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1 2011 JCCCL 71 Page 1 Journal of the Canadian College of Construction Lawyers 2011 *71 Time at Large in Canada Christopher J. O'Connor, Q.C., Dirk Laudan Copyright 2011 by Thomson Reuters Canada Limited; Christopher J. O'Connor, Q.C., Dirk Laudan Editor's Note When may a tribunal sweep away contractual completion dates (and with them any liquidated damages provisions for late completion) and allow the contractor a reasonable time to perform a construction contract? This is the provocative question discussed in the following article. The authors note that to date there has not been a comprehensive legal analysis of this question in Canada. They address and move beyond the well-known prevention principle [FN1] and discuss four particular aspects of the problem: interference, failure to stipulate a new date in response to a contractor's request for an extension of time, waiver of completion, and failure to adequately stipulate an applicable completion date. O'Connor and Laudan examine the problem from the perspective of liquidated damages clauses, providing a useful additional note to the preceding article by Michael Demers and from the perspective of concurrent delay, contributing to the body of knowledge published in our Journal in that regard. The authors also include an excellent bibliography on the subject, with a list of additional cases. The time is out of joint--o cursèd spite, That ever I was born to set it right! [FN2] 1. TIME AT LARGE--IN CANADA YOU SAY? Time at large means that there is no specific time for completion of a contract. Time may be at large from the beginning, or it may be put at large by events. Where time is put at large, it is usually the result of actions by the owner or its agent that delay the contractor's work. The principles around time at large have not been commented upon much in Canada but they have been considered, in one form or another, by Canadian courts. In our view, time at large constitutes a practical and useful tool in the analysis and interpretation of construction delay disputes in Canada, and is therefore worth further study. Let us begin with a real example for illustration. In 1980 a construction contractor,*72 Hawl-Mac Construction Ltd., agreed to build a chlorination system and related works in Campbell River, British Columbia. The contract stipulated that the work was to be completed by December 4, The contractor failed to complete on time. During the course of the work, after the likelihood of delay became evident, Hawl-Mac wrote to the consultant/contract

2 2011 JCCCL 71 Page 2 administrator and asked for an extension of time on the basis that its delay had been caused by the engineer's dealings on some technical and environmental regulatory issues. Despite sending this letter, the case suggests that for reasons unknown, it did not actually come to the consultant's attention until January 1982, after the actual completion of the contract work. The consultant then purported to approve retroactively an extension of 38 days for the delay, after the original completion date, which as of that point Hawl-Mac had not met. The District sought liquidated damages from Hawl-Mac from the new date. The Court ruled that the District was not permitted to collect liquidated damages from the new completion date, or at all. The Court held that the engineer was required to establish a new completion date within a reasonable time after receiving a request for an extension of time and, in any event, before the new completion date passed. It was essential for the contractor to know the new date of completion to be able to take steps to accelerate, if required, to meet it. Failing to provide that date within a reasonable time had the effect of preventing the contractor from completing the work in time. The new date was invalid and time was therefore at large. No liquidated damages could be claimed. [FN3] The obligation to complete a contract by a fixed date is placed at large when the fixed completion date is lost by an intervening event not of the contractor's making and therefore replaced with an obligation on the part of the contractor to complete its work within a reasonable time. As in the Hawl-Mac case, when time is put at large, liquidated damages terms are necessarily rendered inoperative, not as a punishment of the owner for its interference of the contractor's work, [FN4] but as a logical result of there being no fixed completion date. Liquidated damages must run from a specific date and where there is no specific date, they simply cannot be calculated and therefore cannot be claimed. There are other consequences to time being at large, in particular the impact on the owner's ability to enforce its schedule, the impact on damages claims, and the impact of a contractor delay claim. Although there has been no comprehensive legal analysis of when time may be put at large, the circumstances identified by courts to date where time may be put at large in a construction contract include the following: (a) interference-- where the owner or the contract administrator/consultant interfere with or prevent the contractor's ability to complete its work; (b) failure to stipulate a new date in response to a contractor's request for a time extension-- where, for whatever reason, the owner or the consultant has failed to establish a new completion date properly under the provisions of the contract, or the contract machinery has otherwise broken*73 down to prevent a proper completion date from being identified following a contractor's request for a time extension; (c) waiver-- where the owner has waived completion by the completion date or where the parties have agreed that the completion date does not apply; and (d) no completion date-- where there was no completion date stipulated in the contract. [FN5] The idea that time for completion may be put at large by the actions of the owner has been applied in the common law provinces of Canada [FN6] and there seems little doubt that time at large is part of the Canadian common law of contract. The purpose of this article is to in-

