Dr Zeljko Popovic
Claims for Extension of Time in FIDIC Construction Contracts
A Practical Approach under UAE Law
Page 4 of 102
Contents
Foreword ................................................................................................................................. 3
Contents .................................................................................................................................. 4
Abbreviations ......................................................................................................................... 7
List of Cases ........................................................................................................................... 8
List of Statutes and Contract Forms .................................................................................. 11
1
Introduction ................................................................................................................... 12
1.1
Background ............................................................................................................ 12
Risk of delay in construction projects ..................................................................... 12
Common and civil law approaches to time management ....................................... 13
Legal system and construction contracts in UAE ................................................... 15
1.2
What to expect ....................................................................................................... 16
2
Analysis of the provisions for EOT in FIDIC contract forms ..................................... 17
2.1
Relevant definitions and choice of law in the contract ........................................... 17
2.2
Commencement of Works, Time for Completion and Taking Over ........................ 18
2.3
Programme and progress reporting ....................................................................... 18
2.4
Extension of Time for Completion, delay events and damages ............................. 19
2.5
Contractor’s claims for EOT and associated costs ................................................ 22
2.6
Employer’s time-related claims .............................................................................. 23
3
Critique of UAE contract practice for time management ........................................... 25
3.1
Analysis of UAE contract practice .......................................................................... 25
3.2
Programming methodology and quality of the programme .................................... 30
3.3
Progress reporting and maintenance of contemporary records ............................. 31
3.4
Methods for analysis of delay time ......................................................................... 33
Simple methods ..................................................................................................... 33
Prospective time impact analysis ........................................................................... 34
Retrospective methods .......................................................................................... 35
3.5
Breakdown of delay costs ...................................................................................... 36
Site overheads (preliminaries) ............................................................................... 37
Page 5 of 102
Head office overheads ........................................................................................... 38
Loss of profit ........................................................................................................... 40
Increased resource costs due to delay (inflation) ................................................... 40
Increased costs for work under different climatic conditions due to delay ............. 41
Finance and interest charges ................................................................................. 41
Disruption and acceleration .................................................................................... 42
Sub-contractor EOT claims .................................................................................... 43
Claim preparation costs ......................................................................................... 43
3.6
Claim submissions ................................................................................................. 43
3.7
Use of risk management for avoidance of EOT claims .......................................... 44
