A TCC decision looks set to shake up the construction industry's approach to concurrent delay and how to draft extension of time clauses. What's more, the decision is so forthright and clear that its application may influence other jurisdictions beyond the UK.

Negotiating the commercial risk of concurrent delays

The term "concurrent delay" is used to describe the situation where delay to the contract completion date is caused by two or more different events of equal causative potency, one of the two events being the responsibility of the employer and the other the contractor. Who bears the risk of concurrent delays has long been a "hot potato" of an issue between two parties with competing commercial concerns.

  • Contractors work to strict deadlines with many moving parts and must ensure they have adequate time to complete the works. They prioritise fair arrangements on how to deal with delays (however they arise) and a right to an extension of time (EOT) for delays caused by a Relevant Event (i.e. delays at the employer's risk). If the employer causes a delay that is not covered by the contract, time to complete (as a matter of law) becomes "at large" and the contractor must complete the works within a reasonable time. If the employer causes a delay then compensation for the contractor's losses for being delayed on site are payable by the employer.
  • In turn, employers fear time at large with good reason: they want certainty about when the project will complete, how and why that time to complete can be extended, together with how much compensation they will receive from the contractor if the works are delayed. From a commercial perspective, they need to pin the contractor down to agreed, non-penal Liquidated and Ascertained Damages (LADs) to ensure they are adequately and swiftly compensated for delays to the completion date. Without an LAD provision, employers have to prove their loss, which is time consuming, costly and can lead to disputes with all their additional costs and inconvenience.

Standard form contracts such as the JCT aim to strike a fair balance between these competing aims and commercial needs but the issues are always the subject of debate. In contract negotiations, terms dealing with how time is extended and compensation payable (to the employer or contractor as the case may be) are carefully prescribed but who bears the risk of concurrent delays is not dealt with in standard forms: it is up to the parties to agree (or not, as the case may be).

The courts have considered the consequences of concurrent delay on various occasions and the leading authority is now Walter Lilly & Company Ltd v. (1) Mackay and (2) DMW Developments Ltd [2012]. The court held that, where there was a case of concurrent delay, the contractor would be entitled to an EOT but not loss and expense. Walter Lilly represents the common law position and parties are left to create their own bespoke amendments should they wish to depart from this position. Traditionally, few have done so, largely because such amendments have not been tested in the courts. However, there has been a recent trend for parties wanting to agree bespoke amendments dealing with concurrent delay.

The Technology and Construction Court (TCC) has now provided certainty on the status of agreed departures to the common law position in North Midland Building Limited v. Cyden Homes Limited [2017] EWHC 2414 (TCC).

How did the dispute arise?

The defendant company, Cyden, was the corporate vehicle of the Dyson family, set up to build a substantial home in Lincolnshire. Cyden appointed North Midland Building (NMB) as contractor to carry out the works under an amended JCT Design and Build Contract, 2005 edition (JCT DB). The works were delayed and NMB applied for an EOT.

Cyden awarded a small EOT for some delay attributable to bad weather, but refused EOTs for two other delaying events. One was the responsibility of Cyden and the other was the responsibility of NMB. These two delays were concurrent: they had occurred at the same time and each had caused substantial delay. Cyden argued that, while one of the delays had been caused by a Relevant Event and would have, on its own, given rise to an EOT, the other delay was attributable to NMB. Cyden based its refusal of an EOT on clause 2.25 of the JCT DB (which the parties had amended):

" 2.25.1 If on receiving a notice and particulars [of a delay] under clause 2.24:

  1. any of the events which are stated to be a cause of delay is a Relevant Event; and
  2. completion of the Works or of any Section has been or is likely to be delayed thereby beyond the relevant Completion Date,
  3. and provided that

(a) the Contractor has made reasonable and proper efforts to mitigate such delay; and

(b) 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

then, save where these Conditions expressly provide otherwise, the Employer shall give an extension of time by fixing such later date as the Completion Date for the Works or Section as he then estimates to be fair and reasonable." (Paragraph 4 of the judgment.)

NMB disagreed with Cyden's reasoning, commenced proceedings and sought declarations that the effect of clause was to make time at large. If correct, this would mean that NMB was only obliged to complete the works within a reasonable time and the LAD provisions were inoperable.

What was in issue?

The parties agreed on the facts but disputed the correct approach in law of how to apply the amended clause 2.25. In resolving the issue, Mr Justice Fraser had to consider the wording of the clause itself, the concept of concurrent delay and a "rather more subtle" issue arising out of the doctrine of prevention. As noted in the judgment, "Essentially the prevention principle is something that arises where something occurs, for which it is said the Employer is responsible, that prevents the Contractor from complying with his obligations, usually the obligation to complete the works by the completion date."