3 2011 JCCCL 71 Page 3 troduce how this principle has been applied in Canada and to begin to outline its uses in the analysis of Canadian construction disputes. It is hoped that further analysis and debate will refine the principle so that it may become a useful tool in assessing delay claims by owners and contractors. 2. INTERFERENCE AND THE PREVENTION PRINCIPLE Where an owner impedes a contractor from meeting the completion date, the completion date is suspended, time becomes at large and is replaced *74 with an obligation to complete within a reasonable time. -- Holme v. Guppy (1838) [FN7] The concept of time being put at large from the actions of the owner is an application of the prevention principle in contract law, the essence of which is that the person to whom an obligation is owed cannot insist upon the performance of that obligation if he or she has prevented the other party from performing it. [FN8] This principle, also known as the duty of contractual cooperation, [FN9] was articulated in the following way by Bull J.A. [FN10] of the B.C. Court of Appeal in the 1966 decision Perini Pacific Ltd. v. Greater Vancouver Sewerage & Drainage District: [FN11] Considering, then, the fact of failure of the appellant [contractor] to complete construction of the project by January 10, 1963, it becomes necessary to consider its liability in the light of the effect thereon of the acts or breaches of contract of the respondent [owner] which claims recompense for that failure. Since the earliest times it has been clear that a party to a contract is exonerated from the performance of a contract when that performance is prevented or rendered impossible by the wrongful act of the other contracting party [citing Holme v. Guppy and other authorities]. Bull J.A. further quoted from the English case Dodd v. Churton, [1897] 1 Q.B. 562 (Eng. C.A.) (which followed Holme v. Guppy): Where a party to a contract agrees to do a thing within a certain time, the other party must not prevent him from doing it. This is a general principle, and is not confined to building contracts. [For example] the building owner is not allowed to insist upon the penalty for delay if, by ordering extra, he has prevented the builder from completing the work by a specified time. [FN12] In the context of a construction contract, the prevention principle is closely associated with the owner's obligation to facilitate and not impair contract completion by the contractor. [FN13] Acts of prevention are not limited to breaches of terms of the construction contract (express or implied) by the owner. An owner may prevent timely completion of the contract by the contractor by taking an action that is permitted by the contract. [FN14] In such a case, the owner might not be in breach of the construction contract but the owner is required to give the contractor additional time to complete and to take into account the act of prevention. Such acts of prevention, which do not amount to breaching the terms of the contract, might include *75 ordering extra work, [FN15] failure to provide timely access to the site, failure to provide a complete and proper design, significant design changes, or late provision of materials. [FN16]

4 2011 JCCCL 71 Page 4 The principle may therefore be modified by express terms of a contract, in particular by permitting the owner to extend the time for completion of the contract and thereby negating the preventative effect of the owner-caused delay: the owner's act is not preventing the completion of the contract within time if the schedule has been modified to accommodate that delay. That being said, the principle is likely to overcome boilerplate exclusions of all representations and warranties or conditions not expressly stated in the construction contract. [FN17] Most construction contracts in use today contain a mechanism for calculating the extension of time to which the contractor is entitled. This is usually a provision allowing the contractor to apply to the consultant for additional time to complete. When properly employed, this mechanism would extend the time to complete by the fixed period allowed, thereby setting a new completion date, with the other contractual rights and obligations of the parties usually otherwise unaffected. If the owner is entitled to liquidated damages, the owner would be entitled to those damages from the new date. Without such a provision, or without the proper application of an extension of time clause, the contractor remains entitled to additional time to complete but that time period is not defined and therefore time is put at large, with the result, among others, that the owner is not entitled to liquidated or delay damages at all. These issues are well illustrated by the decision of the B.C. Court of Appeal in the Perini case, where the owner, the Greater Vancouver Sewerage and Drainage District, was supposed to deliver in good repair certain engines to be incorporated into the Iona Island sewage disposal plant on the Fraser River near Vancouver, B.C. The contract contained an extension of time clause, allowing the contract completion time to be extended for certain delay events. As things developed, the District did not have the engines ready when they were scheduled to as a result of the fault of an engine supplier with whom the District had a separate contract; this late delivery constituted the breach of an implied terms of the contract by the District. [FN18] This caused substantial interference to the completion of its work. The contractor was behind its work schedule independently of its late receipt of the engines, and it had the benefit of a 46 days extension of time for other circumstances, also unrelated. The contractor completed late and the Court found that a great many items of work that caused a delay to the completion of the contract generally had no relation to completion of the engine work. Despite these concurrent delays, the B.C. Court of Appeal relieved the contractor of its obligation to pay liquidated *76 damages arising from the delay because the District (or contract certifier-- the case report is unclear on this point) had failed to extend the contract time to take into account the delay caused by late provision of the engines. As Davey J.A put it in his reasons: Even if the plaintiff [contractor] had not been otherwise in default, the repairs to the engines would have prevented the plaintiff from completing the power house by January 10, 1963, and so fulfilling its contract. In my opinion the defendant's [District's] delay, although preventing the completion by the due date of only one unit of several covered by the entire contract, disentitles the defendant to liquidated damages for the plaintiffs failure to complete the whole plant by the due date....

