North Midland Building Ltd v Cyden Homes Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Coulson |
| Judgment Date | 30 July 2018 |
| Neutral Citation | [2018] EWCA Civ 1744 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A1/2017/2871 |
| Date | 30 July 2018 |
[2018] EWCA Civ 1744
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM Queen's Bench Division
Technology and Construction Court
Mr Justice Fraser
HT2017000135
Royal Courts of Justice
Strand, London, WC2A 2LL
THE MASTER OF THE ROLLS
( Sir Terence Etherton)
THE SENIOR PRESIDENT OF TRIBUNALS
( Sir Ernest Ryder)
and
Lord Justice Coulson
Case No: A1/2017/2871
Mr Simon Lofthouse QC & Mr Edmund Neuberger (instructed by Browne Jacobson LLP) for the Appellant
Mr Sean Brannigan QC & Mr Matthew Thorne (instructed by Pinsent Masons LLP) for the Respondent
Hearing date: Thursday 12th July 2018
Judgment Approved
Introduction
The principal issue in this appeal concerns the validity of a clause in a building contract which provided that, where there was a delay caused by an event for which the contractor was responsible, and that delay was concurrent with a delay for which the employer was responsible, such concurrent delay would not be taken into account when calculating any extension of time to the contract completion date. It was the appellant contractor's case that this clause was contrary to what has come to be known as ‘the prevention principle’ and therefore ineffective.
In order to address the issues on this appeal, I set out the relevant terms of the contract. I then set out the legal background before identifying some parts of the judgment of Fraser J below. I then address Ground 1 of the appeal, namely whether the clause dealing with concurrent delay is contrary to an overarching principle of law and of no effect. Thereafter I address Ground 2 of the appeal, a related point concerning the respondent's ability to deduct liquidated damages for concurrent delay. For the reasons I explain below, it is both unnecessary and undesirable to address Ground 3, which is concerned with a subsidiary argument about the proper ambit of concurrent delay.
The Contract
Pursuant to a contract executed on 21 September 2009, the respondent engaged the appellant to design and build a large house and substantial outbuildings known as South Farm, Ashby-cum-Fenby, Lincolnshire (“the works”). The contract incorporated the JCT Design and Build 2005 Standard Terms and Conditions. These were the subject of numerous bespoke amendments.
The original contract completion date was 18 June 2010. The stated rate of liquidated damages was £5,000 per week.
For the purposes of this appeal, it is necessary only to set out clause 2.25.3, dealing with the mechanics for extending time for completion of the works, and parts of clause 2.26, setting out those delaying events, known as ‘Relevant Events’, which would justify an extension of time.
Clause 2.25.1 sets out what the employer was to do if it was in receipt of a notice from the contractor that the progress of the works was, or was likely to be, delayed. As amended, (with the amendments underlined), the clause read as follows:
“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 as to be fair and reasonable.”
The Relevant Events justifying an extension of time were set out in clause 2.26. As amended, the first 5 of these (of 13 in total) were as follows:
“2.26 The following are the Relevant Events referred to in clause 2.24 and 2.25 ( but only to the extent that such events are not in any way consequent upon or necessitated by any negligence, omission, default, breach of contract or breach of statutory duty of the Contractor, his servants or agents or any sub-contractor, consultant or supplier of their respective servants or agents):
.1 Changes and any other matters or instructions which under these Conditions are to be treated as, or as requiring, a Change;
.2 instructions of the Employer:
.1 under any of clauses:
• 3.10 (Instructions to postpone any work);
• 3.11 (Instructions to expend any Provisional Sums) to the extent that the Employer's Requirements provided insufficient information to enable the Contractor to make a sufficient allowance prior to the issue of such instructions for the effects on programme of those instructions;
• 3.16 (Instructions on antiquities); or
.2 For the opening up for inspection or testing of any work, materials or goods (including making good) under clause 3.12, unless the inspection or test shows that the work, materials or goods are not in accordance with this Contract; or under clause 3.13, if it is agreed by the Parties or determined by an adjudicator that an extension of time should be awarded in respect of such instruction given under clause 3.13;
.3 deferment of the giving of possession of the site or any Section under clause 2.4;
.4 suspension by the Contractor under clause 4.11 of the performance of his obligations under this Contract;
.5 Any impediment, prevention or default, whether by act or omission, by the Employer or any of the Employer's Persons, except to the extent caused or contributed to by any default, whether by act or omission, of the Contractor or of any of the Contractor's persons or, in the case of any impediment or prevention, save to the extent that the same is in consequence of the reasonable exercise of the rights of the Employer under this Contract…”
Despite this plethora of amendments, Mr Lofthouse QC, on behalf of the appellant, made it clear that it was only clause 2.25.1.3(b) that was in issue on this appeal.
The works were delayed, and a dispute arose between the parties as to the proper extension of time due to the appellant. A major element of that dispute centred on clause 2.25.1.3(b) and the extent, if at all, to which the respondent could take this into account when calculating the appropriate extension of time. We were shown the detailed response to the appellant's claim for an extension of time, provided by the Employer's Agent and dated 29 June 2011, which sought to give effect to the clause. Although the appellant contends that, in this detailed response, clause 2.25.1.3(b) was not properly applied in any event, Mr Lofthouse QC confirmed that that complaint was not a matter for this court, or the underlying Part 8 proceedings.
The Legal Background
In the 19 th Century, the courts concluded that it was wrong in principle for an employer to hold a contractor to a completion date, and a concomitant liability to pay liquidated damages, in circumstances where at least a part of the subsequent delay was caused by the employer. Thus, in Holme v Guppy (1838) 3 M&W 387, the defendant failed to give possession of the site for 4 weeks following execution of the contract. Parke B found that there were clear authorities to the effect that “if the party be prevented by the refusal of the other contracting party from completing the contract within the time limited he is not liable in law for the default…”.
Similarly, in Dodd v Churton [1897] 1 QB 566, where the employer ordered extra work which delayed completion. Lord Esher MR said:
“…where one party to a contract is prevented from performing it by the act of the other, he is not liable in law for that default; and accordingly a well-recognised rule has been established in cases of this kind, beginning with Holme v Guppy, to the effect that, if the building owner has ordered extra work beyond that specified by the original contract which has necessarily increased the time requisite for finishing the work, he is thereby disentitled to claim the penalties for non-completion provided by the contract.”
As a result of these decisions, construction contracts began to incorporate extension of time clauses, which provided that, on the happening of certain events (which included what might generically be described as ‘acts of prevention’ on the part of the employer), the date for completion under the contract would be extended, so that liquidated damages would only be levied for the period after the expiry of the extended completion date. Such clauses were not, as is sometimes thought, designed to provide the contractor with excuses for delay, but rather to protect employers, by retaining their right both to a fixed (albeit extended) completion date and to deduct liquidated damages for any delay beyond that extended completion date.
The problem was that many extension of time clauses tended to be narrowly drawn. Although that was again seen as a benefit to the employer, in fact it was not. That is graphically illustrated by the decision of the Court of Appeal in Peak v McKinney (1970) 1 BLR 111. In that case, McKinney were responsible for defective foundation piling. When they finally came back to carry out the necessary remedial work, it took just 6 weeks to complete. However, the overall delay to the works was 58 weeks because, prior to the remedial works being carried out, Liverpool Corporation had delayed in deciding what they should do and how the problem should be rectified. There was an extension of time provision but it was limited, and the only relevant sub-clause referred to delays as a result of “any other unavoidable circumstances”. The Court of Appeal held that the delay resulting from the Corporation's indecision could not be said to have been an...
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