BT Cornwall Ltd v Cornwall Council & Ors [2015] EWHC 3755 (Comm)

Case No CL-2015-000593

[2015] EWHC 3755 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 21/12/2015

Before

MR JUSTICE KNOWLES CBE

Between

BT Cornwall LimitedClaimant

(1) Cornwall CouncilDefendants

(2) Cornwall Partnership NHS Foundation TrustDefendant

(3) Peninsula Community Health CICDefendant

Duncan McCall QC, George Woods and Ben Woolgar (instructed by Reed Smith LLP) for Claimant

James Ramsden and Cleon Catsambis (instructed by Browne Jacobson) for First Defendant

Mark Chennells (instructed by Eversheds LLP) for Third Defendant

Hearing Hearing dates: 1, 2, 3, 7, 8, 9 and 14 December 2015

Judgment

Mr Justice Knowles :

Introduction

[1]The Defendants are Cornwall Council (“the Council”), Cornwall Partnership NHS Foundation Trust and Peninsula Community Health CIC. Together, the Defendants entered into a written Service Delivery Agreement (“the Agreement”) with BT Cornwall Limited (“BTC”) dated 27 March 2013. The Defendants were described as the “Public Sector Partners” and BTC as the “Strategic Partner”.

[2]The Agreement has an extensive compass. Its operation affects the transaction of services throughout Cornwall in areas including health, transport, communications, and public safety. It is potentially of long term duration. One valuation of the Agreement was at £160 million.

[3]On 24 June 2015 the Council wrote to BTC asserting that, by reason of breaches of the Agreement by BTC, the Defendants had a right to terminate the Agreement forthwith.

[4]Given the compass of the Agreement, it was important that everyone should know where they stand. The parties did not resolve matters by agreement. BTC sought an injunction to prevent termination of the Agreement. On 13 August 2015 Teare J ordered the trial of the following issue:

“… whether, assessed as at 20th July 2015, [BTC] was in breach of [the Agreement] such that the Defendants were entitled in all the circumstances to terminate the Agreement forthwith, and whether [BTC] should be granted an injunction to restrain such termination.”

[5]The parties made holding arrangements pending the trial of the issue, and directions were given for disclosure, witness statements and other preparation for trial. The trial commenced at the beginning of this month, and has been conducted with considerable ability by the legal teams on all sides. This is the judgment on the trial.

The Agreement

[6]The more material provisions of the Agreement form an Appendix to this judgment.

[7]The Commencement Date under the Agreement was 1 July 2013. BTC does not deny that there were substantial problems with its performance in 2014. A backlog of work accrued in 2014 and had still not been cleared by well into 2015.

[8]The situation cannot have been assisted by the fact that the Agreement is, as a document, very hard to work with, including by reason of its impractical length, and the imprecision in some of its drafting. It runs to several lever arch files without that length providing clarity in return. Its oversight and governance arrangements proved inadequate for all parties when things started to go wrong. The imprecision in its drafting was well illustrated at one point in the trial when completely different ways in which “Incident Impact” levels could be interpreted by BTC on the one hand and the Defendants on the other was shown; an uncertainty that extended to critical business functions for the Defendants, where public safety and health might well be involved.

[9]The problems with performance may not have all been one way. Mr Finlayson of BTC gave evidence that a large number of faults were caused by the Council, including as many as 1000 “no shows” by the Council’s staff for equipment upgrades. The trial did not equip me with the background material, documentation and argument to evaluate that evidence closely.

[10]In any event, concerns on all sides were such that in February 2015 BTC and the Council had established a senior level Executive Forum, in addition to the oversight arrangements provided by the Agreement itself. On 17 March 2015 Mr Healy (the Director of Technical Assurance and Rapid Response for BT Global) was describing the contract as “disastrous” and BTC’s position as “precarious”.

[11]On 1 April 2015 the President of BT - Global Government and Health, Mr Dalton CBE, was prompted to write a letter to Mr Masters (Corporate Director at the Council) confirming that “BT take all of its contracts and their obligations and commitments very seriously and that this is indeed the case with the agreement with Cornwall Council and its Public Sector Partners”.

