Telford Homes (Creekside) Ltd v Ampurius Nu Homes Holdings Ltd

[2013] EWCA Civ 577

Telford, a developer, agreed to build and develop and grant long leases of commercial units to Ampurius. Although work started promptly on the construction, in March 2009 Telford decided that it would be necessary to put work on blocks A and B on hold because of funding difficulties. Work on those blocks did not resume until early October 2010. Ampurius sought to terminate the contract in October 2010 on the basis of repudiatory breach by Telford. Telford itself terminated the contract on 9 November 2010 following non-payment by Ampurius of monies said to be due. There was no termination clause in the contract, although Telford had agreed to use its reasonable endeavours to procure completion of the Works by the Target Date or as soon as reasonably possible thereafter. The Judge, at first instance, found that Telford was in repudiatory breach because it had stopped work, something which was contrary to the obligation to proceed with due diligence.

It was agreed that Telford’s delay in carrying out the works to blocks A and B and the deliberate decision to put the works on hold amounted to a breach of contract. The question was whether the breaches were serious enough to amount to a repudiation of the contract. Telford on appeal said that the Judge did not adequately analyse what benefit the investor was intended to receive under the contract in order to decide whether the breaches of contract had deprived the investor of at least a substantial part of that benefit. Further, in assessing whether the breaches of contract were repudiatory breaches, the Judge did not concentrate on the right date; this was the date when the investor purported to terminate the contract. LJ Lewison agreed.

The CA said that the first task of the court was to look at the position as at the date of purported termination of the contract. Second, the court must take into account any steps taken by the guilty party to remedy accrued breaches of contract. Third, the court must also take account of likely future events, judged by reference to objective facts as at the date of purported termination. The starting point must be to consider what benefit the injured party was intended to obtain from performance of the contract. Here the overall benefit that Ampurius was intended to obtain from performance of the contract was a leasehold interest of 999 years’ duration in four blocks. What therefore was the effect of the breach on Ampurius? For example, what financial loss had it caused? Had the breach fundamentally changed the value of future performance of Telford’s outstanding obligations?

Had Ampurius only been able to acquire interests in two out of the four blocks, then it would have been deprived of the benefit of a substantial part of the contract. But that was not the case. Hypothetically, to deprive someone of one year out of 999 years does not deprive them of a substantial part of the benefit he was intended to receive. The effect of the breach was to increase the gap between handover from seven months to thirteen months: an increase of six months. The CA asked what difference that made, given that the contract itself contemplated a gap of seven months. There was therefore no loss to Ampurius. The CA thought that it would be unusual that a breach of contract that has caused no actual loss could be characterised as a repudiatory breach. Even a loss of say £100k in respect of additional funding costs, set against the context of a purchase price in excess of £8 million and an overall development cost exceeding £100 million, was not a loss of such magnitude to warrant characterising it as repudiatory.

At trial the Judge had noted that at the end of 2009 Telford was unable to say when work on blocks A and B would recommence. To the Judge, what gave the breach its repudiatory character was the uncertainty that works to blocks A and B would ever be restarted. This gave rise to the question whether the Judge was right to freeze the situation at that date; or whether he should have taken into account the fact that on 15 September 2010, Telford had told Ampurius that work would recommence on 4 October as well as the fact that work did recommence at that time. The CA thought that it was the date of termination that mattered. When Ampurius sought to terminate the contract, work on blocks A and B had been restarted, and had been in progress for two and a half weeks. Therefore it could no longer be said that “the cessation of work … was indeterminate and prolonged”. The date for completion of the works might well have been indeterminate, even at that stage, but that was a feature of every building programme, and was reflected in the fact that the contractual completion dates were said to be only Target Dates.

At the date of termination, the delay that had already occurred had caused Ampurius no loss. Whilst future delay was likely to require Ampurius to fund deposits and the balance of the purchase price for blocks C and D for longer than it would otherwise have had to have done, Telford had offered to defer the completion of the purchase of blocks C and D, thus neutralising much of that expected loss. Further, Telford had made “strenuous” (and successful) efforts to find the necessary funding. Telford was therefore committed to building out the whole project. Therefore the trial Judge had been wrong to find that Telford was in repudiatory breach and that Ampurius had been justified in terminating the contract.