Define ‘late’: City Inn vs Shepherd

The decision of the Scottish Inner House in City Inn vs Shepherd Construction has already been the subject of much comment in Building’s legal pages over the past few weeks. The discussion has mainly focused on its significance for concurrency and critical path analysis. Another important topic which arose in the decision - how does one determine when an instruction is late? - has received less attention and is in danger of giving rise to some misunderstanding.

How, then, does one assess whether an instruction is late? Common sense suggests that this must be when the contractor needs the instruction but has not received it. If it doesn’t need the instruction when it is given, it can’t be late. But if it is given after the point at which it was needed, when it is causing delay, it must be late. And how can one tell whether the contractor needs an instruction? The answer must be by reference to the progress of the works.

In City Inn this was considered as the second ground of appeal. Lord Osborne, giving the majority decision, found that at first instance Lord Drummond Young had been perfectly entitled to prefer the submissions of Shepherd that “the contractual completion date, allowing for any extension, must always set the criterion against which the timing of instructions should be judged”. Of course, when a contractor is already in culpable delay, being able to claim that instructions are late by reference to the completion date (rather than actual progress) has obvious attractions. Some may even be tempted to rely on City Inn to argue this.

Fortunately, the judgment in City Inn is, in this respect at least, of rather limited application. Why so? The answer is that in the JCT80 (the form of contract in City Inn) there was a specific relevant event for late instructions and it provided as follows: “25.4.6: the contractor not having received in due time necessary instructions … for which it specifically applied in writing provided that such application was made on a date that having regard to the completion date was neither unreasonably distant from nor unreasonably close to the date on which it was necessary for it to receive the same.”

The Judge’s construction meant ignoring common sense and simplistically employing the completion date

Lord Osborne made it clear that he thought that Lord Drummond Young had “proceeded on a proper interpretation of clause 25.4.6”. Under the 1980 form, the completion date is the only possible yardstick for determining whether an instruction is late, given the wording above. Lord Drummond Young had latched on to the words “completion date” in the clause and decided that this must be the yardstick for measuring whether an instruction was late. In fact, arguably, on a proper construction, it is only whether the contractor’s application is late that is to be so determined. Anyway, Lord Drummond Young’s construction meant ignoring common sense and simplistically employing the completion date to determine lateness.

Luckily, when the 1998 form came into being, the relevant event above vanished and instead the information release schedule (IRS) was introduced to assist in determining when an instruction or other information was late. Where the parties did not use an IRS, the contract provided a new way of determining when an instruction was late in clause 5.4.2. Under the 2005 form, the equivalent wording is at clause 2.12.2: “Such further … instructions shall be provided at the time it is reasonably necessary for the contractor to receive them, having regard to the progress of the works.”

Thus, under the 1998 and 2005 forms, after the completion date, whether an instruction is late must be gauged by reference to the progress of the works. If City Inn is persuasive in respect of contracts involving the JCT80 form on this point, it will affect few contracts. It is of no application to instructions issued after the completion date under contracts let on the 1998 and subsequent JCT forms. Their wording is clear that the completion date is only relevant to determining whether an instruction is late when the architect thinks that practical completion is likely to be achieved before the completion date.

It is a credit to the JCT drafting committee that recent forms have avoided a trap that could have given rise to much unmeritorious argument about what makes instructions late.

Nick Lane is a partner in the construction group at Olswang