On 10 February 2017, the Court of Appeal released its decision in the case of Carillion Construction Limited v Emcor Engineering Services Limited and Anor  EWCA Civ 65.
This case concerns the situation in which a Relevant Event (a delay event) occurs after the contractual completion date. The Court of Appeal confirmed the Technology and Construction Court's ("TCC's") earlier decision that clause 11.3 of the subcontract in question required an extension of time to be contiguous; meaning that the period of extension should run from the contractual due date for completion and not the date on which the impact of the delay event was felt.
While consistent with the outcome of previous cases including the well-known Chestermount case, the Court of Appeal noted that Carillion's claim that the Court should grant a non-contiguous extension of time is novel.
In summary, the facts of the case are as follows:
- The dispute related to the construction of the Rolls Building in Fetter Lane, London - the home of the TCC. Carillion was the main contractor and Emcor was a subcontractor responsible for mechanical and electrical services.
- The main contract was on the JCT Standard Form with Contractor's Design, 1998 edition, and incorporating amendments number 1 (1999), 2 (2001) and 4 (2002) (the "Main Contract"). The subcontract between Carillion and Emcor was the standard form of Domestic Sub-Contract 1981 known as DOM/2 (the "Subcontract").
- Following successive amendments to the subcontract, Emcor was required to complete fit-out works by 28 January 2011. This was also the revised contractual completion date under the Main Contract.
- Delays occurred to the contract works, and practical completion under the Main Contract did not occur until 29 July 2011. Carillion blamed its subcontractors including Emcor for the delay, and the subcontractors blamed each other and Carillion.
- The TCC held that, assuming Emcor was entitled to an extension of time, clause 11.3 of the subcontract required such an extension to be added contiguously to the end of the current completion date.
What is a non-contiguous extension of time?
The orthodox position is that when a matter giving rise to an extension of time (a "Relevant Event") occurs after the contractual completion date, the length of that extension of time is added to the contractual date for completion. This is referred to as a contiguous extension of time. This may give rise to anomalies, including that the extended completion period will often have expired by the date of the Relevant Event, and a party may be liable to pay damages for a period of delay for which it is not responsible (ie the period of delay caused by the Relevant Event).
A non-contiguous extension of time refers to an extension of time which is granted after the contractual completion date. The period of extension commences at a later date, typically from the date that the impact of the Relevant Event is felt.
The argument for a non-contiguous extension of time
Carillion's position was that, when a delaying event occurred after the date on which Emcor ought to have completed its works, Carillion had a choice pursuant to clause 11.3 to grant either a contiguous or non-contiguous extension of time.
Carillion argued that this interpretation accorded with commercial common sense. In particular, Carillion noted that clause 12 of the subcontract required Emcor to compensate it for any loss or damage caused by Emcor's delay. If the extension of time was contiguous, Emcor may be exempt from liability for a period in which it was in culpable delay, and may be liable for a period when it was not in culpable delay. Accordingly, the compensation payable by Emcor would not reflect the actual loss and damage caused by its delay.
This difficulty was clearly illustrated by the example contained in the TCC judgment at paragraph . In the example, Emcor had 100 days to complete its subcontract works. By the end of 150 days, the subcontract works remained incomplete and at that point Carillion issued a major variation that resulted in another 50 days being required to complete the subcontract works. If that 50 day period was added to the end of the original period, Emcor would be absolved of responsibility for its culpable delay of 50 days (ie the period between day 100 and day 150). Furthermore, if a further delay was caused by Carillion or another subcontractor at day 150, Emcor may be entirely absolved of responsibility for its delay.
On the other hand, if Emcor was given a further period of 50 days from the date of the variation (ie from day 150 to day 200), then both parties would be responsible for their respective delays to the programme.
The Court of Appeal's decision
The Court of Appeal first considered the natural meaning of clause 11.3 of the subcontract and held that this indicated that the extension of time should be contiguous. In particular, the subcontract referred to extending time by reference to "revised period or periods" rather than granting separate periods of delay with their own start and end dates. The Court of Appeal also noted that the natural meaning of the phrase "extension of time" is a reference to the period allowed for the works being made longer from the contractual completion date, and not the creation of a separate period of delay.
The Court of Appeal did agree with Carillion that the authorities relied on by Emcor, including Chestermount, were not directly material to Emcor's case for a contiguous extension. In those cases, the parties had accepted that any extension of time should be contiguous and it was just the length of the extension that was in issue. However, the Court of Appeal noted that these cases indicated what a reasonable person would understand the subcontract to mean – namely that the actual extension of time would be contiguous.
The Court of Appeal accepted the anomaly that Emcor may be exempt from liability for a period in which it was in culpable delay, and liable for a period when it was not actually in culpable delay. However, the Court of Appeal held that this anomaly was not enough to displace the natural interpretation of the subcontract - the fact that it was a bad bargain for one party was no reason to depart from the natural meaning of the words used.
Conclusion and what it means for you
Although not the issue in this case, the Court of Appeal noted the general position that extensions of time will only be granted for a period which reflects the actual delay caused by a Relevant Event. This should be of some comfort to employers.
Whether the period of extension should be contiguous or non-contiguous will depend on the wording of the contract in question. At the main contract level, the Chestermount case indicates that, in most cases, the extension of time for a Relevant Event in a period of culpable delay will be added to the contractual completion date from which liquidated damages will be levied. It will not therefore give a windfall extension of time to the contractor cancelling out most, if not all, of the period of culpable delay.
However, if an employer does not have a liquidated damages provision and general damages for delay are likely to fluctuate or change depending on when the delay occurs, it appears at least possible that parties could include provision for a non-contiguous extension of time provided that the wording used in the contract is sufficiently clear to displace the orthodox position that extensions of time will be dealt with contiguously.
The contents of this publication are for reference purposes only and may not be current as at the date of accessing this publication. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.
© Herbert Smith Freehills 2021