Many contracts allow for termination if a breach remains unremedied, or is irremediable.
But the UK Supreme Court's judgment in Telchadder v Wickland Holdings Ltd provides an important reminder that redress is possible on a broken contractual promise - even where the breach cannot be undone.
In June 2006 Mr Telchadder (Mr T) – a "somewhat eccentric" man – entered into a licence to lease a mobile home site at Meadowview Park, Essex, under which he undertook not to annoy or disturb the other occupants.
Meadowview Park's owner, Wickland Holdings Ltd, could – subject to court approval – cancel Mr T's licence if he breached a term of the agreement and "after service of a notice to remedy the breach, has not complied with the notice within a reasonable time".
In July 2006, dressed in camouflage clothing and with camouflage netting over his head, Mr T jumped out from behind a tree at another resident, Miss Puncher, startling her.
Wickland wrote to Mr T telling him that he was on no account to mask or obscure his face in any area of the park outside his home or to make unsolicited approaches or advances to other residents. If he did, Wickland would apply to have his licence terminated and to remove him.
Mr T behaved himself - until July 2009, when he jumped out at two women and threatened to kill them and another resident who intervened.
The County Court held that Wickland was entitled to terminate Mr T's occupancy on the strength of the July 2006 notice, a finding which the Court of Appeal upheld. The key issues for the Supreme Court on appeal were:
- whether Mr T could remedy his July 2006 breach, and
- whether his good behaviour for "a reasonable time" did so.
Wickland argued that Mr T could not undo the fright and anxiety he had caused Miss Puncher. He could not, in Lord Wilson's words, "unstartle" her. This was quite different to, for example, failing to pay licence fees when due, which would be remediable by paying arrears plus interest.
On that basis, Wickland said the July 2009 episode entitled it to terminate Mr T's licence.
But the majority of the Supreme Court disagreed, holding that the "answer is to be found by a practical inquiry whether and if so how the mischief from Mr T's breach could be redressed".
Mr T could – as Wickland's notice implied – redress his breach by committing no further anti-social behaviour for a reasonable time. His relatively good behaviour for the three years from July 2006 was enough to satisfy this test.
The Court's solution is consistent with a long line of authority and recognises that an adequate remedy doesn't always require that things be put back the way they would have been had there been no breach.
Commercial contracts often include clauses which entitle a party to cancel the contract in the event of a breach if on receipt of notice the other party fails to remedy the breach within a certain period. Contracts sometimes also provide that 'material' breaches which are not capable of being remedied give rise to an automatic termination right.
But the UK Supreme Court reminds us that to rely on either type of provision is no slam dunk and that a breaching party may remedy in other ways breaches which cannot be undone.
The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.