Extensions of time in cases of concurrent delays are tricky, the key is how you draft your contract…
The recent judgement in the Scottish case of City Inn v Shepherd Construction has highlighted again the difficulties inherent in establishing the contractor’s entitlement to an extension of time where concurrent delays exist.
City Inn (the employer) engaged Shepherd Construction (the contractor) to build a hotel under an amended JCT Standard Form of Building Contract (Private with Quantities) (1980 edition). The project was delayed and a dispute arose over the assessment of extension of time and the resulting liability for liquidated damages.
The contract contained an extension of time provision in Clause 25 similar to current JCT contracts. The clause, amongst other things, provided that “if … the completion of the Works is likely to be delayed … the Architect shall … give an extension of time by fixing such a later date as the Completion Date as he then estimates to be fair and reasonable”.
This clause however did not specifically set out how the certifier was to deal with concurrent causes for delay.
The Inner House of the Court of Session in Scotland decided that where two concurrent causes are operative, one being a relevant event and the other being some event for which the contractor is responsible, the certifier will have to approach the issue in a fair and reasonable manner and apportion the delay between the causes unless one of them is dominant.
The Scottish Court adopted a very broad definition of what was a concurrent cause, stating that not only could concurrency arise where there were overlapping or partially overlapping (in time) delaying events but that concurrency could also arise where there were two or more events which “possessed a causative influence upon some subsequent event, such as the completion of the works, even though they did not overlap in time. In other words they might also be said to be contributory to or co-operative in bringing about some subsequent event.”
Whilst the lack of a generally accepted definition always causes difficulties when discussing the concept of concurrency, the wide approach adopted by the Scottish Court means that the incidence of claims of concurrency are unlikely to decrease given that most significant projects will have delaying events, some of which are the employer’s responsibility and some of which are the contractor’s.
There also remains the difficulty of knowing exactly what “apportion the delay” in the event of concurrent causes for delay actually means and how, practically, a certifier is expected to go about this process.
One way of avoiding the uncertainty is to do away with the problem in the first place by establishing, through clear drafting in the contract, a clear rule as to how concurrency should be treated.
While most standard form contracts are silent with regard to the effect of concurrent delays, an exception is the JCT 2005 Major Project Construction Contract (revision 2, 2009), which resolves matters in the contractor’s favour.
Clause 18.7.3 states that the employer shall grant a fair and reasonable extension of time where a relevant event has occurred notwithstanding that completion may also have been delayed by the concurrent effect of a cause of delay that is not a relevant event.
However, it is not uncommon to see this provision reversed to exclude the contractor’s ability to seek an extension of time for a relevant event where it ran concurrently with another event which is not a “relevant” one, ie for which he bears the risk.
This latter approach has also been attempted by employers in other JCT contracts; whether contractors are willing to accept such a shifting of the risk depends upon their ability to price for it and the commercial drivers surrounding the project.
Whatever approach is taken to the issue of concurrency, the fundamental requirements for pursuing a delay case, such as the need to have retained comprehensive progress records and to have complied with any contractual notification obligations, should be remembered.
The latter point here had also potentially been a problem for Shepherd in this case, but the Scottish Court decided that City Inn had waived its right to require Shepherd to comply with the strict contractual obligations as to notification, leaving Shepherd free to pursue its claim.
Olle Kickler and Peter Lowe are associates Reynolds Porter Chamberlain LLP (RPC).
No comments yet