5 2011 JCCCL 71 Page 5... neither the fact that the work would not have been completed in time if there had been no delay by the defendant, nor the fact that the plaintiff's tardiness or wrongful acts caused some of the delay, prevents the plaintiff's being released of its liability for the liquidated damages through the defendant's substantial defaults that delayed it in completing the contract on time. [FN19] It can be seen from Perini that if the facts had been different and the ownercaused delay had led to a proper extension of the completion date, time would not have been put at large and the owner would have been able to enforce liquidated damages from the new completion date. To put it another way, a provision for the extension of time for the contractor to complete work under a construction contract operates as much for the benefit of the owner as it does for the contractor. It is designed to allow owners to maintain a fixed contractual completion date notwithstanding owner-caused delay. [FN20] Every trivial or insignificant interference on the part of owners or consultants may not necessarily put time at large as not every request for an extra, design modification, or other supposed interference will result in the contractor being entitled to an extension of time to complete the work. The prevention principle is that the delay must prevent the contractor from finishing the work on time: it must render it impossible or impracticable for the contractor to do the work in the contracted time. [FN21] 3. FAILURE TO STIPULATE A NEW DATE / BREAKDOWN OF CONTRACT MA- CHINERY The prevention principle also applies to extension of time clauses. The owner's (or consultant's) conduct or omission might prevent the extension of time *77 clause from achieving its purpose of properly setting a new date for the contractor to complete the work in a timely manner. In particular, this arises where the consultant or owner fails to exercise its rights under the extension of time clause promptly or properly to set a new date for completion of the contract. The contractor must know the date to which the work has been extended, so that it may plan its work to meet the new deadline. In the absence of a clause permitting time to be extended as a result of an act of interference by the owner or the consultant, time will be put at large. [FN22] As in the Perini case, the same result occurs where the extension of time provision is not used or if it is improperly and unfairly used. In addition to those simple examples, the following variants and special problems, perhaps among others, should also be considered: (a) Where the extension of time clause has been incorrectly or unreasonably applied in the circumstances. (b) Where the consultant does not grant an extension because the contractor fails to make the request within the time stipulated. (c) Where the owner prevents the consultant from using the extension of time provision to fix a new completion date. (d) Where the consultant fails to promptly fix the extension of time (including a

6 2011 JCCCL 71 Page 6 delay until after the actual completion of the contract work by the contractor). (a) Where extension of time clause has been incorrectly or unreasonably applied in the circumstances In responding to the contractor's request for an extension of time based upon an interfering event, the consultant is not required to come to a perfect conclusion, unassailable in later analysis, to preserve an effective final completion date. It is sufficient that the consultant exercise his or her authority reasonably and fairly in respect of requests to extend the schedule in a fair and reasonable manner. [FN23] Perfection is not required but reasonable and fair conduct is the hallmark of a proper extension of time. Even if the contractor fails to do so, it has been suggested that so long as the contract provides for the right of a tribunal to open up, review and revise decisions of the consultant, then a perverse decision by the consultant will not have the effect of putting time at large. [FN24] On the other hand, this suggestion has been criticized and has been held to be inapplicable where the decision on delay is so perverse that the contract could not provide a power to extend time. [FN25] This principle may be limited to circumstances where the contract provides an ability to open up, review and revise*78 decisions of the consultant that would permit the contractor to establish his or her true position within a reasonable time to complete the contract work. [FN26] Few contracts in use in Canada contain such a term. This would meet the policy concern in the British Columbia Hawl-Mac case, that the new date should put the contractor in a position that, if necessary, the contractor would be able to accelerate in order to complete within the extended period. Failing to permit the contractor to do so may either be an act of prevention in itself or a failure to abate fully the act of prevention that occurred at first, and which the extension of time is sought to cure. Where the consultant unreasonably fails to grant an extension, through no fault of the owner, it may seem unfair to visit upon the owner the consequence of the consultant's failure, particularly in a case where the consultant's actions are within its adjudicative role, which is distinct from its role as an agent of the owner. [FN27] Nevertheless, the authorities support the conclusion that a failure by the contractor administrator will have the result of putting time at large without any involvement by the owner. [FN28] It would appear that the reasoning in favour of such a conclusion is either that the consultant's default should be attributed to the owner (which we consider to be a weak point given the theoretical distinction between the consultant's adjudicative and representative roles), or that notwithstanding the owner's innocence of the default, the consultant's failure prevents the extension of time mechanism from working properly, thereby prejudicing the contractor's ability to plan its work and leading to time being put at large. (b) Where consultant does not grant an extension because contractor fails to make request within time stipulated If time may be put at large after an owner-caused delay event where no new date is set under the contract mechanism, should the same reasoning apply where no new date is set is be-

