| Date | 10 September 2003 |
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| Judgment | Robin Ellis Limited v Vinexsa International Limited, TCC 13 June 2003 |
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| The Issue | Determination of the contractor's employment under the JCT standard form contracts. |
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| Implication |
The employer and the architect should meticulously follow the determination provisions of the contract, otherwise the determination may be invalid and amount to a repudiation by the Employer. |
printThe JCT standard forms of construction contract contain clauses which allow for the 'determination' of the employment of the contractor in the event of specified defaults. Upon a valid determination the contract between the parties will remain in force, but the contractor will have no further rights to remain on site to complete the construction works. Care should be exercised when operating the determination provisions of a contract. The procedure for determination provided by the contract will be construed and applied strictly. One of the leading text books, "Hudson on Building Contracts", notes "exact and particular compliance by the determining party with any formal or procedural requirements laid down in the determination clause, for example, as to notices or time limits, will usually be required if a contractual determination is to be successful". A wrongful termination by the employer or his architect or engineer will normally amount to a repudiation on the part of the employer. The recent case of Robin Ellis v Vinexsa International examined the contractual determination provisions of the JCT Intermediate form of Contract. Ellis had been engaged by Vinexsa as main contractor for the refurbishment of two flats in Mayfair, London. The works were characterised by a difficult and strained relationship between the parties and on 22 July 1998, Ellis removed its labour from the site. The response two days later from the project architect was to issue a default notice referring to clause 7.2.1 of the contract, informing Ellis that it had without reasonable cause wholly suspended the carrying out of the works. At this point it is necessary to refer to the relevant parts of the contract. The default and determination provisions broadly read as follows: "7.2.1 If before the date of practical completion the Contractor shall make a default on any one or more of the following respects (a) without reasonable cause he wholly or substantially suspends the carrying out of the works or (b) he fails to proceed regularly and diligently with the works, the Architect may give to the Contractor a notice specifying the default or defaults. 7.2.2 If the Contractor continues a specified default for 14 days from the receipt of the notice under clause 7.2.1, then the Employer may, within 10 days of the expiry of that 14 days, by a further notice to the Contractor determine the employment of the Contractor under this contract. 7.2.3 If the Contractor repeats the specified default, then within a reasonable time after such repetition, the Employer may by notice to the Contractor determine the employment of the Contractor under this contract." On receipt of this first default notice, Ellis restored its labour to site and continued working. However, two weeks later it removed its labour from site for a second time. Unfortunately, at this point the architect did not carefully read clause 7.2 of the contract. He failed to recognise that this repeat default gave the employer a right under clause 7.2.3 to determine the contractor's employment without further intervention from the architect. Instead, the architect issued a second notice of default. This gave the impression that a fresh 14 days notice period would run before the Employer would be entitled to determine Ellis' employment under the contract. Three days later, the architect recognised its error and withdrew the second default notice. Meanwhile, the parties' solicitors had by now been engaged. One week after the second default notice had been issued, Vinexsa gave notice that Ellis's contract had been determined. It did not wait for the expiry of 14 days from the date of the second notice. The dispute continued, firstly by reference to an arbitrator and from there to the courts. Ellis contended that the determination had been carried out wrongfully. Following the second notice issued by the architect, Ellis argued that Vinexsa had lost its right to determine the contract under clause 7.2.3. Vinexsa should have waited a further 14 days to determine the contractor's employment if the default continued throughout that period. Moreover, Ellis argued that the architect had no power to withdraw its second notice once it had been issued. His Honour Judge Thornton QC carefully examined the contract provisions. He concluded that once a default notice had been issued under clause 7.2.1, the specified default could not be made the subject of a second default notice. Instead, if the defaults were repeated at any later time, clause 7.2.3 became applicable. This meant that there could be no question of a second default notice being withdrawn, since it had no contractual validity in the first place. Ellis further argued that the issue of the second default notice amounted to a representation that gave it a legitimate expectation that it had 14 days to remedy the default. Judge Thornton recognised that once the architect served the second default notice, whether or not it was invalid to do so under the contract, it might well have been unreasonable or vexatious for Vinexsa to ignore the notice and immediately serve a determination notice under clause 7.2.3. However, since the second default notice was invalid and had in any case been withdrawn, Vinexsa was entitled to serve the determination notice as it did. In conclusion, the determination, although handled poorly by the Architect was perfectly valid.
CJ-0335
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