Source: https://www.bailii.org/cgi-bin/format.cgi?doc=/ew/cases/EWHC/TCC/2011/306.html
Timestamp: 2020-05-25 17:21:31
Document Index: 618752488

Matched Legal Cases: ['art 8', 'art 8', 'UKSC ', 'art 8', 'EWCA ', 'art 1', 'art1', 'art 2']

Astrazeneca UK Ltd v International Business Machines Corporation [2011] EWHC 306 (TCC) (22 November 2011)
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URL: http://www.bailii.org/ew/cases/EWHC/TCC/2011/306.html
Cite as: [2011] EWHC 306 (TCC)
Neutral Citation Number: [2011] EWHC 306 (TCC)
Case No: HT-11-299
Mark Hapgood QC and Alan Roxburgh (instructed by Milbank Tweed Hadley & McCloy LLP) for the Claimant
Jeffery Onions QC and Simon Henderson (instructed by Herbert Smith LLP) for the Defendant
Hearing dates: 1-3 November 2011
In these proceedings the parties seek the determination of certain issues arising out of the termination of a Master Services Agreement ("the MSA") entered into between the Claimant ("AstraZeneca") and the Defendant ("IBM") on 16 July 2007. The issues with which I am concerned relate to the obligations of the parties arising after termination.
With the encouragement of the court, the parties have been able to produce a List of Agreed Facts and this has made it unnecessary for either party to deal with the witness evidence submitted in the underlying Part 8 Proceedings. The parties have also provided a List of Issues for Determination which each of the parties wishes to have determined arising out of these Part 8 Proceedings. The List of Agreed Facts and the List of Issues for Determination are attached as Appendix A and Appendix B to this judgment.
The MSA contains some 90 clauses and 32 schedules. The parts of the MSA which are central to the issues are Clauses 65, 69 and 70 and Schedules 22 and 22A which I set out below.
On 8 April 2011 AstraZeneca gave notice of termination of the MSA in its entirety. There is a dispute as to whether they were entitled to terminate the MSA for cause under clause 65.1 or only for convenience under Clause 68.1 but that is not an issue for determination in these proceedings.
Clauses of the MSA
Clause 69 of the MSA defines the effective date of termination. It provides at Clause 69.3 that IBM's obligation to deliver the Services does not cease on the Termination Date and that IBM must continue to deliver the Services in accordance with the MSA up to and including the date that is the end of the Exit Period.
Clause 70 of the MSA deals with the consequences of termination and, in particular, provides in relation to Termination Assistance at clause 70.5 that:
"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]."
As indicated in Clause 70.5 Schedule 22 contains provision as to Termination Assistance and Exit. It has attached to it a document which is referred to as either Annex or Schedule 22A. Paragraph 2.1.5 of Schedule 22 states that the Exit Plan contains the detailed obligations that both parties must perform during an Exit Period. The Exit Period is defined in paragraph 3.2 of Schedule 22 to mean, in this case, a period commencing at the time the termination notice was given and ending on the Extended Termination Date. Under paragraph 3.3 of Schedule 22 AstraZeneca was entitled to extend and has extended the Exit Period so that the Extended Termination Date is now 8 April 2012.
Paragraph 4 of Schedule 22 deals with Termination Assistance and provides:
"[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."
Those Terminating Services are defined in Paragraph 1 of Schedule 22 to mean, as relevant to this case, "all Services for which a party has issued a formal notification of termination but which continues to be provided during an Exit Period."
Paragraph 7 of Schedule 22 deals with IT Transfer Plans. At Paragraph 7.1 it states: "AstraZeneca may prepare one or more IT Transfer Plans."
Under Paragraph 9 of Schedule 22 there is provision for Termination Assistance charges. It provides at Paragraph 9.1: "AstraZeneca shall make payments in consideration of the performance by [IBM] of Termination Assistance as set forth in Appendix 1 of the Exit Plan."
Paragraph 12 deals with Shared Services. It gives rise to a number of the issues in this case and provides as follows:
Under paragraph 3 of Schedule 22A it provides that "this Exit Plan is the plan for the orderly transition of Terminating Services from [IBM] to AstraZeneca."
Paragraph 4 deals with information to be provided by IBM. It required IBM to provide information to AstraZeneca and states that a list of AstraZeneca information requirements is set out in Appendix 2, Appendix 3 and Appendix 7.
Paragraph 5 deals with IT Transfer Plans. It provides that 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.
Paragraph 5.1 sets out six key phases and paragraph 5.2 deals with three workstreams: legal and commercial, people and communications and transfer.
Paragraph 5.3 deals with governance and sets out the governance and escalation procedure which is to apply during a Transfer.
Paragraph 7 of Schedule 22A deals with shared infrastructure. It provides as follows:
"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: ..."
It then sets out information in relation to staff, infrastructure and physical and logical security at paragraphs 7.1, 7.2 and 7.3. At paragraph 7.4 it refers to Shared Services as follows:
"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."
Paragraph 8 of Schedule 22A deals with the responsibilities and activities that will be undertaken by both parties to support the Transfer. Under various headings at paragraphs 8.6 to 8.34 it sets out responsibilities which apply "during the Actual Exit Period". The Actual Exit Period is defined in paragraph 1 of Schedule 22A to mean:
"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."
Paragraph 10 of Schedule 22A deals with transition activities and states that IBM "Shall provide certain transitional services following the Transfer Date but prior to the end of the Exit Period."
The Transfer Date is defined by paragraph 1 Schedule 22A to mean "a date on which AstraZeneca will assume complete responsibility for Terminating Services."
Attached to Schedule 22A are a number of Appendices. Appendix 1 deals with commercial terms and provides at paragraph 1 "the Termination Assistance of [IBM] as set out in this Exit Plan shall be provided for a fixed fee of £ [ ] ("Fixed Fee")." There was therefore no fee defined in Appendix 1.
Appendix 2 contains a list of information to be provided by IBM. Appendix 3 contains Service Provider, that is IBM, Activities which are representative of what is required. They are set out for each of the six key phases.
Appendix 6 is referred to as a "high level transfer plan timeline" but is blank in Schedule 22A in the MSA.
As I have said, the issues identified by the parties deal with various matters relating to the consequences of termination. First, a number of issues (Issues 1, 2, 3, 4 and 5) concern the meaning of paragraph 12.1 of Schedule 22 of the MSA. This paragraph gives AstraZeneca the ability to request IBM to provide Shared Services for up to 12 months following the Extended Termination Date.
The next issues (Issues 6 and 7) concern the duration of IBM's obligation to provide Termination Assistance and, in particular, whether there is an obligation to provide such Termination Assistance after the Extended Termination Date. The next issue (Issue 8A) concerns the effect of Clause 75 which, in certain circumstances, prevents IBM being liable for failures resulting from excusing causes. There are concerns as to whether I can usefully deal with this issue in the abstract.
The next issues (Issues 8B and 8C) concern AstraZeneca's obligation to provide an IT Transfer Plan. Finally, Issue 8D deals with IBM's obligation to provide a Fixed Fee for Termination Assistance.
The approach to the construction of the MSA
It is common ground that in construing the MSA I should take account of the well known principles stated by Lord Hoffmann in Investors' Compensation Scheme Limited v West Bromwich Building Society [1998] 1 WLR 896 and recently reviewed by Sir Anthony Clarke MR in The Resolute [2009] 1 Lloyd's Rep 225 at [9-12]. In summary the task of the court is to ascertain the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation which they were at the time of the contract but excluding their previous negotiations and declarations of subjective intent.
I was referred, in particular, to the judgment of the Supreme Court in Re Sigma Finance Corporation [2009] UKSC 2 at [12] where Lord Mance, with whom Lords Hope, Scott and Collins concurred, said this:
"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."
In this case in construing the word "infrastructure" in paragraph 12 of Schedule 22, the meaning of that phrase is not the subject of any definition derived from the parties' own dictionary. It is used in different senses in various parts of the MSA. In construing Schedule 22 it is necessary, as set out above, to have an understanding of the overall scheme and to construe paragraph 12 in the context of that overall scheme.
There are two particular aspects which have to be taken into account in this case. First, as set out in clause 70.5 of the MSA, Schedule 22 is the place where the rights and obligations allocated to AstraZeneca and IBM in relation to the preparation for and the consequences of termination of the MSA are dealt with. Therefore Schedule 22, together with Schedule 22A, are likely to be of more assistance in construing those rights and obligations but evidently they must be construed in the context of the MSA as a whole.
Secondly, the parties incorporated into the MSA at Schedule 29 part of IBM's response to AstraZeneca's Request for Proposals relating to the exit planning requirements which have been set out in Schedule 22 and 22A. The parties are agreed that Schedule 29 therefore contains what are sometimes referred to as the "aims and genesis" of the provisions contained in Schedules 22 and 22A and are, to that extent, of some assistance in construing those provisions.
I now turn to consider the individual issues.