[12]Among other things, it was envisaged that a renegotiation of KPIs and what was termed “baselining” would have to take place in about June 2015. As will appear below, these matters have contributed to argument that, ahead of any formal renegotiation, the Agreement was not the only or last word on the parties’ obligations to each other in the meantime, and on the question of the Defendants’ entitlement to terminate.

[13]I do not doubt that by April 2015 BTC was making considerable efforts to rectify things. As will appear further below, in a Council Report to its Resources Policy Advisory Committee the view was recorded that “BT could hardly have done more”.

Witness evidence at trial

[14]I have mentioned that the Agreement affects the transaction of services throughout Cornwall in areas of real importance to the public. It can be taken that a dispute of that nature, and one of this economic value, is of real importance to BTC and the Council.

[15]They found they could not resolve their dispute and needed to ask the Court to decide what had happened and what the consequences were. It is therefore surprising that both BTC and Council each chose not to call as witnesses senior people who had obviously material evidence to give.

[16]This would include Mr Richard Williams (Head of Governance and Information and Head of Legal at the Council), Mr Paul Masters (Corporate Director for Communities and Organisational Development at the Council) and Mr Andrew Kerr (who has recently left the Council as its Chief Executive to take up a post as Chief Executive of another Council). It would also include Mr Chris Leggett (BTC Chief Executive January 2014 to February 2015), Mr Ian O’Brien (BTC Transformation Programme Manager), Mr Peter Wroe (BTC Business Operations and Projects Director; Head of Commercial to July 2015) and Mr Russell Cosway (BTC ICT Service Manager to April 2015) from BTC.

[17]I intend no criticism of any of those individuals because I do not know whether they were asked to give evidence. I cannot readily accept that if they were asked, they had higher priorities than to give evidence in a case of this nature.

Material Breach: KPIs

[18]Schedule 13 to the Agreement was entitled “Price Performance Mechanism” and used a scheme of key performance indicators (“KPIs”). BTC’s Monthly Review Reports show that between November 2014 and April 2015 service in relation to KPI 1 was below Target Service Level six times, and below the Breach Trigger five times. As for KPI 5 (Incident Impact 1), between October and December 2014 service in relation to KPI 5 (Incident Impact 1) was below Target Service Level for three consecutive months, of which one was below Breach Trigger.

[19]What were termed “Service Credits” accrued accordingly in the manner set out in Schedule 13. In addition, subject to all the other points considered below, the level of failure just described, whether in relation to KPI 1 or KPI 5, would amount to a Material Breach under Clause 48.2.1.1 of the Agreement, allowing termination without (see Clause 48.3.2) a remedy period.

[20]However, as regards KPI 5 (Incident Impact 1), for which the Appendix to Schedule 13 contained an entry in the column “Baselining Required”, the effect of paragraph 8.3 was that before paragraph 9 (which dealt with Material Breach) would apply, the “current Actual Performance Level” for that KPI would need to be known and the Target Service Level would need to have been agreed.

[21]It is not easy to understand why the Agreement should, by paragraph 8.3 of Schedule 13, make this type of provision, while by paragraph 8.1 leaving it to BTC to decide to exercise a right to amend its Target Service Level. The combination of provision carries a real risk of delay, and that is what happened.

[22]The Council prepared Contract Change Notices under clause 21 of the Agreement in order to amend Target Service Levels. It did not get BTC to sign them. There was a suggestion in evidence that at the end of a meeting on 23 April 2015 Mr Finlayson of BTC had agreed to take them away and sign them, but having heard a number of witnesses on this aspect I do not consider that more was indicated than a willingness to look at them and sign them if happy with them. In the event they remain unsigned.

