In late March of this year^[1], the Court of Appeal in Victoria handed down its decision in Bensons Pty Ltd v Key Infrastructure Australia Pty Ltd [2021] VSCA 69.  The principal interest in the case lies in what the court had to say about the prevention principle. There is considerable authority at the highest level that the prevention principle is a rule of law, but nevertheless the Court of Appeal of Victoria considered that it was merely a matter of implication, which gives way to the express terms of the contract. The key passage is perhaps at paragraph 114:

Given that the prevention principle is commonly a reflection of the obligation on the parties to a contract not to hinder or prevent one another from enjoying the benefit of the contract, and generally the source of the obligation is an implied term that is found in most contracts, it is unsurprising that little time was spent analysing the jurisprudential nature of the obligation.  The prevalence of the obligation means that generally the focus will be on the consequences of the impugned conduct for the performance of the contract.  That is what occurred here.  It might also be thought that where the consequence is established (one party has prevented the other from enjoying the bargain) there will inevitably be an antecedent breach.  In our opinion, however, it is an error to consider the prevention principle divorced from the terms of the contract and it is a breach of a contractual term that gives rise to the potential application of the principle.

The implications of this approach to the construction industry are profound.  If this approach is to be followed, it means that an owner (or head contractor), if savvy enough with its conditions of contract, can prevent the contractor (or subcontractor) from executing the work for lengthy periods, and then claim damages from the head contractor (or subcontractor) for failing to complete the work on time. On any sensible, or even half sensible, commercial approach to the law, this should be an anathema. Arguably, on this approach, a mere “entire agreement” clause is sufficient to prevent time being set at large, however much owner (or head contractor) has been the cause of the preventing delay.

Unsurprisingly, KIA is seeking to appeal that decision to the High Court, and the special leave application is due to be heard in just over a month’s time, on 5th November.

Relatively little authority was referred to by the Victorian Court of Appeal on this point.  But there is in fact a great deal of authority on it, and it is carefully and convincingly marshalled^[2] in Tony Marshall’s pair of articles The Prevention Principle and Making the Contractor pay for Employer Delay:  is  English Law departing from its Roots? published in the International Construction Law Review^[3], but which perhaps have not obtained the attention that they deserve. With the kind permission of Tony Marshall^[4], I set out the paper below. It is to be hoped that the High Court will be persuaded of its essence, which is that:

• it is very firmly established by the highest authority that the prevention principle is a principle of law, not a mere matter of implied term and,
• that there are very good reasons why it should remain so.

 

 

 

 

The Prevention Principle and Making the Contractor pay for Employer Delay:  is  English Law departing from its Roots?

(Part 1)

“If the failure to complete on time is due to the fault of the employer and the contractor, in my view the (liquidated damages) clause does not bite. I cannot see how, in the ordinary course, the employer can insist on compliance with a condition if it is partly his own fault that it cannot be fulfilled”[5]

1. Introduction

It has been understood in English law for centuries that, where a contractor undertaking work is prevented by his employer from completing his work by the agreed completion date, the agreed completion date ceases to apply and, the date having “gone”, an obligation to complete within a reasonable time is substituted. Any right on the part of the employer to damages for failure to achieve the original date also falls away; the employer is left to his remedy in general damages for any failure to complete within a reasonable time.

The expression which came to be used to describe this situation, in the early nineteenth century cases, was that the contractor was, as a result, “left at large”, both as to the time for completion and as to any damages payable (time and damages were “at large” in the sense of   being “no longer fixed; unconfined”).  Hence the expression so often on the lips of the construction lawyer (not to mention the enthusiastic claims consultant) – “time is at large”.

Those consequences flow from the application of the time-hallowed “prevention principle” of the common law. According to that principle, he who prevents the performance of his contractual counterparty cannot seek recompense for the resulting failure of the counterparty to perform.

From the key 19^th and 20^th century authorities in this area, it emerged that there were two distinct routes (and two only) whereby the “time at large” consequence could be avoided in a case of employer delay.  Each of those routes was well-defined:

First route

First, time would not be set at large if the contract included “very clear language”[6] in which the contractor expressly and unambiguously committed to complete the works by the agreed date, notwithstanding delay on the part of the employer of the particular kind which occurred (whether that delay be attributable to legitimate ordering of variations or to breaches of obligation on the employer’s part) and to pay liquidated damages if he failed to do so.

Second route

Secondly, time would not be set at large if the contract included a mechanism whereby the employer was able to extend the contractor’s time for completion by the number of days’ delay to completion (so-called “critical” delay) caused by the employer. This would allow a new completion date to be set. The liquidated damages would then be payable from that new date.

Under the “first route”, the parties expressly contracted out of the prevention principle. Under the “second route”, on the other hand, they respected the requirements of the prevention principle but circumvented it: the extension mechanism would ensure that the employer could not exact liquidated damages for any period of delay which he himself had caused.

The authorities made it clear that any such “extension of time” clause, being directed at retaining a fixed date and liquidated damages for the delaying employer, and so protecting him from the adverse consequences of his own act,  fell to be construed strictly against the employer. If there was any doubt as to whether the clause could, in a particular case of employer delay, properly operate to extend the time for completion, that doubt would be resolved against the employer and in favour of the contractor – meaning that the mechanism would fail, and time and damages would, again, be “at large”.[7]

In recent years that long-established, two-route approach has been questioned in Australia, Hong Kong and England; in particular, in the judgments in Turner Corporation Ltd (Receiver and Manager Appointed) v Austotel Pty Ltd[8] in 1994,  Hsin Chong Construction (Asia Limited) v Henble Limited[9] in 2005,  Multiplex v Honeywell[10]  in 2007 (followed by Steria v Sigma Communications[11] in the same year) and North Midland Building Ltd v Cyden Homes Ltd[12] in 2017/2018.

In each of those cases, the contract under consideration contained an extension of time clause worded in a way which restricted its operation in certain cases of employer delay.  Such cases of employer delay then arose.  The time for completion could not be extended. So the “second route” for avoiding the prevention principle failed.  The requirements of the “first route” were also not satisfied.  Nevertheless, the contractor was held to the original completion date and to payment of liquidated damages from that date.

In effect, the judgments allow an employer to include provision for an extension of time (the “second route”), but with a stipulation that in certain conditions it will not be able to operate.  That stipulation is then viewed by the judgments as bringing the situation within the “first route” (i.e. amounting to an agreement to contract out of the prevention principle, or  – as it is put – to allocate the risk of delay, in such a case, to the contractor).

Can it be right in principle to recognise wording which does nothing more than cancel out the operation of the “second route” (which respects and circumvents the prevention principle) as amounting to an agreement to contract out of the prevention principle, as in the “first route”?

With a view to investigating that question, this paper – which is in two parts (Part 2 will be published in ICLR Part 1 of 2021) – reviews the key English and Commonwealth authorities of relevance. Sections 2  to 4 cover the orthodox position – Section 2 the earliest authorities,  up to and including the key case of Holme v Guppy in 1838[13];  Section 3 the subsequent 19^th century authorities;  and Section 4 the pre-1994  20^th century authorities.  Section 5 considers the first cases in which the clarity of the two “routes” first encountered some dilution (albeit in obiter dicta) –  these were two cases involving a contractor in liquidation known as Turner Corporation decided in New South Wales in 1994[14]. Section 6 is devoted to the 1999 Australian case of Gaymark[15], where the court rejected that dilution, upholding the orthodox position. Here the present Part 1 ends.

Part 2, in the next edition of this journal,  will then contain  Sections 7  to 12. Section 7 will consider Professor Ian Duncan Wallace QC’s critique of Gaymark[16], and  Sections 8 to 11 will discuss the more recent cases which have further muddied the water as to the two “routes”.  Section 12 will contain some discussion, and Section 13 a summary of conclusions.

2. The prevention principle – the earliest authorities

The prevention principle is of ancient origin in English law.

Many recent judgments trace the origin of the principle to the early 19^th century case of Holme v Guppy[17], heard before Baron Parke in the Court of Exchequer in 1838.

However, in giving judgment in that case, Baron Parke spelt out clearly that he was relying on much older authorities in coming to his decision.

Holme v Guppy [1838][18]

In Holme v Guppy, the Contractor had undertaken to carry out all the necessary carpentry work on a new brewery building within 4.5 months after the date of the agreement, i.e. by 31 August, 1836.   He had also promised to pay £40 per week for each week that completion was delayed beyond that date.  However, due to defaults on the part of masons retained by the Employer to carry out prior building work, the Employer was unable to allow the Contractor access to the site to start work until 4 weeks after the date of the agreement.  Once access was given (4 weeks late), the Contractor was delayed by his own workmen for a further week.  So, the project suffered, overall, a five week delay: four weeks of delay attributable to the Employer, and one week attributable to the Contractor.

Giving judgment in the Court of Exchequer, Baron Parke held that the Contractor had been disabled by the Employer’s act from performing on time.  He went on to say that:

“… there are clear authorities that, if a party be prevented, by … the other contracting party, from completing the contract within the time limited, he is not liable in law for the default.”

The “clear authorities” to which Parke B went on to refer in support of his proposition were:

(1) an entry in a 1668 work on the principles of the common law, Sir Henry Rolle’s “Un Abridgment des Plusieurs Cases et Resolutions del Common Ley” (Sir Henry was Lord Chief Justice of the King’s Bench and lived from 1589 to 1656),  and

(2) Condition L(6) in Sir John Comyns’ “Digest” of common law principles (Comyns’ Digest was the last English law book to be written in Law French, and was printed in the 1760s, although it had been completed by Sir John before his death in 1740).

One of the relevant passages is found at page 453 of Sir Henry Rolle’s “Abridgment” and reads:

“3. Si home soit oblige a levier un mease, etc, il est excuse si l’obligee ne voilt luy suffer a levier ceo, car il ne poet vener sur le terre sans son volunt, 19 E.4.2.b, per Curiam”

or, in English:

“If a man takes on an obligation to build a house, he is excused if the obligee will not suffer him to build it, for he (the obligor) cannot come on the land without his (the obligee’s) consent, 19 E.4.2.b, per Curiam.”

The reference to “19 E.4.2.b” is to a case decided in the nineteenth year of the reign of King Edward IV, i.e. 1479. The record of that case shows that an owner sued his contractor for failing to “frame” and “raise” (i.e. build) a house of certain dimensions by the agreed date. The contractor pleaded that he had indeed “framed” the house as agreed, but the owner had indicated that he did not want the house to be “raised” until an adjoining house had first been made equal in height.  The court appears to have held that the contractor would be released from any liability for failing to complete on time provided he was in a position to plead that the owner had not allowed him to proceed with construction.

A second relevant passage in Rolle, also on page 453, reads:

“4. Si un condition soit a repairer un mease, il est excuse de ceo si un estranger per commaund del obligee mesme luy disturbe et ne voile luy suffer a ceo faire, 9 H.6.44.b.”

Or, in English:

“4. If it is a condition [of the contract] that a house is to be repaired, he (the obligor) is excused from this if a third party, at the command of the obligee himself, obstructs him and does not want to suffer him to do this.”

The reference to “9 H.6.44.b” is to a case decided in the ninth year of the reign of King Henry VI, i.e. 1430.  The plaintiff in the case was the King’s grandmother, Queen Joan (widow of Henry IV).  The final outcome of the case is not apparent from the report, but the principle appears to be established that, provided the contractor could make good his plea that the servant of the Queen had disturbed his attempts to repair the house, and not allowed him to proceed, he would have a good defence.

Then Condition L(6) in  Sir John Comyns’ “Digest” (c. 1760), as translated from Law French into English, reads:

“So the performance of a condition shall be excused by the obstruction of the obligee: as if a condition be to build an house, and he [the obligee], or another by his order, hinders his coming upon the Land. 1 Rol 453, line 50;

Or says that it shall not be built. 1 Rol. 454 line 2

Or interrupts the Performance.  1 Rol. 454 lines 5 and 20″

(see page 344 of the Digest – “1 Rol.” in the citations refers to Volume 1 of Sir Henry Rolle’s Abridgment  (1668) – it is not clear why the cross-references are to page 454, given that the most obviously relevant statements of principle in Rolle are those cited above, which are from page 453; perhaps Baron Parke was referring to a different edition, with slightly different page numbering).

Having referred to those ancient authorities, Baron Parke held that, by reason of the Employer’s prevention of timely completion, the Contractor was excused from performing within the stipulated time.  And, since there was nothing to show that the parties had entered into a new contract by which to perform the work by a later date, the contractor was “left at large” (that is to say, there was no longer any fixed date for completion or fixed amount of damages); and consequently the Contractor was “not to forfeit anything for the delay“.

3. Relevant authorities since Holme v Guppy (19^th century)

As the 19^th century unfolded, various further cases were decided on the same point and followed the Holme v Guppy approach.

Russell v Viscount Sa da Bandeira [1862][19]

Russell had agreed to build a warship (the “Donna Anna Maria”) for the Portuguese government (represented by its Minister of Marine, the Viscount) for £10,400. The vessel was to be delivered on or before 25th April 1860, with a “penalty” of £5 for each day of delay to delivery beyond that date; provided that, if such delay were proved to the satisfaction of the government’s agent (one Admiral Sartorius) to be attributable to a cause not within the control of Russell, then the penalty should not be enforced for the number of days of such delay as certified by the agent (this was an early form of extension of time clause).

Many extras and additions were requested by Portuguese government representatives, but this was not done in accordance with the variations procedure in the contract.  It was held that the extras had caused a delay of about 6 weeks to completion of the ship. For whatever reason, Admiral Sartorius issued no certificate confirming that a certain number of days’ delay was attributable to the Employer.

Russell claimed additional payment for the extras.  The government claimed to be entitled to set off a considerable sum by way of the daily penalty of £5 for the period of delay.

The case came before the Court of Common Pleas on a case stated from an arbitrator – see the questions stated on page 74 of the report.

Byles J held that the case of Holme v Guppy was …

“substantially in point …  .  It is founded upon an old and well-understood rule of law.  The authorities will be found collected in (Sir John) Comyns’s Digest, Condition L.6.  Where the condition has become impossible of performance by the act of the grantee himself, the grantor is excused.  So that Holme v Guppy is not only in point, but is consistent with the ancient authorities, and is founded on the most invincible reason and good sense.  The result is … that the defendant  is not entitled to any set-off in respect of the penalties, the non-delivery of the vessel by the day stipulated having been in part caused by delay for which he himself was responsible.“[20]

Westwood v The Secretary of State for India in Council [1863][21]

Westwood had agreed to construct a general service paddle steam-vessel.  Various variations were ordered by the Engineer during the course of the vessel’s construction. It was not delivered on time and certain payments were withheld.

In proceedings brought by Westwood, the Secretary of State pleaded that the withholding was in respect of liquidated damages due from Westwood by reason of the late delivery of the vessel. Westwood blamed the delay on the variations: the altered and additional work was so mixed up with the original work required by the contract (in respect of which the Secretary of State claimed to make the deductions for liquidated damages) that it was impossible, they said, to complete and deliver the original work until the additions were also complete. They had been prevented from completing and delivering within the time agreed upon, and could not be held to payment of the penalties.

The Court agreed. Crompton J, said:

“…it cannot be said that the penalties ever accrued … when we find that the defendant by his act prevented the possibility of the work being completed within the time, I think that is an answer to the claim for penalties.  Holme v Guppy, and the general rule of law, are sufficient to authorise us in holding that, on this point, our judgment should be for the plaintiff.”

Roberts v The Bury Improvement Commissioners [7 February 1870][22]

Roberts as contractor had agreed to erect buildings for the Commissioners by a specified date, with a penalty payable upon failure to do so. Variations could be ordered, and there was entitlement to an extension of time in respect of any resulting delay to completion.

The Commissioners purported to terminate the contract on the grounds of Roberts’ failure to proceed with due diligence.

Roberts commenced an action against the Commissioners for preventing them from performing, contending that any failure and lack of due diligence on their part had been caused by the Commissioners’ own defaults.

The Court of Common Pleas rejected Roberts’ pleas. But on appeal to the Court of Exchequer Chamber, the majority (Kelly CB, Channell B and Blackburn and Mellor JJ; Cleasby and Pigott BB dissenting)) reversed that decision.

The majority found that the Commissioners had, in fact, admitted that Roberts’ failure to use due diligence was the result of failures by the Commissioners themselves, and their architect, to supply plans and set out the roads necessary to enable Roberts to commence the works.  The majority held that the “rule of law” applied “which exonerates one of two contracting parties from the performance of a contract, where the performance of it is prevented or rendered impossible by the wrongful act of the other contracting party”[23]; also that “the well-established rule of law contended for by [Roberts] applies to this case; that [Roberts’] breach of contract is excused by reason of its having been caused by the [Commissioners’] breach of contract; and that the [Commissioners] cannot, therefore, acquire  by means of their own wrongful act or default the right to enforce” the termination provision of the contract[24].

