Carillion Construction Ltd v Woods Bagot Europe Ltd & Ors

Factual and Procedural Background

This dispute arises from the design and construction of the Rolls Building, which now houses this Court. The developer, Rolls Development UK Ltd., is not involved in the litigation. The main contractor was Company A, while the Second Defendant, Company B, and the Third Defendant, together with the Fourth Defendant providing a parent company guarantee, were subcontractors responsible for various Mechanical and Electrical (M+E) services. For the purposes of this judgment, the Third and Fourth Defendants are collectively referred to as "EMCOR".

Company A claims damages for delays caused by both EMCOR and Company B in completing their subcontract works. The damages include Company A's own costs and sums levied under the main contract as liquidated and ascertained damages. Both EMCOR and Company B defend these claims, asserting entitlement to extensions of time and disputing Company A's liability to the developer for liquidated damages.

The case proceeded before Judge [Last Name] at a case management conference on 8 March 2016, where preliminary issues were ordered for trial after the parties agreed on their wording. These preliminary issues focus on the interpretation of extension of time provisions under the EMCOR Sub-Contract and the effect of a Further Supplemental Agreement between the developer and Company A on liquidated damages liability.

Legal Issues Presented

1. Whether, assuming EMCOR is entitled to an extension of time under clause 11.3 of the EMCOR Sub-Contract, the revised or further revised period(s) for completion must be added contiguously to the end of the current period, or whether such periods can be discontinuous and reflect actual delays.
2. Regarding the Further Supplemental Agreement between the developer and Company A:
   1. Whether Company A's liability to the developer for liquidated and ascertained damages between 29 January 2011 and 22 July 2011 was extinguished by the Further Supplemental Agreement.
   2. If so, whether EMCOR and Company B have any liability to Company A for sums paid or deducted as liquidated damages under the main contract for that period.

Arguments of the Parties

EMCOR's Arguments

• The natural and ordinary meaning of clause 11.3 requires that any extension of time must be added contiguously to the existing period or periods for completion, resulting in an aggregate continuous period.
• This interpretation aligns with commercial common sense and established authority that extensions of time in construction contracts usually fix a new completion date or revised continuous period.
• EMCOR relies on authorities such as Balfour Beatty Building Ltd. v Chestermount Properties and other cases endorsing the "net" extension approach where extensions are added cumulatively to the original period.
• EMCOR submits that the Further Supplemental Agreement crystallised and satisfied Company A's liability for liquidated damages as at 22 July 2011, but did not extinguish it.

Company A's Arguments

• Clause 11.3 contemplates that extensions of time may be given by fixing additional but discontinuous periods for completion, reflecting the actual periods of delay and responsibility.
• Adding all extensions contiguously may artificially relieve a subcontractor of liability for breaches occurring before a later extension is granted, which does not reflect the reality of delay impacts.
• The sub-contract differs from the main contract in that it provides for liability based on actual loss and expense caused by delay, not fixed liquidated damages, and thus the extension mechanism should allow for discontinuous periods.
• Regarding the Further Supplemental Agreement, Company A and Company B argue that the new Dates for Completion agreed therein extinguished Company A's liability for liquidated damages prior to 22 July 2011, and thus no sums could be passed down to subcontractors for that period.
• They rely on clauses 24.1 and 24.2.2 of the main contract, which provide that fixing a later Completion Date cancels earlier notices and requires repayment of liquidated damages paid for the earlier period.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Arnold v Britton [2015] UKSC 36	Principles of contractual interpretation focusing on natural and ordinary meaning, background knowledge, and commercial common sense.	The court applied these principles to determine the natural meaning of clause 11.3 and to be slow to depart from clear language even if commercial common sense might suggest otherwise.
Balfour Beatty Building Ltd. v Chestermount Properties [1993] 62 BLR 1	Whether an architect has jurisdiction to grant extensions of time during periods of culpable delay and whether such extensions should be "net" or "gross".	The court found the architect could grant "net" extensions of time, adding to the aggregate period rather than resetting the completion date, supporting EMCOR's argument on contiguous extensions.
Henry Boot v Malmaison (1999) 70 Con LR 33	Endorsement of the interpretation of clause 25 regarding extensions of time in JCT 1980 contracts.	Dyson J approved the approach in Chestermount, supporting the "net" extension method.
Adyard Abu Dhabi v SD Marine Services [2011] EWHC 848 (Comm)	Rejection of "gross" extension argument in construction contract extensions of time.	Hamblen J rejected arguments inconsistent with the "net" approach, supporting the interpretation of extensions as additive to existing periods.
Walter Lilly & Company Limited v Mackay [2012] BLR 503	Endorsement of the "net" entitlement approach to extensions of time under JCT contracts.	Akenhead J confirmed the additive nature of extensions of time.
Floods of Queensferry Ltd. v Shand Construction Ltd. [1999] WL 478179	Interpretation of sub-contract completion periods and entitlement to extensions of time.	His Honour Judge Humphrey Lloyd QC acknowledged the "net" extension approach but did not decide the precise issue of discontinuous periods.
Ascon Contracting Ltd. v Alfred McAlpine Construction Isle of Man Limited (1999) 66 Con LR 119	Extension of time entitlement under DOM/2 sub-contract conditions.	The court found extensions were given by adding to the original period, consistent with EMCOR's position.

