CASE: North Midland Building Ltd v Cyden Homes Ltd  EWHC 2414 (TCC)
Until recently there has been some uncertainty over the enforceability of risk allocation clauses by the courts in the event of a dispute. The Technology and Construction Court ("TCC") has now upheld a clause that expressly prohibited a building contractor's claim for an extension of time in the case of concurrent delay. The TCC also affirmed that the principle of prevention does not apply to concurrent delay.
Cyden Homes Ltd (the Employer) retained North Midland Building Ltd (the Contractor) to design and build a large residential property under a JCT Design and Build Contract, 2005 edition, with certain bespoke amendments (the Contract).
One such amendment, Clause 188.8.131.52(b), related to the way in which extensions of time would be dealt with. It stated 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"(our emphasis).
The Contract also provided liquidated damages of £5,000 per week of delay after the completion date.
The works were delayed and the Contractor claimed extension of time. The Employer granted a partial extension of time for a delay event that it was responsible for but refused extension of time requests for lighting and roofing delays which were the Contractor's responsibility.
The Employer relied upon Clause 184.108.40.206(b) on the basis that those delays were caused by Relevant Events that were concurrent with delays that the Contractor was responsible.
The Contractor disagreed with the Employer's refusal to grant the extension of time and so commenced proceedings to seek a declaration that Clause 220.127.116.11(b) infringed upon a legal principle known as the prevention principle as set out in the construction case of Multiplex. The prevention principle is relevant in situations where, through some fault of the employer, the contractor is prevented from fulfilling its contractual obligation to complete the works by the completion date. In this situation, the employer cannot force the contractor to comply with the contractual completion date.
The Contractor argued that, because of the infringement of the prevention principle, the Contract was 'at large' (meaning that the delaying events would give the Contractor reasonable time to complete the works and that liquidated damages fall away). The Employer rejected this argument.
The Court's starting point was the language of the Contract itself. The Court considered the wording of Clause 18.104.22.168(b) to be 'crystal clear' in stipulating that: if the Contractor were responsible for a delay event which caused delay at the same time as, or during, that caused by a Relevant Event, then the delay caused by the Relevant Event "shall not be taken into account" when assessing the extension of time.
The relevant provisions of the Contract therefore showed a clear intention that, for situations of concurrent delay, the Contractor was not to be entitled to an extension of time.
With perhaps just a hint of derision, the Court said the 'final nail in the coffin' for the Contractor's argument was that clause 2.26 of the Contract defined Relevant Events, as including "any impediment, prevention or default, whether by act or omission…"(our emphasis). So the Contract specifically classified acts of prevention as Relevant Events.
The Court added that the prevention principle, did not apply to concurrent delay. It stated that: "…there is no rule of law of which…prevents the parties from agreeing that concurrent delay be dealt with in any particular way".
Undoubtedly, this decision will reassure employers because: they can be certain that clearly drafted risk allocation clauses for concurrent delay will be upheld in the courts; and there is now clear authority that the prevention principle does not apply to concurrent delay which is an argument often relied upon by contractors in such disputes.
As a consequence of the decision, employers may be able to successfully claim damages for concurrent delay periods even though their act of prevention caused some of the delay to completion. We anticipate that this concept will be revisited by the courts in the future, as contractors will, perhaps understandably, seek to challenge this.
 Multiplex Constructions (UK) Limited v. Honeywell Control Systems Limited  BLR 195