Blackburn and Mellor JJ  held that there was an implied contract on the part of the Commissioners to do their part towards completion within a reasonable time…

“and, if they broke that implied contract, the contractor would have a cause of action against them for any damages he might sustain, and the commissioners would be precluded from taking advantage of any delay occasioned by their own breach of contract;  for, it is a principle very well established at common law, that no person can take advantage of the non-fulfilment of a condition the performance of which has been hindered by himself: see Comyns Digest Condition (L6);  and also that he cannot sue for a breach of contract occasioned by his own breach of contract, so that any damages he would otherwise have been entitled to for the breach of the contract to him would immediately be recoverable back as damages arising from his own breach of contract. Those principles have been applied to contacts very analogous to the present, in the cases of Holme v Guppy, Russell v Da Bandeira and Westwood v Secretary of State for India …”[25].

That judgment was adopted by Kelly CB and Channell B, who added that “the rule of law relied upon by (Roberts) is applicable to this case; that the [Commissioners] cannot take advantage of their own wrong; and that they consequently had no power to determine the contract …“[26].

On this occasion the issue was not delay caused by variations, but delay caused by breaches of contract on the part of the Employer.

Cleasby B, although he delivered a dissenting judgment, did refer to Holme v Guppy, “and other authorities to the same effect referred to in the argument”, as applying what he called a “maxim of the common law“.[27]

Jones and Another v The President and Scholars of St. John’s College, Oxford [18 November 1870][28]

Jones had agreed to build for the College a farmhouse and related buildings. These were to be roofed in by 1st December 1867 and ready for occupation by 15^th  May 1868. Liquidated damages of £3 were to be paid, if completion was late, for every day until the completion of the works.  The balance of the contract price (£2,340) was to be paid on completion of the works, when the inspector had given his final certificate of approval.

The contract provided that Jones should do no extra works without an order signed by the clerk of works, and countersigned by the bursar; if extra works were so ordered, Jones expressly committed to complete the extra works within the period limited for completion of the original works, unless an extension of time were also allowed by an order signed and countersigned by the same two individuals and issued within 21 days after the order for the extra works.

Various additional works were ordered in the course of the contract, and Jones completed the works later than the contract required.

In a dispute over the amount of the final payment due to Jones, Jones sued for a balance of £990.

In reply, the College pleaded that Jones had not completed the works on the day named and was therefore liable to pay to the College liquidated damages at the rate of £3 for every day from the contractual completion date to the actual date of completion, totalling £873, which the College was entitled to set-off against the £990.

Jones’ response was that additions and alterations ordered by the College had required work which was, as in Westwood, so mixed up with the original works as to make it impossible for Jones to complete the original works on the day named, or until the additions and alterations were completed; and that there always had been a dispute as to the time in which such works ought to have been and were completed and as to the right of the College to be paid the sum of £873 claimed.

The College argued that Jones had contracted positively and absolutely to complete the original work, together with any variations, within the agreed period for completion, save only where an extension of time was allowed by the clerk of works and the College bursar, as mentioned above; and none had been allowed. Jones himself appears to have admitted that he had agreed as alleged (certainly the judges in Dodd v Churton – the next case below – proceeded on that basis).

Mellor J, giving the first judgment, did not believe that the Holme v Guppy line of cases supported the contentions of Jones in this case.  He said that Westwood v. Secretary of State for India did not raise the same issues because, unlike Jones in the present case, Westwood had not committed to complete any alterations which might be ordered within the original time for completion.

Lush J commented that, in effect, the contract here provided as follows:

“We undertake to erect these buildings, and any alterations you may order us to make, and we will roof them in by the 1st of December, and we will completely finish them by the 15th of May.” [29]

The answer to Jones, he said, was:

“You have undertaken to do it, so you must do it, or you must pay the penalty.”[30]

Westwood v. Secretary of State for India did not support Jones, said Lush J, because in that case Westwood had not contracted to do what Jones had expressly contracted to do here; namely, execute the work, with the alterations, within the prescribed time. Westwood was, therefore, distinguishable.

Dodd v Churton [1897][31]

Dodd had entered into a contract with Churton whereby Dodd was to execute and complete certain building works by 1 June 1892. A penalty of £2 per week was to be payable by way of liquidated damages for every week of delay to completion. Express provision was made for the ordering of variations by Churton. If any were ordered, they were not to be taken to “vitiate the contract”.

Additional works to a value of £22 8s 8d were ordered. These necessarily involved a delay in the completion of the works until after the specified date (they were not completed until 5 December 1892 – 27 weeks late).

Churton contended that a fortnight was a reasonable time for the doing of the additional work. He therefore allowed an additional fortnight to Dodd, and  claimed £2 per week  for the remaining 25 weeks of the delay as liquidated damages.

There was no applicable extension of time clause in the contract.

The county court judge held that, in giving the order for the additional works, Churton must be taken to have waived the penalty stipulation, and gave judgment for Dodd. On appeal to the Divisional Court (with 2 judges sitting), Wills J agreed, but Wright J was of the contrary view, with the result that the county court judgment stood.

On appeal to the Court of Appeal, the judgment for Dodd was upheld.

Lord Esher MR said:

“The principle is laid down in Comyns’ Digest, Condition L(6), that, where one party to a contract is prevented from performing it by the act of the other, he is not liable in law for that default; and, accordingly, a well-recognised rule has been established in cases of this kind, beginning with Holme v Guppy, to the effect that, if the building owner has ordered extra work beyond that specified by the original contract which has necessarily increased the time requisite for finishing the work, he is thereby disentitled to claim the penalties for non-completion provided for by the contract.[32]

Jones v St John’s College[33] was distinguished by Lord Esher – in Jones there had been express, specific agreement between the parties that, if any extra work was ordered, the contractor would undertake to complete it within the time originally specified – if the builder was foolish enough to make such an agreement, he was bound by it, and must take the consequences. In this case there was no such agreement.

Lopes LJ agreed.  He added that it was:

” a well-ascertained rule of law that, where the failure of a contractor to complete the work by the specified day has been brought about by the act of the other party to the contract, he is exonerated from the performance of the contract by that date, which has been thus rendered impossible. …  It was argued that this case was taken out of that rule by the clause in the contract which empowers the architects to order extras and provides that such an order is not to vitiate the contract; and that that clause brought the case within the decision in Jones v St John’s College. In my opinion that is not so. I do not think the clause bears the construction which the defendant seeks to put upon it.  …”.[34]

Chitty LJ[35] also agreed, saying:

“The case really depends upon the construction of the contract between the parties. The law on the subject is well settled. The case of Holme v Guppy, and the subsequent cases in which that decision has been followed, are merely examples of the well-known principle stated in Comyns’ Digest, Condition L(6.), that, where the performance of a condition has been rendered impossible by the act of the grantee himself, the grantor is exonerated from performance of it.

The law is put very neatly by Byles J in Russell v Bandeira.  This principle is applicable not to building contracts only, but to all contracts.  If a man agrees to do something by a particular day or, in default, to pay a sum of money as liquidated damages, the other party to the contract must not do anything to prevent him from doing the thing contracted for within the specified time.

Of course, a man may make such a contract as was alleged in Jones v St John’s College. He may contract to do the specified works and any extra work which may be ordered within a certain time.  In Jones a contract to that effect was admitted by demurrer, and therefore there was no opportunity for the application of the rule of law which I have mentioned. I can find nothing in the contract in this case to justify the Court in saying that it was a contract of the same nature as was admitted in Jones v St John’s College.

The provision of the contract principally relied upon by the defendant is one by which it is stated that any authority given by the architects for any alterations or additions in or to the works is not to vitiate the contract. I do not think that this provision, however interpreted, reaches the length contended for by the defendant. I do not think it amounts to a contract to do all the works, including any extras that may be ordered, within the time specified for the performance of the original work. The clause appears to me capable of another and a more reasonable construction. I think that such a construction as is contended for ought not to be put on an ambiguous clause like this, and that it would require very clear language to shew that a man had undertaken a responsibility which very few men would undertake with their eyes open.  The provision is that the contract is not to be vitiated, i.e. that it is to stand, but that does not exclude the application of the principle stated in Comyns’ Digest to which I have referred.”[36]

So, whilst – in Jones v St John’s College, Oxford[37] – wording in which the contractor committed to complete by the stipulated completion date irrespective of the ordering of variations was held to be sufficient to override the prevention principle, in Dodd v Churton  it was established that  wording to the effect that any ordering of variations was not to “vitiate the contract” was not sufficient to do so, even though the prevention principle would obviously cause parts of the contract to be “vitiated” (the definition of “to vitiate” in the Cambridge English Dictionary is “to destroy or damage something”), in that the fixed completion date and the provision for liquidated damages would both, in effect, be excised from it.

4. Relevant authorities in the 20^th century – up to 1990

Wells v Army & Navy Cooperative Society (16 April 1902)[38]

In Wells v Army & Navy Cooperative Society[39], Wells sued their employer, the Society, for  sums owing to them on completion of a certain building. The Society claimed to be entitled to set-off against the sum due “damages or penalties” at the rate of £10 per day for the delay in completion beyond the period of 12 months allowed for the work.

The contract contained the usual provision for variations.  A special provision stipulated that such orders should not “vitiate the contract or the claim for penalties under clause 16” – this was similar to the provision in Dodd v Churton to the effect that the instructing of additional works would not “vitiate the contract”, but this time with the added wording that such instructions would also not vitiate the employer’s claim for penalties for late completion.

The contract provided for an extension of time for any delay to the works caused by any variation, any default by sub-contractors imposed on the contractor, and any “other causes beyond the contractor’s control”.  Importantly, it did not expressly provide for any extension to cover delay caused by breach of contract on the part of the Society.

Completion was delayed by almost 12 months. The Board allowed an extension of 3 months in respect of sub-contractor default.  Wells claimed to excuse the remaining 9 months of delay on the ground of (a) variations and (b) interference by the employer and its architect with the conduct of the works, and failure to give possession and to provide drawings and plans in due time. The extension of time clause did not refer to failures of the kind in (b).

At first instance, Wright J agreed with Wells: in view of the delay caused by the employer’s interference and defaults, the employer could not recover any penalty/liquidated damages. The extension of time provision contained no words expressly covering acts of prevention by the employer generally, unless such acts could be regarded as “other causes beyond the contractor’s control”.  The judge held that, since the wording of an extension of time clause falls to be construed strictly against the employer, the words “other causes beyond the contractor’s control” could not be understood as covering breaches of obligation by the employer himself.

Wright J concluded that the defaults of the employer were such that, in their cumulative effect, they were inconsistent with the employer’s claim to insist on completion within the stipulated time; and, although the contractor had himself also caused delay, delays by the employer “were such as even in the absence of the other causes of delay would have prevented completion in due time …”.

Alfred A Hudson, original author of Hudson’s Building and Engineering Contracts,  appeared as junior counsel (led by Mr English Harrison KC) for  the successful contractor, Wells,  in this case.

The matter went on to the Court of Appeal, which unanimously upheld Wright J[40].

The leading judgment was given by Vaughan Williams LJ (uncle of the famous composer). His Lordship said that it was not his intention to relieve the contractor in any way from the obligations which he had voluntarily undertaken.  However, insofar as the contract set down a period of time within which the contractor was to do the work, not only was he obliged to do it within that time, he was also entitled to have that time within which to do it[41]. He went on:

“In my judgment, where you have a time clause and a penalty [i.e. liquidated damages] clause, it is always implied in such clauses that the penalties are only to apply if the builder has, as far as the building owner is concerned and his conduct is concerned, that time accorded to him for the execution of the works which the contract contemplates he should have.”[42] 

The employer’s counsel (Mr Reginald Bray, KC) had argued that, whilst the employer had so delayed the works as to prevent their completion within the time agreed, it was also true that the builder himself “did not get on as fast as he might have got on” (this appears to be an early case of what is now referred to as “concurrent” delay, although the term was not in use at the time), and that the contractor should therefore not be relieved of his obligation to pay liquidated damages.  However,   His Lordship was of the view that, whatever the contractor might have done, the delay of the employer and his architect on its own was enough to make it impossible to complete by the agreed date, saying:

“In law, I wholly deny the proposition Mr Bray put forward, which was this really in effect:  “Never mind how much delay there may be caused by the conduct of the building owner, the builder will not be relieved from penalties if he too has been guilty of delay in the execution of the works.”  I do not accept that proposition in law.”[43]

Put another way, Vaughan Williams LJ was “wholly denying” that the prevention principle was inapplicable in a case of concurrent delay – it was as applicable then as in a case of sole employer delay.

In his judgment, Mathew J also said:

“The penalties are intended to secure the performance of a contract according to its terms, and when a departure from the terms take place by one of the contracting parties, in this case by the building owner, the claim by that building owner for penalties disappears as a matter of course, and as a matter of common sense.”[44]

Baskett & Anor v Bendigo Gold Dredging Co Ltd [1902] 21 NZLR 166[45]

In Baskett & Anor v Bendigo Gold Dredging Co Ltd, the contractor (Baskett) agreed to build a dredge for Bendigo.  The contract was made on 16 March 1900.  Completion was to be by 16 November 1900, with liquidated damages of £2 to be payable for each day of delay beyond that date.  The site was to be made available, and prepared, by Bendigo.

In the event, Bendigo did not make the site available to Baskett until 8 October 1900.  Equally, Baskett were not ready to begin the work before then (as regards the procuring of necessary timber etc).  There was nothing to suggest that Baskett’s operations were hindered or delayed by not getting the site until October, but it was found as a fact that Bendigo’s failure to prepare the site had delayed Baskett by 2 weeks – Baskett had had to do the site preparation themselves.  Reviewing the earlier authorities (Holme v Guppy [1838], Russell v Bandeira [1862] and Dodd v Churton [1897]), Williams J said:

“These cases seem to show that if any delay is caused by the employer, the right of the employer to recover penalties is gone, even if the contractor would not have completed the work within the time if no delay had been caused by the employer.”

Amalgamated Building Contractors Ltd v Waltham Holy Cross Urban District Council [1952] 2 All ER 452[46]

Amalgamated Building contracted with the Council for the construction of 202 houses by 7 February 1949, with delay liquidated damages of £50 per week. Completion was  achieved on 28 August 1950.  After completion, the Architect extended the time for completion from 7 February to 23 May 1949. Amalgamated Building challenged the extension as invalid on the basis that the extension of time mechanism could only be operated up to the contractual completion date, and contended that accordingly the time for completion was “at large”.

The Court of Appeal (Singleton, Romer and Denning LJJ) rejected that argument, holding that there was no such time limit on the operation of the extension of time clause.  But, in the course of his judgment  Denning LJ remarked that where works were delayed “due to some act or default of the building owner … the contract time may well cease to bind the contractors, because the building owner cannot insist on a condition if it is his own fault that the condition has not been fulfilled.  That was decided in Roberts v Bury Improvement Commissioners and many other cases.”[47]

Perini Pacific Ltd v Greater Vancouver Sewerage and Drainage District[48] (7 March 1966)

Perini had agreed to construct a sewage disposal plant by 25 November, 1962, subsequently extended to 10 January, 1963.  If completion was late, liquidated damages of $1,000 were to be payable. The project was completed on 4 March  1963, 53 days late.

Certain engines which the employer had undertaken to provide for use in the plant, although originally delivered on time, were found to have damaged cylinder walls. They had to be removed and repaired, and this work was only completed on 23 February, 1963.

Perini sued for damages in respect of losses it had sustained as a result of the delay.  The employer counterclaimed for liquidated damages of $53,000.

Perini’s claim was dismissed at trial, and judgment given in favour of the employer on the counterclaim, but in the reduced sum of $8,000.    Perini appealed.  Their appeal was dismissed by the British Columbia Court of Appeal (Davey, Lord and Bull, JJA); importantly, the employer’s counterclaim for liquidated damages was also entirely dismissed.

Perini appealed to the Supreme Court of Canada[49] against the dismissal of their appeal.  There was, however no appeal in relation to the dismissal of the Employer’s counterclaim for liquidated damages.  The judgments of the British Columbia Court of Appeal therefore stand in relation to the counterclaim.

As in Wells v Army & Navy Cooperative Society Limited[50], the contract included an extension of time clause allowing an extension for delay caused by various listed events and then by “ …  any other cause beyond the control of the Contractor …”, but not expressly covering delay caused by breach or default on the part of the Employer.

Following Wells v Army & Navy, the Court of Appeal took the view that, because the extension provision fell to be construed “narrowly and with reference to the preceding specific causes of delay” – that is to say, against the Employer –   on their true construction, the words “other cause beyond the control of the Contractor“ did not extend to include breach or default of the Employer.  Given the Employer delay which had occurred, the clause therefore did not rescue the employer’s liquidated damages entitlement, and Perini were entirely relieved from liability for the liquidated damages claimed[51].

