Definitely not your ordinary town house

Cyden Homes Ltd employed North Midland Building Ltd as contractor to design and build a residential property in Lincolnshire under an amended JCT Design and Build Contract 2005. According to North Midland, the property, was to be "the most important private house to be constructed in the country for many years" and comprised not only the house, but also substantial outbuildings, barns and associated works. One of the amendments concerned how Relevant Events (namely, those which push the time of actual completion beyond the contractual completion date and entitle the contractor to extensions of time) would be dealt with. In particular, amended Clause 2.25.1.3(b) provided 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".

The definition of Relevant Event included various acts of prevention and default by the employer. The works were delayed and the contractor applied for an extension of time, relying on various Relevant Events under the contract. A partial extension of time was allowed, however in reliance of Clause 2.2.5.1.3(b), the employer stated that:

"…the delays resulting from Delay Events 1 and 9 have been consumed by culpable delays attributing to North Midland Building [the contractor], thus reducing the entitlement to an award of an extension of time".

In other words, a portion of the extension of time claimed by the contractor was refused on the basis that two of the employer-caused delaying events were concurrent with delays for which the contractor was responsible. As the parties were unable to agree on the correct approach in applying Clause 2.25.1.3(b), the contractor brought a Part 8 claim (permitted where there are no substantial factual disputes) seeking the correct interpretation of Clause 2.25.1.3(b) and a declaration as to whether the clause offended the prevention principle and was therefore "not permitted".

The judge sides with Cyden

Mr Justice Fraser held that the Clause 2.25.1.3(b) was "crystal clear" and no point of interpretation arose. In a robust statement, the court stated that it could not see how the clause raised any issues of construction whatsoever and held that the clause was:

"…a clear agreement dealing with the proper approach to consideration of the appropriate extension of time in situations of concurrent delay, when one cause would otherwise entitle the contractor to such an extension (absent the concurrent event) but the other cause would not. The contractor is not entitled to an extension of time in that situation".

Prevention cured through express wording

There being no issue with interpretation, the court moved on to deal with the contractor's argument that Clause 2.25.1.3(b) offended the prevention principle and was therefore "not permitted". This principle provides that if the employer has prevented the contractor from being able to meet the original completion date, and the contract does not provide for how that delay is to be dealt with (i.e. by way of an extension of time), the employer cannot insist that the contractor meets the original completion date. Time is therefore set "at large", with the result being that the contractor is provided with a reasonable amount of time to complete. The court found the contractor's submission to be "off the point". In particular, it noted that the prevention principle would not override the express wording deployed in the contract. Here, the contract expressly classified acts of prevention as Relevant Events. That being the case, acts of prevention by the employer were to be taken into account in the way identified in Clause 2.25.1.3(b). Interestingly, even though all the issues in the Part 8 proceedings had been addressed, the court commented on the judgments of 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); two leading cases dealing with the application of the prevention principle when there is concurrent delay. It concluded that the prevention principle is not triggered in cases of concurrent delay, as, quoting Coulson J (as he then was) in Jerram Falkus:

"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".

Parties' freedom to contract bolstered

In allowing the parties' freedom to contract to trump default rules of law, you can no longer assume a contractor will always get an extension of time where concurrent delay occurs if clear drafting suggests otherwise. Parties have historically been cautious about inserting provisions clarifying how concurrent delay will be treated in extension of time claims for fear that they will be rejected by a court or tribunal. With a judicially approved form of words now available, this decision is likely to encourage both employers and contractors to be bolder in negotiating clauses allocating the risk of concurrent delay. Those looking to rely on existing provisions or who routinely deal with disputes involving concurrent delay will also be able to breathe a sigh of relief by the clarity and firmness of the judge's findings. However, the decision's brevity and the fact that it is a first instance judgment are likely to mean that the interpretation and application of these provisions will continue to generate debate.

Original Source: Hogan Lovells, Asia Talking Point: Construction and Engineering. October 2017