4
Comparative analysis of legal issues relevant to EOT in FIDIC contracts under English and UAE laws ................................................................................................... 45
4.1
Construction and interpretation of contract terms .................................................. 45
4.2
Good faith, ethical issues and role of the Engineer when assessing claims .......... 47
4.3
Delay notices and warnings as condition precedent .............................................. 50
4.4
Significance of contemporary records .................................................................... 53
4.5
Approach to resolving concurrent delays ............................................................... 55
4.6
Ownership of float in the programme ..................................................................... 60
4.7
Sub-contractor EOT claims .................................................................................... 62
4.8
Admissible delay costs and exclusion of consequential loss ................................. 65
4.9
Pre-agreed delay damages .................................................................................... 67
4.10
Acceleration of the works ....................................................................................... 70
4.11
Mitigation of delays ................................................................................................ 71
4.12
Delays due to suspension ...................................................................................... 73
4.13
Global EOT claims ................................................................................................. 75
5
Recommendations and conclusions ........................................................................... 78
5.1
Legal issues relating to EOT claims in FIDIC contracts under UAE law ................ 78
5.2
Contract practice for time management on UAE projects ...................................... 80
5.3
The final word ......................................................................................................... 80
6
Appendices .................................................................................................................... 82
6.1
Recommended substantiation to the Programme to improve its quality and suitability for EOT analysis ..................................................................................... 82
A. Analysis of site layout and logistics (example for a high-rise project) ................ 82
B. Studies of cycle times (example for concrete works) ......................................... 82
C. Optimization of crew movements (example for piling works) ............................ 83
Page 6 of 102
D. Process charts and typical sequences of works (example for procurement, installation and statutory approvals for specialist fire fighting works) ..................... 83
E. Line of Balance chart demonstrating crew movements on a high-rise project .. 83
6.2
Recommended formats of progress reports to improve EOT contemporary records84
A. Contractor's daily information report .................................................................. 84
B. Contractor's weekly tracker sheet and weekly progress presentation ............... 88
C. Contractor's monthly progress report ................................................................ 90
6.3
Comparison of retrospective delay analysis methods (practical example) ............ 91
A. Project description and Baseline Programme .................................................... 91
B. Method 1 - Window analysis .............................................................................. 91
C. Method 2 - As-built collapsed ............................................................................ 94
D. Method 3 - As-planned expanded ..................................................................... 95
E. Comparison of methods and conclusion ............................................................ 95
6.4
Risk register for project delay events (sample) ...................................................... 96
Bibliography ......................................................................................................................... 97
Page 7 of 102
Abbreviations