The first pre-condition in paragraph 12.1 of Schedule 22 of the MSA
Under this heading there are two issues: Issues 1 and 2. Essentially the question relates to the meaning of the word "infrastructure" in the first phrase of paragraph 12.1 and, in particular, whether it includes equipment, systems and facilities at IBM's shared data centres which IBM uses to provide the Data Centre Facilities under the MSA.
AstraZeneca's submissions
On behalf of AstraZeneca Mr Mark Hapgood QC, who appears with Mr Alan Roxburgh, submits that since "infrastructure" is neither a term-of-art nor a defined term in the MSA it is necessary to consider the relevant factual matrix; any provisions in the MSA which shed light on the meaning of "infrastructure" in paragraph 12.1 and the commercial reasonableness of the two competing constructions, judged by their effect on each party.
In relation to the relevant factual matrix Mr Hapgood QC relies on four aspects. First, he refers to the move in the MSA, compared to the earlier "Legacy Contract" between AstraZeneca and IBM, to the concept of "Service Effect". Under the MSA AstraZeneca specified its requirement for the Services in terms of the outcomes it required rather than the technical means by which those outcomes were to be achieved. He refers to the Key Deal Principle set out at Clause 4.1(a) of the MSA which gave IBM the freedom to manage the "services how" providing the "services what" and AstraZeneca's business needs were not impaired.
He submits that the parties knew, when they entered into the MSA, that only limited and, possibly on termination, outdated information about AstraZeneca's IT systems could be discerned from the MSA itself whereas IBM would, at termination, be in possession of a very large amount of information about AstraZeneca's IT systems which would not be in the possession of AstraZeneca. He submits that, in the light of this lack of knowledge, AstraZeneca would not know how long IBM might take to provide information nor would AstraZeneca have any control at all over the speed with which IBM would provide that stipulated information. He submits, therefore, that it made sense for AstraZeneca to be given the protection of a back-up period in case the 12 month Exit Period proved to be insufficient to complete the complex process of migration from the WDCs.
Secondly Mr Hapgood QC relies upon the criticality of IT to AstraZeneca's business. He submits that many of the Services provided by IBM under the MSA were critical to AstraZeneca's business, as set out in the Agreed Facts. Against that background he submits that it made sense for the MSA to contain a provision which protected AstraZeneca against the risk that the process of migration from WDCs would take longer than 12 months.
Thirdly, he relies upon the complexity of the migration process which, as stated in the Agreed Facts, included the need to transfer servers and software by physical movement, virtual migration or server replacement. It is also agreed that the parties knew at the date of termination that the migration process would be complex and challenging.
Fourthly, he relies on the impracticability of approaching Successor Suppliers before termination of the MSA. He submits that preparation of a tender for a replacement contract on the scale of the MSA is bound to be time-consuming and costly and that any Successor Supplier would require the information in Appendices 2 and 3 to Schedule 22A. He submits that on the basis of paragraph 15 of Schedule 22 the appointment of a Successor Supplier would occur after termination of the MSA and after IBM has assisted and cooperated with the Successor Supplier.
He submits that it is only after service of the notice of a termination that AstraZeneca is entitled to release Confidential Information to potential Successor Suppliers and he relies on Clause 41.4 of the MSA. He also submits that a Successor Supplier cannot commence the process of migrating servers and other equipment from the WDCs until it has been appointed by AstraZeneca under a new contract. Again he submits that given the likely length of the tender process there might only be a few months of the 12 month Exit Period that are available to carry out this process of migrating servers and other equipment from the WDCs.
Mr Hapgood QC also referred me to various provisions of Schedule 1 to the MSA. He submits that in considering whether Terminating Services are provided by using "shared infrastructure" it is necessary to look at the relevant Services which in this case are the Operational Services defined in Schedule 1.
In the introduction to Schedule 1, paragraph 1.8 explains the framework structure on which AstraZeneca's requirements for their Services are based and which is illustrated in terms of capability requirements and technical infrastructure requirements grouped by capability. A diagram illustrates these concepts showing Hosting as an infrastructure service definition. It states that, in many instances, Services require the use of other Services for delivery and to achieve the Service requirements. A table illustrates the inter-relationships and dependencies between Services. That shows that in relation to Hosting, Data Centre Facilities form part of the Services used by Operating System Hosting and Online Storage both of which form part of those Hosting Services.
Mr Hapgood QC also referred me to paragraph 3.4.1 of Schedule 1 which forms part of the section dealing with Quality and Compliance Services used by the Hosting Services.
Paragraph 3.4.1 deals with Facilities and Utilities. It provides as follows:
"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."
I was referred to an edition of the Infrastructure Qualification Guideline which, although a later version, I understand is identical in relevant terms to the one referred to in Paragraph 3.4.1. The purpose of the guideline is to provide guidance on the minimum requirements to be applied to the entire AstraZeneca IT infrastructure which is stated to be fundamental to meeting current business and regulatory requirements in respect of system stability, reliability and security. It states that the requirement for qualification applies to all components of the infrastructure.
It also states that the infrastructure elements covered by the guideline include, as well as servers and mainframe computers "Electrical Power Supply and heating, ventilating and air conditioning equipment for server rooms and data centres" and "Server rooms and data centres." It defines heating, ventilation and air-conditioning equipment (HVAC) as "the equipment used to maintain the correct temperature and humidity for infrastructure hardware and usually found in a server room or data centre."
Mr Hapgood QC submits that from this it can be seen that the term "infrastructure" is being used to include the physical environment. He submits that this is wider than the definition of infrastructure in paragraph 3.2.5 as being: "Hardware and software components including servers, network devices (routers, hubs, bridges and switches), cabling, operating systems (Windows, Unix, Linux etc.) and middleware products that reside on infrastructure hardware and operating systems."
He referred to section 4 of Schedule 1 to the MSA which dealt with security and formed part of the Services. Paragraph 4.1.3 deals with segregated IT/IS infrastructure, as follows:
"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."
Mr Hapgood QC submits that this provision assists in understanding what the parties had in mind by speaking of "shared infrastructure" in paragraph 12.1 of Schedule 22. He says that it cannot be limited to shared servers or storage devices.
He also referred to section 9 of Schedule 1 which dealt with Hosting Services. In particular he referred to a diagram in paragraph 9.1 which was referred to in the following terms:
"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."
That diagram illustrated that, in relation to Hosting, "Operating System Hosting" was provided by "Operating Systems"; "Storage Hosting" was provided by "Online Storage" and "Facilities" were provided by "Data Centre Facilities".
Mr Hapgood QC referred to a table in paragraph 9.1 which set out the characteristics of four classes of application that should be hosted using Hosting Services. It stated:
"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."
He also referred to a diagram which illustrated how AstraZeneca's applications would be allocated to categories of Hosting Services. This defined Operating System Services, Online Data Storage Services and Primary Facilities Services.
Paragraph 9.2 dealt with the Operating System Hosting Service, paragraph 9.3 dealt with the Online Storage Service and paragraph 9.4 dealt with the Data Centre Facilities Service. At paragraph 9.4.1 it stated as follows:
"[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..."
That paragraph then contained descriptions of four categories of facilities:
(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.
The WDC facilities were to house AstraZeneca's production and pre-production hosting and storage services.
Mr Hapgood QC says that the WDCs provided Data Centre Facilities Services which were part of the infrastructure which IBM had to provide for Operating System Hosting Services and Storage Hosting Services. As a result he submits that these Services formed part of the Terminating Services which were provided by using shared infrastructure.
He refers to the Agreed Facts where it states that because IBM's WDCs are "multi-tenant facilities", AstraZeneca cannot take over the physical environment at these data centres and hence leave the servers and other equipment in situ simply by taking an assignment of the lease of the building. It is agreed that this physical environment includes the power supply, the HVAC, the fire detection and extinguishing apparatus, the cabling and telecoms, access control/security, the building fabric and floor space and the specialist staff all of which are shared between AstraZeneca and IBM and IBM's other customers.
In addition to those matters relating to the Operational Services in Schedule 1, Mr Hapgood QC also relies on paragraph 7 of Schedule 22A which deals with shared infrastructure and, in particular, to the references in paragraph 7.2 under "infrastructure" to "buildings and office space requirements" and "any specific office requirements" and submits that this makes it clear that the MSA uses the concept of shared infrastructure to include the physical environment. He relies on the reference in paragraph 7.4 of Schedule 22, Shared Services, to paragraph 12 of Schedule 22A to show that this reference to infrastructure is directly relevant to that provision.
Mr Hapgood QC also refers to Appendix 2 of Schedule 22A where paragraph 2.3 deals with equipment and physical assets. It states:
"[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..."
He says that this reinforces the link between equipment and other physical assets and the concepts of sharing and transferability in paragraph 12.1 of Schedule 22. In the light of this Mr Hapgood QC submits that the word "infrastructure" is to be construed widely and is not to be limited to IT hardware and software.
