CJ Elvin Building Services Ltd v Noble & Anor

In a construction contract, an employer’s failure or refusal to pay a substantial sum due, particularly coupled with an indication that no further sums will be paid until completion, may amount to repudiatory breach. The contractor may suspend performance in response, and that suspension will not itself be repudiatory where it was caused by the employer’s breach. Financial difficulties do not ordinarily excuse non-payment. The value of work at suspension should reflect incomplete and defective work, ordinarily by deducting the reasonable cost of remedying established defects. Illegality in performance does not prevent recovery absent an intention to perform the contract illegally or a contract prohibited by law.

The claimant builder carried out extensive refurbishment works for the defendants. Disputes arose concerning the value of completed work, alleged defects and alleged repudiation after the claimant suspended work in October 2001 because substantial invoices remained unpaid.

The defendants contended that the claimant had repudiated the contract by suspending performance and that defective or allegedly unlawful gas and heating work defeated the claim. The court determined the contractual valuation, the parties’ payment obligations, the effect of the defendants’ non-payment and the illegality argument.

1. The court assessed the reasonable value of the work carried out, deducting allowances for incomplete and defective work. The appropriate valuation at the date of suspension was the probable cost to the claimant of remedying established defects, rather than the defendants’ increased cost of employing others. The resulting balance due was £40,016.52.
2. The claimant was entitled to reasonable payment at reasonable intervals. By late October 2001, at least £40,000 was due and payable, and the relevant invoices had been outstanding beyond a reasonable payment period. The defendants’ financial difficulties did not excuse non-payment.
3. The defendants’ proposal to withhold all outstanding sums until total completion, impose a completion deadline and penalty, and appoint an independent surveyor materially altered the contractual arrangements. The claimant was entitled to reject those proposals.
4. The defendants’ failure to pay a substantial sum due, together with their threat not to pay further sums in accordance with the contract, constituted repudiatory breach. The claimant’s suspension was caused by that breach and was therefore not itself repudiatory. The defendants could not rely on their own breach to establish repudiation by the claimant.
5. The court distinguished Ashmore Benson Pease and Co Ltd v A.V. Dawson Ltd [1973] 1 WLR 828, because that case concerned parties who knowingly participated in illegal performance. It applied the principle discussed in Coral Leisure Group Ltd v Barnett [1981] ICR 503: illegality during performance does not by itself prevent enforcement where the contract was not made for an unlawful purpose and the contract itself is not prohibited.
6. The claimant was entitled to judgment for £40,016.52, together with agreed interest of £4,262.58, making £44,279.10 in total. The defendants failed on their repudiation case.