In 2025, a litigation analytics and research firm, Solomonic, reported that the trend in the number of UK technology disputes showed a significant increase, having doubled in the five years from 2020 to 2024. This was based upon a survey they conducted of technology firms, including 163 firms they identified as most actively engaged in English High Court proceedings.

The rapid growth of the technology sector and the increasing use of AI is reflected in an increasing number of large-scale technology projects, alongside rapid business change. With this comes an increasing risk that projects will fail and problems will occur, resulting in claims and disputes.

We expect that technology-related issues and risks will continue to be a major concern for businesses. While project failures continue to be a major cause of loss, cyber risks and data privacy are increasingly seen as the primary business risks arising from technology, with data breaches and resulting class action claims seldom out of the news. The dramatic increase in the use of AI also introduces new risks. 

We are seeing developments in disputes in the following technology-related areas:

• a continued increase in disputes arising from failed or cancelled IT projects;
• claims continuing to arise from cyber-crime, including large-scale claims for breach of privacy; and
• claims arising from the use of AI, including regulatory action and civil claims.

Technology project failures and disputes

We continue to see disputes and claims arising from large-scale IT projects that are cancelled or run well over budget. These claims are becoming more frequent.

Solomonic reported that contract disputes were the most common type of technology disputes, with competition and breach of statutory duty claims (likely to include misrepresentation claims) coming in a close second. This reflects our experience. Most of the technology disputes we see are contract and misrepresentation disputes. We are also seeing new issues and new types of claims. 

Solomonic found that the sector producing the most technology disputes in the period from 2020 to the first quarter of 2025 was – unsurprisingly – the technology, media and telecoms sector. Interestingly, this was true of the plaintiff side of claims as well as the defendant side, if claims against individuals are excluded. Technology, media and telecoms firms were not only the primary targets of claims from customers and others – they were the main protagonists as well. This shows that a significant proportion of technology disputes do not involve a customer bringing a claim against a technology provider – the situation is more nuanced. Increasingly, it seems, technology firms may be willing to sue when they consider their rights are infringed.

The second largest sector giving rise to technology claims is the public sector. This accords with our experience in New Zealand, where the public sector has an unfortunate history of failed technology projects and resulting litigation. The third most common sector is consumer products, then professional services, with manufacturing, banking and finance and construction all having a broadly similar number of claims. 

The increase in technology disputes reflects the increasing role and development of technology. It is also likely to reflect the challenges of keeping up. Projects are often complex and may involve new or developing project methodologies or solutions that are bespoke or are being developed as they are implemented. 

Other challenges arise from the growing complexity of technology systems and the challenges of integrating them with legacy systems, especially when a solution has not been implemented with a particular suite of legacy systems before. These are added to the challenges, present in all major projects, of identifying and recording a customer’s requirements, identifying those that can readily be delivered by the proposed solution, and working with new requirements as they emerge during the build. 

Litigation often results when major projects fail or go well over budget. This is because the stakes are high -delays, cost increases and failed implementations can cost millions in wasted costs and can seriously impact businesses. When this happens, executives responsible for the projects may point fingers at suppliers or other parties and seek to justify their criticisms by making formal claims. The large amounts at stake means that the substantial cost of litigation can be justified. 

Several types of disputes commonly arise in technology projects

Contract disputes

As Solomonic identified in their survey, contract disputes remain the most common type of disputes in technology claims. They encompass a broad range of issues, but the following is a typical story: an organisation selects a technology vendor based on a request for proposal and a formal response, it engages the vendor to deliver the solution, but the implementation fails or becomes too costly or the final product falls short of the organisation’s expectations. When this happens, disputes normally involve issues as to whether the vendor took reasonable care to deliver the solution to the agreed specifications, on time and on budget. The vendor’s response to a complaint will typically be that the problems were caused by the customer’s failure to identify and clarify its requirements, provide resources to the project, be flexible in using processes offered by the solution rather than insisting that the solution flex to the customer’s existing processes, and otherwise cooperate to provide information and assistance. 