As in Wells v Army & Navy, it appears that Perini were themselves in delay while being delayed by the issue with the engines for which the employer was responsible (again, an apparent instance of “concurrent” delay before the term entered common usage):

“ … the evidence discloses that (Perini), without the default of the (employer), was quite substantially behind in its work, and that regardless of the delays caused by the said defaults of the (employer), (Perini) would not have completed the project by January 10, 1963.”[52]

Bull JA reaffirmed the working of the prevention principle as established in the previous authorities above:

“Since the earliest times it has been clear that a party to a contract is exonerated from the performance of the contract when that performance is prevented or rendered impossible by the wrongful act of the other contracting part: See Holme v Guppy 3 M&W 387, 150 ER 1195; Russell v Viscount Sa da Bandeira 13 CB (NS) 149, 143 ER 59; Roberts v Bury Improvement Commissioners  LR 5 CP 310; and Dodd v Churton 66 LJQB 477, [1897] 1 QB 562.[53]

Bull JA also quoted passages from the judgments of Lopes LJ and Chitty LJ in Dodd v Churton[54], in which their Lordships referred to the prevention principle as “the well-known rule of law” and stated that “the law applicable to this case is perfectly settled”, Chitty LJ explaining that the cases on this are all examples of the well-known principle stated at Condition L in Sir John Comyns’ Digest (18 LJQB 45; 12 QB 1015), and that “the building owner is not allowed to insist upon the penalty for delay if, by ordering extras, he has prevented the builder from completing the work by the specified time”[55].

Bull JA also quoted from Kelly CB in Roberts v Bury Improvement Commissioners[56]:

“… for it is a principle very well established at common law, that no person can take advantage of the non-fulfilment of a condition the performance of which has been hindered by himself”[57].

Bull JA then referred extensively to Wells v Army & Navy (a case, he said, “singularly similar to the one at bar”[58]), noting the rejection in Wells by Vaughan Williams LJ of the proposition that the employer cannot be said to have prevented timely completion where there is employer delay but the contractor has also contributed to the delay (see the passage quoted above in which Vaughan Williams LJ referred to the submission of  Mr Bray, counsel for the Army & Navy)[59].

It followed that Perini “should have been completely relieved of its obligation to complete the project by January 10, 1963, whereupon the liquidated damages clause … falls, unless other provisions of the contract prevent that result”.[60]

The learned judge went on to explain that an extension of time clause could “prevent that result”, but only “if it is clearly applicable and clearly covers the act of prevention which has in fact occurred.  Where it does not cover such acts, any decision under the clause will not bind the contractor or preserve a liquidated damages clause”. [61]

In other words, the extension of time clause method of respecting and circumventing the prevention principle – our “second route” – is only able to save the employer’s liquidated damages if it is expressed in language which clearly extends time to cover the particular instance of employer delay which has arisen.

Peak Construction (Liverpool) Limited v McKinney Foundations Limited (1 July 1970)[62]

Liverpool Corporation had made a contract with Peak Construction in 1964 for Peak to build a 14 storey block of 58 flats, to be completed within 24 months.  Liquidated damages of 25 shillings per dwelling were payable for each week, or part of a week, elapsing between the agreed completion date and actual completion.  An extension of time clause permitted the Architect to make such extension “as to him may seem reasonable” if the Contractor was delayed by variations, industrial action, force majeure, or “other unavoidable circumstances” (but the clause did not refer to delay caused by any act, omission or breach of the Corporation).

 

McKinney were the nominated sub-contractors for the design and construction of the foundation piles. It was later discovered that one of the piles was seriously defective.  Substantial delay occurred while the defect was rectified.

 

In the court proceedings, Peak sought to recover from McKinney the liquidated damages which they (Peak) had paid to the Corporation in respect of the delay.  McKinney contended that Peak had not in fact been liable to pay those liquidated damages, and so could not pass them on to McKinney.

 

The judge at first instance upheld the award of the liquidated damages, on the basis that the whole of the delay had been caused by McKinney.  McKinney appealed.  The Court of Appeal allowed the appeal on the basis that the facts did “not justify [the finding as to responsibility for delay] but… led irresistibly to the opposite inference or conclusion“, namely that certain delays had clearly been caused by the Corporation.

 

Salmon LJ held that Peak were not entitled to recover any of the liquidated damages,  because Peak had not themselves been liable to pay them to the Corporation. He said:

“The liquidated damages clause contemplates a failure to complete on time due to the fault of the contractor.  It is inserted by the employer for his own protection; for it enables him to recover a fixed sum as compensation for delay, instead of facing the difficulty and expense of proving the actual damage which the delay may have caused him.  If the failure to complete on time is due to the fault of both the employer and the contractor, in my view the clause does not bite.  I cannot see how, in the ordinary course, the employer can insist on compliance with a condition if it is partly his own fault that it cannot be fulfilled: Wells v Army & Navy Corporative Society Limited; Amalgamated Building Contractors v Waltham Urban District Council; and Holme v Guppy.  I consider that, unless the contract expresses a contrary intention, the employer, in the circumstances postulated, is left to his ordinary remedy; that is to say, to recover such damages as he can prove flow from the contractor’s breach.  No doubt if the extension of time clause provided for a postponement of the completion date on account of delay caused by some breach or fault on the part of the employer, the position would be different.  This would mean that the parties had intended that the employer could recover liquidated damages notwithstanding that he was partly to blame for the failure to achieve a completion date.  In such a case the architect would extend the date for completion, and the contractor would then be liable to pay liquidated damages for delay as from the extended completion date. 

The liquidated damages and extension of time clauses in printed forms of contract must be construed strictly contra proferentem [i.e. against the interest of the employer, for whose protection – Salmon LJ had stated earlier, see above – they are inserted].  If the employer wishes to recover liquidated damages for failure by the contractor to complete on time in spite of the fact that some of the delay is due to the employers’ own fault or breach of contract, then the extension of time clause should provide, expressly or by necessary inference, for an extension on account of such a fault or breach on the part of the employer.”[63]

Salmon LJ was, here, following faithfully the previous authorities on the point, in particular Wells[64]  and Perini[65]  (see above[66]).

Edmund Davies LJ, agreeing, quoted the following passage from the 9th Edition of Hudson’s Building and Engineering Contracts:

“It is not open to the employer, where the contract date has ceased to be applicable, to make out a kind of debtor and creditor account, allowing so many days or weeks for delay caused by himself and, after crediting that period to the builder, to seek to charge him with damages at the liquidated rate for the remainder.“[67]

Salmon LJ said that, once it was established that the Corporation had itself caused a part of the delay, the Corporation were entitled to no liquidated damages, however slight the delay caused by them: as in Wells and Perini, that there could only be an extension for delay caused by breach of contract by the Corporation if the wording expressly provided for one, and he was “unable to spell any such provision out of”  the extension of time clause in this case, including the words “other unavoidable circumstance”[68].

 

Phillimore LJ confessed that he had initially been “somewhat startled” to hear from counsel for McKinney that, as soon as any part of the delay could be attributed to the employer, then (in the absence of a workable extension of time mechanism) “any agreement as to liquidated damages disappears” but confirmed that, on the authorities, that was the position.  He went on:

“I would re‑state the position because I think it needs to be stated quite simply.  As I understand it, a clause providing for liquidated damages (clause 22) is closely linked with a clause which provides for an extension of time (clause 23).  The reason for that is that when the parties agree that if there is delay the Contractor is to be liable, they envisage that that delay shall be the fault of the Contractor and, of course, the agreement is designed to save the Employer from having to prove the actual damage which he has suffered.  It follows, once the clause is understood in that way, that if part of the delay is due to the fault of the Employer, then the clause becomes unworkable if only because there is no fixed date from which to calculate that for which the Contractor is responsible and for which he must pay liquidated damages.  However, the problem can be cured if allowance can be made for that part of the delay caused by the actions of the Employer; and it is for this purpose that recourse is had to the clause dealing with extension of time.  If there is a clause which provides for extension of the contractual time in the circumstances which happen, and if the appropriate extension is certified by the architect, then the delay due to the fault of the Contractor is disentangled from that due to the fault of the Employer and a date is fixed from which the liquidated damages can be calculated.“[69]  (underlining added)

So, for the above solution to be available to a delaying employer, it is vital that the contract contain “a clause which provides for extension of the contractual time in the circumstances which happen” so that “the delay due to the fault of the Contractor” can be “disentangled from that due to the fault of the Employer and a date … fixed from which the liquidated damages can be calculated.“  This is, of course, the “second route” to avoiding application of the prevention principle identified in the Introduction above. If, for some reason, the language of the clause, construed strictly against the employer, does not allow that disentangling to occur, time will be at large.

The recent cases in Hong Kong and England which have given rise to the discussion in this paper – in particular  Hsin Chong v Henble[70], Multiplex v Honeywell[71]  and North Midland Building Ltd Cyden Homes Ltd[72] (for those cases, see Sections 8, 9 and 11 of this paper) – do not properly grapple with that point.

S M K Cabinets v Hili Modern Electrics Pty Limited (28 September, 1983)[73]

In May 1980, Hili contracted with S M K Cabinets for the supply and installation of cupboards for a price of $2,190, the work to be completed before 15 July 1980.  There was no extension of time clause.  If the work was not completed within seven days of the due date, the Contractor was to pay Hili $35 per day for each day that the work remained uncompleted.   Hili claimed liquidated damages for 154 days, since completion did not take place until 23 December 1980.  The matter was referred to arbitration.

 

The arbitrator found that acts and omissions by Hili had delayed completion of the works but that, since S M K could not have completed the work before 15 July 1980 anyway because of deficiencies on their own part, Hili’s delays  were of no legal significance.

 

Brooking J disagreed. He held that the arbitrator had erred in holding that, because of SMK Cabinets’ own inability to complete by the relevant date, Hili should not be taken to have delayed completion and could therefore retain its right to liquidated damages:

“(The arbitrator) evidently considered that, where acts or omissions of a proprietor do in fact substantially delay completion, the proprietor nonetheless cannot be said to have prevented the contractor from completing by the relevant date unless the contractor would have been able to complete by that date had it not been for the supposed prevention.  Mr McCurdy [counsel for Hili, the proprietor)] asks us to uphold that view.  But it has been accepted  for more than one hundred years that this is not the law.  The cases are all one way…”. [74] 

To demonstrate his point that “the cases are all one way”, Brooking J reviewed the judgments in Holme v Guppy, Russell v Viscount Sa Da Bandeira, Dodd v Churton, Baskett v Bendigo Gold Dredging, Wells v Army & Navy Cooperative Society, Perini v Greater Vancouver Sewerage and Drainage District and Peak Construction v McKinney Foundations, before concluding:

“In England, the Court of Appeal had occasion to consider the matter in Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd [1970] 1 BLR 111. …Salmon LJ, at p. 121, Edmund Davies LJ, at p. 125 – 6, and Phillimore LJ, at p. 127 – 8, all laid it down that a liquidated damages clause does not operate where the proprietor and contractor are both partly responsible for the failure to complete on time.”[75]

 

5. 1994 – The Turner  Cases  (New South Wales)

In Australia, following SMK Cabinets in 1984, we come to two relevant cases, both  of which involved, as claimant, an insolvent contractor, Turner Corporation Ltd:

Turner Corporation Ltd (Receiver and Manager Appointed) v Austotel Pty Ltd  (2 June 1994)[76]  (“Turner No 1”)

Turner sought (a) leave to appeal from an interim arbitration award on certain issues and/or (b) remission of the award for reconsideration on the basis of technical misconduct by the arbitrators on certain other issues.

The case concerned delay in Turner’s construction of a new hotel.  The Architect appointed to administer the contract (which incorporated the Australian JCCA standard form) had certified an entitlement on the part of the Employer to delay liquidated damages of A$2,259,000. The arbitrator’s award allowed the contractor a certain extension of time, which reduced the liquidated damages to A$1,725,000.

The contract made provision for an extension of time if the Works were delayed by any act, default or omission on the part of the employer or by a variation.  Notice of the cause and extent of the delay was required to be given as a condition precedent to an extension (referred to below as a “notice-as-condition-precedent clause”). However, the JCCA form of contract included, as is common in Australia, a “reserve power” on the part of the Architect to extend the time for completion at his discretion.

While the works were ongoing, in September 1991, Turner requested an instruction from the Architect regarding the provision of a gas leak detector.  The Architect finally responded with an instruction in late February 1992, nominating 6 possible types of gas detector and their suppliers.  Turner obtained prices and passed the prices to the Consulting Engineers, who selected a supplier. There was a certain lead time in the supply of the detector.  It was finally installed by Turner at the end of April 1992.

Turner claimed that it had been prevented from achieving completion on time and that the employer was not entitled to recover any sum by way of liquidated damages because it had prevented performance.

Cole J referred with approval to the discussion of the prevention principle by Brooking J in SMK Cabinets.  He emphasised Brooking J’s point that the principle would only disable the Employer from recovering liquidated damages “in the absence of an applicable extension of time clause”.  He held that, since the JCCA form of contract entitled the contractor to apply for an extension of time where there was a preventing act on the part of the employer, the prevention principle could not have any application in this case.

This does not appear to have been a case where the contractor was claiming that time was at large because he had failed to give the requisite notice.  Nevertheless, Cole J did address what the situation would be if the contractor, having a right to claim an extension of time, failed to do so.  In that circumstance, the view taken by His Honour was that the contractor could not claim that the act of prevention which would have entitled him to an extension resulted in his inability to complete by the stipulated date – in his words:

“A party to a contract cannot rely upon preventing conduct of the other party where it failed to exercise a contractual right which would have negated the affect [sic] of that preventing conduct”.

As regards these extension of time/prevention issues, Cole J declined to give leave to appeal or to remit on the grounds of technical misconduct by the arbitrators (although, on other grounds, he said that the liquidated damages figure of A$1,750,000 would require adjustment and that matter was referred back to the arbitrators).

Cole J’s remarks on the extension of time/prevention issues were obiter  in nature, as he was not actually giving judgment on them.

Turner Corporation Ltd (in Provisional Liquidation) v Co-ordinated Industries Pty Ltd and Ors (26 August 1994)[77] (“Turner No 2”)

On this other new hotel project in Parramatta, Sydney, the Employer gave notice to Turner terminating the building contract on the basis that Turner was unlikely to complete the works within the time stipulated.

Turner asserted that the work had only fallen behind as a result of acts of prevention on the part of the Employer and his Contract Administrator (the Superintendent) and that it was therefore not open to the Employer to form that opinion. Accordingly, the Employer had repudiated the contract.

The matter came before the New South Wales Supreme Court, which referred certain questions of fact to a referee, Mr Max McDougall.  Mr McDougall found that the delays on the part of the Employer/Superintendent did not, in this case, give rise to an entitlement to extension of time because “the Contractor’s own delays have been such that the Superintendent has not, in fact, delayed him”.

Turner contended that the prevention principle applied where an employer made it physically impossible for the contractor to complete by the stipulated date, even though the contractor was, in any event, disabled by his own conduct from completing by that date. This was the position taken by Brooking J in SMK Cabinets.  However, it was a surprising position to take here given that, as in Turner No 1, the contract conferred on the Superintendent the (in Australia) usual “reserve  power” to grant an extension even if Turner had failed to comply with the notice-as-condition-precedent clause.

Rolfe J referred to Wells v Army & Navy Cooperative Society, pointing out the important distinction that, in that case, the extension of time clause did not expressly allow an extension for delay caused by Employer breach, whereas the clause in this case did.

He then referred to Peak v McKinney, SMK Cabinets, McAlpine  v Humberoak International Inc (No 1)[78], Balfour Beatty Building Ltd v Chestermount Properties Limited[79]  and Turner No 2 before stating the following propositions as emerging from the authorities:

(a) Where (as was the case here) the contract provides an extension of time clause which can accommodate delay caused by the employer and a contractual  mechanism whereby the delay is to be calculated, the fact that the employer may have caused delay has the effect that an allowance of additional time is to be made in accordance with the contract. It does not have the effect that the contractual provisions are thereby overlooked or put aside or that time is put ‘at large’.

(b) In any event, the employer’s actions must cause ‘actual’, as opposed to potential, delay, in the sense that the completion of the work is delayed by the actions of the employer. It is not to the point to say that there could have been a delay.  It is necessary to establish that delay was caused.

(c) In any event, one must determine, as a matter of fact, what the overall effect of the action of the employer was.

It followed from the above, he said, that there was no basis, in this case, for application of the concept of prevention and time being ‘at large’.

The New South Wales Court of Appeal upheld Rolfe J’s decision[80].

Rolfe J in Turner No 2  does not actually appear to have touched upon the question whether time is set ‘at large’ where there is a notice-as-condition precedent clause and the Contractor fails to give notice.  In Turner No 1 Cole J did touch on that question, but only in comments made obiter.  In both Turner cases the contract did, in any case (in line with the JCCA standard form), accord a “reserve power” to the Superintendent to grant an extension, even if the required notice was not given.

But that was not the position in the next case in our review.

