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Legal Update

Extension of Time - Has Time Finally Come to an End in City Inn v Shepherd Construction?

3 August 2010
Mayer Brown JSM Legal Update

On 22 July 2010, the Extra Division, Inner House, Court of Session handed down its decision in the long running saga of City Inn v Shepherd Construction. All three judges in Scotland's appellate court rejected Shepherd Construction's 17 grounds of appeal in a case that has been running for the past 10 years. The decision in this case sheds further light on the often thorny issue of determining extensions of time, particularly where there is concurrent delay under standard form construction contracts, in this case, the JCT 1980 Edition standard form.

Background

The dispute in this case concerned late completion of the construction of a hotel in Bristol, England. The parties entered into an amended JCT 80 Edition standard form contract. The contractor, Shepherd Construction, had been awarded a four week extension of time ("EOT") by the Architect and a further five weeks EOT following an adjudication. City Inn was not content with the award of either EOT and commenced proceedings in the Court of Session seeking, among other things, a declaration that Shepherd Construction was not entitled to any EOT. Shepherd Construction counterclaimed seeking an 11 weeks EOT and associated loss and expense. It was apparent from the evidence adduced at the hearing that construction of the hotel was in delay towards the end of the project. As with many construction projects, the delay analysis involved both relevant events (Employer delay) and culpable delay (Contractor delay). Accordingly, issues concerning concurrent delay had to be decided.

Decision

In the court of first instance, Lord Drummond Young decided, in summary, that:

  • In granting an EOT under Clause 25 of the Contract, the decision maker had to award EOT on a fair and reasonable basis;
  • Where there were concurrent delays, irrespective of when delay events started and finished, in the absence of one particular cause of delay being dominant, arriving at a fair and reasonable award of EOT may involve an apportionment exercise; and
  • The "but for" test for causation did not apply in respect of Clause 25 of the contract, (i.e. the delay would not have occurred "but for" the event giving rise to the delay).

Applying these principles, Shepherd Construction was entitled to a nine week EOT. City Inn appealed.

On appeal the majority decision was given by Lord Osborne with Lord Kingarth concurring. In his decision, Lord Osborne set out what he considered to be the correct approach in applying Clause 25 to EOT assessment as follows:

  • The relevant event must be likely to have or actually delayed the Works;
  • Causation is to be decided by applying common sense rather than "philosophical" principles of causation;
  • If a dominant cause of delay can be identified, other causes will not be considered and where the dominant cause is not a relevant event, the claim will fail; and
  • It is for the decision maker, using a fair and reasonable approach, to apportion delay where there is a relevant event and a non-relevant event in the absence of any dominant cause of delay (Lord Carloway dissenting on this point).

Further, their Lordships all agreed that it is not necessary to have a critical path analysis in order to determine an EOT. The court took the view that it is for the decision maker to decide whether such an analysis would assist in determining EOT. A lack of a critical path analysis is not fatal to a claim for EOT.

Conclusion

The decision in City Inn appears to be a vote for applying common sense and reasonableness when deciding EOT issues under standard form construction contracts, particularly when it comes to the issue of causation and concurrent delay.

For inquiries related to this Legal Update, please contact:

Kevin Owen ( )

Richard Lyons ( )

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