Summary and implications
During a construction project, a number of events are likely to have arisen that appear to have delayed completion. The employer is responsible for some. The contractor is responsible for others. How do you determine what the consequences are and who should be responsible for those consequences?
Although this conundrum is not new, the methods used to provide solutions have evolved over the years. They seek to exploit the very latest technological developments to provide a carefully constructed and scientific analysis of cause and effect.
But a July 2010 decision of the Scottish appeal court cautions that a desire for analytical precision should not get in the way of a sensible consideration of the facts. As Mark Twain put it over 100 years earlier, “There is something fascinating about science. One gets such wholesale returns of conjecture out of such a trifling investment of fact”.
Things you should note about the court’s decision:
- Deciding whether a relevant event has caused, or may cause, a delay is a question of fact and common sense;
- If a relevant event coincides with a delay event for which the contractor is responsible, and neither can be identified as the dominant cause of delay, a fair and reasonable apportionment of responsibility should be made;
- Although this was a Scottish judgment, and concerned the JCT 80 standard form, the implications may extend to more recent JCT forms and beyond the Scottish jurisdiction.
The July 2010 judgment in favour of Shepherd Construction Limited is the latest decision in a long running dispute with City Inn Limited.
In 1998, City Inn employed Shepherd Construction, under an amended JCT 80, to build a hotel in Bristol.
City Inn considered that Shepherd Construction was responsible for five weeks’ worth of liquidated damages and withheld £150,000 from payments otherwise due to Shepherd Construction. Extension of time disputes, and other disagreements, ensued.
City Inn started court proceedings shortly after an adjudicator found in favour of Shepherd Construction, awarding them a further extension of time and payment of the £150,000 that had been withheld from them.
Although those proceedings were commenced in 2000, the trial did not take place until some seven years later. Shepherd Construction was, once again, successful on the extension of time arguments.
City Inn appealed against that judgment, citing no less than 17 grounds of appeal. Amongst other complaints, City Inn argued that the original judge had failed to properly deal with questions about the cause and effect of delay events and that he had incorrectly dealt with issues of concurrency.
The Scottish appeal court (the Inner House) issued its judgment on 22 July 2010, rejecting City Inn’s appeal.
Cause and effect
The Scottish appeal court said that deciding whether a relevant event has cause, or may cause, a delay is a question of fact and common sense. A critical path analysis may be a useful tool in terms of presenting some of those relevant facts. But it is by no means essential and its omission is not, of itself, likely to be fatal.
A critical path analysis is merely one way in which relevant facts may be presented. It is not the only way.
After establishing the cause and effect of the various delay events, one must then consider whether there is an element of concurrency between a relevant event and an event for which the contractor is responsible.
What is concurrency?
The question of what is a ‘concurrent delay’ can provoke all manner of excited academic debate.
Some attempts to define concurrency rely upon a detailed analysis of the timing and durations of delay events. For example, does the relevant event for which the employer is responsible share the same start and end dates as the delay event for which the contractor is responsible? Or do the delay events give rise to some overlapping periods of time? Those narrow definitions arguably fuel the attempts to offer the kind of over-analysed scientific explanations as to cause and effect that would have so greatly offended Mark Twain and that, as City Inn discovered, were not favoured by the Scottish appeal court.
The Scottish appeal court preferred a broad definition of concurrency. The court said there would be concurrency if it could merely be established that the delay events contributed to or co-operated in bringing about a particular delay. In doing so, the Court shifted the focus from questions of timing and durations, to cause and effect. But if there is an element of concurrency, how should that be resolved?
The court said that if a relevant event coincides with a delay event for which the contractor is responsible, attempts should first be made to ascertain whether the relevant event was the ‘dominant cause’ of the delay. If so, then the contractor’s extension of time claim should succeed.
If it is not possible to identify the dominant cause of the delay in this way, the court clearly stated that the extension of time claim should not fail for this reason alone. In those circumstances, a fair and reasonable apportionment of responsibility should be made.
The process of making a fair and reasonable apportionment of responsibility would be a matter of considering the degree of culpability attaching to the respective delay events and taking into account the significance of the events in terms of the works as a whole. In practice, this will come down to a question of judgment and experience. The exercise will be similar to apportioning responsibility for a road traffic accident in which the drivers of both vehicles are partly to blame.
The court specifically said that when making a fair and reasonable apportionment of responsibility, it should be borne in mind that liquidated damages may be payable as a consequence of the conclusion that is reached.
As a decision of the Scottish appeal court, the decision binds the lower Scottish courts but does not bind the courts in England. The status of the judgment is, however, likely to carry some weight and may be considered persuasive by the English courts (perhaps even more so the adjudication community).
It is also worth pointing out that although this case concerned the JCT 80 standard form, the implications may extend to more recent JCT forms, such as the JCT Standard Building Contract 2005 edition, Revision 2 2009 (SBC05). Although the wording of the relevant clauses has changed, the fundamental principles may continue to apply.