In this section you will find details of legal cases relating to extensions of time, contract periods, contract disputes and delay analysis. Each will have an interest to planners / schedulers due to their relevance to time related matters.
The details of legal cases are normally submitted by experts, lawyers, attorneys and solicitors. For all entries credits are given to the person and the organisation they represent. To submit details of a case, in the first instance write to caselaw@planningengineers.org outlining your proposed entry.
Title:
Critical Path Delay Analysis
Case:
City Inn Ltd v Shepherd Construction Ltd [2007] CSOH 190
Year:
2008
Court:
Outer House of the Court of Session in Scotland
Overview / Abstract:
Earlier this year Geoff Brewer reported on the case of Mirant Asia-Pacific Construction v Ove Arup in which the judge commented that without a critical path analysis, undertaken by suitably experienced experts, the parties may be mistaken as to what is, or is not, on the critical path. In so commenting, the judge implied that comprehensive critical path analysis was almost a pre-requisite to prove a claim for damages.
City Inn v Shepherd Construction concerns the construction of a hotel in Bristol and the dispute was about entitlement to extension of time. Shepherd (the Defenders) had been granted an extension of time of 4 weeks by the architect but, in the litigation, contended that they were in fact entitled to an extension of time of 11 weeks. The claim comprised three separate periods being 3½ weeks for a late architect’s instruction; 5 weeks for another late architect’s instruction (3½ weeks of which were concurrent with the first period); and 6 weeks for the late issue of variations, additional work and late confirmation of details in the work.
City Inn (the Pursuers) sought a declarator that, among other things, Shepherd was not entitled to any extension of time (not even the 4 weeks granted by the architect). City Inn also sought liquidated damages in respect of the entire period from contract completion to practical completion. The case was heard by Lord Drummond Young in the Outer House of the Court of Session in Scotland, and opinion was handed down on 30 November 2007.
Both parties instructed programming experts who, in the opinion of Lord Drummond Young, were ‘…clearly well qualified to speak about the issues that arose in the case…’ and, despite criticisms raised by counsel on both sides regarding the other’s impartiality, were ‘…doing their best to present their evidence in a fair and impartial manner…’.
Shepherd’s expert did not carry out a critical path analysis, although he did state that he had considered doing so. The reason he gave for not doing so was that he did not have access to an electronic version of the original programme and therefore that it was impossible to determine the planned critical path (in fact, neither expert had access to the original electronic programme data). Although he had attempted to replicate the programme, using his experience, he could not be confident that his version of the programme was correct, and neither could he be sure of the evidence he would give to the court on the basis of that programme. Instead, he relied upon a comparison between the planned programme and the actual (i.e. an as-planned versus as-built analysis) from which he concluded that the delays complained of by Shepherd were critical and that a fair and reasonable measure of the entitlement to extension of time was 11 weeks.
The expert’s failure to carry out a critical path analysis was criticized by City Inn. It was submitted by them that ‘…an expert could only give a meaningful opinion as to which activities in a project are critical on the basis of an as-built critical path analysis…’. Lord Drummond Young did not agree and gave his opinion that ‘...such an approach has serious dangers of its own.’ He went on to suggest that any errors in the programme information would invalidate the use of as-built critical path analysis. Further, the judge suggested that it was necessary to revert to other (older) methods where computer-based techniques cannot be used accurately.
The expert for City Inn did carry out a computerized critical path analysis, but of the as-built programme rather than the original programme. This expert’s conclusion, based upon his analysis, was that none of the delays complained of by Shepherd were on the critical path and that no entitlement to extension of time resulted.
A significant number of errors were identified by Shepherd’s expert in the as-built programme and these were largely accepted by City Inn’s expert. Lord Drummond Young opined that the as-built critical path analysis was therefore of doubtful value and that reliable conclusions could not be based upon it. The approach of Shepherd’s expert was preferred since it appeared to be based upon factual evidence, sound practical experience and common sense.
For each of the three delays complained of by Shepherd the judge preferred the ‘common-sense’ evidence of its expert rather than the analytical approach taken by City Inn’s expert. In preferring those conclusions Lord Drummond Young appears, so far as the English courts are concerned, to have flown in the face of Mr Recorder Toulson’s judgment in John Barker Construction v London Portman Hotels in which it was said that an architect would not have acted fairly and lawfully and his decision would be fundamentally flawed if he had not carried out a logical analysis in a methodical way of the impact of the relevant events on the contractor's programme and made only ‘…an impressionistic, rather than a calculated, assessment’.
