Irish Telephone Rentals Ltd v Irish Civil Service Building Society

• Jurisdiction: Ireland
• Judge: Mr. Justice Costello
• Judgment Date: 01 January 1992
• Neutral Citation: [1991] IEHC 1
• Court: High Court
• Docket Number: [1988 No. 1327],No 1327/1988
• Date: 01 January 1992

[1991] IEHC 1

THE HIGH COURT

No 1327/1988

IRISH TELEPHONE RENTALS LTD v. IRISH CIVIL SERVICE BUILDING SOC LTD

BETWEEN

IRISH TELEPHONE RENTALS LIMITED

PLAINTIFF

AND

IRISH CIVIL SERVICE BUILDING SOCIETY LIMITED

DEFENDANT

Citations:

SALE OF GOODS & SUPPLY OF SERVICES ACT 1980 S39

SALE OF GOODS ACT 1893 S14(3)

SALE OF GOODS & SUPPLY OF SERVICES ACT 1980 S10

HONG KONG FIR SHIPPING CO LTD V KAWASAKI KISEN KAISHA LTD 1962 1 QB 26

DUNLOP PNEUMATIC TYRE CO LTD V NEW GARAGE & MOTOR CO LTD 1915 AC 79

ROBOPHONE FACILITIES LTD V BLANK 1966 1 WLR 1428

TELEPHONE RENTALS LTD V PHOTOPHONE LTD UNREP 8.2.57 UK

RANK (IRL) LTD, IN RE 1988 ILRM 751

Synopsis:

CONTRACT

Repudiation

Justification - Consideration - Failure - Equipment - Hire - Term of years - Telephone system - Failure of system - Breach of fundamental term - Repudiation by hirer - Outstanding hire charges - Recovery - Assessment of damages - Clause of contract - Penalty clause - Validity - Assessment at common law - Sale of Goods and Supply of Services Act, 1980, s. 39 - (1988/1327 - Costello J. - 8/2/91) - [1992] 2 I.R. 525 - [1991] ILRM 880

|Irish Telephone Rentals Ltd. v. Irish Civil Service Building Society Ltd.|

DAMAGES

Assessment

Contract - Breach - Special term - Liquidated damages - Estimation - Penalty clause - Validity - (1988/1327 - Costello J. - 8/2/91) - [1992] 2 I.R. 525 - [1991] ILRM 880

|Irish Telephone Rentals Ltd. v. Irish Civil Service Building Society Ltd.|

1 Judgment of Mr. Justice Costello delivered the 8th day of February 1991.

2 The Plaintiff's main business, as its name indicates, is the letting on hire of telephone installations and ancillary equipment. The Defendant, as its name proclaims, is a Building Society. For many years prior to 1982 the Plaintiff and the Defendant had enjoyed a mutually beneficial ongoing business relationship and when, in that year, a major extension of the Defendant's head office in Molesworth Street was put in train and a new telephone system required the Defendant naturally turned to the Plaintiff to supply it. This it did and the parties entered into a principal hiring agreement in April 1982 and, in subsequent years, seven supplementary agreements. The Defendant also hired from the Plaintiff an internal broadcasting installation to supply an internal paging system. The first broadcasting contract was dated the 17th of January 1985 and it was followed by a supplementary contract on the 3rd of January 1986.

3 The Defendant terminated all their hiring contracts with the Plaintiff in May 1988 claiming that the defects in both systems justified it in doing so. These proceedings resulted. The Plaintiff contends that the termination was wrongful and amounted to a repudiation of the Defendant's contractual obligations. Their claim is for £70,898.27 by way of liquidated or agreed damages together with £3,607.33 in respect of arrears of rental. Alternatively they claim damages for breach of contract. The facts relating to the two main contracts are different and I will deal firstly with the telephone contract.

Telephone Contract

4 The development of the Defendant's head office was undertaken in two phases, firstly, the offices on the Westmoreland Street side of the site and then the offices on the D'Olier Street side. Mr. Evans, the Defendant's Engineer, showed the plans for the phased development to the Plaintiff. From these the Plaintiff was able to ascertain the total office space contemplated in the overall development, the probable number of staff when the development was completed, and the position of the floor boxes from which internal telephone connections could be made. No specification was prepared and the choice of an appropriate telephone system was left entirely to the Plaintiff. The main telephone contract was dated the 30th of April 1982. Under it the Defendant agreed to hire a "Mitel" SX 200 Switchboard, an operator's console, 20 exchange lines (that is, internal lines to staff "phones), 28 push button instruments, 2 "Kirk" instruments. An annual rent of £1,800 (payable quarterly) was provided for, and provision was made for an annual review of this rent. The hiring was to last for 14 years. Clause 11 contained the clause on which the Plaintiff's claim for liquidated damages is based and I will return to it later in this Judgment. Between April 1982 and September 1987 seven supplementary contracts were entered into under which the Defendant hired additional extension lines and "phones bringing the total number of "phones hired to 78. These new contracts involved the payment of extra rentals. At the date of termination the annual rent in respect of the main contract and supplementary contacts was £12,505.16.

