In the leading case of Peak Construction (Liverpool) Limited v McKinney Foundations  1 BLR 111, the construction contract contained a mechanism for extending the completion date, but this mechanism failed to provide for an extension of time where the contractor was delayed in achieving the completion date due to the fault of the employer.
Peak illustrated that a provision which postpones the completion date on account of delay caused by some breach or failure by the employer is inserted as a protection for the employer. This is because the employer cannot insist upon a condition (i.e. completion by a specified date) if it is partly the employer’s own fault that such condition cannot be fulfilled. It is therefore in the employer’s interests to include such a provision, so that the employer can insist upon completion by the extended completion date.
If (as in Peak) the employer is partly responsible for the contractor’s failure to achieve the completion date, but there is no contractual mechanism for the completion date to be extended in such circumstances, then the legal position is:
- the completion date becomes unenforceable: time is ‘at large’, with the result that the contractor’s obligation is to complete the works within a “reasonable time” (to be assessed by reference to all the circumstances); and
- any liquidated damages provision becomes unenforceable: the employer is entitled to recover unliquidated damages for delay, provided that it can prove the actual losses it suffered as a result of the delay.
Contractors have taken the Peak principle on board, arguing that time and damages are ‘at large’ so as to defeat the employer’s ability to require completion by the completion date (as extended) and the payment of liquidated damages. If that argument succeeds, employers may have considerable difficulty (and expense) establishing (i) what is, in all the circumstances, a reasonable time for completion of the works; and (ii) the actual losses the employer has suffered as a result of delayed completion.
In the following case - another one of the Multiplex proceedings in relation to the construction of Wembley stadium - the sub-contractor argued that time was ‘at large’ and an adjudicator agreed. The aggrieved contractor - Multiplex - sought declarations from the court that time was not at large; and that the sub-contractor was required to complete its works within the time specified in the sub-contract (as extended pursuant to the terms of the sub-contract). The sub-contractor countered this by raising numerous arguments as to why time was ‘at large’.
Multiplex Constructions (UK) Limited v Honeywell Control Systems Limited No. 2  EWHC 447 (TCC)
Wembley National Stadium Limited (“WNSL”) entered into a main contract with Multiplex (and its guarantor). Multiplex entered into a sub-contract with the sub-contractor (Honeywell) for the electronic systems at the stadium.
By the time the sub-contractor entered into its sub-contract, substantial delays to the project had already occurred. Delays continued to occur after the sub-contractor commenced work. The sub-contractor was highly critical of Multiplex’s organisation and programming of the work and alleged that Multiplex was responsible for the delays; Multiplex made similar allegations against the sub-contractor.
During 2005, Multiplex issued three revised programmes to the sub-contractor, each in the form of a direction under clause 4.2 of the sub-contract. Each programme showed a later completion date for the sub-contract works. The sub-contractor commenced adjudication proceedings claiming prolongation costs. A separate dispute then arose as to whether Multiplex had, by its conduct, put time ‘at large’.
Before considering the arguments, it is necessary to set out briefly a summary of the relevant sub-contract terms:
The relevant sub-contract terms
Multiplex had power to issue instructions to the sub-contractor which could delay completion under the following provisions of the sub-contract:
- clause 4.2 - directions (including variations);
- clause 4.6 - variations; and
- clause 46 - instructions to postpone.
Clause 4.2 - directions
“... The Contractor may issue any reasonable direction in writing to the Sub-Contractor... (including the ordering of any Variation... ) ”
“ ... The Sub-Contractor shall ... forthwith comply with all directions ...”
Clause 4.6 - Variations
Clause 4.6 set out a mechanism for Multiplex to issue variations. This provided for the parties to agree to an extension of time and the costs consequences associated with the variation or, in default of such agreement, for the dispute to be determined pursuant to the dispute resolution provisions.
Clause 4.6 included the following proviso (the ‘guillotine’ provision):
“ ... provided always that ... the Sub-Contractor shall be entitled to no greater ... extension of time ... than that which, in relation to the Sub-Contract Works, the Contractor receives from the Employer in respect of the equivalent Change under the Contract.”
