North Midland Building Ltd v Cyden Homes Ltd
This case was first heard by the Technology and Construction Court in October 2017; in which the Court considered whether parties to construction contracts were free to allocate the risk of concurrent delay in their construction contracts.
In January 2018, the decision was appealed; however, the Court of Appeal upheld the first instance decision and provided further guidance regarding the interplay between such contractual agreements and common law principles.
North Midland Building Limited (the Contractor) was employed by Cyden Homes Limited (the Employer) to construct a substantial house in Lincolnshire, pursuant to a JCT Design and Build Contract 2005. The contract contained bespoke amendments; in particular, the parties amended the standard extension of time clause at 2.25.1 to add a sub-clause (3); clause 126.96.36.199(b) of the Contract which subsequently read as follows:
- Any of the events which are stated to be a cause of delay is a Relevant Event; and
- completion of the Works or of any Section has been or is likely to be delayed thereby beyond the relevant Completion Date,
- 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 for a number of reasons; North Midland, therefore, applied for an extension of time. Upon assessing the extension of time, Cyden disagreed with North Midland's calculation of the requested days. Specifically, it stated that in the presence of two delay events which occurred at the same time and caused concurrent delay to the completion of the works, but only one event entitled North Midland to an extension of time and the other was a "delay for which the Contractor is responsible", then North Midland would not be entitled to an extension of time for both delays.
Mr Justice Fraser considered this debate in the first instance. Here, North Midland sought to rely upon the prevention principle. This principle is a long established doctrine under English law whereby a party may not enforce a contractual obligation against the other party where it has prevented the other party from performing that obligation. North Midland suggested that this meant that time was now at large, meaning it simply had to complete the works within a reasonable time.
However, Mr Justice Fraser disagreed with such conclusions and determined that the prevention principle simply did not arise in these circumstances. Further, he observed that the only issue was the correct construction of the clause. With regards to this, the clause clearly stated that if the Contractor was responsible for a delay that was concurrent with another delay caused by a Relevant Event, the latter shall not be taken into account. There is no general rule of law that prevents the parties from agreeing that concurrent delays should be dealt with in a certain way.
The Contractor appealed the decision; however, this was to no avail as Lord Justice Coulson agreed with the decisions reached by Justice Fraser. In relation to the question as to whether the prevention principle was invoked given the express contractual terms, Lord Justice Coulson clearly stated that:
“A building contract is a detailed allocation of risk and reward. If the parties do not stipulate that a particular act of prevention triggers an entitlement to an extension of time, then there will be no implied term to assist the employer and the application of the prevention principle would mean that, on the happening of that event, time was set at large. But it is a completely different thing if the parties negotiate and agree an express provision which states that, on the happening of a particular type of prevention (on this hypothesis, one that causes a concurrent delay), the risk and responsibility rests with the contractor.”
Turning to the interpretation of clause 2.25.1(3) regarding the extension of time, Lord Justice Coulson commented that this was "unambiguous" and "plainly [sought] to allocate the risk of concurrent delay to the appellant".
The fundamental message to take home from this judgement is that parties remain free to allocate risk of concurrent delay in their construction contracts. Contractors should therefore pay close attention to the negotiation of such provisions at the outset, not when attempting to claim additional time.
This article is taken from Building Interest - Autumn 2018.