At first reading then, this case appears to be a condemnation of the use of computer-based critical path analysis in determining criticality and the effects of delaying events. It is, however, an unusual case in that nowadays referees are normally asked to choose between two competing critical path analyses both of which are computer-based but relying upon different methodologies. In this case the choice was between no critical path analysis at all, and a patently inaccurate one.
In deciding upon the criticality of the alleged delaying events, and therefore the entitlement to extension of time, the judge considered that the application of practicality and common-sense was more reliable than a flawed as-built critical path analysis. That must of course be right and the message that Lord Drummond Young appears to be sending out is not that critical path analysis is inappropriate but that, if it is to be relied upon, it has to be done accurately, and with due recognition of practicality and pragmatism.
Great Eastern Hotel Company Limited v John Laing Construction Limited and Laing Construction Plc
Laing Construction Plc
Year:
2005
Court:
Technology and Construction Court, London, England
Overview / Abstract:
In the commentary on the case of Skanska UK Limited v Egger (Barony) Limited to be found on this site, the point is made that, notwithstanding the various sophisticated planning techniques around today, in its essence, delay analysis is a fact based process and those giving evidence in Court in the capacity of an expert, must ensure that their approach is both balanced and objective. The Great Eastern Hotel case, another where the Judge was His Honour Judge Wilcox, provides further confirmation of this.
This case arose out of the refurbishment of the Great Eastern Hotel. The project overran by a year and the costs increased from just under £40 million to just over £60 million. One of the issues which the Court had to decide was responsibility for the delay. Both the Claimant and Defendants accepted that there was significant delay. The Defendants denied liability, pointing the finger at both other parties and other concurrent causes of delay.
What impressed the Judge was research and analysis which was based upon the contemporary primary documentation. As well as the usual site progress reports, correspondence, these documents included computer records and dated site photographs which depicted the actual progress of the construction works on site. The Judge was looking for an objective evaluation from the experts.
The two experts approached their analyses of the principle project delay in two different ways. One, for the main, proceeded retrospectively from an as-built programme to determine both the critical path and the respective periods of delay and their causes. The other analysed the project on a monthly basis in order to measure the impact of events as the project proceeded. As it happened, the principal critical path and the extent of the delay periods produced by both the experts was broadly the same.
Where the experts differed was in relation to small differences as to the route of the critical path and more significant differences on the causes of delay. The Judge did not find favour with what he termed the broad-brush approach by the Defendants that none of the delays were caused by them being instead the consequence of concurrent causes of delay on the part of others.
The Judge also had some comments about the potential difficulties with the impacted asplanned delay analysis. He noted that unless this takes account of the actual events which occurred on the project it can only give rise to hypothetical answers. One of the questions at issue here involved the timing of design release. With the impacted asplanned analysis it was necessary to do more than compare actual release against the original construction programme. If you only do this, the analysis will not take account of the fact that the design team would have been aware of the significance of any delays which may have occurred to the original master programme. In other words, the design team may have been able to prioritise design and construction to fit actual progress.
The Judge preferred the forward-looking to the retrospective approach. In particular he felt it important that it had been based on a careful analysis of what had actually happened. Importantly, whilst ensuring that his own retrospective delay analysis could be supported, the expert had dealt with the question of concurrency by separately and comprehensively considering all other activities which might have caused the delay to completion, if the identified critical activities had been completed within the originally programmed period. He concluded that none were in fact critical thereby demonstrating that the case in relation to the alleged concurrent causes to the delay could not be established.
Finally, Judge Wilcox also made it clear that Court was looking for an expert who based his conclusion upon sound and thorough research, who has extensive practical experience he is claiming expertise (and it helps if he has relevant experience for operating under similar contractual provisions as exists in a particular case) and who is prepared to make concessions when his independent view of the evidence warranted it. The expert cannot uncritically accept the evidence of those who instruct him. It must be subjected to rigorous testing. What the Judge was looking for was evidence which was presented in an objective and dispassionate way and which was based on comprehensive research of the contemporary documentation. As we said at the beginning of this article, however complex the underlying techniques behind a particular delay analysis might be, anyone instructed as an expert in legal proceedings should ensure that backing up that analysis is a balanced and objective review of the particular facts of the case
Shawton Engineering Ltd v DGP International Ltd and Others
Year:
2005
Court:
Court of Appeal, London, UK
Overview / Abstract:
In the recent case of Shawton Engineering v DGP International, the Court of Appeal had to examine the circumstances in which a contracting party might lawfully terminate a contract on the basis of delay in performance by the other party, when that party's obligation is to complete the work within a reasonable time.
