| Date | 2 April 2003 |
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| Judgment | IJS Contractors Ltd v Dew Construction Ltd, CA 17 November 2000 |
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| The Issue | Whether an employee's breach of a safety term contained within a construction contract will allow the client to bring the contract to an end. |
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| Implication |
Unless the contract expressly entitles the client to bring the contract to an end in the event of such a breach, an employee's failure to comply with specified safety requirements will only entitle the client to treat the contract as repudiated if the contractor has thereby renounced his obligations under the contract and rendered them impossible of performance in some essential respect. |
printIJS Contractors worked for a number of years as subcontractors to Dew Construction before their relationship went sour. The relationship started in October 1997 when IJS carried out work for Dew on a project at Swindon railway station. That project was concluded successfully and a close working relationship developed between the managing director of IJS and the contract manager for Dew. IJS was subsequently engaged by Dew during the latter part of 1997 to assist with a project at Birmingham New Street station. That contract was also completed without difficulty. In February 1998 IJS was asked if they would be interested in carrying out work at six railway stations in Cornwall. Prices were agreed and the work commenced later that month. Shortly afterwards Dew inquired whether IJS would be prepared to work on a further 10 railway stations in Gloucester and Warwick. The head contract for that work was between Railtrack and Bovis with Dew being a subcontractor. IJS agreed and work started on the project without a written agreement. Both IJS and Dew understood that in carrying out work at railway stations there was a requirement for stringent safety measures to be followed. No workman would be allowed to work at any station unless that person had attended an approved training course and held the appropriate certificate and card. Work commenced at the Gloucester stations in March 1998 and that the Warwick stations in April 1998. Difficulties were encountered from the outset because the work had not at that stage been properly identified. Initial progress was slow. It was at this point that an incident occurred which was to damage the relationship that had existed between the companies for a number of years. During the early hours of 22nd April 1998 three employees of IJS smoked marijuana during a break in the shift. This was discovered by a supervisor employed by Bovis who went into a van where the smoking was taking place. The men had reported for work and might have been called upon to work at the station after they had smoked marijuana. The incident was brought to the attention of Dew and was subsequently reported to IJS. Having made inquiries into the matter IJS dismissed not only the three employees that had been smoking, but also another member of the crew and their supervisor. Later that same day IJS wrote to Dew apologising profusely for the incident, notifying that five men had been dismissed, and concluding that IJS would accept the consequences and any subsequent action that Dew might take. The action that Dew took was unexpected. They demanded that IJS leave all the sites. It was no doubt expected that the parties would subsequently settle these differences. However no agreement was reached and one year later IJS issued a writ endorsed with a claim for approximately £150,000 as payment for work done under the contract up to the date of the incident. Dew denied liability and alleged that it was an implied term of the agreement between the parties that IJS would carry out work in a safe manner and was bound by contract safety regulations which prohibited alcohol and drugs on site. Dew contended that IJS had committed beach of a fundamental term enabling them to repudiate the agreement. The judge at first instance agreed with Dew and concluded that the beach was so serious as to entitle Dew to bring the contract to an end. The matter did not however rest there, and in November 2000 it was brought before the Court of Appeal. IJS argued that the judge had erred on two points of law. Firstly, it did not follow from the breach of the safety policy by its employees that IJS had been in breach of the implied term of the contract concerning safety. Secondly, even if IJS where themselves in breach of contract, that did not entitle Dew lawfully and peremptorily to terminate the contract. Lord Justice Aldous commentated that the requirement implied within the contract to comply with safety standards amounted to an 'intermediate' term of the contract. That meant that breach of the term did not necessarily amount to a repudiation of the contract. Breach of such a term would entitle the party not in default to treat the contract as repudiated only if the other party had thereby renounced his obligations under the contract and rendered them impossible of performance in some essential respect. The breach would amount to repudiation if the consequences of the breach where so serious as to deprive the innocent party of substantially the whole benefit which was intended from the contract. Lord Justice Aldous concluded that it did not appear that this single breach of an implied term to ensure that employees would abide by the safety handbook was so serious a breach of the contract as to entitle the defendant to bring it to an end forthwith. The fact that an employee breaks his contract of employment, thereby entitling the employer to terminate that contract, did not mean that the contract upon which the employer was working would also be terminable. The two contracts were very different. It did not follow that IJS had been shown unfit to continue with the contract particularly when appropriate disciplinary action had been immediately taken. Further, the consequences of the breach were not such as to deprive Dew of substantially the whole benefit of that which they sought to obtain from the contract. Accordingly IJS were granted the appeal with an order that damages be awarded to them assessed on a quantum meruit basis.
CJ-0312
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