In the following case, the court had to consider whether:
- a contractor’s wrongful suspension constituted a repudiation of the contract; and
- whether a contractor could be excused from its liability for defects if the contract administrator failed to require the contractor to remedy defects which should have been apparent on attendance at site.
Mayhaven Healthcare v Bothma & Anor (t/a DAB Builders)  EWHC 2634
The employer engaged the contractor under a JCT Intermediate Form of Building Contract (1998 edition) incorporating amendments 1 - 5 (Contract). The work consisted of the demolition of part of the nursing home in Plymouth and the construction of a three-store extension to increase the number of beds and provide new facilities at the home.
Disputes arose between the parties which were referred to adjudication. On 12 June 2006, the adjudicator directed the employer to pay the contractor certain sums.
The contractor claimed that these sums were not paid and suspended work, and completely withdrew from the site. The employer maintained that the contractor’s suspension amounted to a repudiatory breach (which it accepted) as the employer had paid the disputed sums in a subsequent valuation.
The contractor commenced arbitration proceedings in May 2007 which led to an arbitrator’s award on 30 April 2009. The arbitrator held that the contractor had in fact been paid the relevant sums and that the contractor’s suspension was improper. However, the arbitrator went on to decide that the improper suspension did not amount to a repudiatory breach of contract.
Under section 69 of the Arbitration Act the employer sought to appeal as a question of law the Arbitrator’s decision that the improper suspension did not amount to a repudiatory breach of contract.
Repudiatory breach of contract: the arguments
The employer submitted that the suspension by the contractor was a clear breach of the contractor’s obligation to “regularly and diligently proceed with the Works” and that breach of this obligation permitted immediate termination of the Contract. Alternatively, the employer submitted that the contractor’s breach went to the root of the Contract because a refusal to carry out the work or an abandonment of the work, without lawful excuse, before it was substantially completed was sufficiently serious to amount to a repudiation.
The contractor resisted the proceedings on the basis that the arbitrator had considered “the whole combination of circumstances that existed at the time that the employer sought to determine the builder’s contract” and that as a result the employer was seeking to challenge the Arbitrator’s findings of fact as opposed to a question of law.
Did a wrongful suspension of works amount to a repudiatory breach of contract?
The court found that the arbitrator had correctly set out the principle of law that a breach of a contract would be repudiatory if it went to the root of a contract. But the court went on to find that:
- A wrongful suspension which gave rise to a failure to proceed regularly and diligently would vary in seriousness, depending “on the breach and the facts and the circumstances of the case”. It would not automatically amount to a repudiatory breach.
- There was no absolute refusal to carry out the work or an abandonment of the work on the part of the contractor.
- The contactor’s genuine but mistaken belief that the monies awarded by the adjudicator had not been paid was one factor to be taken into account.
- The arbitrator was entitled to take into account the contents of the contractor’s suspension letters which set out the contractor’s expressed willingness to complete the works once it had been paid.
The arbitrator had not made an error of law. The arbitrator was entitled to come to the conclusion, taking account of the contractor’s breach and all factors and circumstances of the case, that the contractor’s suspension of the works was not a repudiation.
JCT contracts and defects
Another issue that arose in connection with this case concerned defects in the works.
The employer maintained that the contractor failed to construct the foundations in accordance with the details of the structural engineer’s drawing. The arbitrator found that the contractor was not liable for the defective work and in reaching this conclusion the arbitrator apparently relied on the fact that the contract administrator had impliedly approved the work.
The employer argued that the arbitrator had erred in law because implied approval of defective works by a contract administrator did not relieve a contractor of liability for that defective work.
The legal principles
The court accepted that the following passages from Hudson summarised the law on this issue:
- In the absence of express authority “It cannot be too strongly emphasised that the Architect/Engineer … will have no authority whatever to waive strict compliance with the contract.”
- In relation to allegations that the owner has waived or is estopped from claiming damages because the breaches of contract were visible during the course of routine visits to the site, Hudson states:
“no estoppel or waiver could arise unless some matter was expressly brought to an A/E’s attention by the contractor and he was expressly asked for and gave his approval.”
(Hudson 11th edition, at para 2-058)
The court held that these passages were consistent with what was said by Lord Upjohn in East Ham Corporation v Bernard Sunley  AC 406 at 444:
“It seems to me most unlikely that the parties to the contract contemplated that the builder should be excused for faulty work at an early stage merely because the architect failed to carry out some examination which would have disclosed the defect …
For my part, to reach that result I should want to find quite clear words in [the contract] relieving the builder of liability …”
It was clear to the court that the arbitrator had made an error of law and the appeal was successful on this issue.
The case is interesting as it confirms that there is no simple answer as a matter of general principle as to whether a contractor’s wrongful suspension of the works amounts to a repudiatory breach. The answer will depend on the terms of the contract, the breach or breaches of contract and all the facts and circumstances of the case.
The case also confirms that a contractor who is in breach of contract in carrying out defective works is not to be relieved of liability for those defective works by any implied approval derived from the contract administrator’s failure to draw the contractor’s attention to defective works which should have been apparent when the contract administrator attended the site.