Grain Communications Ltd v Shepherd Groundworks Ltd

[2024] EWHC 3067 (TCC)

Grain engaged Shepherd under a framework agreement. A dispute arose as to whether an instruction to postpone works indefinitely was a variation. “Variation” was defined as:

“any addition to, omission from or other change in the Works or the period or order in which they are to be carried out.”

Kelly J summarised the law in relation to implied terms and the variation of contracts as follows:

“(1) A term can be implied into a contract provided the term which a party seeks to imply is not illegal or contrary to an express term of the contract.

(2) A term can be implied if it is reasonable and equitable, is necessary to give business efficacy to the contract, is so obvious it goes without saying, is capable of clear expression and does not contradict any express term of the contract.

(3) The effect of a variation instruction depends on the substance of what is said in the instruction. Variation instructions are not to be read strictly or pedantically.

(4) The variation must be evident from the document said to constitute a variation instruction.

(5) An instruction need not contain the word postpone in postponing certain works.

(6) What is required is that any variation instruction complies with the requirements of the contractual clause for variations.”

On 7 September 2023, Grain issued a work order in accordance with the framework. Then, on 23 October 2023, Grain sent a further email indicating that a pre-start meeting would be held that afternoon with the intention of starting work the following day. That did not happen. Instead, there was a phone call, where Grain told Shepherd that the works would not be starting the next day as agreed.

On 24 October 2023, Grain sent Shepherd an email which included:

“As discussed, it remains our current intention to continue with all Work Orders … However, as mentioned on Monday's call … it currently does not look like we will be able to commence Works on Site … before the end of 2023 … We will continue to keep in touch with you regarding our programme for the Works under these Work Orders and will let you know when anything changes.”

In February 2024, both parties sent notices of suspension, which led to an adjudication where the adjudicator agreed with Shepherd that the email amounted to a breach of contract – not, as Grain held, a variation. The adjudicator said that the email of 24 October 2023 was a cancellation of the Work Order. The reasonable recipient of the email would not understand that it was being issued either as a Variation to the Work Order or as confirmation of an oral variation to the Work Order:

“for the simple reason that it does not make any mention of the fact that it is being issued either as a Variation, or as a confirmation of any oral variation that may have been given in the telephone conversation held on Monday 23rd October 2023.”

The judge disagreed, considering that whilst the email did not specifically state it was a variation, Grain was entitled to make omissions from a Work Order and also to vary the period in which works were to be performed. Grain said in the email that its intention was to continue with all of the Work Orders which had been signed. Although Grain further noted the present position as being that it was unlikely that works would be able to commence before the end of 2023, it also said that it would keep in touch concerning the programme for works. The wording of the contract, as agreed between the parties, permitted Grain to postpone commencement of the works. The October discussions and email was all that was required to do that.

Further, the terms of the Work Order did not allow the implication of a term preventing Grain from postponing the works. The proposed term would contradict the express terms of the contract if permitted. This would be contrary to the express terms within the contract. The already provided “machinery” allowed variations of time, including the machinery to permit commencement to be postponed. The Work Order was able to operate without the need to imply the term suggested.