Delay and Disruption
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KEYWORDS: |
Delay and Disruption, analysis, concurrent causes, extension of time, liquidated damages, JCT 1980, as-built critical path analysis, comparative method, Lord Drummond Young. |
The opinion of Lord Drummond Young in the Scots case of City Inn Ltd v Shepherd Construction Ltd [2007] CSOH CA101/00 is a useful exposition of the practical problems in the analysis of delay in construction projects. I have examined this issue in detail in my book "Causation in Construction Law - Principles and Methods of Analysis". I have therefore prefaced the case commentary below with relevant extracts from my book.
The contract was for the construction of a hotel in Bristol under an amended JCT 80 Form. The date of possession was 26 January 1998, practical completion was certified as 29 March 1999 and the extended Completion Date was 22 February 1999. The result of the certificates was that the contractor, Shepherd, was awarded a 4 week extension of time but the Employer, City Inn, was entitled to deduct liquidated damages for a 5 week period from 23 February 1999 at a weekly rate of £30,000.
In adjudication the Adjudicator awarded an overall 9 week extension of time (a further 5 weeks) and directed the repayment of the total sum of £150,000 deducted as liquidated damages.
In the court proceedings, Shepherd claimed an extension of time of 11 weeks and a declaration that that the Completion Date was 14 April 1999. City Inn claimed that no extension of time was due. There were other issues relating to procedure and particularly Clause 13.8, but these are not examined in this commentary. Shepherd also claimed two weeks prolongation costs of £27,069 as loss and expense, recognising that the Adjudicator had already awarded prolongation costs for 9 of the 11 weeks claimed.
The case is concerned with the details of the construction process and causation in law when there are concurrent events. Expert evidence was central to the case. Generally Lord Drummond Young preferred the approach of the Shepherd expert based on a thorough examination of the construction process and the evidence of a key witness to the construction instead of an as-built critical path analysis prepared by City Inn's expert.
"The evidence of an expert ... will be highly cogent if the expert is objective, meticulous as to detail and importantly not adhering inflexibly to theory when proven facts are inconsistent with computer programme logic. The expert must have sufficient intellectual rigour to admit to the possibility of doubt in his analysis when faced with new evidence particularly from another expert." para 4.10 Causation in Construction Law
Both City Inn and Shepherd each relied upon expert evidence of their programming expert, but only Shepherd led any witnesses of fact. Despite criticisms of the witnesses and experts by the parties, Lord Drummond Young found that all the witnesses were generally reliable and were doing their best to present their evidence in a fair and impartial manner. He found that both experts were well qualified to speak about the issues that arose, so that in choosing the evidence Lord Drummond Young was guided by the details of their evidence and the inherent likelihood of their respective views against the known facts.
Shepherd's expert evidence was based on the evidence of its witnesses, the diaries and weekly reports disclosed by City Inn and his discussion with City Inn's expert of the as-built programme prepared by City Inn's expert. Shepherd's expert had changed his views as more information became available and this was criticised by City Inn.
Lord Drummond Young did not accept the criticism of Shepherd's expert but instead considered that the change in opinion in the light of further information showed an openness of mind and a basic fairness of approach.
"If the Bar Chart is a record of the as-built work, then the start and finish of each activity may not be properly identified and therefore insufficiently accurate to infer the as-built construction logic. Without records of resources, the recorded durations may inaccurately represent continuous activity, when in fact there may be periods when no resources were used or there was no working." para 5.7.2 Causation in Construction Law
"The facts stated in the as-built programme and selected by the expert preparing the programme, may be considered unreliable and inaccurate if the best evidence available has not been used. In some cases, the best evidence will be that of the participants closely and continuously involved with the project." para 5.58 Causation in Construction Law
"The selection of facts to be used may require an element of judgment particularly on technical matters and when faced with apparently conflicting information. The selected fact will then be an inference based on all the information available. The judgment must be objective and logical to be accurate and reliable. A delay analysis will be unreliable if the data included in the programme is selected and characterised by others rather than the expert, and the judgment of others cannot be tested. It is particularly important that the expert carries out adequate research and checks the data used and has sufficient intellectual rigour to admit the possibility of doubt when new evidence comes to light. .." para 5.59 Causation in Construction Law
Only City Inn's expert carried out a full as-built critical path analysis of the project and he produced a filtered as-built programme. His analysis was based on inspection of Shepherd's construction programme and the records of the project. It was accepted by City Inn that this approach required an element of subjective judgment which relied upon the knowledge and experience of its expert of programming in the construction industry.
