The recent judgment in the case of North Midland Building Limited and Cyden Homes Limited is a useful one in clarifying whether parties can allocate the risk of concurrent delay.
Whilst such clauses are sometimes agreed, this is a complex area of the law and, to date, there has been a reluctance to suggest wording that risked rejection by a court, arbitrator or adjudicator in the event of a dispute. This judgment will now encourage parties to address the issue in contract negotiations and also provide them with a form of words that has been judicially approved.
The court’s comments on Adyard and Jerram Falkus are equally important to those involved in disputes involving concurrent delay. Its statement that the prevention principle does not apply in cases of concurrent delay provides a strong weapon for combatting such claims.
The facts were that Cyden Homes Ltd (the employer) engaged North Midland Building Ltd (the contractor) to design and build a substantial residential property under a JCT Design and Build Contract, 2005 edition (DB 2005), with bespoke amendments (the building contract).
The bespoke amendments included changes to the extension of time provisions, so that clause 2.25.1 was amended to provide that:
”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 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 works were delayed and the contractor was allowed a partial extension of time. However, other elements of the contractor’s claim were rejected, citing clause 126.96.36.199(b), on the basis that those delays were caused by Relevant Events that were concurrent with delays for which the contractor was responsible.
The contractor sought declarations that clause 188.8.131.52(b) offended the prevention principle, rendering time at large and any LDs provision void, arguing that the above clause offended the prevention principle as described by Jackson J in Multiplex, in that any interpretation of the clause that offended the prevention principle was “not permitted”. Alternatively, that, regardless of the correct interpretation of the clause 184.108.40.206(b), the prevention principle still operated in relation to the contractual LDs provision, so that his liability to pay LDs fell away.
The TCC refused to grant any declarations, finding that the contract wording was “crystal clear”, so no point of interpretation arose. The court found no support in Multiplex for the proposition that this type of clause was not permitted. In cases of client delay, the prevention principle is not triggered.
In addition, the court noted that the contractual definition of “Relevant Event” in clause 2.26.5 included “any impediment, prevention or default, whether by act of omission …” and this was consistent with the parties having set out a clear regime that dealt with extensions of time, including situations involving an employer’s act of prevention. This also sat squarely within the second of Jackson J’s propositions in Multiplex, which stated that “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.”
The court also rejected the contractor’s alternative argument that the LD’s provision was void regardless of how the clause was construed. The court pointed to the absence of any authority for that argument (rejecting the contractor’s suggestion that it was supported by Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd (1970) 1 BLR 111). In addition, the court saw nothing in the contractual regime that justified such a conclusion, especially as the parties had made widespread amendments to the building contract, but no significant change to its LDs provisions.
Of wider significance, while not strictly necessary in order to decide the issues before it, the court commented on the judgments in Adyard and Jerram Falkus to avoid similar misunderstandings occurring in future cases and emphasised that the parties considering those authorities should conclude that their findings on concurrent delay are correct expressions of the law, rather than relying on legal commentaries that suggest otherwise.