Carillion Construction Limited v (1) Woods Bagot Europe Limited (2) AECOM Limited (3) EMCOR Engineering Services Limited (4) EMCOR (UK) Limited
In another significant ruling for main contractors and sub-contractors, on 10 February 2017, the Court of Appeal handed down an important judgment concerning the operation of a sub-contractor’s entitlement to an extension of time under clause 11 the DOM/2 form of sub-contract. Paul Cowan and Simon Hale appeared for the successful respondent (“EMCOR”), the Third and Fourth Defendants in the main action.
The ruling is also notable as it arises from disputes about delays to the construction of the Rolls Building itself, now home to the Commercial Court, the TCC and part of the Chancery Division of the High Court (and in which the issues were heard and determined).
The Court of Appeal upheld a decision of Ms. Recorder Nerys Jefford QC (as she then was) sitting then as a Deputy Judge in the TCC (she is now Jefford J). The first instance decision was handed down on 28 April 2016 (available here). On a preliminary issue brought by EMCOR, the Judge had determined that any extension of time due to EMCOR under its DOM/2 sub-contract fell to be added contiguously to the end of the existing period for completion of EMCOR’s sub-contract works, resulting in a single, linear, but extended period for completion. She rejected the contrary argument advanced by Carillion, that clause 11 of the DOM/2 contract permitted the main contractor to grant an extension(s) of time that did not necessarily run contiguously with the existing period for completion, but rather could be fixed at any point after the existing period for completion had expired, and in a way which took focused on the calendar dates during which the sub-contractor was itself causing delay to the main contract works.
Carillion appealed to the Court of Appeal, advancing largely the same arguments as had failed before the Judge. Its appeal was dismissed. Jackson LJ gave the leading judgment, with which Simon and Flaux LLJ agreed, and the Court of Appeal upheld the first instance decision principally on the same grounds as given by the Judge. The Court of Appeal found that the natural meaning of the words used in clause 11.3 of DOM/2 was that the extension should be contiguous, in that it started on what was previously the due date for completion. When a contractor granted extensions of time, it was revising the pre-existing period, not granting separate new periods with their own start and end dates. The simple phrase "extension of time" in cl.11.3 had the natural meaning that the period of time which was allowed for the work was being made longer, and the phrase "by fixing revised periods" naturally conveyed the same meaning.
It also rejected an argument by Carillion that the natural meaning of the words in clause 11.3 defied commercial common sense. Whilst accepting that on particular facts, the wording of clause 11.3 could generate anomalous results, the Supreme Court’s judgment in Arnold v Britton  UKSC 36 and the Court of Appeal’s subsequent judgment in Grove Developments Ltd v Balfour Beatty Regional Construction Ltd  EWCA Civ 990 were authority for the proposition that it was only in exceptional circumstances that considerations of commercial common sense could drive the Court to depart from the natural meaning of contractual provisions. The potential for anomalous results was not sufficient to displace the natural interpretation of cl.11.3 in this case. Furthermore, the Judge's interpretation of cl.11.3 was practicable and workable, and accorded with what a reasonable person, with the parties' background knowledge, would have understood the clause to mean on the date when the sub-contract was made. That understanding of the clause by the reasonable person with that background knowledge was also supported by the authorities on which EMCOR relied (e.g. Balfour Beatty Building Ltd v Chestermount Properties Ltd (1993) 62 BLR 1).
This decision, like the decision at first instance which it upholds, is of significance to main contractors and sub-contractors alike. There was no previous authority on this aspect of the operation of clause 11 of the widely-used DOM family of sub-contracts, so the ruling confirms what is new law. At a practical level, its ramifications are important for the practice of granting extensions of time, and for litigation in delay cases, especially where multiple parties are engaged (e.g. main contractor vs. multiple subcontractors, as in the present case).
This is sharply demonstrated by the facts of Carillion’s claim itself, in which it is trying to claim that earlier events of delay claimed against EMCOR caused overall delay to the main contractor’s works. The dismissal of the appeal confirms that, as the Judge found below, where the sub-contractor is entitled to extensions of time (whether arising during the earlier or later phases of its work), the aggregate period of time of those extensions is added contiguously to the sub-contractor’s previously-defined period for completion. As the sub-contractor cannot be in culpable delay before the expiry of the overall period for completion of its works, the effect of clause 11 is therefore to diminish co-extensively the period for which the sub-contractor could be liable to Carillion for delay-related damages during the period of delays claimed against it (a liability which, on the facts, are firmly denied by EMCOR in any event).
A full copy of the Court of Appeal’s judgment is available here.