Shyam Jewellers Ltd v Cheeseman

A failure to pay an interim sum is repudiatory only where, viewed objectively and in context, its seriousness and implications go to the root of the contract and its future performance. The court must assess the breach and the likelihood of repetition, rather than rely on an imprecise notion of contractual confidence. Concerns about future inability to pay require clear and objectively grounded evidence. Where the amount and time for payment depend on demand, the demanding party should ordinarily identify the sum and the time for payment, especially if non-payment is to be treated as repudiation.

The claimant jeweller engaged the defendant shopfitter under a contract for fitting out a retail premises. The contract required interim payments as and when required by the defendant. Following variations, delayed instalments and discussions about further funding, the defendant treated the claimant’s conduct as repudiatory and purported to terminate the contract.

The Technology and Construction Court held that the claimant had repudiated by failing to provide a substantial cheque. The claimant appealed, arguing that no specific sum had been demanded and that the subsequent conduct did not objectively demonstrate an intention not to be bound. The central issues were whether a payment obligation had crystallised and whether the non-payment amounted to repudiation.

1. Appeal allowed. The judgment for the defendant was set aside. Judgment was entered for the claimant on liability, with damages to be assessed.
2. The legal effect of a failure or delay in paying an instalment or interim sum depends on the seriousness of the breach and its effect on continuing contractual performance. The court must consider both the circumstances of the breach and its implications for the future, including any likelihood of repetition.
3. The assessment is objective. Only reasonable perceptions grounded in the acts and intentions manifested by the party in breach are relevant. The court should be slow to infer anticipatory inability or unwillingness to perform future payment obligations without clear evidence.
4. Where the amount and payment date are not specified or determinable under the contract, but depend on a demand, the party seeking payment should ordinarily crystallise the obligation by identifying the sum due and the date for payment. That is particularly important where non-payment is said to be repudiatory.
5. On the facts, the defendant had not demanded a specific sum. Although the court was prepared to assume that the claimant had promised a substantial cheque at a meeting, the subsequent telephone conversation changed the position: the claimant apologised, offered to return immediately, and the parties indicated that they would meet again. The defendant therefore could not treat the failure to pay on the earlier date as repudiatory without making a specific demand, either within a specified period or forthwith.
6. The defendant had no tangible basis for concluding that the claimant was unable to pay either the immediate or future sums. His letter purporting to terminate therefore itself repudiated the contract.
7. The court also endorsed the caution applicable to a Part 24 application where apparently credible factual evidence is in conflict, although the parties had consented to the procedure below and did not seek a remittal.

• Court of Appeal (Civil Division): Shyam Jewellers Ltd v Cheeseman [2001] EWCA Civ 1818. Appeal allowed; judgment for the defendant set aside; judgment entered for the claimant on liability, with damages to be assessed.
• Technology and Construction Court: On 10 March 2000, His Honour Judge Anthony Thornton QC held that the claimant had repudiated the contract by failing to provide a substantial interim payment.