Vivergo Fuels Ltd v Redhall Engineering Solutions Ltd

A contractor’s failure to provide a revised programme may be a material breach where the programme is essential to monitoring progress and coordinating the project. A termination notice must be construed objectively against the contractual and factual background. It must leave a reasonable recipient in no reasonable doubt as to its purpose and operation. Where a contract requires a default notice before termination, the notice must identify the relevant default and sufficiently connect it with the termination machinery. A contractor who has commenced and diligently pursued rectification within the contractual period cannot be terminated under that machinery for the same default. Failure to proceed regularly and diligently does not necessarily amount to repudiation, particularly where the contractor continues working towards completion.

The claimant engaged the defendant to carry out mechanical and piping works at a biofuel plant. The contract contained obligations concerning progress, programming, completion dates, extensions of time and termination. Following serious delay and disputes about programming, the claimant served a termination letter on 11 March 2011. The defendant was excluded from the site and accepted what it regarded as the claimant’s repudiation.

An adjudicator held that the contractual termination was invalid, that the claimant had repudiated the contract and that the defendant had accepted the repudiation. The claimant commenced proceedings seeking declarations concerning the validity of its termination. The defendant counterclaimed for extensions of time. The principal issues were the defendant’s entitlement to extensions of time, whether it was failing to proceed regularly and diligently, whether its programming breach was material, whether the notices were valid, and whether either party had repudiated the contract.

1. Extensions of time. The defendant was entitled to 15.23 working days’ extension to the overall completion date, producing an extended completion date of 7 March 2011. The milestone dates were extended by 12.03 working days. The awards reflected site bussing, access lighting, snow, toxic alerts, waiting for permits and Redwork/CVIs. The remaining claims were rejected or not pursued.
2. Bristol Agreement and priorities. The brainstorming “Actions” recorded after the Bristol meetings were aspirational and did not create binding obligations. The contractual priorities remained operative. The New York Skyline was a practical sequence for system completion and testing, not a variation of the contract.
3. Regular and diligent progress. Applying West Faulkner Associates v London Borough of Newham, (1992) 71 BLR 1, regular progress required sufficient physical resources, while diligence required those resources to be applied continuously, industriously and efficiently towards contractual completion. The defendant’s low productivity and lack of a proper current programme established that it was not proceeding regularly and diligently by late February 2011. Inadequate supervision supported that conclusion, but did not independently establish it.
4. Programming breach and materiality. The defendant was in breach of clause 13.5 from approximately 30 days after 24 November 2010 until 3 March 2011. The breach was material because the revised programme was necessary to monitor progress, assess performance and coordinate the wider project. The defendant’s deliberate decision to withhold a programme pending resolution of its commercial claims aggravated the breach.
5. Notices. Applying Mannai Investments Co Ltd v Eagle Star Assurance, [1997] AC 749, and Architectural Installation Services Ltd v James Gibbons Windows Ltd, (1989) 46 BLR 91, notices were to be construed objectively against the relevant contractual and factual background. The earlier notices did not clearly operate under clause 43.2. The letter of 22 February 2011 validly notified the programming default under clauses 43.2(b) and 43.2(c), but only the programming default.
6. Rectification and termination. The defendant was required to commence and diligently pursue, rather than completely achieve, rectification within 14 days. The Rev 4 Programme supplied on 3 March 2011 sufficiently demonstrated that it had commenced and diligently pursued rectification. The claimant therefore had no contractual right to terminate on 11 March 2011.
7. Repudiation. The defendant’s failure to proceed regularly and diligently did not evince an intention not to be bound or go to the root of the contract. The claimant’s termination letter was not an effective acceptance of a repudiatory breach. The claimant’s exclusion of the defendant from the site was itself repudiatory and was accepted by the defendant’s letter of 14 March 2011. The contract was thereby terminated.

First-instance decision. The judgment records an adjudicator’s decisions dated 29 July 2011 and 17 October 2011, but no appellate history.