Condition Precedents and Delay Payments: Disclosure and Barring Service v Tata Consultancy Services Ltd [2025] EWCA Civ 380

On 4 April 2025, the Court of Appeal passed judgement on the Disclosure and Barring Service’s (DBS’) appeal against a 2024 decision on its entitlement to recover delay damages from Tata Consultancy Services (TCS). The 2024 case arose out of an agreement between TCS and DBS, under which TCS was to take over the processes of performing criminal checks and maintaining DBS’ debarment list, alongside building a new modern system for DBS’ processes.

Constable J’s judgment in the Technology and Construction Court (TCC), amongst key contractual themes, addressed the role of condition precedents in delay claims. In his original decision, Constable J found that there was a clear condition precedent in the contract which DBS was required to meet before being entitled to delay payments from TCS. As a part of its counterclaim, DBS claimed for delay payments from TCS. The TCC found that it was a condition precedent for DBS to be able to claim the delayed payments that DBS had issued a Non-Conformance Report (NCR) in accordance with clause 6.1. As DBS had failed to issue said report, DBS were not entitled to the relevant delay payments.

DBS appealed on whether the provision of a NCR was a condition precedent to the delay payments from TCS. The Court of Appeal affirmed Constable J’s ruling and made further observations regarding the drafting of condition precedents.

1. Background

In 2012, DBS engaged TCS to take over the legacy DBS processes and then build and implement new digital processes. As the contract proceeded, DBS split TCS’ scope into two separate deliverables, R1-B&B (Basics) and R1-D (Disclosure). Separately from the contract with TCS, DBS contracted with Hewlett Packard Enterprises (HPE) as an IT hosting and technical infrastructure provider.

The R1-B&B branch of the services went live after delays in September 2017. DBS contended that the new process suffered from serious defects, affecting both its take-up and the productivity of staff using the system. In September 2018, DBS removed the R1-D branch from TCS’ scope, partially terminating their agreement. TCS argued that this was an unlawful repudiatory breach.

TCS argued that the delays in delivering the scope were because of HPE’s mismanagement or conduct, and that TCS were therefore not responsible. They argued that the main causes of critical delay were the lack of availability of technical infrastructure and inadequate management of HPE by DBS. In opposition, DBS argued that the delays stemmed from TCS’ delay in the development and testing of the software, and that it was not responsible for HPE in any event.

TCS claimed more than £100m in delay damages and c.£14m for underpayment. DBS counterclaimed for delay and poor quality of software, amounting to c.£109m.

The TCC ordered that DBS made a net payment of just under £5 million to TCS. DBS’ appeal relates to the TCC’s construction of clause 6.1 and whether it amounted to a condition precedent.

2. Clause 6.1 and condition precedents:

Clause 6.1 stated ‘if a Deliverable does not satisfy the Acceptance Test Success Criteria and/or a Milestone is not Achieved due to [TCS’] Default, the [DBS] shall promptly issue a non-conformance report to [TCS] categorising the Test Issues as described in the Testing Procedures or setting out in the detail the non-conformities of the Deliverables where no Testing has taken place, including nay other reasons for the relevant Milestone not being Achieved and the consequential impact on any other Milestones. The [DBS] will then have the options set out in clause 6.2.’

Under Clause 6.2.3, one of DBS’ options was to recover ‘Delay Payments’ from TCS. TCS’ case in the TCC was that DBS’ entitlement to Delay Payments relied upon the issuance of the NCR under 6.1, and that this was a condition precedent. Constable J agreed with TCS and dismissed DBS’ claim for Delay Payments.

DBS’ appeal was dismissed by the Court of Appeal. In analysing Clauses 6.1 and 6.2, the Court of Appeal acknowledged the difficulty in drawing comparisons between clause drafting in different contexts. The judgement refers to the case of Tartsinis v Navona, which found that it was seldom, if ever, helpful in deciding how to interpret particular contractual provisions to refer to a case in which a court had interpreted different provisions of a differently worded contract made in a different factual context[1].