6. Gaymark Investments Pty Limited v Walter Construction Group Limited (formerly Concrete Constructions Group Limited) (20 December 1999) (Northern Territory of Australia)[81]

In 1996/1997, Concrete Constructions Group Ltd, later re-named Walter Construction Group, was building for Gaymark Investments Pty Ltd the new Darwin Central Hotel. Concrete Constructions commenced an arbitration, claiming A$4,900,341 for variations, prolongation and disruption.  Gaymark counterclaimed for delay liquidated damages amounting to A$1,545,059.

The arbitrator was, again, Mr Max McDougall, the consulting engineer who had acted as the referee in Turner No 2. He awarded A$1,440,486 to Concrete Constructions and rejected Gaymark’s counterclaim – indicating, however, that Gaymark would have been entitled to 87 days of liquidated damages (A$565,500) but for the view he had taken on a particular question of law (see below).  Both parties applied for leave to appeal – in Gaymark’s case, specifically on that particular question of law.

The building contract was an amended version of the Australian standard form of building contract known as NPWC Edition 3 (1981).  The usual extension of time clause in the standard form (Clause 35.4) had been deleted and replaced with Special Condition 19. This included the opening words:

“The Contractor hereby accepts the risk of liability for completion of the Works strictly in accordance with the provisions of the Contract notwithstanding encountering delay or disruption in the execution of the Works except to the extent provided in this clause.”

The clause went on to allow for extension in case of any delay caused by a breach of contract or other act or omission of the Principal (Employer) or the Superintendent (Contract Administrator), but only where the Contractor had complied strictly with a “notice-as-condition-precedent” requirement.  The Superintendent’s “reserve power” to extend time at his own discretion, even if no notice was given, had been deleted.

The arbitrator had held that Concrete Constructions were entitled to certain extensions, for which they had given the requisite notices. However, he had also held that they had been delayed by Gaymark for another 77 days for which no extension was available because, in relation to those 77 days, Concrete Constructions had not met the notice requirements.  This is what gave rise to the particular question of law on which Gaymark sought leave to appeal.

Bailey J recorded at paragraph 62 how the arbitrator had approached the issue:

“[62] The arbitrator took the view that there are three possible constructions of GC 35.2 and SC19. He stated:

‘G30 It seems to me that there are only three options open. One is to argue for the implication of a term similar to the fourth paragraph of the original Clause 35.4, giving the Superintendent the power to allow an extension in this situation. I would be surprised if that could be done, given the apparent care taken in amending the EOT provisions of NPWC3. Certainly the Superintendent took the view on more than one occasion, in dealing with other time barred situations, that his power was exhausted once the time barrier had been hit.

 G31 The second is to say that it is too bad for the contractor. His own carelessness in not observing the conditions of SC19 has simply cost him the right to recover the delay costs involved, in addition to exposing him to the risk of liquidated damages, and that cannot be an absurd result. Looked at from the other side, though, the principal has, if it was responsible for the delay, not only been absolved from the need to pay the contractor’s costs of the delay, but is also able to recover liquidated damages for a delay of its own causing. The first of these consequences is not, in my view, absurd (having regard to the responsibilities of the contractor)….. However, the second one, I think, is an absurd one (namely that it is possible to be paid for one’s own errors) …

 G32 (The  Gaymark  submission also contends that ‘no logical distinction can be drawn between the avoidance of the payment of delay costs and the imposition of liquidated damages: both result in a benefit or ‘profit’ to the owner’. However I think there is a distinction. The first means that the owner does not have to pay costs, as a result of the contractor’s lack of competence in pursuing his rights – the second means that the owner gets paid for his own lack of competence.)

 G33 This leaves really only the third alternative. This is that the principal, in re-drafting the EOT provisions, is deemed to have elected to take the risk that it would not cause an actual delay to the contractor such as actually to delay the latter in achieving Practical Completion of the works by the due date, or that, if it did, the contractor would apply for an extension within the stipulated times. In consequence, it did not provide for the possibility that this might happen, with the further risk that, if it did, the obligation to finish by a date which could be determined would be replaced by one only to complete within a reasonable time…’. “[82] (underlining added)

The arbitrator adopted the “third alternative” set out in his paragraph G33 and therefore held that time was at large.

Bailey J considered that the arbitrator had been right to distinguish the position in Gaymark from that in the two  Turner  cases:

“[68] I consider that the arbitrator was correct to distinguish both the Co-ordinated Industries Case, supra [Turner No 2] and the Austotel Case, supra [Turner No 1]. In neither case were acts for which the principal was responsible the cause of actual delay in preventing the contractor from achieving the date for practical completion. As the arbitrator observed:

“G43 The situation then, as I see it, is that in none of the cases to which I have been referred has the precise situation being considered here been looked at. (Hence I do not regard the decisions as being relevant to the present matter.)

G44 That situation is one where, if (the contractor) proves that the acts of the owner, either in person or through the Superintendent, have been responsible at least in part for actually preventing the contractor from achieving the date for completion, this is in the context of a contract in which, if the detailed requirements for notifications of EOTs have not been met, the Superintendent has no independent power to extend time.”[83]

Bailey J went on to point out that:

“[69] Acceptance of Gaymark’s submissions would result in an entirely unmeritorious award of liquidated damages for delays of its own making (and this in addition to the avoidance of Concrete Constructions delay costs because of that company’s failure to comply with the notice provisions of SC 19). The effect of re-drafting GC 35 of the contract (to delete GC 35.4 and substitute SC 19) has been to remove the power of the Superintendent to grant or allow extensions of time. SC 19 makes provision for an extension of time for delays for which  Gaymark  directly or indirectly is responsible – but the right to such an extension is dependent on strict compliance with SC 19 (and in particular the notice provisions of SC 19.1). In the absence of such strict compliance (and where Concrete Constructions has been actually delayed by an act, omission or breach for which  Gaymark  is responsible) there is no provision for an extension of time because GC 35.4 which contains a provision which would allow for this (and is expressly referred to in GC 35.2 and GC 35.5) has been deleted.”[84]

            Bailey J then referred to the judgment of Salmon LJ in Peak v McKinney. Salmon LJ had indicated that if an employer wants to recover liquidated damages for failure by the contractor to complete on time, in spite of the fact that some of the delay is due to the employer’s own fault or breach of contract, then the extension of time clause must provide for an extension of time on account of such fault or breach. That principle (said Bailey J at para 71) in his view presented  “a formidable barrier to Gaymark’s claim for liquidated damages based on delays of its own making”, since, under this contract, there was no provision for an extension where Gaymark delayed Concrete Constructions and Concrete Constructions failed to comply with the notice requirement.

So, Bailey J declined to hold that there was any “manifest error of law on the face of the award” of Mr McDougall, the arbitrator, or any “strong evidence” of an error of law by the arbitrator in holding that the prevention principle barred Gaymark’s liquidated damages claim. This was entirely in line with the authorities reviewed above, and in particular Wells v Army & Navy, Perini and Peak v McKinney, all of which made it clear that the prevention principle can only be avoided by use of an extension of time clause if the clause is so worded that an extension can actually be given to cover the employer delay which has occurred.

Bailey J also held that, because the amended form of contract was a one-off form, an appeal was not one which (as required by the relevant legislation on appeals) “may add, or may be likely to add, substantially to the certainty of commercial law”[85], and refused leave to appeal  against the arbitrator’s award (Bailey J will not have been aware, at the time, that the  new FIDIC forms of contract 1999, with their mandatory notice requirement for an extension of time, would have benefited greatly from superior judicial guidance on this point!).

 

The Prevention Principle and Making the Contractor pay for Employer Delay:  is  English Law departing from its Roots?

(Part 2)

[This is the continuation of a paper, Part 1 of which appears in ICLR Part 4 of 2020]

7. Professor Ian Duncan Wallace QC on the Gaymark judgment

As we saw in Part 1 of this paper, in Gaymark Investments Pty Limited v Walter Construction Group Limited (formerly Concrete Constructions Group Limited)[86] , Bailey J (in the Supreme Court of the Northern Territory of Australia) held that where a Contractor fails to give notice of a delay caused by the Employer and the Contract contains a notice-as-condition-precedent clause,  the time for completion is  set at large.

In “Prevention and Liquidated Damages: A Theory Too Far?”[87], Professor Ian Duncan Wallace QC, the then  doyen of English construction law (for many years editor of Hudson on Building Contracts). criticised Gaymark on the following three grounds:

• The prevention theory was “based partly on an early judicial dislike of liquidated damages clauses (which now no longer exists) and partly on an earlier principle of law that a party cannot benefit from its own wrong”.

[In fact the authoritative statements of the prevention principle from the early authorities set out in Part 1 of this paper, at Section 2, made no reference at all to liquidated damages as related to the development of this “theory”.]

• Bailey J was “unrealistic” to interpret the notice-as-condition- precedent requirement in the Gaymark contract as compelling the Employer to reject an application for an extension, or preventing the Employer from waiving the requirement for a notice; this involved, he wrote,  “an artificial if not fanciful and legalistic interpretation”.

[Yet this is precisely the conclusion to which the authorities culminating in Peak v McKinney  lead. They regard the extension of time provision as a means whereby the Employer can rescue his right to liquidated damages when he causes delay, so that it falls to be construed strictly against him and, unless the provisions is clearly operable to extend time, time will be set at large (see:  Wells[88], Perini[89], Peak[90]).]

• Bailey J had paid too much attention to the unreasonableness of giving effect to a strict notice requirement in the context of employer-caused delays, and not enough attention to the practical advantages of a strict notification procedure.

[Bailey J may have viewed the strict notice requirement as unreasonable. However, his main concern seems to have been the correct application of the prevention principle in accordance with the authorities, rather than considerations of reasonableness and the desirability of notices.]

Professor Duncan Wallace QC preferred the line taken by Cole J in Turner Corporation Ltd (Receiver and Manager Appointed) v Austotel Pty Ltd  (“Turner No 1”)[91].

The professor did not explain how it could be that an Employer who, by including a notice-as-condition-precedent provision, risks disabling the extension of time clause – whose very purpose is to rescue his own right to liquidated damages where he himself causes delay –  can then still expect such a rescue to occur if such disabling then occurs.

Nor did he address the point that an extension of time clause only avoids the application of the prevention principle if, when construed strictly against the employer, it allows the granting of an extension so as to “disentangle” (per Phillimore LJ in Peak) any employer delay from other delay, thus ensuring that the employer has no recourse against the contractor for any non-performance caused by the employer himself.

Nor did the Professor grapple with the 19^th century authorities reviewed above, in particular:

(a) Chitty LJ’s insistence in Dodd v Churton that the court should only be willing to accept that the prevention principle was overridden if the parties had used “very clear language to shew that a man had undertaken a responsibility which very few men would undertake with their eyes open”; and

(b) the fact that the only case in which the language had been held to qualify as  such “very clear language”  (Jones v St John’s College)  was a case in which the parties had expressly agreed that the Contractor was to complete by the stipulated time even if variations were instructed  – in other words, the Contractor had, with his eyes entirely open,  given a straightforward, express  undertaking to complete on time, notwithstanding acts of prevention on the employer’s part of the kind which were then committed.

Such “very clear language” containing an express commitment to complete on time in spite of employer delay is a far cry from the language of a notice-as-condition precedent provision.

Professor Doug Jones, in his article “Can Prevention be Cured by Time Bars?”[92],  wonders whether Professor Duncan Wallace QC’s scepticism here owed something to his having perhaps been piqued by his role as junior counsel for the losing party in Peak v McKinney (and, impliedly, a consequent desire to restore the position, as he saw it).  One might also note that, in paragraph 3 of his article, Professor Duncan Wallace QC refers to the notice-as-condition-precedent requirement in the extension of time clause of the Singapore Institute of Architects (1980) private sector form of contract – the learned Professor was the author of that form of contract; he will surely not have welcomed the potential ramifications of Bailey J’s decision for Employer users of the form.

8. Hsin Chong Construction (Asia) Ltd v Henble Ltd (2006) (Hong Kong, 18 August 2006)[93]

This seems to have been the first reported case outside Australia in which Gaymark  came to be considered.

Hsin Chong as contractor agreed to build for Henble a new residential development on Hong Kong Island.  The extension of time clause incorporated a notice-as-condition-precedent provision. Hsin Chong applied for various extensions of time, and some were awarded.  However, as in Gaymark, Hsin Chong also contended that Henble had caused other delays, in respect of which Hsin Chong had not given notice, and that accordingly (citing Gaymark) the time for completion was at large.

Reyes J dismissed Hsin Chong’s argument with no explanation other than a lengthy quotation from a then new passage in Hudson’s Building and Engineering Contracts. This passage was included by the learned editor, Professor Ian Duncan Wallace QC, in the First Supplement (2004) to the 11^th edition,  at paragraph 10.026.  It drew heavily on the professor’s 2002 article in reaction to the Gaymark decision reviewed in Section 7 above.  Under the heading “New version of prevention theory”, it referred to the argument adopted in Gaymark as “a quite new prevention argument”; stated that the “obvious reply”  to the Gaymark argument was that, in a case where notice of delay was a condition precedent to an extension of time and the contractor failed to give notice, “the liability to pay liquidated damages has been caused by the contractor’s failure to give the required notice rather than by any act of employer prevention”; and submitted that any contract containing an extension of time with a notice-as-condition-precedent requirement …

“evinces the clearest intention to bring all owner prevention delays within the scope of its liquidated damages machinery, so that the argument seems to be unsustainable both as a matter of party autonomy and of reasonable commercial intention, while the absence of a dispensation provision [i.e. a “reserve power” of the kind typically found in the Australian standard form contracts] seems irrelevant.”

Yet, given the authorities reviewed in Sections 2 to 4 of this paper[94], there was nothing new about the “argument” adopted in Gaymark.   Bailey J had followed faithfully the previous understanding that, in order effectively to circumvent the prevention principle in all cases of employer delay, a contract must ensure that the employer is free, in all such cases, to extend the time for completion.  Otherwise he takes the risk that it could prove impossible to disentangle delay caused by him from other delay, whereupon the prospect of the employer receiving liquidated damages for his own delay will again rear its head, rousing the prevention principle from slumber and giving it room to operate once more.

Nor can one agree with the professor that it is “obvious” that the liability of the contractor to pay liquidated damages in such a case has been “caused” by the contractor’s failure to give notice.  The giving of notice would have enabled the employer to grant an extension and circumvent any application of the prevention principle. If no notice is given, that circumvention does not – cannot – occur, and the prevention principle will bite. The “cause” is that the employer drafted an extension of time clause which would not work in the circumstance which then arose. And how can a contractor properly be held liable to pay damages agreed in respect of one breach (i.e. a failure to achieve completion on time) for committing an entirely different breach (i.e. failure to deliver a notice) – if, indeed,  it is a breach at all?

9. Multiplex Constructions (UK) Limited v Honeywell Control Systems Limited (27 February 2007, Technology and Construction Court, London)[95]

The interaction between the prevention principle and notice-as-condition-precedent provisions was first  considered in England in this case.

The case involved one of the sub-contracts for the construction of the new national stadium at Wembley. Multiplex was the main contractor and Honeywell a sub-contractor for the provision of various electronic systems for communication and control of the building.

The sub-contract entitled Multiplex to issue “any reasonable direction” to Honeywell. It also provided for an extension of time to be granted by Multiplex where Honeywell were likely to be delayed by one of a number of “relevant events” listed in the clause, provided Honeywell had given notice of the delay as stipulated in the clause. The list of “relevant events” did not include the giving of a “reasonable direction” by Multiplex, but did include any “act of prevention or default” by Multiplex.

The sub-contract did however also stipulate that Multiplex was only to be entitled to make any recovery of damages from Honeywell in respect of loss or damage “caused by the failure of the sub-contractor”.

Multiplex issued successive new programmes to Honeywell pursuant to the “any reasonable direction” provision which put back the date for completion of Honeywell’s works, directing Honeywell to comply with these. No notices of delay were given by Honeywell.

Honeywell contended, in an adjudication before Mr David Miles, that Multiplex had, by requiring compliance with the new programmes, prevented timely completion and so put the time for completion at large. The adjudicator agreed, on the basis that the contract contained no mechanism for the extending of time in respect of delay caused by “reasonable directions” given by Multiplex.    Time was therefore at large.

Multiplex commenced proceedings in the Technology and Construction Court for a declaration that time had not been put at large.

Jackson J explained that it was not necessary for him to make a final decision on the time at large point, since the provision barring Multiplex from recovering any damages from Honeywell in respect of losses not caused by any failure on Honeywell’s part of itself meant that Honeywell could not be required to pay damages in respect of a period of Multiplex delay.

Nevertheless, Jackson J considered the authorities and commented obiter on the point.

He set out key passages from the judgments in Holme v Guppy[96], Dodd v Churton[97], Peak v McKinney[98] and Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board[99] on the operation of the prevention principle in the construction context.

His Lordship drew from those authorities three propositions.  He noted that his third proposition “must be treated with care”  (this was an appropriate warning: although the third proposition itself is well supported by the previous authorities, the gloss which His Lordship then put on the third proposition (in paragraphs 57 and 58 of his judgment) is not at all supported by them):

“56. From this review of authority I derive three propositions:

(i) 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.

