Property Law Journal 1121 January 2008

CONSTRUCTION UPDATE

Delaying tacticsA recent case has implications for the use of computerprograms to analyse delays in projects, and provides furtherinsight into concurrency of delays. Ian Pease reports

Ian Pease is a partner atDavies Arnold Cooperspecialising in construction and engineering law

I n the case of City Inn Ltd v ShepherdConstruction Ltd, handed down at the end of November 2007, Lord

Drummond Young, a Scottish judge in thecountry’s Supreme Court, cast doubt onthe use of computer programs to analysedelays to building projects. He also madeimportant comments concerning a peren-nial problem of concurrent delay and theextension of time provision in the JCTStandard Form of Contract.

Computing delays In commenting on the use of new tech-nology, he said:

The major difficulty, it seems to me, isthat in the type of program used to carryout a critical path analysis any significanterror in the information that is fed intothe programme is liable to invalidate theentire analysis. Moreover, for reasonsexplained by [one of the experts], I con-clude that it is easy to make such errors.That seems to me to invalidate the use ofan as-built critical path analysis to dis-cover after the event where the criticalpath lay, at least in a case where full elec-tronic records are not available from thecontractor.

Buildings are complex things to con-struct and for that reason the use ofcomputerised planning programs haslong been accepted as essential; likewise,in court such programs have become thenorm. The decision in City Inn, though,puts the latter into question.

Whilst it could be said that this case is just another example of the old com-puter aphorism ‘garbage in, garbageout’, it does, I think, go further than thatand express a wider disquiet about the‘black box’ nature of these programs. By

that I mean that it appears that the datagoes in and the computer runs its pro-grams, giving a result. How it gets thereis often less than clear. Of course, this isthe job of the expert who is using theprogram as part of their evidence, butoften clarity is masked rather thanenhanced by the technology.

One gets the feeling that this is whatthe judge was concerned about. He continued:

I think it necessary to revert to the meth-ods that were in use before computersoftware came to be used extensively inthe programming of complex construc-tion contracts. That is essentially what[one of the experts] did in his evidence.Those older methods are still plainly valid, and if computer-based techniquescannot be used accurately there is noalternative to using older, non-computer-based techniques.

This is essentially a plea for experttestimony that can readily be under-stood by the judiciary. Too often in thepast the use of technology has provideda smokescreen behind which expertscould shelter rather than providing anunderstandable explanation for eventsand delays.

Having said that, there is an essentialinconsistency in the judge’s reasoningon the point, for whilst he acknowl-edged the use of the same computerprograms when the building is beingconstructed (‘[t]hat does not invalidatethe use of a critical path analysis as aplanning tool, but that is a differentmatter, because it is being used then foran entirely different purpose’), he con-sidered them inappropriate in a courtscenario.

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Buildings are extremely complex andno one doubts that it would be impossi-ble to bring them to fruition other thanwith the assistance of these programs.Likewise, the analysis of delaying events

and their consequences is just as com-plex, and it is the duty of the architect(or, later, the judge in their stead) toanalyse those delays in order to grantthe extension of time in a proper andobjective manner. Whilst the judgeacknowledged this (‘the architect exer-cises discretion, provided that it isrecognised that the architect’s decisionmust be based on the evidence that isavailable and must be reasonable in allthe circumstances of the case’), hisemphasis on the ‘judgement’ and ‘dis-

cretion’ of the professional is bound tolead to a rather broad-brush approach ifnot constrained by a rigorous method-ology such as computerised delayanalysis. Indeed in other cases (John

Barker Construction Ltd v London PortmanHotel Ltd [1996]) it has been said that thearchitect is to undertake a:

… logical analysis in a methodical way ofthe impact which the relevant mattershad or were likely to have on the plain-tiffs’ planned programme.

Concurrency of delay The interest in City Inn does not endthere, however, for it dealt with thetricky question of concurrency of delay.

