Carillion Construction Ltd v Woods Bagot Europe Ltd & Ors [2016] EWHC 905 (TCC)

Case No HT-2014-000117[2016] EWHC 905 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 28/04/2016
Before
MISS RECORDER NERYS JEFFORD QC(sitting as a Judge of the Technology and Construction Court)
Between
CARILLION CONSTRUCTION LIMITEDClaimantWOODS BAGOT EUROPE LIMITEDDefendantsAECOM LIMITEDDefendantEMCOR ENGINEERING SERVICES LIMITEDDefendantEMCOR (UK) LIMITEDDefendant
Rachel Ansell QC and Edmund Neuberger (instructed by Reynolds Porter Chamberlain) for ClaimantBen Quiney QC and Michele De Gregorio (instructed by BLM LLP) for Second DefendantPaul Cowan and Simon Hale (instructed by White & Case LLP) for Third and Fourth DefendantsHearing Hearing date: 6 th April 2016
JudgmentMiss Nerys Jefford QC:The background
[1]This dispute arises out of the design and construction of the Rolls Building which is now home to this Court.[2]The developer was Rolls Development UK Ltd. (“Rolls”) who are not involved in this litigation. Carillion Construction Ltd. (“Carillion”) were the main contractor; the Second Defendant (“AECOM”) was the sub-contractor for the provision of various Mechanical and Electrical (“M+E”) services; the Third Defendant another M+E sub-contractor for certain other services and the Fourth Defendant provided a parent company guarantee in respect of the Third Defendant. For the purposes of this judgment, I shall refer to the Third and Fourth Defendants, without distinction between them, as “EMCOR”.[3]In these proceedings Carillion claim amongst other things damages caused by delay to the carrying out and completion of both EMCOR and AECOM’s sub-contract works. The damages that they claim include their own costs and sums they plead were levied under the Main Contract in respect of liquidated and ascertained damages. These claims are set out in Appendix 2 to the Particulars of Claim.[4]Both EMCOR and AECOM defend these claims. In EMCOR’s case, it says that it is not liable for damages for delay to completion of its sub-contract works because it was entitled to an extension of time to complete. Both EMCOR and AECOM also contend that Carillion did not have any liability to Rolls for liquidated and ascertained damages and/or have not paid such sums to Rolls and/or such sums have not been deducted from sums otherwise payable to Carillion.[5]The matter came before Carr J on 8 March 2016 for a case management conference. By this stage, pleadings had closed and the parties were, therefore, able to identify the issues arising between them. On the application of EMCOR, Carr J ordered the trial of preliminary issues and that the parties liaise to agree the wording of the preliminary issues, which they did.

The preliminary issues

[6]The preliminary issues so agreed were framed as follows (referring to Carillion as “CCL”):
“1. On the assumption that EMCOR is entitled to an extension of time pursuant to clause 11.3 of the EMCOR Sub-Contract (as amended) by fixing such revised or further revised period or periods for the completion of its Sub-Contract Works, does the EMCOR Sub-Contract (as amended) require: (a) that such revised or further revised periods are added contiguously to the end of the current period, so as to provide an aggregate period within which EMCOR’s Sub-Contract Works should be completed (as contended for by EMCOR); or (b) that such revised or further period or periods are fixed in which EMCOR can undertake its Sub-Contract Works, which are not necessarily contiguous but which reflect the period for which EMCOR has in fact been delayed and is entitled to an extension of time (as contended for by CCL). 2. At paragraphs 3 and 5 of Appendix 2 to CCL’s Particulars of Claim, CCL claims loss and damage from EMCOR and AECOM for delay which includes a claim for the “Liquidated and Ascertained Damages levied by the Employer against CCL” for the period between 29 January 2011 and 22 July 2011 (“the LADs”). On a proper construction of: (i) the Building Contract (as amended); (ii) the Supplemental Agreement; (iii) the Further Supplemental Agreement: (a) was CCL’s liability to Rolls for liquidated and ascertained damages for the period between 29 January 2011 to 22 July 2011 extinguished by the Further Supplemental Agreement (as alleged by EMCOR and AECOM but denied by CCL); and (b) if so, does that mean that: (i) EMCOR has no liability to CCL in respect of any sums which it paid to Rolls under the Further Supplemental Agreement in respect of the period 29 January to 11 March 2011; or alternatively has no liability to CCL for sums purportedly paid to Rolls as LADs under the Building Contract (as alleged by EMCOR but denied by CCL); (ii) AECOM has no liability to CCL for sums purportedly paid to Rolls as LADs under the Building Contract (as alleged by AECOM but denied by CCL).” (a) that such revised or further revised periods are added contiguously to the end of the current period, so as to provide an aggregate period within which EMCOR’s Sub-Contract Works should be completed (as contended for by EMCOR); or (b) that such revised or further period or periods are fixed in which EMCOR can undertake its Sub-Contract Works, which are not necessarily contiguous but which reflect the period for which EMCOR has in fact been delayed and is entitled to an extension of time (as contended for by CCL). (a) was CCL’s liability to Rolls for liquidated and ascertained damages for the period between 29 January 2011 to 22 July 2011 extinguished by the Further Supplemental Agreement (as alleged by EMCOR and AECOM but denied by CCL); and (i) EMCOR has no liability to CCL in respect of any sums which it paid to Rolls under the Further Supplemental Agreement in respect of the period 29 January to 11 March 2011; or alternatively has no liability to CCL for sums purportedly paid to Rolls as LADs under the Building Contract (as alleged by EMCOR but denied by CCL); (ii) AECOM has no liability to CCL for sums purportedly paid to Rolls as LADs under the Building Contract (as alleged by AECOM but denied by CCL).”
[7]Preliminary issue no. 1 concerns Carillion and EMCOR only. Preliminary issue no. 2 concerns Carillion, EMCOR and AECOM. I shall explain below how these preliminary issues arise and the nature of the parties’ cases. The contractual background The main contract