Lord Drummond Young did not accept City Inn's criticism of Shepherd's expert based on the premise that an expert could only give a meaningful opinion on the basis of an as-built critical path analysis. Instead he considered that an as-built critical path approach had serious dangers. He considered that the major difficulty was that any significant error in the information fed into the programme was liable to invalidate the entire analysis and it was easy to make such errors.
He considered that these difficulties invalidated the use of the as-built critical path analysis to discover after the event where the critical path lay, at least in the case where full electronic records were not available to the contractor.
"Although causation in law is not simply a matter of logic, any delay analysis must be logically accurate if it is to have any weight as evidence." para 4.25 Causation in Construction Law
"It is difficult to establish the actual logic of construction from documentary evidence, even if revised method statements and programmes are available. Inevitably, it is necessary to obtain evidence from witnesses of fact and particularly engineers and work managers." para 6.168 Causation in Construction Law
Lord Drummond Young observed that a critical path analysis depends upon a logical sequence of activities. Each activity falling on a critical path could only be performed when a certain stage had been reached in a logically preceding activity. That stage varies. On occasion the succeeding activity may be in a position to start as soon as the preceding activity has started. In other cases it is necessary that the preceding activity should have finished before the succeeding activity can start. In yet other cases it will suffice if the preceding activity has been carried out in part to enable a start on the succeeding activity. If an activity is on the critical path to completion, any delay in starting the activity or any increase in the length or duration of the activity will produce a consequential effect on the date for completion.
City Inn expert's method of handling the programme involved linking activities in three ways.
City Inn's expert also took account of four types of constraint that might affect progress.
On the basis of the above approach and the as-built critical path analysis, City Inn's expert gave the opinion that none of the matters relied upon by Shepherd for the claim for extension of time, caused any delay.
Shepherd's expert identified errors in the logic of the as-built programme and during cross-examination City Inn's expert accepted the inaccuracy of some of the logic links in his programme analysis. The nature of the inaccuracies is instructive:
The Shepherd expert had considered undertaking a critical path analysis, but decided not to do so. He did not have access to an electronic version of Shepherd's original programme for the project, and because of this it was impossible to identify the original critical path through the programme. Nevertheless, making use of his experience in programming, he attempted to replicate what he surmised might be the logic of the original programme but he had no great confidence that his version of that programme was either correct or complete. He considered that to continue with a critical path analysis based on logic that he knew not to be completely correct would have meant that he could not be sure of the evidence that he was giving to the court. Rather than following such a course, he adopted an analysis using a comparative method.
Lord Drummond Young concluded that the full as-built critical analysis by City Inn's expert was of doubtful value and crucially concluded that it was impossible to surmise what the programme might show if the correct logic links were inserted. He concluded that the existence of a substantial number of incorrect links vitiated the programme.
Lord Drummond Young held that it was not possible to base any reliable conclusions upon the as-built critical path analysis.
"The accuracy of the inference from the comparison method depends upon the reliability and accuracy of the model of the two situations. The inference from a comparison of a single activity may be relatively accurate particularly if the activity is a milestone or comprises a simple activity of continuous duration. There is less certainty when the activity comprises many non-continuous activities with different resources. The comparison method has little analytical value when used to make inferences as to the cause of delay to completion of the whole project. The inference cannot logically be made that one particular event from all the variables caused the overall delay without more." para 6.8 Causation in Construction Law
"Any inference made by comparison cannot be certain unless the inference itself is sufficiently probable and is not rebutted by other evidence." para 6.10 Causation in Construction Law
In the absence of reliable critical path analysis, Lord Drummond Young held that it was necessary to revert to the methods that were in use before computer software came to be used extensively in the programming of complex construction contracts. Lord Drummond Young observed that this was what the Shepherd expert had done and he found his evidence to be generally cogent and persuasive, and for the most part his analysis was adopted. He observed that his method appeared to be based on sound practical experience and on common sense. The logical connections that he drew in discussing programming were found to be entirely intelligible.