British Nuclear Fuels had a contract with Kvaerner Construction to construct facilities at Sellafield for handling nuclear waste. Kvaerner subcontracted this work to a joint venture called KAT Nuclear. KAT were effectively the main contractor and they placed a subcontract with Shawton for the design and manufacture of a number of work packages. Shawton in turn subcontracted the design work for five of those packages to DGP.
Disputes arose between Shawton and DGP concerning delay in producing the designs. There had been a number of variations to the work to be carried out by DGP and although there was no contractual mechanism for extending the time on account of these variations, Shawton was prepared to give DGP substantially more time in which to complete the work. A series of revised programmes was accepted, and the parties entered into an agreement extending the time for completion of the design work and agreeing that Shawton would pay for the variations claimed by DGP. It seems that underlying this agreement was the fact that further up the line, KAT were themselves having difficulties and were not pressing Shawton to deliver the plant and equipment on time. There was apparently no operational need for the deliveries.
Despite this, eventually these matters came to a head and Shawton issued a letter purporting to terminate DGP's subcontract. Shawton claimed the cost of another design subcontractor in the amount of approximately £820,000, a sum which was more than three times DGP's original contract price. Shawton also claimed approximately £1m for alleged delay and disruption.
When these matters came to court, Shawton said that DGP had been in breach of its obligation to complete and this entitled Shawton to terminate the subcontract. Shawton accepted that where the contract did not provide a mechanism for extending the time for completion, the legal effect of the variations to the work was that DGP became entitled to complete their work within a reasonable time. Put another way, time was "at large".
On hearing these matters in the Technology and Construction Court, Judge Gilliland QC noted that it was for Shawton to prove on the balance of probabilities that DGP had failed to complete its work within a reasonable time. Judge Gilliland had certain views about how this should be approached. Firstly, he rejected Shawton's submission that the reasonable time should be ascertained by reference to the original contract period extended only by an agreed period for variations. Even where the experts appointed by the parties had agreed an appropriate extension of time for the variation works, this, together with the originally agreed period, could not be regarded as a fair indication of what was a reasonable time for completion of the work. This was in effect to treat the originally agreed period as being a reasonable period.
In the present case, it was clear that DGP had seriously underestimated the number of drawings which would be required and how long the work would take. Judge Gilliland considered that the approach contended for by Shawton might be correct for a contract with express provisions for an extension of time, but not where time had become "at large".
Judge Gilliland also had a particular view concerning to the effect of instructing variations after the original completion date. He held that by instructing extra work after the agreed or extended completion dates, Shawton in effect started time running afresh. DGP became entitled to a reasonable time judged objectively for carrying out the remainder of its work.
Lord Justice May, sitting in the Court of Appeal, appeared to be rather unimpressed by the approach taken by Judge Gilliland on these points. If DGP had initially underestimated the time required to complete its works, Shawton would have had the contractual benefit of that underestimation, and this could not be entirely ignored simply because DGP's obligation became to complete within a reasonable time.
Lord Justice May was similarly not persuaded by the argument that instructing a variation after the original completion date meant, by itself, that the reasonable time had to be assessed afresh.
Despite these criticisms, Lord Justice May agreed that in circumstances where the obligation was to complete within a reasonable time, Shawton could only in law legitimately terminate the contract for delay if either it had given reasonable notice making time of the essence, or DGP's failure to complete within a reasonable time amounted to a fundamental breach depriving Shawton of substantially the whole benefit of the contract.
Having reviewed the evidence Lord Justice May agreed with Judge Gilliland in holding that Shawton had not made time of the essence when it had obtained revised programmes which DGP had indicated it would "try" to meet. Accordingly, DGP's obligation had remained to complete the works within a reasonable time. Against that background, and where on the evidence DGP had been making an effort to complete the contract works, it would always be difficult for Shawton to prove that DGP were in repudiatory breach.
In consequence, the court was correct to conclude that Shawton had unlawfully terminated the subcontract and its appeal against that finding was dismissed.
The use of expert delay analysis in complex construction disputes.
Case:
Skanska Construction UK Limited v Egger (Barony) Limited
Year:
2004
Court:
Technology & Construction Court, London, England
Overview / Abstract:
Despite the use of sophisticated computer based planning techniques, delay analysis remains largely a fact based process upon which the expert must show an objective and balanced approach.
The resolution of disputes on large construction and engineering contracts increasingly involves the use of computer based delay analysis techniques to assist in the identification of the cause of critical delay to a project and, in the more sophisticated cases, to assist in the computation of claims for lost productivity. Whilst the industry is becoming more and more familiar with the use of the tools and techniques employed in the process of delay analysis, unfortunately at present there is very little common agreement upon their correct application.
