IBM chases Qld for legal costs in payroll lawsuit

IBM is going after the Queensland government for all the legal fees it incurred defending itself against the state’s compensation lawsuit over the pair's failed health payroll project.

The technology giant, which was the prime contractor for the 2007 replacement of Queensland Health’s legacy payroll software, wants the government to cover the full cost of its successful application to have the case thrown out of court.

It also wants to be compensated for all the cash it spent fighting the original lawsuit filed in the Brisbane Supreme Court in December 2013.

Last week Justice Glenn Martin ruled in favour of IBM’s push to have the Queensland case thrown out of court, based on a waiver of liability signed by both parties in 2010.

The loss means the state government will now need to pay at least some of the company’s legal fees, on top of the estimated $1.25 billion it has already spent remediating the Queensland Health payroll system since the SAP system hit the rocks in 2010.

IBM is now arguing that the 2010 waiver signed by the two parties included a clause ordering the state of Queensland to pay “any liability” - “including the amount of any judgement, settlement sum and legal and other costs” that should arise out of the government making a claim against it in the courts.

It says this clause allows it to recover over and above the usual costs awarded in an unsuccessful lawsuit, which on the “standard basis” typically doesn’t cover 100 percent of the legal fees paid by the claiming party.

IBM claims if it is only awarded costs on the standard basis it will be “substantially out of pocket” despite being a passive party to the case.

“IBM has incurred the costs of this proceeding because the state commenced a proceeding to agitate claims it had released in 2010 (and in breach of the promise not to sue)," the company said.

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It is asking for cost recovery on an “indemnification basis” - or at a much higher rate that would usually be dealt by a judge in the absence of a signed agreement like the 2010 waiver.

The complex case - which has been running for nearly two years now - is likely to set the state back by a significant sum no matter the outcome.

Queensland government lawyers are trying to minimise its liability by arguing that the waiver should only be interpreted as pointing to a standard cost claim, because it does not specify a “special basis” for a more extensive claim.

They are also trying to distance the appeal from the original suit brought against IBM in 2013, in an effort to block IBM from claiming combined damages for both.

A directions hearing in the costs dispute is scheduled for later today.

The Labor government inherited its LNP predecessor’s lawsuit when it won the 2015 election early this year, and decided to quietly continue the case despite originally describing it as a “waste of taxpayer’s money”.

The office of premier Annastacia Palaszczuk has been contacted for comment.