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Posted August 21, 2018 | Published in Dispute resolution

Freedom '18

If you are anything like me, you will have one or two nagging jobs that you never get round to finishing, or in some cases even starting.  For me, there is a sliding cupboard in the kitchen which needs adjusting but, for the last few months, it has been propped shut by a large book. One day I will get round to dealing with it, but something may intervene that means either I will need to do it urgently or not at all (i.e. someone else will do it).  

The case which is the subject matter of this blog is another “kitchen cupboard”.  In a blog I wrote last year I referred to two TCC cases that dealt with the subject of freedom of contract (Jacobs UK Limited v Skanska UK Limited and North Midland Building Limited v Cyden Homes Limited) but I only discussed the Jacobscase.  Like the kitchen cupboard, I fully intended to deal in a future blog with the North Midland TCC judgment, but never got round to doing so.

The intervening event which has spurred me into action was the Court of Appeal’s recent judgment in North Midland.  Here Lord Justice Coulson upheld the decision of Mr Justice Fraser in the TCC and upheld the principle that parties to a contract have the freedom to agree pretty much anything they like, provided that it is not unlawful. The context in which this principle was upheld was the thorny issue of concurrent delay. 

" … in North Midland … Lord Justice Coulson upheld the decision of Mr Justice Fraser in the TCC and upheld the principle that parties to a contract have the freedom to agree pretty much anything they like… "

North Midland (the contractor) and Cyden Homes (the employer) entered an amended 2005 JCT Design and Build contract under which North Midland was to design and build a large house for Cyden Homes.  The relevant amendment provided that when considering North Midland’s entitlement to an extension of time “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”.

The works were delayed and North Midland claimed an extension of time.  Cyden Homes said that a significant element of the delay caused by a Relevant Event was concurrent with delay caused by North Midland. Accordingly, the amended clause came into effect and North Midland was not entitled to an extension of time.  

North Midland asked the TCC to decide that this clause was unfair and contradicted an overarching legal principle known as the prevention principle, whereby if an employer prevents a contractor from completing on time, the employer cannot deduct delay damages.  

In the TCC Fraser J held that there was no need for the prevention principle to arise as the clause was “crystal clear”. Lord Justice Coulson agreed that the clause was unambiguous and that it plainly seeks to allocate the risk of concurrent delay to North Midland. 

Lord Justice Coulson then had to consider whether any other reason meant that the crystal clear clause should not apply.  He found that there were no other contract terms which affected the clause and that the overarching prevention principle did not apply as there was a clear contractual provision dealing with acts of prevention.  This ground of appeal was therefore rejected. 

Another ground of appeal by North Midland was that, notwithstanding the applicability of the clause, there was an implied term in the contract which would prevent liquidated damages from being deducted in any event.  Lord Justice Coulson said that there was no reason, given the clear contractual provisions dealing with extension of time with which the employer’s entitlement to deduct liquidated damages was “inextricably linked”, why a term should be implied so that liquidated damages were not to be deducted. This ground of appeal was also rejected.

Cyden Homes raised an argument that, even if North Midland succeeded on its grounds of appeal, there was no delay to completion by Cyden Homes if there were concurrent delays by North Midland.  Lord Justice Coulson said that in the light of his findings on the two main grounds of appeal, it was not necessary to deal with the issue of concurrency and that it would be “unwise” to decide the issue without full argument, given the differences of view expressed in various TCC cases and textbooks on the point. 

The issue of concurrency is an important one on construction projects where competing causes of delay result in delays to completion.  Contractors want to be entitled to extensions of time and relief from delay damages but employers do not wish to pay loss and expense in circumstances where the contractor has in some way contributed to the delay.  This is the current legal position.  It does, however, depend on finding true concurrent delay.  The definition cited by Lord Justice Coulson from John Marrin QC in a paper to the Society of Construction Law 16 years ago remains the current test: “A period of project overrun which is caused by two or more effective causes of delay which are of approximately equal causative potency”.  In my experience true concurrency is rare, but that does not prevent it from being raised as an issue in a number of projects.  

This clear judgment from Lord Justice Coulson upholds the principle of freedom of contract and allows the parties to agree (almost) anything they wish.  It would be useful for the Court of Appeal to give some judicial guidance on the correct meaning of the term “concurrent delay”.  It may be that, like my kitchen cupboard, that will remain a nagging job that a Court of Appeal Judge may never get round to fixing.


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