Peregrine Systems Ltd v Steria Ltd

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLord Justice Maurice Kay,Lord Justice Dyson,Lord Justice Auld
Judgment Date14 March 2005
Neutral Citation[2005] EWCA Civ 239
Date14 March 2005
Docket NumberCase No: A1/2004/0851 QBENF

[2005] EWCA Civ 239

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE TECHNOLOGY AND CONSTRUCTION COURT

HHJ Richard Seymour QC

Royal Courts of Justice

Strand, London, WC2A 2LL

Before

Lord Justice Auld

Lord Justice Dyson and

Lord Justice Maurice Kay

Case No: A1/2004/0851 QBENF

Between
Peregrine Systems Limited
Claimant/Respondent
and
Steria Limited
Defendant/Appellant

Lawrence Akka and Henry Byam-Cook (instructed by Messrs Olswang)) for the Claimant/Respondent

David Blunt QC (instructed by Messrs Bird & Bird) for the Defendant/Appellant

Lord Justice Maurice Kay
1

On 26 February 2004, His Honour Judge Richard Seymour QC handed down a long judgment in this case, following a trial in the Technology and Construction Court: [2004] EWHC 275 (TCC). The issues between the parties raised by way of claim and counterclaim were many and various. The result of the trial was a comprehensive victory for the claimant, Peregrine Systems Limited (Peregrine), and a defeat for Steria Limited (Steria). On appeal to this Court, Steria relies on a notice containing 23 grounds of appeal. It seeks to revisit most if not all of the trial issues. In the event, and for reasons which I shall explain in due course, we have heard submissions under only two headings, one chosen by each party. In these circumstances, and having regard to the fact that the background to the case is set out in detail in the judgment of the trial judge, I do not propose to refer to more of that background than is necessary for an understanding of the issues which are now to be considered.

2

Steria is a subsidiary of a French company. It is a provider of managed information technology services, which involves the provision of support services for the computer systems operated by its customers. It runs a customer call centre at Risley, a data centre service desk at Sunbury and a call centre at Hemel Hempstead which provides assistance to its own employees in meeting the needs of customers. The call centre at Risley comprises a number of service desks, each one dedicated to meeting the needs of a particular customer in accordance with the terms of the particular service agreement. There are twelve such service desks. The operation of call centres such as those run by Steria depends upon the use of appropriate computer software.

3

Peregrine is a subsidiary of an American company. It is a supplier of software, in particular software designed to facilitate the operation of call centres by providers of managed information technology services.

4

By an agreement in writing dated 29 March 2002 and called a Managed Services Provider Licence Agreement, Peregrine granted to Steria perpetual, non-exclusive licences to use software packages called ServiceCenter, AssetCenter, InfraTools and GetIT. The agreement contained two schedules. The first, "Schedule A", listed the software and the modules included within it. It described the sums payable by Steria. The total shown was £1,100,000 of which £300,000 was said to be "ROI (Licence Fees)". ROI means return on investment. The payment terms were described as follows:

" Steria agrees to pay Peregrine…..£800,000 (exclusive of appropriate VAT) according to the following payment schedule:

£100,000 on or before July 1, 2002

£700,000 on or before February 28, 2003

The payments are irrevocable and non-cancellable.

When the ROI milestones (which shall be agreed between the parties and documented in writing by April 30, 2002, in accordance with a mutually agreed services agreement) are achieved by Peregrine in accordance with mutually agreed performance thresholds set out therein, Steria will within 30 days of the achievement of such milestones pay the remaining licence fees of £300,000 to Peregrine which payment shall in any event not be payable….before 1 January 2003."

The second schedule bore the title "Technical Services Schedule". It has particular relevance to the first of the two issues to be considered in this judgment and I shall set out the appropriate part at that stage. It also contained numerous terms and conditions.

5

The difficulties that arose are referred to in the judgment below. They ripened into the present dispute which takes the familiar form of a claim by a supplier for sums due under the contract and a counterclaim by a customer to the effect that, as a result of misrepresentations and breaches of contract, it was entitled to terminate the contract and claim damages.