7 2011 JCCCL 71 Page 7 cause of the failure of the contractor to apply for an extension of time within the period for making such an application (or for providing notice of delay) as set out in the construction contract? While the issue has not been addressed in Canada, it arose in an Australian case, Gaymark Investments Pty Ltd. v. Walter Construction Group Ltd. [FN29] Gaymark was the appeal of an arbitrator's award that had denied liquidated damages to the owner arising from a delay beyond the date fixed for practical completion or, as the contract provided, within any extended time granted or allowed by the Superintendent [contract administrator] pursuant to sub-clause [FN30] The contractor was delayed for 77 working days, a delay for which the owner was responsible. The contractor's application for an extension was barred because of its failure to meet a notification requirement. The owner claimed for liquidated damages running from the date of completion (which *79 had been adjusted for other reasons), but the arbitrator dismissed the owner's claim because the owner had caused the delay. The arbitrator applied the principle that an owner could not be enriched by its own wrong. In upholding the decision of the arbitrator on this point, Bailey J. of the Northern Territory Supreme Court stressed there was no provision in the contract granting the consultant discretion to allow an extension of time in the circumstances, but rather the contract explicitly provided that if the contractor were delayed by the owner, it was entitled to an extension if the application were filed on time, and was disentitled otherwise. If liquidated damages were permitted in the circumstances, this would result in an entirely unmeritorious award of liquidated damages for delays of [the owner's] own making, in addition to avoiding a claim by the contractor for delay. [FN31] In support of this the Court referred to the principle, articulated in the English case Peak Construction (Liverpool) Ltd. v. McKinney Foundations Ltd., [FN32] that liquidated damages and extension of time clauses in printed form contracts should be construed contra proferentem, a point to which we will return. There is some logic to the Gaymark case. Time may be put at large and liquidated damages denied to the owner as a result of factors that are not attributable to the owner, such as breakdown of contractual machinery. If the extension provision cannot operate due to failure to fulfil a condition precedent that is a form of breakdown, or at least inoperability of the time extension mechanism. Gaymark, however, has been academically criticized [FN33] on the basis that it rewards the contractor for failing to apply for an extension of time within the limits established by the contract. The contractor has an opportunity to apply for an extension of time. Its failure to seek that allowance is its own fault. Gaymark has been expressly not followed in England in the notable case Multiplex Constructions (UK) Ltd v. Honeywell Control Systems Ltd, [FN34] which involved delay in the supply and installation of electronic systems in Wembley Stadium. In Multiplex, the subcontractor argued that, as with the contractor in Gaymark, its failure to fulfil notice requirements prevented the owner from granting an effective extension to the contract time, thereby putting time at large and relieving the subcontractor from liability for liquidated damages. Justice Jackson commented: 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 con-

8 2011 JCCCL 71 Page 8 sequences become apparent. If Gaymark is good law, then a contractor could disregard with impunity*80 any provision making proper notice a condition preceding. [FN35] (c) Where owner prevents consultant from using extension of time provision to fix new completion date If the owner has a hand in preventing the consultant from granting a proper extension to the contractor arising from owner-caused delay, then that act of prevention will be sufficient to put time at large. (d) Where consultant delays in fixing extension of time (including a delay until after actual completion of contract work by contractor) This point was specifically considered in Canada in the Hawl-Mac case with the result that an extension made after the completion was considered too late. A different conclusion was reached by the English Court of Appeal in the case Amalgamated Building Contractors Ltd. v. Waltham Holy Cross Urban DC, [FN36] where the architect was held to have validly extended the time for completion of the work after the original completion date had passed and where the delay was caused by difficulties in the contractor obtaining labour and materials, which justified an extension under the terms of the contract in question. In that case, the retroactive setting of time was justified on the basis that there was no fault on the part of the owner for the delay and on that basis the Court concluded that the retroactive extension was valid. [FN37] In another instance, the Court determined that the wording of the clause permitting extensions of time indicated that it did not apply to fixing a new date for completion retroactively. [FN38] In a New Zealand case, Anderson v. Tuapeka County Council, [FN39] where the delay was the result of extras ordered by the owner, the Court held that the consultant was obligated to grant the extension to the contractor before the contractor embarked upon the extra work. [FN40] This was distinguished in a subsequent New Zealand case, Fernbrook Trading Co. Ltd. v. Taggart [FN41] on the basis that no one rule of construction to cover all circumstances can be postulated and the best that can be said on the present state of the authorities is that whether the completion date is set at large by a delay in granting an extension must depend upon the particular circumstances pertaining. In an effort to reconcile the previous authorities, Roper J. observed that there could be no justification for delaying a decision as to the appropriate extension where the sole cause of the delay was the ordering of extra work, [FN42] but that where *81 the causes of delay do not rest with the owner and were such as to make the duration of the delay uncertain, a better case can be made for allowing a delay in determining the contract extension. [FN43] We suggest that the guiding principle should be to give the contractor fair notice of the time extension, howsoever caused, so that the contractor can plan its work. Perhaps the best that can be said from these authorities is that where a consultant makes a delayed determination of a time extension and a dispute arises over whether time was put at large, it is likely that both the owner and contractor will be able to marshal legal arguments.

