The Court of Appeal In a decision last week, the Court of Appeal has upheld the TCC’s decision: - The court agreed that the natural meaning of the words used in the DOM/2 form, in keeping with most other construction contracts, showed that contiguous extensions of time were intended. - Although noting that no previous cases (either in England or abroad) appeared to have considered the possibility of discontinuous extensions of time, the court noted that previous cases dealing with extensions of time for events occurring after an originally agreed date for completion had all granted contiguous extensions of time. These cases supported the TCC’s finding as to how a reasonable person with the relevant background knowledge would understand the sub-contract to work. - Like the TCC, the court accepted that the anomaly pointed out by Carillion was real and that unfairness was likely to result. Whilst perhaps being “more troubled” than the TCC about this, the court nonetheless found itself unable to allow this consideration to drive it from the natural meaning of the sub-contract provisions. Conclusions and implications The Court of Appeal’s decision reinforces the potential exposure highlighted in the TCC’s original decision for parties to construction contracts which provide for unliquidated damages in relation to delay. An entitlement to an extension of time arising after the contractual date for completion can result in delay related losses being unrecoverable by an Employer or Main Contractor, or disproportionate and unfair levels of loss being shouldered by a Main Contractor or Sub-contractor. A right to claim unliquidated damages for delay is most commonly included in sub-contracts to avoid the difficulties of agreeing an appropriate rate for liquidated damages in circumstances where a Contractor may be entitled to recover several sets of liquidated damages from different Sub-contractors. Contractors and Sub-contractors in particular should be aware of the potential anomaly which arises on such an approach and consider whether special drafting is required to remove the inconsistency. Such drafting might provide for discontinuous extensions of time, as argued for by Carillion, or provide for other means of apportioning the total delay related losses suffered by a Contractor among those Sub-contractors actually responsible for all or part the delay.
About the Authors
Aidan is a solicitor specialising in construction disputes work. He has significant experience in disputes concerning large scale construction and infrastructure projects, including power plants, oil and gas facilities, chemical plants, rail and highway concessions, hospital developments and sporting facilities.
Kathyn is a lawyer in the UK Construction Team. She specialises in construction disputes and has a range of experience in all types of dispute resolution, including adjudication, litigation and formal negotiation.