Hackney Empire v Aviva Insurance Ltd

Citation: EWCA Civ 1716; [2013] B.L.R. 57; 146 Con. L.R. 1

Nature of case:
Hackney Empire, a charity whose aim was restoring the theatre of the same name, had engaged a contractor for that function, the terms of which contract included a bond, with Aviva as the surety.  Following delays to the works, Hackney Empire made a side-agreement with the contractor to pay the latter £1 million in instalments in respect of its claims for delay. Having received £750,000 of this sum, the contractor subsequently became insolvent, and failed to complete the work. Hackney Empire terminated the contract, and claimed against Aviva for the money due under the bond, and received judgment in their favour.  Aviva appealed against that decision, arguing that: the side agreement was an agreement with reference to the contract, and being made without Aviva’s consent relieved Aviva of liability under the rule in Holme v Brunskill;  alternatively as it was conduct prima facie prejudicial to the surety they were relieved under the rule in General Steam Navigation v v Rolt, and in the further alternative, that Hackney Empire’s termination of the contract had released them from liability because( relying on Perar v General Surety) rights to compensation under the contract did not accrue until an account was drawn up following completion of the works.


David Thomas KC

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