Background

The case of North Midland Building Ltd v Cyden Homes Ltd [2017] EWHC 2414 (TCC) has received a lot of recent coverage. It comments on the controversial topic of concurrent delay, the allocation of risk for such delay and the fact that the prevention principle does not apply to cases of concurrent delay.

In September 2009, North Midland Building Ltd (“Contractor”) and Cyden Homes Ltd ( “Employer”) entered into a building contract which was based upon the JCT Design and Build Contract (2005 Edition) with a bespoke schedule of amendments (“Contract”). The Contract involved the construction of a sizeable house, outbuildings, barns and associated works in Lincolnshire.

Dispute

The case concerns a Part 8 claim brought by the Contractor to determine the interpretation of the extension of time provisions in the Contract. Clause 2.25.1.3 of the JCT Design and Build Contract was amended by the bespoke amendments by inserting two additional provisions regarding the award of an extension of time. First, the Contractor was to make “reasonable and proper efforts to mitigate“ delay; and second that “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“ when awarding additional time. This was an important amendment as standard form construction contracts do not themselves deal with concurrent delay. In addition, the Contract included liquidated damages at a rate of £5,000 per week.

The Contractor sought a declaration that: (i) the above amendments made time at large where there was a cause of delay for which the Contractor was responsible which was concurrent with another delay for which the Employer was responsible; and (ii) that therefore, the Contractor’s obligation was to complete the works within a reasonable time and any liquidated damages provisions are void.

The Contractor relied on the “prevention principle“ which stipulates that no party can require another party to comply with a contractual obligation in circumstances where that party has itself prevented such compliance. For example, if the employer prevents a contractor from carrying out works on time and in accordance with the timeframes in the contract then the employer cannot insist that the contractor meet the original completion date. If there is an act of prevention and there is no mechanism to extend time for completion in such circumstances then time is put “at large“ and the contractor is to complete the works within a reasonable time and any liquidated damages do not apply.

In effect, the Contractor’s argument was that because the contract amendments provided that no extension of time could be made in a period of concurrent delay, this meant that time for completion could not be extended even in circumstances of the employer’s acts of prevention, and that as a result the prevention principle applied to set time at large.

Decision

The court upheld the amendments to clause 2.25.1.3 and disallowed the Contractor’s claim for an extension of time.

Whilst the Contractor was allowed a partial extension of time (due to delays caused by weather), the Contractor was not awarded the remainder of the extension of time since they were caused by Relevant Events which were concurrent with delays that were the Contractor’s fault. The court maintained that the concurrent delay provisions in the Contract expressly disallowed the Contractor’s claim for an extension of time and that the wording in the Contract was “crystal clear“ and that no interpretation of the meaning of such provisions was necessary. In addition, as the definition of Relevant Events included any act of prevention by the Employer, this supported the view that parties had agreed how acts of prevention were to be taken into account.

In reaching his decision, the Honourable Mr Justice Fraser considered the prevention principle, relied upon by the Contractor. In his opinion, the prevention principle could not arise where the acts of the Employer did not actually prevent completion because of the Contractor’s own concurrent delays.

The decision referred to the cases of Adyard Abu Dhabi v SD Marine Services [2011] EWHC 848 (Comm) and Jerram Falkus Construction Ltd v Fenice Investments Inc [2011] EWHC 1935 (TCC) to comment that the prevention principle does not apply in cases of concurrent delay since “if there were two concurrent causes of delay, one which was the contractor’s responsibility, and one which was said to trigger the prevention principle, the principle would not in fact be triggered because the contractor could not show that the employer’s conduct made it impossible for him to complete within the stipulated time. The existence of a delay for which the contractor is responsible, covering the same period of delay which was caused by an act of prevention, would mean that the employer had not prevented actual completion“.

Finally, the court dismissed the Contractor’s argument that their liability for liquidated damages fell away where there was an act of prevention. The court agreed that there was no authority to support the Contractor’s argument that if the Contract specified how to deal with extensions of time in such circumstances, then this could void any liquidated damages. The court stated that the parties had made “a considerable number of amendments“ to the JCT Design and Build Contract but only minor amendments to the standard clauses dealing with the payment and allowance of liquidated damages.

Conclusion

This is an important judgement as it clearly states that parties are free to decide how to allocate the risk for concurrent delay. The decision also provides contract amendments which have been judicially approved and contracting parties should look to draft future documents accordingly. Further, parties can include such conditions in their contracts without causing time to be at large or voiding liquidated damages. This decision also builds upon recent cases where there appears to be a leaning towards relying on the literal meaning of contract provisions observed by many commentators. It will be interesting to see how the decision that the prevention principle does not affect concurrent delay will affects future disputes.