“Concurrent Delay” and “Prevention” in the Court of Appeal

The judgment by the Court of Appeal in North Midland Building Limited v Clyden Homes Limited [2018] EWCA Civ 1744 was handed down at the end of July. The appeal (by North Midland Building) was dismissed by a three judge tribunal comprising The Master of the Rolls, Sir Terence Etherton, The Senior President of Tribunals, Sir Ernest Ryder, and Lord Justice Coulson, recently elevated from the TCC.

The Court of Appeal had to consider whether wording in a contract (“any delay caused by a Relevant Event which is concurrent with any other delay for which the Contractor is responsible shall not be taken into account“) was clear and effective, and whether such words were contrary to the “prevention principle”.

As usual, there has been a flurry of legal comment. And whilst, in the face of it, the judgment confirmed the law as many of us understood it to be, there are some useful clarifications. The judgment makes interesting reading. It highlights that there is still a debate to be had in the Court of Appeal about concurrent delay under an un-amended JCT contract.

In this case, the dispute before the Court related to an amended form of a JCT Design and Build 2005 contract, under which Clyden Homes employed North Midland Building (the Contractor) to build a large house. The project was delivered late, and there were competing claims from the Contractor that “Relevant Events” entitled it to an extension of time, and for liquidated damages from the employer.

The Court had to consider the mechanism for “Fixing a Completion Date” in the contract, and in particular amended JCT contract clause 2.25.1. Although here the 2005 contract was being considered, the wording of JCT DB 2016 is exactly the same as the un-amended JCT DB 2005, and so the wording of the amendment in this case is relevant to anyone amending JCT contracts today.

In the Court’s judgment, Coulson LJ gave a summary of the emergence in the 19^th Century of the law of “prevention” and its development into modern law. The old authorities, starting with the 1838 case of Holme v Guppy, held that it was wrong in principle for an employer to hold a contractor to a completion date, and for the contractor to be liable for liquidated damages, when at least part of the delay was caused by the employer.

So in order to protect employers, construction contracts began to incorporate extension of time clauses to allow for contracts to be extended to a revised fixed date, and so that liquidated damages would not be lost. However, where such clauses were too narrow, the risk (as in Peak v McKinney (1970)) was that, if the employer was responsible for delay, the extension of time provisions in the contract would not work to provide an extension, and in consequence time would be “at large” and no liquidated damages could be levied.

The law on prevention developed, and the relevant modern law now derives from Jackson J’s judgment in Multiplex Construction (UK) Limited v Honeywell Control Systems Limited (No.2) [2007] BLR 195. That judgment summarises the prevention principle as follows:

“(i)          Actions by the employer which are perfectly legitimate under a construction contract may still be characterised as prevention, if those actions cause the delay beyond the contractual completion date.

(ii)           Acts of prevention by an employer do not set time at large, if the contract provides for an extension of time in respect of those events.

(iii)          Insofar as the extension of time is ambiguous, it should be construed in favour of the contractor.”

The principal issue before the Court of Appeal in North Midland Building Limited v Clyden Homes Limited was whether the extension of time clause was valid, and whether (as North Midland Building alleged) the clause was contrary to the prevention principle and ineffective.

Surprisingly perhaps, the Court of Appeal has never been asked to consider whether, under an un-amended JCT contract, a contractor would be entitled to an extension of time where there was concurrent delay.  But, of course, in this case the Court of Appeal was considering an amended form of JCT contract.

The relevant amendment, and in particular clause 2.25.1.3(b), read as follows:

“2.25.1 If on receiving a notice and particulars under clause 2.24:

.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 any other delay for which the Contractor is responsible shall not be taken into account

then, … the employer shall give an extension of time …”

The JCT contract had been amended by the inclusion of sub-paragraph .3(a) and .3(b). In essence, only the meaning and effect clause 2.25.1.3(b) was at issue in the appeal.

The Court of Appeal adopted the definition of concurrent delay offered by Hamblen J in Adyard Abu Dhabi v SD Marine Services [2011] EWHC 848 (Comm) where it was said: A useful working definition of concurrent delay in this context is “a period of project overrun which is caused by two or more effective causes of delay which are of approximately equal causative potency“.

The Court of Appeal had to decide whether clause 2.25.1.3(b) was clear, and unambiguous; and the Court of Appeal said it was. Consequently liability for the concurrent delay rested with North Midland Building.

The remaining issue for the Court of Appeal was whether there was any reason why the clear words in clause 2.25.1 of the contract should not be upheld. The Court of Appeal held that in this case, where clear words were expressed in the contract, the prevention principle did not apply.

An interesting point for lawyers is Coulson LJ’s reference in his judgment to Merton and Leach, and the Court of Appeal’s apparent view that the prevention principle could only sensibly operate by way of implied terms.

So the drafting point for practitioners is that adopting the same amendments to clause 2.25 as in this case, should be a safe way of dealing with concurrent delay, when seeking to protect an employer’s position. The Court of Appeal says this drafting is clear and unambiguous.

More generally, clear drafting of appropriate express terms around extensions of time and delay, should defeat arguments that the prevention principle applies. It seems to follow from this case that clear express terms should trump any contrary argument over whether implied terms (that the employer’s hindrance or prevention was a breach of contract) applied and the prevention principle operated to put time at large.

The Court of Appeal judgment is only 14 pages long. It’s worth a read.