Background

Cyden Homes Limited (the “Defendant”) engaged North Midland Building Limited (the “Claimant”) to design and construct a large house (known as ‘South Farm’) plus outbuildings. The contract used was the JCT Design & Build Contract 2005 with bespoke amendments.

The amendment at issue in this case concerned the extension of time provision where the employer has received notification of a delay to the works from the contractor, which read that where:

“2.25.1 …

1. any of the events which are stated to be 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.”

The bespoke addition to the standard JCT provision appears at 2.25.1.3. Where no extension of time was available to the contractor, the contract provided that liquidated damages of £5,000 per week were payable in respect of delay.

The works were delayed and the Claimant applied for an extension of time quoting a variety of reasons, or ‘Relevant Events’. The Defendant however was of the view that these events had been consumed by concurrent delays for which the Claimant was responsible, and in reliance on clause 2.25.1.3(b), these delay events must be ignored in calculating any extension of time available to the Claimant. By its calculations, the only delay event which had not been consumed by a concurrent delay attributable to the Claimant was the weather, entitling the Claimant to an extension of just 9 days.

The Claimant disagreed with this interpretation of the clause and applied to the court for declarations that:

1. The effect of clause 2.25.1.3(b) was to make time at large where a delay caused by a Relevant Event was concurrent with a delay for which the Claimant was responsible; and

2. In these circumstances, the Claimant was required to complete the works within a reasonable time and liquidated damages were void.

The Claimant relied upon the ‘prevention principle’ in support of its claim, a concept considered by Jackson J in Multiplex Construction (UK) Limited v Honeywell Control Systems Limited [2007] BLR 195. It is the notion that where one party’s act or omission prevents the other party from meeting its contractual obligations, the preventing party should not insist upon performance nor benefit from the prevented party’s breach. The Claimant’s main argument was that the Defendant’s interpretation of clause 2.25.1.3(b), which allowed it to charge liquidated damages in the circumstances, offended the prevention principle and was not permitted. Alternatively, the Claimant argued that regardless of the correct interpretation of clause 2.25.1.3(b), its liability for liquidated damages “fell away” if there was an act of prevention.

Decision

The court rejected the Claimant’s arguments and refused to grant the declaration sought.

The court considered Multiplex in some detail and concluded there was no support for the Claimant’s argument that a clause such as 2.25.1.3(b) was not permitted. One of the propositions laid down in Multiplex was that actions of prevention by an employer will not set time at large where the contract provides for an extension of time in respect of those events. The definition of ‘Relevant Events’ within this contract expressly included acts of prevention and the effect of clause 2.25.1 was to provide an extension of time in respect of them. The fact that the extension was inoperable here due to a concurrent delay attributable to the contractor did not mean the contract did not provide one. The Claimant had simply failed to meet the eligibility criteria. It was decided that “the prevention principle simply [did] not arise” and this was a case “purely concerned with the correct construction of the clause agreed by the parties”.

The court went on to apply a second proposition laid down in Multiplex – that insofar as an extension of time clause is ambiguous, it should be construed in favour of the contractor. The court found the objective meaning of the language used in clause 2.25.1.3(b) to be “crystal clear”. The parties had agreed that “if the contractor were 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 shall not be taken into account in assessing the extension of time”. The Claimant was not therefore entitled to an extension, except in respect of the weather delay. As for the Claimant’s alternative argument, the court could find no authority to support the proposition that a valid liquidated damages clause could not operate as a result of an act of prevention.

Although not necessary to decide this case, the court wished to clarify the relationship between the prevention principle and causation. The proposition that an act of prevention “must actually prevent the contractor from carrying out the works” was stated in Adyard Abu Dhabi v SD Marine Services [2011] EWHC 848 (Comm) and later considered by Coulson J in Jerram Falkus Construction Ltd v Fenice Investments In (No. 4) [2011] EWHC 1935 (TCC). Coulson J explained that “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”. The court commented that these statements were probably part of the binding ratio of these judgments and at the very least, highly persuasive.

Implications

This case demonstrates that parties to a construction contract are free to decide who will bear the risk of delays, including concurrent delays, and unless the drafting is ambiguous and requires the court to construe the parties’ intentions, the prevention principle will not easily override this.

The court was keen to assert that even in the absence of an extension of time mechanism in the contract, the prevention principle would not apply in cases of concurrent delay. In these cases it cannot be said that the completion date would have been reached but for the employer’s act or omission because in fact there was another delay event at play. These comments are arguably obiter however, and remain to be tested.

Nonetheless, this case provides an employer with strong arguments against a contractor’s reliance on the prevention principle to release itself from delays for which it is responsible, plus a form of wording now accepted by the courts, which no doubt employers will be keen to include in contracts.