For example, is a contractor entitled to anextension of time for a delaying eventwhen there is an existing delay to theproject caused by its own fault? Ofcourse, the answer lies in the properinterpretation of the extension of timeprovision in the contract (in the case ofthe JCT Standard Form, clause 25). This,as readers may know, sets out a series of‘relevant events’ that may give rise to anextension of time to the contractor if it isconsidered by the architect to havedelayed the works beyond the existingcompletion date. The architect is to makea ‘fair and reasonable’ assessment ofwhat this might be.

The effect of the clause is to preservethe employer’s right to liquidated dam-ages for any remaining (contractor)delays and for this reason the clause isconstrued contra proferentem (against theemployer).

The first matter of importance tonote, therefore, is that in the applicationof clause 25, a relevant event may still betaken into account even though it oper-ates concurrently with another matterthat is not a relevant event. Hence, as thejudge in City Inn noted:

The effect of JCT Standard Form clause 25 is topreserve the employer’s right to liquidated damagesfor any remaining (contractor) delays and for thisreason the clause is construed contra proferentem(against the employer).

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In other words, the ‘but for’ rule of causa-tion, that an event A will only be a causeof a result B if B would not have occurredbut for A, has no application.

In Henry Boot Construction (UK) Ltd vMalmaison Hotel (Manchester) Ltd [1999]Dyson J had made the position clear:

[I]t is agreed that if there are two concur-rent causes of delay, one of which is arelevant event, and the other is not, thenthe contractor is entitled to an extensionof time for the period of delay caused bythe relevant event notwithstanding theconcurrent effect of the other event. Thus,to take a simple example, if no work ispossible on a site for a week not onlybecause of exceptionally inclementweather (a relevant event), but alsobecause the contractor has a shortage oflabour (not a relevant event), and if thefailure to work during that week is likelyto delay the works beyond the completiondate by one week, then if he considers itfair and reasonable to do so, the architectis required to grant an extension of timeof one week. He cannot refuse to do so onthe grounds that the delay would haveoccurred in any event by reason of theshortage of labour.

Although this was the agreed posi-tion (ie it was not argued before Dyson J)he did not demur from that position andLord Young has now agreed with him.

Secondly, there was some uncertaintyafter Royal Brompton Hospital NHS Trustv Hammond (No 7) [2001] as to whether itmattered that one or other of the eventscommenced first or ran longer. In thatcase Judge Seymour drew a distinctionbetween, on the one hand, a case wherework has been delayed through a short-age of labour and a relevant event thenoccurs, and on the other hand, a casewhere works are proceeding regularlywhen both a relevant event and a short-age of labour occur, more or lesssimultaneously.

Lord Young (finding help from for-eign case law – SMK Cabinets v Hili

Modern Electrics Pty Ltd [1984]) foundthis to be ‘an arbitrary criterion’. Hethought:

It should not matter whether the short-age of labour developed, for example, twodays before or two days after the start ofa substantial period of inclement weather;in either case the two matters operateconcurrently to delay completion of theworks.

It now seems certain, therefore, thatsuch close distinctions do not have to bemade when assessing the proper exten-sion to be granted. However, how is theassessment to be made by the architect/judge where there are concurrent causesof delay? The answer is that, as variouscauses of delay are likely to ‘interact in acomplex manner’, the architect must:

… exercise his judgement to determinethe extent to which completion has beendelayed by relevant events. The architectmust make a determination on a fair andreasonable basis. Where there is true con-currency between a relevant event and acontractor default, in the sense that bothexisted simultaneously, regardless ofwhich started first, it may be appropriateto apportion responsibility for the delaybetween the two causes; obviously, how-ever, the basis for such apportionmentmust be fair and reasonable. Preciselywhat is fair and reasonable is likely toturn on the exact circumstances of theparticular case. [Emphasis supplied]

Money for delay – that’s a different exercise? Whereas apportionment for time delaysappears to have been officially sanc-tioned, the position on paying thecontractor for delays of which some areof its own making and others down tothe employer remains unchanged. Thisis the realm of ‘global claims’ under theloss and expense provisions (clause 26)of the JCT Standard Form, and as JohnDoyle Construction v Laing Management

(Scotland) held if a global claim1 fails, itfails in its entirety, there is no apportion-ment possible unless the contractor canextract an element of loss for which it canprove cause and effect.

