Prevention, liquidated damages and time at large

Mr Justice Ramsey
 The current state of the law: I

If
•A contract provides for completion by 2 April 2011.
•A contract provides for liquidated damages of
£10,000 per month.
•The contractor fails to complete the works by 2
April 2012.
• On the first day, the employer has given a
variation which delays completion by 1 day.
•There is no extension of time clause that applies to
that variation.
 The current state of the law: I

Then
•The employer cannot recover liquidated
damages.
•The contractor is not bound to complete by 2
April 2011.
•The contractor only has to complete within a
reasonable time.
•The employer can only recover unliquidated
damages for failure to complete within a
reasonable time.
 The current state of the law: II

If
•A contract provides for completion by 2 April 2011.
•A contract provides for liquidated damages of £10,000 per month.
•The employer gives a variation which delays completion by 1 year
to 2 April 2012.
•The contractor delays completion the works by 1 day to 3 April
2012.
•There is an extension of time clause which applies to that
variation.
•The extension of time clause requires, as a condition precedent to
any extension of time, notice of delay within 1 hour of any
variation.
•The contractor gives notice 1½ hours after the variation.
The current state of the law: II
Then
•The employer can recover liquidated
damages for delay of 1 year and 1 day.
•The contractor is bound to complete
by 2 April 2011.
•The contractor cannot claim for delay.
 How has this come about?

Holme v Guppy (1838) 150 E.R. 1195 per Parke B at

1196:
 
“if the party be prevented, by the refusal of the
other contracting party, from completing the
contract within the time limited, he is not liable in
law for the default (1 Roll. Abr. 543; Com. Dig.
Condition, L.(6)). It is clear, therefore, that the
plaintiffs were excused from performing the
agreement contained in the original contract; and
there is nothing to shew that they entered into a
new contract by which to perform the work in four
months and a half, ending at a later period. The
plaintiffs were therefore left at large; and
consequently they are not to forfeit anything for
 Comyn’s digest
Comyns’ Digest under “condition” at rule
L(6) provides:
 
“So the performance of a condition shall be
excused by the obstruction of the obligee:
as if a condition be to build a house; and
he, or another by his order, hinders his
coming upon the land.
Or says that it shall not be built.
Or interrupts the performance....”
 
 The Victorian Era
In Thornhill v Neats (1860) 141 E.R. 1392
Willes J stated at 1398 that

“when by agreement of the parties a

portion of the work is not to be done
within the stipulated time, the right to
claim compensation is waived. It
appears to me that that is substantially
what was decided in Holme v Guppy.”

 
 The Victorian Era
In Russell v Viscount Sa Da Bandeira (1862) 143 E.R. 59
Erle CJ said at 82 :
“Holme v. Guppy, 3 M. & W. 387, decides that, where a
contractor undertakes, under pain of a certain penalty
or forfeiture, to perform a work within a given time,
and the performance within the time is prevented by
the act of the party with whom he contracts, the
contractor is exonerated from the penalties.”
 
Byles J said at 83:
“Holme v. Guppy, 3 M. & W. 387, is substantially in
point.... It is founded upon an old and well-understood
rule of law. The authorities will be found collected in
Comyns's Digest, Condition (L. 6). Where the condition
has become impossible of performance by the act of
the grantee himself, the grantor is excused.”  
 The Victorian Era
In Roberts v Bury Improvements Commissioners (1869-70)
L.R. 5 C.P. 310 at 326 Kelly CB said in relation to breach of an
implied term to “do their part within a reasonable time”:
“..if they broke that implied contract, the contractor would
have a cause of action against them for any damages he
might sustain and the commissioners would be precluded
from taking advantage of any delay occasioned by their own
breach: for it is a principle very well established at common
law, that no person can take advantage of the non-fulfilment
of a condition the performance of which has been hindered
by himself; see Com. Dig. Condition (L); and also that he
cannot sue for a breach of contract occasioned by his own
breach of contract, so that any damages he would otherwise
have been entitled to for the breach of the contract to him
would immediately be recoverable back as damages arising
from his own breach of contract. These principles have been
applied to contracts very analogous to the present, in the
cases of Holme v Guppy, Russell v Da Bandeira and
 The end of the Victorian Era

