The Construction Act says it is lawful to down tools if you haven’t been paid what you’re owed. But what happens if you get it wrong and the money isn’t owed?
It is not at all unusual for a peeved contractor or subcontractor to pull off the job and go home. “You blighters haven’t paid me, so I’m off.” It’s tricky territory. So let me take you to a very useful case in the past few weeks. It is Mayhaven Healthcare vs DAB Builders, decided by Mr Justice Ramsey. The work was a fair size extension to Mayhaven Nursing Home in Plymouth; an ordinary JCT intermediate form. The hiccup came when the builder grumbled about an underpayment.
Seemingly, the grumble had legs. The adjudicator said so and ordered Mayhaven to pay up. Then things went astray. DAB grumbled again, accusing Mayhaven of not paying the awarded money. DAB suspended works. It transpires that, in fact, those sums had been paid to DAB in a subsequent valuation. Oh dear! Mayhaven now pounced on the builder for pulling off. The suspension, said Mayhaven’s solicitor, constituted a “repudiatory” breach of contract. In less legalistic language, the builder was accused of wrongly throwing the contract overboard. So, said Mayhaven, don’t bother to try and come back – we won’t have you back.
When this happens an account is eventually drawn up for what the builder would have been paid in the final account – less, oh dear, the extra cost of bringing in a replacement builder to complete the works and, oh dear, put right all the defects that jump out at the new builder’s price. Mayhaven gave DAB the bad news account. There were, you might expect, some more grumbles. This time an arbitrator, rather than an adjudicator was called up. It was to get a once-and-for-all decision, except for the right to appeal errors of law. And yes, the arbitrator’s award was appealed. One question for the court was: “If a contractor under a construction contract breaches that contract by wrongfully suspending the works, does such conduct amount to a repudiatory breach of contract?” The builder had to admit that he had been paid and was mistaken in suspending the works. Was he in hot water? The arbitrator said it was a breach of contract, but not such a whopper of a breach that Mayhaven could ban it forever more and bring in a replacement. It was not “repudiatory”. Mayhaven brought the arbitrator’s decision on appeal. Look, said its barrister, the builder has a duty to proceed regularly and diligently with the works. Wrongful suspension goes to the very root of the contract and ends the deal if the victim says so, and allows compensation to be claimed. Hmmm, said the judge, not every wrongful failure to proceed regularly and diligently amounts to a fundamentally serious breach – it all depends on the circumstances. The barrister pointed to a textbook, which says: “An absolute refusal to carry out the work or an abandonment of the work before it is substantially completed, without lawful excuse, is a repudiation.” But the barrister on the other side said there was no absolute refusal or abandonment of the work. There was “only” wrongful suspension. The judge said that the conduct and behaviour of the building contractor had to be carefully weighed. True, it had downed tools, but it said it would come back once paid. So, on any objective view it was not saying that it no longer intended to be bound by the contract. The arbitrator was convinced that the builder was insisting on the payer complying with the contract, albeit mistakenly, and the builder believed it had a right to suspend. None of this was plain renunciation of the contract. The judge said the arbitrator was right to conclude that while the builder was in breach, it was not such a serious breach as to entitle the injured party to treat the part-completed works as abandoned by the builder.
So, a grumble about so-called under-payment and a tantrum leading to suspending the works, all of which was wrong, is a breach – but not necessarily enough to ban the builder from coming back. The right to suspend work for failure to pay the sum due arises in the Construction Act. The right ceases when the party in default makes payment in full. The snag is making sure that you know for sure what the “sum due“ really is. But as this case illustrates, the aggrieved payee who gets it wrong, then packs his bags, isn’t necessarily throwing up the contract. And it isn’t safe for the other party to now bring in a replacement. Mayhaven got it wrong on this one.
Tony Bingham is a barrister and arbitrator at 3 Paper Buildings Temple