The statutory right to suspend performance of all contractual obligations for non-payment was granted to contractors when the Construction Act 1996 was brought into force, more than 10 years ago.
Some commentators have suggested that the reason why contractors (or, indeed, sub-contractors) have not used the threat to suspend their works more frequently, is the risk that if it was subsequently decided that the monies claimed were not in fact due to the contractor, the suspension would place the contractor in repudiatory breach of contract. Not a pleasant place to find oneself. The consequences can be catastrophic.
Is this about to change?
Ramsey J’s judgment in Mayhaven Healthcare Limited v David Botham and Teresa Botham, may allow contractors to be slightly more bullish when deciding whether to suspend performance (assuming of course the requisite notice has been given).
In Mayhaven, the contractor suspended improperly. The reason that the contractor was not entitled to suspend was that, unbeknown to it, the monies due to it had in fact been paid. In its suspension letter, the contractor made it clear that it was willing to complete its work as soon as it got paid.
Ramsey J found that a breach of contract resulting from a genuine misunderstanding as to a party’s rights, did not necessarily constitute a repudiatory breach. In reaching this conclusion, Ramsey J may have breathed life back into the House of Lords’ Judgment of Woodar v Wimpey, which others have since tried to distinguish on its facts (see, for example, Dalkia Utilities Services Plc v Celtech International Ltd).
Looking at all the facts and circumstances, Ramsey J considered that the contractor’s wrongful suspension, as a result of a bona-fide mistake, did not amount to a repudiatory breach. The contractor did not refuse absolutely to carry out the works; nor had it abandoned the works. It genuinely thought it was entitled to down tools on the basis that it had not been paid. The employer knew it had paid the contractor and stood idly by (without telling it the true position), when the contractor walked off site.
I wonder whether, when word gets out that suspension may be less risky than previously thought, there will be an increase in the number of contractors prepared to up the ante and suspend performance (assuming they have a genuine belief in their claims).
