A Variation or a Breach of Contract? Examining the Postponement of Works in Grain Communications Limited v Shepherd Groundworks Limited

In Grain Communications Limited v Shepherd Groundworks Limited [2024] EWHC 3067 (TCC) the Technology and Construction Court decided to give effect to a variation which postponed the commencement of works indefinitely – despite the instruction not being given in the clearest context. This article provides a summary of the judgment and highlights its key implications for the construction industry.

The Context

Grain Communications Limited (the "Employer”) employed Shepherd Groundworks Limited (the "Contractor”) under a framework agreement. The terms of the framework allowed the Employer to instruct the Contractor to carry out works within the scope through "Work Orders". The relevant events are as follows:

• On 7 September 2023, the Employer issued a Work Order in accordance with the framework.
• A few days later, on 23 October 2024, the Employer sent the Contractor an email indicating that the works would commence the next day.
• Still, on 23 October 2024, following the email, the Employer advised the Contractor in a phone call that the works would not commence on the following day as previously agreed.
• On 24 October 2023, the Employer emailed stating: "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".

The meaning of the 24 October 2023 email is the subject of the dispute between the parties.

The Contractor argued that the Employer, by postponing the works via the email, was cancelling the Work Order and were in breach of the agreement. Meanwhile, the Employer claimed that the postponement was a variation of contract which was broadly 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".

The Proceedings

The dispute was first decided by an Adjudicator who interpreted the email as a cancellation of the Work Order and ultimately sided with the Contractor. However, in the TCC, her Honour Judge Kelly reversed this decision. In delivering her verdict, she confirmed various principles in respect of the instruction of variations:

• A variation instruction is not to be read strictly or pedantically. The effect will depend on the substance of the instruction.
• A variation must be evident from the document which is said to be an instruction. However, it does not need to state explicitly that it is a variation.
• What is required is that any variation instruction complied with the requirements of the contractual clause for variations.

Having regard to the above principles and the email from 24 October 2023, she concluded that the Employer had not omitted the Work Order but instructed a variation of the period in which they were to be performed. The Employer was clearly allowed to instruct variations and those were broadly defined and included the ability to change the period in which they were to be carried out. Thus, she highlighted that the Employer had complied with the variation provision and that it was clear from the email that their intention was to continue all Work Orders and to keep in touch in respect of the programme for works. No breach was found.

The Implications

Variation clauses are important clauses in construction contracts. The decision in Grain Communications Limited v Shepherd Groundworks Limited displays the court’s willingness to give full effect to broadly, but clearly, drafted variation clauses even if they have arguably disproportionate consequences for one party. In this case, the contract did not explicitly prohibit the Employer from postponing the commencement of the Work Order indefinitely and thus the court was unable to assist the Contractor. This serves as a useful reminder to contractors to review, and where appropriate seek legal advice on the drafting of, variation clauses are drafted to ensure they are balanced and that appropriate relief is granted in the event of a variation.

Additionally, still in the interpretation of variations, the court reminds us that “variation instructions are not to be read strictly or pedantically”. There is no requirement for a variation instruction to be labelled as such – each potential instruction is to be interpreted in accordance with what the reasonable recipient would have taken it to be.