When a construction project is delayed nobody wants to take the blame. Here’s how the prevention principle might come into play
Delay is an inherent issue in construction projects, and construction contracts usually provide complex mechanisms for dealing with the delays that may arise. However, despite such provisions, delay is a common area for dispute and the question of which party has caused the delay can have significant financial consequences.
The recent case of Jerram Falkus Construction (JFC) vs Fenice Investments explores the circumstances in which the prevention principle represents a possible defence for a party facing a liquidated damages claim. In this case, the prevention principle was summarised by Mr Justice Coulson to mean: “The employer cannot hold the contractor to a specified completion date if the employer has, by his own act or omission, prevented the contractor from completing by that date.”
However, the position is complicated where, as is common in construction projects, there are concurrent causes of delay - some of which are the contractor’s responsibility.
In this case JFC was engaged by Fenice to carry out the development of a site in London. The contract incorporated the JCT Design and Build Form 2005, subject to a number of bespoke amendments. The works were delayed by 86 days for which Fenice levied liquidated and ascertained damages (LADs). The parties were in dispute as to what caused the delay. JFC maintained that Fenice prevented completion and by reason of the deletions to the extension of time provisions, no extensions of time could be granted in respect of the acts of prevention. As a consequence, JFC argued that time for completion was at large.
If it can be established that an employer prevented completion and there are no extension of time provisions in respect of the act of prevention, then it may be possible to argue that time is “at large”. The consequences of time being at large will be that the contractual completion date will not apply, the contractor will instead have to complete the works within a reasonable time and - most significantly - the employer will not be able to claim LADs.
If it is established that an employer prevented completion, then it may be possible to argue that time is ‘at large’
In this case, Coulson reviewed the relevant case law relating to the prevention principle and summarised the position as follows:
“For the prevention principle to apply, the contractor must be able to demonstrate that the employer’s acts or omissions have prevented the contractor from achieving an earlier completion date and that, if that earlier completion date would not have been achieved anyway because of concurrent delays caused by the contractor’s own default, the prevention principle will not apply.”
Coulson also referred to the propositions in Multiplex vs Honeywell (2007) where Mr Justice Jackson stated that even actions that were legitimate under a construction contract may still be regarded as prevention if those actions cause delay beyond the completion date. Jackson also stated that acts of prevention will not set time at large if the contract provides for extension of time in respect of those acts.
Coulson therefore concluded that the prevention principle had not been triggered. Fenice did not prevent JFC completing the contract by the completion date and even if Fenice had been responsible for the delays it was found that the prevention principle would not have been triggered. This is because such delays would have been concurrent with the delays caused by matters for which JFC was responsible. As a consequence, JFC was not prevented from completing the works any earlier.
Parties should ensure that the provisions in the contract dealing with delay are clearly drafted and provide a mechanism to deal adequately with the delays of both the contractor and employer.
When establishing a delay claim it is crucial that parties have the records available to demonstrate that a delay has occurred and the documentation to show which party is responsible for that delay. It is imperative that parties to a construction contract prioritise the creation and logical storage of contemporaneous records that can establish the existence and cause of delays. Bad record keeping may directly effect how robustly a party is able to make or defend a delay claim.
Alastair Young is partner in the construction and engineering team at SNR Denton