The decision of the Scots Inner House in July last year dismissing appeals in the City Inn litigation has provoked considerable debate. The Inner House approved an apportionment approach to the granting of EOTs under JCT-style contract clauses, whereas the availability of such an approach is questionable under English law. A recent TCC decision has now brought the debate into sharp focus by confirming what is thought to be the English position.

In 2007, De Beers commissioned a large software development project aimed at upgrading its diamond handling systems and supporting the relocation of various processing activities from London to Botswana. The project was put out to tender and a contract was awarded to Atos. The project fell behind schedule, due in part to additional works ordered by De Beers and in part due to matters for which Atos was responsible (such as unrealistic tender assumptions).

De Beers’ contract with Atos contained an extension of time clause allowing a reasonable extension of time for delay caused by acts or omissions of De Beers or any other cause beyond Atos’ reasonable control. The contract also allowed Atos to recover delay costs in the event that time was extended for such matters.

The TCC found that both the Atos delay and the De Beers delay were critical and operated concurrently. That is to say, either delay was sufficient on its own to delay completion. In those circumstances, the court applied a “general rule in construction and engineering cases … that where there is concurrent delay to completion caused by matters for which both employer and contractor are responsible, the contractor is entitled to an extension of time but he cannot recover in respect of the loss caused by the delay.”

The court’s conclusion was not preceded by any contractual analysis of the agreed extension of time clause, suggesting that questions of concurrency, in many cases, can be answered in the abstract without undue focus upon the language of the parties’ agreement. This perhaps reflects the court’s reliance upon the prevention principle, a principle applicable to all construction contracts with liquidated damages provisions, as providing an answer to issues of concurrency.

The court’s reliance on the prevention principle accords with the minority opinion of Lord Carloway in the City Inn appeal and previous English authorities. Put briefly, the prevention principle requires that a contractor have the time allotted to it within which to perform the works. This principle does not depend upon the contractor actually being able to complete within that period of time, but on the need to preserve the integrity of the liquidated damages regime agreed between the parties. On this view, any delay caused by the employer must entitle the contractor to an extension of time regardless of any concurrent delay, as otherwise the contractor will not have had the time that the parties agreed he should have to complete prior to the time when liquidated damages will begin to accrue. Whether or not the contractor could have made good use of this time is irrelevant, on this analysis.

This decision adds to a growing weight of opinion suggesting that City Inn does not represent the law of England concerning concurrent delay in construction contracts. The recently published 12th edition of Hudson’s Building and Engineering Contracts also adopts this view.

It had been hoped that City Inn would proceed to the Supreme Court where authoritative guidance could be given. It is now understood, however, that appeal proceedings have been settled. Uncertainty surrounding claims for concurrent delay may therefore persist for some time to come.

To view our original law-now reporting the Inner House’s decision in City Inn, please click here

Reference: De Beers UK Ltd v Atos Origin It Services UK Ltd [2010] EWHC 3276