[23]As regards KPI 1, the Appendix to Schedule 13 did not contain an entry in the column “Baselining Required”. BTC contended that because KPI 5 was “a component” of KPI 1, KPI 1 should be treated as though there was an entry in the column “Baselining Required” in the Appendix, and thus paragraph 8.3 would also apply to postpone the application of paragraph 9.

[24]I do not accept this contention. KPI 1 is capable of operating independently of KPI 5. The Agreement deals with them separately. The Appendix is clear on its face. There is no claim by BTC for rectification of the Appendix to insert the word “Yes” in the column “Baselining Required”.

[25]Mr McCall QC, who appeared with Mr Woods and Mr Woolgar as Counsel for BTC, argued that the figures for February, March and April 2015 in the Monthly Service Reports could not be used because KPI 1 was intended to be a measure of failure within a month by reference to a benchmark of what was achievable within that month. For these three months the figures were the subject of an express caveat to the effect that their level was due to a large backlog of failed incidents being cleared, so that (it was argued) they could not be said to represent the level of failure within a month.

[26]I do not accept the argument. Indeed it is met by a separate overarching point that Mr McCall QC made, that the Agreement would “log a matter for breach purposes” when the matter was resolved, rather than before. Failures due to backlog were logged within these months because that is what the Agreement contemplated. That BTC fully appreciated that consequence is apparent from the actions it took to try to avoid that consequence. BTC was to argue at trial that these actions led to a “KPI Backlog Agreement”, and this is considered below.

[27]It was also argued on behalf of BTC that the KPIs would not be operative until the entire “set” of KPIs was agreed. A Review of BTC’s performance dated 20 November 2014, version 0.4, prepared by Mr Gaslonde (who gave evidence for the Council) and another, contained the following paragraph, which included the word “set”:

“2.1 (Key) Performance Indicators It is accepted on both sides of the partnership that the contractual indicators were not fit for purpose particularly in regard to ICT. This is because the contract went live with a KPI set that largely represented a Health Service partner that had long since pulled out of the Joint Venture. Although there has been a lot of work done to re-specify and re-baseline these KPIs, the reporting to date, based on these KPIs is clearly flawed.”

It is accepted on both sides of the partnership that the contractual indicators were not fit for purpose particularly in regard to ICT. This is because the contract went live with a KPI set that largely represented a Health Service partner that had long since pulled out of the Joint Venture. Although there has been a lot of work done to re-specify and re-baseline these KPIs, the reporting to date, based on these KPIs is clearly flawed.”

[28]The reference to a “set” of KPIs does not alter the contractual position. In my judgment nothing in Schedule 13 of the Agreement supports the argument by BTC that the KPIs would not be operative until the entire “set” of KPIs was agreed. Paragraph 8.3 of Schedule 13 suggests quite the opposite. Even the description of the KPIs as “not fit for purpose” would still leave them operative until changed.

[29]What was termed a Strategic Partnership Meeting of 3 February 2015 was attended by senior representatives of BTC and the Council. Those present agreed an “Action Plan”. Items 2.7 and 2.8 of the Action Plan were as follows:

“2.7 Complete the baseline process for the current contract KPI performance measures. 2.8 On completion of action 2.7, commence a joint review of the contract KPI/PI performance measures and propose any amendments.”

[30]Mr McCall QC argues that these items show the KPI “set” was never baselined. In my view, confirmed by my hearing what the witnesses had to say at trial, the items show(a) that baselining work remained to be done for some of the KPI performance measures that were in the Agreement

(b) that after that work had been done there would a joint review of the contract KPI/PI performance measures and

[31]In the events that happened the parties did not get to stages (b) or (c) before the Council wrote to BTC on 24 June 2015 asserting that the Defendants had a right to terminate the Agreement forthwith.