Technology project contracts often feature limitations and exclusions of liability, which assume considerable importance when substantial claims are made. The New Zealand courts generally give these terms their full effect when they are entered into between commercial parties. Many claims that might otherwise have been meritorious are not pursued because of contractual liability limitations that render them uneconomic.

Third-party subcontractors are also increasingly involved in technology project disputes. Their involvement complicates matters, as the contractual arrangements are more complex and disputes involving multiple parties take longer to determine. Settlement discussions are also more complicated. 

Well-drafted contracts assist enormously in avoiding disputes and resolving them when they arise. This is particularly important when multiple parties are involved.

Project terminations 

Whether – and how – to terminate a technology project contract when a project has run into difficulty is an important decision. Getting it wrong, especially by terminating (or purporting to terminate) the relevant contracts on an unsound basis, can have serious consequences, especially if the counterparty is able to treat this as an unjustified ‘repudiation’ and sue for damages. 

Some project cancellations can be cynical. It is not unknown for a change in management in a customer to result in the cancellation of large and expensive technology projects that would require a lengthy period to achieve a return on investment, resulting in an immediate apparent improvement in the customer’s financial position. This can be combined with attempts to justify the cancellation by reference to challenges and disputes that have arisen in the project. 

Misrepresentation claims

We are seeing an increase in claims of misrepresentation or misleading conduct when projects have not delivered to expectations or have failed altogether. These claims are usually made alongside claims for breach of contract, but they are increasingly becoming the primary cause of action, particularly where the contract has been drafted in the interests of the technology provider. 

These claims rely on statements or predictions made to a customer during the procurement phase about what it will to be able to deliver to meet the customer’s requirements as they are understood at the time. In most cases, this concerns specific functionality and performance requirements, although in practice the provider’s ability to manage the project – and the customer – are also crucial for success. Statements made in the sales process may prove to be unrealistic, particularly where a customer does not have a clear understanding of its own requirements and processes – which is common with older legacy systems – and replacing them proves more challenging or complex than expected. Specific requirements confirmed as deliverable by a sales teams may cause problems later if the provider is unable to deliver them in the time and for the cost estimated, due to the circumstances of the project.

A reason for the popularity of misrepresentation claims, alongside the ubiquity of contractual limitation or exclusion clauses, is that in New Zealand, misrepresentation claims under the Fair Trading Act are not always subject to those limitations and exclusions, depending on the way they are drafted and the circumstances of the parties. Where a supplier seeks to rely upon limitation or exclusion clauses in defence of an action under the Fair Trading Act, the Court will investigate whether it is fair and reasonable for the supplier to rely on those clauses, whether any relevant rights have been waived, and whether the exclusions should apply to all of the claims made or only some of them. 

Arbitration and mediation

Arbitration in the technology sector is increasingly popular as an alternative to litigation in the courts. The London Court of International Arbitration has reported that approximately six per cent of its annual caseload now involves parties in the technology sector. The advantages of arbitration include the ability for the parties to agree upon an arbitrator with relevant expertise rather than having a judge imposed upon them, relative speed and efficiency, and most importantly, confidentiality of the process and the outcome. Arbitration can be agreed if both parties to a dispute are willing, even where the contract does not contain an arbitration clause.

Mediation is also commonly used to seek an agreed resolution of technology disputes, for similar reasons. The key difference with mediation is that it is non-binding and requires the parties to agree a solution.

Cyber-crime litigation 

The National Cyber Security Centre publishes an annual cyber threat report. Its latest report, published in December 2025, identified the following key threats for businesses and individuals in New Zealand:

• State-sponsored actors are actively targeting New Zealand.
• The commercialisation of cybercrime means cybercriminals have more tools – including ‘ransomware-as-a-service’ or RaaS, which has commercialised cybercrime, allowing criminals to ‘rent’ effective attack tools. Ransomware continues to be the most damaging cyber-criminal activity, with direct financial losses recorded during the year of $26.9 million, a significant increase from the previous year, and this is only the reported loss.
• ‘Hacktivists’ are increasingly targeting New Zealand organisations as global conflicts escalate. Distributed denial-of-service attacks have been linked to political events overseas, including actions taken by the New Zealand Government on international conflicts. Financial institutions, media outlets, utilities and transport providers were among the sectors affected, causing reputational harm. 
• Cyber criminals are increasingly attacking weak links in supply chains, such as crucial service providers.

