Water cooler and triangular chairs

To perform or not to perform? When tendering performance means actual performance

21 May 2020. Published by Dan Wyatt, Partner and Kirtan Prasad, Associate

A consultant was alleged to be in material breach of a consultancy contract for refusing to supply his services. He responded to a notice of material breach by stating that he was willing to perform. However, the Court of Appeal held that this was insufficient to remedy the breach (Bains v Arunvill Capital Limited and others)(1).

Background

Mr Bains had been appointed under an agreement to provide various financial services to Arunvill Capital Ltd. The agreement stated that it could be terminated by a party "in the event of the other Party having materially breached any of the provisions of this Agreement and not having remedied such breach within 21 days after the service of written notice by the first Party requiring the same to be remedied" (clause.3.4).

The timeline of events was as follows:

  • 5 April 2016 - Arunvill gave notice to Mr Bains that he was in material breach of the agreement as he had both verbally and in writing indicated that he did not intend to perform his contractual obligations.  Mr Bains was requested to remedy the breach within 21 days of receipt of the letter. 
  • 20 April 2016 - Mr Bains' solicitors responded stating that he did not accept that he was in breach and "[w]ithout prejudice to the above, Mr Bains confirms that he does intend to perform his contractual obligations under the … Agreement and therefore you should consider a breach (if any) remedied."

Arunvill asserted that, as Mr Bains did not in fact work nor attempt to do so, the contract was terminated on 26 April 2011, 21 days after the service of notice.

Mr Bains commenced proceedings.

The High Court held that there had been a material breach of contract because Mr Bains had clearly refused to provide any further services and had asserted an intention to no longer perform his contractual obligations;  "[T]he proper remedy in the circumstances of this case is not merely the communication of an intention to work in an unspecified way, but it is to continue to provide the services which the claimant was contracted to provide".

The issue before the Court of Appeal was whether Mr Bains' solicitors' letter of 20 April 2016 had remedied the material breach within the required 21-day period. If it had not, Arunvill was entitled summarily to terminate the Agreement; if it had, then Mr Bains was entitled to a termination payment equal to 6 months' remuneration.

Court of Appeal – had the breach been remedied?

The Court of Appeal confirmed that in these cases a simple two-step process should be followed, namely (1) has there been a material breach and (2) if so, has it been remedied. It held that the specified breach was the "refusal to work" which was "a refusal to provide the services in clause 2.1". 

That refusal to work was an "actual state of affairs" and not merely a theoretical threat of how  Mr Bains might, or proposed to, act at some point in the future; it was a threat which he had carried out, and continued to carry out until the expiry of the 21-day period, by not providing the contracted Services. It had not been remedied by the 20 April 2016 letter containing the withdrawal of the refusal to work and the intention to perform the contractual obligations.

Therefore, the remedy was, as held by the courts below, for Mr Bains to have provided the required Services (which he had not).

The appeal was therefore dismissed.

Comment

This decision, like several cases on the right to terminate for material breach, turned on its facts. It nevertheless provides practical guidance on responding to notices of material breach and illustrates that a mere willingness to perform may not be adequate tender of performance.

(1) [2020] EWCA Civ 545