[32]There was also argument whether BTC was entitled to re-open the figures in its Monthly Service Reports, in an attempt to show that KPIs were not in fact breached. As to this argument, by paragraph 3.1 of Schedule 13 BTC was to monitor and measure its performance in respect of the Services on a monthly basis from the Commencement Date against the KPI Table in Appendix A. By Clause 17.10.1 of the Agreement BTC undertook that the process of the monthly Services Review and the content of its Monthly Review Report “shall be objective, fair and reasonable and that the assessment shall be conducted and the report shall be written in good faith”. In these circumstances, assessing the matter as at 20th July 2015 as required by the formulation of the issue being tried, the starting point is that BTC’s Monthly Review Reports were a sound foundation for any conclusion of Material Breach.

[33]That is not to say that figures and calculations could not thereafter be corrected, if they were wrong, at the instigation of BTC or the Defendants. However if BTC was the one to instigate a correction it would first need to show (and in my judgment it did not do so) why the existing figures and calculations, which were its own work, were not objective, fair and reasonable or how it was that the assessment had not been conducted, and the report written, in good faith.

[34]The Council argued, in a rejoinder, that BTC would be estopped from denying the correctness of the figures and calculations. In the result I do not need to determine that point, but I admit to material reservations about it.

[35]Mr Pate gave evidence for BTC of work he had done on the figures in recent weeks. I was left unclear about Mr Pate’s methodology and unconvinced by his approach to “sampling”. As between his work and the figures derived contemporaneously from the Monthly Service Reports I preferred the latter.

Material Breach: Jobs

[36]Under the Agreement, BTC promised the creation of numbers of new jobs for Cornwall. Although its position developed in the course of the proceedings, ultimately the Council did not contend that a failure by BTC to meet what was described as the annual jobs guarantee was itself capable of amounting to a Material Breach. Instead it contended that such a failure gave rise to an obligation to provide a remediation plan and that BTC failed to provide a compliant remediation plan and to implement it or comply with its terms.

[37]As at the date that is material for the issue that was tried, 20 July 2015, a remediation plan would not have been due in respect of a failure by BTC to meet the annual jobs guarantee for the year to 30 June 2015 (Clause 4.1 of Part 2 of Schedule 2 (Jobs) allowing 20 business days for such a plan). Thus the focus must be on a remediation plan being required because of a failure by BTC to meet the annual jobs guarantee for the year to 30 June 2014.

[38]For the year to 30 June 2014 a total of 83 new jobs was guaranteed, as a starting point. But paragraph 5.2 of Part 2 of Schedule 2 to the Agreement provided that that was “dependent upon [the Third Defendant] securing a new Telehealth contract” and “where a new Telehealth Contract is not secured by [the Third Defendant] with NHS Kernow … the Guaranteed New Jobs relating to Telehealth Services shall be deleted from” the table that specified 83 guaranteed new jobs.

[39]The Council accepted, as confirmed in oral closing submissions by its Counsel Mr Ramsden (who appeared with Mr Catsambis), that the Third Defendant did not secure a “new” Telehealth Contract with NHS Kernow, whatever may have been agreed by way of extension of an existing contract. So the “Guaranteed New Jobs relating to Telehealth Services” were to be deleted from the total of 83. However the Agreement does not make clear how that deletion is to be done, and what the figure is for the year to 30 June 2014. Appendix 2 breaks down guaranteed new jobs by source, but supplies no more information than that 139 new jobs were to be in “Telehealth and TeleCare” by 30 June 2017.

[40]Based on the evidence of Mr Finlayson and Mr Drage, BTC contend that had the Third Defendant secured a new Telehealth Contract with NHS Kernow, it would have accounted for 70 new jobs in the year to 30 June 2014. I find that a reasonable approach, based on evidence I am prepared to accept. The result is that BTC was not in breach. As BTC point out, a pro rata approach also leaves BTC not in breach.

[41]Notwithstanding the above, in July 2014 BTC did produce a document that it described as a remediation plan. (I say “described” because the document is a poor one, and most is devoted to a description of the existing situation rather than a plan for the future.) In the document BTC deducted 27 new jobs in relation to Telehealth. The fact of the document, and the amount of the deduction made in it, do not persuade me that BTC was in breach. The plan was not contractually required. The parties in due course put it to one side as they discussed other approaches and priorities as regards jobs. And nothing binds BTC contractually to the figure of 27.

