Vinergy International (PVT) Ltd v Richmond Mercantile Ltd FZC

[2016] EWHC 525 (Comm)

As part of an appeal against an arbitration award, Mr Justice Teare had to consider whether Richmond was able to rely on an unhindered common law right to terminate an agreement by reason of a repudiatory breach so as to completely bypass the notice and remedy requirements in the termination clause. Vinergy said that where a contract provided for a notice to be given before a contract could be terminated that notice also applied with regard to the right to terminate at common law.

There was discussion of the 1995 case of Lockland Builders v Rickwood (1995) 46 Con LR, where a clause in a building contract gave the owner a right to terminate for delay or poor materials if he served a notice of breach and complied with the procedure set out in the contract. The owner did not follow this procedure but sought to terminate for repudiatory breach. The termination was held to be invalid. The CA noted that whilst the notice of breach was required in respect of breaches that fell within the scope of the clause in question (i.e. for delay or poor materials), notice of breach would not have been required if the breaches complained of had been outside the scope of the termination clause. 

However, here, the Judge held that there was no general test; it was a matter of construction as to whether or not the notice clause applied to a party terminating because of a repudiatory breach. Under the agreement here, the express right to terminate arose on the failure of the other party to observe terms of the agreement and the failure of the other party to remedy the breach within the period specified in the notice of breach. There was no express mention of the right of a party to accept a repudiatory breach as terminating the agreement. Further, the Judge did not consider that you could imply an agreement that before a party terminated, whether pursuant to the contract or pursuant to the common law, the party must follow the procedure laid down of giving notice to remedy. The express right to terminate provided by the contract was said to be dependent upon the “failure ... to observe any of the terms herein”.  Further, the requirement to give notice to remedy was not in itself all-embracing as it did not apply to all of the contractual rights to terminate.

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