Some recent examples include the September 2025 ransomware cyber-attacks upon airports across Europe which caused severe disruptions to check-ins. There were also cyber-attacks in the UK on Marks & Spencer in April 2025 and on Jaguar Land Rover in September 2025, which required them to suspend some operations, and are reported to have resulted in hundreds of millions in losses.

While many cyber-attacks result in some form of loss to the target, such as trading losses when systems fail, those most likely to result in litigation are cyber-attacks that result in confidential customer information being accessed and improperly used. These can result in both substantial fines for breaches of privacy as well as private class action litigation in which compensation is sought on behalf of very large numbers – potentially millions – of people whose data has been compromised. While no significant class actions resulting from a cyber breach have been brought yet in New Zealand, these claims are increasingly common in overseas jurisdictions, including a number of substantial claims brought in the courts of Australia. 

Claims and disputes arising from the use of AI

The widespread adoption of AI carries the risk of errors in its outputs, particularly where it is unclear how the relevant AI algorithms work or the AI ‘hallucinates’ an output that is wrong or invented, and where outputs are created by AI without human involvement or a human check of the final work product. This can result in loss and liability. Breaches of legal obligations and rights may also arise in relation to data protection, data ownership, copyright infringement and protection of confidential or privileged information.

From recent conversations we had with insurers in London, one of their biggest concerns is whether businesses – particularly those that provide professional services – are using AI without properly checking and verifying the outputs. The question often asked is: are they using it only as a useful tool, or are they allowing it to generate work product which they rely upon? We are increasingly hearing of instances in which businesses and professionals have been caught out by relying too heavily upon AI without ensuring that a human being checked its output. 

From the legal profession, there have been cases in which AI-drafted documents have been relied upon in court that contained non-existent case law. In the UK, in Ayinde v The London Borough of Haringey, a lawyer cited cases in argument that did not exist. A wasted costs order was made against the lawyer and she narrowly missed contempt proceedings when she unwisely denied using AI. Similarly, in Al-Haroun v Qatar National Bank the Judge found that correspondence and witness statements provided by a client to his lawyers made numerous references to cases that did not exist or cited them for propositions they did not support. The lawyers admitted that they had used the material without checking it and the Court referred them to the Solicitors Regulatory Authority for further investigation.

These risks are not confined to the legal profession. Recently, Deloitte Australia agreed to partially refund a substantial fee it had received from the Department of Employment and Workplace Relations after a junior staff member added references to a 2025 report which were found to contain AI-generated errors, including a fabricated quote and non-existent research. While Deloitte reportedly advised its client that it was using AI and the report’s conclusions remained unchanged, the reputational damage was done.

Where professionals use AI tools to generate work product without a proper review, the consequences can be serious and can result in costly regulatory action or compensation claims. For example, if a lawyer relies on AI to prepare advice upon which a client relies, this could result in a significant liability claim. Similarly, accountants may face claims for financial losses, and engineers or architects could be liable for design failures requiring costly remediation. 

Other organisations are also at risk from unfettered AI systems offering advice and recommendations. In the US, the National Eating Disorders Association reportedly had to withdraw its chatbot after it made potentially dangerous suggestions to users relating to eating disorders, including recommending weight reduction, calorie tracking and body fat measurements.

There are also significant risks from allowing AI tools to access confidential information. We find that confidentiality provisions in some third-party contractor agreements may no longer be adequate, particularly where third parties unknowingly breach their obligations by uploading confidential information into free or unsecured AI services.

Dealing with the increased risk of technology claims

As technology develops, problems arising from it will continue to raise new claims and disputes. At present, we see technology project failures as giving rise to the most significant litigation, with cyber-crime and resulting claims also on the rise. AI-related losses and claims are occurring in increasing numbers and while their values have been relatively small to date, there is potential for them to increase. 

Organisations may take steps to avoid liabilities arising from these issues and the resulting claims and losses by making sure they are aware of the risks, investing in good contract processes, avoiding actionable representations, investing in good cyber-security and cyber insurance, and taking care with their use of AI.