The contractual background

[8]The main contract between Rolls and Carillion was entered into on 14 June 2007 and was made on the JCT Standard Form of Building Contract with Contractor’s Design 1998 edition (incorporating Amendments 1:1999, 2:2001 and 4:2002) with bespoke amendments. I shall refer to this contract either as “the main contract” or, as the parties have done, “the Building Contract”.[9]That standard form contract contains provisions that deal with completion, extensions of time and liquidated damages.(i) By clause 1.3, the Completion Date is defined as “the Date for Completion for each section as fixed and stated in Appendix 1 (sectional completion) or any date fixed under clause 25.” In turn, the Date for Completion is defined as “the date fixed and stated for each section in Appendix 1 (sectional completion).”(ii) Clause 23.1.1 sets out the Contractor’s obligation to complete the Sections of the Works on or before the Completion Date for such Section.(iii) Clause 24 deals with the Contractor’s obligation to pay or allow liquidated and ascertained damages for non-completion. Parts of this clause are material to the issues arising and I set it out in almost its entirety: “24 Damages for non-completion 24.1 If the Contractor fails to complete the construction of a Section by the Completion Date for such Section the Employer shall issue a notice in writing to the Contractor to that effect. In the event of a new Completion Date for a Section being fixed after the issue of such a notice in writing such fixing shall cancel that notice and the Employer shall issue such further notice in writing under clause 24.1 as may be necessary.24.2.1 Provided: - the Employer has issued a notice under clause 24.1; and - the Employer before the date when the Final account and Final Statement ….. become conclusive as to the balance due between the Parties by agreement or by the operation of clause 30.5.5 or clause 30.5.8, has informed the Contractor in writing that he may require payment of, or may withhold or deduct, liquidated and ascertained damages then the Employer may not later than 5 days before the final date for payment of the debt due under clause 30.6: either .1.1 require in writing the Contractor to pay to the Employer liquidated and ascertained damages at the rate stated in the Appendix 1 ….. for the period between the Completion Date of a Section and the date of practical completion of such Section and the Employer may recover the same as a debt or .1.2 give a notice pursuant to clause 30.3.4 or clause 30.6.2 to the Contractor that he will deduct from monies due to the Contractor liquidated and ascertained damages at the rate stated in Appendix 1 …. for the period between the Completion Date of a Section and the date of practical completion of such Section.24.2.2 If, under clause 25.3.3, the Employer fixes a later Completion Date for a Section, the Employer shall pay or repay to the Contractor any amounts received allowed or paid under clause 24.2.1 for the period up to such later Completion Date for such Section ….”. 24.1 If the Contractor fails to complete the construction of a Section by the Completion Date for such Section the Employer shall issue a notice in writing to the Contractor to that effect. In the event of a new Completion Date for a Section being fixed after the issue of such a notice in writing such fixing shall cancel that notice and the Employer shall issue such further notice in writing under clause 24.1 as may be necessary. - the Employer has issued a notice under clause 24.1; and - the Employer before the date when the Final account and Final Statement ….. become conclusive as to the balance due between the Parties by agreement or by the operation of clause 30.5.5 or clause 30.5.8, has informed the Contractor in writing that he may require payment of, or may withhold or deduct, liquidated and ascertained damages then the Employer may not later than 5 days before the final date for payment of the debt due under clause 30.6: either .1.1 require in writing the Contractor to pay to the Employer liquidated and ascertained damages at the rate stated in the Appendix 1 ….. for the period between the Completion Date of a Section and the date of practical completion of such Section and the Employer may recover the same as a debt or .1.2 give a notice pursuant to clause 30.3.4 or clause 30.6.2 to the Contractor that he will deduct from monies due to the Contractor liquidated and ascertained damages at the rate stated in Appendix 1 …. for the period between the Completion Date of a Section and the date of practical completion of such Section. ….”.(iv) Clause 25 is the extension of time clause. In summary, it provides for the Contractor to give notice of delay to the progress of a Section, identifying the cause or causes of delay and any Relevant Event, particulars of the expected effect and an estimate of the delay in completion resulting therefrom. If the completion of a Section is likely to be delayed beyond the Completion Date as a result of a Relevant Event, the Employer on receipt of any notice, particulars and estimate “shall make in writing to the Contractor such extension of time, if any, for completion of such Section beyond the Completion Date for such Section as is the fair and reasonable, by fixing a later date as the Completion Date for such Section.” (clause 25.3.1).[10]At the time that contract was entered into, the Works did not include any fit out works. The Contract Sum was £70,130,000.The Works weredivided into 2 Sections. The Date for Completion of Section 1, stated in Appendix 1, was 1 September 2009 and the Date for Completion of Section 2 was 27 October 2009. The rates of liquidated and ascertained damages were(i) for Section 1, £54,000 per week (or pro rata for part thereof) for Week 1, £72,900 for Week 2 and £81,000 per week thereafter and(ii) for Section 2, £46,000 for Week 1, £62,000 for Week 2 and £69,000 per week thereafter.[11]In respect of the Contract Sum, clause 30.5 provided, following Practical Completion, for the Contractor, or otherwise the Employer, to produce a Final Account and Final Statement which would become conclusive, in accordance with the terms of the contract, as to the balance due between the parties. Clause 30.5.2 provided that the Contract Sum should be adjusted in accordance with the terms of the contract, with clause 30.5.3 providing for deductions or additions to be made to the Contract Sum. By clause 30.3.3.5, the deductions include “any other amount which is required by this Contract to be deducted from the Contract Sum.”[12]On 16 July 2009, the main contract was amended by written agreement to incorporate substantial fit out works. The Contract Sum was now agreed as £93,130,000.The Works were divided into 4 Sections: Section A was shell and core works; Section B was court fit out; Section C was the 5th floor; Section D was the hoist. Dates for Completion were provided for each of these Sections: for Section A, 22 March 2010; for Section B, 24 September 2010; for Section C, 22 March 2010; for Section D, 17 December 2010. In relation to Sections A to C there were rates of liquidated damages provided for Weeks 1 and 2 and thereafter the rates were £46,000 per week for Section A, £86,000 per week for Section B and £18,000 per week for Section C. The rate for Section D was nil.[13]On 25 November 2010, Rolls and Carillion agreed, in writing, to further amend the main contract (“the Supplemental Agreement”):(i) The Contract Sum was increased to £96,168,587.(ii) By clause 2.2:
“The parties acknowledge that the revised Contract Sum has been calculated and agreed by the parties having taken into account all provisional sums, Changes, loss and/or expenses and any other deductions and/or additions referred to in clause 30.5.3 of the Building Contract which are set out in the attached Schedule 1.” (iii) By clause 2.3: “The Contractor agrees and acknowledges that it shall not be entitled to any extension of time pursuant to clause 25 of the Building Contract arising out of the occurrence of any event which has taken place on or before the date of this Deed, whether or not the Contractor has given notice in respect of such event.” (iv) The Dates for Completion of Sections B and C were now 28 January 2011 and, for Section D, 25 February 2011. The rates for liquidated and ascertained damages were now £86,000 per week for Section B and £18,000 per week for Section C. (v) Clause 2.5 then provided that: “The parties acknowledge that the Contract Sum has been adjusted to take into account full deduction of liquidated and ascertained damages which would have been payable by the Contractor for Section B and Section C up to 28 January 2011, as specified in paragraph 20 of Schedule 1.”
That Schedule identified matters taken into account in calculating the revised Contract Sum and paragraph 20 stated that the full deduction of liquidated and ascertained damages for Sections B and C up until 28 January 2011 had been included. Clause 2.5 made further provision for the repayment of liquidated damages if Section B or C was completed earlier than 28 January 2011.[14]On 29 July 2011, Rolls and Carillion entered into a Further Supplemental Agreement which I deal with below.