The present proceedings

6

On 17 June 2003, Peregrine commenced the present proceedings. It claimed that Steria had wrongfully terminated the agreement on 5 February 2003 and sought damages for breach of contract in the sum of £700,000 plus interest. At trial, Peregrine was granted permission to amend its pleading so as to claim £700,000 as monies due under the contract rather than as damages. The much—amended Defence and Counterclaim of Steria sought to justify the termination of 5 February 2003 on the grounds of repudiatory breaches of contract by Peregrine and/or misrepresentations. It sought the recovery of all sums paid to Peregrine under the contract, together with damages for the wasted time of Steria's employees and interest. At the conclusion of the trial the judge held that the termination of 5 February 2003 was wrongful and gave judgment to Peregrine in the sum of £732,602.74, inclusive of interest. He dismissed Steria's counterclaim. He did not consider that Peregrine had committed any breaches of contract, let alone repudiatory breaches or breaches justifying termination pursuant to the express terms of the contract. He further held that if, contrary to his primary finding, there had been misrepresentations or breaches on the part of Peregrine, Steria had lost the right to rescind or terminate the contract by reason of affirmation or waiver.

7

Permission to appeal was granted to Steria by Carnwath LJ on 7 May 2004. The Appellant's Notice seeks to advance no less than 23 grounds of appeal, taking issue with virtually the entire judgment at first instance. The appeal was given a time estimate of two to three days. We questioned whether it would be necessary for us to address all 23 grounds of appeal and doubted that the time estimate was sufficient to enable us to do so. Accordingly, at the outset of the hearing we considered with Counsel whether they could point to a small number of issues which might enable us to resolve the appeal without having to go through the full menu set out in the Appellant's Notice. On behalf of Steria, Mr David Blunt QC suggested that we first consider the question whether Peregrine had been in repudiatory breach of the agreement in relation to tardy performance so as to justify Steria's termination. On behalf of Peregrine, Mr Lawrence Akka invited us to deal with the issue of affirmation or waiver. We acceded to these proposals and heard submissions upon the selected issues. This judgment is therefore limited to those issues.

Issue 1: was there a repudiatory breach in relation to time for performance ?

8

The case for Steria is that there was an implied term in the contract requiring Peregrine to complete implementation within a reasonable time. In the final version, it pleaded its case thus:

"Pursuant to the Contract, [Peregrine] was obliged to implement all the software modules listed in Schedule A to the Contract, at all three of Steria's call centres (Risley, Sunbury and Hemel Hempstead). It was obliged to carry this out within a reasonable time (which Steria will contend meant by the end of December 2002, as stated in the Technical Services Schedule to the Contract)….

Phase 1 concerned the implementation of only some of the modules listed in Schedule A, and only at Risley. Phase 1 should have been completed within a reasonable time of the commencement of the contract. This would have been by 9 August 2002, as stated in the Project Plan produced by [Peregrine] dated 14 May 2002. The implementation of Phase 1 should have been completed at a time that allowed completion of the remainder of the modules at Risley and the implementation at the other two sites by the end of December 2002."

9

The judge rejected these contentions in two separate passages of his judgment. In paragraph 80 he rejected this and all the other allegations of implied terms in the contract. In paragraph 72 he rejected the basic premise of Steria's case, namely that the contract obliged Peregrine to complete the implementation of the software. He said:

"What Peregrine agreed to do was to provide £200,000 worth of implementation services, not to implement the software for £200,000. The implementation services were to be provided as required by Steria, rather than by any particular date, although it was contemplated that they would be provided by the end of December 2002, because that was the 'Period over which contract is valid' set out in the TSS."

10

This part of the case has become bedevilled by misunderstandings. The original misunderstanding was on the part of Steria which took the view that it had a fixed price contract entitling it to full implementation for £200,000. That position was rightly abandoned before the end of 2002. The second misunderstanding relates to the interpretation of the judge's rejection of all the pleaded implied terms, including in particular one relating to performance within a reasonable time. The likeliest explanation for that rejection in relation to time is that the way in which Peregrine had put its case had negated the need for such an implied term. It was Mr Akka's view that the express term relating to "reasonable skill, care and diligence" embraced an obligation to perform...

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