[42]However the Council advanced an argument that BTC “knowingly removed the dependency between the Guaranteed New Jobs and [the Third Defendant] securing a new TeleHealth contract with NHS Kernow before signing the Agreement”. Its argument rests on a reference in the “Jobs Plan” at Appendix D to Schedule 2 to the Agreement, and Schedule 27 of the Agreement where there is a “clarification”.

[43]In the “Jobs Plan” there is a statement that “Telehealth and Telecare jobs are modelled independently, and are based on acquiring 54,000 persons [patients] from outside the County”. The clarification in Schedule 27 is in relation to a section of a Business Plan dealing with “Core Services”, rather than in relation to the “Jobs Plan”. In the course of giving the clarification BTC stated that it anticipated that Telehealth patient numbers would come “from Kernow CCG or a similarly sized contract”.

[44]The clarification sought, and given, was in terms in relation to provision for patients rather than jobs, and the allegation of breach levelled against BTC is not in relation to patient numbers. Attention was drawn to Clause 6A of the Agreement, but in my judgment that does not bridge the gap. I also understand the point that Mr Hughes (for the Council) made in evidence to the effect that patient referral numbers drive jobs, but that point does not result in an amendment to the wording of 5.2 of Part 2 of Schedule 2 to the Agreement, which is what would be required.

Waiver

[45]BTC refers to paragraph 7 of Schedule 13. This gives the Defendants the right “at their sole discretion” to waive Key Performance Indicator Scores achieved due to Service Failures “if they are satisfied (acting reasonably) that a remedial plan to prevent the Service Failure being repeated is in place and being adhered to”.

[46]In some circumstances this paragraph might be difficult to analyse and operate, with its combination of provisions just referred to. In the present circumstances that difficulty does not arise.

[47]BTC points out that the paragraph requires no particular formality. I can understand that point, but the paragraph does require the exercise of the right it confers (or a successful contention that there was an obligation to exercise the right and that that obligation was not complied with). I heard no evidence at the trial that would cause me to conclude that the right had been exercised or should have been exercised.

[48]Mr Finlayson gave evidence that a waiver from Material Breach “was implied and everyone understood”. I do not accept that as an accurate statement of or conclusion on the facts. Nor is it enough in law. “The KPI Backlog Agreement”

[49]BTC contends that at the Executive Forum the Council expressly agreed that BTC should clear the backlog, quickly, with the accepted consequence that the KPI results would be below breach level. Mr McCall QC develops the contention as follows:

“Given that specific authorisation was given, with knowledge of the consequences, it was implied that the expected ‘breach level’ KPI results would not be taken into account in assessing whether BTC was in Material Breach and would not be used to justify termination. It is inconceivable that BTC would have agreed to it otherwise.”

[50]Nothing was written to record the suggested “KPI Backlog Agreement”. In my view that is because there was no agreement and not because, as BTC argues, there was a general atmosphere of co-operation, and the parties were working fast to resolve problems. BTC described those problems in its closing submissions as being problems “with the Agreement”. As I have touched on above, the Agreement is not an impressive document in many, many respects. But in my view the problems were more with BTC’s performance than with the Agreement.

[51]BTC urges that closing historic incidents would tend to cause two things cumulatively: a dip in KPI performance and an impact on the Service Desk’s ability to respond to new incidents. But these were for BTC to deal with, applying whatever resources it took. And I also accept the evidence of Mr Gaslonde that even without the backlog, BTC’s KPI 1 performance would still breach for March and April 2015.

[52]BTC’s evidence was that simply throwing more resources at the problem would not work. I accept Mr Healy’s and Mr Kritikos’s evidence that it typically takes one to two months for a new operative to be trained and to understand how the ICT systems in Cornwall work. But that means that, to meet its obligations, BTC should have started to prepare earlier. The cumulative dimensions of the situation were of BTC’s own making.

