IBM tries to throw Qld govt’s payroll case out of court

Technology giant IBM has moved to have the Queensland government’s case against it over the payroll saga thrown out of the state's Supreme Court based on a waiver liability signed by both parties in September 2010.

The state government took its former partner to court earlier this year over claimed misleading and deceptive conduct that “induced” it to pick IBM for the payroll rollout deal over rival Accenture, even though the supplier wasn’t equipped to meet the conditions of the contract.

But IBM has now accused the state of trying to “rewrite history”, particularly when it comes to a September 2010 agreement which released the contractor from liability in any future legal action.

It is the same waiver former Supreme Court judge Richard Chestermann said prevented the state from recouping damages from IBM in his 2013 commission of inquiry.

The precise nature of that waiver - and exactly what it protects IBM from - is currently before the court, as IBM appeals to have the initial proceedings called off.

It is also demanding the state of Queensland pay all its court costs to this point.

Lawyers for IBM - the Sydney branch of international law firm Jones Day - say the agreement was designed to relieve parties from exactly the kind of legal action Queensland is now pushing.

IBM is arguing the waiver does not specify any causes or classes of legal action against the company, and thus encompasses a broad range of reasons to sue - including misleading and deceptive conduct under the Trade Practices Act.

This, it says, precludes the state’s ability to continue with the current litigation.

The conflict is likely to drill down to nitty gritty arguments about the exact meaning of particular words and passages within the text of the 2010 agreement.

Queensland claims the waiver was never intended to be that broad, and that conditions elsewhere in the document make it clear the release was only ever intended to apply to the quality and completeness of IBM’s ongoing work under the payroll deal.

It says the waiver centres on the contract - and therefore does not apply to conduct that took place before it was even signed (IBM's alleged misleading behaviour in the procurement stage). 

Lawyers for the state of Queensland have dredged up correspondence between the government and IBM from when the agreement was being drafted, showing a to-and-fro between the parties over how comprehensive the waiver should be.

“The parties went to obvious pains to define precisely what ‘claim’ meant,” lawyers for the Queensland government state.

“IBM is now seeking to obtain the benefit of a release which it knows the state rejected and did not ever intend to grant."

IBM is seeking to have this “extrinsic evidence” thrown out as well, and force the judge to focus only on the final agreed text of the waiver to make a ruling.

The case is due to be heard in the Brisbane Supreme Court in the coming weeks. If IBM fails to secure its injunction it will be forced to defend itself against the state’s claim that it knowingly misled procurement officials.

IBM was awarded a contract to replace Queensland Health's ageing LATTICE payroll system in 2007, which was plagued with defects when it went live in 2010.

The state government has struggled since to get the new system to pay health staff correctly, and has estimated the remediation will cost it $1.25 billion overall.