9 2011 JCCCL 71 Page 9 (f) Where contract machinery fails to operate Where the extension of time provisions within a construction contract simply cannot operate to extend the contract time as a result of an act of prevention by the owner, time will be put at large. [FN44] This illustrates the point that time is put at large not essentially to punish the owner for the act of prevention but as a consequence of the additional time given to the contractor and its impact on the fixed completion date, and any liquidated damages provision, in the absence of a properly used extension of time mechanism. An example of where the contract machinery fails to operate may arise in contracts that contain detailed and complex notice provisions. Some contracts require that the contractor provide lengthy documents, schedule updates, and other detailed information in support of a request for an extension of time. If a consultant arbitrarily and unreasonably rejects the contractor's application as being unsupported by the required documentation, it may render time at large as the contract machinery has failed to operate by the improper conduct of the consultant in refusing to properly consider the request for an extension. 4. WAIVER OF COMPLETION DATE Where the owner waives the specified time for completion, either explicitly or by its conduct, time will be put at large and the contractor will be required to complete within a reasonable time. Waiver by conduct can arise where the owner fails to complain about delay and accepts the contractor's explanation for its inability to complete within a stated time, thereby leading the contractor to believe that its strict rights will not be insisted upon. [FN45] 5. NO COMPLETION DATE Where no complete date is stipulated in the contract, time is at large from the outset. Under general principles of contract law, the contractor is required to complete*82 in a reasonable time. [FN46] There is an unresolved issue about whether the owner is, after commencement of the work, entitled to stipulate a date and, if that date is reasonable, to treat failure to meet it as constituting default, and potentially default of an essential term. It would be unusual to see a liquidated damages term in a contract that lacked a fixed completion date from the outset. While we are not aware of a case that has specifically considered the point, it would be consistent with the principles reviewed in this paper if such a provision we considered unenforceable. 6. HOW MUCH INTERFERENCE IS REQUIRED TO PUT TIME AT LARGE An act of prevention does not have to make completion of the work impossible. A hindrance of the contractor's work may be enough. As Jackson J. stated in the Multiplex case If a variation instruction [the form of interference in issue] affects the date upon which Honeywell [FN47] is going to complete by a small period, one may say that this is

10 2011 JCCCL 71 Page 10 a hindrance; it does not in any sense make the installation of the electronic systems impossible. On the other hand, the matter does prevent completion on the due date and it should be characterized as prevention. If a direction issued by Multiplex pursuant to clause 4.2 requires Honeywell to postpone the execution of any work, such a direction may be characterised as a postponement instruction [for which extensions could be granted, under the subcontract in question]. [FN48] That being said, should every act by the owner that might impede the contractor have the effect of putting time at large? The policy problems in so broad an approach were identified by Professor I.N.D. Wallace Q.C. in the following way: a careful trawl through the history of most construction projects after the event by a contractor in serious delay can often disclose some minor variation or failure of partial possession onto which a plausible prevention assertion can be attached, however minimal its actual impact on progress, so arguably defeating the liquidated damages clause altogether under the prevention doctrine even where the delay is found to be a comparatively trivial part of the total delay. [FN49] Professor Wallace's solution is that including acts of prevention or breach by the owner in permitted extensions of time allow the preservation of a fixed completion date and liquidated damages, which has been the basis of informed drafting *83 advice to construction owners for many years, a point we referred to earlier in this paper. We believe that the guiding principle is that the contractor should be permitted a proper extension of time so that it can effectively plan its work. It is artificial to analyze delays after the fact to determine if the event complained of caused a delay. The time to address the question of whether an act of prevention by the owner or the consultant will cause a delay is at the time it occurs rather than by the reconstruction of subsequent events with the benefit of hindsight. It should be added that notice provisions applicable to contractors, as in the CCDC2 contract referred to earlier, significantly help the owner with this problem as well. Their function is to alert the owner to claims and allow swift evaluation. [FN50] Minor acts of prevention not the subject of proper notice will not put time at large, unless perhaps the reasoning in Gaymark is applicable. 7. INTERPRETATION OF LIQUIDATED DAMAGES CLAUSES Historically, the courts have been hostile to liquidated damages clauses, regarding such a clause as an unenforceable penalties unless it constitutes a genuine pre-estimate of damages by the parties, rather than acting in terrorem. The origins of the court's power to relieve against such clauses was grounded in its equitable jurisdiction, which has been related to its jurisdiction to relieve against unconscionable contracts and also its hostility to the parties purporting to oust by agreement the courts' role in assessing damages arising from contractual breach. The strict interpretation of liquidated damages provisions has extended into the time at large context. Salmon L.J. said in Peak Construction (Liverpool) Ltd. v. McKinney Founda-