He submits that his construction gives rise to a reasonable result because AstraZeneca is protected against the risk that the process of migration from the WDCs might take more than the 12 months up to the Extended Termination Date if, for instance, IBM take an unreasonably long time to provide the information required by Appendix 2 or perform the obligations in Appendix 3 to Schedule 22A. He submits that IBM is not disadvantaged by the migration process taking longer because under paragraph 12 it is only required to provide the Shared Services on commercial terms and therefore will be paid for performing the obligation.
In any event, Mr Hapgood QC submits, the third precondition in paragraph 12.1 of Schedule 22 requires the Successor Supplier to have acted reasonably in failing to take on the provision of Terminating Services before the Extended Termination Date. He submits that IBM's contention that infrastructure is limited to IT infrastructure is unreasonable because it places AstraZeneca in difficulties if the period of migration from the physical environment of the WDCs takes longer than the Exit Period. In such circumstances he says that IBM could hold AstraZeneca to ransom if it were necessary to provide the Terminating Services after the Extended Termination Date.
He submits that, in any event, given the requirements of paragraph 4.1.3 of Schedule 1 to the MSA there could not be shared IT infrastructure services and if the provision of paragraph 12.1 of Schedule 22 only applied to such services it would have no purpose.
IBM's submissions
On behalf of IBM Mr Jeffrey Onions QC, who appears with Mr Simon Henderson, submits that, in fact, there are no Shared Services as defined in paragraph 12 of Schedule 22. He submits that shared infrastructure refers to hardware and software such as servers, storage devices and application software used to provide the Services. He submits that paragraph 12.1 of Schedule 22 is concerned with the situation where Services cannot be transferred and the Successor Supplier cannot reasonably take those Services on by the Extended Termination Date and that it is in the context of shared servers, storage devices and software that issues of this sort can be expected to arise.
He submits that, as set out in paragraph 9.4.1 of Schedule 1 to the MSA, IBM's provision of the WDCs is a provision of facilities not Services and the Data Centre Facilities Service is not the provision of servers and software but the provision of the facilities to store and allow the running of AstraZeneca's Services. He submits that the MSA as a whole is concerned with the provision of IT services and paragraph 12.1 of Schedule 22 is concerned with possible problems with the transferability of those services provided by servers, storage devices and software. In particular, he submits that it is concerned with the situation at the end of the Exit Period, where some of those services cannot be transferred to a Successor Supplier.
Mr Onions QC also submits that there are two basic elements in the overall provision of the Services: the servers on which application software and other services run and which form the Operating System Hosting and the mass storage systems in which the application software and other services keep their data which form the Online Storage. He submits that whilst the WDCs and the infrastructure, in the sense of physical environment of the WDCs, provide the physical place where some of the servers and mass storage systems are located, it is only if the servers, storage devices and application software are shared that there is a possible problem in relation to the transfer of the Services. He submits that paragraph 12 of Schedule 22 is designed to address this problem.
In this case, as agreed by the parties, whilst Terminating Services are provided by IBM using servers situated in the WDCs, all the servers and software at the WDCs are dedicated solely to AstraZeneca. All the servers and software can therefore be transferred and no other IBM client would be affected by those operations. He submits that the parties have agreed that IBM should generally cease to provide the Terminating Services by the end of the Exit Period and that paragraph 12.1 of Schedule 22 is designed to provide for the exceptional circumstance when AstraZeneca was unable to effect the transfer of all Terminating Services within the Exit Period due to difficulties caused by the particular way in which IBM delivered Services. He submits that this might happen because IT equipment is shared so that AstraZeneca's share of that equipment could not readily be extracted or transferred.
Mr Onions QC refers to AstraZeneca's submission that the parties must have intended paragraph 12.1 of Schedule 22 to have some application and, because it was known that all of AstraZeneca's servers were to be dedicated solely to AstraZeneca, it must have been intended that this provision applied to Services being provided from the WDCs. He submits the MSA is a vast document covering many thousands of pages and that an argument that each clause must have some application is not appropriate to such a document.
He further submits that it might be contemplated that, over time, the Services for which IBM was responsible could change so that there might be Shared Services being dealt with as Terminating Services.
Mr Onions QC refers to Schedule 29 to the MSA where at paragraph 19.3.12 it deals with Shared Services. The relevant part of the Request for Proposal stated as follows:
"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]."
He submits that this provision shows that the possibility that servers, storage devices and application software might, in due course, be shared between AstraZeneca and other IBM clients was expressly recognised in the MSA. He also refers to the provision in Appendix 3 to Schedule 22A where one of the requirements is for IBM "to provide information to enable AstraZeneca to prepare a post Transfer Solution for all [IBM] shared services elements (e.g. Oracle HR and Finance)." Whilst IBM does not provide such shared services, Mr Onions QC submits that this provision illustrates that the shared service provision in Paragraph 12 of Schedule 22 was designed to cover a wide range of eventualities not all of which might be factually present.
Further Mr Onions QC submits that paragraph 4.1.3 of Schedule 1 acknowledges that, in addition to exclusive use of all physical networking equipment and plant equipment, some equipment might be securely segregated into virtual segments which were used exclusively to provide the Services to AstraZeneca. This, he submits, may give rise to problems because of the segregation of this shared equipment.
In relation to AstraZeneca's reliance on paragraph 7 of Schedule 22A headed Shared Infrastructure he submits that this provides little assistance in relation to the meaning of "shared infrastructure" in clause 12.1. Whilst he accepts that, as set out in paragraphs 7.2.1 and 7.2.2, infrastructure can include the fabric of the building, he notes that in paragraph 7.2.3 there is reference to "use of dedicated and shared hardware, software and services" which, he submits, assumes that shared infrastructure involved shared hardware and software. He therefore submits that the term "shared infrastructure" in paragraph 12 of Schedule 22 is intended to cover the circumstances where IT equipment such as servers or software are shared in the sense of being used for more than one client of IBM and hence cannot readily be transferred to AstraZeneca on exit.
It is clear that the term "infrastructure" has not been used consistently in the MSA. At one stage AstraZeneca placed some reliance on industry definitions within the ITIL Glossary of Terms and Definitions. ITIL is referred to in paragraph 3.1.5 of Schedule 1 to the MSA as being a standard of best industry practice in relation to Quality and Compliance Services. However I do not consider that it is of assistance in this case.
AstraZeneca do not submit that the ITIL definitions are in any way determinative of the meaning of infrastructure and I do not consider that the fact that the ITIL document is referred to in relation to Quality and Compliance Services has any role in making those definitions applicable when interpreting the Schedule 22 obligations. In any event, there is no definition of infrastructure in the ITIL definitions and IT infrastructure is evidently limited to IT hardware and software.
In relation to AstraZeneca's reliance on four matters of factual matrix, whilst I accept that they provide background, I do not gain much help from them in resolving the question of the meaning of the word "infrastructure" in paragraph 12.1 of Schedule 22. The fact that there was a move to Service Effect may have meant that AstraZeneca did not have all the information about the way in which the Services were provided by IBM but I do not consider that the time or difficulty in obtaining that information would explain why there should be a further period of up to 12 months for IBM to provide Terminating Services provided by using shared infrastructure, which was evidently related to issues of transferability in Paragraph 12.1 of Schedule 22. In this context I note that AstraZeneca would be expected to have a degree of information under the Portal, as dealt with in Clause 47 of the MSA and the Operations Procedures and Tools Manual in Schedule 7 to the MSA.
The second aspect of factual matrix is the criticality of IT to AstraZeneca's business. In general terms, as AstraZeneca accept, every major business is to a greater or lesser extent dependent on IT and I find nothing in the particular context of the criticality of IT services to AstraZeneca which assists in the interpretation of paragraph 12.1. Evidently the potential extension of 12 months in that paragraph was provided where the shared infrastructure would not have been transferred by the Extended Termination Date. But I am not persuaded that the criticality of IT to AstraZeneca's business assists in the interpretation of the phrase shared infrastructure.
The third aspect of factual matrix relied upon by AstraZeneca is the complexity of the migration process. Whilst it is an agreed fact that the parties knew at the date of termination that the migration process would be complex and challenging, there is no evidence or necessary inference that that would have been known to the parties at the time of the MSA. Rather it is difficulties arising from transferability in respect of shared infrastructure which can be seen from paragraph 12.1 of Schedule 22 to be the problem rather than the migration itself.
The fourth aspect relied upon by AstraZeneca is the impracticability of approaching Successor Suppliers before termination of the MSA. Whilst I accept that the confidentiality provisions of Clause 41 of the MSA would preclude AstraZeneca from providing Confidential Information, as defined, to Successor Suppliers until after termination, that would not preclude AstraZeneca from disclosing such Confidential Information to consultants as Authorised Persons so that they could draw up the necessary documentation for an invitation to tender to be sent out soon after termination. Nor would those provisions prevent Successor Suppliers from being approached to ascertain their willingness to tender, in advance of termination. However I do not gain assistance in deciding what is "shared infrastructure" from the fact that Successor Suppliers might only be involved from the date of termination. Again it seems to me that paragraph 12.1 of Schedule 22 is more concerned with difficulties of transferability affecting "shared infrastructure" than with any delay which may be caused by having to engage a Successor Supplier to provide the Services in place of the Terminating Services being provided by IBM.
