Monday 28 June 2010

Courts approach to concurrent delay

The Scottish Appeal Court decision in City Inn Ltd v Shepherd Construction Ltd is a landmark decision in construction law. For the first time, a Scottish court set out the approach which should be taken in determining extensions of time claims. The decision in England is not binding, but it will be very persuasive.

Facts

City Inn engaged Shepherd under an amended JCT 80 standard form of building contract to construct a hotel in Bristol. The project was delayed and after a series of adjudications, Shepherd was awarded an extension of time of 4 weeks by the architect and a further 5 weeks by the adjudicator, 9 weeks in total. City Inn disagreed with the architect and the adjudicator and issued proceedings in the Commercial Court.

First instance

The court found in favour of Shepherd and held that it was entitled to a 9 week extension of time. City Inn again disagreed and issued proceedings in the appeal court.

Court of appeal

All three judges rejected City Inn’s appeal. Lord Osborne gave the majority opinion and having examined the leading authorities, formulated five propositions as regards the proper approach to be taken to the application of clause 25.3. This clause deals with a situation in which the architect has received a notice and particulars from the contractor. It empowers the architect to grant extensions of time if in its opinion the reasons for delay claimed by the contractor are relevant events and the completion date is, or is likely to be delayed. Lord Osborne’s five propositions are:
For an extension of time claim to succeed, it must be shown that a relevant event caused delay or is likely to cause delay to the completion of the works.
Whether or not a relevant event causes delay is a matter of fact, which is to be resolved by common-sense, not theoretical, principles.
The decision maker, for example the architect, is at liberty to decide the cause of delay on the basis of factual evidence acceptable to them. A critical path analysis is not necessary but may be of assistance.
If a dominant cause of delay can be identified, other non-material causes of delay can be disregarded. If the dominant cause is not a relevant event, the claim will fail.
If delay is caused by (a) a relevant event and (b) the contractor and neither of which are the dominant cause, the claim will not necessarily fail but the decision maker will make a fair and reasonable apportionment of delay as between the two causes.

With regard to the fifth proposition, the court of appeal held that it is not correct to apply a “but for” test, and conclude that the works would have been delayed by the contractor in any case and it should not be entitled to an extension of time.

Furthermore, with regard to claims for loss and/or expense based on extensions of time, if delay is caused by a relevant event and the contractor, the contractor will not lose entitlement to its loss. Instead the loss should be apportioned between the two events.

Comment

Great weight seems to be placed on the need to reach a fair and reasonable decision on extensions of time. It seems that a critical path analysis is not essential to a successful claim for an extension of time, but is up to the decision maker to decide whether this or a similar type of analysis would assist.