The EMCOR Sub-Contract

[15]The sub-contract between Carillion and EMCOR (“the EMCOR Sub-Contract”) was entered into on 18 July 2008. The EMCOR Sub-Contract incorporated the standard form of Sub-Contract Conditions for use with the Domestic Sub-Contract DOM/2, 1981 edition (referred to simply as DOM/2) and was for the carrying out and completion of theSub-Contract Works, namely the design, manufacture, supply, installation, testing and commissioning of the M+E and associated works.[16]Although this standard form pre-dates the JCT 1998 form, it is not in issue that DOM/2 is intended to be used with this form and they form part of a suite of contracts.[17]Key to preliminary issue no. 1 are the terms of DOM/2 relating to completion and damages for late completion which are as follows:
“11 Sub-Contractor’s obligation – carrying out and completion of Sub-Contract Works – extension of Sub-Contract time 11.1 The Sub-Contractor shall carry out and complete the Sub-Contract Works in accordance with the details in the Appendix, part 4, and reasonably in accordance with the progress of the Works and in accordance with the Contractor’s programme for the Works as issued by the Contractor from time to time but subject to the notice to commence work on site as stated in the Appendix, part 4, and to the operation of clause 11. ….. 11.2.1 If and whenever it becomes apparent that the commencement, progress or completion of the Sub-Contract Works or any part thereof is being or is likely to be delayed, the Sub-Contractor shall forthwith give written notice to the Contractor of the material circumstances including, insofar as the Sub-Contractor is able, the cause or causes of the delay and identify in such notice any matter which in his opinion comes within clause 11.3.1. 11.2.2 In respect of each and every matter which comes within clause 11.3.1, and identified in the notice give (sic) in accordance with clause 11.2.1, the Sub-Contractor shall, if practicable in such notice, otherwise in writing as soon as possible after such notice: .1 give particulars of the expected effects thereof; and .2 estimate the extent, if any, of the expected delay in the completion of the Sub-Contract Works or any part thereof beyond the expiry of the period or periods stated in the Appendix, part 4 or beyond the expiry of any extended period or periods previously fixed under clause 11 which results therefrom whether or not concurrently with delay resulting from any other matter which comes within clause 11.3.1; and ….. 11.3 If on receipt of any notice, particulars and estimate under clause 11.2 the Contractor properly considers that: 11.3.1 any of the causes of the delay is an act, omission or default of the Contractor, his servants or agents or his sub-contractors, their servants or agents (other than the Sub-Contractor, his servants or agents) or is the occurrence of a Relevant Event; and 11.3.2 the completion of the Sub-Contract Works is likely to be delayed thereby beyond the period or periods stated in the Appendix, part 4, or any revised such period or periods, then the Contractor shall, in writing, give an extension of time to the Sub-Contractor by fixing such revised or further revised period or periods for the completion of the Sub-Contract Works as the Contractor then estimates to be reasonable. …. 11.7 If the expiry of the period when the Sub-Contract Works should have been completed in accordance with clause 11.1 occurs before the date of practical completion of the Sub-Contract Works established under clause 14.1 or 14.2, the Contractor may and not later than the expiry of 16 weeks from the aforesaid date of practical completion of the Sub-Contract Works, the Contractor shall either: .1 fix such period or periods for completion of the Sub-Contract Works longer than that previously fixed under clause 11 …. as the Contractor properly considers to be fair and reasonable … .2 fix such period or periods for completion of the Sub-Contract Works shorter than that previously fixed under clause 11 as the Contractor properly considers to be fair and reasonable …. .3 confirm to the Sub-Contractor the period or periods for the completion of the Sub-Contract Works previously fixed. … 11.9 No decision of the Contractor under clauses 11.2 to .7 inclusive shall fix a period or periods for completion of the Sub-Contract Works which will be shorter than the period or periods stated in the Appendix part 4.”
Clause 11.10 set out the Relevant Events including any breach of contract or act of prevention on the part of the Contractor.[18]In respect of the failure by the Sub-Contractor to complete within the period or periods in Appendix part 4 or any revised period or period, clause 12 provided: “12 Failure of Sub-Contractor to complete on time12.1 If the Sub-Contractor fails to complete the Sub-Contract Works or fails to complete the Sub-Contract Works within the period or periods for completion or any revised period or periods as provided in clause 11, the Contractor shall so notify the Sub-Contractor in writing within a reasonable time of the expiry of that period or those periods.12.2 On receipt of the notice referred to in clause 12.1 the Sub-Contractor shall pay or allow to the Contractor a sum equivalent to any direct loss and/or expense suffered or incurred by the Contractor and caused by the failure of the Sub-Contractor as aforesaid. As I have said, there were bespoke amendments to the standard form and these are incorporated into the quotations above.[19]The Appendix, part 4 provided as follows: Part 4: Timing of the Sub-Contract Works In relation to clause 11.1 of the DOM/2 Conditions, the details of the timing of the Sub-Contract Works are as follows: 1. The date for commencement of the Sub-Contract Works on site will be between November 2008 and December 2008[2]The period required for notice to commence work on site is: 4 weeks 3. The period for the Sub-Contract Works off site and prior to commencement on site is 32 weeks 4. The period for the carrying out and completion of the Sub-Contract Works on site is: 46 weeks (including Christmas and Easter periods) – refer to Numbered Document No. 7 for further details.”

Changes to the EMCOR sub-contract

[20]Following the amendment of the main contract in July 2009 to incorporate fit out works, Carillion and EMCOR entered into a written agreement dated 23 September 2009 which amended the EMCOR Sub-Contract to incorporate M&E elements of the fit out works and amended and varied the Appendix part 4 to provide periods for off-site and on-site works falling within Sections A, B and C.[21]Carillion and EMCOR entered into a further written agreement dated 21 October 2010 (“the EMCOR Supplemental Agreement”). That agreement took account of the Supplemental Agreement between Rolls and Carillion (albeit that Supplemental Agreement was executed later):(i) The parties agreed a revised Sub-Contract Sum and, by clause 2.2 acknowledged that this had been calculated having taken into account all matters known of at the date of the deed, including Carillion’s claims against EMCOR in relation to delayed completion of the Section B and C works up to 28 January 2011.(ii) By clause 2.5, the parties agreed the dates for commencement of on-site works for Sections A to C and by clause 2.6 they agreed “to vary the period for completion of the Sub-Contract Works on site ….”. The effect of the periods then provided for Sections A to C was to make the end of the period for completion of the EMCOR Sub-contract Works the same as the Dates for Completion of Sections A to C under the main contract. For Sections B and C that date was 28 January 2011.

The AECOM Sub-Contract

[22]AECOM was originally appointed by General Partner Rolls and Arnold Ltd. in December 2003 to provide M+E design services (“the AECOM Appointment”). In 2007, AECOM’s appointment was novated to Rolls and then to Carillion.[23]The AECOM Appointment included an express provision that AECOM should perform its services regularly and diligently but it was not in the nature of a contract that provided fixed dates or periods for the completion of AECOM’s services with corresponding provisions for extension of time.[24]At the same time that the main contract was amended to include fit out works, AECOM’s appointment was amended, by a written agreement dated 16 July 2007, to include fit out works within AECOM’s scope of works. Following the entering into of the Supplemental Agreement between Rolls and Carillion, AECOM and Carillion also entered into a further written agreement (“the AECOM Supplemental Agreement”) which amongst other things acknowledged that the Dates for Completion of the Works under the main contract were those set out in Supplemental Agreement.[25]As I have said, because the terms of AECOM’s appointment were not similar to those of the EMCOR Sub-Contract in relation to completion, preliminary issue no. 1 does not concern AECOM. The terms of AECOM’s appointment are also not material to preliminary issue no. 2. For those reasons, I do not say any more about them.