One other matter which was referred to in submissions was the fact that under paragraph 4.1.3 of Schedule 1 there would not be expected to be any shared IT hardware or software. This led to submissions that some other forms of hardware and software might or might not be relevant or that there might or might not have been changes so that shared IT hardware or software would be contemplated. These submissions generally went to the question of whether, if "infrastructure" did not include the physical environment at the WDCs, the provision for Shared Services in paragraph 12.1 of Schedule 22 might be redundant. Arguments for and against redundancy are premised on a perfection of reasoning and drafting which, in the context of a large and complex agreement like the MSA, are not practically attainable. I therefore focus on whether or not infrastructure in paragraph 12.1 of Schedule 22 includes the physical environment of the WDCs. Whether or not it might include other matters does not seem to me to assist in coming to a conclusion on this issue.
In approaching the meaning of Schedules 22 and 22A I consider that a useful starting point is the document at Schedule 29 which sets out the exit planning requirements contained in AstraZeneca's Request for Proposal, together with the relevant response from IBM. That document set out the background to the Exit Plan. At paragraph 19.1 it stated the background to the Exit Plan:
"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."
At paragraph 19.3.12 it referred to Shared Services and stated that: "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...."
This formed the background to Shared Services in paragraph 12.1 where instead of referring to "platforms", the term "infrastructure" was used. The fact that a different term was used makes it difficult to draw any conclusions from this provision. It may have been changed to preserve or alter the meaning.
Turning to the provisions of the Exit Plan in Schedule 22A, I consider that paragraph 7 dealing with shared infrastructure is of importance. As can be seen from the reference to paragraph 12.1 of Schedule 22 in paragraph 7.4, the provisions of paragraph 7 relate to the relevant infrastructure. Paragraph 7 provides that, for Services using IBM's "shared infrastructure", certain information was required in relation to staff, infrastructure and physical and logical security. This indicates strongly, in my judgement, that elements of staff, infrastructure and security could potentially be matters of "shared infrastructure" where, as set out in paragraph 7, they were "not dedicated solely for the purposes of AstraZeneca".
The provision at paragraph 7.2 dealing with "infrastructure" includes at paragraph 7.2.1 "buildings and office space requirements" and at paragraph 7.2.2. "any specific office requirements". I consider that these provisions show that the shared infrastructure could include shared buildings and office space requirements or specific office requirements. It could also, as Mr Onions QC observed, include the matters set out in paragraph 7.2.3, "use of dedicated and shared hardware, software and services". Whilst this indicates that hardware, software and services might be shared, I do not consider that the absence of the word "shared" elsewhere in paragraph 7.2.1 and 7.2.2 precludes those elements of infrastructure from being "shared infrastructure" if, in fact, they are shared.
Secondly, I see no reason why the word "services" in paragraph 7.2.3 should not include services provided to the buildings or offices which are used to provide the Services. Thus I consider that paragraphs 7.1, 7.2 and 7.3 indicate aspects of infrastructure which might be shared so as to give rise to the difficulties identified in paragraph 7.4 which are then dealt with substantively in paragraph 12.1 of Schedule 22 of the MSA.
In this case the question is whether the WDCs come within the definition of "shared infrastructure". As set out in Agreed Fact 30, the WDCs are "multi- tenant" facilities and AstraZeneca cannot take over the physical environment of those data centres simply by taking an assignment of the lease of the building. It is also agreed that the physical environment includes power, HVAC, fire detection and extinguisher apparatus, cabling and telecoms, access control/security building fabric and floor space and specialist staff, all of which are shared between AstraZeneca and IBM and IBM's other customers.
In principle, therefore, I consider that the physical environment at the WDCs is capable of coming within the definition of "shared infrastructure" in paragraph 12.1 of Schedule 22.
IBM contends that "Terminating Services" cannot be described as being provided by using the shared WDCs. They seek to distinguish between Operational Services in the form of Operating System Hosting or Online Storage and the Data Centre Facilities which house servers and mass storage used by IBM to provide IT services to AstraZeneca.
In my judgement, there is no proper distinction to be drawn between the Services provided in the form of Operating System Hosting and Online Storage on the one hand and the Services provided in terms of Data Centre Facilities on the other hand. They are all part of the Operational Services identified in and set out respectively in sections 9.2, 9.3 and 9.4 of Schedule 1 to the MSA. I consider that this is supported both by the text and the diagrams in section 1.8 of Schedule 1 to the MSA. That clearly indicates that Data Centre Facilities are Services used by Operating System Hosting and Online Storage to provide the Services including the Terminating Services, under the MSA.
This is further confirmed by paragraph 3.4.1 of Schedule 1 and its reference to the computer centres that IBM uses in the provision of Services and by the provisions of Section 9 which show that Facilities Services formed part of the infrastructure used to provide the Services.
Accordingly I have come to the conclusion that 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.
Under this heading there are two issues, Issues 3 and 4. They relate to the second precondition in paragraph 12.1 of Schedule 22 which is that "the associated Systems and Third Party contracts are not transferable to the Successor Suppliers". The issue between the parties is whether the reference to "associated Systems and Third Party contracts" refers to those associated with the "shared infrastructure" or those associated with the "Terminating Services".
Mr Hapgood QC submits that Schedule 22 draws a distinction between matters that are shared where there might be an issue of transferability dealt with in paragraph 12 of Schedule 22 and what is not shared where there is an obligation to transfer assets and Third Party contracts to the Successor Supplier. He submits that the concept of only transferring dedicated equipment is reflected in Section 8.7 of the Exit Plan at Schedule 22A where IBM has to provide a list of systems used in providing the Terminating Services but only has to transfer the dedicated equipment, being the equipment used by IBM exclusively to perform the Terminating Services.
He refers to the definition of Systems in the MSA as meaning:
"all computer hardware, firmware, middleware, protocols and software and other hardware, peripheral equipment, networks, communications systems and other equipment of whatever nature;"
He relies on the final phrase of that definition: "other equipment of whatever nature". He submits that this definition includes equipment which is not of a similar nature to that already listed in the definition and is therefore wide enough to cover equipment such as HVAC equipment in the WDCs. The concept that some equipment and physical assets are transferred to AstraZeneca but that others which are shared might need desegregating or replacement is, he submits, also shown by Section 2.3 of Appendix 2 to Schedule 22A.
Further he submits that, under Paragraph 8.7.2 of Schedule 22A, IBM has to offer to sell all individual items of dedicated equipment but under paragraph 7, for shared infrastructure which is not dedicated solely for the purposes of AstraZeneca, IBM has to provide a suitable working solution, it being recognised that Services provided using a shared infrastructure may require specific plans to transfer.
In relation to Third Party contracts Mr Hapgood QC refers to paragraph 2.4 of Appendix 2 to Schedule 22A under which IBM has the following obligation to provide information:
"[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:..."
That information includes information "on what basis AstraZeneca can replace [IBM] and lists of contracts which could be difficult to novate." Mr Hapgood QC points out that paragraph 8.15 of Schedule 22A, dealing with the transfer of contracts, contains a right for AstraZeneca to elect to have contracts which are wholly related to providing the Services transferred to AstraZeneca. He also points out that the provision in Appendix 3 states that for Third Party contracts which are not transferable, IBM has to "propose a strategy for dealing with these contracts and licences and a timetable for implementing the strategy including any operational changes required by AstraZeneca.".
He therefore submits that it is the Systems and Third Party contracts associated with the shared infrastructure about which there are concerns of transferability under Paragraph 12.1 of Schedule 22. He submits that there are no such concerns about the dedicated equipment such as the servers used to provide the Terminating Services because those are always transferable and IBM is obliged to offer them for sale.
Mr Onions QC submits that the definition of Systems makes it clear that it is the computer hardware and other IT equipment which is associated with the Terminating Services which must be incapable of transfer. He says that whilst Third Party contracts is not a defined term its meaning is clear from the definition of Third Party Contracts Database which effectively defines Third Party contracts as contracts between IBM and Third Parties used by IBM to deliver the Services. He submits that this is therefore directed at contracts which are directly referable to the provision of the Services and that the Third Party contracts were contemplated as being transferred to the Successor Supplier.
On a plain reading of paragraph 12.1 of Schedule 22 together with paragraph 7.4 of Appendix 22A and paragraph 19.3.12 of Appendix 29 I consider that it is apparent that the issue of transferability relates to the fact that there is shared infrastructure. It is therefore concerned with whether or not in the case of shared infrastructure the associated Systems and Third Party contracts are transferable to the Successor Supplier.
In this case, as I have found above, the WDCs were Services used to provide Operating System Hosting and Online Storage Services. I do not consider that under paragraph 12.1 of Schedule 22 it is only the IT systems and Third Party contracts associated with those Terminating Services which have to be analysed to see if they are transferable but rather it is the shared infrastructure to which that enquiry has to be directed. I consider that this is supported by the provisions of Schedules 22 and 22A relied on by Mr Hapgood QC.
