North Midland Building Ltd v Cyden Homes Ltd [201, England and Wales Court of Appeal (Civil Division), Judgment, Law, casemine.com

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Attorney(S)

Mr Simon Lofthouse QC & Mr Edmund Neuberger (instructed by Browne Jacobson LLP) for the Appellant
Mr Sean Brannigan QC & Mr Matthew Thorne (instructed by Pinsent Masons LLP) for the Respondent

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North Midland Building Ltd v. Cyden Homes Ltd [201

Smart Summary

Factual and Procedural Background

The dispute arises from a building contract executed on 21 September 2009 between Company A (the appellant contractor) and Company B (the respondent employer) for the design and construction of a large house and outbuildings known as South Farm, located in The City. The contract incorporated the JCT Design and Build 2005 Standard Terms and Conditions with numerous bespoke amendments. The original contract completion date was 18 June 2010, with liquidated damages set at £5,000 per week for delay.

The central contractual provision in dispute is clause 2.25.1.3(b), which stipulates that where a delay caused by the contractor coincides concurrently with a delay caused by the employer, the concurrent delay caused by the employer shall not be taken into account when granting an extension of time. A dispute arose regarding the correct application of this clause and whether it conflicted with established legal principles, specifically the prevention principle. The appellant contractor appealed the validity and effect of this clause and related liquidated damages provisions. The procedural history includes an initial judgment by Judge Fraser and subsequent appeal proceedings before the Senior President of Tribunals and the Master of the Rolls.

Legal Issues Presented

Whether clause 2.25.1.3(b) of the contract, which excludes concurrent delay caused by the employer from extension of time calculations, is contrary to the prevention principle and therefore ineffective.
Whether, if clause 2.25.1.3(b) is enforceable, there is an implied term preventing the employer from levying liquidated damages for periods of concurrent delay for which it was responsible.
The precise ambit and definition of concurrent delay (not addressed in detail as unnecessary for this appeal).

Arguments of the Parties

Appellant's Arguments

The clause excluding concurrent delay from extension of time calculations is contrary to the prevention principle, which protects contractors from being held liable for delay caused by the employer.
There should be an implied term preventing the employer from recovering liquidated damages for periods of delay for which it is responsible, even if concurrent with contractor delay.
The clause was unfair and should be rendered ineffective on grounds of legal policy or implied terms.

Respondent's Arguments

The clause 2.25.1.3(b) is clear, unambiguous, and a valid allocation of risk agreed by the parties.
The prevention principle does not override express contractual terms freely agreed between parties.
There is no implied term preventing the employer from levying liquidated damages for concurrent delay, and any such term would contradict the express provisions of the contract.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Holme v Guppy (1838) 3 M&W 387	Contractor not liable for delay caused by employer's prevention.	Established the prevention principle that a party prevented from performing by the other is not liable for delay.
Dodd v Churton [1897] 1 QB 566	Employer ordering extra work causing delay disentitles employer to liquidated damages for that delay.	Reinforced the prevention principle protecting contractors from liability where employer causes delay.
Peak v McKinney (1970) 1 BLR 111	Limitations of extension of time clauses and the possibility of time being set at large.	Illustrated that narrow extension clauses can result in time being set at large; also envisaged parties could contractually allocate risk of concurrent delay.
Multiplex Constructions (UK) Ltd v Honeywell Control Systems Ltd (No.2) [2007] BLR 195	Three propositions on the prevention principle and extension of time clauses.	Confirmed that legitimate employer acts causing delay do not set time at large if covered by extension clauses; ambiguous clauses construed in favour of contractor.
Adyard Abu Dhabi v SD Marine Services [2011] EWHC 848	Definition of concurrent delay as overlapping delays caused by separate events.	Adopted a definition of concurrent delay relevant to the dispute.
Walter Lilly & Co Ltd v Giles Mackay [2012] EWHC 1773 (TCC)	Contractor entitled to extension of time for concurrent delay under standard JCT clauses.	Supported contractor's entitlement to full extension for concurrent delay absent bespoke clauses.
Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd [1999] 70 Con LR 32	Concession of contractor entitlement to extension for concurrent delay.	Referenced in support of contractor's entitlement to extensions.
City Inn Ltd v Shepherd Construction Ltd [2010] BLR 473	Alternative approach to concurrent delay.	Noted but distinguished by the court in this appeal.
London Borough of Merton v Stanley Hugh Leach Ltd [1985] 32 BLR 51	Implied terms preventing employer hindrance and prevention.	Distinguished as inapplicable due to express wide-ranging relevant events clause in current contract.
Lynch v Thorne [1956] 1 WLR 303	No implied term can contradict express contractual terms.	Applied to reject implied term negating liquidated damages entitlement.
Powell v Lowe [2010] EWCA Civ 1419	'Officious bystander' test for implied terms.	Applied to reject implication of term preventing liquidated damages.
A-G of Belize v Belize Telecom Ltd [2009] 2 All ER 1127	Business efficacy test for implied terms.	Applied to reject necessity of implied term preventing liquidated damages.

Court's Reasoning and Analysis

The court began by examining the relevant contractual provisions, focusing on clause 2.25.1.3(b), which excludes concurrent delay caused by the employer from extension of time calculations. The clause was found to be clear and unambiguous, allocating the risk of concurrent delay to the contractor. The court rejected the appellant's argument that the clause conflicted with the prevention principle, noting that the prevention principle is not an overriding legal rule that invalidates freely agreed contractual terms. The court emphasized that the prevention principle typically operates through implied terms, which were not argued successfully here given the express wide-ranging relevant events clause in the contract.

The court also considered the appellant's contention that an implied term should prevent the employer from levying liquidated damages for periods of concurrent delay. This argument was rejected on several grounds: the liquidated damages clause was a valid pre-estimate of loss; the linkage between extension of time and liquidated damages provisions meant that if no extension was granted, liquidated damages could apply; and any implied term contradicting express provisions would fail the necessary implication test. The court found no commercial or legal basis to imply such a term.

Regarding concurrent delay, the court acknowledged differing judicial views but found it unnecessary to resolve these differences for the purposes of this appeal. The bespoke clause at issue was designed to reverse the outcome in cases where contractors might otherwise benefit from concurrent delay, thereby allocating risk to the contractor as agreed by the parties.

Holding and Implications

The court's final decision is DISPOSAL OF THE APPEAL IN FAVOUR OF THE RESPONDENT.

The court held that clause 2.25.1.3(b) is clear, unambiguous, and enforceable, and is not overridden by the prevention principle or any implied term. Consequently, the appellant contractor is not entitled to an extension of time for periods of concurrent delay for which it bears responsibility. Furthermore, the respondent employer is entitled to levy liquidated damages for such periods. The decision confirms that parties may validly contractually allocate the risk of concurrent delay, and that the prevention principle does not operate to invalidate such express terms.

No new precedent was established; the ruling affirms established principles that the prevention principle is not an overriding legal rule and that express contractual terms govern risk allocation unless contrary to statute or public policy. The direct effect is that the appellant contractor's appeal is dismissed, and the contractual provisions as drafted govern the dispute.