Dodd v Churton [1897] 1 Q.B. 562 at 566 per Lord Esher

MR:
“The principle is laid down in Comyns' Digest, Condition L
(6.), that, where one party to a contract is prevented
from performing it by the act of the other, he is not liable
in law for that default; and, accordingly, a well
recognised rule has been established in cases of this
kind, beginning with Holme v Guppy to the effect that, if
a building owner has ordered extra work beyond that
specified by the original contract which has necessarily
increased the time requisite for finishing the work, he is
therefore disentitled to claim the penalties for non-
completion provided for by the contract. The reason for
that rule is that otherwise a most unreasonable burden
would be imposed on the contractor.
The end of the Victorian Era
Dodd v Churton [1897] 1 Q.B. 562  Lopes LJ said at 568:

“It has been often laid down that, where there is provision that a
contractor shall pay penalties for delay as in the present case, no
penalty can be recovered where delay has been occasioned by
the act of the person endeavouring to enforce the penalties.”

Chitty LJ said at 568: 

“The case of Holme v Guppy and the subsequent cases in which

that decision has been followed are merely examples of the well-
known principle stated in Comyns' Digest, Condition L (6.), that,
where performance of a condition has been rendered impossible
by the act of the grantee himself, the grantor is exonerated from
performance of it.”
 Summary of the Position at 1900

Principle:
If the party be prevented, by the refusal of
the other contracting party, from
completing the contract within the time
limited, he is not liable in law for the
default.
Application:
No penalty can be recovered where delay
has been occasioned by the act of the
person endeavouring to enforce the
penalties.
 How has that developed into:

Principle:
If the party be prevented, by the refusal
of the other contracting party, from
completing the contract within the time
limited, he is not liable in law for the
default.
Application:
•Liquidated damages are not recoverable.
•The fixed time for completion becomes
completion within a reasonable time.
 How has that developed into:

Principle:
If the party be prevented, by the refusal of
the other contracting party, from
completing the contract within the time
limited, he is not liable in law for the
default.
Application:
If the party be prevented, by the refusal of
the other contracting party, from
completing the contract within the time
limited, he is not liable in law for the
default.
 Liverpool in the 1960s

The Court of Appeal in Peak v McKinney (1970) 1 BLR 111 held that part of a 58
week period of delay was caused by the employer’s breach. On that basis
Salmon LJ said at 121:

“In my judgment, however, the plaintiffs are not entitled to anything at all
under this head, because they were not liable to pay any liquidated damages
for delay to the corporation. A clause giving the employer liquidated damages
at so much a week or month which elapses between the date fixed for
completion and the actual date of completion is usually coupled, as in the
present case, with an extension of time clause. The liquidated damages clause
contemplates a failure to complete on time due to the fault of the contractor. It
is inserted by the employer for his own protection; for it enables him to recover
a fixed sum as compensation for delay instead of facing the difficulty and
expense of proving the actual damage which the delay may have caused him.
If the failure to complete on time is due to the fault of both the employer and
the contractor, in my view, the clause does not bite. I cannot see how, in the
ordinary course, the employer can insist on compliance with a condition if it is
partly his own fault that it cannot be fulfilled: Wells v Army & Navy Co-
operative Society Ltd.- Amalgamated Building Contractors v Waltham Urban
District Council; and Holme v Guppy. I consider that unless the contract
expresses a contrary intention, the employer, in the circumstances postulated,
is left to his ordinary remedy; that is to say, to recover such damages as he can
prove flow from the contractors’ breach.”
 Liverpool in the 1960s

Edmund Davies LJ said at 126:

“The stipulated time for completion having ceased to be

applicable by reason of the employer’s own default and the
extension clause having no application to that, it seems to
follow that there is in such a case no date from which
liquidated damages could run and the right to recover them
has gone.”