The progress of the Works and the Further Supplemental Agreement

[26]There is no doubt that the progress of the (main contract) Works was delayed. Practical Completion of Sections B and C was not achieved until 29 July 2011.[27]On the same day, Rolls and Carillion entered into a further supplemental agreement (“the Further Supplemental Agreement”) dated 29 July 2011, that is, the same date as the date of Practical Completion.[28]Under that Further Supplemental Agreement:(i) The parties, Rolls and Carillion, recited that they had agreed to enter into this Deed as a further supplement to the Building Contract (that is, the main contract as amended).(ii) Clause 1 provided that the terms in the Deed should have the same meaning as in the Building Contract and that “For the avoidance of doubt the provisions of the Building Contract shall continue in full force and effect, subject to the amendments set out in this Deed.”(iii) Clause 4 provided as follows:
“4. Contract Sum 4.1 The Parties agree that the Contract Sum shall be £93,978,887 as set out in Schedule 3 hereto and that there shall be no further adjustment of the Contract Sum in respect of any matter arising on or before the date of this Deed including without limitation those matters set out in Schedule 3 hereto. 4.2 The Parties acknowledge that the revised Contract Sum has been calculated and agreed by the Parties as at the date of this agreement as having taken into account all provisional sums, Changes, loss and/or expense and any other deductions and/or additions referred to in clause 30.5.3 of the Building Contract. 4.3 The Contractor agrees and acknowledges that it shall not be entitled to any extension of time pursuant to clause 25 or to loss and/or expense pursuant to clause 26 of the Building Contract arising out of the occurrence of any event which has taken place or could reasonably be foreseen on or before the date of this Deed, whether or not the Contractor has given notice in respect of such event. ……” (iv) Clause 5 was headed Liquidated Damages and was in the following terms: “5.1 The Contractor acknowledges that the Dates for Completion of Sections B, C and D have not been achieved by the Dates for Completion varied by the Supplemental Agreement dated 25 November 2010 (the “Supplemental Agreement”). 5.2 The Parties acknowledge that the Contract Sum has been adjusted and the retention arrangement modified, as set out in Schedule 3 and Clause 5 hereto, to satisfy all the Contractor’s liability for liquidated and ascertained damages payable by the Contractor for delays to completion of Sections B and C up to 22 July 2011. 5.3 The Parties agree that the new Dates for Completion of Sections B and C shall be 22 July 2011 and that the new Date for Completion of Section D shall be 30 September 2011. 5.4 The Parties confirm that the rates for liquidated damages accrued after the Dates for Completion shall be as follows: Section B: 22nd July 2011 £68,000 per week or pro-rata for part thereof. Section C: 22nd July 2011 £18,000 per week or pro-rata for part thereof Section D: 30 September 2011 [Not applicable] Section B: 22nd July 2011 £68,000 per week or pro-rata for part thereof. Section C: 22nd July 2011 £18,000 per week or pro-rata for part thereof Section D: 30 September 2011 [Not applicable] …………. 5.6 In the event that any of the new Dates for Completion are not achieved, the Contractor acknowledges that the right of the Employer to claim liquidated damages in accordance with the Building Contract shall remain unfettered.”
Clause 5.7 made provision for the repayment of liquidated and ascertained damages if completion was achieved earlier than 22 July 2011, although as a matter of fact that date had already passed. (v) Schedule 3 was entitled “Final Account Completion Agreement Proposal”. Under the heading “Revised Contract Sum”, the Contract Sum of £96,168,857 in the Supplemental Agreement was set out followed by two deductions for LADS for Section B and C up to 22 July, in total a sum of £2,600,000. A further deduction and addition gave a revised contract sum of £93,978,887.[29]Preliminary issue no. 2 arises out the terms of that Further Supplemental Agreement.[30]With that background, I turn now to the preliminary issues.

Preliminary issue no. 1: extension of time

[31]I trust that I do no disservice to the detailed arguments advanced before me if I summarise the issue that arises on preliminary issue no. 1 as follows:(i) EMCOR says that if it is entitled to an extension of time in accordance with clause 11.3, that is to be given by the adding of time to the end of the period or periods set out in Appendix part 4 as amended by the later agreements or as previously revised under clause 11.3. In the course of the hearing this was described as adding a further period contiguously to a previously fixed period.(ii) Carillion disagree. They say that if the matter giving rise to the entitlement to an extension of time and falling within clause 11.3.1 occurs before practical completion, then the extension of time is given (as EMCOR contends) by adding time to the relevant period or periods for completion. However, if the matter arises after the date for practical completion has passed (which for shorthand Carillion refer to as a period when EMCOR is in culpable delay), it is not necessarily the case that the further time is added to the end of the existing period or periods. In these circumstances, consideration has to be given to the effect of the matter relied upon at the time that it occurs. That may result in a further period of time for completion being given to EMCOR but that period need not be added to a previous fixed period. Rather it can be a further discontinuous period of time and, under clause 11.3, it should be a discontinuous period if that properly reflects responsibility for delay.[32]In support of their arguments both Carillion and EMCOR rely on the most recent statement of the principles relevant to the interpretation of contracts in the decision of the Supreme Court in Arnold v Britton[2015] UKSC 36. That case concerned the meaning of clause 3(2) of long leases for holiday chalets which provided for the payment of a service charge. By that clause the lessees covenanted “to pay … a proportionate part of the expenses and outgoings incurred by the lessors in the repair, maintenance, renewal and the provision of services … in the yearly sum of £90”. Some leases provided for that sum to increase at a three-yearly compound rate of 10% and later leases provided for an annual 10% compound increase. The issue between the landlords and the tenants was whether the clause provided for the payment of a fixed and escalating sum (as the landlords contended) or a variable sum, being a fair proportion of service costs, with the fixed sum representing a maximum amount payable.[33]In his speech, Lord Neuberger, at paragraph 15, reiterated that when interpreting a contract, the court is concerned to identify the intention of the parties by reference to “what a reasonable person having all the background knowledge which would have been available to the parties would have understood the language in the contract to mean” (quoting Lord Hoffman in Chartbrook Ltd. v Persimmon Homes Ltd. [2009] AC 1101, at paragraph 14)and the court does so by focussing on the meaning of the relevant words, which in this case were the relevant terms of the lease. That meaning, he said, was to be assessed in the light of(i) the natural and ordinary meaning of the clause,(ii) any other relevant provisions of the lease,(iii) the overall purpose of the clause and the lease,(iv) the facts and circumstances known or assumed by the parties at the time that the documents was executed, and(v) commercial common sense, but(vi) disregarding subjective evidence of any party’s intentions.[34]Lord Neuberger emphasised seven points. The points relevant to this case seem to me to be as follows:(i) The reliance placed on commercial common sense and surrounding circumstances should not be invoked to undervalue the importance of the language of the provision which is to be construed (paragraph 17).(ii) The less clear the relevant words are or the worse their drafting, the more ready the court can properly be to depart from their natural meaning (paragraph 18).(iii) Commercial common sense is not to be invoked retrospectively. The fact that a contractual arrangement, if interpreted according to its natural language, has worked out badly for one party is not a reason for departing from the natural language (paragraph 19).(iv) “While commercial common sense is a very important factor to take into account when interpreting a contract, a court should be very slow to reject the natural meaning of a provision as correct simply because it appears to be a very imprudent term for one of the parties to have agreed, even ignoring the benefit of wisdom of hindsight” (paragraph 20).(v) When interpreting a contractual provision, the court can only take into account facts or circumstances which existed at the time the contract was made, and were known or reasonably available to both parties.[35]Following these principles, and in order to identify the intention of the parties as to the meaning of the words used, the court should first look for the natural meaning of the words used in the contract and not be too ready to depart from the natural meaning on the basis of the meaning the court thinks accords with commercial common sense. However, the more unclear the words or the worse the drafting, the more ready the court should be to do so. When considering the parties’ intended commercial meaning of the words used, the court should be careful to have regard only to what the parties knew or could reasonably have known at the time of entering into the contract.

