Practical Law

In Adyard Abu Dhabi v SDS Marine Services, the Commercial Court had to determine whether SDS could rescind two shipbuilding contracts and reclaim the sums it had paid to Adyard. Adyard had commenced proceedings, arguing that SDS could not rescind, as SDS had caused delays to the project.

Adyard cited the prevention principle: the principle that SDS could not rely on the consequences of its own default, when rescinding the contracts. The court found against Adyard in that respect, but went to look at whether Adyard had proved that SDS caused the delay to the project in any event. In doing so, the court considered the judgments of Lord Carloway and Lord Osborne in the Scottish appellate decision in City Inn v Shepherd. This post focuses on those causation issues.

Causation in law and fact

Adyard’s case was that causation was established by showing that the duration of the relevant event (or act of prevention) extended over the original contractual sea trial date (equivalent, in a sense, to a practical completion date), regardless of:

• what other events may have been delaying the works; and
• whether the variation would have any impact on the actual progress of the works.

In other words, Adyard argued that the court should only look at the event or act in question to see how it related to the contractual completion date. A theoretical delay would suffice, rather than only an actual delay.

Balfour Beatty v Chestermount

The court rejected Adyard’s submissions as a matter of principle, authority and common sense. Adyard had to show that SDS’s variations were likely to cause or did cause actual delay to the progress of the works. This was consistent with Colman J’s judgment in Balfour Beatty v Chestermount Properties (1993) 9 Const LJ 117, which rejected an argument that the architect ought to award a “gross” extension of time. (That is, an extension of time that re-fixed the completion date at the calendar date upon which the work would reasonably be expected to be completed having regard to the calendar date upon which a variation was instructed).

It followed that delay to the completion date had to assessed by reference to the progress of the works (that is, by reference to the then programmed completion date). The editors of the Building Law Reports at the time commented that Balfour Beatty v Chestermount should end:

“…hypothetical questions about the potential as opposed to actual effect of causes of delay which entitle a contractor to an extension of time…”

Concurrent delay and Henry Boot v Malmaison

The court also discussed causation in relation to cases of concurrent delay, which could be summarised as:

“a period of project overrun which is caused by two more effective causes of delay which are of approximately equal causative potency.” (John Marrin QC, Concurrent Delay (18 Const LJ No. 6 436, 2002.)

Following Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999) 70 Con LR 33, in a case where a contractor could show that the relevant event caused concurrent delay, it was entitled to an extension of time (despite there being another concurrent cause of that same delay).

City Inn v Shepherd

The court dismissed Adyard’s reliance on Lord Carloway’s judgment in City Inn Ltd v Shepherd, where he stated that the decision maker is required to consider only the effect on completion of the relevant event and not of the effects of the events which are not relevant events. The court explicitly stated that his suggestion that it was not necessary to show that the relevant event was an operative cause of delay to the progress of the works “does not reflect English law”.

This was reflected by both the English authorities and Lord Osborne in City Inn v Shepherd, who recognised the relevance of considering and establishing causation in fact:

“…In the first place, before any claim for an extension of time can succeed, it must plainly be shown that a relevant event is a cause of delay and that the completion of the works is likely to be delayed thereby or has in fact been delayed thereby.”

Fact, not theory

The case illustrates the importance of a party proving that a relevant event or act causes actual delay to the progress of the works. The court must focus on fact, not theory.