The method was to understand the construction process involved in that project so as to identify events in the process which logic, experience and common sense suggested would be critical to completion as a whole unless exceptional measures were taken to recover lost time. He identified events in the construction programme that he considered to be critical and discussed them with a key witness of fact who confirmed in relation to each that he also considered them to be critical for completion of the works.
The details of the approach adopted are given in summary below, since they demonstrate the importance of understanding the construction process.
The event in issue was an instruction to change the membrane at the foundation and the effect that this had on the method and sequence of construction.
The ground floor slab, made of concrete, was reinforced by concrete beams. The analysis of delay to this part of the works and completion without a logic linked programme did not cause any difficulty. Lord Drummond Young readily accepted that constructing the ground floor slab was critical because the reinforced concrete frame of the building was constructed on that slab and was accordingly dependent upon it. He accepted as obvious that a delay in the ground floor slab would inevitably delay completion of the Works as a whole unless exceptional measures were taken to recover lost time. The delay in the ground floor slab delayed the construction of columns and walls to the first floor, which in turn delayed the first floor slab, which in turn delayed columns and walls to the second floor, and so on. The length of the delay was 3 1/2 weeks, supported by the opinion of Shepherd's expert and contemporaneous evidence.
In the original specification a gas proof membrane was to be inserted at foundation level to prevent the emission of radon gas from the soil under the building. The form of membrane originally specified was a product known as Bituthene. The membrane was laid on top of the hardcore which supported the ground beams and ground floor slab. The membrane was continuous, and passed under both beams and slab. Lord Drummond Young accepted that it was common practice to pour the ground beams homogeneously with the ground floor slab in a single pour.
The architect instructed the use an alternative form of membrane known as Proofex. Lord Drummond Young accepted that it was necessary to construct polythene pipes through the ground beams to allow gas to pass out of the building. Those pipes involved a more complex form of construction and a sequenced build with the ground beam first followed by the venting system and followed by the slab.
Lord Drummond Young considered that the only explanation for the delay that has been advanced was the change in the construction activities necessitated by the gas venting scheme. No other tenable alternative had been put forward. The conclusion was supported by the contemporary claim and the reaction to that claim. There was also evidence in the Clerk of Works' diary that considerable work was involved in the construction of the ground beams. This was entirely consistent with the conclusion.
Lord Drummond Young held that the instruction of the gas venting scheme was a Relevant Event for the purposes of clause 25.4.5.1.
The event was an instruction to change the roof coverings from a built−up system to the Stramit Speedeck system. There was an issue as to the system incorporated in the contract but Lord Drummond Young held that the instruction was a change and that Shepherd had applied in writing for the instruction as required by Clause 25.5.5.6 of the contract. The issues then were whether the instruction was received in due time as required by Clause 25.4.6 of the Contract and the extent of any delay caused.
Lord Drummond Young considered the meaning of "due time" in Clause 25.4.6 and adopted the meaning of "in a reasonable time" stated by Lord Fraser of Tulleybelton in Percy Bilton Ltd v Greater London Council [1982] 20 BLR 1 HL. He also referred to the judgment of Diplock J in Neodox Ltd v Borough of Swinton and Pendlebury [1958] 5BLR38 for the meaning of "in a reasonable time". He considered the factors referred to by Diplock J and made the following observations on each.
Although the Package Procurement Schedule showed that full information relating to roof steelwork should have been available by 8 April 1998, Shepherd's expert and its key witness both favoured a date of approximately 11 May 1998 and Lord Drummond Young accepted that evidence. He considered the date reasonable in all the circumstances particularly in view of a 10 week lead-in period required for steelwork and two weeks required for the tendering process.
Lord Drummond Young found that full details were only provided by the Architect by 17 July 1998 which was wholly incompatible with Shepherd's original programme which showed steelwork due to start on 27 July 1998 and the Package Procurement Schedule which showed a date of 29 July 1998.
