Carillion agreed that clause 11.3 of the subcontract entitled EMCOR to an extension of time in the event of a Relevant Event, but went on to say that such an extension of time need not be awarded contiguously to the end of the pre fixed period of works but could be (and should be in this instance) awarded for a discontinuous period. Carillion said this  this was the common sense interpretation of the clause and it ensured the proper allocation of responsibility for delay. Carillion gave the following hypothetical example in support of its interpretation:

  • the period of completion of the subcontract works is 100 days;


  • at the end of this period, the subcontract works are not complete. Such delay has the effect of delaying the main contract works and causes loss to the main contractor;


  • by day 150 the subcontract works are still not complete. At this point, a major variation to the subcontract works is instructed entitling the subcontractor to an extension of time;


  • it takes the subcontractor 50 days to complete the variation.


  • If the 50 days is added to the original 100 days for completion of the works, then the subcontractor is not in delay until day 150.


Carillion said that such an approach was "artificial and does not reflect the reality of the impact of EMCOR's failure to complete by Day 100. Further, if by Day 150 some other sub-contractor's default is now driving the delay to completion of the main contract works, EMCOR may be absolved from all liability because they can say that their failure to complete by Day 150 has not caused loss and expense this is recoverable under clause 12."

Carillion went on to state that "if on the other hand, EMCOR is given a further period of 50 days between Day 150 and Day 200 to complete its works and is relieved from the consequences of its failure to complete for this further period, that properly reflects the loss and expense for which EMCOR is responsible. If the subcontract works were still incomplete by Day 200, EMCOR would again be in breach and liable for the loss and expense caused by its failure to complete by that date.”

DECISION
The Court agreed that there were scenarios in which awarding a contiguous extension of time might relieve the sub-contractor of liability with the effect that the subcontractor effectively escaped the consequences of its breach. Notwithstanding this, the Court determined that it was "clear that the natural meaning of clause 11.3" supported EMCOR's interpretation, and consequently directed that any award for an extension of time should run contiguously from the end of the existing period for completion.

 
CONCLUSION
The Court's decision confirms that, where a sub-contractor is entitled to an extension of time, such an extension should be granted contiguously, even in circumstances where the same sub-contractor is already in culpable delay.

Main Contractors will need to be alive to the possibility of a sub-contractor escaping or limiting its liability for delay in the event an entitlement to an extension of time arises after the date for completion has already passed.

The case also confirms that the Courts will be slow to depart from the natural meaning of the words within a contract, even if such words appeared at odds with commercial common sense!

When a client engages a contractor to undertake construction works under a construction contract, it will usually require that contractor to complete such works by an agreed completion date.

What happens if a Sub-Contractor claims an EoT and is entitled to it but is already in culpable delay ? Courts have cleared this up !

However, mindful of what can happen to the best laid plans, a client will often take steps to ensure it is compensated in the event the contract completion date is missed, including, for example, by requiring the main contractor to pay liquidated damages in the event of delay.


What happens if the Main Contractor sub-contracts some (or all) of the works to a trade sub-contractor?


Generally speaking, the terms of the sub-contract will (or at least should) mirror the terms of the main contract. Therefore, should the project be in delay, the Main Contractor may face liquidated damages. If such delay was caused by the sub-contractor then the Main Contractor will be entitled to claim liquidated damages from the sub-contractor (thus 'stepping down' any claim for liquidated damages by the client). Conversely, where the delay has been caused by the Main Contractor (or the client), the sub-contractor will be entitled to an extension of time.

However, what happens when a sub-contractor applies for (and is entitled to) an extension of time for an event occurring after the contractual date for completion has already passed  and to complicate matters further it is during a period in which the sub-contractor is already in culpable delay?

The Courts have answered this question in its decision in the case of Carillion Construction Ltd v Woods Bagot Europe Ltd and others [2016] EWHC 905 (TCC) (28 April 2016).

BACKGROUND


Carillion, the Main Contractor, was engaged to undertake works to The Rolls Building, being the home of the TCC in London. The building contract provided for the payment of liquidated damages in the event of delay.

Carillion, in turn, sub-contracted the M&E works to EMCOR Engineering Services Ltd (the second defendant) under a JCT Domestic Subcontract DOM2 (1981).

The sub-contract entitled Carillion to recover "any direct loss and/or expense suffered or incurred" as a result of EMCOR's failure to complete the sub-contract works on time.

Carillion's started proceedings against EMCOR (amongst others), for damages caused by the sub-contractor's delay. Such damages included those levied by the Employer under the building contract.

EMCOR resisted the claim on the basis that:

It was entitled to an extension of time; and In accordance with clause 11.3 of the subcontract, such an extension of time should run contiguously (i.e immediately following the pre-existing period for the Sub-Contract works)..