The Court of Appeal found that Steria Limited v Sigma Wireless Communications Limited provided the closest drafting in the authorities to clauses 6.1 and 6.2. In Steria Limited, the relevant provision was found to be a condition precedent. This was because of its ‘if’ ‘then’ wording: ‘if by reason of any circumstance’ / ‘then in any such case provided the sub-contractor shall have given within a reasonable period written notice[2].’

The Court of Appeal acknowledged that it was futile to try and come up with a checklist for condition precedents. However, the following principles on condition precedents were taken from the authorities[3]:

• Whether a party had to comply with one or more stated requirements before being entitled to relief would turn on the precise words used, set within their contractual context.
• To be framed as a condition precedent, a clause needed something that made the relief conditional upon the relevant requirement. There must be no automatic relief.
• Clear words would usually be necessary for a clause to be a condition precedent, although it was unnecessary for the clause to say “this is a condition precedent.”
• The consequences of failure to comply with any of the requirements of one clause precludes a claim for relief under another clause.
• In addition to conditionality, it would usually be necessary for the link between the two steps to be expressed in the language of obligation, but that would not on its own be sufficient to amount to a condition precedent.
• It was not necessary for the “step one” condition to be expressed in a finite number of days or weeks. More flexible periods had been included in clauses which had been found to be conditions precedent.

The Court of Appeal found that the wording of Clause 6.1 was clear in that on the occurrence of one or both of the different events in 6.1, DBS shall promptly issue a NCR. DBS argued that only the failure of the testing or the failure to achieve a milestone date was conditional for there to be a right to Delay Payments, not the provision of the NCR. DBS’ argument was that the report would have no use in the case of simple delay.

In finding against DBS’ argument, the court held that the words of the clause showed that providing the NCR was clearly not a tick-box exercise and that the report was required to exercise Clause 6.2. The report allowed both parties to work together to see how problems could be resolved, and it was a clear intention of the drafting that one event would lead to another. Lewison LJ found that almost any clause starting with ‘if’ was conditional, and that the drafting was sufficiently clear to give effect. Clause 6.2 was split into two sentences, with the first needing to be satisfied before the second can take effect.

3. Conclusion

The Court of Appeal’s dismissal of DBS’ appeal shows the complexity of condition precedent drafting and the importance of ensuring that any condition precedents are strictly followed. In this case, DBS were unable to claim Delay Payments due to its failure to follow the condition precedent. It is crucial that contracts are managed effectively to ensure that the desired reliefs are not excluded by a failure to meet condition precedents. Legal advice may be required to ensure that contractual requirements are followed and that condition precedents are met.

The Court’s ruling on condition precedents shows the complexity of condition precedent drafting and application. It is important to review drafting in detail to ensure that the relevant clauses have the intended effect. Drafting needs to be clear and explicit regarding which clauses are condition precedents and how these should be followed, and what the outcome of the condition precedent will be. It is important to look at the contractual and factual context and the content of the drafting – while authorities can provide indications of when clauses will be considered precedents, they should not be relied upon for certainty. Accuracy in drafting is crucial.

For advice on contractual drafting, including condition precedents and compliance with contractual requirements, please contact the authors and the Beale & Co Contracts and Projects Advisory team

[1] Tartsinis v Navona Management Co. [2015] EWHC 57 (Comm)

[2] Steria Limited v Sigma Wireless Communications Limited [2007] EWHC 3454 (TCC)

[3] Bremer Handels GmbH v Vanden-Avenne Izegem PVBA [1978] 2 Lloyd’s Rep. 109, [1978] 3 WLUK 49; Steria Limited v Sigma Wireless Communications Limited; WW Gear Construction Ltd v McGee Group Ltd [2010] EWHC 1460 (TCC); Yuanda (UK) Co Ltd v Multiplex Construction Europe Ltd (formerly Brookfield Multiplex Construction Europe Ltd) [2020] EWHC 468 (TCC); Scottish Power UK Plc v BP Exploration Operating Co Ltd [2015] EWHC 2658 (Comm)