The next issue then was the delay to completion caused by the late instruction. Again in the absence of a logically linked programme, Lord Drummond Young considered the detail of the construction process. He accepted the evidence of Shepherd's expert and a key witness of fact that the roof steelwork and roof coverings was critical to completion.
Lord Drummond Young found that the steelwork was delivered to site on 1 September 1998 five weeks later than planned. He held that 5 weeks of delay to completion was caused by the late instruction and accepted the evidence of Shepherd's expert that the actual duration of the installation of the roof steelwork and roof coverings was in fact exactly the same as the duration planned. It was conceded by Shepherd that the 3 1/2 week delay resulting from the gas venting scheme was contemporaneous with the five week delay resulting from the late instruction of the system of roof cladding.
The events were nine instances of instructions issued by the replacement architects which Shepherd argued were late instructions.
Lord Drummond Young adopted the approach described above for Roof Steelwork and Cladding to ascertain whether or not the instruction was late. As to the analysis of the effect on completion, he observed that in a sense, as a contract nears completion, more items will fall on the critical path because practical completion is impossible until they have been completed. This culminates in the last item to be completed which is, of necessity, on the critical path. In relation to each of the nine items of work Lord Drummond Young accepted that each of them was on the critical path, in the sense that the work was necessary before a hotel could be said to have achieved practical completion.
Lord Drummond Young considered any extension to be granted was not to be on the basis of the delay in any individual case but on the basis of the whole of the causes of delay that were operative in the period following the contractual completion date.
Lord Drummond Young accepted various analyses of the Shepherd expert based on both what actually happened and estimates based on his experience of what was reasonable for a particular item of work.
Lord Drummond accepted that each of the nine Relevant Events had caused differing and overlapping delays which overall amounted to a further 6 weeks delay in addition to the 5 weeks for the late instructions to the Roof Steelwork and Cladding, giving a total of 11 weeks.
Shepherd's expert conceded that that the lifts had been installed late, and that this was a problem for which Shepherd had been responsible concurrent with other delays up to a date some 3 weeks before the extended date for completion sought. City Inn's expert was of opinion that Practical Completion could not have taken place until the work to the lifts had been completed.
Lord Drummond Young found that Shepherd changed its lift subcontractor due to serious concerns on lack of performance. Even with the second subcontractor, progress appeared to have been fairly slow as evidenced by the Clerk of Works' diary. No extension of time was sought by Shepherd for delay arising from the lift installation.
Lord Drummond Young held that the lift delay was the responsibility of Shepherd who did not argue the contrary and that the delay lasted to 3 weeks before the effect of the latest of the other delay events.
There was no dispute that work on the stair balustrades and finishes delayed completion and was the responsibility of Shepherd. No extension of time was claimed for the delay. The evidence of a key witness was that it was not possible to achieve Practical Completion without the main stair and the fire escape stairs. In order for these to be available for use the balustrading had to be complete, as the handrail was obviously necessary.
Lord Drummond Young held that the work on the stair balustrades and the stair finishes was a concurrent source of the delay in completion which lasted until the end of the effect of the latest of the other delay events.
Lord Drummond Young concluded that the delay in completion was the result of concurrent causes of which 11 events were late instructions or variations issued by the architect and Relevant Events. The two causes of the work on the lifts and the work on the stair balustrading were the fault of Shepherd. He held that none of the causes of delay were a dominant cause - each of them had a significant effect on the failure to complete timeously.
In considering the entitlement to extension of time and prolongation costs in a situation of concurrency, Lord Drummond Young usefully examined relevant caselaw and provided legal analysis which is set out below in summary under four convenient headings
"Only in the situation where the Relevant Event and the shortage of labour in the example affect the same activity, is the time difference the important characteristic. The contractor has already allowed, or put in train, the event of not providing sufficient labour so as to delay the activity. The Relevant Event simply occurs in the context of the operating event of the shortage of labour. The fact of the time difference, allows that conclusion to be made so that the issue of causation in law does not arise." para 3.51 Causation in Construction Law.
"In the situation where the Relevant Event and the shortage of labour do not affect the same activity, then the fact of the time difference may not allow that conclusion to be made." para 3.52 Causation in Construction Law.