ADR Alternative Dispute Resolution BIM Building Information Modelling BOQ Bill of Quantities CIOB Chartered Institute of Building DAB Dispute Adjudication Board EOT Extension of Time FIDIC Fédération Internationale Des Ingénieurs Conseils (The International Federation of Consulting Engineers) (http://fidic.org/) GCC Gulf Cooperation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, UAE) ICC International Chamber of Commerce JCT Joint Contracts Tribunal LDs Liquidated Damages NEC New Engineering Contract PMI Project Management Institute RB FIDIC Conditions of Contract for Construction for Building and Engineering Works Designed by the Employer, 1
st
Edition 1999 (The Red Book) RIBA Royal Institution of British Architects RICS Royal Institution of Chartered Surveyors SCL Society of Construction Law UAE United Arab Emirates UK United Kingdom USA United States of America YB FIDIC Conditions of Contract for Plant and Design-Build, 1
st
Edition 1999 (The Yellow Book)
Page 8 of 102
List of Cases
Abu Dhabi Court of Cassation Case (2010), Decision on Using Electronic Communications as Evidence
Adyard Abu Dhabi v SD Marine Services
[2011] EWHC 848
Alfred McAlpine Capital Projects v Tilebox Ltd
[2005] BLR 271
Allen v Pink
[1838] 4 M & W 140
Arabtec Construction LLC v Ultra Fuji International LLC
(2007) DIFC Case CFI 004/2007, Dubai
Ascon Contracting Ltd v Alfred McAlpine Construction Isle of Man Ltd
[1999] 66 Con LR 119
Attorney General for the Falklands Islands
v
Gordon Forbes Construction (Falklands) Limited
[2003] 6 BLR 280
Babcock Energy Ltd v Lodge Sturtevant Ltd (Formerly Peabody Sturtevant Ltd)
[1994] 41 ConLR 45
Balfour Beatty Building Ltd v Chestermount Properties Ltd
[1993] 62 BLR
Balfour Beatty Construction Ltd v The Mayor And Burgesses of the London Borough of Lambeth
[2002] 1 BLR 288
Beaufort Developments (NI) Ltd v Gilbert-Ash NI Ltd and Others
[1988] UKHL 19
Bickerton v North West Metropolitan Regional Hospital Board
[1970] 1 WLR 607
Bramhall and Ogden Ltd v Sheffield City Council
[1985] 29 BLR 73
Bremer Handelgesellschaft mbH
v
Vanden Avenne Izegem nv
[1978] 2 Lloyd’s Rep. 113
British Sugar plc v NEI Power Plant Projects Ltd
[1997] 87 BLR 42
British Westinghouse Electrical Manufacturing Co Ltd v Underground Electric Railways
[1912] AC 673
Bush v Whitehaven
[1888] 52 JP 392
City Inn Ltd
v
Shepherd’s Construction
[2007] CSIH 68
Costain Ltd v Charles Haswell & Partners Ltd
[2009] EWHC 3140 (TCC)
Croudace Construction Ltd v Cawoods Concrete Products Ltd
[1978] 2 Lloyd’s Rep 55
Dimond v Lovell
[1999] EWCA Civ 1311
Dood v Churton
[1897] 1QB 562
DSND Subsea Ltd v Petroleum Geo-Services ASA and PGS Offshore Technology AS
[2000] WL 1741490 Dubai Court of Cassation Case 1/2006 Dubai Court of Cassation Case 125/2007 Dubai Court of Cassation Case 138/1994 Dubai Court of Cassation Case 176/1996 Dubai Court of Cassation Case 184/2008
Page 9 of 102
Dubai Court of Cassation Case 213/2008 Commercial Appeal (2009) Dubai Court of Cassation Case 266/2008 Commercial Appeal (2009) Dubai Court of Cassation Case 280/2008 Dubai Court of Cassation Case 294/2008 Dubai Court of Cassation Case 3/2000 Dubai Court of Cassation Case 302/21/2001 Dubai Court of Cassation Case 324/2001
Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Company Limited
[1915] AC 79
F B McKee & Company Ltd v North West Regional College
[2010] NIQB 59
F G Minter Ltd v Welsh Health Technical Services Organisation
[1980] 13 BLR 1, CA
Gaymark Investments Pty Ltd
v
Walter Construction Group Ltd
[1999] 18 BCL 449
Hadley v Baxendale
[1854] 156 ER 145
Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd
[1999] 70 Con LR 32
Henry Boot Ltd v Alstom Combined Cycles Ltd
[2005] EWCA Civ 814
H Fairweather and Co Ltd v London Borough of Wandsworth
[1987] 39 BLR 106
Hutton v Warren
[1836] 150 ER 517 ICC Case No. 3790 (1983) ICC Case No. 7910 (1996) ICC Case No. 10619 (2001) ICC Case No. 10847 (2003) ICC Case No. 11813 (2002) ICC Case No. 11847 (2003) ICC Case No. 12654 (2005) ICC Case No. 15282 (2010)
Inserco Ltd v Honeywell Control Systems Ltd
[1996] 21 BLISS 3
Investors Compensation Scheme Ltd v West Bromwich Building Society
[1998] 1 All ER 98
James Longley v South West Thames
[1984] 25 BLR 56
J F Finnegan v Sheffield City Council
[1988] 43 BLR 124
John Doyle Construction Ltd v Laing Management (Scotland) Ltd
[2004] Scots CS 141, BLR 295
John F Hunt Demolition v ASME Engineering
[2007] EWHC 1507 (TCC)
John L Haley Ltd v Dumfries & Galloway Regional Council
[1988] 39 GWD 1599
John Mowlem & Co plc v Eagle Star Insurance Co Ltd
[1992] 62 BLR 126
Kitson Sheet Metal Ltd v Matthew Hall Mechanical & Electrical Engineers Ltd
