In the following case the court had to consider:
- the conclusiveness of an adjudicator’s decision between the parties:
- the conclusiveness of the contractor’s final account and final Statement; and
- whether the delays complained of were caused by the employer’s acts of prevention.
Jerram Falkus Construction Limited v Fenice Investments Inc (No 4)  EWHC 1935 (TCC)
The employer engaged the contractor to carry out the development of a site in Camden. The contract incorporated the JCT Design and Build Form 2005, as amended by the parties.
The original contract completion date was 25 May 2009 which was extended to 15 June 2009. Practical completion was achieved on 9 September 2009, a delay of 86 days. The employer deducted liquidated damages for the period of delay.
The contractor maintained that the employer had no entitlement to liquidated damages because the employer deleted the relevant event provision in the standard form which provided for acts of prevention by the employer. Consequently no extension of time could be granted for such acts and therefore “time was set at large”. The contractor also claimed loss and expense.
The contractor submitted its Final Account on 17 November 2009 claiming £200,000 for loss and expense of a total balance of £311,393.78. The Final Statement was submitted on 1 July 2010.
The parties were unable to agree the Final Account, particularly which party was responsible for the delay and commenced a number of adjudications.
In the third adjudication, the adjudicator, on 28 October 2010, found that the contractor was not entitled to an extension of time for alleged: (i) delays caused by British Gas and EDF; and (ii) the employer’s late instructions dealing with a problem of floor levels. The adjudicator was satisfied that these acts of delay did not constitute acts of prevention by the employer.
In March 2011, the contractor started proceedings, seeking various declarations relating to the contract. There were a number of issues before the court. This report considers only two of those issues.
Was the decision in the third adjudication conclusive?
The contract contained a number of provisions regarding the conclusiveness of the Final Account and Final Statement. In particular, clause 1.9.4 provided that in the event of a dispute or difference on which the adjudicator had given a decision after the submission of the Final Account and Final Statement then either party could commence arbitration or legal proceedings within 28 days of the adjudicator’s decision.
The employer maintained that as the issues raised in the current proceedings by the contractor were precisely the same as those which had been decided in the third adjudication, and the contractor’s failure to challenge the adjudicator’s decision within the prescribed 28 day period meant that the adjudicator’s decision was conclusive.
The court’s decision
The court agreed with the employer. It was plain that the court was being asked to decide all of the same issues argued in front of the adjudicator, with even the same authorities being cited in both instances. Since the third adjudication took place after the Final Account and Final Statement had been submitted, clause 1.9.4 was triggered.
The court concluded that clause 1.9.4 was plainly intended to ensure that if there was an adjudication after the Final Account had been provided, the losing party had 28 days in which to challenge the result, otherwise the result became conclusive. The imposition of a deadline also made “commercial common sense” since it would prevent the losing party to an adjudication from challenging the decision, months or years later.
Did the contractor’s Final Account and Statement become conclusive?
The period for rectification of defects under the contract expired on 13 January 2011.
The contractor argued that clause 4.12.4 of the contract rendered the Final Account and Final Statement conclusive as at 13 February 2011, unless the employer challenged anything in the Final Account or the Final Statement.
“4.12.4 The Final Account and Final Statement as submitted by the Contractor … shall on the expiry of one month from whatever occurs last:
1 the end of the Rectification Period in respect of the Works …
be conclusive as to the balance between the parties except to the extent that the Employer disputes anything in that Final Account or Final Statement before the date on which, but for the disputed matters, the balance would be conclusive.”
The employer maintained that it had disputed the contractor’s Final Account in its letter on 24 January 2011 in which it had submitted its own version of the Final Account.
The court agreed with the employer. On the facts, there was a clear and detailed challenge by the employer. Save to the extent that the employer admitted certain items in the Final Account in its letter of 24 January 2011, the employer’s challenge prevented the contractor’s Final Account and Final Statement from becoming conclusive.
Did the employer’s acts set time at large?
It is well established following the case of Peak Construction (Liverpool) Limited v McKinney Foundation Limited (1970) 1 BLR 111 that an employer can not hold a contractor to a specified completion date if the employer has by his own act or omission prevented the contractor from completing the works (the prevention principle).
However, acts of prevention by the employer which cause delay do not necessarily set time at large if the contract expressly provides for an extension of time in respect of such events (Multiplex v Honeywell  Bus LR 109).
In this case, there was no such extension of time provision and so in deciding whether the prevention principle applied, the court considered Hamblen J’s analysis of an employer’s acts of prevention in the case of Adyard Abu Dhabi v SD Marine Service  EWHC 848 (Comm), reported in our May 2011 Updater where he said:
“The conduct therefore has to render it “impossible or impracticable for the other party to do the work within the stipulated time.” The act relied on must actually prevent the contractor from carrying out the works within the contract period or, in other words, must cause some actual delay.”
The court noted that Hamblen J stressed the importance of the contractor proving that delay to the works was because of the employer’s act of prevention - if there were two concurrent causes of delay, the prevention principle would not be triggered because the contractor would not be able to show that the employer’s conduct made it impossible for him to complete within the stipulated time.
As a result, the court concluded that for the prevention principle to apply, the contractor had to 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 because of concurrent delays caused by the contractor’s own default, the prevention principle would not apply.
On the facts, the court found that:
- the delay which arose in dealing with the problem to the floor levels was actually due to the contractor’s failure as design and build contractor to spot the error earlier. The employer was entitled to require the contractor to deal with the problem - the fact that the contractor was dilatory was not the employer’s responsibility; and
- any delay caused by British Gas and EDF was the contractor’s responsibility because the contractor in fact failed to ensure that the site was ready to accommodate their works.
As a result, the contractor failed to establish that the employer had any liability for the delays complained of. Even if the relevant event entitling an extension of time in the contract for the employer’s acts of prevention had not been deleted, the contractor’s claim for an extension of time would still have failed.
The contractor in this case “got nowhere near” demonstrating that the prevention principle had been triggered. In view of Adyard Abu Dhabi v SD Marine Services in order for the prevention principle to apply the contractor must be able to prove that the act complained of is likely to or did cause actual delay to the progress of the works.
The case is also illustrative of the need to ensure precision when drafting bespoke amendments to standard construction contracts.
The court also noted its concern of “the hopeless nature of the points” pursued by the contractor given that the contractor had already lost of all the points in front of the adjudicator and anticipated that there may well be costs implications for the contractor at a subsequent costs application.
View: Jerram Falkus Construction Limited v Fenice Investments Inc (No 4)  EWHC 1935 (TCC)