5 At the end of 1985 and on different occasions in 1986 complaints were made by the Defendant to the Plaintiff about the manner in which this system was working. In March of 1987 the Defendant enquired what sum was payable under Clause 11 should it wish to terminate the hiring and it was informed that the amount due would be £87,178.03 plus the sum outstanding for current rent of £4,823.14. Later in 1987 the Defendant obtained the assistance of a telephone systems consultant who wrote to the Plaintiff on the 11th of February 1988 sending a detailed specification for a new telephone system and requesting a quotation for the new system from the Plaintiff. The Plaintiff's quotation (which included a claim for £55,980 "by way of premature cancellation of the existing telephone contract") was not accepted and the Defendant purchased another system from a rival firm. By registered letter to the Plaintiff's parent Company of the 23rd May 1988 the Defendant explained why the Plaintiff's quotation was not accepted and terminated all the existing hiring contracts. The Plaintiff replied on the 17th of June 1988 advancing the claims which are now incorporated in the present proceedings.

(a) Were there defects in the system?

6 The system which the Plaintiffs installed worked satisfactorily until about the year 1985. From 1985 however problems in relation to it arose which became progressively worse as the volume of the Defendant's business increased causing greater demands on the telephone system. The complaints which the Defendants had with the system were two-fold, but inter-related. Firstly incoming callers began to experience very long delays in having their calls answered. They heard the ringing tone but the telephone operator failed to respond to it. Secondly, calls transferred internally from members of the Defendant's staff were subject to being cut off and reverting to the switch. The delays which outside callers experienced were very extensive. The Defendant's Solicitor told me how he was required regularly to "phone his clients and how he experienced very excessive delays in attempting to do so. On one occasion he decided to time the delay - it lasted for 22 minutes during which time the ringing tone was heard but was left unanswered. The manager of the Defendant's Dundrum Branch described to me how difficult he found it was to get through to head office. He was required to "phone on a daily basis and frequently. His estimate was that three out of every ten calls involved a delay of about five minutes before the call was answered. The consultant called in to advise the Defendants gave up using the Defendant's listed number because of the delay problem. Many complaints about the delay were made by members of the public to the Defendant's telephone operator and other members of the staff.

7 The internal problem was related to the "cradle-tap" or "cradle-flash" system for transferring internal calls. Instead of a hold-button on the internal "phone when a call had to be transferred (for example, from a secretary to her principal or from one member of the staff to another) the cradle of the telephone had to be tapped. The tap had to be exact. It had to be held for at least a quarter of a second and not more than half a second. If the tap was for less than a quarter of a second nothing would happen. If it was for more than half a second the call would revert to the switch. This produced the phenomenon referred to as "backing up" by which a great number of calls which were cut off by the cradle tapping system would queue at the switch for the operator's attention. Incoming callers became part of the queue. The evidence satisfies me that a high proportion of attempts to transfer calls resulted in the calls reverting to the switch. Staff found the system frustrating and to avoid it a practice developed by which they requested a colleague to "phone the operator to effect the transfer rather than attempt to do so by the cradle-tapping method.

8 The situation caused by the backing up of calls was aggravated by another feature of the system. There were four hold-buttons on the operator's console. This number was not sufficient for the volume of calls but in fact only three were operative in 1987 and 1988. This meant that on only three incoming lines could the operator answer the caller and put the caller on hold. Thus the delays suffered by callers were due to a combination of an inadequate number of hold-buttons and the backing up of calls at the switch caused by the cradle-tapping system.

9 Complaints about the system were made verbally to the Plaintiffs by Mr. Nolan the Defendant's General Manager. He complained about the system at a meeting in December 1985 and at six meetings in 1986. A letter written in May 1987 requiring information about the amount payable under Clause 11 should the Defendants terminate the contract was written because of dissatisfaction with the system. This dissatisfaction deepened and towards the end of 1987 an expert consultant was called in to advise the Defendants. As a result specifications for a new system were prepared and tenders sought. When the Plaintiff's tender was not accepted...