Building contract – Delay – Extension of time – Prevention principle – Liquidated damages – Respondent engaging appellant to design and build property – Works being delayed – Appellant seeking extension of time – Whether concurrent delays taken into account when calculating extension of time to completion date – Whether prevention principle rendering relevant clause inoperable – Appeal dismissed
The respondent engaged the appellant to design and build a large house and substantial outbuildings known as South Farm, Ashby-cum-Fenby, Lincolnshire. The contract incorporated the JCT Design and Build 2005 Standard Terms and Conditions, subject to bespoke amendments. Clause 2.25.1.3(b) provided that, in assessing an extension of time, “any delay caused by a relevant event which is concurrent with another delay for which the contractor is responsible shall not be taken into account”. The works were delayed, and a dispute arose between the parties as to the proper extension of time due to the appellant. A major element of that dispute centred on clause 2.25.1.3(b) and the extent, if at all, to which the respondent could take that into account when calculating the appropriate extension of time. The appellant relied on various relevant events allegedly attributable to the respondent. The respondent said that concurrent delays had been caused by culpable delays attributable to the appellant so that the appellant had no right to an extension of time.
The court held that clause 2.25.1.3(b) was clear. The prevention principle (whereby a party might not enforce a contractual obligation against the other party where it had prevented the other party from performing that obligation) did not arise. In Multiplex Constructions (UK) Ltd v Honeywell Control Systems Ltd [2007] EWHC 447 (TCC), the court had laid down three propositions: (i) an employer’s legitimate actions under a construction contract might still be characterised as prevention if those actions caused delay beyond the contractual completion date; (ii) an employer’s acts of prevention did not set time at large if the contract provided for extension of time in respect of those events; and (iii) insofar as the extension of time clause was ambiguous, it should be construed in the contractor’s favour. However, those dicta did not affect the clause being considered in the present case. It was a clear agreement dealing with the proper approach to consideration of the appropriate extension of time in situations of concurrent delay, when one cause would otherwise entitle the contractor to such an extension (absent the concurrent event) but the other cause would not. The contractor was not entitled to an extension of time in that situation: [2017] EWHC 2414 (TCC). The appellant appealed.
Held: The appeal was dismissed.
(1) (1) Clause 2.25.1.3(b) was unambiguous. It plainly sought to allocate the risk of concurrent delay to the appellant. Thus, principle (iii) in Multiplex did not arise. The parties had agreed that, where a delay was due to the appellant, even if there was an equally effective cause of that delay which was the responsibility of the respondent, liability for the concurrent delay rested with the appellant, so that it would not be taken into account in the calculation of any extension of time. There was no reason in law why effect should not should be given to that clear provision. No express terms of the contract were relied on by the appellant in support of the argument that clause 2.25.1.3(b) should be ignored or rendered nugatory.
(2) There was no basis on which clause 2.25.1.3(b) could be struck down or rendered inoperable by the prevention principle. The clause was clear and unambiguous. The clause stipulated that, where there was a concurrent delay, the contractor would not be entitled to an extension of time for a period of delay which was as much his responsibility as that of the employer. That was an allocation of risk which the parties were entitled to agree. The prevention principle was not an overriding rule of public or legal policy. Moreover, there had been no contravention of either principle (i) or (ii) identified in Multiplex. Pursuant to clause 2.25.5, “any impediment, prevention or default, whether by act or omission, by the employer” gave rise to a prima facie entitlement on the part of the appellant to an extension of time. Those could be acts or omissions which were permitted by the contract but still gave rise to an entitlement to an extension of time. In that way, time was not set at large because the contract provided for an extension of time on the occurrence of those events. Furthermore, the prevention principle had no obvious connection with the separate issues that might arise from concurrent delay. In any event, a building contract was a detailed allocation of risk and reward, clause 2.25.1.3(b) was an agreed term and there was no suggestion that the parties could not contract out of some or all of the effects of the prevention principle: Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd 1 BLR 111 and Walter Lilly & Co Ltd v Mackay [2012] EWHC 1773 (TCC) considered.
(3) There was no basis for implying a term to prevent the respondent from levying liquidated damages under the contract. In the absence of any suggestion of a penalty, the liquidated damages provision was a valid and genuine pre-estimate of anticipated loss caused by the delay, whether the delay was the result of one effective cause, or two causes of approximately equal causative potency. So there remained a proper causal link between the delay and the liquidated damages. The extension of time provisions were inextricably linked to the provisions relating to liquidated damages. The primary purpose of an extension of time provision was to give the contractor relief against the levying of liquidated damages for delays which were not his responsibility under the contract. If the right to an extension of time was expressly negated, there was no reason why liquidated damages should not apply to the delay beyond the contractual completion date. Since clause 2.25.1.3(b) was valid and effective, it would expressly permit the employer to levy liquidated damages for periods of concurrent delay. It was clear that the contract worked in the form in which it had been executed and there was no need of nor room for any implied terms. That result was not uncommercial or unreal.
Simon Lofthouse QC and Edmund Neuberger (instructed by Browne Jacobson LLP) appeared for the appellant; Sean Brannigan QC and Matthew Thorne (instructed by Pinsent Masons LLP) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read transcript: North Midland Building Ltd v Cyden Homes Ltd