In relation to "Systems" the list clearly starts with IT hardware and software but concludes with the phrase "other equipment of whatever nature". In my judgment this phrase opens up the definition of Systems to cover systems outside the realms of IT systems. The use of the words "whatever nature" in that context is, I consider, deliberately aimed at not retaining the IT nature of the equipment which is set out in the proceeding list. Rather it is intended to broaden the nature of equipment from IT equipment to other equipment of whatever nature.
As a result I consider that it would cover equipment under a number of the heads of the agreed physical environment, set out in Agreed Fact 30, including power, HVAC, fire detection and extinguisher apparatus, cabling and telecoms and access control/security.
So far as Third Party contracts are concerned there is the reference in the MSA to a Third Party Contracts Database which was to be maintained by IBM and to contain all of the names of the contract counterparties for all contracts between IBM and Third Parties used by IBM to deliver the Services. Without having sight of the contents of that database and of the other information relevant to Third Party contracts to be provided under Appendix 2, Paragraph 2.4 and Appendix 3 of Schedule 22A, it is not possible to identify what Third Party contracts are associated with the shared infrastructure.
However I note in IBM's submission that if, as I have held, AstraZeneca's construction of "shared infrastructure" and "associated Systems and Third Party contracts" is correct then IBM accepts, at paragraph 96 of IBM's opening submission, that if "shared infrastructure does mean the power, air-conditioning etc in use in the WDCs then those facilities are not transferable as such to Successor Suppliers".
Accordingly I hold that 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.
The Scope of the request for Services
This issue, Issue 5, concerns the extent of AstraZeneca's right to specify Services in its request for IBM to continue to provide Shared Services under paragraph 12.1 of Schedule 22. The three alternative declarations put forward by IBM are that AstraZeneca may request IBM to provide "all Shared Services" or "particular Individual Services in full" or "any Service (forming part of an Individual Service as set out in Schedule 11 Annex O and which is also a Shared Service)".
AstraZeneca contends that the request is not required to be limited in terms of any of those definitions of Services but rather that it is entitled to request the continued provision of "particular Operational Services" or particular "Service Components (which are also Shared Services)" or particular "instances of such Operational Services or Service Components".
Mr Hapgood QC submits that the MSA creates a hierarchy of concepts in relation to the Services to be provided by IBM. He submits that the widest concept is that of "Services" which is defined to include such matters as the Operational Services set out in Schedule 1 to the MSA, other Services and Projects set out in Schedules 2, 3, and 4 to the MSA and Termination Assistance set out in Schedule 22 to the MSA. He submits that beneath the concept of Services there is the concept of "Individual Service" such as an "Individual Operational Service" set out in Annex 11 O of Schedule 11 which uses the concept of an Individual Service to provide a pricing mechanism for groups of Operational Services.
He submits that next in the hierarchy is the concept of "Operational Services" which from Schedule 1 includes numerous items described as a "Service" or a "Service Component." He says that each "Service Component" is properly to be considered as a Service but is also a component of one of the other items described as a "Service".
Finally, Mr Hapgood QC submits that at the very bottom of the hierarchy lies the concept of an "instance". He refers to paragraph 9.2.1 of Schedule 1 where, in the context of the Operating System Hosting Service, it is stated that: "this Service shall provide Operating System (the collection of software that directs a computer's operations, controlling and scheduling the execution of other programs, and managing storage, input/output, and communication resources) instances for hosting AstraZeneca's Applications and [IBM's] Applications…"
He submits that an instance is therefore a subdivision or unit of the Operating System Hosting Service recognised in the MSA. He says that if, for example, there are two physical servers, each running a Windows operating system, then each of those would be an Operating System instance. As can be seen from Annex 11 D to Schedule 11 the pricing mechanism is based on Operating System instances that have allocated to them a number of CPUs (computer processing units).
Mr Hapgood QC submits that in relation to Terminating Services the relevant definition in Schedule 22 is "all Services, for which a Party has issued a formal notification of termination but which continues to be provided during an Exit Period." He submits that these Services include the Operational Services in Schedule 1 and under paragraph 9.2.1 this would include Operating System instances. Alternatively he submits that it must, at the very least include each Service Component as set out in Schedule 1.
He submits that it cannot have been the intention that AstraZeneca had to request the continued provision of all Shared Services even if it does not require them. He points out that IBM's obligation to continue to provide Shared Services is triggered by the request from AstraZeneca under paragraph 12.1 of Schedule 22. He submits that AstraZeneca has a right to select what Shared Services it requires to be continued, there being no limitation within the language of paragraph 12.1.
Mr Onions QC submits that, on a proper construction of Clause 12.1, where there are Shared Services then AstraZeneca has a simple choice of whether or not to request IBM to make an offer to continue to provide all of "those Shared Services" for no more than 12 months. He contends that AstraZeneca cannot pick and choose which of the Shared Services it wants IBM to continue to provide and which it does not. He relies on the reference to "those" Shared Services as showing that it is all "those" not some of "those".
If contrary to that primary case, AstraZeneca is entitled to select which of the Shared Services it wishes IBM to continue to provide, then Mr Onions QC submits that the approach adopted by the MSA is to group and charge for the Services and this means that AstraZeneca cannot pick and chose which part of an Individual Service it wishes IBM to continue to provide but must make its request in respect of the whole of an Individual Service. He submits that AstraZeneca's construction that they can request Service Components or instances is wrong because the MSA is concerned with Shared Services which cannot be transferred and not with Shared Service Components or instances.
In my judgement paragraph 12.1 of Schedule 22 has to be read in the context of Schedule 22 itself. Paragraph 2.2.3 of that Schedule sets out responsibilities of IBM that are required to be performed so as to enable an efficient Transfer, that is a transfer of the provision of Terminating Services from IBM to AstraZeneca or a Successor Supplier. The detailed obligations which each party has to perform during the Exit Period are set out in the Exit Plan.
As paragraph 4.2 of Schedule 22 states, the Exit Plan may be used over a single Exit Period to phase out Individual Services in multiple stages over time. The overall intention is that, by the end of the Exit Period, the Terminating Services will have been transferred by IBM to AstraZeneca or a Successor Supplier. Those Terminating Services might therefore be gradually reduced over a period of time so as to phase out Individual Services in multiple stages. I see no reason why, in principle, that staging should not apply to each of the Services within the Operational Services in Schedule 1 or, where appropriate, each of the Service Components or, in relation to the Operating System Hosting Service, Operating System instances which are used to support a particular Application.
That seems entirely consistent with the way in which an orderly Transfer of the Terminating Services is to be carried out in accordance with the provisions of Schedule 22.
Where there are Terminating Services provided using shared infrastructure and there are difficulties with the transferability of the associated Systems or Third Party contracts so that the Successor Supplier cannot reasonably take on provision of those Terminating Services before the Extended Termination Date, I see no reason why, in principle, those Shared Services should be treated differently from the Terminating Services of which they form part.
The request by AstraZeneca under paragraph 12.1 has evidently to be made in sufficient time for IBM to be able to produce an offer not less than 30 days prior to the Extended Termination Date. At that stage AstraZeneca has a right, but not an obligation, to request IBM to provide the offer. Thus, the mere fact that some Terminating Services are provided by using shared infrastructure and that the other conditions of paragraph 12.1 are met does not mean that AstraZeneca is bound to make a request in respect of those Services.
In contrast I consider that the reference to the offer to continue to provide "those Shared Services" must refer to the Shared Services which are requested by AstraZeneca rather than imposing on AstraZeneca an obligation to request all Shared Services whether or not AstraZeneca does, in fact, wish IBM to continue to provide them. Any other construction would mean that IBM might be providing Services which AstraZeneca did not require which would have no commercial purpose. I consider that the reference in paragraph 12.1.2 to commercial terms being based on "the volume and nature of the services to be provided" supports this construction.
In those circumstances, I do not consider that there is a limit to the Shared Services which IBM can be requested to provide other than it must be an element of the Services which it is possible to provide separately and I see no reason why, in principle, this should not include an item which is a Service Component or an Operating System instance. In relation to an "instance", it is evident what an Operating System instance is but I would need further submissions to decide whether the term instance can be applied otherwise than in relation to an Operating System instance.
Accordingly I consider that 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.
The duration of IBM's obligation to provide Termination Assistance
AstraZeneca contends that IBM is under an obligation to carry out the Termination Assistance obligations in paragraphs 8.6 to 8.34 of Schedule 22A until "all responsibilities to be transferred have been assumed by AstraZeneca or a Successor Supplier", irrespective of the Extended Termination Date.
IBM contends that it has no obligation under the MSA to provide Termination Assistance to AstraZeneca after the Extended Termination Date.
Mr Hapgood QC relies heavily on the fact that the responsibilities in Paragraphs 8.6 to 8.34 of Schedule 22A are said to "apply during the Actual Exit Period." The definition of "Actual Exit Period" in paragraph 1 of Schedule 22A is:
"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."
He refers to clause 1 of Schedule 22 which defines Termination Assistance as follows:
"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."