11 2011 JCCCL 71 Page 11 tions Ltd., [1970] 1 BLR 111: The liquidated damages and extension of time clauses and printed forms contract must be construed strictly contra proferentem. If the employer wishes to recover liquidated damages for failure by the contractors to complete on time in spite of the fact that some of the delay is due to the employer's own fault or breach of contract, then the extension of time clause should provide, expressly or by necessary inference, for an extension on account of such a fault or breach on the part of the employer. The same point was made by Allan J. of the B.C. Supreme Court in the Dilcon case: contractual clauses dealing with extensions of time and penalties for delay will be construed strictly contra proferentem. [FN51] It is doubtful that liquidated damages are, or should be, regarded with continuing judicial hostility. [FN52] They are useful precisely where it is difficult to anticipate future damages and therefore it is somewhat unhelpful to judge such clauses on whether they have successfully estimated the likely damages arising from contractual breach, even if regarded ex ante. As regards the prohibition against penalty clauses designed to operate in terorrem, there seems nothing wrong with providing *84 a party with an economic incentive to abide by its enforceable promises. Also, it has been observed that at least where liquidated damages clauses preclude the owner from suing for actual damages, the contractor may be benefitted in so far as the costs of delay are clearly known in advance and the contractor may therefore act more rationally in his approach to completion in circumstances where he is delayed, for instance in determining whether to incur significant costs of acceleration. Associated with this hostility to penalty clauses and strict approach to liquidated damages, the courts also historically interpreted liquidated damages clauses strictly against the owner. In light of the considerations we have just reviewed that undercut the traditional criticisms of liquidated damages, and also the fact that owners need not invariably be the drafters of contracts that include liquidated damages, the traditional application of contra proferentem interpretation against the owner has both policy-related and theoretical problems. However, a strong case can be made that liquidated damages clauses should be treated sceptically and interpreted contra proferentem where they are found in a contract that also permits the owner to recover its actual damages in addition to liquidated damages. As regards the interpretation of extension of time clauses, Jackson J. in the Multiplex case had the following to say, after reviewing the applicable authorities: It seems to me that, in so far as an extension of time clause is ambiguous, the court should lean in favour of a construction which permits the contractor to recover appropriate extensions of time in respect of events causing delay. This approach also accords with principles of construction set out by Lewison in The Interpretation of Contracts (3d edition, 2004). That principle reads as follows: Where two constructions of an instrument are equally plausible, upon one of which the instrument is valid and upon the other of which it is invalid, the court should lean towards that constructions which validates the instrument.

12 2011 JCCCL 71 Page CALCULATING WHAT A REASONABLE TIME FOR COMPLETION MAY BE If time is put at large with the consequence that liquidated damages may not be charged and that the contractor is required to complete within a reasonable time, there remains the question of how the reasonable time to complete the contract should be calculated. It has been suggested that where there was an original clear completion date, the reasonable time is the original time stipulated in the contract plus an allowance representing the impact upon the schedule of the delaying event that is attributable to the owner or the consultant. Where the original completion date was arbitrary or in any event not achievable by the contractor this is likely still to cause the contractor problems, but it seems fair that the contractor be held to the original bargain made as regards completion, with such adjustments as are appropriate for the delay. A related question is whether a fixed completion date may be re-established, giving rise to the possibility of liquidated damages once time has been put at large. We are not aware of any authority for this outcome in the cases directly on point, but an argument might be made for it based upon [English sale of goods case]. *85 9. WHERE TIME IS OF THE ESSENCE Where time is of the essence in a contract, the non-breaching party is entitled to treat the contract as being at an end if the other party fails to fulfil its obligation by the time and date specified. This is different from whether a time for completion has been set or time is at large, but the concepts can interrelate in fact. If time is not of the essence of a construction contract, the contractor who completes late may still be in breach for failing to complete by a date stipulated for completion. Indeed, it has been suggested that the presence of liquidated damages and extensions of time provisions in a construction contract suggest that the parties do not consider time to be of the essence, since they contemplate the remedy for lateness to be damages, rather than termination of the contract. [FN53] In practice if the schedule is not met, most owners would normally prefer compensation to the difficulty of finding a replacement contractor, unless it becomes evident that the contractor is unsuitable or unlikely to complete at all. Despite the value of maintaining the distinction between the date of contract completion and whether that date permits the owner to terminate for its breach, in practice the distinction is sometimes blurred when contractors and owners proceed after the contractual completion date and make no reference to it. One case, Charles Rickards Ltd. v. Oppenheim, [FN54] involved delivery of a Rolls Royce automobile. The buyer and seller had allowed the delivery date to pass with a continuing intention of completing the contract and the Court held that in so doing the original delivery date had ceased to have any meaning and had been replaced by an obligation that the car be delivered within a reasonable time. As usual with time ceasing to be of the essence, the customer retained a right to set a new reasonable date for delivery, which would have the effect of making time of the essence again. Here, not only did time cease to be of the essence, but the stipulated time for delivery was replaced with an obligation that the delivery be within a reasonable time and therefore time was also put at large. The con-

