North Midland Building Limited v Cyden Homes Limited

An unambiguous extension-of-time clause may validly allocate the risk of concurrent delay to the contractor. The prevention principle is not an overriding rule of public policy. It ordinarily operates through implied contractual terms and does not invalidate an express allocation of risk.

Where the contract grants extensions for employer prevention generally, but expressly excludes periods concurrently delayed by the contractor, the contractor has no extension for those periods. The parties may contract for that result. If the extension mechanism validly denies relief, a term preventing liquidated damages for the same concurrent delay cannot be implied where it contradicts the express bargain and is neither necessary nor obvious.

The contractor appealed from Fraser J in the Technology and Construction Court. The parties’ amended JCT Design and Build 2005 contract provided for liquidated damages of £5,000 per week and included an extension-of-time clause.

The clause provided that delay caused by a Relevant Event which was concurrent with delay for which the contractor was responsible should not be taken into account when fixing a revised completion date. The contractor contended that the clause was ineffective under the prevention principle and, alternatively, that an implied term barred liquidated damages for concurrent delay.

The central issue was whether the parties could validly agree that concurrent employer and contractor delay should not entitle the contractor to an extension of time or relieve it from liquidated damages.

1. Appeal dismissed unanimously. Coulson LJ, with whom the Senior President of Tribunals and the Master of the Rolls agreed, upheld the clause. It was unambiguous and allocated to the contractor the risk of a period of concurrent delay. Even where an employer event was an equally effective cause, that period was excluded from the extension-of-time calculation.

2. The prevention principle did not invalidate the clause. It was not an overriding rule of public or legal policy. In a conventional case it operates through implied obligations not to hinder or prevent performance. Where an extension-of-time mechanism covers employer prevention, time is not set at large. The contract here provided a prima facie extension for employer impediment, prevention or default, but made an express and limited allocation for concurrent delay.

3. The parties were free to agree that allocation. The court treated Peak v McKinney, (1970) 1 BLR 111, and Walter Lilly and Co Ltd v Giles Mackay and Another, [2012] EWHC 1773 (TCC), as recognising the importance of the wording of the extension clause. The result under an unamended standard clause did not prevent the parties from inserting a proviso which produced a different allocation of risk.

4. The implied-term argument concerning liquidated damages also failed. The extension-of-time and liquidated-damages provisions were closely linked. If the contractor was expressly denied an extension for concurrent delay, the employer could levy liquidated damages after the contractual completion date. A term preventing that result would contradict the express clause, would not go without saying, and was not required for business efficacy.

5. The court did not determine the wider disputed question whether, absent such an express clause, concurrent delay itself prevents an employer from delaying the contractor. That issue had not received full argument and was unnecessary to the appeal.

• Court of Appeal (Civil Division) — in [2018] EWCA Civ 1744, dismissed the contractor’s appeal and upheld the concurrent-delay allocation and the employer’s entitlement to liquidated damages.
• High Court, Technology and Construction Court — Fraser J held that the amended clause was clear and effective. The citation of that decision is not stated in the judgment.