Paragraph 4.1 of Schedule 22 is also relied on by Mr Hapgood QC and this provides:
Mr Hapgood QC says that while this paragraph imposes an obligation to provide Termination Assistance during the Exit Period it does not say that Termination Assistance is only to be provided during the Exit Period. As a result he submits that the reference to responsibilities applying during the Actual Exit Period has the effect of requiring IBM to provide the Termination Assistance under paragraphs 8.6 to 8.34 until the date of the actual completion of the transfer of responsibilities and not by reference to a fixed Exit Period.
Mr Hapgood QC further submits that, as paragraph 12.1 of Schedule 22 might lead to IBM continuing to provide Shared Services for up to 12 months after the Extended Termination Date, it would be expected that Termination Assistance would continue until those Shared Services had been transferred and it would be illogical, he submits, for IBM to be required to continue to provide Shared Services but be under no obligation to assist AstraZeneca in achieving the eventual transfer of those services to AstraZeneca or a Successor Supplier.
Mr Onions QC submits that, as set out in Paragraph 3.3 of Schedule 22A, the Exit Plan does not supersede the MSA and the MSA shall prevail to the extent of any inconsistency. He therefore relies on Clause 69.3 of the MSA which provides that:
"[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."
The Exit Period is defined in Paragraph 3.2 of Schedule 22 as ending on the Extended Termination Date. The Services are defined to include Termination Assistance. As a result, Mr Onions QC submits that the obligation to provide Termination Assistance is defined by reference to the Exit Period, ending on the Extended Termination Date. He submits that the MSA provided for an exit regime whereby the Exit Period can be extended for a maximum period of 12 months from the date of termination, after which, subject only to the issue of Shared Services, IBM is under no further obligation to provide either the Services or Termination Assistance.
In relation to the use of the phrase "Actual Exit Period", in respect of the responsibilities under paragraphs 8.6 to 8.34 of Schedule 22A, he submits that it would be an extraordinary and wholly uncommercial outcome if, notwithstanding AstraZeneca's termination of the MSA, IBM would be obliged to remain in place providing certain Termination Assistance with no fixed end date or any means of ascertaining the fixed end date. He refers to the definition of "Transfer Date" in Schedule 22A as "a date on which AstraZeneca will assume complete responsibility for Terminating Services."
He also refers to the obligation in paragraph 10 of Schedule 22A to Transition Activities. Under that provision: "[IBM] shall provide certain transitional service following the Transfer Date but prior to the end of the Exit Period". He submits that this shows that Termination Assistance is to be provided in order to effect the transfer of responsibilities from IBM to AstraZeneca; that the date on which AstraZeneca is to assume complete responsibility is the Transfer Date and that the Transfer Date will take place before the end of the Exit Period, which is no later than the end of the Extended Termination Date.
As a result he submits that there is no obligation upon IBM to provide Termination Assistance after the Extended Termination Date. Rather he submits that the term "Actual Exit Period" simply reflects the fact that there will or may be different exit periods for different Services before the Transfer Date. He submits that it is likely that some Service would be transferred to a Successor Supplier earlier than others so that not every Service will be provided by IBM up to the Extended Termination Date.
On that basis the use of the term "Actual Exit Period" recognises that all responsibilities to be transferred and assumed by AstraZeneca will have been transferred by the Transfer Date but before the end of the Exit Period. As a result the Actual Exit Period will be earlier, or no later than the end of the Exit Period.
As defined, Termination Assistance is the assistance which IBM provides AstraZeneca in order to transfer responsibility for delivery, performance and management of the Terminating Services as set out in the Exit Plan. Subject to the provision for Shared Services, the Terminating Services are only provided during the Exit Period which ends on the Extended Termination Date. In the absence of any provision for Shared Services there would be no need for any Termination Assistance after the end of the Exit Period.
The general structure of Schedules 22 and 22A is therefore that during the Exit Period IBM has an obligation to provide Terminating Services and Termination Assistance to assist in transferring the Terminating Services. All of that is to be carried out during the Exit Period ending on the Extended Termination Date.
In my judgment, the Services to be provided by IBM under the MSA after termination only have to be provided for a fixed period. This is not a case where IBM has an obligation to carry out Terminating Services or Termination Assistance for as long as it may take to transfer the Terminating Services, even if that occurs after the Extended Termination Date. That is clear from the fact that Paragraph 12.1 of Schedule 22 provides an exceptional position where the Shared Services cannot reasonably be taken on by the Successor Supplier before the Extended Termination Date.
I therefore accept that submission made by Mr Onions QC based on clause 69.3 and the provisions of Schedule 22. This is reinforced by the provision as to transition activities in paragraph 10 of Schedule 22A which shows that the period during which Terminating Services and Termination Assistance is to be provided under the MSA ends on a date which is prior to the end of the Exit Period. I consider that this provides an explanation as to why the obligations under paragraphs 8.6 to 8.34 of Schedule 22A are said to be responsibilities during the Actual Exit Period because the actual period during which they are provided may be less than and will be no greater than the Exit Period.
I do not consider that the use of the phrase "Actual Exit Period" in Schedule 22A was intended to extend the period during which Termination Assistance was to be provided or that it was intended to apply to require IBM to provide any further Termination Assistance that might be necessary to transfer responsibility for delivery, performance and management of the Shared Services.
It is not clear from paragraphs 8.6 to 8.34 what, if any, of the responsibilities of IBM in those paragraphs would need to be carried out for Shared Services after the Extended Termination Date. The Shared Services would have been transferred, if they had not been provided using the shared infrastructure, there had not been difficulties in transferability and they could reasonably have been transferred by the Extended Termination Date. On that basis it seems likely that the Termination Assistance needed to transfer responsibility for the Shared Services would have been carried out before the Extended Termination Date. To the extent that any further assistance were required in transferring the Shared Services to AstraZeneca after the Extended Termination Date, I do not consider that that is a matter which has been dealt with under the terms of Schedules 22 and 22A of the MSA. Whether such assistance might, or should be dealt with in any offer made by IBM under paragraph 12.1 of Schedule 22 of the MSA is a matter I leave open for further argument if necessary.
Accordingly I do not consider that the words "the following responsibilities will apply during the Actual Exit Period" in relation to paragraphs 8.6 to 8.34 of Schedule 22A gives rise to an obligation by IBM to carry out those activities until all responsibilities have been transferred to and assumed by AstraZeneca or a Successor Supplier irrespective of the Extended Termination Date. Rather I consider that, 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.
Clause 75 of the MSA
The parties have now agreed the position on this issue, Issue 8A, under which IBM sought the determination of an issue as to whether Clause 75 applies when there has been no failure on the part of IBM to perform or no delay on the part of IBM in performing its obligations under the MSA.
The background to this issue is that the second declaration sought by AstraZeneca in the Part 8 Claim Form was a declaration that IBM was under "an unqualified obligation (subject only to potential relief under Clause 75 of the MSA) to perform the obligations imposed on [IBM] by paragraphs 8.6 to 8.34" of Schedule 22A of the MSA, in the context of the arguments concerned with the Actual Exit Period which I have just considered.
Clause 75.1(a) of the MSA provides that:
"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;…"
Clause 75.3 states that IBM "shall not be liable for any failure to perform (or any delay in performing) any of its obligations under this Agreement if and to the extent that [IBM] can reasonably demonstrate that the failure or delay results from any of the following (each an "Excusing Cause")…." Those excusing causes are essentially failures or delay by AstraZeneca, acts or omissions by AstraZeneca or cases where IBM was acting in accordance with an express instruction from AstraZeneca.
As those provisions show, IBM is excused from liability for failure to perform or delay in performing and it might be thought that on this basis Issue 8A could simply be answered on the basis that it does not apply when there has been no such failure or delay. However, in reality, the question relates to the obligations both of AstraZeneca and of IBM under paragraphs 8.6 to 8.34 of Schedule 22A. I understand IBM's case to be that essentially there are obligations of AstraZeneca which must be performed as a condition precedent to IBM itself having an obligation to perform. In those circumstances, IBM contends that because the condition for IBM to perform has not been fulfilled they had no obligation to perform and therefore there was no failure to perform or delay in performing any obligation. They say that they therefore did not have to comply with the various provisions of Clause 75 in order for their liability to perform to be excused.
It seems to me that it is that issue which lies at the heart of this contention and that it raises a question of the extent to which Clause 75 would be applicable to such conditional obligations, if that is what they are.
Subject, therefore, to any further submissions and whilst the parties have agreed the position, I do not propose making any declaration at this stage because I consider that it would not have any purpose in dealing with the real issue between the parties.
IT Transfer Plan
This relates to Issues 8B and 8C which essentially raise two issues. The first is whether AstraZeneca is under an obligation to provide an IT Transfer Plan at all. The second issue concerns the extent to which IBM's obligations under Schedule 22A are conditional upon AstraZeneca producing an IT Transfer Plan. It is not in issue that any IT Transfer Plan which is produced by AstraZeneca has to comply with the provisions of Paragraph 7.2 of Schedule 22.
