Old chestnuts under fire

Some years ago I was involved in a case about a swimming pool: I was acting for the contractor against a local authority client. The case was all about the effect of variation instructions issued after the completion date under the standard JCT contract. The decision cast considerable light on what had been an old chestnut on the standard form.

Ultimately, the decision got reported in a little-known source and a few years later the same point arose in the well-known decision of the Court of Appeal in Balfour Beatty vs Chestermount.1 Why was an important decision for users of the JCT form not reported immediately? Simple: arbitration is a private process and both parties' agreement is required before anything can be published. Is it any wonder, therefore, when the standard forms have traditionally contained arbitration agreements, that there are so many old chestnuts in this area of law on which there is no established authority?

I am now involved in an arbitration that shows up another old chestnut on the JCT contract. We have just had a hearing before a leading arbitrator – with senior construction barristers on either side – where everyone was arguing about what sort of matters an architect (or arbitrator, exercising his review powers) should take into account in determining a contractor's entitlement to an extension of time under clause 25 of the JCT conditions (now in the 1998 edition).

Why, oh why, I thought, as I listened to the persuasive and totally conflicting arguments from both sides, had this point not been sorted out years ago? After all, claims for extensions of time crop up on virtually every project. I became convinced that I should share those arguments with you.

Clause 25.3.1 provides that if the architect is satisfied that a delaying event notified by the contractor is a relevant event (meaning one of the matters identified in clause 25.4) and "the completion of the works is likely to be delayed thereby beyond the completion date", the architect is obliged to grant a reasonable extension of time. This absolves the contractor from having to pay damages for failure to achieve the completion date.

That is what the contract provides, but, from a practical point of view, how should the architect conduct that exercise? Is it an art or a science? Should the architect consider other competing or concurrent causes of delay and the state of progress at the time the alleged relevant event occurred. Or, alternatively, should he consider the impact of the notified delaying event in a vacuum? Against what programme should he measure its impact: the original one or an adjusted as-built programme?

Why, oh why, I thought, as I listened to the persuasive and totally conflicting arguments from both sides, had this point not been sorted out years ago?

In this case, the approach of the contractor's side to the nature of the architect's duty under clause 25 was straightforward. Having satisfied himself of the existence of a relevant event, the architect should simply consider its likely impact on the original programme. That would, it was argued, give you the most objective assessment of the delaying effect of that matter. It is not only unnecessary, but would be incorrect, to look at its impact judged on the actual state of progress as at the date of occurrence of the matter or, alternatively, when it begins to impact on progress.

By way of illustration, take a project in which the original scope was the construction of a four-storey building. Halfway through, the client decides to add a fifth storey. The architect has the relatively simple task of extending the contract period in proportion to the increase in scope of the works. On this analysis, he could and should ignore the fact that the variation was instructed at a time when the progress of the works had been affected by competing or concurrent delays for which the contractor was responsible.

Now, the client's side might accept that, in the most straightforward case, the approach outlined above might be appropriate. It would not, however, suffice for a more complex situation in which a more sophisticated approach is required. That approach should, in a situation involving competing or concurrent causes of delay, take account of their relative impact on actual progress at the relevant time. Typically, this would be achieved through carrying out a critical path analysis. The original programme would be a relevant factor – in demonstrating the intended sequence of logic of the works – but would by no means be the only one. Not to examine the "as-built" picture would, under this approach, be trying to judge the impact of particular events while ignoring the vital issue of whether the relevant event in fact was likely to or did cause delay to the project.

So, there you have it: two fundamentally different approaches to how architects and arbitrators should evaluate extensions of time. We await the arbitrator's decision as to which is the correct approach and I will tell you which way he jumped in a future column. In the meantime, contact Building and let us know your views on this vexed question.

1 Balfour Beatty Limited vs Chestermount Properties Limited (1993) QBD 62 BLR1.