[53]Mr McCall QC puts matters in this way : “The point that BTC makes is that, given that a backlog had arisen, it had a choice as to how to clear it:(a) as quickly as possible consistent with avoiding hitting Breach Triggers, or

(b) in “one fell swoop”, in a way that would place it in Material Breach”.

[54]The answer to the point put in that way is that contractually BTC was required both to avoid hitting Breach Triggers and to avoid placing itself in Material Breach. BTC might have hoped that the Defendants would take a sympathetic line, but I was not satisfied that BTC thought the Defendants would relieve it from either.

[55]Having heard them give evidence, I do not accept Mr Kritikos’ or Mr Finlayson’s evidence where it suggests that agreement was reached in the form of the asserted KPI Backlog Agreement.

[56]There is no mention of such an agreement in contemporaneous documents where one would expect to find mention had it existed. An example is in internal email exchanges at BTC on 10 March 2015. Mr Kritikos made no mention in an email to his line manager Mr Hood of there being an agreement that would provide a shield to the consequences of breach triggers; his suggestions in evidence that his reference in an email to “on face value” was intended to refer to an agreement, and that he had later had a discussion with his line manager, were not credible suggestions and I reject them.

[57]In oral closing submissions Mr McCall QC drew attention to the fact that the Agreement would “log a matter for breach purposes” when the matter was resolved, rather than before. Given that, he argued, it was unsurprising that BTC would seek “buy in” from the Council before committing to resolve the backlog “at one fell swoop” and it was inconceivable that BTC would have addressed the backlog in that way unless it had clarity that it would be safe from breach triggers.

[58]The answer in my view is again that, in contract, it was already obliged to resolve the backlog. It was not entitled to protection from the consequences. On the evidence, BTC sought reassurance that clearing the backlog was “the right thing to do”. It was the right thing to do, in the sense that doing it would honour BTC’s obligations, albeit late. BTC was not entitled to expect or assume that it would be exempted from other consequences under the Agreement simply because it was honouring its existing obligations. BTC made clear to the Council what it proposed to do next, and the Council acknowledged that.

[59]Mr McCall QC sought to meet the point that BTC had an existing obligation to clear the backlog by reference to a provision in the Service Specification for ICT Services, version 5.4 of which formed a further part of the Agreement. Paragraph 7.1.15.1 of that Service Specification provided that it was a responsibility of BTC’s to “prepar[e] and present[] remediation plans in response to an underperforming area of [BTC]” and “ensure remediation plans are implemented and that underperformance does not re-occur”. From this Mr McCall QC argued that remediation measures to address the backlog could not be required when they would put BTC in breach.

[60]I do not, with respect, accept that argument as sound. The reference to ensuring that underperformance does not re-occur was, in this context, a reference to not incurring backlog again or increasing it. I further accept as sound in law the proposition put by Mr Ramsden for the Council to the effect that the obligation to ensure remediation plans are implemented (and thus to remedy underperformance) was an obligation to be carried out as soon as possible.

[61]Mr Kritikos of BTC suggested in his evidence that as he and Ms Hazell of the Council were leaving the Executive Forum meeting on 9 March 2015 Ms Hazell acknowledged an observation from him that BTC had a “let”, by which he meant a waiver, from the KPI requirements for March and April. His evidence continued that Ms Hazell had said Mr Hughes would have a “fit”, or words to that effect. I found Mr Kritikos’ evidence on these points wholly unconvincing, and a late, untrue, and therefore very regrettable elaboration. Ms Hazell denies such a conversation and I have no hesitation in accepting her evidence.

[62]The proposition that there was a KPI Backlog Agreement as contended for by BTC is further negatived by the evidence of Mr Gaslonde of the Council, that when in or around March 2015 he was asked by Mr O’Brien of BTC if BTC could exclude back log calls from the performance report, he (Mr Gaslonde) agreed that any call logged prior to the start of the Agreement could be excluded but all others were the responsibility of BTC. I accept Mr Gaslonde’s evidence, originally given in a witness statement on 11 August 2015 and confirmed in the witness box. As mentioned above, BTC did not call Mr O’Brien as a witness.