Lord Drummond Young considered the example given by Dyson J in Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd [1999] 70ConLR32 and considered by Judge Richard Seymour QC in Royal Brompton Hospital NHS Trust v Hammond (No 7) [2001] 76ConLR148. The example has been examined in detail in my Book "Causation in Construction Law" as Example 1.
Lord Drummond Young observed that Judge Seymour explained what was meant by "events operating concurrently". He drew a distinction between on one hand a case where work has been delayed through a shortage of labour and a relevant event then occurs and on the other hand a case where works are proceeding regularly when both a relevant event and a shortage of labour occur, more or less simultaneously. Judge Seymour considered that in the former situation the relevant event had no effect upon the completion date.
Lord Drummond Young had some difficulty with the distinction made by Seymour J. He observed that it seemed to turn upon the question whether the shortage of labour and the relevant event occurred simultaneously. At least it assumed that the shortage of labour did not significantly predate the relevant event. He considered that to be an arbitrary criterion. It should not matter whether the shortage of labour developed, for example, two days before or two days after the start of a substantial period of inclement weather. In his view in either case the two matters operate concurrently to delay completion of the works. Lord Drummond Young considered that both of these cases should be treated as involving concurrent causes.
"It is implicit in the observations of Colman J that it is possible to provide a different risk regime by clear provisions of the contract dealing with concurrency. Nonetheless, it will be difficult for the Employer to construct a risk regime that allows the deduction of liquidated damages when there are concurrent events causing delay, without the provision being construed as a penalty." para 3.64 Causation in Construction Law.
"When the contract provides liquidated damages for delay, the allocation of risk is that the Contractor is not liable for liquidated damages when the delay is caused by a Relevant Event even if concurrent. On that basis, there is no question of apportionment. the contractor is simply not liable. When damages for delay are unliquidated, then the general difficulty of proving loss when there is concurrency remains as described above. The extension of time provisions then have less relevance in determining the risk regime for the Employer's loss due to delay, since the extension of time provisions no longer determine the level of damages even indirectly. The general principle will then apply as described below in the context of contractor's claims for prolongation costs." para 3.65 Causation in Construction Law.
In considering the interpretation of the extension of time provisions, Lord Drummond Young first referred to the purpose of extension of time clauses. He referred to the statements made by Lord Fraser of Tullybelton in Percy Bilton Ltd v Greater London Council [1982] 20 BLR 1 HL and concluded that extension of time provisions were of critical importance in ensuring that the contractor was not subjected to liquidated damages for events that were outwith his control. He recognised that extension of time clauses were construed strictly and that if the contractor is prevented from completing in time through the acts of the employer the liquidated damages clause will be the treated as inapplicable. He referred to the statement by Salmon LJ in Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd [1970] BLR 111. In that case Salmon LJ stated that
Lord Drummond Young considered that the analysis applied to instructed variations. He considered that it was implicit in Salmon LJ's analysis that an extension of time should still be available in cases where delay has been caused partly by the fault of the contractor and partly by the fault of the employer.
Lord Drummond Young then referred to the judgments of Colman J in Balfour Beatty Building Ltd v Chestermount Properties Ltd [1993] 62BLR1 and Dyson J in Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd [1999] 70CONLR32. He concluded from analysis of these cases that
Lord Drummond Young referred again to the analysis by Dyson J in Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd [1999] 70CONLR32 including the statement that in the situation of two concurrent events, the contractor is entitled to an extension of time for the period of delay caused by the relevant event notwithstanding the concurrent effect of a non-relevant event. Dyson J gave an example which I have analysed as Example 1 in my book, which involved concurrent delays of adverse weather (a relevant event) and shortage of labour (a non-relevant event) likely to cause one weeks delay to completion. Dyson J stated that if the architect considered it fair and reasonable to do so, he was required to grant an extension of time of one week. He could not refuse to do so on the grounds that the delay would have occurred in any event by reason of the shortage of labour.
