Dispute Resolution Coursework

 Introduction

This report will discuss the different approaches to concurrent delays in construction contracts by reviewing various construction cases where disputed have arisen.

I will also analyse the findings in the recent Court of Session case of City Inn v Shepherd Construction (2010) and assess the extent to which an appeal against the decision to the Supreme Court may succeed.

Order custom essay Dispute Resolution Coursework with free plagiarism report

450+ experts on 30 subjects Starting from 3 hours delivery

Get Essay Help

Concurrent Delay

A “concurrent delay” is a term used loosely by the construction industry without any real definition. It is not uncommon for more than one delay to occur on a construction project at any given time which delays the completion of the works. A concurrent delay usually occurs when actions by the client and contractor simultaneously delay the project. However there is no clear guidance on the most suitable method for considering an extension of time when there is a concurrent delay usually involving the contractor and employer. (Cushman et al, 2001).

Judge Seymour in the case of Royal Brompton Hospital NHS Trust v Frederick A Hammond & Ors1 describes a concurrent delay as, “Two or more delay events occurring within the same time period, each independently affecting the Completion Date.” He goes on to say;

“It is, I think necessary to be clear what one means by events operating concurrently. It does not mean, in my judgement, a situation in which, work already being delayed, let it be supposed, because the contractor has had difficulty in obtaining sufficient labour, an event occurs which is a Relevant Event and which, had the contractor not been delayed would have caused him to be delayed, but which in fact, by reason of the existing delay, made no difference. In such a situation although there is a Relevant Event, the completion of the Works is not likely to be delayed thereby beyond the Completion Date.” (www.charlesrussell.co.uk, February 2011).

From Judge Seymour’s statement a concurrent delay can therefore be defined as two events that happen at the same time.

Causes of a Concurrent Delay

A delay can vary due to the different consequences for example an excusable delay is the fault of the employer such as late issuing of drawings which entitles the contractor to an extension of time and an inexcusable delay is due to the fault of the contractor. A neutral event may occur as a result of unforeseen ground conditions or adverse weather conditions. There a number of different scenarios that arise where delays are considered to be concurrent. They are as follows:

• A delay that is caused by both employer and contractor.
• A neutral event and contractors delay.
• A neutral event and employers delay.
• A neutral event where the contractor is entitled to more time and a financial payment.
• An employer’s delay where the contractor is entitled to more time and a financial payment.
• A contractor’s delay where the employer is entitled to a financial payment. (www.theqsi.co.uk, February 2011)

Approaches to Concurrent Delays

There are a number of approaches when considering an extension of time with some having more success than others. They are as follows;

• Apportionment approach
  ‘but for’ approach
• First in Line approach
• Dominant approach
• Malmaison approach

• Apportionment Approach

The apportionment approach is where the total cost of the delay is distributed between the parties responsible for that delay. Although this is a logical approach it is not supported in the courts as when it comes to a breach of contract they usually look to relate any loss to a single cause. (www.alway-associates.co.uk, March 2011).

If a dominant cause cannot be identified the courts say, “It may be possible to apportion the loss between the causes for which the employer is responsible and other causes. In such a case, it is obviously necessary that the event or events for which the employer is responsible should be a material cause of the loss. Provided that the condition is met, the apportionment of loss between the different causes is possible in an appropriate case.” (www.cila.co.uk, March 2011).

One of the most controversial cases that adopted the apportionment approach is City Inn v Shepherd Construction Ltd. As the causes of the delay were the fault of both the employer and contractor the contractor was entitled to an extension of time. Lord Drummond said, “where there is time concurrency between a relevant event and 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 must be fair and reasonable.” (www.clarkslegal.com, March 2011). It was the contract administrator’s duty to award Shepherd construction an extension of time on a “fair and reasonable” basis. (Smith, 2010). However shepherd construction did not deem this to be sufficient and wanted a significantly longer extension of time as well as payment of loss and expense. As there was no dominant event causing the delay the court apportioned the delay between the causes. (Smith, 2010).

In case of John Barker Construction Ltd v London Portman Hotel Ltd [2004] Lord Young indicated the most appropriate approach would be to apportion the cost of the delay between the employer and contractor he states, “This is a case where delay has been caused by a number of different causes, most of which were the responsibility of the employer, through the architect, but two of which were the responsibility of the contractor. It is accordingly necessary to apportion the defenders prolongation costs between these two categories of cause. I consider that the same general consideration, the causative significance of each of the sources of delay and the degree of culpability in respect of each of those sources, must be balanced.” (www.dac.co.uk, March 2011).

