Factual and Procedural Background
This litigation concerns whether time has been set at large under a sub-contract for the construction of the New National Stadium at Wembley. The main contractor, Company A, engaged Company B as a sub-contractor to design, supply, and install electronic systems for the stadium. The employer under the main contract is Company C, a wholly owned subsidiary of a national sports association.
Company A and Company B entered into a sub-contract dated 27th May 2004, which included provisions for completion within 60 weeks and conditions governing variations and extensions of time. Delays occurred prior to and after Company B commenced work, with disputes arising over responsibility for those delays. Company A issued several revised programmes as directions under the sub-contract, extending the completion date multiple times.
Company B contended that time had been set at large, meaning its obligation to complete within the contractual period had fallen away and was replaced by an obligation to complete within a reasonable time. Company A denied this and sought declarations that time was not at large and that the extension of time mechanism remained effective.
Several adjudications were held, with one adjudicator ruling that time had been put at large due to the nature of the directions issued. Company A was aggrieved and commenced the present proceedings seeking declarations to the contrary. The trial consisted of submissions based on contractual documents and witness evidence from Company B. The court considered multiple points, including construction, operational issues, a relevant Australian authority, and the effect of a settlement agreement between Company A and Company C.
Legal Issues Presented
- Whether a direction issued under clause 4.2 of the sub-contract that affects the completion date puts time at large, thereby relieving the sub-contractor of its obligation to complete within the specified period.
- Whether Company A's conduct has rendered the extension of time mechanism inoperable, effectively putting time at large.
- Whether non-compliance by Company B with the condition precedent notice requirements under clause 11.1.3 results in time being set at large, as argued based on the Australian decision in Gaymark Investments Pty Limited v Walter Construction Group Limited.
- The effect of the settlement agreement between Company A and Company C on the operation of the extension of time provisions and whether it sets time at large under the sub-contract.
Arguments of the Parties
Company A's Arguments
- Clause 11 provides a mechanism for extending time in respect of delays caused by directions under clause 4.2, and therefore such directions do not set time at large.
- The extension of time machinery remains operational and has not been rendered inoperable by Company A's conduct.
- The condition precedent notice requirements in clause 11.1.3 require the sub-contractor to do its best within available knowledge and information; there is no absolute obligation to provide unavailable details.
- The settlement agreement with Company C does not affect Company B's rights under the sub-contract and does not set time at large.
Company B's Arguments
- Directions issued under clause 4.2 which affect the completion date put time at large, releasing Company B from the obligation to complete within the contractual period.
- Company A's failure to provide updated and adequate programming information has made the extension of time mechanism inoperable, thereby putting time at large.
- Non-compliance with clause 11.1.3's notice requirements should result in time being set at large, relying on the Australian Gaymark decision.
- The settlement agreement between Company A and Company C effectively prevents extensions of time under the main contract, which in turn prevents extensions under the sub-contract, putting time at large.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Holme v Guppy (1838) 3 M&W 387 |
Establishes the prevention principle: a party prevented from performing by the other is excused from strict contractual performance. |
The court relied on this to affirm that an employer's act preventing completion excuses the contractor from timely performance. |
| Dodd v Churton [1897] 1 QB 566 |
Ordering extra work causing delay disentitles employer from liquidated damages; prevention principle applies despite contractual obligation to perform variations. |
Supported the view that directions causing delay can constitute prevention even if contractually permitted. |
| Peak Construction (Liverpool) Limited v McKinney Foundations Limited [1970] 1 BLR 111 |
Extension of time clauses must be construed contra proferentem; employer cannot claim liquidated damages if partly responsible for delay unless contract expressly provides. |
Used to support that extension of time provisions protect contractors from employer-caused delay and that ambiguities are construed in contractor’s favor. |
| Trollope & Colls Limited v North West Metropolitan Regional Hospital Board [1973] 1 WLR 601 |
Employer whose conduct prevents timely completion cannot claim penalties or liquidated damages for delay. |
Affirmed that legitimate employer acts causing delay can be characterized as prevention. |
| Gaymark Investments Pty Limited v Walter Construction Group Limited [1999] NTSC 143 |
Failure to comply strictly with notice provisions can result in time being set at large, barring contractor from extensions of time and exposing to liquidated damages. |
The court distinguished this case, expressing doubt that it represents English law and noting different contractual consequences in the present matter. |
| Turner Corporation Limited v Austotel Pty Limited (1994) |
Failure to exercise contractual rights negates ability to rely on prevention principle to claim extensions of time. |
Referenced in discussion of Gaymark and notice requirements. |
| Peninsula Balmain Pty Limited v Abigroup Contractors Pty Limited [2002] NSWCA 211 |
Declined to follow Gaymark; held contractor liable for liquidated damages despite employer-caused delay if notice provisions not complied with. |
Used to support criticism of Gaymark and to question its application in English law. |
| City Inn Limited v Shepard Construction Limited 2003 SLT 885 |
Contractor not entitled to extension of time if notice provisions not complied with. |
Referenced but Australian authorities were not cited; court’s approach noted in comparative context. |
Court's Reasoning and Analysis
The court began by reviewing the prevention principle, which excuses a party from strict contractual completion if prevented by the other party’s acts or omissions. It acknowledged that construction contracts commonly include extension of time provisions to mitigate the effect of prevention and protect both parties.
The court examined the sub-contract’s clause 11 and related provisions, noting that while clause 11.10 lists relevant events entitling extensions of time, it does not expressly mention directions under clause 4.2. However, the court held that directions under clause 4.2 causing delay constitute acts of prevention or postponement instructions, entitling the sub-contractor to extensions of time under clause 11. This reasoning led the court to reject the adjudicator’s earlier decision that such directions set time at large.
Regarding the operational point, the court considered Company B’s argument that Company A’s failure to provide adequate programming information rendered the extension of time mechanism inoperable. The court analysed clause 11.1.3’s condition precedent notice requirements and concluded that these do not impose an absolute obligation but require the sub-contractor to do its best with the information reasonably available. The evidence showed Company B had complied as best it could, and the machinery remained operative.
On the Gaymark point, the court reviewed the Australian authority and its reasoning but expressed significant doubt that it reflects English law. It distinguished Gaymark on the basis that non-compliance with notice provisions in the present sub-contract does not automatically result in liability for delay damages. The court held that even if Company B failed to comply with clause 11.1.3, this would not set time at large.
On the effect of the settlement agreement between Company A and Company C, the court accepted that the agreement might have commercial implications but held that it does not deprive Company B of its contractual rights to extensions of time. The proviso in clause 4.6.2.2 limiting extensions to those granted under the main contract falls away if the main contract’s extension mechanism is abandoned. Company A expressly disclaimed any intention to rely on the settlement to deprive Company B of rights.
Overall, the court concluded that time is not at large under the sub-contract, the extension of time provisions remain effective and operative, and the adjudicator’s contrary decision was incorrect.
Holding and Implications
The court held that time has not been set at large under the sub-contract between Company A and Company B. Directions issued under clause 4.2 that affect the completion date are relevant events entitling Company B to extensions of time under clause 11. The extension of time mechanism remains operational despite programming and notice issues. The Australian Gaymark decision does not apply to the present contract and facts. The settlement agreement between Company A and Company C does not set time at large or deprive Company B of extension of time rights.
The direct effect of this decision is that Company B remains contractually bound to complete within the extended periods as may be properly granted, and Company A retains the ability to grant or withhold extensions of time under the contract terms. No new precedent beyond the interpretation of the specific sub-contract clauses in this case is established. Company B’s counterclaim seeking declarations that time was at large was dismissed.