Clause 46 - postponement
“The Contractor may issue instructions in regard to the postponement of any ... work to be executed under the provisions of the Sub-Contract.”
Clause 11 - extension of time: “Relevant Events”
Clause 11 gave the sub-contractor the right to an extension of time in relation to ‘Relevant Events’:
“ ... If and whenever it becomes apparent ... that the ... completion of the Sub-Contract Works ... is being ... delayed, the Sub-Contractor shall forthwith give written notice to the Contractor of the material circumstances including, so far as the Sub-Contractor is able, the cause... of the delay and identify in such notice which in his opinion is a Relevant Event.” [Emphasis added.]
“ ... In respect of ... every Relevant Event ... the Sub-Contractor shall, if practicable in such notice, or otherwise in writing as soon as possible after such notice [give particulars and estimate delay]”. [Emphasis added.]
The following clause applied:
“ ... It shall be a condition precedent to the Sub-Contractor’s entitlement to any extension of time under clause 11, that he shall have served all necessary notices on the Contractor by the dates specified and provided all necessary supporting information including but not limited to causation and effect programmes ... In the event the Sub-Contractor fails to notify the Contractor by the dates specified and/or fails to provide any necessary supporting information then he shall waive his right, both under the Contract and at common law, in equity and/or pursuant to statute to any entitlement to an extension of time under this clause 11.” [Emphasis added]
- ‘Relevant Events’ included:
- Variations pursuant to clause 4.6.
- Compliance with the Contractor’s instructions under clause 46 [instructions to postpone].
“delay caused by any act of prevention or default by the Contractor in performing its obligations under the Sub-Contract ...”
[Note: compliance with the Contractor’s instructions under clause 4.2 [directions] was not specified as a ‘Relevant Event’.]
Clause 12 - effect of delayed completion
Clause 12 did not provide for the sub-contractor to be liable for liquidated damages in the event it failed to achieve the completion date. Instead, it provided that, in the event of such failure:
“... the Sub-Contractor shall indemnify the Contractor for, and shall pay or allow to the Contractor a sum equivalent to, any damage, loss, cost and/or expense suffered or incurred by the Contractor and caused by the failure of the Sub-Contractor as aforesaid.” [Emphasis added]
Time ‘at large’: the sub-contractor’s arguments and the court’s findings The alternative arguments advanced by the sub-contractor as to why time was at large included (using the descriptions adopted by the court):
The ‘construction point’
The argument: A direction for a variation under clause 4.2 did not constitute a Relevant Event under clause 11, so the extension of time mechanism did not apply to directions issued under clause 4.2. Since Multiplex had no power under clause 11 to extend time in respect of a clause 4.2 direction which affected the completion date, under the Peak principle, time was at large.
The court’s decision: The issue by Multiplex of a direction under clause 4.2 - which constituted a variation and delayed completion - constituted a Relevant Event under clause 11:
- First, such variation constituted an ‘act of prevention’ by Multiplex. The fact that Multiplex was permitted to issue such a direction under the contract did not prevent it from being an act of prevention.
- Secondly, each direction constituted an instruction to postpone under clause 46.
There was therefore a mechanism to extend time for directions issued under clause 4.2 which constituted a variation and delayed completion. The Peak principle did not therefore apply, and time was not at large.
The ‘operational point’
The argument: Multiplex was in breach of its obligations in respect of programming (by failing to link its revised sub-contractor programmes to the overall programme), which made it impossible for the sub-contractor to estimate the impact of the delays. The sub-contractor was therefore unable to comply with the notification requirements under clause 11. This had the effect of setting time at large.
The court’s decision: Clause 11 did not require the sub-contractor to provide information which was not available to him at the time of the notice of delay. The clause required the sub-contractor to provide information in its notice “if practicable” or otherwise “as soon as possible”. In short, clause 11 was not an absolute obligation - it required the sub-contractor to do its best as soon as it reasonably could. The evidence demonstrated that the sub-contractor had given notices of delay; it had stated that it could not ascertain the precise consequences of the delay; and it had stated that it intended to serve such information when it became possible for it to do so. The court concluded that this evidence demonstrated that the sub-contractor had complied with clause 11. The clause 11 machinery was both operable and being operated: time was not, therefore, at large.
