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Construction contracts: extensions of time and apportionment of delay

If an extension of time (EOT) clause permits the apportionment of delay, what should be taken into account when apportioning delay? Comments in a recent decision of the Singapore Court of Appeal indicate that a party's 'culpability' for the delay is not an important factor when assessing delay claims, and a factual analysis of the delay sustained is paramount.

 

Introduction

Construction contracts often use the rubric of the contractor being entitled to a "fair and reasonable" EOT where a relevant delay has occurred.1 This broad wording suggests that the person assessing the EOT application has a large measure of discretion in deciding what EOT to award. This, in turn, leads to the question of how a "fair and reasonable" EOT should be assessed where there are two or more causes of the same period of delay, some at the owner's risk, and some at the contractor's risk – i.e., concurrent or parallel delay. Where there is concurrent delay, this can give rise to difficult questions regarding which party should be responsible for the schedule impact, and associated costs, of the delay. Should a "fair and reasonable" EOT be determined purely from a critical-path analysis, or are other approaches acceptable, including the apportionment of delay between the parties? 

A recent case from the Singapore Court of Appeal considered some of these issues, and appears to support an apportionment approach in EOT assessment. 

 

CAJ v CAI [2021] SGCA 102

The dispute in this case arose under two contracts (the "Contracts") under which the contractors were engaged by the owner to construct a polycrystalline silicon plant. 

  • During construction, there were issues relating to excessive vibrations at the plant, which were unresolved as at the contractual completion date. 
  • Rectification works extended beyond the completion date, but were completed piecemeal, following instructions from the owner. 
  • The owner commenced arbitration proceedings in Singapore under the ICC rules, claiming liquidated damages from the contractor for a 144-day delay. 
  • In its defence, the contractor, among other things, contended that the delay had been caused by the owner's instructions. 
  • The relevant wording of the Contracts stated that, if delay was caused by the owner, the contractors would be entitled to an EOT of "such period as shall be fair and reasonable in all the circumstances and as shall fairly reflect the delay or impediment sustained." 
  • The contractor did not, however, assert that it had a contractual entitlement to an EOT until very late in the arbitration, only raising an EOT defence for the first time in its written closing submissions. 
  • The owner objected to the late introduction of the EOT defence, but the arbitral tribunal found that it could consider it, and awarded the contractor a 25-day EOT on the basis that this was reflective of the parties' culpability for the overall delay. 
  • The owner successfully applied to the Singapore courts to have the award partially set aside, on the basis that, by allowing the EOT defence, the tribunal had exceeded the scope of the parties' submission to arbitration and breached natural justice. 

While the focus in this case was on the question of whether the tribunal's award of an EOT should be set aside, the court also commented on the tribunal's apportionment of the delay, stating that: 

"… there was simply no legal basis for the Tribunal to apportion the length of the delay on account of the respective parties' culpability. [The EOT clause] clearly states that the period of extension shall be that which is fair and reasonable in all the circumstances and which fairly reflects the delay sustained. This has nothing to do with the parties' culpability per se." 

Thus, the court implicitly accepted that the assessment of a "fair and reasonable" EOT could involve an apportionment of an overall period of delay between contractor and owner. However, the Singapore Court of Appeal indicated that "culpability per se" does not afford a basis for determining any apportionment.

 

Commercial Implications: Apportionment

Different jurisdictions have taken different approaches to the question of apportionment: 

  • In England & Wales, courts have so far rejected apportionment, in favor of giving a contractor a full EOT where there is concurrent delay, but denying them the recovery of prolongation costs during the period of concurrent delay. This approach (known as the 'Malmaison Approach') is mirrored in the SCL Delay and Disruption Protocol (2nd edition, 2017, core principles 10 and 14), which is widely used throughout Europe, the Middle East, and Asia, to assist when determining culpability for delay and disruption on construction projects. 
  • In Scotland, the courts have found that it might be appropriate in these circumstances to apportion responsibility for delay between the two causes, with that apportionment to be done on a fair and reasonable basis. As to how this apportionment might be carried out, the courts have said that the approach could be similar to that taken in contributory negligence cases (in which the parties' 'blameworthiness' is a relevant factor), and suggested that two 'main elements' would be important: 'the degree of culpability involved in each of the causes of the delay and the significance of each of the factors in causing the delay,' with culpability likely to be the less important of the two factors in practice, and "the causative significance" of each of the factors likely to be more important. 
  • Apportionment could also be more common in civil law jurisdictions, where the applicable civil code provisions may contemplate this approach. 

The significance of CAJ v CAI [2021] SGCA 102 is that it gives guidance to the approach that may be taken in EOT assessment where apportionment is permitted. It suggests that subjective notions of "blameworthiness" and "fault" are not relevant in apportioning delay, and that what is called for is a factual assessment of which competing causes of delay caused particular periods of delay. Once that assessment is done, the apportionment of delay between the parties may be made, so that a "fair and reasonable" EOT is given which reflects the factual responsibility of each party for delay. The use of "fair and reasonable" wording in EOT clauses suggests that great precision is not called for in assessing an EOT claim. Nevertheless, any assessment must be grounded in fact, as opposed to subjective ideas of what is "right" and "fair."

 

1 See, for example, clause 2.25.1 of the JCT Design and Build Contract, 2016.

 

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