The recent case of North Midland Building Limited v Cyden Homes Limited [2017] EWHC 2414 (TCC) considered the enforceability of a contractual provision, which sought to exclude a contractor’s entitlement to an extension of time in circumstances of concurrent delay.
The Contract
North Midland Building Limited (the Contractor) had been engaged by Cyden Homes Limited (the Employer) to construct a substantial house in the Midlands. The parties had entered into a JCT Design and Build 2005 form of contract with bespoke amendments.
In particular, the parties had agreed the following in relation to extensions of time:
Clause 2.25:
“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.”
(Note – save for the bespoke amendment included at 2.25.3(b) the remainder of the clause appears in all later editions of the JCT Design & Build Contract, including the current 2016 edition)
The Delay
The works were delayed and the Contractor applied for an extension of time based on a variety of different Relevant Events. Whilst a partial extension of time was granted, the Employer relied upon clause 2.25(3)(b) of the contract to reject the other elements of the application. This was on the basis that those delays were caused by Relevant Events that were concurrent with delays for which the Contractor was responsible.
Part 8 Claim
The Contractor disagreed and commenced Part 8 proceedings seeking a declaration concerning the true interpretation of clause 2.25.1.3(b).
The Contractor contended that the “prevention principle” applied. In these circumstances, if the employer prevents the contractor from complying with its obligations to complete the works by the contractual completion date, the contractor is relived of its obligations to complete by that date and need only complete the project within a reasonable time. In addition, as the contractual completion date falls away, times is “at large” and the employer would be unable to recover liquidated damages (LADs).
The decision
The court rejected the Contractor’s argument and held that the meaning of the clause was “crystal clear”. The concurrent delay exclusion was effective to exclude the Contractor’s entitlement to extensions of time whilst concurrent delays for which it was responsible were operative.
Given the meaning of the clause was clear the court confirmed that the “prevention principle” simply did not arise. It held that this principle applied only where the parties had failed to provide for extensions of time in respect of acts of prevention. It did not apply where such extensions had been expressly excluded by the parties.
The court also noted that the “prevention principle” did not, in any event, apply in the circumstances of concurrent delay.
Comments
The judgment provides clear confirmation that parties to a construction contract have the ability to allocate the risk of concurrent delay and such clauses are enforceable.
This decision should provide comfort to employers who may be looking to rely on such clauses safe in the knowledge that in doing so they will not risk setting time at large or jeopardise their entitlement to LADs.
Equally, contractors should pay particular attention to such clauses when negotiating construction contracts given the potential severe financial consequences of having no entitlement to an extension of time where there is concurrent delay.
