Delay in performing development obligations – is default fatal? New court guidance


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You should read this update if you are a party to contract which is not being performed at all or on time and you want to know if the contract can be terminated.

Telford Homes (Creekside) Ltd v Ampurius Nu Homes Holdings Ltd [2013] EWCA Civ 577

The 20-second summary:

A landlord’s delay in building out part of a development did not entitle the investor tenant to treat the agreement for lease as discharged; the landlord’s delay was not sufficiently serious to amount to repudiation of the contract.  The Court of Appeal confirms that the benchmark for repudiation remains very high.

The Court of Appeal has overturned a first instance decision that a landlord which had delayed building out a development was in repudiatory breach of an agreement for lease .

The development consisted of four mixed use buildings. The commercial units were to be let to an investor on 999 year leases after Practical Completion.

The landlord had started work but then the credit crunch caused it to stop work on two of the four blocks. After a long delay, the landlord did restart its work but the investor without being aware of this, then purported to accept the landlord’s default as repudiatory and terminate the agreement.

At first instance the judge had agreed with the tenant that the on-going delay in building out by the landlord was sufficiently serious to constitute a repudiation.

The Court of Appeal disagreed. In doing so, it analysed carefully:

(i)   what benefit the investor was intended to receive under the agreement in order to decide whether the default had deprived the investor of the whole of (or at least a substantial part of) that benefit ; and

(ii)  what was the right date on which to assess whether there was a repudiatory default.

The Court decided that the benefit under the agreement was the grant of 999 year leases of the four blocks. The actual default which had occurred did not have the effect of depriving the investor of a substantial part of the benefit of that agreement.  The landlord’s delay had in fact caused the investor little if any loss.

Additionally it decided that the relevant date for assessing the seriousness of the default was not the date at which the default itself occurred but rather the date when the investor elected to rely on it as entitling it to terminate the agreement.

As a result the court concluded that the agreement for lease was still in place.

Excerpt: A repudiatory breach of contract is one which deprives a party of the whole of or at least a substantial part of the benefit of that contract. It must be judged at the date when the injured party purports to terminate the contract. A court should take into account actions taken to cure actual breaches prior to termination.

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