[1989] BLR 82
London Borough of Merton v Leach (Stanley Hugh) Ltd
1985 32 BLR 51
London Underground Ltd v Citylink Telecommunications
[2007] EWHC 1749 (TCC)
Martin Grant & Co Ltd v Sir Lindsay Parkinson & Co Ltd
[1984] 3 ConLR 116
McCain Foods GB Ltd v Ec-Tech (Europe) Ltd
[2011] EWHC 66
Page 10 of 102
Midland Land Reclamation Ltd v Warren Energy Ltd
[1997] EWHC Technology 375
Motherwell Bridge Construction Ltd v Micafil Vakuumtechnik
[2002] TCC 81 ConLR 44
Multiplex Construction
v
Honeywell Control Systems
[2007] EWHC 447 (TCC)
National Insurance Property Development Co Ltd v NH International (Caribbean) Ltd,
High Court of Trinidad and Tobago, 21 October 2009 (Claim No CV2008-04881)
Natken & Co v George A Fuller & Co
347 F. Supp. 17 (W.D. Mo. 1972)
Ogilvie Builders Ltd v
Glasgow City District Council
[1994] 68 BLR 122
Pacific Associates Inc and Another v Baxter and Other
[1988] 44 BLR 33
Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd
[1970] 1 BLR 111
Percy Bilton v Greater London Council
[1982] 1 WLR 794
Pigott Foundations v Shepherd Construction
[1994] 67 BLR 48
P&O Developments Ltd v The Guy's and St Thomas' NHS Trust
[1999] BLR 3
Reardon Smith Line v Hansen-Tangen
[1976] 1 WLR 989
Rees & Kirby Ltd v
Swansea City Council
[1985] 30 BLR 1
Robertson v Jackson
[1845] 2 CB 412
Royal Brompton Hospital National Health Trust v Hammond etc
[2002] BLR 255, [2002] All ER 801
Steria Ltd v Sigma Wireless Communications Ltd
[2008] 118 Con LR 177
Tate & Lyle Food and Distribution Ltd v Greater London Council
[1981] 3 All ER 716
Temloc Ltd v
Errill Properties Ltd
[1987] 39 BLR 34
Terrell v Mabie Todd & Co Ltd
[1952] 69 RPC 234
Volkswagen Financial Services (UK) Ltd v George Ramage
[2007] CTLC 119
Walter Lilly and Company
v MacKay
[2012] BLR 503
Whittal Builders Company Ltd v Chester-Le-Street District Council
[1985] 11 CLR 40
Wraight Ltd v PH & T (Holdings) Ltd
[1968] 8 BLR 22
Yam Seng Pte Ltd (a company registered in Singapore) v International Trade Corporation Ltd
[2013] EWHC 111 (QB)
Page 11 of 102
List of Statutes and Contract Forms
Abu Dhabi Conditions of Contract, Decree of the Head of Executive Council, Decision No 1 of 2007 (Based on modified FIDIC Red and Yellow Books under special FIDIC license issued to Abu Dhabi Municipality) Dubai International Financial Centre (DIFC) Law of Contract (DIFC Law No. 6 of 2004) Dubai International Financial Centre (DIFC) Law of Damages and Remedies (DIFC Law No. 7 of 2005) FIDIC Conditions of Contract for Construction for Building and Engineering Works Designed by the Employer, 1
st
Edition 1999 (The Red Book) FIDIC Conditions of Contract for EPC/Turnkey Projects, 1
st
Edition 1999 (The Silver Book) FIDIC Conditions of Contract for Plant and Design-Build, 1
st
Edition 1999 (The Yellow Book) FIDIC Conditions of Subcontract for Construction for Building and Engineering Works Designed by the Employer, 1
st
Edition 2011 Housing Grants, Construction and Regeneration Act 1996 Local Democracy, Economic Development and Construction Act 2009 UAE Commercial Transactions Law No. 18 of 1993 (‘Commercial Transactions Law’ or 'Commercial Code') UAE Federal Law No. 5 of 1985 amended by Federal Law No. 1 of 1987 (‘The Law of Civil Transactions’ or ‘Civil Code’) UAE Federal Law of Evidence No. 10 of 1992 ('UAE Evidence Act'), amended by Law No. 36 of 2006 ('Electronic Transactions')
Page 12 of 102
1 Introduction
1.1 Background
Risk of delay in construction projects
Delay in construction projects is not a new topic. The extensive
CIOB Report (2008)
1
addressed the inefficiency of time management in the 21
st
Century, based on data collected from around 2,000 projects. CIOB criticized the improper use of network programming, lack of resource/cost allocation in construction programmes and poor contract administration. In 33% of building and 75% of civil engineering projects, contractors were responsible for delays
2
and only 20% of them were familiar with a delay being declared even if the contract required it! Reasons for failing to notify delays included 'possible catch up' (41%), blame of others (10%), good relationships (37%); only 12% of reasons were contractual.
3
In the Middle East,
EC Harris (2013)
4
reported that top two causes of construction disputes were: improper contract administration and failure to make interim extension of time (EOT) awards. Furthermore, dispute resolution times in the Middle East seem to be the longest in the world, 14.6 months in average!
