AML: HMRC flexes enforcement muscle to the tune of £7.8 million
Delay is a major issue on construction projects. To combat this, most construction contracts will specify a particular date by which the works must be completed. If the contractor fails to meet this deadline, it will usually have to pay a pre-agreed level of damages for the period of delay. This is unless the contractor can show that it has a claim for an extension of time which will push back the date for completion.
A construction contract will generally list the grounds where a contractor can apply for an extension of time. The employer may seek to limit the scope of such grounds from what is contained in standard form contracts such as the JCT at the point of negotiation. However, it is generally considered imperative that “acts of prevention” by the employer (i.e. where the employer has caused the delay) remain as a ground for an extension of time to be granted. Otherwise, the contract is generally considered to fall foul of what is known as the “prevention principle”.
The “prevention principle” provides that a party may not enforce a contractual obligation against the other party where it has prevented such other party from performing that obligation. Where this principle applies, the requirement to complete the works by the specific deadline will fall away and the contractor will only be required to complete within a reasonable period of time. This can leave an employer in a disastrous situation. However, a recent decision from the Court of Appeal suggests that it may be possible for parties to disapply the “employer’s act of prevention” ground for an extension of time with express wording without the prevention principle coming into play.
In North Midland Building Ltd v Cyden Homes Ltd  EWCA Civ 1744, Cyden Homes Ltd employed North Midland Building Ltd to design and build a large residential property in Lincolnshire. North Midland was engaged under a JCT Design and Build Contract 2005 edition with amendments. The project was delayed by a matter which was an employer risk (exceptionally adverse weather) and matters which were contractor risks (lighting to the main house/asphalt roofing) occurring simultaneously. This is known as a situation of “concurrent delay”. Cyden Homes did not grant North Midland an extension of time relying on a clause within the contract which addressed concurrent delays. North Midland sought a declaration that this clause offended the prevention principle and therefore did not apply.
The Court of Appeal, agreeing with the Technology and Construction Court, refused to grant the declaration. Coulson LJ found that the prevention principle was not engaged because the contract still provided for an extension of time being available in the event of an employer act of prevention where there was no contractor cause of delay occurring at the same time. In any event, Coulson LJ went on to find that, even if the prevention principle was engaged, it is not an overriding rule of public policy, but more of an implied term. It could therefore be disapplied with express wording, as it had partially been here by the clause dealing with concurrent delay. Coulson LJ suggested that the application of the prevention principle will not interfere with “an express provision which states that, on the happening of a particular type of prevention, … the risk and responsibility rests with the contractor.”
The implications of this decision may be broader than concurrent delay. It does not seem too far of a jump from this to suggest that parties could disapply the “act of prevention” extension of time ground itself with clear, express wording without this causing the deadline for completion to fall away. I would suggest that something more than merely deleting it from the list of grounds for extensions of time would be needed. Although this might appear to create an unfair position, it would demonstrate the courts’ commitment to abide by the express agreement between the parties. We wait to see whether this point will now come before the courts as in the meantime the position on this remains unclear.
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