The parties have now produced updated versions of the Exit Plan and of an IT Transfer Plan. Evidently, in construing the obligations under the MSA, I take no account of these documents, produced subsequently, in determining what the MSA means.
The definition of IT Transfer Plan is set out in paragraph 1 of Schedule 22 as follows:
"one or more plans prepared by AstraZeneca for transferring some or all Services in the event of termination."
IT Transfer Plans are then dealt with in more detail in paragraph 7 of Schedule 22 which provides as follows:
"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."
Mr Hapgood QC relies strongly on paragraph 7.1 and, in particular, the word "may" rather than "shall" governing the preparation of IT Transfer Plans. He submits that the draftsman could have used the word "shall" but chose to use the word "may" and that therefore this shows that it is not mandatory for AstraZeneca to prepare any IT Transfer Plan.
He submits that because of the importance of the obligations on the part of IBM to provide AstraZeneca with the information that it needs, Schedules 22 and 22A recognise that the point in time at which it becomes sensible or necessary for AstraZeneca to produce an IT Transfer Plan is dependent on the provision of information by IBM. He therefore submits that the drafting of Schedules 22 and 22A has deliberately not made the production of an IT Transfer Plan mandatory at any particular juncture or at all. Instead he submits that those provisions have given AstraZeneca the right, but not the obligation, to prepare an IT Transfer Plan and an obligation on IBM to make the Exit Plan conform to any IT Transfer Plan that may be prepared by AstraZeneca.
Mr Hapgood QC places heavy reliance on the way in which, in Schedules 22 and 22A, the reference is to "the Exit plan" but to "any IT Transfer Plan". He says that this shows that while there must be an Exit Plan there may or may not be an IT Transfer Plan. He submits that IBM have difficulty in stating when an IT Transfer Plan must be produced if there is, as IBM contends, an obligation on AstraZeneca to produce one. He submits that this is strongly indicative of the fact there is no obligation to produce one.
In relation to the contention that Termination Assistance is conditional upon an IT Transfer Plan, Mr Hapgood QC refers to the definition of Termination Assistance as being the assistance which IBM is to provide "including the Services described in the Exit Plan or any IT Transfer Plan." He submits that this recognises that IBM are obliged to provide Termination Assistance even if there is only an Exit Plan and no IT Transfer Plan. He also points out that none of the obligations on IBM in Schedule 22A are expressed to be conditional on the production of an IT Transfer Plan. He further submits that, in particular, IBM has an obligation to comply with various discovery obligations under Schedule 22A as a necessary precursor to the development of any IT Transfer Plan. He submits that there is no reason why IBM's obligations to provide information to AstraZeneca should be dependent on AstraZeneca providing information about its future plans.
In relation to the timing of any obligation, Mr Hapgood QC refers to paragraph 5.1 of Schedule 22A which states that the indicative timeline for the six key phases of an IT Transfer Plan is detailed in Appendix 6. In fact Appendix 6 is blank. However Mr Hapgood QC submits that the indicative timeline including the timeline for Phase 0, which covers the initiation of the IT Transfer Plan, is a matter for IBM to include in the Exit Plan and to update in conformity with any IT Transfer plan that is provided.
Mr Onions QC submits that AstraZeneca was under an obligation to produce an IT Transfer Plan and he refers to a number of provisions of Schedule 22A. First, he refers to paragraph 3 of Schedule 22A which states:
"AstraZeneca shall develop one or more IT Transfer Plans, supported by its key business and technology leaders, that set out potential Transfers."
Secondly, he relies also on paragraph 5 of Schedule 22A which deals with IT Transfer Plans and says:
"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."
Mr Onions QC submits that these provisions clearly indicate that the parties anticipated that AstraZeneca would have in place on termination one or more IT Transfer Plans that would set out potential transfers and AstraZeneca's IT Service Requirements following Transfer. He says that Schedule 22A sets out what is expressly stated in paragraph 7.2.2 of Schedule 22 and paragraph 3.3 of Schedule 22A to be a "template" for the IT Transfer Plan and he submits that this is what is contained, in particular, in paragraphs 5 and 8 of Schedule 22A and Appendix 3 to that Schedule.
He submits that IBM's obligations under the Exit Plan are predicated on the existence of an IT Transfer Plan. In relation to the obligation on IBM to provide information under Paragraph 4 of Schedule 22A, he refers to paragraph 5.1 which shows that the information is provided at the discovery stage, Phase 1, which is after the initiation of an IT Transfer Plan, Phase 0. He submits that until such time as AstraZeneca has notified IBM of the details of the Transfer, IBM's obligations have no content. In such circumstances he submits that it is difficult to see why IBM should be obliged to do anything. Rather he submits that it is for AstraZeneca to provide information to populate Appendix 3 of Schedule 22A in its IT Transfer Plan since that is necessary to define when the obligations of IBM are to be performed.
He submits that the definition of IT Transfer Plan in Schedule 22 as meaning "one or more plans prepared by AstraZeneca for transferring some or all Services in the event of termination", would suggest that an IT Transfer Plan should be in place prior to termination and, as stated in paragraph 3 of Schedule 22A, should set out potential transfers. He submits that in any given situation there needs to be an IT Transfer Plan in existence on termination and if there is not then the obligations of IBM exist in a vacuum and without reference to a timetable or an actual Transfer. He therefore submits that IBM's obligation to provide Termination Assistance under Schedule 22A is conditional upon there being an IT Transfer Plan.
He submits that a review of Schedule 22A as a whole makes it clear that the structure and timetable by which IBM's obligations are to be performed is the IT Transfer Plan. He refers to paragraph 7.4 of Schedule 22 which refers to IT Transfer Plans and, he submits, establishes the iterative nature of the process with each Exit Plan being updated to be consistent with the IT Transfer Plan.
In relation to the reference in paragraph 7.1 of Schedule 22 to the fact that AstraZeneca "may" prepare one or more IT Transfer Plans, he submits that the plain and obvious meaning is not to qualify the requirement for AstraZeneca to provide an IT Transfer Plan but to give AstraZeneca the right to prepare more than one IT Transfer Plan.
In any event Mr Onions QC submits that a construction of the MSA which led to the conclusion that the word "may" did not oblige AstraZeneca to provide an IT Transfer Plan would be commercially absurd and, in the words of Lord Diplock in Antaios Cia Naviera SA v Salen Rederierna AB [1985] AC 191 at 201, such a conclusion would flout business common sense. He further relies on the passage from the judgment of Sir Anthony Clarke MR in Cosmos Holidays Plc v Dhanjal Investments Limited [2009] EWCA Civ 316 at [17] where he said that whilst the primary source for understanding the meaning of a contract is the language interpreted in accordance with conventional usage, a particular provision must be construed in the context of the clause as a whole, the clause must be construed in the context of the contract as a whole and, in turn, the contract must be considered in its factual matrix or against the circumstances surrounding it.
In addition I was referred to the case of Entwisle v Dent (1848) 1 Ex Ch R 812 as an example of a case where the word "may" was interpreted, in context, as giving rise to an obligation.
It might be argued that, theoretically, in the case of a termination where AstraZeneca did not require any Terminating Services or Termination Assistance there would be no need for an IT Transfer Plan as there would be no need for "one or more plans prepared by AstraZeneca for transferring some or all Services in the event of termination".
However, where AstraZeneca do in fact require Terminating Services and Termination Assistance, it is difficult to see how the obligations under Schedules 22 and 22A could be performed without an IT Transfer Plan.
I consider that some assistance as to the need for an IT Transfer Plan can be gained from a consideration of Schedule 29 at paragraph 19.1 where it states that "an example Exit Plan shall be provided with the [MSA]. AstraZeneca shall then expect [IBM] to amend the Exit Plan in a manner consistent with its solution."
At paragraph 19.3.2 of Schedule 29 there is then a reference to AstraZeneca's IT Transfer Plan and it states "AstraZeneca shall prepare an overall transfer plan and this plan shall drive the transfer process. The tasks and activities set out in the Exit Plan shall enable AstraZeneca to prepare its IT Transfer Plan with sufficient certainty."
The term "IT Transfer Plan" is defined in Schedule 22 to mean "one or more plans prepared by AstraZeneca for transferring some or all Services in the event of termination". Whilst IBM could and did provide an Exit Plan in Schedule 22A detailing the obligations of the parties during the Exit Period I consider that without an IT Transfer Plan setting out AstraZeneca's plan for transferring the Services, IBM would not know what the scope and contents of the "Transfer" was.
The Transfer involves the transfer of the provision of Terminating Services from IBM to AstraZeneca or a Successor Supplier. I consider that it is for AstraZeneca to determine and define the way in which the Terminating Services will be provided in the future and this will dictate the Transfer. Some Services might be provided by AstraZeneca and some Services might be provided by one or more Successor Suppliers. Equally, as envisaged by paragraph 4.2 of Schedule 22, Individual Services might be phased out in multiple stages over time. That would be a matter dealt with in the IT Transfer Plan. In addition, Termination Assistance would depend, as stated in paragraph 4.1 of Schedule 22, upon the IT Transfer Plans applicable to the Terminating Services and also what assistance was necessary to transfer responsibility for delivery, performance and management of the Terminating Services.