[63]More generally, there was considerable argument over the authority of the Executive Forum (the body that came into existence after the Agreement was made) to agree a legally binding amendment to the Agreement including in the form of the KPI Backlog Agreement. The argument is ultimately not material because I am satisfied that, as a matter of fact, no such agreement material to this trial was reached at the Executive Forum. Had the facts been otherwise I would not have ruled out the possibility that there would have been authority to bind BTC or the Council respectively through their Chief Executives at a meeting of the Executive Forum attended by those Chief Executives.

[64]Clause 21 of the Agreement contains detailed provision for how the Agreement may be changed or varied, including as regards Defendants other than the Council. That Clause may make it harder to establish on the facts that an amendment achieved by other means was intended to have legal effect, but I do not think it makes it impossible, at least as between the Council and BTC. In her evidence Ms Hazell indicated she had been anxious at the time about the potential impact arrangements for the Executive Forum could have on the clarity of governance and contractual arrangements. Her anxiety was well placed.

[65]In submissions to which I pay particular tribute because of their measured tone and analytical rigour, Mr Chennells for the Third Defendant drew attention to the respects in which BTC and the Council did not involve the Third Defendant in the Executive Forum. That further militates against a conclusion that the Agreement was amended.

Estoppel and Affirmation

[66]Having heard Mr Hughes and Mr Gaslonde of the Council, and considered the available documents, I find that the Council was aware by shortly after 8 April 2015 that BTC was in breach of KPI 1 for March 2015, and by shortly after 13 May 2015 that BTC was in breach of KPI 1 for April 2015.

[67]In a report of 8 April 2015 Mr Williams of the Council recommended the option of working with BTC “to recover the performance position” rather than the option of terminating. He noted that the first option carried the risk “that the partnership is unable to recover its performance and fails to bring the necessary transformation to Cornwall” and the second option “… would need considerable planning … could have a large monetary penalty and also come with a risk of further delay in moving the organisation forward in key areas such as ICT …”.

[68]In a second report of the same day Mr Williams recommended that he provide another report to set out progress by 31 October 2015; it was here he recorded the view (mentioned above) that “BT could hardly have done more” since February “to demonstrate their commitment both to turning around contractual performance and to the Strategic Partnership as a whole”. His conclusion on the “proposed way forward” (accepted as a fair summary by Mr Finlayson) was in these terms:

“… that the Council, Health Partners and BTC continue to work urgently to address all issues set out in the Executive Action Plan. In parallel, BTC performance will be robustly monitored and enforced through the Contract.”

In parallel, BTC performance will be robustly monitored and enforced through the Contract.”

[69]In an internal BT and BTC email of 19 May 2015 Mr Healy wrote:

“We are in grave danger of breach on ticket performance. … Ian & Mark will be working with Stuart & Nicola to make sure that we keep as many tickets out of the system as we can. Tickets that do enter the system will be simply & quickly classified (get people off phones & fixing). For those that are in the system we need to re-categorise wherever possible; to get them out of SLA breach.”

[70]On 1 June 2015 Mr Healy wrote to Mr Pate after Mr Pate had provided current figures, indicating breach:

“Where did the new ones come from since Thursday? Need to use poetic license & [g]et the buggers out”

. Mr Healy accepted in the witness box that he meant “get them out of fail”. He recognised the implication from his words that he was proposing manipulation. He pointed out that the email was sent late at night, and claimed it was “a joke” “to a friend”. However in the circumstances, including the email of 19 May, and having heard Mr Healy make his claim from the witness box, I conclude it was not a joke and that it reflected both a recognition that things were serious and a preparedness to take inappropriate steps to avoid that.

[71]It was by letter dated 24 June 2015 that the Council communicated to BTC its position that it was left “with no realistic option but to invoke the termination procedure under the contract”, subject to authorisation by its members and appropriate officers and discussion with the other Defendants.

