Astea v Timegroup

Out-Law Guide | 02 Nov 2007 | 8:31 am | 7 min. read

This case provides guidance on the factors which a court may consider when determining whether a party has complied with an obligation to perform within a "reasonable time".

Astea (UK) Limited v Timegroup Limited

  • MCLR April 2004
  • [2003] EWHC 725 (TCC)
  • [2003] All ER (D) 212 (Apr) Tech & Constr Ct

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Facts

The claimant company, Astea (UK) Limited ("Astea"), was a provider of a software package called "ServiceAlliance" (the "Software"). The Software, which was designed for independent use but could also be linked with other software systems via integration software, had three core elements which:

  • allowed the user to take a call from its customer to record that a product was broken and allowed the user to check as to whether a contract existed with that customer and whether billing was appropriate;
  • allowed the user to write onto its system what the issue was with the broken product and what action was required to fix the problem; and
  • allowed the user to track spare parts for its products and had a program which could automatically re order certain parts.

The defendant company, Time Group Limited ("Time"), was a manufacturer and retailer of personal computers. As part of its business Time ran a Call Centre for which it needed appropriate computer based support. In 1999 Time decided to replace its existing computer system with three different software packages. The first package was an office accounting package called "Tetra CS/3". The second package, which was to facilitate the sales function of the Call Centre, was produced by Time and was known as "Pulse". The third package was required to manage all aspects of service and repair. Time chose to use the Software provided by Astea.

n July 2000 Time and Astea entered into a Licence and Support Agreement for the Software (the "Contract"). Astea granted to Time licences to use the Software and also agreed to provide services which included configuring the Software and integrating the Software with Tetra CS/3 and Pulse. The parties originally agreed that the scheduled date for the implementation of the Software would be 1 August 2000. This date was confirmed in the Contract despite the parties agreeing prior to the execution of the Contract that the implementation of the Software would not occur until 1 September 2000. By implementation, the parties were referring to the date that the Software would become operational, or the "go-live" date.

Following the execution of the Contract there was slippage to the scheduled date for implementation of 1 September 2000 to 30 October 2000 and then to 6 November 2000. In fact, Astea did not install the integration software which linked the Software with Tetra CS/3 and Pulse until mid November 2000. Once the Software was installed, the next key task before the Software could "go-live" was the testing of the Software as installed and integrated with Tetra CS/3 and Pulse. Time took over the role of testing with Astea's personnel assisting. Despite the installation of the Software, Time delayed in paying Astea's outstanding invoices rendered pursuant to the Contract.

At an important meeting between the managing directors of Astea and Time on 6 March 2001, the issue of Astea's outstanding invoices was discussed. Time also suggested to Astea that the implementation work be suspended temporarily until Time could decide whether to proceed with implementing the Software. There were many factors which contributed to the delay to the implementation of the Software which included:

  • significant problems with the implementation of Tetra CS/3 and Pulse;
  • delay by Time in choosing the computer hardware necessary to enable the Software to run;
  • a dispute between Time and the supplier of Tetra CS/3 which had a significant impact upon the work of integrating the Software with Tetra CS/3 and Pulse;
  • delay by Time in paying Astea's invoices;
  • absence of Astea's personnel due to illness;
  • delay by Time in providing information to Astea on data issues.

Following the meeting of 6 March 2001, Time refused to pay Astea's outstanding invoices. The end result was that Astea issued these proceedings against Time to recover the outstanding sums due under the Contract. Time's principal defence to Astea's claim was that due to Astea's failure to ensure the Software had "gone live" by 6 March 2001, Astea had repudiated the Contract, and Time had accepted Astea's repudiation. As such, Astea was not entitled to payment of the sums claimed.

Time also made a Part 20 claim against Astea alleging that the software provided was of no use and that, as a result of the failure to complete the services under the Contract, Time had suffered a loss.