The judge decided forcefully that NMB was not entitled to the declarations sought and that the doctrine of prevention was irrelevant in cases of concurrent delay.

The wording and incorporation of the amended clause was upheld

NMB argued that Cyden's refusal to grant an EOT based on amended clause 2.25 was unfair and contrary to the contract terms. Instead, the EOT should be granted without taking into consideration NMB's delay.

Keeping in mind that clause 2.25 works in conjunction with other clauses such as the employer's right to deduct LADs, Fraser J disagreed and was emphatic that there was no issue about the construction of clause 2.25 itself. The parties had specifically agreed to incorporate it as a bespoke amendment and, what was more, the meaning was "crystal clear". In effect, the parties had agreed that in cases of concurrent delay, where NMB was responsible for a delaying event which caused delay at the same time as, or during, that caused by a Relevant Event, then the delay caused by the Relevant Event was not to be taken into account when assessing the EOT.

The prevention principle

In arguing that time was at large, NMB relied heavily on Jackson J's decision on the prevention principle in Multiplex Constructions (UK) Limited v. Honeywell Control Systems Limited [2007] BLR 195. The prevention principle arises in situations where the employer somehow prevents the contractor from fulfilling its contractual obligation to complete the works by the completion date. The employer cannot, in this situation, force the contractor to comply with the contract.

Fraser J considered the Multiplex decision and the relationship between the prevention principle and time at large – particularly as expounded by Jackson J in the following three points:

(i) actions by the employer which are perfectly legitimate under a construction contract may still be characterised as prevention if those actions cause delay beyond the contractual completion date;

(ii) acts of prevention by an employer do not set time at large if the contract provides for extension of time in respect of those events; and

(iii) insofar as the extension of time clause is ambiguous, it should be construed in favour of the contractor.

According to NMB, the effect of applying the propositions at (i) and (ii) in Multiplex to their factual matrix made time at large. Again, Fraser J disagreed. The terms of the amendment were crystal clear. There was no issue relating to the construction of the clause and, in Fraser J's view:

  • unlike payment terms and dispute resolution terms (which are governed by the amended Housing Grants, Construction and Regeneration Act 1996), there is no rule of law or statutory restriction which stops the parties agreeing on how to deal with concurrent delay. Multiplex and the doctrine of prevention were simply not relevant;
  • Multiplex did not apply and the doctrine of prevention had no relevance in cases where the employer and the contractor are in concurrent delay;
  • there was no merit in NMB's argument that Cyden's interpretation of clause 2.25 was not permitted: contracting parties are free to agree whatever terms they wish to agree; and
  • there is no rule of law that prevents the parties from agreeing that concurrent delay be dealt with in any particular way.

As a final flourish, Fraser J pointed to the fact that the parties had specifically included acts of prevention in the list of Relevant Events under clause 2.26 of the contract. There could be no doubt in the mind of anyone reading the contract about how the parties intended to deal with EOTs in terms of acts of prevention.

Fraser J also found no authority to support NMB's submissions that an act of prevention meant that NMB's liability to pay LADs under clause 2.29 fell away. Clause 2.29 could not be interpreted in that way nor had the parties made any attempt to create that effect by amending clause 2.29.

Additional guidance on when the prevention principle might apply

To avoid future misunderstandings, Fraser J expressed his support for two previous decisions on the operation of the prevention principle - Adyard Abu Dhabi v. SD Marine Services [2011] EWHC 848 (Comm) and Jerram Falkus Construction Ltd v. Fenice Investments Inc (No.4) [2011] EWHC 1935 (TCC). Those decisions made clear that the operation of the prevention principle did not detract from the need to prove causation. In other words, and to quote from Jerram Falkus:

"… for the prevention principle to apply, the contractor must be able to demonstrate that the employer's acts or omissions have prevented the contractor from achieving an earlier completion date and that, if that earlier completion date would not have been achieved anyway, because of concurrent delays caused by the contractor's own default, the prevention principle will not apply."

Guidance and the decision's potential for wider application

Fraser J's firm and clear judgment effectively approved the wording of the amended clause (as above). The decision will leave more employers happy than contractors, with employers now likely to regard this wording as a safe way to achieve protection from having to give an EOT to the contractor in the event of concurrent delay. An amendment of the type in this case will likely become the norm in contract negotiations.

The decision might encourage parties to consider in more depth the degree to which each party is responsible for the concurrent delay and more complex drafting may result. Time will tell. The strong views of Fraser J in this judgment are also likely to be viewed with interest, if not applied, in other jurisdictions where the applicable laws are less prescriptive. Amendments of the type seen in this case are becoming more prevalent in international construction contracts and no doubt this authority will be presented regularly to arbitral tribunals from now on.