Adjudication Matters – November 2018

6th November 2018

Time is not on your side: North Midland Building Ltd v Cyden Homes Ltd [2018] EWCA Civ 1744

Introduction

In the case of North Midland Building Ltd v Cyden Homes Ltd, the Court of Appeal upheld a decision that a bespoke extension of time clause could be used to prevent entitlement to an extension of time in the event of concurrent delay.

Summary of Key Principles

Time at Large: If a delay event occurs due to an employer’s risk event and the contract does not make provision for an extension to the completion date as a result of that delay, the original completion date falls away and time is put “at large”. This means the contractor is obliged to complete the works within a reasonable time.

Concurrent Delay: This occurs where a delay which is a contractor risk event takes effect at the same time as a delay which is an employer risk event, both of which are of equal causative potency.

The Prevention Principle: If Party A, by its own conduct, renders it impossible or impracticable for Party B to complete their work within the stipulated completion date then Party A can no longer insist upon completion by the time stated.

Case Facts

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).

One of the amendments to the Building Contract stipulated that the Employer shall give an extension of time “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” (the Concurrent Clause).

The works were delayed and the Contractor claimed an extension of time. The Employer allowed a partial extension of time, citing the Concurrent Clause in order to reject other elements of the Contractor’s claim on the basis that those delays were concurrent with delays caused by the Contractor.

The Contractor made a claim for declaratory relief arguing that:

• (a) the amended clause offended the Prevention Principle and was therefore “not permitted”; and
• (b) regardless of the correct interpretation of the amended clause, the Prevention Principle still operated in relation to the contractual liquidated damages provision, so that the Contractor’s liability to pay liquidated damages fell away.

Decision

Coulson LJ, upholding the first instance decision, held that the amended clause was unambiguous, and raised no issues of contractual interpretation. It did not offend the Prevention Principle and should be given effect.

The court decided that the wording of the clause was “crystal clear“. It rejected the argument that the Prevention Principle required a different reading of the clause because its plain meaning was “not permitted“.

Indeed, there was no authority to suggest that parties cannot contract out of some or all of the effects of the Prevention Principle. On the contrary, this sort of agreement was expressly envisaged in cases such as Walter Lilly & Company Ltd v Mackay and another [2012] EWHC 1773 (TCC).

Furthermore, the court considered that the Prevention Principle is not an overriding rule of public or legal policy and has no obvious connection with the separate issues that may arise from Concurrent Delay.

Finally, the court noted that under the unamended JCT standard forms, the contractor’s entitlement to an extension of time where there is Concurrent Delay is not “entirely free from doubt” and that there are differences of opinion in first instance decisions and the textbooks.

Analysis

This decision clarifies that parties are free to allocate the risk of Concurrent Delay. The judgment will encourage parties to address the issue in contract and sub-contract negotiations, providing them with a form of words that has been judicially approved.

In addition, the court’s statement that the Prevention Principle does not apply in cases of concurrent delay provides a strong weapon for combatting such claims in construction and engineering disputes.