The discussion was based on the outcome of a case in arbitration, but because of the confidentiality that is an essential feature of arbitration, I was unable to disclose either the identity of the parties or any details about the dispute. Now Mr Justice Dyson, the senior judge in the Technology and Construction Court, has delivered judgment on the case – Malmaison Hotel (Manchester) Limited vs Henry Boot – so the matter is at last in the public area.
The case is relevant to all situations where the contract gives either one of the parties or, more typically, someone acting on their behalf, the function of granting extensions of time to the contract period. In essence, it involves the nature of the investigations that the person adjudicating on these matters should carry out. Should the investigation be limited to looking only at the impact of the “relevant event” in respect of which the contractor is seeking an extension of time? Alternatively, can, and indeed should, the certifier also consider the impact of other events?
Unsurprisingly, this area has proved a fertile breeding ground for disputes. A great deal is at stake. From the employer’s point of view, the proper exercise of this function will dictate the extent to which the contractor can be charged liquidated damages. For the contractor, not only is it vital for cash flow purposes, but there is also the question of its entitlement to recover time-related costs.
The decision in the dispute between Malmaison Hotel and Henry Boot is not going to eliminate time-related disputes. But by clearing up some of the central uncertainties, it should substantially reduce their number. It will certainly make the certifier’s task, in considering claims for extension of time, more certain.
Malmaison engaged Boot to construct a new hotel in Piccadilly, Manchester. Practical completion was fixed for 21 November 1997 but was not achieved until 13 March 1998. The architect extended time through to 6 January 1998. On the strength of those certificates, Malmaison deducted liquidated damages totalling £250 000 from Boot’s account.
Boot claimed further extensions of time in respect of a number of alleged relevant events. However, for tactical reasons it gave notice of arbitration in respect of only two, which it used to claim extensions through to practical completion. If it succeeded in the arbitration, the liquidated damages would have to be repaid. It would then also be in a position to claim time-related costs for the overrun.
Malmaison denied that the two alleged relevant events caused delay. It went further by pleading a host of other matters which, if proved, would demonstrate that Boot itself was the cause of the overrun.
Boot argued before the arbitrator that Malmaison should not be permitted to advance a positive case of that sort. That, it said, amounted to introducing into the arbitration, the scope of which had been defined by its original notice, matters that were outside its scope and, therefore, outside the arbitrator’s jurisdiction.
There is nothing in the wording of JCT98 that precludes an architect from taking into account other events in deciding whether a relevant event relied on by a contractor had caused delay
The arbitrator rejected Boot’s argument regarding jurisdiction. Boot appealed, and the matter came before Mr Justice Dyson for his decision. The central issue, he considered, was the proper construction of clause 25 of the JCT98 conditions. If Boot could show that the matters upon which Malmaison sought to rely fell outside the ambit of what an architect should properly consider in exercising his duties under clause 25, then Boot would succeed.
The judge considered the key words in clause 25 were: “If, in the opinion of the architect, upon receipt of any notice … the completion of the works [is likely to be delayed thereby beyond the completion date] … the architect shall in writing to the contractor give an extension of time …”
The judge observed that the decision in Balfour Beatty vs Chestermount was of some assistance.1 However, that case involved the retrospective exercise of the clause 25 power whereas, in this case, an opinion had to be formed prior to practical completion. The judge acknowledged that, until this case, there had been no legal authority dealing with that point.
Malmaison accepted that if it could be shown that there were two equal concurrent causes of delay, for which the employer and contractor were respectively responsible, the contractor would be entitled to an extension of time. But, Malmaison argued, that begged the crucial question as to whether such matters had actually caused delay in the first place. In considering this question the architect could and should consider the impact on progress of other events and, for instance, whether the alleged relevant events were on the critical path.
In the course of dismissing Boot’s appeal, Mr Justice Dyson preferred Malmaison’s approach to clause 25. He concluded that there was nothing in its wording that precluded an architect from taking into account the impact of other events in deciding whether a relevant event relied on by a contractor had caused delay.
Crucially, he held that it was impossible “to lay down hard and fast rules”. The extent to which other events might fall for examination will therefore depend on the facts of each situation. Where, as in this case, the facts on which both parties relied ranged over most of the contract period, it was impossible to narrow the scope of the investigation in the way Boot wanted to.
The judge stated that a different approach might be appropriate in other circumstances. An example would be where a contractor claimed a two-week extension on the grounds that it was denied access to the site for the first two weeks of the contract period. The employer could argue in its defence that, for instance, access had not been denied or that there was other work the contractor should have been doing. However, it would be a different matter if the employer tried to rely on the contractor’s poor progress throughout the rest of the contract period.
Mr Justice Dyson has interpreted clause 25 in a flexible way that gives architects plenty of scope to produce a just result in each case.
Postscript
Dominic Helps is a partner in solicitor Shadbolt & Co. He can be contacted on 01737-226277 or on dominic_helps@shadboltlaw.co.uk.
