Hong Kong – In Concurrent Delay Cases, Can Express Agreement Override The Prevention Principle?

25 January, 2018

 

Concurrent delay refers to a situation where there are two effective causes of delay, one attributable to the Employer and one attributable to the Contractor. Under common law, the prevention principle may apply in such cases, which leads to the result of “time at large”, meaning the completion date specified in the contract no longer applies and the Contractor need only complete the works within a reasonable time. However, the case of North Midland Building Limited v Cyden Homes Limited [2017] EWHC 2414 (TCC) shows that parties are free to agree to a different framework governing concurrent delay situations.

 

Background

 

Cyden Homes Limited (Cyden) engaged North Midland Building Limited (NMB) to construct a sizeable house in the Midlands. The parties used the JCT Design and Building Contract 2005, with bespoke amendments. One of the important amendments was Clause 2.25, which dealt with how extensions of time would be dealt with where a Relevant Event caused work to be delayed (or likely to be delayed) beyond the completion date and there had been concurrent delays. It provided:

 

“(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

 

(a)        the Contractor has made reasonable and proper efforts to mitigate such delay; and

 

(b)        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.” (emphasis added)

 

The works were delayed and NMB applied for an extension of time, relying on certain Relevant Events (i.e. delays attributable to Cyden). The extension of time was refused by Cyden on the grounds that the effects of the Relevant Events were “consumed by culpable delays” attributable to NMB.

 

The parties disagreed on the effect of Clause 2.25.1.3(b) and NMB applied to the Court for a declaration that:

 

(1)     the effect of Clause 2.25.1.3(b) was to make time at large where NMB had a claim to an extension of time for a delay caused by a Relevant Event where that delay was concurrent with another delay for which NMB was responsible; and

 

(2)     in such circumstances, NMB must complete within a reasonable time and liquidated damages were void.

 

Court’s Decision

 

NMB relied on the prevention principle, namely that where the Employer’s actions prevent the Contractor from completing a project on time, and where the contract does not provide for an extension of time in such situations, then time is at large, meaning that the Contractor need only  complete the project within reasonable time.

 

The Court refused to grant the declaration sought. It held that this was a case purely concerned with the correct interpretation of a contractual clause agreed by the parties (and here, specifically agreed by incorporation into the contract of a bespoke amendment) and the prevention principle simply did not arise. The Court said that parties were free to agree to deal with concurrent delay in any particular way they chose.

 

Turning to the interpretation of Clause 2.25.1.3(b), the Court said that its meaning was “crystal clear”. The Court stated the effect of the clause was that “the contractor would not be entitled to any extension of time for Event X (for which he was not responsible) in so far as delay caused by that event was concurrent with delay caused by Event Y (for which he was)”.

 

Conclusion

 

This case confirms that parties are free to agree to deal with concurrent delay as they choose and that such an agreement (where clearly worded, of course) will override the prevention principle. Construction contracts commonly used in Hong Kong are usually silent on the entitlement of extensions of time in the case of concurrent delay. It may lead to disputes which have to be resolved by arbitration or litigation. Employers and their consultants may consider adding a similar clause in their construction contracts to put the question beyond doubt.