HSS Hire Services Group Plc v BMB Builders Merchants Ltd & Anor

A contracting party commits an anticipatory repudiatory breach when its objectively assessed words or conduct clearly convey that it will not perform. Its subjective intention is irrelevant, and the innocent party need not await the date fixed for performance.

Where liability is tried as a preliminary issue and the court learns that a Part 36 payment has been made, the amount remains undisclosed. Save perhaps in the most exceptional case, the costs of that issue should be reserved until damages have been determined. The court can then exercise its discretion with knowledge of the payment and all other relevant circumstances.

HSS licensed BMB to operate a tool-hire agency arrangement for five years. Before BMB was sold to Grafton, BMB referred HSS to Grafton's acquisitions director, who stated that the arrangement would not continue. HSS and BMB then arranged for HSS to remove its materials.

Simon Brown QC, sitting as a Deputy High Court Judge, held that BMB had committed an anticipatory repudiatory breach which HSS accepted. He also held that Grafton had wrongfully interfered with the contract. Following a trial confined to liability, he ordered BMB to pay HSS's costs despite having been informed that BMB had made a Part 36 payment.

BMB and Grafton sought permission to appeal the liability findings. BMB also challenged the costs order. The principal costs issue was whether costs following the determination of a preliminary liability issue should be decided immediately when an unresolved Part 36 payment covered the proceedings as a whole.

1. Appeal allowed in part, unanimously. Permission to appeal the findings on repudiatory breach and wrongful interference with contract was refused. Permission was granted on the Part 36 costs issue, and the order awarding HSS the costs of the liability trial was reversed. Those costs were to be reserved until quantum had been determined.

2. The finding of anticipatory repudiatory breach was inevitable on the facts found. Viewed objectively, BMB's words and conduct conveyed that the licence would not continue after the takeover. HSS had made clear that it wished to continue, yet BMB adopted Grafton's firm refusal and agreed arrangements for the removal of HSS's materials. HSS was entitled to accept that breach without waiting for completion of the takeover. BMB's subjective intention was irrelevant.

3. HSS did not need to prove that Grafton's acquisitions director was BMB's agent with authority to repudiate. BMB had referred HSS to him to discover what would happen and had conveyed that it would adopt his answer. Although this differed slightly from the pleaded legal characterisation, the essential facts had been pleaded and the defendants suffered no disadvantage. Beaco Ltd v Alfa Laval Ltd [1995] QB 137 was therefore inapposite because the case had not been substantially altered.

4. Rule 36.19 permitted disclosure only of the existence of a Part 36 payment after liability had been determined, not its amount. If no payment had been made, the court could determine the preliminary issue's costs immediately. If a payment had been made while damages remained unresolved, costs should normally be reserved. Without knowing the amount, the court could not fairly perform its obligation under rule 44.3(4) to consider the payment alongside all the circumstances.

5. BMB was ordered to pay all the costs of the appeal. HSS had offered to settle the appeal on precisely the basis ultimately adopted. Although the offer did not comply with rule 36.5, rule 44.3(4) required the court to consider any admissible settlement offer, whether or not made under Part 36.

1. Court of Appeal (Civil Division): Permission to appeal the liability and interference findings was refused. The appeal concerning the costs of the preliminary liability issue was allowed, and those costs were reserved pending determination of quantum. BMB was ordered to pay all costs of the appeal.

2. High Court, Queen's Bench Division: Simon Brown QC, sitting as a Deputy High Court Judge, held that BMB had committed an anticipatory repudiatory breach accepted by HSS and that Grafton had wrongfully interfered with the contract. He ordered BMB to pay HSS's costs of the liability trial.