Prevention Principle? Time at Large? Concurrent Delay?
That’s a lot of jargon for two short sentences. Regular readers of these blogs will be familiar with these concepts but, for more detail, see my colleague Melissa Moriarty’s blog on the first instance decision.
How did the parties apportion risk for concurrent delay?
Cyden (as employer) and North Midland (as contractor) entered into a contract based on the JCT D&B 2005 standard form contract, with amendments. Importantly, clause 220.127.116.11 was amended to include the following:
(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;
As is standard, one of the Relevant Events was “acts of prevention” by the employer.
So, in the event of concurrent delay, North Midland would not be entitled to an extension of time (EOT). The clause sought to reverse the effect of Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd and Walter Lilly, which decided that, in the absence of such amendment, the contractor would be entitled to an EOT under the JCT form.
In my experience, this type of amendment is not unheard of. I have seen similar amendments to a JCT form and to a FIDIC contract.
So, what was the problem?
As is often the case, there were delays on site and North Midland applied for an EOT of around 6 months. Cyden, relying on the concurrent delay clause, permitted 9 days, on the basis that any delays caused by a Relevant Event were “consumed by culpable delays attributable to” North Midland.
North Midland commenced Part 8 proceedings for a declaration that, in effect, clause 18.104.22.168 was void. It argued that denying it an EOT where there were concurrent delays (one of which was a Relevant Event), offended the prevention principle and so would make time at large.
Court of Appeal’s decision
Consistent with the first instance decision, the Court of Appeal held that the clause in question was unambiguous, and raised no issues of contractual interpretation. It did not offend the prevention principle and so should be given effect.
Well, no surprises there then?
The outcome of the appeal was unsurprising, but there are a number of interesting points to come out of the judgment. The ones that stood out to me are:
Nature of the prevention principle – implied terms
The nature of the prevention principle has been the subject of academic discussion, but Coulson LJ (giving the leading judgment) confirmed that it operates by way of implied term. It is not an overriding rule of public or legal policy (unlike, say, the rule against penalties).
As with any implied term, it can be excluded by the express terms of the contract. In this case, the parties decided that concurrent delay would not entitle the contractor to an EOT, even if one of the delay events was an act of prevention.
It must also be open to the parties to exclude the prevention principle entirely. The common law has traditionally had no qualms with holding a contractor to onerous obligations, and the decision is consistent in this respect with the recent line of cases on contractual interpretation (such as Arnold v Britton) and those which emphasise the importance of contractual autonomy, such as Astor Management AG v Atalaya Mining Plc, Wood v Capita Insurance Services Ltd.
As the judgment acknowledges, the application of Unfair Contract Terms Act 1977 (UCTA) would be the only limitation, although it rarely applies to large scale construction contracts.
What is concurrent delay?
The legal position in the event of concurrent delay (at least under a JCT contract) has been reasonably clear for some time: Malmaison and Walter Lily. The more difficult question is what is concurrent delay and when does it arise?
The “John Marrin QC definition” of concurrent delay has long been accepted by the courts and now has Court of Appeal approval. The definition is:
A period of project overrun which is caused by two or more effective causes of delay which are of equal causative potency.
The Court of Appeal did not have to decide whether there was concurrent delay in this case, so applying this test in practice is a task for another day.
No connection between prevention principle and concurrent delay
To be entitled to an EOT the contractor will usually have to demonstrate that:
- An event has occurred which entitles it to an EOT (in this case, a Relevant Event).
- The end date of the works is going to be delayed.
- The event in question caused the delay to the works.
While parties may be in dispute about the first two of these, it tends to be the final requirement which causes the most vexation.
The causative requirement is a question of law rather than fact. Because a claim for an EOT is a claim under the contract, rather than a claim for breach, the causal test is determined by the contract. However, most of the standard forms are not specific as to what is required (perhaps for good reason). For instance, the test in the JCT form is whether completion of the work “is likely to be delayed”.
Coulson LJ, was asked, but declined to answer, whether, where there is concurrent delay, it could be said that the employer had actually delayed completion at all.
This question goes to the heart of the causal requirement for an EOT under the contract. It may be that the John Marrin QC definition answers the question. If concurrent delay only arises where there are two or more effective causes of delay of equal causative potency, then without two causes, there is no concurrent delay.
However, Coulson LJ did state:
The prevention principle has no obvious connection with the separate issues that may arise from concurrent delay.
This suggests that an act of prevention does not cause delay (in a legal sense) where delays are concurrent.
Let’s hope for a case which considers the point soon.
From a practical point of view, employers are already asking for advice on whether to include this Court of Appeal approved amendment into their contracts. Obviously, such amendments will need to be agreed by both sides. Contractors remain risk averse and are very alive to the inherent risks of such a clause, so the likelihood of them accepting the amendment is low.
Perhaps more importantly, employers should consider the message that trying to include such an amendment sends to the contractor. Contractors may decide that this approach isn’t for them and that they would rather work with more “collaborative” clients. Even if they do bid, they are likely to include a significant price premium for taking on this risk.
Given the official wisdom that concurrent delay hardly ever occurs, whether such an amendment will have much impact in practice remains to be seen.
However, those on the ground will know that complex construction projects are nearly always, at some point, subject to two or more delays at the same time. Having a concurrent delay clause in the contract will, at the least, impact the contractor’s negotiating position during the course of a project.
A version of this blog first appeared on Practical Law Construction on August 8, 2018