Whilst I accept that Schedules 22 and 22A refer to the Exit Plan and any IT Transfer Plan, I do not consider that this meant that there might not be an IT Transfer Plan. Rather it is clear that within the MSA there was an existing Exit Plan contained in Schedule 22A. This was therefore the Exit Plan which might be updated. There was no IT Transfer Plan within the MSA but one or more were envisaged and I consider that "any" is consistent with this.
I do not accept that, as IBM contends, there was any obligation upon AstraZeneca to provide an IT Transfer Plan before termination. The reference to "in the event of termination" in the definition of IT Transfer Plan is not to be construed as meaning that there is one which will be applied in the event of termination. Rather, in my judgment, it requires a plan to be prepared and applied in the event of termination.
In relation to AstraZeneca's contention that a discretion as to whether or not to produce an IT Transfer Plan was given to AstraZeneca by the use of the word "may" in paragraph 7.1 of Schedule 22, I consider that IBM's submission is correct and this provision gives AstraZeneca a discretion to produce more than one IT Transfer Plan. It is evident from paragraphs 3 and 5 of Schedule 22A that AstraZeneca had an obligation to produce an IT Transfer Plan. It is expressly stated that AstraZeneca "shall develop one or more IT Transfer Plans" and the key phases of an IT Transfer Plan are defined which clearly establish that one was intended to be produced.
In any event if I had considered that paragraph 7.1 might provide AstraZeneca with a discretion as to whether or not to produce an IT Transfer Plan, I consider that applying a commercial construction to the provisions of Schedules 22 and 22A, the language of paragraph 7.1 would have to have yielded to the clear underlying commercial intention that AstraZeneca should provide an IT Transfer Plan where IBM were to provide Terminating Services and Termination Assistance during the Exit Period.
The IT Transfer Plan had to be produced in accordance with paragraph 5 of Schedule 22A. That shows that the initial phase, Phase 0 covers the initiation of an IT Transfer Plan. Appendix 3 to Schedule 22A shows what has to be carried out at that stage, which includes IBM providing the information set out in Appendix 2 of the Exit Plan. This is then followed by Phase 1 Discovery which, as explained in paragraph 5.1.2 of Schedule 22A is a phase "to develop an accurate and complete understanding of all aspects of the Terminating Services." Again Appendix 3 sets out the role of IBM in providing information in this phase.
It is clear from Phase 2, the Receiving Organisation and Associated Infrastructure Design Stage, that an IT Transfer Plan is essential. This phase, as set out in paragraph 5.1.3 of Schedule 22A, "covers the design of the new AstraZeneca 'retained organisation' and the Successor Supplier's receiving organisation and associated infrastructure and interface requirements". As further expanded in Appendix 3 AstraZeneca has to provide input during this phase. The IT Transfer Plan is then dealt with in Phase 3 before being executed in Phase 4.
It is evident that the starting point for the IT Transfer Plan is the Exit Plan. First, as set out in paragraph 3.3 of Schedule 22A the Exit Plan sets out a "summary of the template IT Transfer Plan". Paragraph 5 of Schedule 22A besides identifying the key phases and the workstreams also deals with such matters as governance, the formation of groups and forums, the appointment of program directors, program managers and work stream leaders as well as a meeting timetable. Each of those matters is set out in general terms in the Exit Plan and requires completion of a number of items indicated as "tbd". I consider that an IT Transfer Plan would have to be produced early in the Exit Period which filled in the necessary details in the template and that the IT Transfer Plan would be further developed as set out in relation to the responsibilities in paragraphs 8.6 to 8.34 of Schedule 22A.
During the Exit Period it is clearly envisaged that both IBM and AstraZeneca would be providing information to each other and that both the Exit Plan and the IT Transfer Plan would be developed in parallel. The initiation of the IT Transfer Plan at Phase 0 of the key phases of the IT Transfer Plan and Discovery at Phase 1 are, in my judgment, generally phases during which information will be provided by IBM to AstraZeneca relevant to the Terminating Services.
In relation to the information to be provided by IBM there is the further provision in paragraph 4 of Schedule 22A. That envisages that AstraZeneca's information requirements set out in Appendix 2, Appendix 3 and Appendix 7 to Schedule 22A will be provided "in accordance with the planned timeframes set out in this Exit Plan". It then states that "if no timeframe has been agreed, the relevant information will be provided by [IBM] to timescales to be agreed between the parties." It was clearly envisaged, for instance, at Appendix 3 that there would be a "Planned Completion Date" for each "[IBM] Activity Description" under each of the phases. It was also envisaged that Appendix 6 would include a "high level transfer plan timeline" which would set out the indicative timeline for the key phases, as stated in paragraph 5.1 of Schedule 22A.
The time when the obligations under the Exit Plan had to be complied with was therefore a matter for agreement, where, as here, the Exit Plan was silent. Whilst any such agreement might take account of the project timetable "that shall guide the Transfer" which, as set out in paragraph 7.2.1 of Schedule 22, was to be part of an IT Transfer Plan, I do not consider that an IT Transfer Plan was necessary for there to be an agreement as to timing.
Nor do I consider that IBM's obligations under, for instance, paragraphs 4 or 8 of or Appendix 2 or Appendix 3 to Schedule 22A, were dependent upon AstraZeneca producing an IT Transfer Plan. Whilst the scope of the obligations as to Termination Assistance in the Exit Period might change as the result of an IT Transfer Plan and the consequent changes to the Exit Plan, I do not consider that IBM is entitled to wait for an IT Transfer Plan before, for instance, carrying out the obligations to provide information in paragraph 4 of Schedule 22A including the obligation in Appendix 3 to Schedule 22A "to provide information as set out in Appendix 2 of the Exit Plan… and copies of operational procedures. Such information will be provided on an ongoing basis as soon as practicably possible."
Whether and to what extent certain obligations of IBM under Schedule 22A may require some input from AstraZeneca to allow IBM properly to perform those obligations is not a matter with which I can deal at this stage. It will require more detailed consideration of the particular obligations.
Accordingly, in relation to these issues I consider that:
(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
This issue, Issue 8D, concerns the question of whether or not IBM's Fixed Fee for Termination Assistance is conditional upon two matters; first, upon IBM being provided with an IT Transfer Plan by AstraZeneca and, secondly, upon the ascertainment of the duration of the Exit Period.
Payment for Termination Assistance is dealt with in paragraph 9.1 of Schedule 22 which provides that "AstraZeneca shall make payments in consideration of the performance by [IBM] of Termination Assistance as set forth in Appendix 1 of the Exit Plan."
In Appendix 1 to the Exit Plan at Schedule 22A of the MSA it provides that:
"the Termination Assistance of [IBM] as set out in this Exit Plan shall be provided for a fixed fee of £ [ ] ("Fixed Fee")."
It was clearly intended that IBM should complete Appendix 1 by putting in a sum for the Fixed Fee. This is confirmed by paragraph 19.1 of Schedule 29 to the MSA which refers to "A detailed and costed Exit Plan". It was therefore envisaged that IBM would provide a costed Exit Plan as part of the MSA. It is also clear, though, that the Exit Plan would be revised to take account of an IT Transfer Plan, as required by paragraph 7.4 of Schedule 22. It was also stated at paragraph 8.2 of Schedule 22 that "Amendments to the Exit Plan that in any way change the substance of either Party's obligations should not bind the Parties unless agreed pursuant to the Change Control Procedure".
I therefore consider that there should have originally been a Fixed Fee in Appendix 1 to the Exit Plan and that such a Fixed Fee would not have been conditional upon the provision by AstraZeneca of an IT Transfer Plan. When however an IT Transfer Plan is provided then the Exit Plan would be amended to take account of that IT Transfer Plan and, if the substance of IBM's obligations to provide Termination Assistance changed, then that Fixed Fee might need to be adjusted.
Equally the Exit Period was defined in paragraph 3.2 as being a period which ended on the Extended Termination Date and in accordance with paragraph 3.3 of Appendix 22 it was, initially, the later of 60 days after the commencement of the Exit Period or the Termination Date (if any). I consider that in setting out the Fixed Fee in the Exit Plan it would have been necessary for IBM to take account of an assumed Exit Period. Accordingly there was nothing to prevent IBM from completing Appendix 1 to the Exit Plan based upon the Termination Assistance set out in the Exit Plan and an assumed duration of the Exit Period derived by IBM. That in my view would form the initial basis for the Fixed Fee.
Again, however, the Exit Period would have to be amended to the extent that the duration of the Exit Period as defined under paragraph 3.3 of Appendix 22 differed from that assumption.
As a result, I do not consider that it is correct to say that the Fixed Fee was 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, I consider that 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.
Accordingly, subject to any observations by the parties as to the precise wording of the declarations I would propose to make declarations as follows:
(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.