City Inn vs Shepherd Construction: Time was on our side

The sorry saga of City Inn and Shepherd has been dragging on for eight years. Briefly, the facts are that City Inn employed Shepherd Construction to build a hotel in Bristol under an amended JCT contract. City Inn dismissed the design team two months prior to the completion date. The new architect then awarded Shepherd a four-week extension, but practical completion was not certified for another five weeks, entitling City Inn to deduct liquidated damages of £150,000.

Shepherd’s right to the further five-week extension was referred to adjudication, at which it was duly awarded.

Most recently it came before the court of session, which drew the attention of Tony Bingham (18 January, page 56). City Inn contended that Shepherd was not entitled to any extension at all beyond the original contractual completion date. The basis for this was twofold:

• If the instructions issued by the architect in fact caused any delays, they were concurrent with delays arising from matters that were Shepherd’s fault
• Shepherd did not comply with clause 13.8 of the contract, which specified the procedures to be followed by the contractor where an architect’s instruction was likely to delay completion.

Calculating delay

Shepherd’s programming expert stated that it was not possible to rely on computer software exclusively to calculate delay. He preferred to use the as-planned versus as-built method. In contrast, City Inn’s expert relied on a critical path analysis.

Shepherd’s method found favour with the judge as it identified events that logic, experience and common sense show would be critical to completion of the works. Bingham suggests that the judge may have found the computer analysis “bewildering”, but omitted to mention that City Inn’s planning expert’s method was proven to be flawed.

Concurrency and responsibility

Using the preferred analysis, the judge found that, with one exception, all of the items that Shepherd claimed as late instructions caused delay, and that this delay was caused by the lateness of the instructions rather than their content.

Culpable and non-culpable causes of delay will frequently interact in a complex manner

 

City Inn contended that the works were delayed by two further matters that were the responsibility of Shepherd. These two matters operated as concurrent causes of the delay and so completion could not have occurred any earlier than it did.

The judge made clear that, in the absence of an explicit provision to the contrary, an event that would have entitled Shepherd to an extension of time (a “relevant event”) might still be taken into account even though it operated concurrently with another matter that was not a relevant event.

This is an approach to concurrency that recognises the fact that culpable and non-culpable causes of delay will frequently interact in a complex manner. Where a contractor default and a relevant event contribute to the same delay, the architect is entitled to apportion responsibility.

City Inn relied heavily on John Doyle Construction vs Laing Management, which dealt with the proposition that when a global claim is pursued, the contractor must normally demonstrate that the whole of its loss and expense results from matters that are the responsibility of the employer. However, the judge dismissed this as largely irrelevant, since Doyle did not address extensions of time.

Clause 13.8

The judge dealt with the clause 13.8 issue briefly, drawing a distinction between delay caused by the lateness of an instruction and delay caused by its content; clause 13.8 applied to the latter only. If the clause was interpreted as applying to the former, compliance with it would only add to the delay. Shepherd (with one exception) was not precluded from claiming an extension of time for the late instructions.

City Inn has given notice of its intention to appeal.