HT-2020-000448 - [2024] EWHC 1185 (TCC)

Clause 7 deals with delay to Milestones due to AUTHORITY Cause. The rights and relief are stated to be subject to Clause 5.6, accepted to be a condition precedent clause by TCS.

The rights and relief, subject to Clause 5.6 (considered further below), are also said to be available if TCS ‘would have been able to Achieve the Milestone by its Milestone Date but has failed to do so as a result of an AUTHORITY Cause’.

DBS had not focussed on the meaning or import of this element of Clause 7.1 either in its pleading or in its Written Opening Submissions. However in its Closing Submissions its case was that in order for any relief to be granted pursuant to Clause 7 (and subject to Clause 5.6), TCS had to show that it would have met the Milestone. It contends therefore where there is any critical delay, or any delay on a sub-critical path, either of which prevents TCS from establishing that it would have been able to Achieve the Milestone but has failed to do so as a result of an ‘Authority Cause’, no rights or relief under Clause 7 exist.

TCS contends that read as a whole, the regime set up by this clause is one whereby (Clause 5.6 aside) TCS is liable for failure to meet a Milestone by its Milestone Date save where and to the extent that the delay is ‘AUTHORITY Cause’. So, if there are 100 days of Delay (such that a Milestone is Achieved 100 days late), 70 of which are ‘AUTHORITY Cause’ and 30 of which are not, then TCS is liable in respect of 30 days (and potentially has liability to make Delay Payments to DBS), but in respect of the other 70 days, TCS is not in breach of the Agreement (by virtue of Clause 7.2.2), is not liable to make Delay Payments (Clause 7.2.3), and is entitled to compensation (Clause 7.2.4).

TCS expressly accepted that if TCS would not have achieved a Milestone by the Milestone Date in any event (even where its own delays were sub-critical) it would not get relief or compensation for the period during which it would have been in delay in any event. So, for example, if the Milestone is 1 February, and there are two months’ critical delay caused by ‘AUTHORITY Cause’ to achievement of the Milestone which takes place on 1 April, but in circumstances where TCS would not have been able to Achieve the Milestone because of software development delays (on a sub-critical path) until 1 March, the maximum relief/right would be for 1 month.

Mr Cogley argues that the ‘all or nothing’ construction advanced by DBS does not fit with Clause 7.2.1 and Clause7.2.3 where these clauses contain qualificatory language – ‘equal to the Delay caused by’ (Clause 7.2.1) and ‘to the extent that the Delay results directly from’ (Clause 7.2.3).

TCS’s construction is to be preferred. The product of DBS’ construction is that one day’s sub-critical delay to a Milestone not caused by ‘AUTHORITY Cause’ has the effect of depriving TCS of relief or compensation for potentially significant periods of (critical) Delay caused by ‘AUTHORITY Cause’. This is the most improbable outcome and could only be achieved by clear, consistent language. Whilst it is correct that Clause 7.1 itself has no qualifying language, the better construction reads the Clause 7.1 and 7.2 regimes as complimentary. Clause 7.1 is intended to make clear that, in considering the rights and relief under Clause 7.2, it is necessary to take into account whether TCS would have been able to Achieve the Milestone by its Milestone Date in any event. Thus, when considering the extent to which Delay was ‘caused’ by or ‘results from’ ‘AUTHORITY Cause’ within Clause 7.2, Clause 7.1 make clear that DBS’s own inability to have met the Milestone in any event is to be taken into account. This construction, in effect, gives contractual effect to the prevention principle and therefore has the benefit of coherence and compatibility with existing common law rights. (In doing so, it is potentially less favourable to TCS than some common extension of time standard form regimes in which CONTRACTOR Default on sub-critical paths – or the question of whether or to what extent the Milestone would have been achieved anyway – does not affect the extent of relief from liquidated damages).

This means that whilst the analysis of what lies on the critical path remains an important aspect of the case, the wording of the clause means that it is equally important (even if TCS establishes that it has been critically delayed by an ‘AUTHORITY Cause’) to consider whether TCS would have been able to Achieve the Milestone by its Milestone Date in any event. In other words, if TCS was delayed by matters which were not ‘AUTHORITY Cause’, albeit on a sub-critical path running in parallel to the critical path, such that TCS is unable to establish that it would have achieved the Milestone by the Milestone date irrespective of critical delay caused by the matters it complains of, TCS has no entitlement under Clause 7. Similarly, in this situation it would be unable to claim prolongation costs as damages for breach of contract because it would not be able to establish the necessary causation for the period during which it was incurring costs by reason of its own delays.

I also consider that, in relation to the debate between the parties as to the appropriate methodology for considering delay issues, the clause makes clear that the entitlement depends upon establishing whether TCS in fact failed to achieve the Milestone by the Milestone Date as a result of ‘AUTHORITY Cause’. I return to this when considering the competing methodologies of Mr Britton and Mr Jardine.