Lord Drummond Young made the following observations of Dyson J's analysis
Lord Drummond Young then examined further decided cases including Australian and US cases to arrive at the proposition that it was appropriate in some cases of concurrency to adopt apportionment in the evaluation of the extension of time due. There is considerable difficulty in recognising in the cases the proposition put forward by Lord Drummond Young and indeed the cases appear to support the contrary position. This is discussed further below in the Concluding Commentary together with the more fundamental objections to the approach.
Lord Drummond Young stated that the ratio of Wells v Army and Navy Co−operative Society [1903] 86LT764 was that the fact that delay has been caused by matters for which the contractor was responsible would not deprive the contractor of his right to claim an extension of time for delay caused by a relevant event.
Importantly Lord Drummond Young referred to a modern statement of this principle in the Australian case of the Supreme Court of Victoria in SMK Cabinets v Hili Modern Electrics Pty Ltd [1984] VR 391 where Brooking J. considered the soundness of a decision of an arbitrator. The arbitrator had rejected the defence of prevention, acts of the employer that prevent the contractor from completing on time. The Arbitrator had considered that where acts or omissions of an Employer did in fact substantially delay completion, the Employer nonetheless could not be said to have prevented the contractor from completing by the relevant date unless the contractor would have been able to complete by that date had it not been for the supposed prevention. Brooking J observed that it had been accepted for more than one hundred years that this was not the law and that the cases were all one way.
Lord Drummond Young also referred to the summary by Brooking J. of the decision in Wells that if the supposed prevention was such as would in ordinary circumstances have made it impossible for the contractor to complete in time, then prevention had in law occurred, notwithstanding that the contractor may in fact have disabled himself by his own delays from completing by the due date.
Lord Drummond Young then turned to the interpretation of the extension of time provisions. He considered that implicit in the wording was a procedure to apportion responsibility for the delay between two concurrent causes, one a relevant event and the other a contractor default. He considered that where there was true concurrency between a relevant event and a contractor default, in the sense that both existed simultaneously, regardless of which started first, it might be appropriate to apportion responsibility for the delay between the two causes. The basis for such apportionment must be fair and reasonable, but precisely what was fair and reasonable was likely to turn on the exact circumstances of the particular case.
Lord Drummond Young referred to the approach taken by the Board of Contract Appeals in the US case of Chas. I. Cunningham Co.[1957] IBCA 60, 57−2 BCA P1541 for support for the proposition that the contracting officer, equivalent to the architect under the JCT Forms, was permitted to apportion the delay between the culpable and non−culpable causes. In that case Mr Slaughter stated that
Lord Drummond Young observed that the the decision of the Board of Contract Appeals in Chas. I. Cunningham Co. was followed in Sun Shipbuilding & Drydock Co. ANBCA 11300, 68−1 BCA (CCH) P7054 [1968].
Having concluded that there was no dominant cause of delay but concurrent events, Lord Drummond Young then considered the evaluation of the extension of time. He held that in the case of true concurrent causes Clause 25 required that the architect should determine the aggregate period within which the Works as ultimately defined should have been completed having regard to the incidence of Relevant Events. That determination had to be on a fair and reasonable basis. He held that where there was true concurrency between Relevant Events and events that involve contractor default, apportionment would frequently be appropriate, and the instant case was such a case. He considered that apportionment enabled the architect to reach a fair assessment of the extent to which completion has been delayed by Relevant Events while at the same time taking into account the effect of other events which involved contractor default.
Lord Drummond Young then considered the factors to be considered in determining the apportionment. He held that the exercise was broadly similar to the apportionment of liability on account of contributory negligence or contribution among joint wrongdoers. Two main elements were important:
Applying this approach to the instant case, Lord Drummond Young did not consider culpability to be a major factor. Nevertheless, he considered significant the sheer quantity of late instructions issued after replacement of the Architect. The fact that the failure to issue instructions followed requests for information which started on 7 October 1998 was also significant.
So far as to the causative significance of each of the events, Lord Drummond Young considered that all caused some delay. Two items had the longest lasting effect, one a late instruction Relevant event and the other the fault of Shepherd the contractor. In relation to the causative significance of each of the events for the Works as a whole, three late instruction relevant events affected all of the bedrooms in the hotel. In addition the number of Relevant Events was substantially greater than the number of items for which Shepherd was responsible. Some of them such as the gas venting and roof steelwork instructions, related to important matters that had significant effects on the overall progress of the Works.
