Scottish Court Offers Clear Directions on Extension of Time Evaluation

The Appeal Court ratification of the decision in City Inn v Shepherd Construction [2010] provides clear and concise guidelines for evaluating EOT claims. This will be of interest to all quantity surveyors having to deal with EOT claims.

Introduction

The recent case of City Inn v Shepherd Construction has put a ‘damper’ on the reliance by Architects, Engineers and Planners on set rules of critical path analysis and concurrency in their attempts to defeat Contractors’ claims for extensions of time. By far this appears to be first case that has dealt with such issues and advocated a common sense approach to dealing with delays to a construction operation. In the case under discussion, decided Lord Drummond Young, detailed critical path analysis was rejected instead a sensible approach which is more practical in the assessment of delay events was favoured. Also the manner of “apportionment” of delay between the parties where there was no “dominant cause” of delay was also rejected by Lord Drummond Young. This therefore raises a serious question in apportioning delay due to concurrency in the evaluation of extension of time claims from contractors. Perhaps a deeper examination of the facts of the City Inn v Shepherd case might shed some light on these issues.

 The Facts

The disputed between City Inn, the Employer and Shepherd Construction, the Contractor is in respect of delay in completion of a hotel for City Inn in Bristol, England. The contract was based on an amended JCT standard form of building contract (with quantities), 1980. The contractor had been awarded 9 weeks extension of time (4 weeks by the architect and 5 weeks by the adjudicator). The Employer, City Inn disputed the decisions of the architect and adjudicator and challenged these decisions and sought various orders including a declaration of disentitlement of any extension of time. The Contractor Shepherd counterclaimed for 11 weeks extension of time and associated loss and expense.

The evidence produced at the trial indicated that there were qualifying events and also delays caused by the contractor concurrently with some qualifying events which all contributed towards the delay in completion of the project.

The Court of First Instance Decision

The case in the Court of First Instance was heard by Lord Drummond Young who concluded that the task of the decision maker under clause 25 of the contract was to make a “judgment” and, ultimately, arrive at a “fair and reasonable” decision on an extension of time. Where there was concurrency (that is, the relevant event and the contractor risk-event existing at the same time), irrespective of when the events began (or ended), in the absence of one event being “dominant”, achieving a fair and reasonable outcome may involve an apportionment exercise and that the “but for” test of causation did not apply in the context of clause 25. On the basis of this analysis Lord Drummond Young agreed with the architect and adjudicator and held that the contractor was entitled to an extension of time and that the 9 weeks extension of time granted was fair and reasonable.

The employer, City Inn appealed and the appeal was heard by three judges who all rejected City Inn’s appeal and set out five propositions for a proper approach to the application of clause 25 as follows:

1. Before any claim for an extension of time can succeed, it must be shown that the relevant event is likely to delay or has delayed the works.
2. Whether the relevant event actually causes delay is “an issue of fact which is to be resolved, not by the application of philosophical principles of causation, but rather by the application of principles of common sense”.
3. The decision maker can decide the question of causation (that is, whether the event has caused delay to completion) by the use of whatever evidence he considers appropriate. If demonstrated to be sound, this may take the form of a critical path analysis, but the absence of such an analysis does not mean the claim will necessarily fail.
4. If a dominant cause can be identified in respect of the delay, effect will be given to that by leaving out of account any cause or causes that are not material. If the dominant cause is not a relevant event, the claim will fail.
5. Where there are two causes operating to cause delay, neither of which is dominant, and only one of which is a relevant event, a contractor’s claim for an extension of time will not necessarily fail. Rather, it is for the decision maker “approaching the issue in a fair and reasonable way, to apportion the delay in completion of the works… as between the relevant event and the other event.”

All three judges agreed that a critical path analysis was not essential to carry out the exercise (although it may be relevant). All three judges also disagreed with HHJ Seymour QC’s comments in Royal Brompton Hospital NHS Trust v Hammond & Others (No 7) 2001 76 Con LR 148 to the effect that a relevant event falls to be disregarded if a pre-existing contractor default would nonetheless have caused delay.

How does this decision affect future claims for extension of time?

Before arriving at any conclusion it is essential to understand the approach of the learned judges all of whom appear to place emphasis on the need for a “fair and reasonable” decision on extensions of time. Lord Osborne expressed dissatisfaction at the various attempts (by architects, engineers and planners) at classification of “concurrent delay” or “concurrent delaying events” when he stated that:

“It may not be of importance to identify whether some delaying event or events was concurrent with another, in any of the possible narrow senses described, but rather to consider the effect upon the completion date of relevant events and events not relevant events. For that reason, discussion of whether or not there is true concurrency, in my opinion, does not assist in the essential process to be followed under clause 25.” 

The Appeal Court decision is also a rejection of the insistence by planners that a critical path analysis is essential to demonstrate an extension of time entitlement. However, the court recognised that there is some value in critical path analysis, but it is for the decision maker to decide if such evidence is of assistance. A claim will not necessarily fail in the absence of such evidence. 

How does the decision maker (architect, engineer or planner) apportion delay in the event of concurrency?

A majority of the court supported Lord Drummond Young’s apportionment exercise in the event of concurrency where no cause is dominant, although Lord Osborne does emphasise that it is “open” to the architect to apportion as part of approaching the issue in a fair and reasonable way; he is not compelled to do so.

In my view this is not the end to the question, the question of concurrency, causation and apportionment will continue to dominate the EOT scene. The Shepherd case is based on the JCT 80 form of contract and does not necessarily apply to other forms where clear statements are contained for dealing with extension of time. It must also be pointed out that the rejection of “critical path” analysis in the Shepherd case should not be taken as a precedent where the production of a programme in such format is the requirement in a contract. In the Shepherd case it was found that it was not possible to accurately recreate the critical path. This therefore certainly does not give any licence for contractors to deviate from any contractual requirement for providing electronically generated programmes in critical path format.

As to the application of concurrency in the apportionment of delay, the decision makers must take into account the event of dominant delay and apply a common sense judgement on arriving at a fair and reasonable conclusion. If the dominant delay is attributable to the employer, then the contractor’s delay will not matter (even if concurrent with the qualifying delay) common sense dictates that the contractor will be entitled for an extension of time because it was the dominant event that caused the eventual delay irrespective of the concurrent delay.

References:

CHOAT, R; “Pulling Out all the stops”- RICS Construction Journal (Nov. – Dec. 2010).   

By. Dr. M. Haris Z Deen

(Many thanks for Dr. Haris Deen for providing us with this valuable article)