1. Almost invariably, all modern construction contacts would contain a term which requires the contractor to proceed regularly and diligently with the works. Prima facie, this is a statement of the obvious, but this seemingly harmless provision had nonetheless caused much ink to be spilt on its jurisprudence.
2. The often quoted English Court of Appeal case of West Faulkner v London Borough of Newham (1994) 71 BLR 1 aptly defined that the obligation to proceed regularly and diligently was:
“... essentially to proceed continuously, industriously and efficiently with appropriate physical resources so as to progress the works steadily towards completion substantially in accordance with the contractual requirements as to time, sequence and quality of work.”
3. The resultant effect is that without an express provision under the construction contract, the contractor is not allowed to suspend work or ‘slow down’ its progress even if there are breaches of obligations on the part of the Employer. In Canterbury Pipelines v Christ Church Drainage [1979] 16 BLR 76 it was held as follows:
“ ... Apart from suing for interim payments, or requiring arbitration where that is provided for ,the remedy – and apparently the only remedy – which the contractor is recognised as having at common law is rescission if a sufficiently serious breach has occurred. If he chooses not to rescind, his own obligations continue. He is bound to go on with the work. All the available English and Commonwealth textbooks on building contracts state the law consistently with this view ..."
4. See also:
- Hudson’s Building and Engineering Contract (12th Ed.), at para 3-140 aptly stated this:
“... In the event of non-payment the Contractor may be entitled to suspend their work, pursuant to a contractual right to do so, but there is no right to suspend at common law”
- Hudson’s Building and Engineering Contract (12th Ed.) stated the position clearly at para 8-018 as such:
“Both Courses are extremely perilous – particularly any element of suspension or “go slow” on the part of the Contractor – since it seems clear that in England and the Commonwealth there is no common law right to suspend work, or indeed of payment otherwise due, upon a breach by the other party.”
5. This position of law is fortified in Kah Seng Construction Sdn Bhd v Selsin Development Sdn Bhd [1997] 1 CLJ Supp 448 where the Court held that “in the absence of a specific provision in the contract, a contractor has no automatic right to suspend work simply because one or two of his certificates have not been paid.”
6. Interestingly however, in our local case of Medan Prestasi Sdn Bhd v Law Kok Hong & Ors [2012] 6 CLJ 641 it had been held (in obiter) that:
“[20] The plaintiff submitted the 2nd defendant is not entitled to rely on the allegation that the plaintiff failed to make direct payments under the supplementary agreement as an excuse for BESB's failure to complete the project works or to go slow with the execution of the contract works and cited Kah Seng Construction Sdn Bhd v. Selsin Development Sdn Bhd [1997] 1 CLJ Supp 448 HC. I find the plaintiff's argument cannot be sustained in the light of all the evidence which I have alluded to above (paras. 19-19.2) where it has been demonstrated that it was the plaintiff itself that had withheld timely payments to BESB and the sub-contractors. Furthermore the importance of timely payments by an employer to a main contractor has been borne out in the case of Pembenaan Leow Tuck Chui & Sons Sdn Bhd v. Dr Leela's Medical Centre Sdn Bhd [1995] 2 CLJ 345 SC.”
7. In Medan Prestasi, the plaintiff (employer) claimed against the 2nd defendant (contractor) based on 2 conditional letters of guarantee. In defence, it was claimed that the plaintiff was in breach of the construction contract and the terms of the conditional letters of guarantee, and therefore not allowed to call on the said letters of guarantee – one of the breaches being the plaintiff’s wrongful termination of the 2nd defendant, allegedly due to the 2nd defendant’s slow progress of work. It was established that the main reason for the delay was due to the plaintiff’s itself withholding timely payment to the contractors. The High Court rejected the plaintiff’s argument that the contractor was not entitled to rely on the plaintiff’s dilatory payment to go slow with the works.
8. The decision in Medan Prestasi, without more, would be difficult to be reconciled with the established strong line of authorities. However, it is submitted, the Medan Prestasi case can be justified by reference to the trite age-old principle of ex turpi causa non oritur actio, that the Defendant cannot be allowed to take advantage of its own wrongs. See Ngan Siong Hing v RHB Bank Bhd [2014] 3 CLJ 984.
9. Nonetheless, the contractor would be coursing on thin line. Let alone that Medan Prestasi is only an obiter judgment, it is also pertinent that the innocent contractor must make a clear and unequivocal election as to its legal position. The innocent contractor must either accept the repudiation (by the employer) or affirm the contract and continue with the works regularly and diligently. If he does not do so, he will run the risk of being in breach of the contract himself for its failure to proceed regularly and diligently. This proposition is clearly reflected in the case of Kwan Chew Holdings Sdn Bhd v Kwong Yik Bank Bhd [2006] 6 MLJ 544:
“So, when the plaintiff broke the contract, the choice was with the defendant to put an end to the contract or to affirm in its continuance. In the words of Seah FJ in Ganam Rajamany v Somoo Sinnah [1984] 2 MLJ 290 :
A wrongful repudiation by one party cannot, except by the election of the other party, so to treat it, put an end to an obligation; if the other party still insists on performance of the contract the repudiation is what is called 'brutum fulman' that is, the parties are left with their rights and liabilities as before. A wrongful repudiation of a contract by one party does not of itself absolve the other party if he sues on the contract from establishing his right to recover by proving performance by him of conditions precedent [per Lord Wright in Edridge v Sathna (1933) 60 IA 363 ].
It follows that a party to a contract who affirms in its continued performance must himself perform his obligations. I have looked in vain for a clearer statement of the law on this point than that made by Ma JA in the Court of Appeal of Hong Kong in Bill Keh Lung v Don Xia [2003] 679 HKCU 1 where he said:
All I would add in relation to the aspect of acceptance of breach is that the facts of the present case starkly demonstrate the application of the principle that where a repudiatory breach takes place, in order to terminate the contract, the so-called innocent party must clearly and unequivocally accept the repudiation. If he does not do so, he will run the risk of being in breach himself were he not to perform his side of the bargain and thereby allow the original wrongdoer to 'turn the tables' on him: see Frost v Knight (1872) LR 7 Exch. 111; Avery v Bowden (1855) 5 E & B 714; (1856) 6 E & B 953. The basis for this conclusion (often ignored in the business world) is that unless a contract is terminated, it remains in existence for the benefit of the wrongdoer as well as the innocent party.”
Conclusion
10. Absent an express provision in the construction contract, suspension of works or ‘going slow’ is a serious breach and a risky position to adopt by any contractors. The contracting parties would do well to be aware of its own obligations under the construction contract and/or to negotiate a reasonable term to allow for suspension of works in reasonable circumstances.
11. Fortunately as the saying goes, every cloud has a silver lining. With the advent of the Construction Industry Payment and Adjudication Act 2012, a statutory right is expressly conferred on the contractor to suspend work in the event of non-payment. Nonetheless, it must be preceded with an adjudication award/decision in favour of the contractor.
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