Out-Law News 1 min. read

Cornwall Council wins right to terminate £160m outsourcing agreement with BT Cornwall


Cornwall Council is to notify BT Cornwall of its intention to exit a multi-million pound outsourcing deal prior to Christmas after the High Court in London rejected BT Cornwall's application to prevent the sourcing agreement being terminated.

The Council argued successfully that BT Cornwall had failed to deliver services it was contracted to undertake up to service levels set out in the agreement. The High Court rejected BT Cornwall's request for an injunction to prevent Cornwall Council terminating the 10-year £160 million outsourcing deal after less than three years.

The High Court ruled that BT Cornwall was in material breach of the outsourcing contract and that Cornwall Council was entitled to exercise its rights to termination under the agreement.

Mr Justice Knowles said that that BT Cornwall (BTC) "faced problems of its own making and did not provide to [Cornwall Council] 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," the Judge said. "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 (key performance indicators) would be breached again. There was 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."

The judge criticised the drafting of the outsourcing agreement and said it did not help the parties resolve their differences.

"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," Mr Justice Knowles said. "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."

In a blog, Cornwall Council councillor Andrew Wallis said Cornwall Council "intends to provide notice of termination of the contract before Christmas" in light of the ruling. The Council will bring a number of functions it had outsourced to BT Cornwall back in-house, although "there will be no immediate change in the arrangements as termination will not take effect until January", he said.

"The process of transferring staff and services from BT Cornwall to the Council and our public sector partners will begin in January and will be completed as quickly and smoothly as possible," Wallis said. "This will involve approximately 250 members of staff. The following services will transfer back to the authority: HR transactional services including payroll, HR employment support, first point helpdesk, financial processing, ICT, despatch, printing and telecare."

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