As the courts become more familiar with delay analysis techniques, it is likely that there will be an increasing number of reported cases addressing these issues giving guidance to delay analysts as to the preferred approaches to take and censuring experts who fail to present cogent and balanced evidence that assists the court.
An example is the recent case of Skanska Construction v Egger (Barony) where Judge Wilcox was required to take account of the evidence of expert delay analysts in arriving at the quantum of damages. The contract between Skanska and Egger has created a long running legal battle between the parties.
Egger is a subsidiary of an Austrian family owned company which produces chip board and other timber based products at several factories throughout Europe. It entered into a contract with Skanska for the design and construction of a factory to be built in East Ayrshire in Scotland. Skanska agreed to undertake design development, management and construction of the factory for a guaranteed maximum price of £12 million. Egger took direct responsibility for the supply and installation of the specialist plant and equipment.
The contract was particularly difficult. By completion, Skanska was making claims in the order of a further £12 million relating to what it argued were extras to the contract. There was a counterclaim by Egger for more than £4 million. In January 2003 I reported a decision of the Court of Appeal where the court had reviewed earlier decisions concerning responsibility for claimed additional works arising out of design and development.
Following those earlier judgments concerning liability, Judge Wilcox held a separate trial to hear evidence concerning quantum, including the evidence of two expert delay analysts concerning the delay suffered by certain of Skanska's subcontractors leading to loss and expense claims which Skanska sought to pass on to Egger.
Judge Wilcox clearly preferred the evidence of Skanska's expert who had prepared an analysis which he described as "accessible". He described the characteristics of a good planning expert as someone who was objective, meticulous as to detail and, importantly, not hide-bound by theory when demonstrable fact collided with computer program logic.
Apparently this could not be said of the evidence provided by Egger's programming expert. Judge Wilcox was severely critical of his evidence on a number of levels. Firstly he made clear his frustration with the complexity of his report. It ran to several hundreds of pages supported by 240 charts. Egger's expert had been supported by a team of assistants and it appears that the report he had prepared was too complex and extensive for the court to easily assimilate.
More critically however, Judge Wilcox commented that the report had largely been based upon factual matters provided third hand from employees of Egger, such that, perhaps understandably, the expert was not entirely familiar with all the details. Judge Wilcox commented that the extent of reliance upon the untested judgment of others in selecting and characterising the data for input into the computer program, however impeccable the logic of that program, adversely affected the authority of the opinion based upon such an exercise.
Judge Wilcox gave an example of evidence which had been made available to Egger's expert which contradicted the evidence he had based his report upon. Despite this, the expert had refused to change his view which clearly irritated Judge Wilcox who commented that it was surprising that there was not sufficient intellectual rigour to admit the possibility of doubt.
Other failings in Egger's expert's evidence were highlighted. Judge Wilcox observed that the reliability of a sophisticated delay impact analysis is only as good as the data put in. The expert had made errors in reconstructing the initial contract programme in a computer based network form. Those errors meant that the programme adopted by the expert could not be used as a reliable base line. Similar criticisms were made of the expert's approach to the construction programme, which he had based upon a master programme prepared by Skanska, despite that this had become virtually redundant from the outset.
Judge Wilcox commented that at the heart of the matter lay the expert's power of selection of facts and interpretive judgement of them. This being the case, it was crucial that the expert could demonstrate that he applied an objective and balanced approach to the evidence.
That balanced approach needed to be applied for example when dealing with the vexed problems of concurrent delays. Egger's expert had taken the view that where there was a delay event that Skanska did not claim to be the responsibility of Egger, he had assumed without further investigation that Skanska was accepting liability for the event. Judge Wilcox described this as applying the logic of Humpty Dumpty and with that searing observation, rejected the evidence of Egger's expert, holding substantially in favour of Skanska.
McAlpine were subcontractors to McDermott for the construction of some pallets for the weather deck of a North Sea oil platform some 250 miles north east of Aberdeen. The work was delayed. McAlpine said that this was on account of the large numbers of drawings, and claimed £3.5 million. At first instance, the case was heard by His Honour John Davies QC. After a 92 day trial, he found that the issue of the drawings had so distorted the substance and identity of the contract that it was frustrated and accordingly McAlpine were freed from the obligation to complete within the contract period and were entitled to recover on a cost plus basis. This might have come as a surprise to the parties as frustration had neither been pleaded or argued.
McDermott duly appealed to the Court of Appeal who reversed the first instance decision. In fact the Court of Appeal held that McAlpine had failed to establish an entitlement to any money at all.
