Atwal & Anor v Rochester

A construction contract may be frustrated by the illness of a sole-trader contractor where the contractor’s personal involvement, project-management skills and supervision are fundamental to completion. The fact that the contractor may use subcontractors does not prevent the contract being personal in character. The relevant question is whether, without default and in the absence of contractual provision, the supervening event has so significantly altered the outstanding obligations that it would be unjust to hold the parties to them. On frustration, the contractor may recover a just sum under section 1 of the Law Reform (Frustrated Contracts) Act 1943.

The claimants engaged the defendant, a sole-trader builder, to undertake extensive building work at their home. The defendant suffered a serious heart attack, was advised not to return to work and did not arrange for the work to continue. The work therefore ceased while incomplete.

The claimants alleged repudiatory breach. The defendant contended that the contract had been discharged by frustration and claimed a just sum under section 1(3) of the Law Reform (Frustrated Contracts) Act 1943. The issues were whether the contract was personal in character, whether the defendant’s illness frustrated it, and, if so, what sum was payable for completed work and variations.

1. Frustration. The court applied the established test that frustration occurs where, without default, a supervening event makes performance radically different from what was undertaken. Hardship, inconvenience or financial loss alone is insufficient. The change must substantially alter the significance of the outstanding obligations.
2. Personal character of the contract. This was a personal contract. The claimants had chosen the defendant as a sole trader because of their established relationship of trust, his unusually low price and their reliance on his continuing involvement. His role was not limited to manual performance. It included procuring, supervising and managing the work. Those skills were personal to him.
3. The use of subcontractors was not inconsistent with the contract being personal. The defendant could procure work through others while retaining personal responsibility for supervision and management. After his serious illness, however, he could neither continue personally nor realistically procure and supervise completion. The illness was not his default, the contract made no provision for it, and it significantly changed the outstanding rights and obligations. The contract was therefore frustrated, and the claim for repudiatory breach failed.
4. Just sum. Under section 1 of the Law Reform (Frustrated Contracts) Act 1943, the defendant was entitled to a just sum for work completed before frustration. The completed work and variations were valued at £89,450. After crediting £4,050 for roof tiles paid for by the claimants and deducting £71,850 already paid, the sum due was £13,550.
5. The court found that the variations were payable at more than materials cost. It was inherently unlikely that a builder would undertake substantial additional work without payment for labour and profit. The defendant was entitled to judgment for £13,550. The comments on the claimants’ alleged damages for repudiatory breach were unnecessary to the decision.

The judgment was given by the High Court for the sole purpose of deciding a point said not to have been previously considered. The proceedings otherwise remained a county court case and were transferred back to the county court immediately after judgment.