EMCOR’s case

[36]The submission of Mr Cowan and Mr Hale on behalf of Emcor is simply that the natural meaning of the words in clause 11.3 is clear. As they put it in their skeleton argument, the fixing of an additional period for completion of EMCOR’s Sub-Contract Works contiguously to the pre-existing period is what a reasonable reader, in the parties’ position at the time of making the EMCOR Sub-Contract, would have understood to be required by the words “fixing such revised or further revised period … as the Contractor then estimates to be reasonable” (in clause 11.3). That, they say, is the ordinary meaning of the words used and accords with commercial common sense.[37]EMCOR say that that construction is supported by authority, at least to the extent that the authorities relied upon demonstrate that, in construction contracts, extensions of time are usually given by the fixing of a new date for completion or a revised period for completion in a manner that adds the further time “contiguously” to the time originally provided for completion. For convenience I deal with the authorities that I have been referred to by EMCOR and Carillion’s response to them below.

Carillion’s case

[38]Carillion’s case is that the natural and ordinary meaning of the words used does not lead to the conclusion that an extension of time should be “contiguous” but that the words used contemplate and allow for the provision of additional but discontinuous periods of time for the carrying out and completion of the sub-contract works.[39]In support of that argument, Ms Ansell QC relies on the commercial effect of construing the clause in the way advocated by Mr Cowan. A number of examples were canvassed in argument but Ms Ansell’s point can be simply explained by reference to the following example. Say that the period for completion of EMCOR’s Sub-Contract works is 100 days. By the end of this period, the sub-contract works are not complete. That has the effect of delaying the main contract works and that delay and the loss and expense caused by it and suffered or incurred by Carillion is EMCOR’s liability under clause 12. By Day 150 the Sub-Contract Works are still not complete. At this point, a major variation to the Sub-Contract Works is instructed. This is a Relevant Event under clause 11.3 and entitles EMCOR to an extension of time. Say that the effect of this variation is that EMCOR requires and is entitled to another 50 days to complete the sub-contract works. If that 50 days is added to the original 100 day period for completion, there is no breach by EMCOR in failing to complete until Day 150. So the impact and consequences of EMCOR’s delay are determined by reference to its failure to complete by Day 150. This, says Ms Ansell QC, is 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 the 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 that is recoverable under clause 12. 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 Sub-Contract 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.[40]In their skeleton argument, Ms Ansell QC and Mr Neuberger gave 2 examples where, on the facts of this case, the application of clause 11 in the manner contended for by EMCOR could either relieve EMCOR from liability completely or could be unfair to EMCOR rendering it liable under clause 12 at a time when it was, in fact, being delayed by a Relevant Event.[41]In this context Carillion emphasises that the DOM/2 conditions are part of a suite of contracts. Under the main contract made on the standard form that forms part of that suite of contracts, there is provision for the payment of liquidated damages which represent (in this instance) a fixed sum per week (or pro rata for part of a week) payable in the event of failure to complete by the Completion Date. The parties can be taken to have understood that there may be a complex interaction between the consequences of the default of different sub-contractors and to have provided for this to be reflected in the provisions in respect to liability for delay and the corresponding provisions for extensions of time. They have done so by providing not for the payment of liquidated damages but of direct loss and expense (caused by the sub-contractor’s failure to complete within the period for the sub-contract works) and by allowing for revised periods of time for completing the works. This relieves the sub-contractor of liability for the consequences of his failure to complete at the point in time when he is, in fact, entitled to more time and ensures that he is liable for the actual consequences of the delay for which he is responsible.

