The wrongful suspension of construction work was not a repudiatory breach of contract
If a developer wrongfully suspends construction work, will its conduct amount to a repudiatory breach of contract? It is not always easy to answer this question. Much will depend on the terms of the contract in question and on the facts and circumstances of the particular case.
The litigation in Ampurius NU Homes Holdings Ltd v Telford Homes (Creekside) Ltd [2013] EWCA Civ 577 sprang from a delay in completing a development following the economic downturn, which made it difficult for the developer to obtain funding. The development was to comprise two phases. The target dates for completion of the first and second phases were July 2010 and February 2011 respectively. Time was not of the essence of either date.
The developer began work promptly, but put the second phase of the development on hold in March 2009 when its funding dried up. It made strenuous efforts to secure the finance needed and resumed work in October 2010, just before the buyer terminated the contract on the ground that there had been a repudiatory breach of contract. The High Court agreed that the buyer had been entitled to terminate the agreement, but the Court of Appeal has overturned the decision.
It ruled that the court must consider the position on the date of the purported termination of the contract, and not on the date when the contract was broken. It must also take account of any steps that the seller had taken to rectify its breaches of contract, as well as likely future events judged by reference to the facts on the date of the purported termination.
It was also important to consider the benefit that the buyer had contracted to receive, and not just the impact of the breach in the short term. In this case, the buyer had agreed to take 999-year leases of four buildings, with the intention of exploiting the rents and profits to be derived from them.
The second phase of the work was eventually completed one year after the target date, by which time the seven month gap between the completion of each phase had grown to thirteen months. However, the developer had remained committed to the entire project and the temporary cessation of work had not deprived the buyer of substantially the whole of the benefit of the contract, or even a substantial part of it. The buyer had not incurred any loss when it purported to terminate the contract, and any future loss that it might have suffered could easily have been counteracted by an award in damages or by a set-off against the purchase price.
The developer was back on site when the buyer purported to terminate the contract and the contractual completion dates were only target dates. A delay might cause commercial problems but, absent any attempt to make time of the essence, will only become repudiatory if and when it is so prolonged that it frustrates the contract. This was not the case here, in the context of an agreement for 999-year leases. Consequently, the buyer was liable for any damages that had not already been offset by the forfeiture of its deposit.
Allyson Colby, property law consultant
