Court of Appeal agrees that parties can allocate responsibility for concurrent delay
North Midland Building Ltd v Cyden Homes Ltd [30.07.18]
This week the Court of Appeal handed down its highly anticipated judgment in the case of North Midland Building Ltd v Cyden Homes Ltd [30.07.2018]. The Court of Appeal upheld the first instance decision of Mr Justice Fraser, in which he held that contracting parties are free to allocate the risk of concurrent delay in their contracts, with the effect that the contractor is not entitled to an extension of time and the employer may levy liquidated damages.
‘Crystal clear’ contract terms
The contract in question was a heavily amended JCT D&B 2005 form. The issue centred on clause 126.96.36.199(b), which provided 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”.
At first instance Fraser J found that the clause itself was “crystal clear” and that there is therefore no question of construction whatsoever. He also stated that the prevention principle is not engaged where there is concurrent delay and there is no rule of law that prevented the parties from agreeing that concurrent delay be dealt with in a particular way.
The Court of Appeal, consisting of the Master of the Rolls, the Senior President of the Tribunals and Lord Justice Coulson, robustly agreed with Fraser J that the wording of the clause was clear and unambiguous. Therefore, the question for the court was whether there is any reason in law why effect should not be given to that clause, i.e. whether another term of the contract or some overarching principle of law or legal policy would render the clause inoperable.
Prevention principle considered
The principle argument advanced by the contractor was that the prevention principle was a matter of legal policy, which would operate to rescue the contractor from the effects of the clause. However the court rejected the submission for several reasons. Principally, the court stated that the prevention principle is not an overriding rule of public or legal policy and that there is no authority to suggest that the parties cannot contract out of some or all of the effects of the prevention principle. In fact, the opposite appears to be true from the authorities cited in the case.
Coulson LJ said “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.”
Although parties may have been negotiating similar clauses for many years, this decision provides Court of Appeal authority that:
- Approves particular wording to achieve this aim, which is useful for those drafting construction contracts
- Despite arguments to the contrary, the prevention principle does not operate to save the contractor from the effects of a clause to which it has freely agreed
- Adopts the well-known definition of concurrent delay provided by John Marin QC and cited by Hamblin J (as he then was) in Adyard Abu Dhabi v SD Marine Services  – “a period of project overrun which is caused by two or more effective causes of delay which are of approximately equal causative potency”.
The court did not deal with the question as to whether there is only concurrency if both events in fact cause delay to the progress of the works and the delaying effect of the two events is felt at the same time. The answer to this question may have a bearing on the issue as to whether a similar clause, which we have seen negotiated from time to time, would operate without the need for the delays to be concurrent (i.e. where the Employer’s delay actually causes a delay, but the contractor’s does not). While this issue was not decided, this case is likely to give contract administrators and employer’s agents sufficient authority to enforce such clauses in the future.