City Inn Ltd v Shepherd Construction Ltd

This long running Scottish dispute, see for example issue 14, came to a final judgment at the end of last year. The disputes related to the construction of a hotel under a contract incorporating the JCT Standard Form (Private Edition with Quantities) 1980 as amended. The core element of the dispute was whether or not the contractor was entitled to an extension of time of 11 weeks and consequently whether or not the employer was entitled to deduct LAD's. In the course of his lengthy decision, Lord Drummond Young had to consider the approach to take when delay is caused by concurrent causes, one of which is the fault of the contractor, the other of which is not. The Judge said that: "Where there is true concurrency between a relevant event and a contractor default, in the sense that both existed simultaneously, regardless of which started first, it may be appropriate to apportion responsibility for the delay between the two causes; obviously, however, the basis for such apportionment must be fair and reasonable."

As to what was fair and reasonable, the Judge said this would turn on the exact circumstances of a particular case. He noted that, in the application of clause 25 of the JCT contract, the architect has the power to take a relevant event into account even though it operates concurrently with another matter that is not a relevant event. Under this JCT form, the Judge felt the architect was given a "reasonably wide discretion" in order to achieve fairness as between the contractor and the employer. In other words, what was required by clause 25 was that the architect should exercise his judgment in determining the extent to which completion has been delayed by relevant events. This determination must be on a fair and reasonable basis. The Judge also considered the dominant cause principle. Where it is possible to show that a relevant event or a contractor risk event is the dominant cause of delay, then that event should be treated as the cause of delay. However if it is not possible to establish the dominant cause of delay, then all concurrent causes of delay must be considered. This stress on the need to act fairly and reasonably lead the Judge to conclude that the correct approach would be to carry out an exercise to apportion the delay periods. In doing so, he went a step further than any of the English authorities, such as Henry Boot v Malmaison.

On the facts here, the Judge concluded that the delay in completion was the result of concurrent causes. The majority were the result of late instructions or variations issued by the architect. However, two of the causes were the fault of the contractor. In the Judge's opinion none of the causes of delay could be regarded as a dominant cause. They each had a significant effect on the failure to complete on time. Therefore, the correct approach was that the architect should use his judgment to determine the extent to which completion had been delayed beyond the completion date by all these events. This involved a determination of the period in which the works should have been completed having regard to the various delay events. Of course, this determination must be made on a fair and reasonable basis.

The Judge said that the exercise of apportionment is broadly similar to apportionment of liability on account of contributory negligence or contribution amongst joint wrongdoers. What matters is the degree of culpability involved in each of the causes of the delay and the significance of each of the factors in causing that delay. That said, culpability is likely to be less important than the actual causative significance of each of the relevant factors. Two matters are potentially of some importance: the length of the delay caused by each of the causative events and the significance of each of the causative events for the works as a whole. An event that only affects a small part of the building might be of less importance than an event whose impact runs throughout the building. Ultimately this would be a question of judgment and accordingly, the Judge carried out his own fair and reasonable apportionment exercise. This lead to the contractor’s claim for an 11-week extension of time being reduced by two weeks.

Finally, the Judge considered prolongation. He agreed that a claim for prolongation costs need not automatically follow success in a claim for an extension of time. Different considerations may apply. However, here on the circumstances of this case, he felt that the claim for prolongation should follow the result of the extension of time claim. This was a case where delay had been caused by a number of different causes, most of which were the responsibility of the employer, but two of which were the responsibility of the contractor. Therefore, the correct approach here, in the view of the Judge, was to apportion the prolongation costs between the two categories on the same basis as the delay apportionment.