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Concurrent delay and the express allocation of risk

News / / Concurrent delay and the express allocation of risk

The Court of Appeal has upheld a decision of the Technology and Construction Court that parties to a construction contract can agree how to allocate the risk of concurrent delay to the works and exclude the prevention principle: North Midland Building Limited v Cyden Homes Limited [2018] EWCA Civ 1744.

The first instance judgment for this case featured in our February 2018 Bulletin. As a recap, Cyden Homes Limited (the Employer) engaged North Midland Building Limited (the Contractor) to construct a sizeable property under an amended version of the JCT Design and Build Contract 2005 edition. The parties had amended Clause 2.25.1.3(b), which dealt with the calculation of an extension of time where there was concurrent delay caused by both the Contractor and the Employer. The clause read:

“ … 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 term “Relevant Events” was defined to include acts of prevention by the Employer.

The Contractor, relying on the prevention principle, sought a declaration that the effect of Clause 2.25.1.3(b) was such that time would be at large if delay was caused by a “Relevant Event” where that delay was concurrent with another delay for which the Employer was responsible.

It was originally held that the parties were free to allocate risk as they wished, the contract wording was “crystal clear” and the prevention principle was not triggered. Indeed, Fraser J held that “ … there is no rule of law of which I am aware that prevents the parties from agreeing that concurrent delay be dealt with in any particular way”.

The Contractor appealed, arguing, amongst other things, that Clause 2.25.1.3(b) was contrary to the prevention principle and was therefore ineffective.

Unsurprisingly the Court of Appeal dismissed the appeal and held that Clause 2.25.1.3(b) was unambiguous and that it plainly sought to allocate the risks of concurrent delay to the Contractor – and that it was not to be taken into account in the calculation of any extension of time. Indeed Coulson LJ remarked that “[t]here is no suggestion in the authorities … that the parties cannot contract out of some or all of the effects of the prevention principle: indeed the contrary is plain”.

In addressing arguments raised by the Contractor, the Court of Appeal held that an implied term (imposing the prevention principle) would cut across Clause 2.25.1.3(b) and therefore fail the test of necessary implication in any event – although this did not mean that (depending on the facts) an implied term is not the right vehicle by which the prevention principle can be given contractual force.

The Court of Appeal also confirmed that the prevention principle is not an overriding rule of public or legal policy (and that there is no authority for such a proposition).

The Court of Appeal rejected the Contractor’s further argument that, even if Clause 2.25.1.3(b) was enforceable, there was an implied term which would prevent the Employer in those circumstances from levying liquidated damages. The court rejected this argument for a number of reasons, most notably because, despite there being two or more causes of delay (of approximate equal causative potency), “ … there remains a proper causal link between the delay [caused by the Contractor] and the liquidated damages.” Further, as Clause 2.25.1.3(b) prevented the Contractor from obtaining an extension of time (the purpose of which would be to relieve the Contractor from liquidated damages), it followed that liquidated damages could be applied in the event of concurrent delay.

The Employer made an additional submission to the effect that, even if Clause 2.25.1.3(b) did not prevent the prevention principle from applying, it would still not have been triggered on the basis that the delay caused by the Contractor would have been incurred anyway and, therefore, it could not be said that the Employer had actually delayed the Contractor at all. Although there are differing views (from first instance decisions and textbooks) on this point, it was not necessary for the Court of Appeal to consider this argument for the purpose of this appeal. Therefore, this issue will have to be debated in another case. 

Comment

Although the outcome of the appeal was unsurprising, the Court of Appeal judgment was helpful in confirming, in the context of concurrent delay and the prevention principle, that parties are free to allocate risk as they see fit, the prevention principle can operate by way of an implied term and the prevention principle is not an overriding rule of public or legal policy.

Chris Kidd

Chris Kidd Head of Shipbuilding and Offshore Construction, Joint Head of Energy & Infrastructure, Partner

David Choy

David Choy Managing Associate

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