Lord Drummond Young held, taking all these circumstances into account, that the part of the total delay apportioned to Relevant Events should be substantially greater than that apportioned to the two items for which Shepherd was responsible. he therefore held that Shepherd was entitled to an extension of time of nine weeks from the original Completion Date to 29 March 1999.
"The Inner House suggested in its example that the contractor would recover all his loss for the whole period of delay caused by the late information except for half his loss during the period when there was also concurrent adverse weather. It appears that the distinction being made by the Inner House is between neutral events such as weather and physical conditions and events that arise from actions or inactions of the contractor for which he would be considered liable." para 3.75 Causation in Construction Law.
"The reduction in additional costs due to the contractor by apportionment is fair only if the effect of weather in the example is considered to be a neutral event outside the control of both parties, but not if the risk has been allocated to the contractor under the contract." para 3.78 Causation in Construction Law.
"If the contract provides a seamless risk regime, then the risk of additional costs for all events will be allocated to either the employer or the contractor. There is no reason in that case why apportionment should apply. ...If there are two concurrent events, one the responsibility of the contractor and the other the responsibility of the employer, then fairness would suggest that the employer should not be liable for all the costs in the period of concurrent delay." para 3.80 Causation in Construction Law.
City Inn relied strongly on the opinion of the court in John Doyle Construction Ltd v Laing Management (Scotland) Ltd [2004] 1BLR295 in relation the issues of both extension of time and prolongation costs. Lord Drummond Young stated in the early part of his opinion that the principles in Doyle had only limited application to the issue of extension of time. He observed that Doyle was concerned with claims for loss and expense and although it might have some bearing on Shepherd's claim for prolongation costs it was not directly relevant to the granting of an extension of time.
Lord Drummond Young observed that the contractual wording of Clause 25 relating to an extension of time was different from Clause 26 relating to claims for loss and expense. In particular there was no reference in Clause 26 to the architect making an award that was fair and reasonable. He considered that the conceptual structure of the two clauses was quite different and the events that triggered an extension of time and a claim for loss and expenses were distinct. He held that the decision in Doyle was not of general assistance in the construction of clause 25.
Later in his opinion Lord Drummond Young observed that a claim for prolongation costs need not automatically follow success in a claim for extension of time and that different considerations might apply to Clauses 25 and 26. Nonetheless, having decided (as detailed above) that Shepherd was entitled to 9 weeks extension of time on the basis of apportionment. Lord Drummond Young held that in the instant case the claim for prolongation costs should follow the result of the claim for extension of time and that Doyle was relevant to allow the apportionment of loss between the two concurrent causes.
Lord Drummond Young held that delay had 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 was accordingly necessary to apportion the defenders' prolongation costs between these two categories of cause. He held that the same general considerations, 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. On this basis, he held that the result of the exercise should be the same. He held that there was no reason to treat the two exercises under clause 25 and clause 26 on a different basis.
Lord Drummond Young held that the rigidly logical principles of causation as they applied in the general law of contract and delict were not appropriate to the operation of Clauses 25 and 26, but instead the direct loss and expense sustained by the contractor should be apportioned between the events for which the employer is responsible and the events for which the contractor is responsible.
Lord Drummond Young held that Shepherd was entitled to its prolongation costs for nine weeks. Since that amount had in fact been paid in consequence of the determination of the adjudicator, no further sum was due.
The opinion of Lord Drummond Young is an important contribution to the analysis of causation in construction law. It emphasises the role and the duty of the expert in giving evidence. Once again the Court has rejected the approach that a critical path analysis programme provides all the answers and instead has concentrated on understanding the construction process and the application of common sense. In this regard see also the judgment of Mr Justice Ramsey in London Underground Limited v Citylink Telecommunications Ltd [2007] EWHC 1749 (TCC).
