Out-Law Guide 6 min. read
16 Aug 2011, 10:38 am
Determining contractor entitlements to extensions of time under a contract when there are competing causes of delay, also known as 'concurrent delay', is a complex area of law. In 2010, the Scottish case between City Inn and Shepherd Construction highlighted again the difficulties in establishing whether the contractor is entitled to more time where concurrent delays exist.
The Scottish Appeal Court rejected a detailed critical path analysis in favour of a more practical, commonsense approach. It decided that apportioning delay was the best method where there are competing causes of delay and none of those causes are the dominant cause of delay.
In Scotland at least, this decision is now binding on lower courts. Scottish judgements are not binding in England, but given that it is an Appeal Court decision it is likely to be very persuasive. This guide looks at the outcome of the case, and its wider implications.
Facts of the case
City Inn employed Shepherd, the contractor, to construct a hotel in Bristol. Completion of the project ran late and, after a series of adjudications, Shepherd was awarded a four week extension of time (EoT) by the architect and a further five weeks by an adjudicator – giving nine weeks extension in total. City Inn was unhappy with the decisions of the adjudicator and its architect, and raised proceedings in the Scottish Courts seeking various orders including:
The parties had used a standard form JCT contract which contained a bespoke provision (clause 13.8) which City Inn argued barred Shepherd from obtaining any EoT at all. Shepherd argued that City Inn had waived its right to rely on this provision.
Lord Drummond Young's opinion
The case was first heard before Lord Drummond Young in 2007.
Clause 13.8 and waiver
The evidence showed that neither party, nor the architect, had made any reference to clause 13.8 during the course of the contract, and applications for EoT had been made and considered as if the provision did not exist. In fact, it became clear that the first time City Inn ever sought to rely on the provision was during the adjustment of its written claim, sometime after the court action had been raised and a number of years after the job was finished.
Lord Drummond Young agreed that it would make no sense to apply the bespoke clause (clause 13.8) to the instructions and variations which caused delay - not because of their content, but because the instruction or variation had itself been given too late. He also found that City Inn had effectively waived its right to rely on the clause by its director's failure to mention the provision in face to face discussions with the contractor and the fact that Shepherd had then proceeded as if the clause did not exist. There was evidence, which he accepted, to the effect that if City Inn and its architect had refused the earlier EoT application on the basis that it didn't comply with clause 13.8, Shepherd would have applied the clause to later EoT applications.
Causation, concurrency and delay
With regard to delay it was clear that various events had occurred concurrently with one another, particularly towards the end of the project, which all potentially caused delays to completion. Some of these were Relevant Events under the construction contract, and some were events which were attributable to Shepherd.
Shepherd had been unable to locate the full version of its original construction programme to use as evidence - all that was available was a fairly basic programme showing activities and durations. An as-built programme was agreed between the two parties' experts, and City Inn's expert then worked backwards to establish the critical path of how the job had to proceed and how much time had to be given for each task from that information. However, the critical path established by City Inn's expert managed to avoid many of the matters on which Shepherd relied for its claims. This led him to the conclusion that these had not affected the time for completion and so the contractor was not entitled to a single day's EoT.
Shepherd's expert, on the other hand, gave evidence that he had also tried to establish the critical path but felt it was impossible to do so reliably from the information available. Instead, he compared the original and as-built programmes to see where delays occurred and then looked at what had caused those delays. He then used his experience and judgement to offer an opinion as to the effect those delays had on completion.
At the trial, numerous errors were identified in City Inn's critical path analysis which were eventually conceded by its expert.
Lord Drummond Young concluded that the contract expected the decision maker to come to a 'fair and reasonable' decision on whether to approve an extension of time. Where a Relevant Event and contractor risk event existed at the same time then, irrespective of when the events began or ended, if neither of the events was 'dominant' then a fair and reasonable outcome may involve an apportionment exercise. The judge then went on to consider the evidence and the competing approaches of the two experts. Lord Drummond Young rejected City Inn's critical path analysis and preferred the evidence of Shepherd's expert. Applying this approach, he found that Shepherd was entitled to the same nine-week EoT that had been awarded by the adjudicator.
City Inn appealed.
The Appeal decision
The Scottish Inner House heard the appeal in 2009 and made their decision in 2010. All three appeal judges rejected City Inn's appeal on many of the same grounds as Lord Drummond Young. The aspect of their decision which is most interesting, however, relates to the proper application of an extension of time clause and how to deal with issues of concurrency and causation. The majority judgement, by two of the three judges, set out five propositions:
One of the three judges in the appeal decision, Lord Carloway, agreed with the overall result but rejected the concept of apportionment. On his approach, the architect or decision maker's sole task is to consider whether the relevant event, viewed in isolation, is going to delay completion. If it is, then the next question is what EoT would be fair and reasonable to award. Lord Carloway agreed that this was a matter of "common sense". He also agreed with the other two judges that a critical path analysis was not essential to the assessment of an EoT.
What does the decision mean in practice?
In Scotland at least, the decision is now binding on lower courts. Scottish judgements are not binding in England, but given that it is an appeal decision it is likely to be very persuasive.
All the judges appear to place great weight on the need to reach a fair and reasonable decision on extensions of time, although they vary in their views as to how to reach such a decision.
The decision is also a rejection of the argument that a critical path analysis is essential to demonstrate an EoT entitlement. The value of a critical path analysis is not completely discounted, The City Inn case amounts to a statement that common sense, judgement and experience are preferable to an overly complicated analysis of causation. However, the case is most certainly not a charter to those who wish to cut corners in the presentation of EoT claims. Shepherd was successful because the judge found that it was not possible to accurately recreate the critical path through the job. If accurate electronic programming data is available, then a decision maker may take the view that it is relevant – while taking the issue of dominance into account where there is concurrency.
The De Beers case – Since City Inn
Following the City Inn case, concurrent delay and extensions of time were referred to briefly in an English case in December 2010 between De Beers - the diamond manufacturers - and an IT software contract supplier. In this case, the judge concluded that where there were concurrent delays the contractor could not recover damages if it would have suffered the same loss as a result of the cause that was within its control. The De Beers case could be relied on as a statement of the position under English law and that the approach of the Scottish majority in City Inn ought not be followed. As the statements about concurrent delay in De Beers were made without reference to case law, including City Inn, it remains to be seen what effect the case will have.