Extension of the time claims clarified
21/03/2011
Let me tell you about the recent Scottish case of City Inn –v- Shepherd Construction. It will be of interest to any contractors out there who are concerned with extension of time claims and liquidated damages. It will also be of interest to architects who have responsibility for administering building contracts day to day.
Shepherd agreed to construct a 168 bed hotel in Bristol for City Inn. The completion date was to be the 25th January 1999. Liquidated damages were fixed at £30,000 per week. Practical completion was certified on the 29th March 1999. This was nine weeks late. The architect granted Shepherd an extension of time of four weeks but this left them liable to City Inn for liquidated damages in the sum of £150,000 for the remaining five weeks.
Adjudication proceedings were commenced and the Adjudicator decided Shepherd should have an extension of time for the full nine week period and that City Inn should repay the £150,000 liquidated damages. An Adjudicator’s decision however is only binding unless and until one or other party decides to go to Court and in this case City Inn decided to go to Court.
In Court City Inn said Shepherd should have no extension of time at all – not even that which had been given by the architect. Shepherd said it should have an extension of time totalling 11 weeks. The case lasted 29 days during which time the Judge heard from a number of witnesses on each side including expert witnesses. The expert for Shepherd favoured a common sense approach based on practical experience and concluded 11 weeks had been lost due to late instructions from the architect at critical points during the contract. The expert for City Inn produced a critical path analysis which was computer based and which concluded none of the late instructions complained of caused any delay. The Judge preferred the commonsense approach and awarded Shepherd an extension of time of nine weeks. In other words he agreed with the Adjudicator.
City Inn appealed to a higher Court where the appeal was heard by three Judges. The appeal lasted 13 days and the decision was handed down in July this year. Note this is more than 11 years after the work was finished! In the end two of the three Judges agreed with the lower Court. Its decision stood.
The Judgments analyse in detail how one should approach an extension of time claim under the JCT Standard Form where there are overlapping delays some of which are “relevant events” under JCT which give rise to an extension of time and others are not. The point is significant because if an extension of time is granted it relieves the contractor of the obligation to pay liquidated damages.
The Judgments are lengthy but the key points can be summarised as follows:
- If there is a dominant cause of delay other causes should be ignored. If the dominant cause is a “relevant event” under JCT then an extension of time should be granted. If the dominant cause is not a “relevant event” there is no entitlement to an extension of time.
- If there are two causes of delay running concurrently, one being a “relevant event” and the other not, and neither cause is a dominant cause, it is for the architect to apportion the delay as between the relevant event and the other event in granting whatever extension of time is fair and reasonable.
- While some architects might find a critical path analysis helpful in analysing an extension of time claim a critical path analysis is by no means essential.
The decision in City Inns appears to be a strong vote in favour of commonsense when it comes to deciding extension of time claims. Mind you I would not like to be the one picking up the tab for all those days in Court!
If you have any queries or questions regarding this article please contact Michael McCord on 028 9055 3314, by email
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