What happens when completion is delayed by two events acting simultaneously, where one event is an employer risk and the other a contractor default?
This question was widely debated until it was put to rest by the Walter Lilly case back in 2012. Walter Lilly made the position clear, at least as far as many unamended JCT forms of contract were concerned. The Contractor will get an extension of time, but it does not follow that it will recover associated loss and expense.
Even before the Walter Lilly decision, employers had been amending their contracts to allocate the risk of concurrent delay to the contractor or, to put it another way, to deprive the contractor of an extension of time in those circumstances. The purpose of these clauses was clear, but they had not been tested in the courts. This led commentators to question whether those clauses were effective, or whether they would fall foul of the 'prevention principle' (which is explained below).
In a case that will be welcomed by employers, but met with mixed emotions by contractors, the Technology and Construction Court has recently held that such concurrency clauses work, and that parties are free to allocate risk of concurrent delay. This was the decision of Fraser J in North Midland Building Limited v Cyden Homes Limited on 2 October 2017.
To understand the issues clearly, it is worth looking briefly at what constitutes concurrent delay, and the problems posed by the prevention principle.
Concurrent delay arises where completion is delayed by two or more events of broadly equal 'causal potency' or strength, where the effect of those events is felt at the same time. To put it another way, where each event has an equal claim to be said to have caused the consequent delay at any given time. For example, where a contractor is delayed at the same time by both instructions to carry out additional works and remedial work to address its own construction defects.
The prevention principle is a long standing rule affecting the right to liquidated damages. In broad terms, it applies where a contract gives the employer the right to liquidated damages, but does not give an extension of time for delay caused by employer default. This can cause the liquidated damages mechanism to fail and time to become 'at large'.
Clauses allocating the risk of concurrent delay to contractors were argued to breach the prevention principle, as they would allow the employer to recover liquidated damages where delay was caused (at least in part) by their own default. This argument was rejected by Fraser J in the North Midland Building case, who said that the prevention principle did not apply and that "there is no rule of law of which I am aware that prevents the parties from agreeing that concurrent delay be dealt with in any particular way…"
This judicial endorsement of concurrent delay clauses will almost certainly lead to them being used more widely.
Currently, the most common clauses simply deprive the contractor of an extension of time where there is concurrent delay. This does not need to be the case, however. Parties are free to allocate risk as they see fit, which might include agreeing that concurrent delay should be apportioned between the parties (contrary to the position under many JCT standard forms following the Walter Lilly case).
Where disputes arise, there will undoubtedly be greater focus on the competing causal strength of concurrent events. There is often, a judgment to be made when deciding whether events truly cause the delay in question, or whether they are simply part of the factual background. That issue could be the subject of an article in its own right. For now the starting point, at least, for issues of causation should be old fashioned common sense.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at September 2017. Specific advice should be sought for specific cases. For more information see our terms and conditions.