Hong Kong – England’s Court Of Appeal Confirms That Express Agreement Can Deny EOT In Case Of Concurrent Delay.

13 September, 2018

 

Background

 

In January 2018, we reported on the judgment of England’s Technology and Construction Court (TCC) in North Midland Building Limited v Cyden Homes Limited. For a recap of the matters in issue and the TCC’s decision, please click here.  On 30 July 2018, the Court of Appeal upheld that judgment.   

 

Court of Appeal’s Decision

 

Was the concurrent delay allocation clause contrary to the prevention principle?

 

The court adopted the definition of concurrent delay as stated in Adyard Abu Dhabi v SD Marine Services [2011] EWHC 848 (Comm), namely “a period of project overrun which is caused by two or more effective causes of delay which are of approximately equal causative potency.

 

The court also adopted the ambit and scope of the prevention principle, as summarized by the court in Multiplex Constructions (UK) Limited v Honeywell Control Systems Limited (No.2) [2007] BLR 195, in the following terms:

 

"(i) Actions by the employer which are perfectly legitimate under a construction contract may still be characterised as prevention, if those actions cause the delay beyond the contractual completion date. 

 

(ii) Acts of prevention by an employer do not set time at large, if the contract provides for an 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."

 

The Court of Appeal agreed with the TCC that clause 2.25.1.3(b) was unambiguous and its meaning was “crystal clear”, since it plainly sought to allocate the risk of delay to the appellant contractor, such that principle (iii) in Multiplex above did not arise on the facts of this case. The consequence of this clear provision was that the parties had agreed that, where a delay was due to the contractor, even if there was an equally effective cause of that delay which was the responsibility of the employer, liability for the concurrent delay rested with the contractor, so that it would not be taken into account in the calculation of any extension of time. 

 

The Court of Appeal said that even if it were wrong and clause 2.25.1.3(b)  was somehow connected to the prevention principle, clause 2.25.1.3(b) was an agreed term and there was no suggestion in any of the legal authorities that  parties could not  contract out of some or all of the effects of the prevention principle. Indeed, the Court of Appeal said, the contrary is plain. 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. 

 

Accordingly, the Court of Appeal concluded that clause 2.25.1.3(b) could not be struck down or rendered inoperable by the prevent principle. The court would not disturb the clear contract terms which stipulated that, where there was a concurrent delay, the contractor would not be entitled to an extension of time for a period of delay which was as much his responsibility as that of the employer.

 

Comments

 

The Court of Appeal decision confirms that parties are free to agree to deal with concurrent delay as they choose and that such agreement (assuming it is clearly worded) will override the prevention principle.

 

Armed with this judgment, employers may amend their contracts to preserve their entitlement to liquidated damages in cases of concurrent delay, although the validity of such clause has yet to be tested in the Hong Kong Courts.