CONSTRUCTION ALERT: Contracting out of the prevention principle

19 October 2017

Publications

Introduction

The United Kingdom’s Technology and Construction Court’s recent decision in North Midland Building Limited v Cyden Homes Limited [2017] EWHC 2414 addresses a number of pertinent issues in relation to the prevention principle and concurrent delay.   Namely:

  1.  that parties can exclude concurrent delay claims by inserting express clauses into their contract; and
  2. how the prevention principle applies in relation to concurrent delay. This latter guidance is important and expands on the New South Wales Court of Appeal’s recent decision in Probuild Constructions (Aust) v DDI Group Pty Ltd [2017] NSWCA 151.

Background

North Midland was contracted by Cyden Homes to build a residential home.  The contract entered into was a standard UK JCT Design and Build Contract.  The parties amended the extension of time (EOT) clause to include an exclusion for concurrent delay.  The EOT clause was worded such that North Midland could claim an extension of time if delay was caused by a Relevant Event, but 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.’

It followed that during construction the works under the contract were delayed due to a number of Relevant Events.  For each Relevant Event North Midland submitted an EOT claim to Cyden.  These were nearly all rejected by Cyden relying on the exclusion for concurrent delay.  In its response Cyden maintained that there were two delaying events and that because the second delaying event was both a delay for which North Midland was responsible and operating concurrently to the other delay then North Midland was not entitled to an EOT.

Subsequently North Midland sought a declaration from the Court that Cyden’s interpretation of the contract, specifically the EOT clause, was incorrect.

Issue

The Court was asked to decide whether the exclusion of EOT claims for concurrent delays resulted in time being set at large under the contract.

The argument for time at large was premised on the prevention principle, which applies where the contract fails to account for delays caused by acts or omissions of the principal.  Specifically North Midland contended that the amended EOT clause had the effect of allowing Cyden to reject EOT claims that arose from Cyden’s own conduct or directions.

Decision

The Court rejected North Midland’s case.  It did so by focusing on the wording of the contract.  It  found that the parties had clearly and expressly agreed how the EOT entitlement would operate under the contract.  In particular, the parties had expressly agreed that an act of prevention by Cyden would fall within the EOT exclusion in circumstances of concurrent delay.

Relevance

The decision provides important guidance on the interaction between the prevention principle and concurrent delay in construction contracts.  Specifically, it makes clear that the operation and effect of the common law’s prevention principle may be amended or even excluded by clear drafting.

This decision reinforces the fact that the exclusion of EOT rights for concurrent delay in contracts are valid and enforceable.  Where a contract does expressly deal with concurrent delay in the manner in which it did in Cyden Homes, contractors risk exposing themselves to liquidated damages even where delay was caused by an act or omission of the principal.

Written by:

Tom McKillop | Senior Associate | +61 7 3338 7530 | tmckillop@tglaw.com.au