In a judgment issued earlier this week, the English High Court considered whether a contract excluding any claim for an extension of time in respect of periods of concurrent delay caused time to be rendered "at large" due to the operation of the prevention principle.
"Concurrent delay" has been a cause of much controversy in the construction law sphere. Concurrent delay may be said to occur when two or more critical delay events (one, a contractor culpable event and, the other, an employer culpable event) occur at the same time, and their effects are felt at the same time.
North Midland Building Limited v Cyden Homes Limited  EWHC 2414 (TCC)
In North Midland Building v Cyden Homes the contractor brought an application for interpretation of an extension of time clause in an amended JCT Design and Build Contract 2005. The extension of time clause provided that the contractor could claim an extension of time if delay was caused by a Relevant Event, but that:
"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 contractor sought two declarations from the English Technology and Construction Court:
- first, that the effect of the clause was such that time would be "at large" where there was a cause of delay for which the contractor was responsible which was concurrent with a Relevant Event;
- secondly, that in these circumstances the contractor was required to complete within a reasonable time, and the liquidated damages for delay were void.
The "Prevention Principle"
In seeking these declarations, the contractor relied on the "prevention principle". The prevention principle arises where an act or omission by the employer prevents the contractor from complying with its obligation to complete the works by the completion date. If this act of prevention causes critical delay to the works, and there is no mechanism in the contract for the time for completion to be extended (or such mechanism is ineffective or inoperable), time is rendered "at large"; the contractor must complete the works within a "reasonable time"; and the employer cannot levy liquidated damages for delay.
The contractor argued that because the extension of time clause operated such that, where there was concurrent delay, the time for completion could not be extended even if there was an act of prevention by the employer, the prevention principle applied to render time at large.
The court rejected this argument, and held that the prevention principle did not arise in these circumstances. Instead, the court found that the case turned on the interpretation of the extension of time clause which the court described as "crystal clear". The court found that the parties had made a clear agreement according to which if the contractor was responsible for a delay event which caused delay at the same time as or during the delay caused by a Relevant Event, then the extension of time awarded to the contractor would not include the delay caused by that Relevant Event.
In reaching this conclusion, the court noted that the definition of "Relevant Event" in the contract expressly included any act of prevention by the employer. Thus, the court found that the parties had agreed the manner in which extensions of time would be dealt with in circumstances where there had been an act of prevention by the employer, and that this agreement should be upheld.
The court also dismissed the contractor's alternative argument that, irrespective of the court's findings with respect to the first declaration, the liability of the contractor to pay liquidated damages for delay "fell away" where there was an act of prevention by the employer. The court found that there was no authority to support the contention that where parties had agreed that extensions of time be dealt with in a specified way, such agreement would (or could) render an otherwise operable liquidated damages clause inoperable. There was also nothing in the contract to support a differentiation between acts of prevention (which were included in the definition of a Relevant Event) and any other Relevant Event.
The judgment recognises that the legal effect of the common law "prevention principle" may be modified or even abnegated by agreement. Accordingly, if a contract excludes any entitlement to an extension of time where there is concurrent delay, the employer will be able to recover delay damages for periods of concurrency even though its act of prevention may have caused at least some of the delay to completion. This conflicts with the approach to concurrent delay taken by the Society of Construction Law’s Delay and Disruption Protocol 2nd Edition1, but is in line with the position taken in recent cases in other Commonwealth jurisdictions.2
Whilst this case may lead to clauses which allocate the "risk" of concurrent delay becoming even more common, in practice, instances of true concurrent delay are rare. Often, upon analysis, it becomes apparent that the effect of one delay event is more influential on the critical path than the other, meaning that the two delay events cannot be said to be truly "concurrent".
1 See SCL Delay and Disruption Protocol 2nd Edition, paragraphs 10.12 – 10.16.
2 See, for example, Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd  NSWCA 151 at  (23 June 2017).
This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
© 2017 White & Case LLP