Concurrent Delay: City Inn Snubbed Again

The decision of a Scottish court in July last year dismissing appeals in the City Inn litigation continues to provoke debate in England over delay analysis under extension of time clauses. In our previous Law-Now, we commented on a recent Technology and Construction Court decision which was consistent with the minority judgment in City Inn rather than the apportionment approach adopted by the majority. A subsequent decision of the Commercial Court in Adyard v SD Marine has now raised doubts over both the majority and minority views in City Inn.

Adyard was a small to medium-size shipyard situated in Abu Dhabi. It contracted with SD Marine Services to construct two sea vessels in time for sea trials to be held on specified dates (the "Sea Trial Dates"). Two separate contracts each allowed SD Marine a right of termination if the vessels were not ready for sea trials on their respective Sea Trial Dates. The works were delayed and SD Marine gave notice of termination very shortly after the Sea Trial Date for each vessel.

The contracts stated that, "to the extent that any delays are caused by the Buyer's default or any Permissible Delay, [the Sea Trial Dates] shall be extended to the same extent". Adyard accepted primary responsibility for the delays which had occurred, but alleged that two relatively small variations had been made to the works which justified an extension of time ("EOT"). As SD Marine had given notice of termination within a week of the original Sea Trial Dates, Adyard only needed to establish a small extension of time.

Adyard's own very long delays meant that it was unable to show any actual delay caused by the alleged variations. The project was already in irretrievable critical delay before the variations arose and Adyard had admitted that no additional delay had been caused. Instead, Adyard relied upon Lord Carloway's minority opinion in City Inn to argue that the alleged variations justified an EOT regardless of existing delays and regardless of whether the variations had any actual impact on the progress of the works. Adyard's argument, like Lord Carloway's opinion, was based substantially on the prevention principle and can be summarised as follows:

the parties had agreed that Adyard was to have a certain amount of time to be ready for sea trials and that in the event of variations, Adyard would receive any necessary additional time; variations had occurred which in the ordinary course would have required additional time...