13 2011 JCCCL 71 Page 13 clusion of this case is interesting because when time is put at large it is not normally considered open to the owner to reset a fixed contract completion date. 10. THE INTERRELATION WITH CONCURRENT DELAY Under the Hawl-Mac case, described above, concurrent delay on the part of the contractor did not prevent time from being put at large by acts of prevention on the part of the owner. [FN55] This made sense on the premise that the delay caused to the contractor by the owner was real. An allowance ought to have been made for that and in failing to make that allowance it was now impossible to identify a clear contractual completion date. An opposite conclusion was reached in the Australian *86 case Turner Corporation Ltd. v. Co-ordinated Industries Pty Ltd. & ORS. [FN56] There, the contractor had been responsible for considerable delay. The owner was responsible for a number of acts that would not have been consistent with the contractor's original schedule but that were, in fact, consistent with the contractor's actual schedule. Taking the contractor's delayed schedule as the baseline, no actual delay had, as a matter of fact been, suffered by the contractor as a result of the owner's acts of supposed prevention. Not surprisingly, perhaps, the Court held that there must be actual delay caused by the owner and that the sort of concurrent delay considered here was insufficient to constitute an act of prevention. [FN57] The question of when concurrent delay actually can put time at large is likely to be a troublesome part of the prevention/time at large principle, at least in practice. From the perspective of theory, it may be clear enough to say that if the owner actually causes delay to the contractor, it must be provided for in a time extension, irrespective of how much other delay is caused by the contractor, or time will be put at large. As with concurrent delay issues generally, there is often a real and difficult task in sorting out the causes of delay and their impact upon the schedule, but that is essentially a practical question of proof rather than strictly a legal issue. 11. STANDARD CONTRACT TERMS We now turn to how these issues might apply in the context of typical Canadian construction contacts, and for that purpose we will begin with the popular form CCDC Stipulated Price Contract published by the Canadian Construction Documents Committee/Comité canadien des documents de construction. General condition 6.5 of CCDC provides as follows: If the Contractor [FN58] is delayed in the performance of the Work by an action or omission of the Owner, Consultant or anyone employed or engaged by them directly or indirectly, contrary to the provisions of the Contract Documents, then the Contract Time shall be extended for such reasonable time as the Consultant may recommend in consultation with the Contractor. The Contractor shall be reimbursed by the Owner for reasonable costs incurred by the Contractor as the result of such delay. [FN59] Note that GC6.5.1 refers only to acts or omission of the Owner or consultant contrary to the provisions of the Contract Documents. A question therefore arises of whether the consult-

14 2011 JCCCL 71 Page 14 ant has authority under this clause to recommend an extension of time for acts of prevention that are not contrary to the provisions of the Contract Documents, for instance if they are breaches of implied terms. If the consultant has no authority under GC6.5.1 to grant such an extension in those circumstances, then a contractor who believes he has been prevented from timely completion*87 by such an act of prevention may argue that time has been put at large and the owner has no ability to ameliorate that by setting a new completion date, absent agreement by the contractor. The owner might respond by suggesting that contrary to the provisions of the Contract Documents includes implied terms. With regards to the impact of change orders on the contractor's ability to complete within the schedule, CCDC authorizes the consultant to give additional time for change orders (GC6.2) and change directives (G.C6.3.12). So long as the consultant provides such adjustments properly and reasonably, time should not be put at large. Is the consultant restricted in the time the schedule extension can be made? CCDC does not provide for a limit on the time in which the consultant may validly determine the extension of time arising from the owner's act of prevention. The reasoning in the Hawl-Mac case, discussed at the beginning of this article, suggests that the consultant should move promptly and not wait too long in making that determination and that the contractor would be able to argue that an unreasonable delay in determining the amount of the extension would prevent the contractor from effectively organizing and planning the work to meet that new deadline. How long a period may be permitted between notification of the delay event and its determination remains an open question. Further, the grounds on which the consultant is entitled to grant an extension under GC6.5 are broad, thereby reducing the chance that there could be a delay event that might put time at large for which the consultant lacks jurisdiction to grant a specific extension of time. CCDC does however include a notice requirement for extensions of time for ownercaused delay: No extension shall be made for delay unless Notice in Writing of the cause of delay is given to the Consultant no later than 10 Working Days after the commencement of the delay. In the case of a continuing cause of delay only one Notice in Writing shall be necessary. This limitation could presumably be waived by the owner, and in any event the contractor would normally agree to such a variation, unless the contractor intends to argue that its own failure to provide notice in time prevents the consultant from making a valid extension of time, with the effect that an act of prevention by the owner has put time at large. [FN60] As noted above, that reasoning has been challenged. As regards acts by other contractors, in circumstances where the owner has engaged multiple contractors directly, it is suggested that the answer will turn on the owner's obligations (express or implied) to the late contractor in respect of the co-ordination of work. 12. TIME AT LARGE UNDER CIVIL LAW

