| Date | 15 October 1997 |
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| Judgment | Sweatfield Ltd -v- Hathaway Roofing Ltd, 31 January 1997. 1997 CILL 1235 |
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| The Issue | Whether introducing other labour onto sub-contract work amounts to a repudiatory breach by the main contractor. |
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| Implication |
In the absence of an express provision entitling a main contractor to take such steps, a main contractor will be in repudiatory breach if it instructs that parts of the sub-contractor's works should be undertaken by others. |
printMost standard forms of construction contract carry provisions for determination of the employment of the contractor as a consequence of certain specified defaults. It is a common feature of these contracts that the express provisions do not include rights to bring the contract itself to an end, but instead a right to determine the 'employment' of the contractor. In other words the determination will relieve the contractor from an obligation to complete the work, but the contract itself will remain in full force. Usually the express terms of the contract will describe in detail the rights and obligations which flow to each party following such determination. By way of example most of the main contracts provide for determination by the contractor in the event of failure by an employer to observe the payment provisions. Usually a written notice specifying the default must be given by registered post or recorded delivery. However, even where default in payment has occurred and notice properly given, contractors should still be cautious. The courts have been very robust in construing such provisions. Mere delay in paying interim certificates may not be sufficient to demonstrate an entitlement to determine under the contract. With these clauses there is no half way house. Where a contractor wrongfully exercises the determination provisions this may amount to a repudiatory breach. Thus the pendulum will swing entirely in favour of the employer who will be able to recover all its costs and losses arising from the contractor's cessation of work. Under the general law, repudiation is thought to arise in two circumstances. Firstly, where there has been a breach of a condition of the contract. Here, by using the term 'condition', lawyers intend something much more restrictive than the general understanding given to 'conditions of contract' widely and sometimes inappropriately used in the construction industry. The use of the word 'condition' in its legal sense means a term which the parties agreed, either expressly or by implication of law, to be such that any breach would entitle the other to terminate the contract. Secondly, a breach of a 'fundamental 'term may amount to repudiation. This is thought to arise when the breach is so grave as to have the effect of substantially depriving the other party of the intended benefit of the contract. Thus if a party to a contract shows an intention not to perform its obligations under the contract this may be treated as a repudiatory breach. The innocent party may either affirm the contract, if that is possible, or accept the repudiation and so bring the contract to an end. Each party may rely upon rights accrued before the termination, and in addition the innocent party may claim damages for breach of contract. In the case of Sweatfield Ltd -v- Hathaway Roofing Ltd, heard in January 1997, the court took a rather harsh view of circumstances which it considered amounted to repudiation. The sub-contractor Hathaway was engaged to install roofing and cladding work and had fallen severely behind its programme, partly because of bad weather and partly because of earlier disputes. Delays to the sub-contract works continued and in January 1995 the main contractor complained to the sub-contractor that its operatives were not working a full day. They sought the sub-contractor's assurance that it would use its best endeavours to avoid further slippage on the programme and that they would at least work normal site hours. This caused further bad feeling between the parties and in a subsequent telephone conversation the main contractor asked the sub-contractor to increase the number of men on site. The sub-contractor said that this would not be practical but that if they were given an instruction to accelerate they would respond by setting out the additional costs involved. The main contractor, no doubt extremely frustrated by this exchange, indicated that if agreement could not be reached they would bring additional men on site themselves. The following day the main contractor brought six additional operatives from another sub-contracting company onto the site, with instructions to commence carrying out work within the sub-contract. The sub-contractor immediately left site and claimed that the main contract was in repudiatory breach. Similarly the main contractor claimed that the sub-contractor was in repudiatory breach by leaving the site. The whole matter came before the courts. Only one party could be judged to be in repudiatory breach and thus only one party would be entitled to recover all the damages which flowed from this event. Would the sub-contractor's failure to progress the works and failure to take appropriate measures to mitigate further deterioration of the programme amount to a repudiation, or would the main contractor's act of bringing six further operatives on site to undertake part of the sub-contractor's work be treated as the fatal move? It was decided that the main contractor was in repudiation by instructing other workers to carry out work within the sub-contract. Whilst it might be accepted that this was clearly a breach of the sub-contract, it seems surprising that a main contractor, desperate to see the project brought back on to programme, should be found to be so fundamentally at fault. Nevertheless, the sub-contractor was held entitled to recover all its costs and losses arising from the premature bringing to an end of their sub-contract works. Perhaps the lesson for main contractors is to include a clause in their sub-contracts giving them the express right to introduce other labour or resources or to take over parts of the sub-contractor's work in the event of the sub-contractor falling substantially behind programme.
CJ-9738
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