Get lost, Plato: City Inn vs Shepherd Construction

Since the introduction of the Construction Act, JCT disputes regarding loss and expense and extensions of time have, in the main, been resolved by adjudication. This is perhaps one reason for the high level of interest in the November 2007 opinion of Lord Drummond Young in the case of City Inn vs Shepherd Construction. However, what really provoked discussion was Drummond Young’s apparent rejection of detailed critical path analysis in favour of a more practical assessment of the impact of delay events, together with an “apportionment” exercise where there was no “dominant cause” of delay.

City Inn appealed against Drummond Young’s decision, arguing that his approach was misconceived. The Scottish Court of Appeal issued its judgment on 22 July, and it amounts to an endorsement of Drummond Young’s approach.

City Inn employed Shepherd under an amended JCT80 contract to construct a hotel in Bristol. The project ran late, and after a series of adjudications Shepherd was awarded a five-week extension. Thereafter, City Inn raised proceedings in the Court of Session seeking a declaration that Shepherd was not entitled to a single day’s extension, and therefore was liable for liquidated damages. The evidence appeared to suggest that there was “concurrency” between certain relevant events and other causes of delay. It was against that background that Drummond Young reviewed the authorities on clause 25 of JCT.

Whether or not the relevant event causes delay is not an issue to be resolved on philosophical principles

In summary, he concluded that the task of the decision maker under clause 25 was to arrive at a “fair and reasonable” decision on an extension. Where the relevant event and the contractor risk event existed at the same time, irrespective of when the events began (or ended), in the absence of one being “dominant”, achieving a fair and reasonable outcome may involve an apportionment exercise.

In reaching this view, Drummond Young also noted that the “but for” test of causation did not apply in the context of clause 25. He went on to find Shepherd entitled to a nine-week extension. City Inn appealed.

All three appeal judges rejected City Inn’s grounds of appeal. The main opinion was delivered by Lord Osborne. He endorsed the approach taken by Drummond Young and set out five propositions relative to the proper approach to the application of clause 25.

n Before any claim for an extension can succeed, it must be shown that the relevant event is likely to delay or has delayed the works.

n Whether or not the relevant event actually causes delay is “an issue of fact that is to be resolved, not by the application of philosophical principles of causation, but rather by the … principles of common sense”.

n The decision maker can decide the question of causation by the use of whatever evidence they consider 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.

n If a dominant cause can be identified in respect of the delay, effect will be given to that by leaving out of the account any cause or causes that are not material. If the dominant cause is not a relevant event, the claim will fail.

n Where there are two causes behind the delay, neither of which is dominant and only one of which is a relevant event, a contractor’s claim for an extension 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 … between the relevant event and the other event”.

Osborne appears to be unimpressed by the attempts to classify “concurrent delay” or “concurrent delaying events” stating that “discussion of whether there is true concurrency, in my opinion, does not assist in the essential process to be followed under clause 25”.

The decision does not amount to a rejection of critical path analysis, and in many circumstances it may well be appropriate for the decision maker to have regard to it. But in its absence, a claim will not necessarily fail.

Taken together, the decisions amount to an endorsement of the application of common sense and a rejection of what the court described as “philosophical” arguments about concurrency and causation.

Alastair Walls is senior associate at Pinsent Masons