The making of a muddle

The article by Dominic Helps (5 November, page 54) gave us one interpretation of Skanska vs Egger, focusing on the role played by “delay analysis” computer software. It was certainly a judgment that livened up many delay analysts’ mail-boxes after it was handed down. But what really caught our attention was that the court had decided that a main contractor had reasonably settled claims for loss and expense made by its subcontractors by deciding their entitlements to extensions of time.

Now it is one thing for a claimant to show an entitlement to an extension of time. In simple terms, what you do is bring your current programme fully up-to-date, add the “excusable delay” and revise if appropriate, and you are probably entitled to an extension of time if the predicted completion date has been delayed.

But to be entitled to compensation for delay you have to demonstrate the link – what lawyers call a “nexus” – between what you say was the cause and the delay. That is a wholly different ball game. If in doubt, ask any competent delay analyst.

The effect is that you can be entitled to compensation without being entitled to an extension of time; and you can be entitled to an extension of time without compensation (even if the employer caused delay to your work).

The story is this. Skanska and Egger had fallen out. An earlier hearing had decided that Skanska was entitled to “full” extensions of time. A large part of this action concerned whether Skanska had reasonably settled claims for loss and expense made against it by its subcontractors. The sums involved exceeded £1m.

It is likely that Egger felt aggrieved at Skanska’s getting “full extensions of time as claimed” at that earlier hearing. Whatever prompted it, the court gave Egger leave to produce expert evidence at the forthcoming trial of its liability for the compensation paid to Skanska’s subcontractors.

But, for reasons that are unclear, the court limited that expert opinion to “the evidence as regards: (i) the methodology of analysis employed in reaching and offering conclusions on a) extensions of time to which the principal subcontractors are entitled; b) the reasons why [they] arise from matters for which Egger are responsible; and (ii) the lengths of those extensions of time”.

The judgment doesn’t explain why the court didn’t give leave for expert opinion as to Skanska’s subcontractors’ entitlement to compensation. Skanska had settled certain of those subcontractors’ claims. But how could it have settled them reasonably if it had done so on no more than their entitlements to extensions? Those extensions only excused them from Skanska’s claims against them for being late. The figures don’t add up.

Almost every standard form of contract requires an extension of time to be granted if an “excusable delay” is likely to cause delay to completion and is reasonable.

The purpose of extensions of time is to preserve a date for completion, and no more. The purpose of compensation is to restore the complainant to the position in which it would have been but for the event complained of, no better than that.

The court exclusively addressed the subcontractors’ entitlements to extensions of time, and not to compensation. This is clear from the wording of the judgment, which states: “The extensive programming evidence has convincingly demonstrated that the delay and disruption caused by Egger and considered extensively in the liability trial inevitably impacted upon the subcontractors.”

The judge did not pause to explain how the “programming evidence” provided in support of Skanska’s successful claim to entitlements to extensions of time, however extensive or convincing, was relevant to compensation for delay.

This case not only affects Egger and Skanska.

It is now a precedent that, unless reversed, will be used by lawyers to blur what was a reasonably clear line between entitlements to extensions on the one hand, and compensation on the other.