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​TechnologyOne ready to hit Brisbane City Council with AU$50m damages claim

In response to its second notice to show cause from Brisbane City Council in an ongoing contractual dispute, TechnologyOne has said it is ready to take the issue to court if the council proceeds with 'wrongful' termination.

In an ongoing contractual dispute between TechnologyOne and Brisbane City Council (BCC), the IT services firm has told shareholders on Monday it is ready for litigation.

"BCC has made it clear through both its actions and its statements that it does not want to complete this project and is endeavouring to engineer a termination of the contract for breach," the company said in a statement to the Australian Securities Exchange (ASX).

"TechnologyOne has now made it clear to BCC if they proceed with a wrongful termination, TechnologyOne will immediately commence proceedings for a AU$50 million-plus damages claim."

TechnologyOne was awarded a AU$122 million contract to deliver the Local Government Systems (LGS) Program by the BCC back in June 2015.

However, at the start of the year, Brisbane Lord Mayor Graham Quirk directed council officers to renegotiate the contract after learning of an 18-month delay in deployment and a potential AU$60 million cost blowout.

The BCC had stopped making payments to TechnologyOne between October and May, after it was decided the company needed to deliver "significant" milestones first. However, the council paid AU$750,000 in June after being issued a breach notice by TechnologyOne in May for failure to pay invoices.

In June, the council slapped TechnologyOne with its second notice to show cause -- the first was issued in May -- as to why the council should not terminate the contract to deliver the LGS.

The latest notice details material breaches of the contract which the council alleges have been committed by TechnologyOne, with a council spokesperson telling ZDNet last month that it would reassess its position after the enterprise software firm responded.

"In the interim, Council will continue to perform its obligations in accordance with the contract in a bid to get the contract back on track," the spokesperson said. "Council is committed to ensuring the best outcome for Brisbane ratepayers."

Although prepping its legal case, TechnologyOne told the ASX on Monday that its offer for BCC to pay outstanding invoices and part ways still stands, calling it a substantially cheaper option than a "long and drawn out court case that exposes Brisbane ratepayers to a AU$50 million-plus damages claim".

In its latest statement, the Brisbane-based tech company also held firm its claim that it is not in material breach of the customer contract as alleged by BCC, and rather the actions taken by BCC -- such as serving TechnologyOne with 75 legal letters in the last six months -- has prevented the LGS contract from being completed.

"Though the Lord Mayor has on many occasions publicly stated that the project needed to be reformed, and that he was committed to doing this, BCC has taken no steps to achieve this, and has hindered TechnologyOne from doing so," executive chairman Adrian DiMarco said.

"TechnologyOne at all times remains ready, willing, and able to complete the BCC contract."

Despite handing TechnologyOne a second, near identical notice to show cause, the company said BCC has ignored its bona fide requests for extensions of time under the contract due to BCC's conduct.

"If BCC lawyers had not assumed control of this project after the Lord Mayor's inaccurate press conference in January, and common sense had prevailed, we would still be on track to meet the contracted 'go live' date," the company's founder and former CEO added.

According to TechnologyOne, BCC has not acted on the recommendations of the independent review commissioned by the council, having said the council's "unreasonable conduct and lack of real action after the Lord Mayor's announcement has condemned the project to fail".

"TechnologyOne remains confident of its legal position," the company concluded.

For the six months ended March 31, 2017, TechnologyOne reported AU$8.1 million in after-tax profit, up 10 percent from the AU$7.4 million reported a year prior.

TechnologyOne also turned around its operating cash flow from negative AU$3.3 million to $2.9 million, up 177 percent year on year.

The government sector accounted for AU$10.7 million or 44 percent of TechnologyOne's initial license fees, and the company remains confident that the BCC dispute will not impact its sales pipeline.