[72]BTC contends that if the facts fall short of enabling the Court to conclude that a binding agreement in the form of the KPI Backlog Agreement was reached, then the facts gave rise to an estoppel, or support BTC’s case on affirmation, so as now to bar the Council from relying on breaches of KPIs in February, March and April in terminating for Material Breach.

[73]With respect, the facts do not begin to make out a case on estoppel or affirmation for BTC. The Council was entitled to express its wish that BTC clear the backlog even if it knew that the effect of doing so would be to have an adverse impact on the monthly results. It was entitled to have the backlog cleared and to retain all its rights to insist that the monthly results meet the standards required by the Agreement.

[74]Mr McCall QC submitted that the Council’s actions were only consistent with there being a future for the Agreement. I disagree. There was consideration of the future (item 2.8 of the Action Plan is an example, and what was termed the jobs growth plan is another), but that did not mean that the consequences of current problems were put aside (item 2.7 of the Action Plan is an example, and so too was Mr Finlayson’s acceptance in cross examination that as at April 2015 he believed the Council would enforce its contractual rights). The fact that the Council was prepared to engage through the Executive Forum, and to work collaboratively with BTC is not to be held against it and did not signal that it would not take action in accordance with the provisions of the Agreement.

[75]There was no material delay on the Council’s part, and certainly neither its actions nor the passage of time are to be taken as an election not to terminate for Material Breach. The word “forthwith” in Clause 48.1 addresses the point at which the Council may act, and not the period within which it must act if it is going to.

[76]BTC argues that “the Executive Forum represented a major commitment for BTC, not only in terms of the executive input at the highest level, but also in terms of the huge resources and costs involved”, which it put at £4.3 million. This is no more than a reflection of how serious it had allowed things to become; it does not advance its argument that the Council was not entitled to enforce the Agreement in accordance with its terms.

Good Faith

[77]BTC advanced the argument that any termination for Material Breach in relation to KPIs must be made in good faith. It did so both by reference to what the Agreement stated and by an argument about what requirements should be implied into the contract.

[78]The provision with which BTC began this argument was Clause 5.2.2. That Clause in my judgment requires good faith (and reasonable endeavours) in relation to “a continuing Partnership dialogue”. It has no bearing on the exercise by one party of contractual rights, provided for elsewhere in the Agreement, where another is in breach of its obligations.

[79]BTC’s arguments that, under the common law, those rights could not be exercised unless there was good faith, and an absence of capriciousness, are most shortly answered by the fact that I am satisfied that there was good faith and an absence of capriciousness.

[80]BTC faced problems of its own making and did not provide to the Defendants the service it had promised to the standard it had promised. The Council worked with BTC to try to resolve things but ultimately decided the position was not good enough. There is no absence of good faith or presence of capriciousness in expecting BTC to clear the backlog at once and also to take the contractual consequences if that meant KPIs would be breached again. There was (as discussed above) no KPI Backlog Agreement, waiver, estoppel or affirmation. And unless and until different KPIs were agreed there is no absence of good faith or presence of capriciousness in expecting BTC to honour the existing agreed KPIs, “fit for purpose” or not.

Conclusion

[81]In my judgment the first part of the issue tried should be answered “yes”. Assessed as at 20th July 2015, BTC was in breach of the Agreement such that the Defendants were entitled in all the circumstances to terminate the Agreement forthwith.

[82]It follows, on the second part of the issue tried that the answer is “no”. BTC should not be granted an injunction to restrain termination. I would add for completeness that even had the first part of the issue tried attracted the answer “no” it is not inevitable that an injunction would be granted, rather than BTC left to a remedy in damages.

[83]Ultimately it is the public that is affected by this dispute, and by the shortcomings in the drafting of the Agreement and the failings in performance under the Agreement. It is very much to be hoped that all parties to the dispute will consider the position carefully, in the interests of the public, and take steps now to avoid a similar situation in the future, in Cornwall and elsewhere.