Court's Reasoning and Analysis

The court began by applying the principles of contractual interpretation as established in Arnold v Britton, emphasizing the importance of the natural and ordinary meaning of the contract language, informed by the background knowledge available to the parties at the time of contracting, and being cautious about departing from clear language even if commercial common sense might suggest otherwise.

Regarding preliminary issue no. 1, the court closely examined clause 11 of the EMCOR Sub-Contract and its Appendix, noting that the clause refers to revising the existing period or periods for completion rather than creating fresh, discontinuous periods. The court found that the language and structure of clause 11 contemplate an aggregate, contiguous extension of time added to the current period or periods for completion.

The court acknowledged Company A's argument that a discontinuous approach might better reflect the actual liability for delay but held that such potential factual scenarios do not override the clear contractual language. The court emphasized that under clause 12, liability arises only if the subcontractor fails to complete within the fixed or extended period(s), reinforcing that the periods must be continuous.

Turning to preliminary issue no. 2, the court analyzed the Further Supplemental Agreement, concluding that it did not extinguish Company A's liability for liquidated damages but rather crystallised and satisfied it as at 22 July 2011 by way of deduction from the Contract Sum. The agreement of new Dates for Completion was seen as drawing a line under prior claims rather than granting extensions of time.

The court rejected the defendants' argument that the new Dates for Completion operated like extensions of time under the main contract provisions, noting express clauses denying entitlement to extensions and confirming liquidated damages liability up to the agreed date. Consequently, the court found that Company A's liability to the developer for liquidated damages for the period between 29 January 2011 and 22 July 2011 was not extinguished by the Further Supplemental Agreement.

The court also noted that the issue of whether EMCOR or Company B are liable for sums paid or deducted as liquidated damages under the main contract remains open for further determination, as the preliminary issue only addressed extinguishment of Company A's liability.

Holding and Implications

Holding:

• In respect of preliminary issue no. 1, the court held that any extension of time granted to EMCOR under clause 11.3 of the EMCOR Sub-Contract must be added contiguously to the end of the current period or periods for completion, resulting in an aggregate continuous period.
• In respect of preliminary issue no. 2(a), the court held that Company A's liability to the developer for liquidated and ascertained damages for the period between 29 January 2011 and 22 July 2011 was not extinguished by the Further Supplemental Agreement.
• Accordingly, preliminary issue no. 2(b) does not arise in relation to either Company B or EMCOR at this stage.

Implications: The decision clarifies that under the EMCOR Sub-Contract, extensions of time operate by extending the existing period contiguously rather than creating separate, discontinuous periods. It also confirms that a commercial settlement agreement fixing new Dates for Completion does not necessarily extinguish prior liquidated damages liability unless expressly stated. This ruling affects the parties' understanding of delay liability and the calculation of damages but does not establish new precedent beyond the interpretation of the specific contract clauses at issue. Further proceedings will be required to resolve remaining issues on liability and costs.