The authorities

[42]EMCOR primarily relies on the decision of Colman J. in Balfour Beatty Building Ltd. v Chestermount Properties [1993] 62 BLR 1. This case arose out of an arbitration between Balfour Beatty and Chestermount who were parties to a contract on a JCT Standard Form 1980 edition for the construction of the shell and core of an office block. The contract provided a Completion Date and contained provisions for extensions of time (by clause 25 which was in materially the same terms as clause 25 of the main contract in this case) and the payment for liquidated damages for non-completion.[43]At a time when the Completion Date had already passed, and Balfour Beatty was therefore described as being in culpable delay, instructions were issued for the carrying out of fit out works as variations.[44]The arbitrator heard two preliminary issues in the following terms:
“Question 1 Does Clause 25 confer upon the Architect jurisdiction to grant an extension of time for the completion of the Works in respect of a Relevant Event occurring during a period of culpable delay?” “Question 2 In granting an extension of time in respect of the Relevant Event occurring during a period of culpable delay, ought the Architect to award a “gross” extension (that is, one that re-fixes the Completion Date at the calendar date upon which the work would reasonably be expected to be completed having regard to the calendar date upon which it is instructed) or ought it to be a “net” extension (that is, one which calculates the revised Completion Date by taking the date currently fixed and adding the number of days which the Architect regards as fair and reasonable)?”
[45]The arbitrator decided that the Architect did have power to grant an extension of time for a Relevant Event in a period of culpable delay and that the extension of time should be “net”. Both decisions were upheld by Colman J.[46]In the context of the first issue, Colman J said this: “In order to answer this question it is right to examine the underlying contractual purpose of the completion date/extension of time/liquidated damages regime. At the foundation of this code is the obligation of the contractor to complete the works within the contractual period terminating at the completion date and on failure to do so to pay liquidated charges for the period of time for which practical completion exceeds the completion date. But super-imposed on this regime is a system of allocation of risk. If events occur which are non-contractor’s risk events and those events cause the progress of the works to be delayed, in as much as such delay would otherwise cause the contractor to become liable for liquidated damages or for more liquidated damages, the contract provides for the completion date to be prospectively or, under clause 25.3.3, retrospectively, adjusted in order to reflect the period of delay so caused and thereby reduce pro tanto the amount of liquidated damages payable by the contractor…… The underlying objective is to arrive at the aggregate period of time within which the contract works as ultimately defined ought to have been completed having regard to the incidence of non-contractor’s risk events and to calculate the excess time if any, over that period, which the contractor took to complete the works. In essence, the architect is concerned to arrive at an aggregate period for completion of the contractual works, having regard to the occurrence of non-contractor’s risk events and to calculate the extent to which the completion of the works has exceeded that period.[47]It is the last part of this passage that EMCOR relies upon as supporting its case that any extension of time must result in an aggregate (and thus continuous) period for completion of the Sub-Contract Works (or, as in this case, a Section or part).[48]In the context of the second issue before him, Colman J again relied on the purpose of the clause. Under the clause, the architect was to assess “the extent to which the period of contract time available ought to be extended or reduced having regard to the incidence of the relevant events”. He has then to apply that assessment of delay “by extending the contract period for completion of the works by a like amount and this he does by means of postponing the completion date”.[49]In rejecting Balfour’s Beatty’s argument for the “gross” approach, Colman J. emphasised that the function of the completion date was “to identify the end of the period of time commencing with the date of possession within which the contractor must complete the works, including subsequent variations, failing which he must pay liquidated damages”. He concluded “The completion date as adjusted retrospectively is thus not the date by which the contractor ought to have achieved or ought in future to achieve practical completion but the date which marks the end of the total number of working days starting from the date of possession within which the contractor ought fairly and reasonably to have completed the works.”[50]EMCOR similarly relies on these passages as supporting its case that the way in which an extension of time is given is to extend the contractual period or periods for completing the works and not to provide for further discontinuous periods.[51]Mr Cowan points out that Colman J’s decision has been repeatedly cited with approval and followed:(i) In Henry Boot v Malmaison(1999) 70 Con LR 33 at paragraph 12, Dyson J, as he then was, referred to Colman J’s “valuable interpretation of cl 25” and cited with apparent approval the last passage which I quoted in paragraph 46 above. The contract in issue in that case was the JCT 80 standard form.(ii) In Adyard Abu Dhabi v SD Marine Services[2011] EWHC 848 (Comm), Hamblen J at paragraphs 265-266 rejected an argument that was a version of the gross entitlement argument and in Walter Lilly & Company Limited v Mackay[2012] BLR 503, Akenhead Jat paragraph 364-365 endorsed Colman’s J’s “net” entitlement approach in relation to a JCT Standard Form of Contract 1998 edition.(iii) In Floods of Queensferry Ltd. v Shand Construction Ltd. [1999] WL 478179, His Honour Judge Humphrey LLoyd QC was concerned with an earthworks sub-contract which incorporated the FCEC Blue Form. The sub-contract required the sub-contractor, Floods, to complete the Sub-Contract Works within the Period for Completion specified as 27 weeks with “Sectional progress to be detailed in the Main Contractor’s Programmes”. On the facts of the case, the court held that this meant that the Period for Completion was 27 weeks for the bulk earthworks plus whatever time might be required by the main contractor’s programmes for the so-called second season work. The sub-contract provided that if the Sub-Contractor was delayed by specified events, “the Sub-Contractor shall be entitled to such extension of the Period for Completion as may in all the circumstances be fair and reasonable.” At paragraph 122, referring to Chestermount, His Honour Judge LLoyd QC said:
“In that case the question was what was to happen if during a period of culpable delay an event occurred which entitled the contractor to a JCT contract to an extension of time. The pragmatic and sensible answer was to add the further time to the relevant completion date. I see no reason why that approach should not also apply to the FCEC form ….”
However, on the facts of the case, he found that the bulk earthworks merged with the carrying out of other works so that it was not possible to arrive at an extended date for completion of the bulk earthworks earlier than the notional date of their completion. Whilst this decision endorses the “net” approach, the issue that arises on this preliminary issue was not considered.[52]The final case relied on by EMCOR was Ascon Contracting Ltd. v Alfred McAlpine Construction Isle of Man Limited (1999) 66 Con LR 119. In this case, McAlpine was the main contractor and Ascon the sub-contractor for reinforced concrete works. Although the form of sub-contract is not identified in the judgment of His Honour Judge Hicks QC, part of clause 11.1 is quoted (at paragraph 86) in the same terms as paragraph 11.1 of DOM/2. At paragraph 3, the judge recites that the sub-contract period was 27 weeks. Practical completion of the sub-contract works was achieved late and the dispute concerned, amongst other things, Ascon’s claim for an extension of time. The judge found that Ascon was entitled to 2 extensions of time of 6 days and 8 days and it is apparent that that extension of time was given by adding the total extension of 14 days to the Period for Completion. EMCOR argues that that is wholly consistent with its case.[53]Ms Ansell QC argues, in effect, that the decision in Chestermount is simply not relevant in the present case and/or does not determine the issue of construction that arises. The “gross” or “net” argument as such does not arise and the relevance of Chestermount, if any, is therefore in what is said about the contractual mechanism for granting an extension of time. Ms Ansell QC points out that Chestermount was concerned with a main contract in similar terms to the main contract in this case. In particular, there was a fixed completion date and a sum payable as liquidated damages in the event of non-completion and the extension of time operated to relieve the Contractor from the obligation to pay liquidated damages for non-completion. It followed, as Colman J said, that the only way to extend the period for completion of the works was to fix a later Date for Completion. Further, since the sum payable for failure to complete by the Completion Date was a fixed rate, it would have made no difference whether a further period for completion was added to the end of the existing period for completion or related to a further discrete period of time.[54]Ms Ansell QC submits that the position is different under this sub-contract. In clear distinction from the standard form main contract, the DOM/2 Conditions contemplate that there will be, as there is here, a period or periods for completion, so an extension of time does not need to be given by fixing a single completion date and an aggregate period for completion. Further the extension of time provision does not operate to relieve EMCOR from the obligation to pay liquidated damages but from the obligation to pay loss and expense caused by its breach in failing to complete within time. What EMCOR is obliged to pay, and what it is relieved from paying, should, therefore, reflect the actual loss caused by its failure to complete on time and that, argues Ms Ansell QC, involves considering the impact of that failure to complete at the time it occurs. That means that the underlying objective of the extension of time provision does not need to be and is not the determination of an aggregate period for the carrying out and completion of the Sub-Contract Works. The sub-contract therefore gives the Contractor the power to fix further periods for the completion of the works rather than a date, reflecting the Contractor and Sub-Contractor’s true responsibility for delay.[55]So far as the other cases relied upon are concerned, Ms Ansell QC points out that they were either cases in which there was a Completion Date and not a period for completion or the issue in this case simply did not arise. In Ascon, the only case identified where the contract appears to have been on DOM/2 or a similar form of sub-contract, the court was not concerned with delay arising from a relevant event arising in a period of culpable delay.