Lord Young noted:

The contractual wording relating to anextension of time is different from thatrelating to claims for loss and expense. Inparticular, in the form of contract that is presently under consideration, there isno reference in clause 26 to the archi-tect’s making such award as is ‘fair andreasonable’.

It would appear, therefore, that thejudge, at this point, thought thatwhereas apportionment was allowed for concurrent delays, it was not to be sanctioned for the costs associated with those delays, where the contractor

would have to strictly prove cause andeffect.

Of course the courts have sanctionedglobal claims in cases going back to JCrosby & Sons v Portland Urban DistrictCouncil [1967] where there wasextremely complex interaction of differ-ent events. Indeed the leading case ofrecent years was John Barker ConstructionLtd v London Portman Hotel Ltd [2004](one of the judges being Lord Younghimself). which held that even if theglobal claim1 failed (because some of theevents were caused by the contractorrather than the employer), that did notmean that no claim whatsoever couldsucceed; there may remain sufficient evi-dence of cause and effect to allow thecourt to find that certain losses are nolonger to be classified as part of a globalclaim. This is to be contrasted with amaking a general apportionment basedupon what is fair and reasonable in allthe circumstances (which LaingManagement did not sanction).

Lord Young’s interpretation of clause26, up to this point, is in line with LaingManagement. However, there appears atthe end of his judgment to be something

Whereas apportionment for time delays appears tohave been officially sanctioned, the position on

paying the contractor for delays of which some are ofits own making and others down to the employer

remains unchanged.

(1) A global claim is any claim that fails toshow cause and effect as between theevents causing the delays and theparticular (loss and expense)consequences of those delays.

Note

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of a volte-face as he concludes, withoutexplanation as to why his previous rea-soning on clause 26 should not hold good:

It is I think correct that a claim for pro-longation costs need not automaticallyfollow success in a claim for extension oftime. The wording of clause 26 differsfrom that of clause 25, and different con-siderations may apply. In the present case,however, I am of opinion that the claimfor prolongation costs should follow theresult of the claim for extension of time.In this respect the decision in John DoyleConstruction Ltd v Laing Management(Scotland) Ltd… may be relevant. In thatcase it is recognised at paragraphs [16]-[18] that in an appropriate case whereloss is caused both by events for whichthe employer is responsible and events forwhich the contractor is responsible it ispossible to apportion the loss betweenthe two causes. In my opinion that shouldbe done in the present case. This is a casewhere delay has been caused by a numberof different causes, most of which werethe responsibility of the employer,through the architect, but two of whichwere the responsibility of the contractor.

It is accordingly necessary to apportionthe defenders’ prolongation costsbetween these two categories of cause. Iconsider that the same general consider-ations, the causative significance of eachof the sources of delay and the degree ofculpability in respect of each of thosesources, must be balanced. On this basis, Iam of opinion that the result of the exer-cise should be the same; I am unable todiscover any reason for treating the twoexercises under clause 25 and clause 26on a different basis.

Comment This is a very instructive case for allexperts giving opinion evidence ofdelays to building projects. You must notbe overly reliant upon your technology.A clear explanation of the causes andeffects of the delaying events needs to begiven. It is obvious that there is disquietin the judiciary regarding the use ofcomputer programs, and whilst theiruse is by no means out of the question,the data used and particularly the logiclinks need explanation.

Secondly, and after something of avolte-face late in his judgment, the judge

does seem to have sanctioned a perhapsmore permissive view of claiming the‘global’ costs associated with concurrentdelays. ■

City Inn Ltd v Shepherd Construction Ltd [2007] CSOH 190

Henry Boot Construction (UK) Ltd vMalmaison Hotel (Manchester) Ltd (1999) 70 Con LR 32 (TCC)

J Crosby & Sons Ltd v Portland Urban District Council(1967) 5 BLR 121

John Barker Construction Ltd v London Portman Hotel Ltd (1996) 83 BLR 31

John Doyle Construction v Laing Management (Scotland) [2004] 1 BLR 295

Royal Brompton Hospital NHS Trust vHammond (No 7) (2001) 76 Con LR 148

SMK Cabinets v Hili Modern Electrics Pty Ltd[1984] VR 391

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