Judgment

At trial both parties agreed that Astea's contractual obligation was to complete the services within a reasonable time. The key issue which Judge Seymour had to decide was whether Astea was in breach of this obligation by its failure to perform all the services under the Contract by 6 March 2001. In determining this issue Judge Seymour held that it was necessary to take a broad consideration of what in all these circumstances would have been a reasonable time for performance. This broad consideration involved taking into account the following factors:

  • any estimate given by the performing party of how long it would take it to perform;
  • whether any estimate had been exceeded, and if so in what circumstances;
  • whether the party for whose benefit the relevant obligation was to be performed needed to participate in the performance or not at all;
  • whether it was necessary for third parties to collaborate with the performing party in order to enable it to perform;
  • what exactly was the cause, or what were the causes, of the delay to performance.

Judge Seymour also emphasised that the onus was on Time to prove that Astea had by 6 March 2001 exceeded a reasonable time for completing the services under the Contract. Time did not lead any expert evidence on this issue. Instead, Time relied on the original estimate that Astea had given as its time for performance and compared that estimate to the actual resources which Astea had allocated to perform those services, the implication being that Astea had not committed enough resource to meet its own time estimate for the performance of the services. Judge Seymour did not accept Time's argument and held that as at 6 March 2001 Astea had not exceeded a reasonable time for performance.

Judge Seymour was particularly persuaded by the fact that Time was in fact not ready to receive the integration software earlier than 30 October 2000 because of problems with Tetra CS/3 and Pulse and that Astea's staff had been willing and helpful throughout the testing period. Assuming Astea had been in breach of Contract as at 6 March 2001 by taking longer than a reasonable time to perform its obligations, Judge Seymour went on to consider whether this breach would have been repudiatory. He held that in a situation where work had been carried out before the alleged repudiation, the application of the test of repudiation must consider whether a failure to perform the remainder of the obligation will deprive the other party of substantially the whole benefit of the contract.

Obviously a flat refusal to perform the services would amount to a repudiation of a contract. However, where what was alleged to be a repudiation is an indication to continue at a speed considered by the other party to be unreasonably slow, Judge Seymour held that it would be difficult to conclude that what has been offered would deprive the other party of substantially the whole benefit of the contract. Judge Seymour held that in this case, even if he had found that Astea was in breach, he would not have found this to be a repudiatory breach.  Astea had never refused to complete the services at any time and, as at the date of the alleged repudiation, there was no suggestion that the resources Astea had devoted to the project were inadequate or Astea's intention to complete the services was not genuine.
As to Time's Part 20 claim, Judge Seymour held that even if he had found that Astea was in breach of contract, Time had failed to establish that it had suffered any loss by reason of such a breach.  One of the key reasons Judge Seymour gave for this finding was that Time had failed to mitigate any of its losses by permitting Astea to complete the services.

Commentary

Time's defence was difficult for a number of reasons. First, there was no express agreement between the parties that the software would be implemented by 6 March 2001. Second, Time had not issued any notice to Astea making time the essence of the Contract. Third, by its delay in taking any action against Astea, Time had effectively waived Astea's breaches to implement the software by the scheduled dates in October and November 2000.

As delay is a common feature in the performance of many IT contracts this decision is useful as it provides guidance as to what factors a court may consider in deciding whether a performing party has exceeded a reasonable time in the performance of its obligations under a contract. These factors are set out above. Of course if a contract includes specific dates for performance, then this decision will not assist unless those dates have been waived either by express agreement or by conduct. Where a dispute concerns delay to an IT project, expert evidence will sometimes assist the court's consideration of whether a reasonable time for performance has been exceeded. For example, an expert could give evidence on how long the relevant technical operations should have taken or give a view as to the expectations of the IT industry as to the appropriate level of resourcing for a particular project.

As to proving a repudiatory breach of contract, this may be difficult unless a supplier, such as Astea, has given a flat refusal to continue to perform under a contract. Where the concern is that the supplier is taking too long in completing its obligations, the most appropriate action for a customer to take is to give notice to the supplier making time the essence of the contract. This may be done by writing to the supplier and advising it of a date by which the works must be complete, setting out the reasons why this date is both necessary and reasonable. If Time had taken such action in this case then it would certainly have had a stronger defence to Astea's claim.