Phillimore LJ said at 127:

“It follows, once the clause is understood in that way, that if

part of the delay is due to the fault of the employer, then the
clause becomes unworkable if only because there is no fixed
date from which to calculate that for which the contractor is
responsible and for which he must pay liquidated damages.”
 Wembley in the 1960s

In Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board [1973]
1 WLR 601 Lord Pearson said in relation to the judgment in the Court of Appeal:

On the other hand, the majority of the Court of Appeal, Lord Denning M.R. and
Phillimore L.J., decided in favour of the respondents. Lord Denning M.R. decided
first on a point of construction or perhaps on a rule of law which he derived from
Dodd v Churton [1897] 1 QB 562. I will set out a passage from the judgment of
Lord Denning, inserting “(1)” and “(2)” to divide it into two parts:
“(1) It is well settled that in building contracts — and in other contracts too —
when there is a stipulation for work to be done in a limited time, if one party by
his conduct — it may be quite legitimate conduct, such as ordering extra work —
renders it impossible or impracticable for the other party to do his work within the
stipulated time, then the one whose conduct caused the trouble can no longer
insist upon strict adherence to the time stated. He cannot claim any penalties or
liquidated damages for non-completion in that time.
“(2) The time becomes at large. The work must be done within a reasonable time
— that is, as a rule, the stipulated time plus a reasonable extension for the delay
caused by his conduct.”
Then he said: “That was established by Dodd v Churton .”
Now Dodd v Churton does establish the first part of that passage, which I have
marked “(1),” but does not establish, or afford any support to, the second part of
the passage which I have marked “(2).”
 Squatters in Chiswick in the 1980s

In Rapid Building Group v Ealing Family Housing

Association Ltd (1984) 29 BLR 5 Stephenson LJ
said at 15:
“It is accepted that a party must elect whether to
claim liquidated or unliquidated damages; but as
it seems to me, where the claim for liquidated
damages has been lost or has gone, as has been
rightly held by the judge, the defendants are not
precluded from pursuing their counterclaim for
unliquidated damages. It is not accepted on
behalf of the defendants that if they pursue their
claim it has on it a ceiling equal to the amount of
liquidated damages claimed. I do not find it
necessary to decide that point...”
 250 miles North East of Aberdeen in the 1990s

In McAlpine Humberoak Ltd v McDermott International

Inc (1992) 58 BLR 1 at 21 Lloyd LJ said:  
“The principle enunciated in Wells v Army & Navy Co-
operative Society was not new. It is as old as Holme v
Guppy (1831) 3 M & LJ 387, where Baron Parke first used
the phrase, often since repeated, of the contractor being
“left at large”. In recent times the principle has been
applied in such cases as Peak Construction (Liverpool) Ltd
v McKinney Foundations Ltd (1970) 1 BLR 114, The Cape
Hatteras [1982] 1 Lloyd’s Rep 518 and SMK Cabinets v Hili
Modern Electrics Pty Ltd [1984] VR 391. In all these cases
the employer was claiming liquidated damages. In all of
them it was held that the claim for liquidated damages
must fail since the employer could not rely on the original
date of completion, nor on a power to extend the date of
completion. In the absence of such a power, there could
be no fixed date from which the liquidated damages
 Wembley in the 2000s

In Multiplex v Honeywell [2007] BLR 195 at [103] Jackson J

said this:

“I am bound to say that I see considerable force in Professor

Wallace’ criticisms of Gaymark. I also see considerable force
in the reasoning of the Australian courts in Turner and in
Peninsula and in the reasoning of the Inner House in City Inn.
Whatever may be the law of the Northern Territory of
Australia, I have considerable doubt that Gaymark represents
the law of England. Contractual terms requiring a contractor
to give prompt notice of delay serve a valuable purpose; such
notice enables matters to be investigated while they are still
current. Furthermore, such notice sometimes gives the
employer the opportunity to withdraw instructions when the
financial consequences become apparent. If Gaymark is good
law, then a contractor could disregard with impunity any
provision making proper notice a condition precedent. At his
option the contractor could set time at large.”
 Wembley in the 2000s

In Multiplex v Honeywell [2007] BLR 195 at [48]

Jackson J said this:

“In the field of construction law, one

consequence of the prevention principle is that
the employer cannot hold the contractor to a
specified completion date, if the employer has by
act or omission prevented the contractor from
completing by that date. Instead, time becomes
at large and the obligation to complete by the
specified date is replaced by an implied
obligation to complete within a reasonable
time.”
 Abu Dhabi in the 2000s

In Adyard Abu Dhabi v SD Marine Services [2011] BLR 384

Hamblen J adopted the statement of Jackson J on the
prevention principle at [240] but held that it did not apply
because there was an extension of time provision.

