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North Midland Building Limited v Cyden Homes Limited [2017] EWHC 2414 (TCC)

The decision of Fraser J. in North Midland Building Ltd. v Cryden Homes Ltd. is an interesting example of a party to a construction contract attempting...

...to avoid the clear meaning of the words of an agreed contractual term dealing with extensions of time and thereby its liability for LADs, by reliance on the principle of prevention in circumstances where it is alleged that there were concurrent delays.

The Claimant was the contractor in respect of a very substantial residential home and outbuildings being built for the Defendant (a corporate vehicle for the Dyson family) in Lincolnshire. The building works were contracted under a JCT Design and Building Contract (2005) as amended by the “Special Conditions” – the contract was executed as a deed. The amendments to the JCT contract included clause 2.25.1.3(b), which dealt with the contractor’s right to extensions of time. Further agreements in respect of the building works were subsequently agreed between the parties but those are of no relevance to the Part 8 Claim that was before the court.

Clause 2.25.1.3(b) of the contract – as amended – provides that in circumstances where:

  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
    1. the Contractor has made reasonable and proper efforts to mitigate such delay; and
    2. 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 Claimant sought declarations that where there were delay events for which the contractor was responsible that were concurrent with a Relevant event that would entitle it to an extension of time, then time for completion would become “at large” – and the works should then be completed in a reasonable time.

The works on the Defendant’s property had become substantially delay during the building works and the Claimant had applied for an extension of time under clause 2.25.1.3(b) – relying on a number of Relevant events that were said to have delayed the works. However, the response to that application was that the delays attributable to the Relevant events had “…. been consumed by culpable delays attributable to North Midland Building, thus reducing entitlement to an award of an Extension of Time". The Defendant’s view of the contractual clause in question was quite simple – if there were a delay that was a Relevant event and a concurrent delay for which the contractor was responsible then the contractor’s delay cancelled out any entitlement to an extension of time and might leave the Claimant (contractor) exposed to the £5,000 per week LADs provided for under the contract.

Before dealing with the contractual construction point that was at issue the learned Judge first sought to spell out the general principles that apply where the doctrine of prevention is relied upon. The starting point for that analysis was the decision of Jackson J (as the judge then was) in Multiplex Construction (UK) Ltd v Honeywell Control Systems Ltd. [2007] BLR 195 . In reliance on that judgment Fraser J explained that that 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.” [11]. And that “concurrent” delays were to be understood as delays of equal causative potency. The Judge then approvingly cited the three principles enunciated by Jackson J. (as he then was) in Multiplex that should apply to the prevention principle and when time becomes at large (i.e. a reasonable time to complete the works after the contractual completion date) – as follows [13]:

  1. 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;
  2. 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;
  3. Insofar as the extension of time clause is ambiguous, it should be construed in favour of the contractor.

Albeit the last of those principles should be applied with care.

For the purposes of the present the Claimant argued that the Defendant’s construction of the contractual clause was “unfair” and not in accordance with the terms of the contract – and that in reliance on the doctrine of prevention the Claimant was contractually entitled to an extension of time where there were concurrent delays in the works and therefore time for completion of the works had become “at large” and furthermore the LAD’s would naturally fall away if there were an act of prevention – leaving the Defendant to claim only its provable losses for delay.

However, the Court was far from persuaded of the Claimant’s case, the Judge concluding that it:

“…. faced a rather insurmountable obstacle. This is, very simply, that there is no point of construction at issue on the clause in question in these proceedings at all. In my judgment, the prevention principle simply does not arise. This case is purely concerned with the correct construction of the clause agreed by the parties, in this case specifically agreed by the incorporation into it of a bespoke amendment.” [18].

The Judge regarded the meaning of the clause in question as being “crystal clear”. Where the wording of the contract specifically excludes the contractor’s right to an extension of time in respect of a Relevant event where there was a concurrent delay that was the responsibility of the contractor then that – as a matter of contractual construction – means exactly what it says. Further, the Judge held that there was simply no authority, statutory or otherwise, to conclude that the LAD would not apply. As the Judge noted, counsel for the claimant “… could point to no authority that stated that a perfectly operable LAD clause (in the case of this contract, clause 2.29 in the standard form) would or could, as a result of an extension of time having been agreed by the parties to be calculated in a particular way, not be operated.” [22].

Having disposed of the substance of the Part 8 claim the judge also noted, for the benefit of future cases (the issue having apparently been ventilated in the course of argument in the present case), that where the doctrine of prevention is to be relied on the burden of proving a causal link between the act of prevention relied on and the actual delay said to have been caused by that act of prevention falls squarely on the contactor – as was explained by Coulson J in Jerram Falkus Construction Ltd v Fenice Investments Inc :

“[52] Accordingly, I conclude 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 decision of Fraser J. demonstrates that generally speaking where parties agree variations to standard form construction contracts there will be very limited scope for creative constructions to be placed on those terms later – you will get what the contract says you agreed get – and more specifically that the express wording of clauses dealing with extensions of time will neither be implicitly be constrained by the principle of prevention nor will time become at large simply by reason of an employer’s act of prevention where the contract itself provides for extensions of time in such circumstances.

Dr Tim Sampson / 9th Oct 2017


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