Construction e-Brief: Claims for liquidated damages

In Henia Investments Inc and Beck Interiors Limited [2015] EWHC 2433 (TCC), the TCC was asked to consider whether a failure on the part of the Contract Administrator to make a decision in respect of a valid application for extension of time would prevent the Employer from deducting and/or claiming liquidated damages from the Contractor. The building contract was the JCT Standard Building Contract without Quantities 2011.

It has been suggested in many quarters over the years that a Contract Administrator’s failure to operate the extension of time mechanism in the building contract would leave the Employer unable to claim liquidated damages, and it would probably therefore be left to prove its actual losses.

Mr Justice Akenhead expressed the view that such a failure does not prevent the Employer from claiming liquidated damages under this form of contract. This was principally on the ground that operation of the extension of time machinery was not stated to be a condition precedent to the Employer’s entitlement to liquidated damages. If such operation was stated to be a condition precedent in the contract, then matters would be different.

Further, it was relevant that the Contractor had a short term dispute resolution procedure, in the form of adjudication, if it wished to challenge the deduction of the liquidated damages by the Employer.

Of course, the Contract Administrator must still serve a notice of non-completion, and the Employer must give notice of its intention to withhold or deduct liquidated damages before the Final Certificate, both of which are clear conditions precedent in the JCT Standard Building Contract.

For more information on this, please contact a member of the construction team.