15 2011 JCCCL 71 Page 15 The prevention principle in construction contracts has been applied in the province of Quebec under the Civil Code, [FN61] and in particular its courts have *88 adopted the reasoning of common law courts on the point. [FN62] It seems clear that the prevention principle, if not the whole panoply of time at large principles as they have been articulated in the common law case law, is the law in Quebec. [FN63] The cases do not, however, discuss explicitly the origin of the prevention principle in Quebec (except by citing common law cases and referring to a discussion in Goldsmith on Building Contracts) and do not root the principle in a specific provision of the Civil Code. A possible theoretical basis for applying time at large principles in civil law jurisdictions is considered in the paper Common Law Time at Large Arguments in a Civil Law Context by English authors John Bellhouse and Paul Cowan. [FN64] The authors describe an international arbitration in which they participated, held in Miami, governed by the law of a South American country (unnamed) in which the construction project took place. That country had, as might be expected, a civilian legal system. In that arbitration, time at large arguments were advanced based upon certain general provisions of the country's civil code. From their experience in this arbitration, the authors conclude that the prevention principle and its ability to put time at large is arguable and can, as a theoretical matter, be based on the broad equitably based powers and discretion available under most civil codes, including provisions implying a duty of good faith contract performance. [FN65] Despite the interrelation suggested by Bellhouse and Cowan between the prevention principle and good faith contract performance obligations in civil law, the prevention principle in common law jurisdictions does not depend on the existence of any general duty of good faith. The existence of such a duty has been explicitly rejected in the common law provinces, at least outside specific classes of contract such as insurance, and despite the absence of such a general duty the prevention principle is applicable at common law. [FN66] 13. FINAL COMMENTS As we have seen, the principle of time at large in construction contracts is *89 alive and well in Canada. As well, we have the benefit of extensive commentary and analysis on this principle in England and elsewhere in the Commonwealth, some of which have been extensively cited in other jurisdictions. The prevention principle, and its application to completion dates in the context of allegations of delay, provides a useful tool for the analysis of construction delay claims. Our intention herein has been to introduce the topic of time at large with a view to encouraging debate and further legal review of all of its aspects and impacts. Hopefully, Canadian courts and construction lawyers will see more of these principles in the future. Further reading Daniel Atkinson, Administration of Claims in Construction Law Handbook, 2009 ed (London: Institute of Civil Engineers, 2009) (Sir Vivian Ramsey et al., eds). See pp. 732 ff David Atkinson, Time at Large (April 8, 2007) David Atkinson Limited David Chappell

16 2011 JCCCL 71 Page 16 et al, Building Contract Claims, 4th ed (Oxford, UK: Blackwell Publishing Ltd., 1988) Ian Cocking, Construction Law Update: Time at Large (Jan. 11, 2008) Mondaq Business Briefing Paul Cowan and John Bellhouse, Common Law Time at Large Arguments in a Civil Law Context (2007), 23 Const. L.J. No Brian Eggleston, Liquidated Damages and Extensions of Time in Construction Contracts, 3d ed (London: John Wiley & Sons, 2008) at 33 Peter Godwin et al, The prevention principle, time at large and extension of time clauses April 21, 2009 Lexology Peter Godwin et al, Extensions of Time: What Happens if the Contractual Machinery Breaks Down? (July 2010) 17 Herbert Smith newsletter Immanuel Goldsmith and Thomas G. Heintzman, Goldsmith on Canadian Building Contracts, 4th ed (Toronto: Carswell, 1988) at 5-10 David Goldstein and Bree Miechel, Time at large (January 2008) Minter Ellison Construction Law Update Dominic Helps, Mr. Justice Jackson v. Gaymark [2007] 19 Building.co.uk Roger Knowles, 150 Contractual Problems and their Solutions, 2d ed (Oxford, UK: Blackwell Publishing Ltd., 2005) at para. 5.9 Hamish Lal, Extension of Time: The Conflict Between the Prevention Principle and Notice Requirements as a Condition Precedent. Paper presented to the Society of Construction Law (United Kingdom), April 2002 Hon. Humphrey Lloyd Q.C., Time at large does not lead to riches 1992 Building Patrick J. O'Neill, Challenges to Liquidated Damages (Autumn 2008) ADR Partnership Digest 1 Keith Pickavance, Calculation of a Reasonable Time to Complete when Time is at Large [2006] 2 International Construction Law Review Sir Vivan Ramsey et al, eds, Construction Law Handbook (2009) (London: Thomas Telford Publishing, 2009) *90 S.G. Revay, Time Extension in Construction Contracts (1984) 6 C.L.R. 253 Andrew Rimmer, Time at large (October 2007) Structure newsletter of Pannone LLP David Thomas Q.C., Wembley Stadium: extra time but time not at large (2007) 2 Const. L. Int'l 18-19