The construction of the clause

[56]It is, in my judgment, clear that the natural meaning of the clause 11.3 is that contended for by EMCOR.[57]Under clause 11.1, EMCOR’s obligation is to carry out and complete the Sub-Contract Works in accordance with the details in the Appendix part 4. That provides periods for the carrying out of the off-site and on-site works. It is easy to envisage circumstances in which sub-contract works, which have to fit with the main contract works, might have more than one period provided for their execution on site. It follows that there is no particular significance in the use in clauses 11.2.2 and 11.3, for example, of the expression “period or periods”. They do not serve to indicate that the extension of time provisions are intended to or may operate by the creation of fresh periods for the carrying out and completion of the sub-contract works.[58]On the contrary, it is clear that what is contemplated in the extension of time provisions in clause 11 is the revision of the period or periods either(a) stated in the Appendix part 4 or(b) the period or periods extended from those stated in the Appendix part 4: (i) Clause 11.3 provides for the Contractor, in the circumstances specified, and if the completion of the Sub-Contract Works is likely to be delayed “beyond the period or periods stated in the Appendix part 4, or any revised such period or periods”, to give an extension of time by fixing such revised or further revised period or periods for the completion of the Sub-Contract Works as the Contractor then estimates to be reasonable. It is evident from the wording that what is contemplated is a revision to the period or periods in the Appendix part 4 and potentially further revision of that revised period or periods. The starting point, so to speak, is always the period or periods in the Appendix part 4. It is not the case that the clause makes provision for giving an “extension of time” by providing a fresh and distinct period in which the Sub-Contract Works may be carried out without further liability attaching to EMCOR unless they fail to complete by the end of that period. (ii) As I have set out above, the preceding clause 11.2.2.1 provides for the Sub-Contractor to give notice of the expected delay in the completion of the Sub-Contract Works or any part thereof “beyond the expiry of the period or periods stated in the Appendix part 4 or beyond the expiry of any extended period or periods previously fixed under clause 11….”. The reference to “extended period or periods” previously fixed itself demonstrates that the way in which an extension of time may be given is by the fixing an extended period or period for completion. This is consistent with my reading of clause 11.3 as set out above and inconsistent with Carillion’s case that an extension of time may be given by giving a further but discontinuous period for carrying out and completing the works. (iii) In the course of argument, Mr Cowan drew my attention to further references within clause 11 to the fixing of a shorter or longer period for the completion of the sub-contract works. Clause 11.6 provides, in certain circumstances, for the fixing of “a period or periods for the completion of the Sub-Contract Works shorter than that previously fixed under clause 11.3”. Clause 11.7 provides that, if the period when the Sub-Contract Works should have been completed in accordance with clause 11 expires before the date of practical completion of the Sub-Contract Works, the Contractor may, in the circumstances set out, fix such period or periods for completion of the Sub-Contract Works shorter or longer than that previously fixed under clause 11. It does not refer to the fixing of other or further periods. Clause 11.9 provides that the Contractor cannot fix a period or periods shorter than the period or periods stated in the Appendix part 4. Mr Cowan submits that these provisions make it plain that what is contemplated is the shortening or lengthening of the period or periods in Appendix part 4 or the revised such period or periods. I accept that submission. It reinforces that clause 11 only provides for revision to the period or periods in the Appendix part 4 and does not provide for the creation of fresh and discontinuous periods for completion.[59]Ms Ansell QC’s argument as to the potential effect of that approach is nonetheless well made. There are indeed factual scenarios in which the addition of a further period of time to the existing period of time set for completion may have the effect of relieving a sub-contractor for liability to an extent that does not truly reflect the consequences of his breach in failing to complete within, say, the original period for completion. That there may be such factual scenarios does not affect the, to my mind, obvious interpretation of clause 11.3. In any event, these are only potential factual scenarios that may arise particularly on a contract where there is more than one sub-contractor. They will not necessarily arise and it follows that the extent to which they can influence the interpretation of the clause must be limited.[60]In any event, the difficulty with these arguments is that they create a distinction which is not drawn from the sub-contract between responsibility for delay and contractual liability. Under clause 12, EMCOR is only contractually liable for delay if it fails to complete the Sub-Contract Works within the period or periods for completion, so the material obligation is what the contract provides in respect of those periods and not some broader concept of who is factually responsible for delay to the progress of the works or liability for some other breach of contract.[61]Given that I consider the clause to be clear, following the principles in Arnold v Britton, I should be slow to depart from that meaning even if I considered that the result did not accord with commercial common sense. I do not, however, consider that this meaning does not accord with commercial common sense. As EMCOR has submitted, this interpretation of clause 11.3 is practicable and workable and is what a reasonable person with all the background knowledge of the parties would have thought the clause meant at the time the contract was entered into. Carillion’s argument in this respect assumes that the sub-contractor may be in breach for a period of time and then not in breach and so on. I do not see that the words of the contract can be read to have this effect or that the putative reasonable person would have thought it had this meaning at the time the contract was entered into. If it had been intended to have this unusual effect, I would have expected to see this much more clearly provided for.[62]I should add that I have placed little reliance in construing this clause on the decision in Chestermount simply because, in my view, Ms Ansell QC is right to say that neither Chestermount nor the other authorities cited directly address the question raised by this preliminary issue. They do, however, to my mind, support EMCOR’s argument as to how the reasonable person with the parties’ knowledge of the background would construe clause 11.3 to the extent that they demonstrate that extension of time provisions are commonly operated by the extension of the period for completing contract works and not by the provision of further discontinuous periods in which to do so.

Decision

[63]For all these reasons, in respect of preliminary issue no. 1, I find that, on the assumption that EMCOR is entitled to an extension of time pursuant to clause 11.3 of the EMCOR Sub-Contract (as amended) by fixing such revised or further revised period or periods for the completion of its Sub-Contract Works, the EMCOR Sub-Contract requires that such revised or further revised period or periods are added contiguously to the end of the current period within which EMCOR’s Sub-Contract Works should be completed.

Preliminary issue no. 2

[64]As I have already said, this preliminary issue arises out of the Further Supplemental Agreement dated 29 July 2011 between Rolls and Carillion, the relevant terms of which are set out at paragraph 28 above.

Carillion’s case

[65]The nature of the dispute is this. Carillion say that the Further Supplemental Agreement was, in effect, a settlement of, amongst other things, the final account. It settled any claims by either party that there may have been to adjust the Contract Sum under the main contract. The compromise recorded in that agreement was achieved by agreeing the Contract Sum as £93,978,887, a figure that was less than the Contract Sum previously agreed under the Supplemental Agreement.[66]By clause 4.2, Rolls and Carillion acknowledged that that revised Contract Sum took account of, amongst other things, any deductions and/or additions referred to in clause 30.5.3 of the main contract. Such deductions may include deductions in respect of liquidated and ascertained damages and, on the face of it, Schedule 3 recorded the deduction of substantial sums by way of liquidated and ascertained damages in respect of the late completion of Sections B and C. By clause 4.3, Carillion acknowledged that it was not entitled to any extension of time arising out of the occurrence of any event which had taken place or could reasonably be foreseen on or before the date of the agreement and, by clause 5.1, Carillion acknowledged that the Dates for Completion of Sections B, C and D had not been achieved.[67]Consistently, with these clauses, Carillion then, by clause 5.2 acknowledged that the Contract Sum had been adjusted “to satisfy all the Contractor’s liability for liquidated and ascertained damages payable by the Contractor for delays to completion of Sections B and C up to 22 July 2011.” Liquidated damages for Section D had been set at nil.[68]By clause 5.3, however, the parties then went on to agree that the new Dates for Completion of Sections B and C should be 22 July 2011 (the same date as referred to in clause 5.2) and the new Date for Completion of Section D should be 30 September 2011. By clause 5.4, the parties then agreed rates for liquidated damages after “the Dates for Completion”. These were the same as the rates previously agreed but applied only after 22 July 2011.[69]Adopting the expression that I used in the course of the argument, Carillion’s position is that this agreement drew a line in the sand. Carillion was late in the completion of the Works; Carillion agreed that it was not entitled to an extension of time and agreed the sum which it was liable to pay in liquidated damages up to 22 July 2011; that sum was then deducted from the Contract Sum and an adjusted Contract Sum was agreed. If there was further delay to completion after 22 July 2011 – and by the time the agreement was executed there had been – further liquidated damages would be payable. If completion was achieved earlier, liquidated damages were repayable, this provision being included even though that could not, in fact, be the case. In these proceedings, Carillion seek to recover from EMCOR and AECOM the sums recorded as being deducted by way of liquidated damages on the grounds that these sub-contractors were contractually responsible for the delay to the completion of the main contract works.

The Defendants’ case

[70]EMCOR and AECOM advance essentially the same argument as to the effect of the Further Supplemental Agreement and I will take their cases together. In essence what they say is that Carillion’s case ignores the terms of the Further Supplemental Agreement. The Further Supplemental Agreement fixed, by agreement, new Dates for Completion, the Date or Dates for Completion being defined terms under the main contract. Under clause 25, the Contractor is only liable for liquidated damages for failure to complete by the Date(s) for Completion. Accordingly, they say, Rolls and Carillion having set the Dates for Completion of Sections B and C as 22 July 2011, Carillion cannot have been liable for liquidated damages prior to this date and/or Rolls cannot have levied liquidated and ascertained damages in accordance with the main contract.[71]In this context, the Defendants place reliance on the express terms of clause 24.1 and clause 24.2.2 of the main contract which contemplate that where a later Completion Date (being the Date for Completion) of a Section is fixed, any notice of failure to complete is cancelled and any liquidated damages paid or allowed are repayable. Since the Further Supplemental Agreement provides that the main contract remains in full force and effect, the agreement of the new Dates for Completion must have the same effect as if a new Completion Dates had been fixed.[72]The Defendants’ case therefore is that any liability that Carillion might have had for failure to complete by 22 July 2011 was extinguished by the Further Supplemental Agreement and there is nothing to be passed down to the sub-contractors. Indeed, on behalf of AECOM, Mr Ben Quiney QC goes somewhat further and submits that Rolls never had a right to levy liquidated damages for the period between 25 April and 18 July 2011 which are the sums claimed against AECOM.