He then considered whether, in any event, there had been

delay caused by the alleged act of prevention. He referred
to Lord Denning’s speech in Trollope & Colls and said at
[282]:

“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.”
 Camden in the 2000s

In Jerram Falkus Construction Ltd v Fenice Investments Inc

[2011] BLR 644, Coulson J adopted that passage in Adyard and
said this at [50]:

“Hamblen J’s analysis indicated that, if there were two

concurrent causes of delay, one which was the contractor’s
responsibility, and one which was said to trigger the prevention
principle, the principle would not in fact be triggered because
the contractor could not show that the employer’s conduct made
it impossible for him to complete within the stipulated time. The
existence of a delay for which the contractor is responsible,
covering the same period of delay which was caused by an act of
prevention, would mean that the employer had not prevented
actual completion. Throughout his analysis, Hamblen J stressed
the importance of the contractor proving delay to the actual
progress of the work as a result of the alleged act of
prevention.”
 Startled Judges

The effect of the law has been the subject of judicial

comment:. In Peak v McKinney, Phillimore LJ said at 127:
“...I would add a word or two about liquidated damages. I do
so really because I was somewhat startled when Mr Gardam
said in the course of his argument that the moment any part
of the delay which has occurred can be attributed to the
employer, then any agreement as to liquidated damages
disappears. In other words, if in this particular case 50 weeks
of the delay was attributable to these defendants due to their
breach of contract, and eight weeks was attributable to the
inefficient action of the corporation, then this provision for
liquidated damages would automatically become ineffective.
Mr Rankin conceded that the summary of the effect of the
cases set out in Hudson’s Building and Engineering Contracts
(9th Edition, 1965 page 478) was correct save only in regard to
subparagraph (d), which he suggested went too far. I think his
concession was right. “

 
 Startled Judges

In Rapid v Ealing Lloyd LJ said at 19:

“Like Phillimore LJ, in Peak Construction (Liverpool) v McKinney

Foundations Ltd, 1 BLR 127, I was somewhat startled to be told
in the course of the argument that if any part of the delay was
caused by the employer, no matter how slight, then the
liquidated damages clause in the contract, clause 22, becomes
inoperative.
I can well understand how that must necessarily be so in a case
in which the delay is indivisible and there is a dispute as to the
extent of the employer’s responsibility for that delay. But where
there are, as it were, two separate and distinct periods of delay
with two separate causes, and where the dispute relates to only
one of those two causes, then it would seem to me to be just
and convenient that the employer should be able to claim
liquidated damages in relation to the other period.”

 
 Startled Judges

In Balfour Beatty v Chestermount (1993) 62 BLR 1 Colman J expressed similar

surprise:

“It was common ground that if the contract failed to provide for power to grant
an extension of time on account of delays caused by an act of prevention, the
effect of the act of prevention was to prevent the employer relying on the
completion date/liquidated damages provisions in the contract. The obligation
to complete the works was to be performed within a reasonable time, there
could be no extensions on account of relevant events and the employer’s only
hope of compensation would be to recover unliquidated damages for delay: see
Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd (1970) 1 BLR 111.
The remarkable consequences of the application of this principle could
therefore be that if, as in the present case, the contractor fell well behind the
clock and overshot the completion date and was unlikely to achieve practical
completion until far into the future, if the architect then gave an instruction for
the most trivial variation, representing perhaps only a day’s extra work, the
employer would thereby lose all right to liquidated damages for the entire
period of culpable delay up to practical completion or, at best, on the
respondents’ submission, the employer’s right to liquidated damages would be
confined to the period up to the act of prevention. For the rest of the delay he
would have to establish unliquidated damages. What might be a trivial
variation instruction would on this argument destroy the whole liquidated
damages regime for all subsequent purposes. “
 Rewind the clock

Holme v Guppy: where one party is

prevented from completion by the other
party that party is not liable for the
default and is “left at large”.
Does that mean that the act of
prevention alters the fundamental
obligations and rights as to time under
the contract?
Or rather, should the time and
liquidated damages provision remain,
with the contractor not being liable for
the delay caused by the employer?
 It depends on “left at large”

“Killer left at large by police failures”

Or
Vacancies left at large: