BT Cornwall Ltd v Cornwall Council & Ors

Contractual key performance indicators remain operative according to their terms unless validly amended. A backlog-clearing exercise, collaborative discussions, or an intention to preserve the commercial relationship does not, without more, waive termination rights or create an estoppel. A party may enforce material-breach provisions where the agreed performance standards have been missed, even if the contract is difficult to operate or the standards are regarded as imperfect. A contractual good-faith obligation concerning continuing partnership dialogue does not generally control the separate exercise of termination rights. Where the contractual conditions for material breach are satisfied, termination may be exercised forthwith and injunctive relief may be refused.

The claimant and the defendants entered into a long-term service delivery agreement concerning services throughout Cornwall. Following substantial performance problems, including failures against contractual key performance indicators, the first defendant asserted that the defendants were entitled to terminate the agreement. The claimant sought an injunction and the court tried the preliminary issue whether, assessed as at 20 July 2015, the claimant was in material breach and whether termination was available. The dispute concerned the operation of the KPI and jobs provisions, alleged waiver, estoppel, affirmation, an alleged backlog agreement, and good faith.

1. Material breach. The failures recorded against KPI 1 satisfied the contractual material-breach mechanism. KPI 1 operated independently of KPI 5 and was not subject to the baselining requirement applicable to KPI 5. The KPIs remained operative even though some were described as not fit for purpose and further review or amendment was contemplated.
2. Performance reports. The claimant’s contemporaneous Monthly Review Reports were a sound foundation for assessing breach. Figures could be corrected if wrong, but the claimant had to show why its own reports were not objective, fair and reasonable or had not been prepared in good faith. It failed to do so.
3. Jobs obligation. The guaranteed Telehealth jobs were dependent on a new Telehealth contract being secured. As no such new contract was secured, the relevant jobs were to be deleted from the guaranteed total. On the evidence, the claimant was not in breach of the jobs provisions and no remediation plan was contractually required on that basis.
4. Waiver, agreement, estoppel and affirmation. No binding KPI backlog agreement was made. The defendants’ willingness to work collaboratively with the claimant and to seek recovery of performance did not waive contractual rights, create an estoppel, or amount to an election not to terminate. The word “forthwith” addressed when termination could take effect, rather than imposing a period within which the right had to be exercised.
5. Good faith and relief. The good-faith obligation concerned continuing partnership dialogue. It did not qualify the separate contractual right to terminate for material breach. In any event, the defendants acted in good faith and without capriciousness. The defendants were entitled to terminate forthwith, and the claimant was not entitled to an injunction. The court added that, even if no breach had been established, an injunction would not necessarily have followed rather than a remedy in damages.

This was a first-instance decision following an order by Teare J for trial of the contractual termination issue. No appellate history is stated in the judgment.