Dayah & Anor v The Partners of Bushloe Street Surgery & Anor v

Frustration is determined by construing the contract in its commercial and factual context. The court must consider the contractual terms, the parties’ objectively ascertainable assumptions and risk allocation, and the nature and consequences of the supervening event. A contract is not frustrated merely because performance becomes less valuable, more difficult, or financially burdensome.

Where interlocking agreements expressly contemplate that a regulated practice may lose registration or cease operating, the resulting inability to use premises will not ordinarily discharge separate obligations to contribute to shared running costs. An obligation to pay an accrued debt is not discharged merely because the payer loses the expected income or benefit. Equitable estoppel also requires a proper juridical basis, including detrimental reliance.

The appellants, two general practitioners, appealed against a county court judgment awarding the respondent partnerships £27,812 plus interest and costs. The sum represented the appellants’ agreed share of shared medical-centre running costs under a Facilities Management Agreement and a Mutual Indemnity Agreement.

The appellants’ registration as a healthcare provider was cancelled under section 30 of the Health and Social Care Act 2008. Their registration was later reinstated, but they could not practise at the centre during the relevant period. They argued that the agreements had been frustrated and, alternatively, that the respondents were barred by equitable estoppel from recovering the sums. They also sought permission to appeal on whether the quantum could be challenged at trial.

1. Appeal dismissed. The cancellation of the appellants’ registration did not frustrate the Facilities Management Agreement or Mutual Indemnity Agreement.
2. Frustration required construction of the agreements in their commercial context, applying the multi-factorial approach stated in Davis Contractors v Fareham UDC [1956] AC 696, National Carriers Ltd v Panalpina (Northern) Ltd [1981] 1 AC 675 and Edwinton Commercial Corp v Tsavlirlis Russ (Worldwide Salvage and Towage Ltd) (The Sea Angel) [2007] EWCA Civ 547. The court considered the lease, FMA and MIA together.
3. The contractual documents contemplated that a practice might cease to operate at the centre or lose qualifying status. They imposed endeavours obligations but did not provide that payment obligations would automatically end. The supervening event therefore fell within the contractual allocation of risk and did not make performance radically different.
4. The appellants’ obligation to pay shared running costs was separate from their obligation to provide medical services to the CCG. The sums were debts triggered by the incurring and assessment of costs. Inability to practise, reduced funding, or diversion of funds to legal expenses affected ability to pay, not the underlying obligation. It was not unlawful to continue making payments.
5. The estoppel arguments failed on the facts. The emergency caretaking payments covered staffing and clinical resources, not the appellants’ share of premises costs. The respondents remained out of pocket. The proposed evidential estoppel also lacked a coherent basis and there was no detrimental reliance. The court found no support for the argument in Ted Baker Plc and No Ordinary Designer Label Ltd v AXA Insurance [2017] EWCA Civ 4097.
6. Permission to appeal on quantum was refused. The county court had a broad power to control evidence and limit cross-examination under CPR 32.1. The parties had agreed, through their representatives, that quantum was not in issue, and permitting a new challenge at trial would have been unfair and contrary to the overriding objective.

• High Court (Queen’s Bench Division): appeal from the judgment of HHJ Murdoch, Northampton County Court, handed down on 11 December 2019 and perfected on 13 December 2019. The appeal was dismissed and permission to appeal on the additional quantum ground was refused.