Another case that applied the apportionment approach is the case of Musselburgh and Fisherrow Co-operative Society Ltd v Mowlem (Scotland) Ltd (2005). This case involved a number of defects to a swimming pool. The court decided to apportion the costs of defect s which included changing channels and gratings and the replacing of the waterproof membrane. (www.scotcourts.gov.uk, February 2011).

For the apportionment approach to apply the causes contributing to the loss must start and finish at the same period which is highly unlikely. It also depends on the court’s understanding of the particulars and the use of complex ideas. Keating (2000) encourages the use of apportionment he states, “Where the loss or damage suffered by the plaintiff results partly from his own conduct and partly form the defendants breach of contract it is correct in principle for the damages to be apportioned.” (Keating et al, 2000).

• The ‘but for’ Approach

This approach has not had great success and is reflected in the fact no cases can be found to support this approach. However despite its low success rate it is favoured by contractors as they tend to adopt this approach in reply to the first in line argument even though it is usually rejected by the courts. The contractor’s argument is based on the circumstance that a delay to a particular event would not have happened ‘but for’ an architect’s instruction requesting additional work to be carried out. (www.charlesrussell.co.uk, February 2011). Basically the contractor believes the additional work the reason a delay has occurred. This is supported by Fletcher (1998) who states that the ‘but for’ approach exonerates the contractor but only when, “events for which the contractor is not responsible compound delay already caused by the contractor.” (Fletcher, 1998).

• First in Line Approach

This approach adopts the logic that if a delay has arisen due to a number of events the event that occurred first will be responsible for the whole delay. This means any other contributing events to the delay will be overlooked so long as the completion date is not affected and it does not carry on after the first event. (www.rics.org, March 2011). For example it is the responsibility of the employer to give the contractor access to the site on the day the works are due to commence i.e. 29 January. However if access is not provided a delay occurs commencing on the 29 January and if severe weather prevents work from starting on the 7 February the first in line approach will apply therefore the delay in access will take priority over severe weather until access is provided. If the contractor gains access to the site on the 16 February but the severe weather conditions persists until the 21 February then an extension time can be granted with regards to the severe weather. (www.rics.org, March 2011).

• Dominant Approach

The dominant approach analyses the causes of a delay and decides which event is the most dominant or predominant. (www.charlesrussell.co.uk, February 2011). Keating (2000) defines a dominant event as, “If there are two causes, one the contractual responsibility of the defendant and the other the contractual responsibility of the plaintiff the plaintiff succeeds if he establishes that the cause for which the defendant is responsible is the effective dominant case. Which cause is dominant is a question of fact, which is not solved by the mere point of order in time but is to be decided by applying common sense standards.” (Keating, 2000).

An important case in Scotland that adopted the dominant approach is case of John Doyle Construction Ltd v Laing Management (Scotland) Ltd (2004). John Doyle claimed for loss and expense of ?4.8 million and a twenty two week extension of time as they believed Laing Management had disrupted and delayed the progress of the works. Laing Management contended that as John Doyle claim was global and therefore it could not succeed so long as any one of the claims where proven not to have been caused by them. (www.cila.co.uk, March 2011). However Lord McFayden who was involved in the case stated, “The global claim may fail, but there may be in the evidence a sufficient basis to find casual connections between individual losses and individual events, or to global claims and the problems of concurrent cases arise time and again in relation to delay and loss and expense claims.” (Ross, 2004).

Lord McFayden allowed the claim to proceed however Laing appealed his decision to the Court of Session. At the Court of Session Lord Drummond young agreed with Lord McFayden he said, “if any events or events for which the employer is responsible can be described as the dominant cause of an item of loss, that will be sufficient to establish liability, notwithstanding that other events played a part in its occurrence.” (Ross, 2004).

Therefore if the contractor can prove the events for which he depends on are the duty of the employer then he will be required to, “prove casual links between individual events and particular heads of loss.” (www.cila.co.uk, March 2011). Where loss has occurred through events the employer is responsible for and through events that he is not, the court states that the contractor must prove the events that the employer is accountable for are the “proximate or dominant cause of loss” In order for the claim to succeed.

However there are problems associated with the dominant approach especially when there are events that contribute equally to the cause of the delay. Therefore the grounds for recuperating loss and expense could be unfair to one party. For example as a dominant cause apportions responsibility to one party which therefore gives the bases for recovery of loss and expense by the other party. However this gives the claiming party the right to recover cost for the entire delay even though the causes contributing to the delay may not be sufficient enough for grounds of recovery. (www.alway-associates.co.uk, March 2011).