McAlpine presented their claim for an extension of time by going through each of the variation orders, identifying how long it took to do that work, and adding up those delays. The Court of Appeal said that this method suffered from the major defect that it assumed that if one man was working for one day on a particular variation order, then the whole contract was held up for that day. The Court noted the absurdity of this assumption by taking an example of a claim for £39 being the cost of an inspector carrying out a lamination check. The check took one hour, yet a whole day’s delay was sought.
In calculating its claim for additional labour costs, the plaintiff calculated the number of man hours allowed in the tender for each activity, and divided that by the number of days that the activity was originally planned in order to arrive at the number of man hours per day that that activity absorbed. McAlpine then extrapolated that number of man hours per day for the whole period of delay, making adjustments for holidays, night work, etc. The method assumed that the whole of the work force until the day it finished. Again, the Court of Appeal threw this approach out.
The Court of Appeal went on to identify what sort of approach was needed in this sort of case, namely a reconstruction of what actually happened. In contrast to McAlpine, McDermott had undertaken the task of tracing the impact of every drawing revision. Lloyd LJ said:
"the Judge dismissed the Defendants' [McDermott’s] approach to the case as being a 'retrospective and dissectional reconstruction by expert evidence of events almost day by day, drawing by drawing, TQ and TQ and weld procedure by weld procedure, designed to show that the fate of additional drawings which descended upon McAlpine virtually from the start of the work really had little retarding or disruptive effect on its progress. In our view the Defendants' approach is just what the case required'."
By doing this, McDermott was able to demonstrate that the real cause of delay was not the number of revised drawings but the failure of McAlpine to qualify their welding procedures.
Finally, the Court of Appeal considered the argument made by McAlpine that the date for completion cannot precede the last date that extra work was ordered. This suggestion that a contractor is entitled to extensions of time, as of right, where instructions are late is often known as the 'colour of the front door' argument. Once again, the Court of Appeal firmly dismissed that approach, saying that:
'If a contractor is already a year late through his culpable fault, it would be absurd that the employer should lose his claim for unliquidated damages just because at the last moment, he orders an extra coat of paint.'
Glenlion Construction Ltd v The Guiness Trust (1986)
Year:
1987
Court:
Queens Bench Division, James Fox-Andrews QC
Overview / Abstract:
Glenlion entered into a contract with The Guinness Trust on the terms of the JCT Building Contract (1963 ed. 1977 Rev.) to carry out works at a residential development at Bromley, Kent.
The proposed tender programme was 104 weeks. Glenlion submitted a programme of 114 weeks but offered a reduction in price in return. This was accepted and the contract reflected this. However Glenlion’s master programme showed completion being achieved in 104 weeks. Works did not go to plan.
A dispute arose as to whether or not Glenlion was obliged to:
(a) Produce a bar chart programme in accordance with the contract; or
(b) Whether agreement or approval of the programme relieved Glenlion from completing the work by the completion date; and if so then (c)
(c) If the programme showed an earlier completion date than the contractual completion date whether Glenlion was entitled to rely on the latter.
The dispute was referred to arbitration where Glenlion were unsuccessful. They appealed to the TCC. His Honour Judge James Fox-Andrews QC heard the appeal but dismissed it.
The appeal raised the following points:
(a) Whether a contractor should provide a programme for the whole of the works showing a completion date no later than the contractual date for completion; and
(b) Whether agreement or approval by the architect of the programme relieves the contractor of its responsibility to complete the whole of the works by the contractual date for completion.
The Court also considered the additional issue of:
(c) Whether there was an implied term in the contract that an employer must perform its part of the contract so as to allow the contractor to complete by the completion date.
The Judge found that Glenlion was entitled to complete on an earlier date whether or not it produced a programme with an earlier date and whether or not it was contractually bound to produce a programme. He then stated:
"It would follow that if he was entitled to complete before the date for completion he was entitled to carry out works in such a way to enable him as to achieve the earlier completion date whether or not the works were programmed".
In considering whether there was an implied term the Judge held:
"It is not suggested by Glenlion that they were both entitled and obliged to finish by the earlier completion date. If there was such an implied term that imposed an obligation on the Trust but none on Glenlion".
This decision therefore has an impact on claims for extensions of time. In essence, whilst the contractor may determine that it wishes to complete the project earlier than the contractual completion date and programme accordingly, if the contractor is delayed past this date but still completes before the contractual completion date then there has been no delay. The contractor is therefore not entitled to an extension of time, as he is only so entitled if the job has been delayed beyond the contractual completion date, and not any earlier date nominated by the contractor.
These reviews have been prepared as summaries and are intended for general guidance only. If you have a query relating to a specific problem, it is recommended that professional advice is sought.
