Hong Kong: Denying Access to Site

The decision of the English Court of Appeal in March 2002 in Hayes v. Stewart highlights the dangers to employers of denying contractors access to site.

Ms. Hayes was employed by Mr. Stewart to supply and fit windows to a property. The conditions of contract were set out on the back of Hayes’s standard order form. They provided that times quoted for delivery and installation were quoted in good faith and that work normally took between four to ten weeks.

Mr. Stewart had not read the conditions. He claimed that it was a condition of the contract that work would be completed within one week.

Work began on 22 November 1999 and was not completed within one week. There were some discussions between the parties and Ms. Hayes’s fitter attended the property on 30 November to remedy some defects. There was still work to be done and, whilst Ms. Hayes proposed that the fitter should return on 3 December to complete, Mr. Stewart insisted that she was now out of time.

When the fitter arrived on 3 December, Mr. Stewart refused to let him onto the property and wrote to Ms. Hayes’s partner stating that "we do not want the existing fitter anywhere near our property again". Correspondence was exchanged and Ms. Hayes went to see Mr. Stewart to patch things up. Mr. Stewart, however, insisted that Ms. Hayes deal with his solicitors. She lost her temper and, to quote the Court of Appeal, "unwise things were said".

Mr. Stewart accused Ms Hayes of abandoning the contract and wrote to her saying he had "no alternative but to rescind your contract".

Ms. Hayes sued. Mr. Stewart argued that it was a term of the contract that work would be completed within one week and that Ms. Hayes had committed a repudiatory breach by (i) abandoning the contract and (ii) executing defective work. Ms. Hayes denied abandonment and argued that Mr. Stewart had terminated the contract unlawfully.

The judge at first instance decided in favour of Ms. Hayes. Mr. Stewart appealed. The Court of Appeal held:

• The judge was entitled to find that by refusing to let the fitter on site, together with the surrounding conduct of the parties, Mr. Stewart had shown an intention to bring the contract the contract to an end. On the other hand, by turning up on 3 December, Ms. Hayes had shown that she had not abandoned the contract.
• Mr. Stewart had "a considerable hurdle to leap over" to show that the defects amounted to repudiation. The defects would need to be so serious that they showed that Ms. Hayes did not intend to, or could not, perform the contract. Mr. Stewart could not show this, particularly where the contract had been brought to an end without Ms. Hayes having been given an opportunity to put things right.
• Although the defects were not enough to allow Mr. Stewart to terminate, they were enough to justify a counterclaim or a set-off. The judge had not properly considered this. The appeal was allowed on that point alone but the Court of Appeal noted that this was "a case which should be settled between the parties". Therefore, before the parties were allowed to argue the question of set-off or counterclaim before a judge, the parties would have to certify to the court that attempts to settle by negotiation or alternative dispute resolution had failed.

Although set in a relatively modest context, this case illustrates how important it is for an employer to be sure of his ground before terminating. If the employer is wrong then the termination will entitle the contractor to sue for damages. It also illustrates the growing trend in England for judges to insist that the parties attempt alternative dispute resolution. We wait to see whether courts in Asia will take a similar stance.

© Herbert Smith 2002

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