REUTERS | David Bebber

Another “nail in the coffin” for the prevention principle?

On the face of it, the judgment in North Midland Building Ltd v Cyden Homes Ltd is one to which you might say “so what”? The parties agreed in their contract to disregard the effect of any concurrent delay in assessing the contractor’s entitlement to an extension of time. Surprise surprise, the court gave effect to the amendment. You can envisage the headline:

“Court gives effect to parties’ agreement, yet again”.

However, the judgment is much more interesting for construction lawyers, as it provides guidance on some of my favourite quirks of construction law: concurrent delay, time at large and the prevention principle.

Time at large and the prevention principle

By virtue of an arcane principle of law, if the employer under a building contract causes delay so that the contractor cannot complete by the contractual completion date, the contractor is relieved of its obligation to complete by that date and need only complete the project within a reasonable time. Because the contractual completion date falls away, time is “at large”: the employer cannot recover liquidated damages and is put to the time and expense of proving any losses suffered as a result of the delay.

This is because of the prevention principle. Lord Denning expressed the principle with characteristic clarity in Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board when he said:

“It is well settled that in building contracts – and in other contracts too – when there is a stipulation for work to be done in a limited time, if the other party by his conduct – it may be quite legitimate conduct, such as ordering extra work – renders it impossible or impracticable for the other party to do his work within the stipulated time, then the one whose conduct caused the trouble can no longer insist upon strict adherence to the time stated. He cannot claim any penalties or liquidated damages for non-completion in that time.”

I remember a Society of Construction Law seminar in 2012 where Sir Vivian Ramsey recounted how various High Court judges were “somewhat startled” to discover the concept of time at large in construction contracts.

The prevention principle doesn’t appear that often in TCC judgments. It seemed to have been comprehensively dealt with in the judgment of Jackson J (as he then was) in Multiplex v Honeywell Systems. He derived the following three principles:

  • Actions by the employer which are perfectly legitimate under a construction contract may still be characterised as prevention, if those actions cause delay beyond the contractual completion date.
  • Acts of prevention by an employer do not set time at large, if the contract provides for extension of time in respect of those events.
  • In so far as the extension of time clause is ambiguous, it should be construed in favour of the contractor.

The second of these is particularly important, and standard form contracts now generally provide that acts of prevention by the employer or its agents constitute a relevant event for the purposes of granting an extension of time. In fact, the contract in North Midland v Cyden provided exactly that, a factor which the judge considered weighed heavily in favour of the prevention principle not being relevant in that case.

Concurrent delay

Concurrent delay is a nebulous concept, and some have doubted whether it ever really occurs in practice. Concurrent delay, as explained by John Marrin QC in his 2013 paper “Concurrent Delay Revisited”, arises where a delay caused by the contractor takes effect at the same time as a delay caused by the employer, both of which are of equal causative potency. Contractors regularly rely on allegations of concurrent delay and argue that since the employer has caused a delay to the works, a failure to award an extension of time gives rise to the prevention principle, which means that time is “at large”.

The courts have given this argument short shrift. In Adyard Abu Dhabi v SD Marine Services, Hamblen J (as he then was) in the commercial court said that:

“The conduct therefore has to render it ‘impossible or impracticable for the other party to do the work within the stipulated time’. The act relied on must actually prevent the contractor from carrying out the works within the contract period or, in other words, must cause some actual delay.”

And in Jerram Falkus Construction Ltd v Fenice Investments Inc Coulson J (as he then was) in the TCC supported this view that concurrent delay does not invoke the prevention principle, saying:

“… for the prevention principle to apply, the contractor must be able to demonstrate that the employer’s acts or omissions have prevented the contractor from achieving an earlier completion date and that, if that earlier completion date would not have been achieved anyway, because of concurrent delays caused by the contractor’s own default, the prevention principle will not apply.”

This is not the end of the story though, as it is commonly argued that the above pronouncements on concurrent delay are obiter, and therefore persuasive but not binding. Accordingly these arguments are still commonly run, particularly in adjudications, and so it is helpful to obtain further guidance from the TCC.

The judgment

Fraser J held that the prevention principle simply wasn’t relevant here, and nor did he need to apply the rules on interpreting contracts, since the meaning of the clause was not ambiguous. Indeed, he thought it was “crystal clear”. Following recent cases including Woods v Capita Insurance Services Ltd, he held that the language that the parties had chosen to express their agreement was key.

However, he went further, and considered the relationship between the prevention principle and concurrent delay, including the judgments of Hamblen J and Coulson J in Adyard and Jerram Falkus. He said that he did not regard either statement as obiter, but that even if they were obiter, they were highly persuasive, particularly as both judges have since been promoted to the Court of Appeal.

What next for the prevention principle?

So, what can we expect in future? Standard forms haven’t traditionally catered for what should happen in cases of concurrent delay, but as this clause has been upheld by the courts we anticipate that employers will now routinely seek to include this type of provision.

This judgment, while interesting, does not necessarily take us much further: for one thing, John Marrin QC’s 2013 paper made it abundantly clear that if the contract specified what was to happen in cases of concurrent delay, then the parties’ agreement was paramount.

In addition, considerations of the prevention principle in both Adyard and Jerram Falkus were arguably obiter, and while Fraser J’s overwhelming support for them is highly persuasive, it is certainly arguable that it is itself obiter and therefore not binding. Nonetheless it will be a brave party who takes this question to court!

Berwin Leighton Paisner LLP Melissa Moriarty

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