Nicholas LongleyConsultant

JSM +852 2843 2599nicholas.longley@mayerbrownjsm.com

17 November 2008

Extensions of Time Claims

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Mayer Brown is a global legal services organisation comprising legal practices

that are separate entities ("Mayer Brown Practices"). The Mayer Brown

Practices are: Mayer Brown LLP, a limited liability partnership established in

the United States; Mayer Brown International LLP, a limited liability partnership

incorporated in England and Wales; and JSM, a Hong Kong partnership, and

its associated entities in Asia. The Mayer Brown Practices are known as Mayer

Brown JSM in Asia.

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• Uncertainty with

– What can be claimed?

– How to claim?

– When to claim?

• Two Central Themes

– Clear drafting

– Clear thinking – Do not overly restrict EoT grounds

Introduction

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What is Completion?

• Practical or Substantial Completion

• Mariner International Hotels v Atlas (2007)

• Watts v McLeay (1911)

• Balfour Beatty v Chestermount (1993)

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Prevention Principle

“Essentially it is that a party to the contract has been prevented from fulfilling its contractual obligations by virtue of conduct of the other party”

Turner Corp v Co-ordinated Industries

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Peak v McKinney

Facts

• A Fault in the Perimeter Piles

• The Employer had to appoint an expert but there were delays in doing so

• The works were suspended for 58 weeks

• The Contract contained an extension of time clause but it did not allow the Employer to extend time for its own delays

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Peak v McKinney

Decision• There was no date from when liquidated damages could

run

“If a failure to complete `on time is due to the fault of both the employer and the contractor…the clause does not bite. I cannot see how…the employer can insist on compliance with a condition if it is partly his own fault that it cannot be fulfilled.”

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Hong Kong Government Building Contract

Clause 50 (1) (a) – Grounds for a EoT claim

• Inclement weather and/or its consequences adversely affecting the progress of the Works

• Variations under Clause 60

• A substantial increase in the quantity of any item of work

• Late possession or being deprived of possession of the Site at a later date

• Disturbance to the progress of the Works

• Any special circumstance of any kind whatsoever

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HKIA/RICS Building ContractClause 23 – Grounds for an EoT Claim • Force majeure

• Inclement weather or the subsequent effects of such inclement weather – which is expressly defined

• Civil commotion, local combination of workmen, strikes and lockouts affecting any of the trades employed upon the Works

• Variations under the contract

• Delays by the Architect in providing instructions, drawings, details or levels

• Delays by artists, tradesmen or others engaged by the Employer

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HKIA/RICS Building Contract

…by reason of the Main Contractor not having received in due time, necessary, instructions, drawings, details or levels from the Architect…

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HKIS/HKIA Building Contract (2005)

Clause 25.1 - Grounds for an EOT Claim

• Excepted risks

• Act of prevention, a breach of contract or other default by the Employer

• Late issue of drawings, details, descriptive schedules or other similar documents

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When to Claim?

Notification Clauses

• RICS – “the Main Contractor shall forthwith give written notice of the

cause of the delay”

• HK Government – “the Contractor shall forthwith give notice in writing

to the Architect…Such notice shall not in any event be given later

than 28 days after the Architect has issued the relevant order or

instruction”

• KCRC – cl 45.11 – “it shall be a condition precedent to the Contractor

being granted extensions of time that he complies strictly with [the

notification requirements]”

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The Gaymark Decision

The Facts• The Contractor failed to complete by the Date of Completion

because of Employer’s Delays

• The Contractor had an obligation to comply with strict time limits which the Contractor did not do

• The Employer claimed liquidated damages for delay

• The Contractor argued that the Prevention Principle applied. The Employer’s acts prevented the Contractor from completing on time

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The Gaymark Decision

The Decision• The Prevention Principle applies

“The contract between the parties fails to provide for a situation where [the Employer] caused actual delays to [the Contractor] achieving practical completion coupled with the failure by [the Contractor] to comply with the notice provisions.”

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City Inn v Shephard Construction

The Facts• The Contract included a condition precedent requiring the

Contractor to notify the architect if any instruction was likely to delay the Works within 14 days

• The Contractor argued that there was an architect’s instruction which entitled it to an extension of time

• The Contractor did not comply with this clause and completed late

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City Inn v Shephard Construction

The Contractor’s ArgumentThat the condition precedent acted as a penalty as the failure to comply results in liquidated damages

The DecisionThe liability for liquidated damages stems from the failure to complete late not from the failure to comply with the notification clause

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How to ClaimCausation Leyland Shipping v Norwich Union - competing causes

• The torpedoes

• Hitting the side of the dock

• The decision of the harbour master to have the ship towed out of the harbour

• The effect of two days of hitting the ground

• The storm

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Causation and Concurrency

• Main Test – proximate or dominant cause (Leyland Shipping v Norwich Union)

• Laing v Doyle (2004) usual rules of causation apply to construction contracts

• Henry Boot v Malmaison – importance of critical path

• Royal Brompton Hospital – concurrent claims

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Global Claims

• Origins – Crosby v Portland

– A lump sum award is proper, provided that there is no duplication

• Wharf v Eric Cumine

– The fact that there are evidential problems is not a sufficient reason to strike out the claim

– However a delay of seven years in detailing a claim meant that the claim was embarrassing and should be struck out

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Global Claims – Laing v Doyle

Common Sense Approach• Generally the Contractor must show a causal link

• If the Contractor can show that all of the loss stems from delays which are all the responsibility of the Employer, a causal link is unnecessary

• A global claim cannot succeed where any of the causes is the responsibility of the Contractor

• If the global claim fails, the Contractor might still be able to use the dominent cause approach to claim for some losses

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Conclusion

• When drafting the contract – take great care. Keep the Prevention Principle in mind. Small mistakes can be costly

• When making claims, ensure that you can show cause and effect

• Ultimately many claims are won or lost not on the law but on the evidence. Ensure that you keep good records and if you want to claim, get an expert at an early stage