(ii) 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.

(iii) Insofar as the extension of time clause is ambiguous, it should be construed in favour of the contractor.

57. The third proposition must be treated with care. It seems to me that, insofar as an extension of time clause is ambiguous, the court should lean in favour of a construction which permits the contractor to recover appropriate extensions of time in respect of events causing delay. This approach also accords with the principle of construction set out in Lewison, The Interpretation of Contracts , 3rd ed (2004), at p 231, para 7.14:

“Where two constructions of an instrument are equally plausible, upon one of which the instrument is valid, and upon the other of which it is invalid, the court should lean towards that construction which validates the instrument.”

58. That principle is supported by a line of authority, as set out in para 7.14 [of Lewison] and is encapsulated in the Latin maxim “verba ita sunt intelligenda ut res magis valeat quam pereat”. [in loose translation: “words are to be so understood that the subject-matter may be preserved rather than destroyed”].”

His Lordship went on to consider the submission of counsel for Honeywell that the sub-contract conferred no power on Multiplex to extend time in respect of a reasonable direction given under Clause 4.2, so that the delay caused by Multiplex’s directions to comply with the new programmes set time at large.  He rejected that submission on the basis that delay so caused would amount to an “act of prevention”, which was listed as a “relevant event” on which an extension of time could be founded.  Multiplex was therefore entitled to the declarations sought.

As to whether the time for completion would be set at large because the extension of time mechanism could not operate (as a result of failure to serve a timely notice), Jackson J reviewed in some detail the judgments of Bailey J in Gaymark[100] and Cole J in Turner No 1[101], and the article of Professor Ian Duncan Wallace QC on the Gaymark decision reviewed in Section 7 above [102].

He said that he could “see considerable force in Professor Wallace’s criticisms of Gaymark”.  He went on:

I also see considerable force in the reasoning of the Australian courts in Turner[103] and in Peninsula[104] and in the reasoning of the Inner House in City Inn[105].  Whatever may be the law of the Northern Territory of Australia, I have considerable doubt that Gaymark represents the law of England. Contractual terms requiring a contractor to give prompt notice of delay serve a valuable purpose; such notice enables matters to be investigated while they are still current.  Furthermore, such notice sometimes gives the employer the opportunity to withdraw instructions when financial consequences become apparent.  If Gaymark is good law, then a Contractor could disregard with impunity any provision making proper notice a condition precedent.  At his option the contractor could set time at large.”

Jackson J focuses on the undoubted fact that requirements for the giving of notice “serve a valuable purpose”.  However, he does not at all address the fact that, if no extension can be given, the result is a situation where the contractor is compelled to pay liquidated damages for a period of employer delay.

Jackson J says that, if Gaymark were good law, a contractor would be able to “disregard with impunity” such notice requirements (underlining added).   Yet that is hardly so:  if a contractor fails to give notice as required, and the employer can identify some loss he has suffered as a result of that breach, the contractor will be liable in damages.   And if, due to the disabling of the extension mechanism, time is set at large, the contractor must still complete within a reasonable time and pay general damages to the employer if he fails to do so.  How can those consequences be said to amount to “impunity”?   (And for the delaying employer, Jackson J’s approach provides not just “impunity”  for his breach of the obligation (implied, if not express) not to hinder completion, but a windfall,  in the shape of liquidated damages!).

The difficulty which arises here can, with respect, be traced back to the way in which Jackson J decided to interpret his orthodox proposition (iii) –  i.e. taking the view that that proposition (iii) meant that any uncertainty about the effect of an extension of time clause was to be resolved in the direction of giving the contractor an extension.  That view flatly contradicted those many authorities (especially Wells, Perini and Peak) which had established that uncertainty as to whether an extension of time is available in a given case is to be construed against the employer being able to extend,  and in favour of the contractor’s time and damages being at large[106].

His Lordship’s approach is to refer to the more general principle, set out in paragraph 7.14 in Lewison,  that one should aim to give effect to a contract rather than treating it as invalid,  where one can.   But he cites no authority for holding that, in a clash between that principle and the ancient prevention principle, the former should prevail (and the prevention principle, we are reminded by, Brooking J in SMK Cabinets[107], is underpinned by a fundamental notion of justice – “some such broad notion of justice as that a man should not be allowed to recover damages for what he himself has caused: cf 152 American Law Reports, 1350[108]).

Later in the same year as Multiplex was decided, on 28 September 2007, His Honour Judge Stephen Davies, giving judgment in Steria Limited v Sigma Wireless Communications Limited (15 November 2007)[109], a  case concerning delays in the provision of a new computerised system for fire and ambulance services in Ireland, said, referring to the Multiplex case:

“Although on the facts of that case Jackson J did not, due to the particular wording of the extension of time and liquidated damages clauses employed, need to express a final decision on the point, nonetheless I gratefully adopt his analysis and agree with his preliminary conclusion.  Generally, one can see the commercial absurdity of an argument which would result in the contractor being better off by deliberately failing to comply with the notice condition than by complying with it.”

His Honour did not pick up on the equal, if not greater, “absurdity” identified by arbitrator Mr Max MacDougall in  Gaymark,  as quoted by Bailey J (at para 62 of his judgment[110]), of the contractor being required to pay to the employer liquidated damages for the employer’s own delay.

10. Relevant Post-2007 cases:

Adyard Abu Dhabi v SD Marine Services (2011)[111] and De Beers UK Limited v Atos Original IT Services Limited (2010)[112]

Adyard was  a shipyard operating from a site on the Abu Dhabi shoreline.  SD Marine Services (SDMS) was a commercial supplier of services to government entities in the United Kingdom. SDMS had made two shipbuilding contracts with Adyard. Under each  contract, Adyard was to build and supply  a 50 metre “Mooring and Special Operations Support vessel”.

The vessels were to be “ready for sea trials” by dates in late 2009, failing which SDMS were to be entitled to rescind the contracts.  Neither vessel was ready for sea trials by the stipulated date, and SDMS exercised its right to rescind.

Adyard contended that the delay was caused by variations relating to the installation of certain waterproof sliding doors. Adyard said they were either entitled to an extension to the Delivery Date (meaning that the right to rescind had been exercised prematurely) or, if the somewhat vague extension of time clause was not applicable, then, by virtue of the prevention principle, time was at large.

First, Hamblen J held that Adyard’s case on variations failed – the waterproof sliding doors were in fact required by the contract in the first place[113].

But in case he was wrong on that, he went on to hold that, if delay had been caused by the “variations”, the somewhat vague extension of time clause would have applied so as to extend time. In this, His Lordship relied on the third of Jackson J’s propositions in Multiplex – (“(iii) insofar as the extension of time clause is ambiguous, it should be construed in favour of the contractor”) and on Jackson J’s gloss on that proposition (to the effect that “the court should lean towards an interpretation which validates the instrument”). In this way, he  resolved any doubt over the extension of time clause in favour of the clause operating to extend time[114] (as we have seen, this was not what “construction in favour of the contractor” had previously been understood as meaning). However, he then went on to point out that Adyard’s own delay expert, Mr Richard Swan, had “agreed in cross-examination that there was no actual delay, whether viewed prospectively or retrospectively, caused by any of the design items”.  As a result, the delay case fell away and, along with it, the question whether the vague extension of time provision was adequate to extend time.

In considering the working of the prevention principle, Hamblen J relied on a paragraph in the judgment of Lord Denning MR in the Court of Appeal in Trollope & Colls Ltd v North West Metropolitan Regional Health  Board[115] which was referred to with approval by Lord Pearson in that case when it came before the House of Lords:

“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 one 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. [116]”

Hamblen J did make it clear that, in a case where both parties cause actual delay concurrently (i.e.  a case where, in the well-known definition by John Marrin QC, there is “a period of project overrun which is caused by two or more effective causes of delay which are of approximately equal causative potency”[117]) – “…the English law approach would be to recognise that the builder is entitled to an extension of time… see, for example, Malmaison  at para 13”[118].

Hamblen J also noted that “the English law authorities in relation to extensions of time under the JCT form and similar contracts are clear that it must be established that the ‘relevant event’ (i.e. the event giving rise to an extension of time) is at least a concurrent cause of actual delay to the progress of the works”.  His Lordship thus spelt out that, where there is indeed concurrent delay, since the employer is “causing” the delay just as much as the contractor, the contractor will be entitled to an extension[119].

That position – that an extension should be granted in a case of concurrent delay – had also been firmly stated by Mr Justice Edwards-Stuart just three months earlier, in his judgment in De Beers UK Limited v Atos Original IT Services Limited[120], where he said:

  “177. The general rule in construction and engineering cases is that where there is concurrent delay to completion caused by matters for which both employer and contractor are responsible, the contractor is entitled to an extension of time but he cannot recover in respect of the (financial) loss caused by the delay. In the case of the former, this is because the rule where delay is caused by the employer is that not only must the contractor complete within a reasonable time but also the contractor must have a reasonable time within which to complete. It therefore does not matter if the contractor would have been unable to complete by the contractual completion date if there had been no breaches of contract by the employer (or other events which entitled the contractor to an extension of time), because he is entitled to have the time within which to complete which the contract allows or which the employer’s conduct has made reasonably necessary.”

Jerram Falkus Construction Limited v Fenice Investments Inc [No 4] (2011)[121]

Fenice had employed contractor Jerram Falkus to design and build a new development in Camden in North-West London.  The contract incorporated the JCT Design and Build form 2005, with amendments.

The original completion date was 25 May 2009.  This was extended to 15 June 2009.  Practical completion was achieved on 9 September 2009, a delay of 86 days, for which Fenice levied liquidated damages.

Jerram Falkus asserted that acts of prevention by Fenice or its agents had caused the delay and that, because of deletions to the extension of time provisions, no extension of time could be granted and the time for completion was at large.  Various adjudications had taken place and Fenice contended that these arguments were not open to Jerram Falkus because they had been conclusively decided in adjudication.

Amongst the issues which arose for decision was whether, “if Fenice did prevent completion, but the delay so caused was concurrent with delays which were Jerram Falkus’s fault,… time was set at large”.

Coulson J included in Section 7 of his judgment[122] a significant amount of detail on the prevention principle and considered the relevant authorities from Peak v McKinney in 1970 onwards (but none of the earlier ones). He quoted the first two of Jackson J’s three propositions in Multiplex[123], the second being that “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”.

His Lordship then quoted from Hamblen J in Adyard to the effect that the prevention principle will only apply where the employer’s conduct has ”actually prevented” completion by the agreed date and caused “actual” delay[124].

Coulson J then continued (and here careful attention is needed):

“Hamblen J’s analysis indicated that, if there were two concurrent causes of delay, one which was the contractor’s responsibility, and one which was said to trigger the prevention principle, the principle would not in fact be triggered because the contractor could not show that the employer’s conduct made it impossible for him to complete within the stipulated time.  The existence of a delay for which the contractor is responsible, covering the same period of delay which was caused by an act of prevention, would mean that the employer had not prevented actual completion.”[125]

The foregoing passage in Coulson J’s judgment appears to have given rise to the inclusion in the 8^th, 9^th and 10^th  editions of Keating on Building Contracts  of the following passage:

“However, where there are concurrent causes of delay (one the contractor’s responsibility and the other the employer’s) the prevention principle would not be triggered because the delay would have occurred anyway absent the employer delay event.”[126] (underlining added)   (Adyard Abu Dhabi v S D Marine Services[127]  and Jerram Falkus Construction Ltd v Fenice Investments Ltd[128] are cited by Keating in support of this proposition).

On a fair reading of Adyard, however, it is not authority for that proposition.

As mentioned above[129], Hamblen J repeated several times in the course of his judgment in Adyard that, in a case where both parties were causing delay concurrently, the correct course in English law is ordinarily (as established in Henry Boot v Malmaison[130])  to award an extension of time.  Hamblen J quoted the well-known passage from the judgment of Dyson J in Henry Boot and confirmed that, where it is established that there are genuinely two operative causes of delay “then the contractor is entitled to his extension of time”[131]. .

Hamblen J did stress in Adyard  that one must satisfy oneself that the employer delay is an actual cause of delay – i.e. the two causes are both operating to delay completion.  Only then is there true concurrent delay.

But Hamblen J definitely  did not say, in Adyard,  that where there is concurrent delay the prevention principle is not triggered.

Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (23 June 2017) (New South Wales)[132]

Probuild was the main contractor undertaking the renovation of the Tank Stream Hotel in Hunter Street, Sydney.  On 19 May 2014 it sub-contracted certain works to DDI, with a completion date of 5 January 2015.  Completion was actually achieved on 28 May 2015.

The sub-contract provided for the time for completion to be extended in the case of certain types of delay, including Employer delay, but contained a notice-as-condition-precedent requirement.  As in both Turner cases[133], it also conferred the (in Australia) usual “reserve” power on Probuild to extend time at its discretion, irrespective of whether DDI was entitled to or had claimed for an extension.

The parties fell out when Probuild refused to pay monies alleged by DDI to be due in respect of variations.  Probuild  contended that DDI’s variations claim was reduced to nil by reason of a set-off for liquidated damages for the late completion.  DDI commenced an adjudication, including a claim for extension of time.  Probuild introduced its set-off defence. Subsequently – presumably in enforcement proceedings – the matter came before the New South Wales courts.

The reasoning in the judgment of McColl JA in the New South Wales Court of Appeal is not always easy to follow, but it seems that a time at large argument emerged at some point on the basis that DDI had not given notice of its delay claim.

McColl JA referred to the judgments in the Turner cases and Gaymark.  She noted that Professor Ian Duncan Wallace QC’s view[134] that Gaymark was wrongly decided, and that Hodgson JA had followed the Duncan Wallace guidance in Peninsula Balmain[135], implicitly rejecting Gaymark.

She questioned whether there was a real conflict between Gaymark  and the Turner cases, given the distinction between the two situations: in the Turner cases, the contract included the “reserve power”; whereas, in Gaymark, the “reserve power” had been deliberately removed (this was a stalwart attempt at distinguishing the cases so as to explain the different outcomes, but neither Cole J in Turner No 1 nor Rolfe J in Turner No 2 in fact refers to the “reserve power” as part of his reasoning).

McColl JA took the line that, in a contract containing the “reserve power”, the sure way to fend off application of the prevention principle is for the Employer or his agent to use the “reserve power” to grant an extension so as to “disentangle …the delay due to the fault of the Contractor …from that due to the fault of the Employer and (fix a new) date … from which the liquidated damages can be calculated.”[136]    

Her Honour’s reasoning suggests that, where there is no “reserve power”, and where the primary extension mechanism for some reason cannot operate, the prevention principle will intervene to prevent the Employer form recovering damages for his period of delay.  In other words, the thrust of McColl J’s judgment seems to follow Gaymark.

McColl JA, following Wells, Perini and Peak, did note (at para 129) that, “as a matter of general principle, both the liquidated damages and extension of time clauses in printed forms of contract must be construed strictly contra proferentem”.  It is reasonable to understand Her Honour as meaning this in the orthodox sense that the extension clause cannot work to cover Employer delay unless it clearly and plainly applies; not in the unorthodox sense applied by Jackson J in Multiplex  and Judge Davies in Steria, i.e. leaning to the view, in any case of doubt, that the wording does apply so as to allow an extension for Employer delay.

11. North Midland Building Limited v Cyden Homes Limited (2 October 2017, Technology and Construction Court; 30 July 2018, Court of Appeal, London)[137]

This is a further case touching on the interaction between the prevention principle and a “disabled” extension of time clause where, as in Multiplex, the court was persuaded to view a block on the operation of the extension of time clause (intended as the vehicle for what we have called a “second route” circumvention of the prevention principle) as somehow meeting the requirements for a “first route” contracting out of the prevention principle[138].

Here the extension clause was disabled from operating not where the Contractor had failed to give notice of a delay, but rather where the Employer’s act of prevention was causing delay concurrently with another cause for which the Contractor himself was responsible.

Pursuant to a contract dated 21 September 2009, Cyden Homes engaged North Midland to design and build a large house in Lincolnshire (referred to by Fraser J in his first instance judgment as “the most important private house to be constructed in the country for many years”).

The contract incorporated the JCT Design and Build 2005 Standard Terms and Conditions.  The original completion date in the contract was 18 June 2010.  If completion was delayed, liquidated damages were to be payable at the rate of £5,000 per week.

There was the usual provision for extension of time in the event of certain delays, including delays caused by Employer breach.  The clause setting out what Cyden Homes as Employer were to do upon receiving a notice of delay had been amended to add the underlined text below:

“2.25.1  If on receiving a notice and particulars under clause 2.24:

.1  any of the events which are stated to be a cause of delay is a Relevant Event, and

.2 completion of the Works or of any Section has been or is likely to be delayed thereby beyond the relevant Completion Date;

.3   and provided that:

• the Contractor has made reasonable and proper efforts to mitigate such delay; and
• 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;

then, save where these Conditions expressly provide otherwise, the Employer shall give an extension of time by fixing such later date as the Completion Date for the Works or Section as he then estimates to be fair and reasonable.”