In the case of H. Fairweather & Co. Ltd v. London Borough of Wandworth (1988) the dominant approach was rejected by the court due to the problems discussed previously. (www.alway-associates.co.uk, March 2011). During the construction of the works, consisting of 480 homes, the project was delayed due the late issue of variations and strikes by the workforce. When the case went to arbitration it ruled in favour of the architect and suggested that the strikes had been the dominant cause. However the contractor appealed the decision to the courts who overruled. The judge stated, “On the assumption that condition 23 is not solely concerned with liquidated or ascertained damages but also triggers and conditions a right for a contractor to recover direct loss and expense where applicable under condition 24 then an architect and his turn an arbitrator has the task of allocating where the facts require it the extension of time to the various heads. I do not consider that the dominant test is correct.” (www.brewerconsulting.co.uk, March 2011).

• Malmaison Approach

This approach was established in the case of Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999). It came about not because the dispute was resolved but by both parties agreeing to resolve elements of the dispute which the court then approved. (www.alway-associates.co.uk, March 2011). This was the first instance the court acknowledged that an extension of time should not be refused when a delay caused by the contractor is concurrent with a delay caused by the employer.

During the case concurrent delays were discussed in detail but the main focus was on how delays caused by both the contractor and employer should be interpreted. Judge Dyson said, “It is agreed that if there are two concurrent causes of delay, one of which is a relevant event, and the other is not, then the contractor is entitled to an extension of time for the period of delay caused by the relevant delay notwithstanding the concurrent effect of the other event,” (www.alway-associates.co.uk, March 2011).

Judge Dyson went on to explain this in simpler terms he said, “For example if no work is possible on a site for a week not only because of exceptionally inclement weather (a relevant event) but also because the contractor has a shortage of labour (not a relevant event) and if the failure to work during that week is likely to delay the works beyond the completion date by one week, then if he considers it fair and reasonable to do so, the architect is required to grant an extension of time of one week. He cannot refuse to do so on the grounds that the delay would have occurred in any event by reason of the shortage of labour.” (www.alway-associates.co.uk, March 2011).

This approach entitles the contractor to an extension of time when they are responsible for the delay at the same time the employer is also causing the delay. This is due to the contractors delay occurring at the same time as a neutral event i.e. inclement weather.

In the more recent case of Steria Limited v Sigma Wireless Communications Limited (2007) the Malmaison apporoach was adopted. A dispute occurred between both parties as Sigma did not pay the final contract price owed to Steria. Sigma argued that completion of the works were delayed due to events caused by Steria and therefore where entitled to claim loss and expense. Judge Davies considered whether or not Steria should have been entitled to an extension of time. The judge ruled that Steria should have been granted an extension of time as the delay was not predominantly caused by them and because the matter relied upon was not the dominant cause although it did have equivalent contributing influence with other events relating to the delay. (www.pinsentmasons.com, March 2011).

Analyse of City Inn v Shepherd Construction Ltd

In 1997 City Inn appointed Shepherd construction to construct a hotel in Bristol under a JCT form of contract. The initial completion date of January 26, 1999 was extended by the architect but only by two weeks. The project was not completed until the 29 March 1999 therefore incurring a nine week delay. The same day the architect issued a two week extension of time he also issued a non-completion certificate and stated the contractor had failed to complete the works by the extended completion date therefore allowing City Inn to deduct liquidated damages. (www.jonesday, March 2011).

The dispute arose as Shepherd construction claimed they were entitled to eleven weeks extension of time as a result of the architect issuing instructions late and also demanded damages for loss and expense at ?11,500 per week. City Inn argued that as the works were completed late they were entitled to liquidated damages of ?30,000 per week for nine weeks therefore proceeded to withhold ?270,000 of damages. (www.cila.co.uk, March 2011).

In summary the concurrent causes of delay claimed by both parties are as follows;

• Employer- Defective work and late completion
• Contractor – Architects Instructions and variations issued late

The dispute went to adjudication where the adjudicator ruled in favour of the Shepherd construction. The adjudicator awarded Shepherd construction a nine week extension of time and instructed City Inn to repay the monies owed to the Shepherd construction. However City Inn did not agree with the adjudicator’s decision and appealed to the Scottish Court of Session. The case went to court before Lord Drummond Young.

•  Lord Drummond Young’s Decision

The experts of both parties agreed that a critical path analysis could not be carried out as there was no accurate programme establishing how the contractor intended on carrying out the works. Lord Drummond Young therefore had to judge what impact the actions of City Inn and Shepherd construction had on the overall delay of the whole project. (www.cila.co.uk, March 2011).

