Despite being nearly 20 years old, the decision is Multiplex Constructions (UK) Ltd v Honeywell Control Systems Ltd (No. 2) [2007] EWHC 447 (TCC) (06 March 2007) continues to cast a long and venerable shadow over EOT claims.
As we develop in the short briefing note below, the judgment demonstrates the need for a clear focus on causation, concurrency and global claims in delay disputes. In short, a ‘global’ or composite EOT claim will almost certainly fail, unless it links specific delay events to specific periods of delay.
If a construction contract does not satisfy what Mr Justice Jackson, delivering judgement Multiplex referred to as the Operational Point and/or the Construction Point, then time is set “at large”.
The Operational Point relates to the requirement for a construction contract to have an effective and operational EoT mechanism. Despite the introduction of standard forms of contract, including the JCT suite of contracts, considerable court time continues to be occupied by arguments that standard form clauses are impractical and/or that EOT machinery has failed or been incorrectly administered.
The Construction Point is an application of the “prevention principle”: a promisee cannot insist on performance of an obligation if they have prevented the promisor from performing that obligation. In the context of a construction contract, an Employer cannot insist on a Contractor meeting a deadline if the Employer, through requested variations or other conduct constituting a Relevant Event, has prevented a Contractor from meeting that deadline.
If time is set “at large”, the contractual completion date falls away and is replaced by the requirement to complete within a reasonable time. Additionally, any contractual entitlement to liquidated and assessed damages is lost.
In Multiplex, a case concerning the Wembley Stadium project, Mr Justice Jackson, sitting in the Technology and Construction Court, determined that time had not been set “at large”.
Mr Justice Jackson found that the EOT machinery in the construction contract remained fully operational and that directions issued by Multiplex did not trigger the prevention principle as they qualified as Relevant Events under the construction contract and entitled Honeywell to such EOTs, if any, as may be appropriate under the contract.
In so finding, Mr Justice Jackson set out the following key propositions in relation to the operation of the prevention principle:
“(i) Actions by the employer which are perfectly legitimate under a construction contract may still be characterised as prevention, if those actions cause delay beyond the contractual completion date.
(ii) Acts of prevention by an employer do not set time at large, if the contract provides for extension of time in respect of those events.
(iii) In so far as the extension of time clause is ambiguous, it should be construed in favour of the contractor.”
In relation to the third proposition, Mr Justice Jackson clarified that “… in so far as an extension of time clause is ambiguous, the court should lean in favour of a construction which permits the contractor to recover appropriate extensions of time in respect of events causing delay.”
EOT clauses exist for the protection of both parties to a construction contract.
For Employer’s, if time is set “at large”, they lose the protection afforded by a contractual completion date as well as any contractual entitlement to liquidated and assessed damages for delays.
For Contractor’s, if time is set “at large”, they lose the certainty of contractually defined damages for delays and become exposed to the prospect of a claim for general damages.
Project Teams should be cautious to ensure that construction contracts, including standard forms of contract, are properly drafted and/or amended to avoid inadvertently losing critical contractual protections and entitlements.
The following examples illustrate several potential pitfalls that Employers and Contractors should look to avoid:
Example A
An Employer issues a Variation which qualifies as a Relevant Event for the purpose of the EOT mechanism in a construction contract. The Employer seeks to force the Contractor to comply with the original contractual completion date.
Time is set “at large”. The contractual obligation on the Contractor to complete by the completion date is replaced by the common law obligation to complete within a reasonable time and any contractual entitlement to liquidated and assessed damages falls away.
Example B
An Employer and a Contractor enter a standard form of contract, with amendments. The amendments to the EOT mechanism make it ineffective and inoperative.
Time is set “at large”. The obligation on the Contractor to complete by the contractual completion date is replaced by the common law obligation to complete within a reasonable time and the contractual entitlement to liquidated and assessed damages falls away.
Example C
A Contractor is delayed in the performance of an obligation under a construction contract and does not seek an EOT under the contract. The Employer does not issue notice of their intention to request liquidated and assessed damages for the delay, as required by the construction contract.
The Employer’s contractual entitlement to claim liquidated and assessed damages for the delay is lost.
General practical tips:
If you need help in relation to delays, EOT machinery, assertions that time has been set “at large” and/or claims for liquidated and assessed damages under a construction contract, we can help.
We recognise that every dispute is unique and strive to offer pragmatic, tailored and creative legal solutions and to maximise outcomes for our clients.
If you require advice on Construction Law and are interested in finding out how we can help, please contact Paul O’Donnell at paul.odonnell@ilaw.co.uk or call 07521 417579.