A dispute arose as to delay to completion alleged by North Midland to have been caused by Cyden Homes.  Cyden Homes’ position was that any delay they had caused had run concurrently with delay attributable to defaults by North Midland. Cyden Homes contended that, given the terms of Clause 2.25.1.3(b), there could be no extension in respect of that delay; liquidated damages were therefore payable – notwithstanding that they would be paid in respect of a period when Cyden Homes was itself delaying completion.

North Midland’s counterargument was – or, in light of the authorities reviewed above, ought to have been – that the extension of time mechanism included in the contract for the protection of Cyden Homes’ liquidated damages could not operate in respect of any delay by Cyden Homes which had run concurrently with delay by North Midland – it had been disabled from working in such a case.  That being so, the prevention principle  applied to set the time for completion at large, and the liquidated damages fell away.

North Midland commenced proceedings for a declaration to that effect.  The point was put as a preliminary issue of law; whether or not concurrent delay by both parties had in fact occurred was not investigated.

As Fraser J explained[139], Cyden Homes’ contention was that, if there were two delaying events, Event X and Event Y, occurring at the same time and causing concurrent delay to completion, Event X entitling North Midland to an extension and Event Y being “another delay for which the Contractor is responsible”, there could be no extension of time – given the wording of Clause 2.25.1.3(b).

Fraser J further explained that the term “concurrent delay” referred to a situation where the delay to completion was caused by two or more different events “of equal causative potency” (quoting the definition of Mr John Marrin QC)[140].  In other words, His Lordship started out from the premise that there is “concurrent” delay only where both parties are causing delay at the same time: he therefore approached the case on the basis that Cyden Homes was as responsible for the delay which had occurred as North Midland.

Fraser J then[141] quoted the three propositions which Jackson J had set out in Multiplex[142].  The second proposition is that an act of prevention by the employer does not set time at large if the contract provides for an extension of time in respect of that act.  The third is that, if there is any ambiguity in the extension of time clause, it is to be construed in favour of the contractor – which (as seen above) Jackson J had explained as meaning that the court should, in a case of doubt, lean towards giving an extension, rather than (as was the understanding under the previous authorities) leaning against the clause applying and holding that time is at large[143].

Fraser J understood the second proposition to mean that, if the extension of time clause allows extensions for acts of prevention in general, an act of prevention cannot set time at large[144]. On that basis, he decided that Jackson J’s second proposition was directly contrary to North Midland’s position.  However, in so deciding, he did not directly grapple with the fact that, in this case, the clause was so worded that an extension could not be given where delay caused by a Relevant Event was concurrent with a delay for which the Contractor was responsible – or with the fact that, where “concurrent delay” occurs, there is, by definition, an employer act of prevention (because there are two factors “of equal causative potency” operating at the same time).

The amended wording of the JCT contract in Cyden Homes meant that the contract did not satisfy Jackson J’s second proposition, because it specifically did not allow time to be extended if there was concurrent delay.

Nevertheless, Fraser J held that in this case the prevention principle was overridden: Cyden Homes was entitled to liquidated damages for a period when Cyden Homes was itself causing delay (concurrently) – in effect, he treated the disabling of the “second route”-type circumvention of the prevention principle (i.e. the disabling of the extension of time clause) as a “first route” contracting out of the prevention principle (as found in Jones v St John’s College, Oxford[145]).

Fraser J may have had in mind Chitty LJ’s requirement for “very clear language” (for the “first route”) in Dodd v Churton: he was at pains to insist that the amended Clause 2.25.1.3(b)   was “crystal clear in terms of the meaning of the words”[146].  Indeed, so it was:  there was to be no possibility of an extension of time in respect of delay to completion caused by the Employer if the Contractor was also delaying completion at the same time.[147]  But this was not “very clear language” in the sense of an express commitment by the Contractor to complete on time even if delayed by the Employer and, if not, to pay liquidated damages, as in Jones v St John’s College, Oxford, and as Chitty LJ clearly had in mind – i.e. “first route” language.   All the parties had here agreed was that, in a case of concurrent delay, the extension mechanism could not and would not operate.

Fraser J further said that:

“… there is no rule of law of which I am aware that prevents parties from agreeing that concurrent delay be dealt with in a particular way, and Mr Lofthouse QC could not direct me to any. Multiplex and the doctrine of prevention are so far off the point, with respect, as to be dealing with something else entirely.”[148]

That is of course correct.  The parties could have agreed that, if concurrent delay occurred, North Midland was still to complete the works within the agreed time or pay liquidated damages.  But they did not agree that.  What they agreed was that, if concurrent delay occurred, there was to be no extension of time in respect of that delay.  And if there could be no extension of time, since the employer had been preventing completion (albeit simultaneously with the contractor), on a faithful application of the authorities the prevention principle would set time at large – precisely as North Midland had contended.

Fraser J said he could deal with North Midland’s argument to that effect “very shortly”, and that “in the absence of any authority, it is difficult to see the rationale for the submission”.   Yet, as we have seen, there is overwhelming authority (in Wells, Perini and Peak) for the proposition that, where time cannot be extended so as to ensure that the Employer does not receive liquidated damages for delay caused by him, time and damages are both set at large.

The only one of the pre-Multiplex authorities cited to Fraser J seems to have been Peak v McKinney[149].  This is, at any rate, the only one he mentions.

Fraser J went on to say, relying on indications given by Hamblen J in Adyard[150]  and by Coulson J in Jerram Falkus Construction Ltd v Fenice Investments Ltd (No 4)[151], that:

 “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 …,  if that earlier completion date would not have been achieved anyway, the prevention principle will not apply.”[152]

That statement flatly contradicted the position as stated by Brooking J, based on his careful review of all the relevant authorities, in SMK Cabinets[153].

Fraser J declined to make the declaration sought, leaving North Midland open to a claim for liquidated damages for any period of concurrent delay.

North Midland appealed. However, the Court of Appeal (Etherton MR, Sir Ernest Ryder and Coulson LJ) dismissed the appeal, approving Fraser J’s reasoning.

Coulson LJ gives the leading judgment in the Court of Appeal. He opens by saying that the main issue before the court is the “validity” of the clause preventing the granting of an extension of time where there is concurrency, and whether that clause “is contrary to an overarching principle of law, and of no effect”.   

But the true issue was not the validity of the provision; rather – remembering that the purpose of an extension of time clause is to rescue the liquidated damages regime in the contract, and a fixed completion date, if Employer delay occurs – the true issue was whether the extension of time clause could still fulfil that rescue mission, or had been disabled from doing so in cases of concurrent delay, so that if concurrent delay did occur, time would be set at large.

Coulson LJ respected the old authorities in his approach to the underlying rationale for including an extension of time clause.  Such clauses, he said:

“were not, as is sometimes thought, designed to provide the contractor with excuses for delay, but rather to protect employers, by retaining their right both to a fixed (albeit extended) completion date and to deduct liquidated damages for any delay beyond that extended completion date”.[154]

That was of course the background to the requirement, in the authorities[155], that such clauses be strictly construed against the Employer.

Coulson LJ then quoted the passage in paragraph 8-14 of the 10^th edition of Keating on Construction Contracts  which was based on His Lordship’s own decision in Jerram Falkus (and not, as the footnote in Keating suggests, also on the judgment of Hamblen J in Adyard) to the effect that concurrent delay will not engage the prevention principle:

“However, where there are concurrent causes of delay (one the contractor’s responsibility and the other the employer’s) the prevention principle would not be triggered because the delay would have occurred anyway absent the employer event.”[156]

As already pointed out, the statement in Keating cannot be right: if there are “two or more effective causes of delay which are of approximately equal causative potency” (as per the John Marrin QC definition of concurrent delay[157]), and one cause is the fault of the Employer, the Employer is preventing timely completion at the same time as the Contractor is preventing it.[158]

Brooking J in SMK Cabinets v Hili[159] had considered, and roundly rejected, the proposition that an employer “cannot be said to have prevented the contractor from completing by the relevant date unless the contractor would have been able to complete by that date  had it not been for the supposed prevention”. He went on:  “But it has been accepted for more than one hundred years that this is not the law.  The cases are all one way.”[160]

Then Coulson LJ comes on to consider whether the amended extension of time clause stipulating that concurrent delay is “not to be taken into account” is “clear in its meaning and the prevention principle does not arise”. On this point, Coulson LJ quotes with approval from the first instance judgment of Fraser J, paragraph 18:

“18.  The defendant submits that the amendment could be said, understandably, to be crystal clear in terms of the meaning of the words. If there is any doubt about that, I am happy to confirm that in my judgment it is crystal clear.”

As already noted above, the clause is perfectly clear “in terms of the meaning of the words”, as Fraser J puts it.  But whether it was “clear in terms of the meaning of the words” was not the proper test.  On the authorities, and having regard most especially to Jones v St John’s College, Oxford and Dodd v Churton,  the true test is (in the words of Chitty LJ himself in Dodd v Churton):  does this language disapplying the extension of time mechanism in cases of concurrent delay amount to “very clear language to shew that (North Midland Building Limited) had undertaken a responsibility which very few men would undertake with their eyes open”[161] ?  Or does it, rather, simply disable the working of the extension of time clause whose working is vital if North Midland’s liquidated damages entitlement is to be preserved?

On the test set by Chitty LJ, it is respectfully suggested that the outcome should have been the opposite of the actual outcome.  In Dodd v Churton, the contract provided that the ordering of a variation was not to be taken to “vitiate the contract” – i.e. all of the provisions of the contract, including those as to the time for completion, were to stay in place. That language was held to be insufficient to overthrow the prevention principle (“I do not think the clause bears the construction which the defendant seeks to put upon it”, said Lopes LJ[162]). So how can a provision which does nothing more than disapply the extension of time mechanism in a case of concurrent delay bear the construction put upon it in Cyden Homes?

Coulson LJ also notes Fraser J’s comment, at first instance, that he failed to see how the wording of Clause 2.25.1.3(b) raised any issues of construction at all – it was all quite simple:  “The contractor is not entitled to an extension of time in that situation”.   With respect, Fraser J was absolutely right:   the wording stipulates that there cannot be an extension of time “in that situation” – and, since “in that situation” the Employer had caused delay, if there was no possibility of extension, it necessarily followed that time and damages were at large.

Coulson LJ refers to North Midland’s counsel’s “bold proposition that the prevention principle was a matter of legal policy which would operate to rescue [North Midland] from the clause to which it had freely agreed”[163].  He then rejects that submission for the following five reasons (comments by the present writer are set out beneath each reason in square brackets):

• The prevention principle is not an overriding rule of public or legal policy – it was “not expressed in those terms in Multiplex or any of the other authorities noted above”.

[The authorities he had reviewed included Dodd v Churton,  where Lord Esher MR referred to the prevention principle as a “well-recognised rule” and Lopes as a “well-ascertained rule of law”.  And the cases reviewed in Sections 3 and 4 of this paper[164] contain numerous instances of the courts emphatically characterising the prevention principle as a rule of law.]

• The prevention principle was anyway not engaged in this case because there was no contravention of either of Jackson J’s propositions (i) and (ii) in

[There was, in fact, a plain contravention of Jackson J’s proposition (ii), which read:  “Acts of prevention do not set time at large, if the contract provides for an extension of time in respect of those events”.  In Cyden Homes the Contract specifically did not provide for an extension of time in respect of  Employer delay if there was concurrent Contractor delay.  So proposition (ii) was plainly breached.]

• The prevention principle had “no obvious connection with the separate issues that may arise from concurrent delay”.

[Under the generally accepted Marrin definition, “concurrent delay” is the label applied to a situation where two (or more) events of “equal causative potency” are causing delay at the same time, one attributable to each party[165].  If the Employer is “causing” delay, albeit while the Contractor is as well, there is Employer delay and the prevention principle inevitably applies – so, in fact, the prevention principle and concurrent delay are inextricably connected.]

• The amended clause stating that no account was to be taken of any Employer delay which was concurrent with Contractor delay (Clause 2.25.1.3(b)) was, in His Lordship’s view, “designed to do no more than reverse the result in Henry Boot v Malmaison[166] and Walter Lilly[167]  for the purposes of this particular contract”, and was “unconnected” to the prevention principle.

[As was made clear in all the authorities prior to Multiplex, in order to avoid application of the prevention principle there must either be (1)  “very clear language” in which the Contractor agrees that he will complete on time, or pay liquidated damages, even if delayed by the Employer (our “first route”) or (2) a working extension of time provision allowing any delay by the Employer to be disentangled from Contractor delay and an extension granted in respect of it (our “second route”[168]);  otherwise the Contractor is being required to  pay liquidated damages to the Employer for a period when the Employer was himself causing delay, which the  prevention principle does not allow.]

• The final reason, which His Lordship described as “perhaps the most important of all”, and which would apply if he was wrong and the amended clause was somehow connected to the prevention principle, was that the amended clause “was an agreed term”. “There was no suggestion in the authorities noted above that the parties cannot contract out of some or all of the effects of the prevention principle: indeed, the contrary is plain.  Salmon LJ’s judgment in Peak v McKinney[169], set out at paragraph 33 above (and in particular the passage in bold), expressly envisaged that, although it had not happened in that case, the parties could have drafted an extension of time provision which would operate in the employer’s favour, notwithstanding that the employer was to blame for the delay”.

[First, it has always been clear that the parties can contract out of the effects of the prevention principle (the “first route” in the Introduction above).  They indeed did so in Jones v St John’s College.  But that is a rare event.  And, again, Chitty LJ in Dodd v Churton spelt out that any such contracting out must  be in  “very clear language (so as) to shew that a man had undertaken a responsibility which very few men would undertake with their eyes open” (i.e. the responsibility to complete on time, or pay liquidated damages, notwithstanding delay by the Employer).   An extension of time provision, however (the “second route”), does not involve “contracting out of” the prevention principle.  Quite to the contrary,  it honours the prevention principle, by removing any possibility of the Contractor being held liable for a delay which the Employer himself has (wholly or partly) caused (Phillimore LJ’s “disentangling” in Peak v McKinney[170]).  If the extension provision is worded in such a way that it cannot work in a particular case of Employer delay, and such a case then arises, the prevention principle is inevitably once again enlivened and enters into effect.

Secondly, Salmon LJ was dealing in Peak v McKinney[171] with a situation where there was no applicable extension of time provision and making the point that it is, of course, possible to draft an extension provision which will cover delay caused by the employer – indeed, in Cyden Homes, there was just such a clause, but it had been so worded that it could not work in a case of concurrent delay.]

12. Discussion

As seen above, in each of Multiplex and Cyden Homes, the Court departed from previous authority in a significant respect:

• In Multiplex, the learned judge, in discussing his third proposition, indicated that when construing an extension of time clause which is ambiguous, and arguably does not apply to extend time for a given type of employer delay, the court should – where employer delay has occurred – lean in favour of a construction which permits the contractor to recover an extension of time.

[In the historic authorities, any doubt as to whether the extension clause could operate to extend time was  resolved against the employer being able to extend time, and in favour of time being set at large – that is what was understood, in those cases,  by “construction in favour of the contractor”.]

• In Cyden Homes, both Fraser J at first instance and Coulson LJ in the Court of Appeal accepted that the extension of time clause could not operate to extend time in a case of concurrent delay. However, they also accepted (a) that where there is concurrent employer and contractor delay, the prevention principle is not triggered in the first place (on the authority of Coulson J’s decision in Jerram Falkus) and (b) that, in any event, agreement that concurrent delay is not to be taken into account in assessing extensions of time amounts to agreement to contract out of the prevention principle.

[If “concurrent delay” has occurred, then by definition the employer has caused delay to completion. The decision at (a) above  is therefore illogical.

And the decision at (b) above does not square with the need for any intention to contract out of the prevention principle to be set out in  “very clear language” – see the comment in square brackets under point (5) in Section 11 above.]

Professor Doug Jones, in his article mentioned above (“Can Prevention be Cured by Time Bars?”)[172], points out that, following all of the above decisions and commentary, Gaymark[173] remains the only case in which there is a determination, as part of the ratio decidendi,  as to whether the prevention principle intervenes to set time and damages at large where a Contractor (a) has been or is delayed by the Employer and (b) has failed to comply with a notice-as-condition-precedent requirement. As we have seen, however, there are strong obiter comments to the contrary from Jackson J in Multiplex  and Judge Stephen Davies in Steria.

We have also seen that there is no question but that parties can agree to contract out of the prevention principle if they so wish. Professor Jones suggests, in the same article, that the “very clear language” required in order to satisfy the test laid down by Chitty LJ in Dodd v Churton would be very simple:

• The contract could state that “the Contractor agrees to complete the Works by the date specified notwithstanding having been actually delayed by acts of prevention by the Owner” (i.e. closely similar to the position in Jones v St John’s College, Oxford, where the Contractor had expressly agreed to complete by the date specified even if variations were ordered); or
• The contract could provide, in terms, that liquidated damages are to be payable in respect of any period of delay caused by the Employer unless the Contractor has properly operated the extension of time procedures in respect of that delay.