Lord Drummond Young concluded that all the delays identified by City Inn and Shepherd construction were concurrent causes of delay. Therefore under clause 25 of the contract Lord Drummond Young was required to make a judgement and reach a “fair and reasonable” decision on an extension of time. (www.pinsentsmasons.org, March 2011). Due to the absence of a dominant cause Lord drumming Young adopted a “common sense” approach and apportioned the delay between the relevant event and other events to reach a fair and reasonable outcome. (www.cila.co.uk, March 2011). Lord Drummond Young stated the adjudicator was correct to award Shepherd Construction a nine week extension of time. However City Inn where not happy with his decision and decided to appeal his ruling to the Supreme Court.

•  The Appeal Decision

The appeal launched by City Inn was rejected by all three judges however they did not all fully support Lord Drummond Young’s ruling on awarding an extension of time. Lord Osborne delivered the bulk of the judgment with Lord Kingarth agreeing with his assessment. Lord Osborne set five propositions for the proper approach to be taken when granting an extension of time:

Before a claim for an extension of time can succeed a relevant event must be proven to have caused a delay and as a result the works will be delayed.
When considering whether or not a relevant event has caused a delay a common sense approach must be taken.
A critical path analysis will help the decision maker determine the cause of the delay however it is not relied upon for the claim to succeed.
If a dominant cause of delay can be identified then effect will be given to that delay by leaving out of account any cause of or causes that are not material. The claim will fail if the relevant event is not a dominant cause.
If there is no dominant cause the contractors claim should not automatically fail. The decision maker should, “approach the issue in a fair and reasonable way, to apportion the delay in completion of the works between the relevant event and the other event.” (www.pinsentsmasons.org, March 2011).

Although Lord Carloway agreed with the result of the case however he rejected the Lord Drummond Young’s apportionment approach. Lord Carloways stated it was the architect’s responsibility to judge whether or not a delay was the result of a relevant event. Therefore the contractor should be granted an extension of time so long as he can prove the cause of the delay is a relevant event.

•  Likelihood of an Appeal Succeeding

I believe an appeal by City Inn to the Supreme Court would be unsuccessful. From the two cases already put before the courts all four judges have agreed that the decision to award the contractor an extension of time was the correct one after considering the arguments of both parties.

The judges put great emphasis on adopting a common sense approach when considering an extension of time in order to make a fair and reasonable decision. Concurrent causes of delay arose as no dominant cause of delay could be identified and therefore apportionment approach was adopted which had strong support from all the appeal judges.

If an appeal was made to the Supreme Court I believe the judge would reject City Inns appeal as it is clear to see a common sense approach has been adopted to achieve a fair result between City Inn and Shepherd Construction.

References:

Literature:

• Cushman, R., Carter, J., Gorman, P. And Coppi, D., (2001). Construction Disputes: Representing the Contractor
• Fletcher A. (1998) Key issues in Time Extension claims, Building and Construction Law
• Keating D., Ramsey, V., Furst S. (2000) Keating on Building ContractsRoss J., (2004) Knowledge Is Power: The Freedom of Information Act comes into Force
• Smith H., (2010) Construction Dispute Avoidance; Herbert Smith, Newsletter no.18

Websites:

• http://www.alway-associates.co.uk/legal-update/article.asp?id=24
• Accessed 03/03/11http://www.brewerconsulting.co.uk/cases/RPC_CES4.htm
• Accessed 01/03/11http://www.cila.co.uk/files/Construction/Kennedys/Concurrency%20Talk.pdf
• Accessed 04/03/11
• http://www.charlesrussell.co.uk/UserFiles/file/pdf/Construction%20&%20Engineering/BB_sept_2010/concurrent_delay.pdf
• Accessed 26/02/11http://www.clarkslegal.com/Article/533/Counting+the+cost+of+lost+time+-+apportioning+concurrent+delay+in+EOT+claims
• Accessed 13/03/11 http://www.dac.co.uk/documents/resources/articles/Delaying_tactics_Property_Law_Journal
• Accessed 13/03/11 http://www.jonesday.com/extensions-of-time-concurrent-delays-and-causation-city-inn-v-shepherd-judicial-guidance-from-the-uk-courts-at-long-last-05-14-2008/
• Accessed 16/03/11 http://www.pinsentmasons.com/PDF/SteriavStigma0408.pdf
•  Accessed 17/03/11 www.pinsentsmasons.org/PDF/CityInnLtd.pdf
• Accessed 18/03/11 http://www.rics.org/site/download_feed.aspx?fileID=3400&fileExtension=PDF
• Accessed 05/03/11 http://www.scl.org.uk/node/533 Accessed 26/02/11 http://www.scotcourts.gov.uk/opinions/2006hcjac27.html

Don't let plagiarism ruin your grade

Run a free check or have your essay done for you

Check my essay Hire Writer