The ‘Gaymark point’
The argument: Clause 11 required the sub-contractor to comply with the notice requirements as a condition precedent once Multiplex had issued a direction under clause 4.2 which caused delay. Even if the sub-contractor had been able to comply with the notice provisions in clause 11, it had failed to do so. Following the Australian case of Gaymark Investments Pty Limited v Walter Construction Group Limited  NTSC 143; (2005) 21 Construction Law Journal 71, the effect of this was to set time at large (following the Peak principle) because otherwise Multiplex would be able to recover damages (under clause 12) for a period of delay which Multiplex had caused.
The court’s decision: There was considerable doubt as to whether Gaymark represented English law. If Gaymark was good law, it would mean that a contractor/sub-contractor could disregard with impunity any provision making notice a condition precedent and effectively set time at large at its own option.
It was not necessary for the court to decide whether Gaymark represented English law, since Gaymark could be distinguished. In Gaymark, the contract in question contained a liquidated damages clause, so that if the contractor failed to comply with the condition precedent set out in the extension of time provision, the contractor automatically became liable to pay liquidated damages. In contrast, in this case, the sub-contract did not contain a liquidated damages provision. If the sub-contractor failed to comply with the condition precedent set out in the extension of time provision, clause 12 provided that the sub-contractor would only became liable to pay losses incurred by Multiplex which were “caused by the failure of the Sub-Contractor”.
In these circumstances, if the sub-contractor could have complied with the conditions precedent set out in the extension of time provision, but had simply failed to do so (whether or not deliberately), this did not set time at large.
The settlement agreement point
The argument: The sub-contractor was entitled to an extension of time in respect of variations to the sub-contract works which were changes to the main contract works. Under clause 4.6, the sub-contractor’s right to an extension of time in relation to variations was limited to the extension granted under the main contract. Multiplex had entered into a settlement agreement with the employer, the terms of which were confidential.
If it was assumed that:
- Variations were instigated by WNSL which caused substantial delays, these would entitle (i) Multiplex to an extension of time under the main contract; and (ii) the sub-contractor to an extension of time under the sub-contract.
- The commercial deal agreed by Multiplex involved Multiplex abandoning its claim to an extension of time for these variations, the result would be that Multiplex would not “receive” an extension of time under the main contract, so the sub-contractor would not (as a result of the guillotine provision set out in clause 4.6) be able to claim the extension to which it would otherwise be entitled in respect of those variations.
In other words, the abandonment by Multiplex of the extension of time mechanism under the main contract prevented the extension of time mechanism under the sub-contract from operating properly and, as a result, time was at large.
The court’s decision: If the mechanism for extending time under the main contract had been abandoned or replaced by the settlement agreement, then the guillotine provision in clause 4.6 would fall away. Multiplex could not rely upon the guillotine provision to deprive the sub-contractor of its rights for an extension of time otherwise due under the sub-contract. The settlement agreement between Multiplex and WNSL did not therefore set time at large under the sub-contract.
The court’s decision that the extension of time mechanism in clause 11 remained effective and operational reflected the judge’s view that, in so far as an extension of time clause was ambiguous, the court should lean in favour of a construction which permitted a contractor or sub-contractor to recover appropriate extensions of time in respect of events causing delay.
The judge’s approach will no doubt be welcomed by employers who have faced arguments from contractors that the extension of time mechanism was inoperable so that time and (where there were liquidated damages provisions) damages, were at large.
Although obiter, the doubt cast by the judge on the Gaymark case is interesting. This case adds force to the academic argument (strongly propounded by the late Ian Duncan Wallace QC) - that Gaymark does not represent English law.
Contractors and sub-contractors, be warned! Where an employer has itself delayed the works and a contractor or sub-contractor (deliberately or otherwise) fails to exercise its contractual rights under the extension of time mechanism (which would have negated the effect of an act of prevention by the employer or contractor), it remains a moot point under English law as to whether:
- time is at large; and
- if there are liquidated damages provisions, the contractor/sub-contractor will be liable to pay liquidated damages for delay.