If… then… what?

Case law update: Disclosure and Barring Service v Tata Consultancy Services Limited [2025]

The Court of Appeal recently upheld an important ruling on contractual interpretation, dismissing the Disclosure and Barring Service’s (DBS) appeal against Tata Consultancy Services Limited (TCS) in a dispute over a £1.6m liquidated damages claim. In a concise 20-page judgment, Coulsdon LJ endorsed Constable J’s TCC decision, affirming that DBS’s entitlement to levy delay damages was subject to a condition precedent.

Having only granted DBS leave to appeal on one issue, the Court of Appeal did not have to consider the earlier TCC decision [1] in its entirety, nor lay down any new law. However, the judges’ analysis provides a convenient case study in the importance of clear language, commerciality and the need to consider the contract as a whole. While disputes over the existence and interpretation of conditions precedent will always depend on context, understanding this judgment will help to avoid common pitfalls and better assess where contractual entitlements might be precluded. It is also worth noting that the Court of Appeal gave a more general endorsement of the TCC judgment, meaning that Constable J’s separate analysis of the proper interpretation of aggregate liability caps and limitation clauses remains good authority.   

Case Facts 

The case involved an IT modernisation project which, as Coulsdon LJ aptly notes is “often the case” with such projects, “did not go well”. By an agreement signed in December 2022, TCS was contracted to digitise DBS’s paper-based disclosure and barring checks. Delays and quality issues eventually led to mutual claims exceeding £110m each for delay damages, with DBS also alleging software defects. After concluding that TCS’s liability was capped at £10m in the aggregate, Constable J in the TCC  found that both parties’ entitlements to delay damages were subject to conditions precedent. After set-off, TCS was awarded just over £4.8m, and DBS was granted leave to appeal solely on whether clause 6.1 of the contract constituted a condition precedent to its delay claims. The relevant wording of this clause was as follows:

"6.1     If a Deliverable does not satisfy the Acceptance Test Success Criteria and/or a Milestone is not Achieved due to the CONTRACTOR's Default, the AUTHORITY shall promptly issue a Non-conformance Report to the CONTRACTOR categorising the Test Issues as described in the Testing Procedures or setting out in detail the non-conformities of the Deliverable where no Testing has taken place, including any other reasons for the relevant Milestone not being Achieved and the consequential impact on any other Milestones. The AUTHORITY will then have the options set out in clause 6.2." [2]

In affirming this decision, the Court of Appeal considered and rejected DBS’s various arguments against the provision of a Non-conformance Report (NCR) constituting a condition precedent:

1. Clarity of Language

Delivering the lead judgment, Coulson LJ rejected DBS’s complaint that the wording of clause 6.1 was insufficiently clear to create a condition precedent, noting that it is not necessary to use the words “condition precedent” for one to arise. More pertinent is “whether the words, in their context, make it plain that there is a conditional effect: that unless one step is taken, you are not entitled to the relief envisaged at step two”.

DBS had attempted to argue that too much reliance had been placed on the “If-then” wording in clause 6.1. However, Coulson LJ found that Constable J had been entitled to find this wording persuasive, since it was clear in meaning that on the happening of one or both of the events in question, a detailed NCR would need to be provided promptly by DBS, and that only then would the options under clause 6.2 become available.

DBS also argued that Constable J had focused on the wrong trigger event for DBS’s entitlements under clause 6.2, asserting that the condition that engaged clause 6.1 was the Deliverable failing to satisfy the Acceptance Test Success Criteria and / or TCS’ failure to achieve a Milestone – not the subsequent prompt provision of an NCR. In making this argument, DBS placed “considerable stress” on the placement of the first comma in clause 6.1. However, in Coulsdon LJ’s opinion the plain language in the first sentence of clause 6.1 set out two stages: the failure at testing / failure to reach a Milestone; and the provision of an NCR. There was no reason on the facts to read conditionality into the first of these stages but not the second. Giving the words the interpretation sought by DBS would mean “essentially re-writing” clause 6.1 and ignoring the requirement to serve an NCR.

