Three judges in the Inner House of the Court of Session delivered their decision in the case of City Inn Limited v Shepherd Construction Limited on 22 July 2010. This case has attracted interest in relation to delays.
The case concerned the construction of a hotel in Bristol. In simple terms the contractor, Shepherd Construction Limited sought to have finally determined by legal proceedings their entitlement to an extension of time and a claim for loss and expense. The employers, City Inn Limited, wished to resist the claim and to deduct liquidated damages. The court proceedings followed earlier adjudications. The case went to debate in 2002. There was a reclaiming motion in 2003 followed by a proof in which judgement was issued in November 2007. City Inn reclaimed against that judgement.
The decision of the Inner House substantially reaffirms the judgement of the Lord Ordinary (Lord Macfadyen) following proof and to that extent is not revolutionary. It examines closely the several grounds of appeal in which it was contended that the Lord Ordinary had erred.
Of particular interest was the appeal judges’ consideration of the approach taken by the Lord Ordinary to assessing concurrent delaying events for the purposes of clause 25 of the Standard Form of Building Contract (Private Edition with Quantities) (1980 Edition). That clause allows the Architect where the delay is a Relevant Event to award an extension of time which he estimates as fair and reasonable. City Inn Limited argued that the Lord Ordinary failed to properly interpret clause 25.
The Lord Ordinary held that what is required by clause 25 is that the architect should exercise his judgement to determine the extent to which completion has been delayed by Relevant Events. The architect must make a determination on a fair and reasonable basis. He also held that where there is a concurrency between the Relevant Event and a contractor default it may be appropriate to apportion responsibility for the delay between the two causes. Lord Osborne who delivered the leading judgement in the Inner House held that discussion of whether or not there is true concurrency does not assist the essential process to be followed under clause 25 of the contract. He did however endorse the Lord Ordinary’s view that it may be appropriate for the architect to apportion responsibility for delay between two causes. That view was endorsed by Lord Kingarth, reinforcing the decision in this respect.
Fellow Inner House judge Lord Carloway distanced himself from Lord Osborne’s comments on concurrency. He did not consider that the application of clause 25 was an apportionment exercise. Rather it is one involving a professional judgement on the part of the architect to determine, as a matter of fact whether the Relevant Event would have or did cause delay beyond the Completion Date and then to estimate a fair and reasonable new Completion Date. Accordingly where the contractor can show that an operative cause of delay was a Relevant Event he is entitled to an extension to such new date as would have allowed him to complete the works in terms of the contract. The words “fair and reasonable” are not related to the determination of whether a Relevant Event has caused the delay to the Completion Date, but to the exercise of fixing a new date once causation is already determined.
This judgement provides confirmation that the assessment of an extension of time under the 1980 contract wording should be a simple and straightforward factual exercise. As part of this, apportionment may be appropriate but it does not assist the essential process.
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Ann O’Connell
(Article created in October 2010 and may not have been updated at the time of reading).