL v INTERNATIONAL COMPUTERS LIMITED
The case itself arose after International Computers Limited, a UK hardware and software manufacturer company agreed to supply St. Albans City and District Council with a computer system of both hardware and software which the council needed order to administer and collect the Community Charge ( poll tax ) which was then to be introduced. The computer system would maintain a reliable database of the names entered on the community charge register, accurately count the names, and accurately retrieve and display the figures resulting from the count. It had to be reasonably fit for the purpose of maintaining and retrieving a reliable register. The system was to calculate and dispatch bills for the Community Charge.

In early November 1989 the UK government instructed all councils that they were required to make a return of the relevant population by the 8th of December.

At an important meeting before the system was first used, ICL's project manager who was providing consultancy services to St. Albans assured representatives of the council that the figure to be returned to central government could be extracted from the transaction processing screen. At no point between then and the 8th of December was any indication given that the figures on the transaction screen could not be relied upon. This in fact was the case and in late February 1990 the council began to suspect the figure they had taken from the transaction screen and subsequently submitted to the government before the 8th of December of the previous year was incorrect.

The number submitted by the council to the government was 97,385. In fact, the number should have been 94,419 and hence the number used overstated the population by 2,966. This overstatement of the population resulted in an undercharging of each chargeable resident; therefore the council suffered a total loss of 1,314,846.

St. Albans council therefore sued International Computers Limited for these losses along with costs on the grounds that the software did not meet its intended purpose and was inherently flawed. In the end St. Albans was awarded 1.3 million.

Liability
Another important element to emerge from the St. Albans v ICL case was the fact that ICL's limitation of liability clause which set their liability to 100,000 at most was thrown out. The judge of the original case (an appeal was launched by ICL) Scott Baker J said that the defendant had not justified the figure of 100,000 which was small both in relation to the potential risk and the actual loss, noting also that the defendant was insured for 50 million worldwide. If the loss were to fall on the council it would ultimately be borne by the local population. He did not think it unreasonable that he who stood to make the profit, who had been well able to insure and in this case was insured, should carry the risk and therefore awarded damages to St. Albans well over 100,000. This decision by Baker J caused a reaction in the industry which saw suppliers reviewing their limitation clauses to make them as effective as possible.

Conclusion
In the last paragraph the issue of liability relating to the St. Albans case is discussed this however is not the most important aspect of the case. The real importance of the St. ALBANS CITY & DISTRICT COUNCIL v INERNATIONAL COMPUTERS LIMITED is the fact that it demonstrates that software stored and installed from a physical storage 'good' can be classified as a good and hence protected under the UK Sales of Goods Act 1979 and other similar country specific acts. This caused a major review of standard terms and conditions of companies within the computer industry. Many cases have been interpreted on the precedent set in this case and hence St. ALBANS CITY & DISTRICT COUNCIL v INERNATIONAL COMPUTERS LIMITED is firmly a part of modern case law.

Sources
http://www.scit.wlv.ac.uk/~cm1995/cbr/cases/case14/ONE.HTM
Provides a detailed article on the events leading up to the case: what the case was about.

http://www.nipclaw.com/comcon/rc01.htm
Interesting reflections on different elements relating to the case.

http://www.neil-myerson.co.uk/dcm/showsingleelement.asp?elementid=199
Discusses the 100,000 liability clause.



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