| Date | 8 February 2006 |
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| Judgment | Leighton Contractors (Asia) Ltd v Stelux Holdings Ltd, HCHK 10 September 2004 |
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| The Issue | The use of retrospective delay analysis to determine entitlement to extension of time. |
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| Implication |
Whilst delay analysis techniques may be required to look at the prospective effect of delay events, there is nevertheless a requirement to show that actual or likely delay had occurred having regard to the true as-built progress of the works at the relevant time. |
printMost standard forms of construction contract require the architect or engineer to deal with contractor’s claims for extension of time when actual delay has occurred to the works and also when a prospective delay event is notified. An example of this approach is found in the JCT Standard Building Contract 2005 at clause 2.27; “if and whenever it becomes reasonably apparent that the progress of the Works or any Section is being or is likely to be delayed the Contractor shall forthwith give written notice . . .”. The underlying objective is for extension of time applications to be dealt with as close as possible to the occurrence of the events giving rise to delay. In this way it is anticipated that the contractor will always be working to a justified and realistic completion date. If extension of time is largely ignored until the completion stages of the project, when delay events can be assessed with the benefit of hindsight, the contractor may be forced to plan his construction operations against an unrealistically early completion date. This may give rise to unnecessary acceleration claims which inevitably operate to the disadvantage of both parties. One consequence of all this is that when dealing with contractor’s extension of time claims retrospectively, it will often be argued that the most appropriate method is to examine the delay events on a “time slice” basis. This type of analysis is undertaken effectively standing in the architect’s or engineer’s shoes at periodic time slices over the project’s history. If the analysis shows that an event was likely to cause delay according to the evidence available at that time, it is argued that an extension of time should be allowed, even where, with hindsight, it is clear that the event did not in fact delay completion of the project. The critics of this approach will often argue that such an analysis results in an overly theoretical prediction of delay which fails to take account of actual events as they unfold on the project. These matters were recently examined in the case of Leighton Contractors (Asia) v Stelux Holdings in the Court of First Instance of Hong Kong. The decision provides useful guidance that the courts will generally look for a common sense approach to these matters. The court confirmed that though a time slice approach to examining extension of time entitlement may be appropriate, an overly theoretical or artificial result will be rejected. Put another way, whilst a delay event may be examined prospectively to determine the likely effect it will have on project completion, any such examination should have regard to the “as-built” situation of the project at the relevant time. Stelux was the employer and Leighton the main contractor on a large building project in Hong Kong. The contract was in the standard form widely used in Hong Kong containing provisions which closely reflected those of the JCT form cited above. Disputes between the parties were referred to arbitration. One of Leighton’s key arguments in front of the arbitrator was that Stelux had caused critical delay by releasing tender information for the heating, air conditioning and electrical subcontract works late. The arbitrator found that the information was indeed provided later than it should have been according to the original programme, but she also held that such lateness could not have delayed the completion of the works. The information was required for the award of the heating, air conditioning and electrical subcontracts which could not proceed until the building superstructure had been progressed. By the time the information had been provided and the relevant subcontracts awarded, Leighton was still only commencing construction of the basement slab. On this basis the arbitrator concluded that the late information could not have caused actual delay. Leighton appealed the arbitrator’s decision to the Court of First Instance in Hong Kong. Leighton argued that the contract made it clear that both “delay” and “likely delay” gave proper grounds for an extension of time. Leighton contended that by standing in the architect’s shoes at the time of the delay events, if the arbitrator thought that an event was likely to cause delay, she should have granted an extension of time. It was irrelevant that, with hindsight, the event did not in fact delay completion. The court rejected those contentions and upheld the decision of the arbitrator. The arbitrator was entitled to find on the facts that, having regard to the delays incurred by the contractor in constructing the substructures, the information which would allow them to place the subcontract packages for heating, air conditioning and electrical was not necessary at that time. Due to Leighton’s own substantial delay there was ample time for the information to be provided much later than the original programme date. The judge concluded that there had to be some finding of a causal link between the late submission of information and the potential delay to the completion of the works. It was not enough for the contractor simply to show that the information was late. Whichever delay analysis method was used it was therefore necessary to take account of the as-built progress of the works at the point that the claimed delay event occurred.
CJ-0605
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