White & Case LLP has secured an important victory for its client, mechanical and electrical subcontractor EMCOR Engineering Services Limited, in its dispute with Carillion Construction Limited in the Court of Appeal.
The dispute concerned the construction and fit-out of the Rolls Building in Fetter Lane, London, which houses the Commercial Court, the Chancery Division and the Technology and Construction Court. The fit-out works were completed late and Carillion, the main contractor, alleged that its consultants and sub-contractors (including EMCOR) were responsible for different delays over different time periods.
"In a unanimous decision that provides welcome certainty to the construction industry, the Court of Appeal has confirmed that extensions of time awarded under a standard form of domestic sub-contract, widely used throughout the UK construction market, must start on what was previously the date for completion," said White & Case partner Robert Wheal.
EMCOR contended that it was entitled to receive an extension of time for variation works that were instructed after the original date for practical completion had passed and therefore the original period in which EMCOR was obliged to complete its sub-contract works should be extended.
Carillion argued that the wording of the sub-contract permitted it to award an extension of time that covered only the distinct and disjointed periods that corresponded with the actual time when EMCOR’s sub-contract works were being delayed by the variation works. Carillion submitted that its interpretation was to be preferred as a matter of commercial common sense, in order to avoid the "oddity" of a sub-contractor being exempted from liability during a period when it might actually be in culpable delay, only to subsequently be made liable to the contractor for loss and expense during a period in which the sub-contractor was not actually in culpable.
In delivering the lead judgment, Lord Justice Jackson held that the natural meaning of the words in the contract required Carillion to award extensions of time contiguously. He also noted that “the system of awarding extensions of time contiguously has worked satisfactorily” in the construction industry and that this was the first reported instance in which a contractor or sub-contractor had argued that awards of time should be non-contiguous.
Applying the principle established by Arnold v Britton and the subsequent line of cases that followed it, the Court held that the circumstances of the case were not so exceptional as to require considerations of commercial common sense to drive the court to depart from the natural meaning of the contractual provisions.
The White & Case team was led by partner Robert Wheal, supported by associates Rebecca Shorter, Alex Rowe and Alina Sartogo (all London).