The opinion also identifies the inherent difficulties of an as-built critical path analysis. It is clear that the emphasis of any analysis should be on understanding and explaining the construction process. The original intention as shown on the planned programme is important evidence and particularly the construction logic together with the regular updates of the programme as work proceeds. Without such evidence and without the evidence of key witnesses of fact, any expert will have significant difficulties in constructing any critical path analysis let alone an as-built critical path analysis. Indeed that is why such an analysis by the City Inn expert was rejected by Lord Drummond Young and why generally he preferred the approach of the Shepherd expert. It is interesting to note that the Shepherd expert was trained as a civil engineer whereas the City Inn expert was a trained as a quantity surveyor. Although that was not an issue in the proceedings, it may explain the difference in approach adopted by each expert.
The most interesting part of the opinion of Lord Drummond Young is the interpretation of the extension of time clause 25 in the amended JCT 80 form. This represents a new development in law. Previous cases in which delay has been considered in the context of liquidated damages, have made clear that the "prevention principle" operates. The effect is that the extension of time clause will be considered ineffective if it does not allow an extension of time for an act of prevention, even if there are concurrent events the fault of the contractor. The argument that there cannot be an act of prevention because the contractor would have completed late anyway, was firmly rejected in the Australian case of SMK Cabinets v Hili Modern Electrics Pty Ltd [1984] VR 391 relied upon by Lord Drummond Young.
It is implicit in previous cases that it may be possible to draft extension of time clauses and an allocation of risk regime, which allows the Employer to levy liquidated damages even when there are concurrent causes of delay. Nonetheless it has never been suggested that the words "fair and reasonable" in Clause 25 of the JCT 80 Form allowed such an interpretation. Instead the previous interpretation has been that the parties must have contemplated the possibility of concurrent causes but nonetheless expressly provided for extension of time for a Relevant Event, even in that situation.
Further, the effect of apportioning delay for concurrent events is to allow the Employer to benefit from a delay which he has caused, albeit concurrently with delays caused by the Contractor, and to deduct liquidated damages. Although the "prevention principle" may be considered an anachronism, nonetheless it is the means which has been adopted by the Courts to allow the Employer to forgo the need to prove his loss in the normal way and instead apply a pre-estimate of that loss. The term "fair and reasonable" in Clause 25 is not sufficient to circumvent the application of the "prevention principle".
Further, in my view it is not fair and reasonable that the contractor, on the findings of fact in this case, should be liable for any liquidated damages for the 11 weeks delay. The events which delayed completion were not neutral events but voluntary acts by the Employer. The events were late instructions by the Employer, through his architect, and not events such as weather or physical conditions so there is little need to adopt the doctrine of apportionment to achieve justice. Further it is doubtful that the Employer has suffered any loss at all since on the facts even without the delays the fault of the Contractor, completion would have been delayed by 11 weeks. The effect of adopting apportionment is to allow the Employer to benefit from his own breach where he would not do so if he had to prove damages in the normal way. Of course the fact that the Employer has suffered no loss does not of itself prevent the levy of liquidated damages, but to use the doctrine of apportionment to achieve such a result does not appear fair. The effect is to change the allocation of risk under the contract. In short, it is unfair to the contractor to fix a completion date which would make the contractor liable in liquidated damages for events which were not the contractor's risk (paragraph 3.84.6 of my Book).
As to the adoption of the doctrine of apportionment for prolongation costs that can be similarly criticised. The defaults of the Contractor which caused the delay were again not neutral events so there would appear no sound reason to adopt the doctrine of apportionment to achieve justice. There is no difficulty of proof which requires a remedy of apportionment to do justice as in medical cases such as Barker v St Gobain Pipelines plc [2006[ UKHL20 [paragraphs 3.35 - 3.39 of my Book], there is no problem of composite or compound causation such as in W Lamb Ltd v J Jarvis & Sons Ltd [1998] [Section 3.3 of my Book] and there is no problem of the single solution as in Musselburgh and Fisherrow Cooperative Society Limited v Mowlem Scotland Limited (No 2) [2006] CSOH39 [Section 3.9 of my Book]. The findings of fact by Lord Drummond Young in my view lead to the conclusion that the contractor is not entitled to any prolongation costs, since there appears to have been no direct loss and expense caused by the events the responsibility of the Employer; those costs would have been incurred in any event due to the significant culpability or default of the contractor.