In a more recent article in 2018[174], Professor Jones put forward a third possible form of words which would amount to “very clear language”, as follows:

“The Contractor assumes the risk and liability for all delay caused by the Employer, and agrees to pay liquidated damages for such delay caused by the Employer, except in circumstances where it applies for an extension of time in accordance with the notice requirements and time-bars specified in the Contract.”

Such language conveys an unmistakable intention to displace the prevention principle and satisfies Chitty LJ’s “very clear language” requirement.

In Multiplex, Steria and Cyden Homes, there is no such express, head-on commitment by the contractor to complete on time irrespective of employer delay and, if not, to pay liquidated damages for that period of employer delay.  Rather, there is a stipulation in the provision designed to respect and circumvent the prevention principle (i.e. the extension of time clause) that, in a certain specified circumstance, the circumvention is not to apply.  If that circumstance then arises, and the circumvention of the principle is not available, it must follow that the prevention principle applies with full vigour.  How can language which, in its plain meaning, is cancelling out the circumvention of the principle  (i.e. the use of our “second route”) properly be viewed as “very clear language” intended to override the prevention principle (our “first route”), particularly in circumstances where the courts have repeatedly – even in these recent unorthodox judgments – emphasised that the extension of time provision falls to be construed against the employer and in favour of the contractor?

With regard to Multiplex and Steria (and the position as to notice-as-condition-precedent clauses), other points one can cite in support of the approach of Bailey J in Gaymark include:

(a)     It has been suggested that the Gaymark approach violates the principle that a party should not be permitted to profit from his own wrong, because it allows the Contractor to benefit from his failure to comply with the notice requirement.   Yet he only “benefits” in the negative sense of not being held liable to pay liquidated damages for a period of delay caused to him by the Employer; which hardly amounts to “profiting from his own wrong”. He does still owe an obligation to complete within a reasonable time, and to pay general damages if he fails to do so – and, if any separate loss can be shown to have flowed from his failure to give the notice, to pay damages in respect of that loss too.  So the Contractor hardly “profits” from his failure to give notice, under the Gaymark approach.

(b)   Whereas, if the Gaymark approach is rejected, the Employer does make a significant windfall profit from his wrong, obtaining liquidated damages for a period of delay which he himself has caused.

And with regard to  Cyden Homes, as well as Multiplex and Steria, the following points can also be made:

(c)    An analogy can be drawn between the prevention principle and the other rule of the common law whereby liquidated damages are not enforceable if they are found to amount to a penalty (Dunlop Pneumatic Tyre Co Limited v New Garage and Motor Co Limited[175]).  The common law does not permit parties to contract out of the rule against penalties.  Similarly, parties can contract out of the prevention principle, but only by using the  clearest of language.

(d)   As also pointed out by Professor Jones (at page 69 of his earlier article[176]), the underlying principle whereby Employer delays put the time for completion at large in the first place where there is no provision for extension  should, as a matter of logic, also apply where the Employer has drafted the extension of time mechanism in such a way as to disable it from working in certain circumstances and those circumstances eventuate: for the Employer is then, by means of his own drafting, put back into the position he would have been in if he had included no such mechanism in the first place.

(e)     Professor Duncan Wallace QC refers, in his article on Gaymark[177],  to the fact that what he calls “informed drafting advice” to construction owners has, for many years, emphasised the need to include express provision in any construction contract for any act of prevention or breach by the owner which causes delay to give rise to an extension of time, in order to avoid application of the prevention principle.  In Australia, such “informed drafting advice” has also, for many years now, given rise to the inclusion in most standard forms of building contract of the “reserve power” for the Engineer/Superintendent (or equivalent) to undertake a final review of delays which have occurred at the end of a project and to grant further extensions in his own discretion, irrespective of whether any notice of claim has been given by the Contractor.  This approach has reflected a general understanding amongst practitioners, based on the authorities reviewed in Sections 2 to 4 above, that the Employer who wants to be sure to preserve his liquidated damages entitlement must retain in his own hand the freedom to grant an extension of time if he causes delay. Otherwise, as indicated by Bailey J in Gaymark, the Employer takes upon himself the risk of the Contractor not giving notice in time, and time being set at large.

(f)         In his judgment in Adyard,  when deciding that it was not open to Adyard to rely on the prevention principle, Hamblen J gave seven reasons[178].  One of those – reason (6) –  hinted at a possible view that, merely by including an extension of time clause in their contract, the parties had “intended to deal with the possible application of the prevention principle”. Possibly from that statement by the learned judge, a suggestion has gained ground amongst some practitioners dealing with shipbuilding contracts that, where a shipbuilding contract includes an extension of time regime, that regime is to be taken as an adequate and complete regime for the allocation of the risk of delay between the parties, and to exclude the application of the prevention principle.  This suggested trend is mentioned in an article in the Keating Chambers Legal Update (Summer 2019)[179] with reference both to Adyard  and to the judgment of Leggatt J in Zhoushan Jinhaiwan Shipyard Co Ltd v Golden Exquisite Inc [2014] 1 Lloyd’s Rep 283. 

(g)        Any such suggestion is inconsistent with all but the most recent authorities.  Note in particular these remarks of Bull JA in Perini:

“It has been suggested that the relief of a contractor from liability for liquidated damages under a completion clause, as I have indicated is appropriate here [i.e. by application of the prevention principle], cannot take effect where the contract has an extension of time clause whereby mechanics to establish a new and later completion date are provided.    I agree that an extension of time clause has such effect if it is clearly applicable and clearly covers the acts of prevention which have in fact occurred.  Where it does not cover such acts, any decision under the clause will not bind the contractor or preserve a liquidated damages clause.”[180] (underlining added)

The decision in Multiplex has been respectfully questioned before. Indeed, in his 2018 article[181] (in fact written in tribute to Lord Justice Jackson on his retirement as a judge),  Professor Doug Jones AM refers  to the position taken in Multiplex as “extraordinary”, “inconsistent with the rationale of the prevention principle” and effecting “an astonishing displacement of risk from the Employer to the Contractor”  (without, one might add, the “very clear language”  required for such a displacement, as per the dictum of Chitty LJ in Dodd v Churton[182]).

In another recent article in this journal[183], Max Twivy also pointed out the illogical consequence of the judgments in the Multiplex  and Cyden Homes  cases:  they mean that, if there is Employer delay, and the Contractor is not entitled to an extension of time because none is provided for in the contract, the prevention principle intervenes to put time at large;  but if the Contractor is not entitled to an extension of time because the contract expressly states that no extension is available, the prevention principle does not intervene. These two positions are at odds.

Both Professor Jones AM  and  Max Twivy, in their articles, advocate a new approach to the prevention principle whereby it would only operate to prevent the levying of liquidated damages for the period of employer delay – effectively, fixing a new completion date and applying the agreed damages from that date.

Twivy suggests that the new approach might be achieved by a “reformulation of the law on the prevention principle … so as to bring this ‘principle of some antiquity’ in line with the modern-day approach to liquidated damages and freedom of contract”[184].  This, it seems, could only be achieved, in English law, by legislation, since it is precisely what Edmund-Davies said it was “not  open to the employer” to do  in Peak v McKinney[185].

Professor Jones AM, on the other hand, has in mind that, in future, parties should draft their contracts “with a provision which allows an arbitral tribunal or court to retrospectively exercise a power for extension of time upon proven grounds, and obliges its exercise in cases of Employer-caused delay”[186].

These suggestions may have been partly inspired by the usual civil law approach in this area.  The doctrine of good faith and requirements of reasonableness in the civil codes appear to make it possible for a court or tribunal operating under a civil law system to decline to award any liquidated damages in respect of a period of delay caused by the employer, but then to allow liquidated damages from a new fixed date, time being extended to take into account the employer delay.  English law has always shrunk from re-making the parties’ bargain in that way, viewing it as going beyond the proper role of the court.

In French law, the position is as follows:

“Il arrive que le dommage subi par le créancier trouve sa cause dans son propre fait.  Lorsque ce fait a été la cause exclusive de l’inexécution, le débiteur est logiquement exonéré de toute responsabilité. Dans le cas contraire, le fait du créancier ne demeure pas indifférent : s’il est fautif,  il peut conduire à un partage de responsabilité entre le créancier et le débiteur .” [187]

Or, in English:

“It can happen that a loss suffered by the creditor is attributable to the act of the creditor himself.  If that act is the sole cause of the debtor’s non-performance, the debtor is logically exempt from all responsibility.  If it is not the sole cause, the act of the creditor may still have an effect: if it amounts to a default by him, it can lead to a sharing of responsibility between the creditor and the debtor.”[188]

In German law, Section 286(4) of the Civil Code (Bürgerliches Gesetzbuch) provides that:

“(4) Der Schuldner kommt nicht in Verzug, solange die Leistung infolge eines Umstands unterbleibt, den er nicht zu vertreten hat.”

“(4) The obligor is not in default for as long as performance is not made as the result of a circumstance for which he is not responsible.”

Or, as it was put in a 1996 judgment of the Federal Supreme Court:

“Wegen der behaupteten Überschreitung des Liefertermins für dieses Programm hat die Kl. die Bekl. jedoch nur dann in Verzug setzen können, wenn die Verspätung in den Verantwortungsbereich der Bekl. fällt. Verzug ist demgegenüber ausgeschlossen, wenn die Verspätung auf einer Verletzung von Mitwirkungspflichten durch die Kl. beruht.”[189]

Or, in English:

“Due to the alleged failure to meet the delivery date for this programme, the claimant can only claim default by the defendant if the delay was the responsibility of the defendant. In contrast, default is excluded if the delay is due to a violation of the claimant’s obligation to cooperate.”[190]

These principles also find expression in the UNIDROIT Principles. Article 7.1.2 (“Interference by the Other Party”)  states:

“A party may not rely on the non-performance of the other party to the extent that such non-performance was caused by the first party’s act or omission or by another event for which the first party bears the risk.”

The leading Swiss construction lawyer and arbitrator Michael E Schneider has also written as follows, referring to the “contributions” which an employer has to make in order for timely completion to be achieved by the contractor:

“The construction by which the law deals with the situation may be described as follows: the employer’s failure to make these contributions in time is a case of creditor’s default and justifies any delay of the contractor caused by such failure. It also entitles the contractor to withhold its own performance accordingly. As a result the time for completion is adjusted to make allowance for the time during which the contractor was prevented from performing due to the employer’s failure or entitled to withhold his own performance. Unless the contract contains the necessary rules for making such adjustment the basis for it is found in a reference to what is called the “hypothetical will of the parties”.

In other words, the contractor is relieved of the obligation to complete the work by the agreed date and substitutes for that date the later date resulting from the programme adjustment. Since, as a result of the adjustment, the contractor is no longer in delay, the employer may not claim damages for delay, liquidated or not; subject always to contrary contractual provisions in the contract. In other words situations which entitle the contractor for an extension of time by the same token also relieve him, for the time of the extension, of the risk of claims for damages from the employer.”[191]

So, whilst something closely akin to the “prevention principle” is also recognised in the civil law systems, its effect is not to put time and damages at large. Instead,the court or tribunal itself is recognised as having authority to make the necessary adjustment to the completion date, with the employer then able to retain his liquidated damages and apply them from that adjusted date.  The common law courts have always balked at “re-making the contract” for the parties in that kind of way (again, this is precisely what Edmund-Davies LJ said could not be done in Peak v McKinney[192]).

In the civil law tradition, then, the extension of time clause is simply reiterating the position under the general law (based on the Schneider analysis above).  If parties agree expressly that there is not to be an extension for employer delay in specified circumstances, it is plain that the parties are agreeing to depart from the usual legal consequence of employer delay.

Whereas, in the common law context, agreement to disapply the extension mechanism removes the means of circumventing the usual legal consequence of employer delay (that time and damages are at large) but does not provide the “very clear language” necessary (on the authorities) to overrule the prevention principle. Logically, therefore, the prevention principle must again apply.

13. Conclusion

English law is admired for its certainty and predictability.  These considerations have much to do with its choice as the governing law for the contracts on many major projects around the world.

This paper has highlighted the departure of the English courts, since 2007, from the old authorities in terms of the requirements to be met in order if one wants to override the “rule of law” known as the prevention principle.

In Multiplex the learned judge (albeit obiter)  doubted that an Australian judgment which had faithfully followed the earlier authorities (Gaymark)  represented the law of England.  He also held that any ambiguity or uncertainty as to the application of an extension of time clause, where employer delay is in issue, should be resolved in favour of granting an extension to the contractor (the precise opposite of the previous understanding).

In Jerram Falkus, the learned judge pronounced that Adyard  had established that the prevention principle was not triggered in a case of concurrent delay, which it had not.  This misunderstanding  was then a key factor in the judgments in Cyden Homes  –  if the prevention principle  did not come into play in a case of concurrent delay, it would not (the courts held, both at first instance and on appeal) operate to set time at large where the contract disallows extensions of time for concurrent delay.

It is regrettable that the judgments in the post-2007 cases gave little, if any, attention to relevant authorities earlier than Peak v McKinney  in 1970.   Given the prevalence, today – for example, in the FIDIC suite of contracts – of notice-as-condition-precedent clauses with respect to claims for extension of time, and (increasingly) of clauses disapplying the extension of time machinery in cases of concurrent delay – it is to be hoped that an opportunity for careful reconsideration of these matters by the Supreme Court will arise soon,  with due attention to the earlier authorities reviewed above, an appreciation of the different requirements of what we have referred to as the “first” and “second” routes to avoiding application of the prevention principle where there is employer delay, and due consideration of  the relevant Australian judgments.

In the meantime, employers (not least, users of the FIDIC forms) may continue to insist  on the giving of notice of time claims as a condition precedent to an extension of time, and sometimes on the disapplying of the extension of time regime in cases of concurrent delay. But if they also want their contracts to be secure against any “time at large” argument, they may want to consider adopting the Australian practice of including in the contract a “reserve power” for them, or their agent, to grant extensions of time at their discretion.

Tony Marshall

6 July, 2020

 

 

[1] Just after the effective deadline for my book Extra-Contractual Recoveries for Construction & Engineering Work, which is now with the publishers – London Publishing Partnership – with a publication date early next year.

[2] Forgive the pun.

[3] At [2020] ICLR 325 and [2021] ICLR 88.

[4] Senior Counsel, Hogan Lovells Construction and Engineering Practice Group.

[5]               per Salmon LJ in Peak Construction (Liverpool) Ltd v  McKinney Foundations Ltd [1970] 1 BLR 111, at  121

[6]               Dodd v Churton [1897] 1 QB 562, per Chitty LJ at 569

[7]               Wells v Army & Navy Co-operative Society [1902] 86 LT 764, Perini Pacific v Greater Vancouver Sewerage and Drainage District 57 DLR (2d) 307, Peak Construction (Liverpool) Ltd v  McKinney Foundations Ltd [1970] 1 BLR 111

[8]               [1997] 13 BCL 378 (Cole J, Supreme Court of New South Wales)

[9]               [2006] HKCFI 965;  HCCT 23/2005 (18 August 2006, Reyes J, Judge in charge of the Construction List))

[10]             [2007] BLR 195 (Jackson J, Technology & Construction Court, London)

[11]             [2008] BLR 79 (Judge Stephen Davies)

[12]             [2017] B.L.R. 605 and 174 Con. L.R. 1  (Fraser J, Technology & Construction Court); [2018] B.L.R. 565 and 180 Con. L.R. 1 (Court of Appeal, England – Etherton MR, Sir Ernest Ryder and Coulson LJ)

[13]             3 M & W 387; 150 ER 1195 (Court of Exchequer, Parke B)

[14]             Turner Corporation Ltd (Receiver and Manager Appointed) v Austotel Pty Ltd [1997] 13 BCL 378 (Supreme Court of New South Wales, Cole J, 2 June 1994) and Turner Corporation Ltd v Co-ordinated Industries Pty Ltd [1995] 12 BCL 33 (Supreme Court of New South Wales, Rolfe J, 26 August 1994)

[15]             Gaymark Investments Pty Limited v Walter Construction Group Limited (formerly Concrete Constructions Group Limited) [1999] NTSC 143 (Supreme Court of the Northern Territory of Australia, Bailey J, 20 December 1999)

[16]             Prevention and Liquidated Damages: A Theory Too Far? [2002] 18 BCL 82

[17]             3 M & W 387; 150 ER 1195 (Court of Exchequer, Parke B)

[18]             Ibid

[19]             Russell v Viscount Sa da Bandeira [1862] 13 C.B. (N.S.) 149  (Court of Common Pleas; Erle CJ, Byles and Keating JJ, 22 November 1862)

[20]             Ibid, at paragraph [205], page 83

[21]             [1863]  11  WR 261l 7LT 736 (Court of Queen’s Bench, Wightman J, Crompton J and Mellor J),

[22]             [1870] LR 5  CP 310  (Court of Exchequer Chamber, on appeal from the Court of Common Pleas – Kelly CB, Channell B, Blackburn and Mellor JJ;  Cleasby and Pigott BB dissenting),

[23]             Ibid, per Kelly CB, at page 329

[24]             Ibid,  per Kelly CB, at page 331

[25]             Ibid, per Blackburn and Mellor JJ, at page 326

[26]             Ibid, per Kelly CB, at page 333

[27]             Ibid, per Cleasby B, at page 320

[28]             LR 6 QB 115 (Queen’s Bench Division, Mellor, Lush and Hannen JJ).

