Regular and Diligent Progress

Leander Construction –v- Mulalley [2012] CILL TCC. Coulson J

Mulalley had a main contract to carry out works at a development in Lewisham, and sub-contracted the ground works to Leander.  The sub-contract terms included a clause entitling Mulalley to give notice to terminate Leander’s employment if it failed to proceed with the works regularly and diligently despite having been given notice to rectify.  The job fell into delay and each party blamed the other.  Mulalley gave contractual notices to terminate, ending Leander’s employment.  Mulalley further gave notices of withholding based upon failure to achieve dates given in an Activity Schedule.  Leander commenced proceedings.

HELD:

1. There was no express obligation in the contract to make regular and diligent progress.  As long as the contractor finishes the job by the time he agrees to do so, he has discharged his obligation.  There is no need to imply a term that the contractor will achieve this by working regularly and diligently.  Just because the Contractor can be dismissed if he fails to work regularly and diligently does not mean that he has a positive duty to do so giving rise to a claim for damages.
2. Although there were dates in the Activity Schedule these are expressly described as being “indicative only” and further as being subject to change as required by the main contractor in order to fit in with the main contractor’s requirements.  They were therefore not capable of being fixed commitments for which the sub-contractor could be made liable if he failed to achieve them.
3. The notices of withholding were therefore based upon a false premise.

Comment

This is a surprising but entirely logical decision.  It is a fundamental principle of contractual law that terms will only be implied into a contract if the contract will not work without such a term.  Interestingly, the judge discussed the two standard text books.  Keating writes that initial slowness in performance which does not lead to a failure to complete in time is not necessarily a breach of contract whereas Hudson writes that an implied term to make regular and diligent progress is appropriate.  The Judge disagreed with Hudson and adopted the Keating approach.

We suggest that a different decision might have been reached had this been a more complicated project with a number of different trades needing access to the same work faces in sequence.  Then regularity and diligence of performance by the sub-contractor would have become vital to the success of the contract. A wise employer or contractor will always ensure that his/her contract is properly structured to deliver what he/she needs from his/her contractors and sub-contractors.