The construction of the Further Supplemental Agreement

[73]The same principles of construction as set out at paragraphs 32 to 35 above apply to this agreement. So I am first concerned with the ordinary and natural meaning of the words used. It seems to me that the terms of the Further Supplemental Agreement are clear. What the agreement provides for and records is not the extinguishment of Carillion’s liability for liquidated and ascertained damages but its crystallisation, and satisfaction, as at 22 July 2011, by way of deduction from the Contract Sum. The agreement of the Dates for Completion as 22 July 2011 has the effect of setting the dates from which any further liability for liquidated damages is to be ascertained.[74]There is, of course, an inconsistency between the acknowledgement in clause 4.3 that Carillion is not entitled to an extension of time and the agreement of the Dates for Completion at 22 July 2011. It does not seem to me that that assists EMCOR and AECOM’s arguments. Rather it reinforces that Rolls and Carillion were agreeing new Dates for Completion rather than operating the extension of time mechanism in the main contract.[75]The Defendants argue that the Supplemental Agreement provides an aid to construction in that it shows that Rolls and Carillion were using the agreement of new Dates for Completion as the means to grant extensions of time and the Further Supplemental Agreement followed the same approach. I do not accept that argument. Both the Supplemental Agreement and the Further Supplemental Agreement clearly recite that no extension of time is granted. The fixing of new Dates for Completion is a means of drawing a line under previous claims but not of granting extensions of time.[76]When the Further Supplemental Agreement is seen in this way, it demonstrates the flaw in the Defendants’ argument: the Defendants’ argument assumes that the agreement of new Dates for Completion under the Further Supplemental Agreement has the same effect as the fixing of a new Completion Date under the main contract by the operation of the provisions in respect of extensions of time. There is no reason why that should be the case. It was open to Rolls and Carillion to agree, as they did, a new Date for Completion but not by the granting of an extension on time and on the basis that Carillion was liable for liquidated damages up to that date. Put another way, they agreed, by reference to a particular date, that there would be no extension of time granted to Carillion, that Carillion would be liable for liquidated damages and the amount of those damages, and what would happen from that date onwards.[77]It is, therefore, not the case, as AECOM argue that Rolls never had the right to levy liquidated damages. Rolls had the right, or would have had that right on the service of the relevant notices, to require Carillion to pay liquidated and ascertained damages or to allow them by way of deduction. Rolls’ claim and Carillion’s liability were compromised by the terms of the Further Supplemental Agreement.[78]The Defendants’ seek to draw a distinction between liquidated damages levied under the main contract and a payment or allowance as part of a commercial settlement. Whilst there is a technical distinction between the two, I do not see that that is material to Carillion’s claims or the preliminary issue. Carillion’s point, which I accept, is that it was liable under the main contract for liquidated damages and it compromised that liability. That did not extinguish its liability nor did it mean that EMCOR and AECOM have no liability for sums paid or allowed as liquidated damages under the main contract as part of that compromise.

Decision

[79]I, therefore, find in relation to Preliminary Issue no. 2(a) that Carillion’s liability to Rolls for liquidated and ascertained damages for the period between 29 January 2011 to 22 July 2011 was not extinguished by the Further Supplemental Agreement.[80]So far as sub-paragraph (b) of the preliminary issue is concerned, in respect of AECOM, it follows that the issue does not arise.[81]It was argued, however, that the position in respect of EMCOR is not so straightforward. The second part of the preliminary issue reflects the terms of Carr J’s order that the preliminary issues should address the construction of clause 10 of Schedule 1 to the EMCOR Supplemental Agreement. That clause is in the following terms:
“Should Practical Completion of either Section B or C of the Works (as certified by the Employer in accordance with the Main Contract ) occur at a date later than 28 January 2011, then the following shall apply: .1 If for whatever reason Practical Completion of Section B or C of the Works occurs between 29 January 2011 and 11 March 2011 (inclusive), then the Parties agree to waive any claims either may have against the other for any losses, whether arising under the Main Contract, the Sub-Contract or otherwise, in respect of any delay to completion of the Works or the Sub-Contract Works during such period; save to the extent the Sub-Contractor causes such delay to Practical Completion of either Section, the Contractor shall be entitled to recover such Liquidated and Ascertained damages as are deducted by the Employer under the Main Contract as a result. .2 If for whatever reason Practical Completion of Section B or C of the Works occurs after 11 March 2011, the Parties’ liabilities and entitlements to recover any losses arising as a result of such delay beyond 11 March 2011 shall be determined in accordance with the provisions of this Sub-Contract.”
[82]EMCOR argues that the effect of these provisions is that in respect of delay to completion of Sections B and C between 29 January and 11 March 2011, the only liability EMCOR could have to Carillion would be in respect of liquidated damages paid to Rolls. This is the case, it argues, whether practical completion of Sections B and C was achieved between 29 January and 11 March 2011 or after 11 March 2011. I am not asked to decide this point. What the preliminary issue asks me to decide is whether, if the Further Supplemental Agreement extinguished Carillion’s liability to Rolls for liquidated damages for failure to complete by 22 July 2011, EMCOR could not be liable for liquidated damages paid to Rolls in respect of the period from 29 January to 11 March 2011. If that is what I had held, then that result would have followed without the need for any reliance on clause 10. Since that is not what I have decided, it is not the case that EMCOR has no liability to Carillion in respect of sums which Carillion paid or allowed in respect of the said period or at all. Any remaining issues as to the construction of this clause remain to be dealt with.[83]Further,I should make it clear that nothing I have said in relation to this issue affects any arguments that may be open to the Defendants as to Carillion’s liability to Rolls and the reasonableness of the settlement.

Conclusions and further matters

[84]As I have set out above, therefore, I find that:(i) in respect of preliminary issue no. 1, on the assumption that EMCOR is entitled to an extension of time pursuant to clause 11.3 of the EMCOR Sub-Contract (as amended) by fixing such revised or further revised period or periods for the completion of its Sub-Contract Works, the EMCOR Sub-Contract requires that such revised or further revised period or periods are added contiguously to the end of the current period within which EMCOR’s Sub-Contract Works should be completed; and(ii) in respect of preliminary issue no. 2(a) that Carillion’s liability to Rolls for liquidated and ascertained damages for the period between 29 January 2011 to 22 July 2011 was not extinguished by the Further Supplemental Agreement. Accordingly, preliminary issue no. 2(b) does not arise in relation to either AECOM or EMCOR.[85]I express my thanks to all leading and junior counsel and those instructing them for the clear and detailed submissions which enabled these issues to be dealt with efficiently within a day.[86]I invite further submissions from the parties on any issues of costs.