[29]             Ibid,  at page 125

[30]             Ibid, at page 125

[31]             [1897]  1 QB 562 (Court of Appeal, Lord Esher MR, Lopes LJ, Chitty LJ)

[32]             Ibid, per Lord Esher MR at page 566

[33]             [1870]  LR 6 QB 115

[34]             [1897]  1 QB 562, per Lopes LJ at pages 567 – 568

[35]             Sir Joseph Chitty, Lord Justice of Appeal 1897 to 1899, was the grandson of Joseph Chitty, the compiler and editor of  the first and second editions (1826 and 1834) of the standard English law textbook Chitty on Contracts, and nephew of Thompson Chitty, editor of the third edition (1841)

[36]             [1897]  1 QB 562,  per Chitty LJ, at pages 568 – 569

[37]             [1870]  LR 6 QB 115

 

[38]             [1902] 86 LT 764  ( King’s Bench Division, Wright J, 16 April 1902)

[39]             Ibid

[40]             [1902] KB 383 (Court of Appeal, Vaughan Williams, Stirling and Mathew LJJ, 3 April 1903)

[41]             This important point for contractors is echoed by Edwards-Stuart J in the Technology & Construction Court in De Beers UK Ltd v Atos Origin It Services UK Ltd [2010] EWHC 3276 (TCC) (16 December 2010) (134 Con LR 151; [2011] BLR 274, at paragraph 177

[42]             Wells v Army & Navy Cooperative Society [1902] KB 383, per Vaughan Williams LJ, at page 384

[43]             Ibid, per Vaughan Williams LJ at page 385; also cited by Bull JA in Perini Pacific v Greater Vancouver Sewerage and Drainage District 57 DLR (2d) 307, at 320

[44]             Ibid, per Mathew J, at page 391

[45]              [1902] 21 NZLR 166

[46]             [1952] 2 All ER 452 (Court of Appeal, England – Singleton, Denning and Romer LJJ)

[47]             Ibid, per Denning LJ at page 455

[48]             [1966] 57 DLR (2d) 307 (British Columbia Court of Appeal – Davey, Lord and Bull JJA)

[49]             [1967] SCR 189

[50]             [1902] KB 383

[51]             [1967] SCR 189, per Bull JA, at page 321

[52]             Ibid, per Bull JA, at page 316

[53]             Ibid, per Bull JA, at page 318

[54]             [1897]  1 QB 562

[55]             [1967] SCR 189, per Bull JA, at page 318

[56]             [1870] LR 5  CP 310

[57]             [1967] SCR 189, per Bull JA, at page 319

[58]             Ibid, per Bull JA, at page 319

[59]             See page [   ] of this paper

[60]             [1967] SCR 189, per Bull JA, at pages 320 – 321

[61]             Ibid, per Bull JA,  at page 321, citing Wells v Army & Navy Co-operative Society   [1902] KB 383

[62]             [1971] 1 BLR 111 (Court of Appeal, England;  Salmon, Edmund Davies and Phillimore LJJ)

[63]             [1971] 1 BLR 111, per Salmon LJ at page 121

[64]             Wells v Army & Navy Cooperative Society [1902] KB 383

[65]             Perini Pacific Ltd v Greater Vancouver Sewerage and Drainage District [1966] 57 DLR (2d) 307

[66]             See the passage from the judgment of Bull JA cited at footnote 47, supra

[67]             [1971] 1 BLR 111, per Edmund-Davies LJ, at page 125

[68]             Ibid,  per Salmon LJ, at pages 121/122

[69]             Ibid,  per Phillimore LJ, at page 127

[70]             [2006] HKCFI 965;  HCCT 23/2005 (18 August 2006),

[71]             [2007] BLR 195

[72]             [2017] EWHC 2414

[73]             [1984] VR 391 (Full Court of the Supreme Court of Victoria – Starke, Kaye and Brooking JJ)

[74]             Ibid, per Brooking J, at page 398

[75]             Ibid, per Brooking J, at page 400

 

[76]             [1997] 13 BCL 378 (Supreme Court of New South Wales, Cole J)

[77]             [1994] 11 BCL 202 (Supreme Court of New South Wales, Rolfe J)

[78]             [1992] 58 BLR 1

[79]             [1993] 62 BLR 12

[80]             Turner Corporation Ltd v Co-ordinated Industries Pty Ltd [1995] 12 BCL 33

[81]             [1999] NTSC 143 (Supreme Court of the Northern Territory of Australia, Bailey J)

[82]             Ibid, per Bailey J, paragraph 62

[83]             Ibid, per Bailey J, paragraph 68

[84]             Ibid,  per Bailey J, at paragraph 69

[85]             Ibid,  per Bailey J, at paragraph 72

[86]             [1999] NTSC 143 (Supreme Court of the Northern Territory of Australia, Bailey J)

[87]             [2002] 18 BCL 82

[88]             Wells v Army & Navy Cooperative Society (16 April 1902) [1902] 86 LT 764  ( King’s Bench Division, Wright J) and [1902] KB 383 (Court of Appeal)

[89]             Perini Pacific v Greater Vancouver Sewerage and Drainage District 57 DLR (2d) 307

[90]             Peak Construction (Liverpool) Limited v McKinney Foundations Limited [1971] 1 BLR 111

[91]             [1997] 13 BCL 378 (Supreme Court of New South Wales, Cole J), and Part 1 of this paper at  page [   ] in [REFERENCE TO PART 1 ARTICLE]

[92]             [2009] ICLR, Pt 1 57

[93]             [2006] HKCFI 965;  HCCT 23/2005 (18 August 2006)  (Mr Justice Anselmo Reyes, Judge in charge of the Construction List, High Court of Hong Kong)

[94]             [INSERT CROSS REFERENCE TO PART 1 OF THE PAPER IN ICLR PART 4 OF 2020]

[95]             [2007] BLR 195, 111 Con LR 78

[96]             3 M & W 387; 150 ER 1195 (Court of Exchequer, Parke B)

[97]             [1897]  1 QB 562 (Court of Appeal, Lord Esher MR, Lopes LJ, Chitty LJ)

[98]             [1970] 1 BLR 111

[99]             [1973] 1 WLR 601

 

[100]            [1999] NTSC 143 (Supreme Court of the Northern Territory of Australia, Bailey J)

[101]            Turner Corporation Ltd (Receiver and Manager Appointed) v Austotel Pty Ltd [1997] 13 BCL 378 (Supreme Court of New South Wales, Cole J, 2 June 1994)

[102]            [2002] 18 BCL 82

[103]            Turner Corporation Ltd (Receiver and Manager Appointed) v Austotel Pty Ltd [1997] 13 BCL 378 (Supreme Court of New South Wales, Cole J, 2 June 1994)

[104]            Peninsula Balmain Pty Limited v Abigroup Contractors Pty Limited [2002] NSWCA 211

[105]            City Inn v Shepherd Construction [2010] CSIH 68, [2010] CILL 2889, [2010] ScotCS CSIH_68, 2010 GWD 29-598, [2010] BLR 473

[106]            See Wells [1902] 86 LT 764; Perini [1966] 57 DLR (2d) 307; Peak [1970] 1 BLR 111

[107]            [1984] VR 391, at page 395, lines 10 – 15

[108]            The relevant passage commences at 152 ALR 1349

[109]            [2008] BLR 79; 118 Con. L.R. 177

[110]            [1999] NTSC 143 (Supreme Court of the Northern Territory of Australia, Bailey J), para 62 (quoted from para G31)

[111]             (Queen’s Bench Division (Commercial Court, 11 April 2011)

[112]            2010 EWHC 3276 (TCC)

[113]            [2011] EWHC 848 (Comm), per Hamblen J, paragraph 237

[114]            Ibid, per Hamblen J, paragraph 255 (6) and (7)

[115]            [1973] 1 WLR 601

[116]            Ibid,  per Lord Pearson (quoting Lord Denning MR in the Court of Appeal), at page 608

[117]            Concurrent Delay  by John Marrin QC [2002] 18 Const LJ No 6 436

[118]            Adyard Abu Dhabi v SD Marine Services [2011] EWHC 848 (Comm), at para 288, referring to dicta of Dyson J in Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd [1999] 70 Con. L.R. 32 at page 34, paras 8 and 9

[119]            Subsequently, in Jerram Falkus v Fenice Investments Inc [2011] EWHC 1935 (TCC), Coulson J asserts that Hamblen J’s analysis in Adyard leads to the conclusion that, where there is concurrent delay, the prevention principle is not triggered.  However, there appears to be no such indication in Hamblen J’s judgment.

[120]            2010 EWHC 3276 (TCC), at para 177

[121]            [2011] EWHC 1935 (TCC, Coulson J)

[122]            Ibid,  per Coulson J, at para 47

[123]            See page [28] of this paper

[124]            [2011] EWHC 1935, at para 49

[125]            [2011] EWHC 1935, at para 50

[126]            Keating on Construction Contracts, 10^th edition (2016), at para 8-014

[127]            [2011] EWHC 848 (Comm) [2011]

[128]            [2011]  EWHC 1935 per Coulson J at  49 – 52

[129]            See page [32] of this paper

[130]            Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd [1999] 70 Con. L.R. 32

[131]            Adyard Abu Dhabi v S D Marine Services [2011] EWHC 848 (Comm), at para 277

[132]            [2017] NSWCA 151 (New South Wales Court of Appeal: Beazley ACJ, McColl and Macfarlan JJA)

[133]            Turner Corporation Ltd (Receiver and Manager Appointed) v Austotel Pty Ltd  (“Turner No 1”) [1997] 13 BCL 378 (Supreme Court of New South Wales, Cole J, 2 June 1994) and Turner Corporation Ltd v Co-ordinated Industries Pty Ltd  (“Turner No 2”) [1995] 12 BCL 33

[134]            Prevention and Liquidated Damages: A Theory Too Far? [2002] 18 BCL 82

[135]            [2002] NSWCA 211 (New South Wales Court of Appeal, 3 July 2002; Sir Anthony Mason P, Hodgson and Stein JJA)

[136]            [1971] 1 BLR 111, per  Phillimore LJ, at page 127

[137]            [2017] B.L.R. 605 and 174 Con. L.R. 1  (Fraser J, Technology & Construction Court); [2018] B.L.R. 565 and 180 Con. L.R. 1 (Court of Appeal, England – Etherton MR, Sir Ernest Ryder and Coulson LJ)

[138]            For explanation of these “first” and “second routes”, please see Section 1 of this paper at [2020] ICLR [ADD IN REFERENCE]

[139]            North Midland Building  Limited v Cyden Homes Limited [2017] EWHC 2414 (TCC), at para 9

[140]            Ibid, at para 12

[141]            Ibid, at para 13

[142]            [2007] BLR 195, at para 56

[143]            North Midland Building  Limited v Cyden Homes Limited [2017] EWHC 2414 (TCC), at para 14

[144]            Ibid, at para 20

[145]            [1870]  LR 6 QB 115

[146]            North Midland Building  Limited v Cyden Homes Limited [2017] EWHC 2414 (TCC), at para 18

[147]            Ibid

[148]            Ibid, para 19

[149]            [1971] 1 BLR 111

[150]            Adyard Abu Dhabi v S D Marine Services [2011] EWHC 848 (Comm)

[151]            [2011] EWHC 1935 (TCC)

[152]            North Midland Building  Limited v Cyden Homes Limited [2017] EWHC 2414 (TCC), at para 26,  referring to Jerram Falkus v Fenice Investments Inc [2011] EWHC 1935, per Coulson J, para 52

[153]            [1984] VR 391 (see also passage from Brooking J’s judgment quoted in Part 1 of this paper, at [2020] ICLR [REFERENCE])

[154]            [2018] B.L.R. 565 and 180 Con. L.R. 1, at para 12

[155]            See Wells [1902] 86 LT 764; Perini [1966] 57 DLR (2d) 307; Peak [1970] 1 BLR 111

[156]             [2018] B.L.R. 565 and 180 Con. L.R. 1, at para 17

[157]            See Concurrent Delay  by John Marrin QC [2002] 18 Const LJ No 6 436

[158]            It may also be of relevance here to recall that, in English law, “if a breach of contract is one of two causes, both co-operating and both of equal efficacy in causing loss to the claimant, the party responsible for the breach is liable to the claimant for that loss”  (in full) – see Chitty on Contracts, 30^th edition, paragraph 26-041 – which would make it very surprising if an employer, in breach of his obligation not to hinder or prevent completion (his breach causing delay simultaneously with delay by the contractor), could then recover liquidated damages from the contractor for the delay in question.

[159]            S M K Cabinets v Hili Modern Electrics Pty Limited [1984] VR 391 (Full Court of the Supreme Court of Victoria – Starke, Kaye and Brooking JJ)

[160]            See  also the fuller reference to this passage on page [18] of this paper

[161]            Dodd v Churton [1897]  1 QB 562,  per Chitty LJ, at pages 568 – 569

[162]            [1897]  1 QB 562, per Lopes, at pages 567 – 568

[163]            [2018] B.L.R. 565 and 180 Con. L.R. 1, at para 29

[164]            See ICLR [INSERT HERE REFERENCE TO PART 1]

[165]            See Concurrent Delay  by John Marrin QC [2002] 18 Const LJ No 6 436

[166]            [1999] 70 Con. L.R. 32

[167]            Walter Lilly & Co Ltd v Mackay  [2012] B.L.R. 503

[168]            For explanation of these “first” and “second routes”, please see Section 1 of this paper at [2020] ICLR [ADD IN REFERENCE]

[169]            [1971] 1 BLR 111

[170]            [1971] 1 BLR 111, per Phillimore LJ, at page 127

[171]            Ibid,  per Salmon LJ, at page 121

[172]            [2009] ICLR Part 1 58

[173]            [1999] NTSC 143 (Supreme Court of the Northern Territory of Australia, Bailey J)

[174]            Construction Law, Costs and Contemporary Developments: Drawing the Threads Together – A Festschrift for Lord Justice Jackson (ed. Julian Bailey, 2018), chapter 19, page 348

[175]            [1915] AC 79

[176]            Can Prevention be Cured by Time Bars? [2009] ICLR Part 1 69

[177]            Prevention and Liquidated Damages: A Theory Too Far? [2002] 18 BCL 82

[178]            Adyard Abu Dhabi v S D Marine Services [20110 EWHC 848 (Comm), at para 255

[179]            Keating Chambers Legal Update, Summer 2010, “The Prevention Principle: Onshore v Offshore and the Problem of Time At Large”, by Adam Constable QC and Thomas Lazur, page 5 et seq

[180]            Perini Pacific v Greater Vancouver Sewerage and Drainage District 57 DLR (2d) 307, at page 321

[181]            Construction Law, Costs and Contemporary Developments: Drawing the Threads Together – A Festschrift for Lord Justice Jackson (ed. Julian Bailey, 2018), chapter 19

[182]            Dodd v Churton [1897] 1 QB 562, per Chitty LJ at 569

[183]            The Prevention Principle after North Midland v Cyden Homes:  Time for Change? [2019] ICLR 375

[184]            Ibid,  at page 391

[185]            [1971] 1 BLR 111, per Edmund-Davies LJ, at page 125 (and see page [INSERT PAGE NO] in Part 1 of this paper at [2020] ICLR [??????]

[186]            Construction Law, Costs and Contemporary Developments: Drawing the Threads Together – A Festschrift for Lord Justice Jackson (ed. Julian Bailey, 2018), chapter 19, at page 352

[187]            Cass. civ. 1, 22 Jan. 1962, Bull. Civ. I n° 45 ; Cass. com 4 Nov. 2014, n° 13-24196 ; and more generally: B. Fages, Droit des obligations, July 2018, Lextenso, para. 326

[188]            Ibid

[189]            Bundesgerichtshof, Judgment of 23 January 1996 – X ZR 105/93, NJW 1996, 1745 ff., 1746

[190]            Ibid

[191]            “Delay in Civil Law – the Swiss Example: Relevant Events and Basic Principles”,  Michael E. Schneider – paper delivered to the International Construction Projects Committee of the International Bar Association, Madrid, at a session entitled “Time and Acceleration Issues affecting International Construction Contracts, especially Concurrent Delay” and chaired by His Honour Humphrey LLoyd, QC

[192]            See footnote 100, supra