2. Commercial Context

A number of DBS’s other arguments against the existence of a condition precedent were considered to be unpersuasive once the wording was considered in its wider commercial context:

• DBS argued that an NCR was unnecessary where TCS already knew that it was in delay, but the court disagreed. The NCR’s role in detailing test failures or non-conformities facilitated resolution of the underlying issues, aligning with the collaborative intent behind the contract. It was therefore incorrect to say that it would serve no useful purpose for DBS to be required to serve an NCR before being entitled to claim Delay Payments.
• Clauses 6.2.1 and 6.2.2 could not be sensibly operated if clause 6.1 was read as anything other than a condition precedent. For DBS to be able to escalate any issues to dispute resolution, or to issue a conditional milestone certificate, there would need to exist an NCR already identifying material test issues and any non-conformities. There was no rational basis for reading clause 6.1 as a condition precedent to DBS’s entitlements under clauses 6.2.1 and 6.2.2, but not to its entitlement to claim Delay Payments under clause 6.2.3.
• The onerous requirement for TCS to pay any Delay Payments “on demand” provided further justification for treating an NCR as a pre-condition to DBS’s entitlement. The information which would need to be included in the NCR was clearly important in this context, and again demonstrated that it was incorrect for DBS to argue that the NCR served no purpose in the context of claims for Delay Payments.

3. Lack of Precise Timescales

The Court of Appeal’s decision has also re-affirmed the fact that the existence of a condition precedent is not dependent on having a precise timeframe for compliance. DBS had attempted to argue that the fact that there was no set time limit for the provision of an NCR under clause 6.1 meant that the parties had not intended the requirement to be a condition precedent.

Coulson LJ rejected this submission outright. For one, he noted that the authorities relied upon by DBS did not in fact support its own conclusion. For example, in WW Gear [3], “timely” submission was sufficient to constitute a condition precedent, as was the requirement to issue a notice “within a reasonable period” in Steria [4]. Similar flexible language had also been used throughout the contract between TCS and DBS, including in clause 5.1 which required TCS to give a particular notice “as soon as reasonably practicable”. Flexibility and uncertainty were built into clause 5, but that had not prevented a condition precedent from being established. In Coulsdon LJ’s view, there was no reason to interpret clause 6.1 any differently.

4. Difference of language

The most persuasive argument put forward by DBS was that since the wording of clause 5.6 created a clear condition precedent, the fact that clause 6.1 used different phraseology suggested that it was intended to achieve something else. However, while the differences in wording required the clauses to be subjected to careful scrutiny, the court held that no presumption of different effect applies. The court has to give effect to the words actually used, and in complex, prolix contracts, inconsistency is not decisive unless a rational basis for distinction exists.

5. Utility of Authorities

The Court of Appeal judgment also casts doubt on how much reliance may be placed on previous judicial interpretation of similar contractual provisions. While Coulsdon LJ acknowledged that the first instance judge had been entitled to consider the previous authorities relied on by DBS as a “useful comparison” with clause 6.1 when formulating his own interpretation, both he and Lewison LJ noted their general skepticism as to the utility of “referring to different contracts made in different circumstances, where the disputes were very different”. What is clear is that context is everything – even where very similar drafting has been interpreted in a particular way before, this will be of limited assistance where the underlying contracts and overall contexts differ.

Conclusion

While the Court of Appeal’s decision in this case does not introduce any new law, it nonetheless provides a helpful illustration of the principles to apply in interpreting conditions precedent:

1. Effect must be given to the words actually used, so it is important to keep language clear, precise, consistent and well structured. There is no specific formula necessary, but make sure that conditionality is clear on the face of the drafting, and that the language of obligation is used where possible. 
2. Clauses will be interpreted within their wider context, so thought must be given to matters such as the justification for introducing conditionality into entitlements, and how the clause interacts with other provisions in the contract. Do not assume that two clauses from different contracts will have the same effect simply because they share the same wording
3. The existence of a condition precedent is not dependent on having a precise timeframe for compliance. While having an absolute deadline may help to emphasise the conditionality of the entitlement, it is perfectly acceptable to build flexibility into the operation of conditions precedent.

Many of these principles echo the conclusions of the Scottish Court of Session in FES v HFD Construction [5] last year, where it was confirmed that no specific language is necessary to give rise to a condition precedent. What matters is the plain meaning of the words actually used, and how these would be interpreted within their commercial context.