5
1
CIOB,
Managing the Risk of Delayed Completion in the 21
st
Century
, Research published in 2009, available at <http://www.ciob.org/sites/default/files/CIOB%20research%20-%20Managing%20the%20Risk%20of%20Delayed%20Completion%20in%20the%2021st%20century.pdf> accessed 25-07-2014
2
Ibid, Executive summary, page 7
3
Ibid, Administration of delay, page 43
4
EC Harris,
Global Construction Disputes: A Longer Resolution
, Report published in 2013, available at <http://www.echarris.com/pdf/EC%20Harris%20Construction%20Disputes%202013Final.pdf> accessed 04-08-2014
5
Ibid, Chapter: Middle East Region, page 4
Page 13 of 102
Another
UAE-specific survey (2012)
6
found that 90% of 63 surveyed projects were delayed in average by 8.3% of the planned duration. Reasons for delay correlate with poor scope management and lack of proper project planning and control systems. CIOB recommended further standardization, training and accreditation measures, which are yet to be finalized. Other professional organizations in the UK, such as SCL
7
, RIBA
8
and RICS,
9
have taken similar initiatives and published their own professional guides. However, practitioners in the Middle East are in need of recommendations that are locally implemented or tested, which prompted this publication.
Common and civil law approaches to time management
In English common law, unless expressly stated, it is unusual for time to be of the essence, which would entitle the employer to rescind (cancel) the building contract and claim damages
10
. Usually, contractor's failure to complete on time is regarded as breach of contract, which entitles the employer to apply liquidated damages (LDs). At common law, contractor's obligation to pay LDs is removed if the employer delays the contractor (e.g. by instructing additional works).
11
The employer has a duty not to prevent the contractor, see
London Borough v Leach (Stanley Hugh)
(1985)
,
12
and cannot benefit from his own wrong (the 'prevention principle'). If the employer delays, time becomes 'at large', and the contractor is to complete within 'reasonable' time. Even if the employer's contribution to overall delay is small, the LDs provision fails altogether,
13
see
Dood v Churton (1897)
.
14
In
Peak Construction v McKinney
6
Arun Bajracharya and Mohammad Halloum,
Cost and Time Overrun Revisited: A Study on the Infrastructure Construction Projects in Abu Dhabi - UAE
, Third International Conference on Construction in Developing Countries (ICCIDC–III) “Advancing Civil, Architectural and Construction Engineering & Management”, July 4-6, 2012, Bangkok, Thailand
7
Society of Construction Law (SCL),
Delay and Disruption Protocol,
October 2002, reprinted October 2004, available at <http://www.scl.org.uk/resources> accessed 26-07-2014
8
Royal Institution of British Architects (RIBA),
Good Practice Guide: Extensions of Time
(RIBA Publishing, 2008)
9
Royal Institution of Chartered Surveyors (RICS),
Extensions of Time
(1
st
Edition, RICS Professional Guidance, 2014)
10
MacRoberts Solicitors,
MacRoberts on Scottish Building Contracts
(2nd edition, Blackwell Publishing, UK, 2008), para 6.3 - Time of the essence, p 102
11
John Murdoch, Will Hughes,
Construction Contracts – Law and Management
(4
th
edition, Taylor & Francis, UK, 2008), para 14.5 - Adjustments of time, p 197
12
London Borough of Merton v Leach (Stanley Hugh) Ltd
1985 32 BLR 51
13
John Murdoch, Will Hughes,
Construction Contracts – Law and Management
(4
th
edition, Taylor & Francis, UK, 2008), para 14.5 - Adjustments of time, p 197
Page 14 of 102
Foundations (1971),
15
McKinney's piling works were delayed due to defects, but also due to late employer's instructions. Since the employer's delay event was not contemplated by the EOT mechanism, time became 'at large' rendering the LDs clause inoperative. The employer could only recover damages at common law for delay beyond a ‘reasonable period’. Both contractors and employers are, therefore, interested in the EOT mechanism; contractors to avoid LDs and employers to retain the entitlement to them. However, EOT provisions in international contract forms, such as FIDIC,
16
usually have their roots in English law and their interpretation in civil law systems may be different. For example, English law establishes LDs as a genuine pre-estimate of damages, not as a penalty, which is unenforceable. In contrast, the German Civil Code allows for a penalty against non-fulfilled contractual obligations even if no damage occurred, and further damages are not excluded;
17
penalties may be reduced by German courts.
18
Similarly, English law favours express contract provisions over 'good faith'.
19
On the other hand, the French Civil Code requires that contractual obligations
'must be performed in good faith'.
20
The German Civil Code also states that performance should be effected
'in the manner of good faith, having regard to custom'
.
21
The UAE civil law stipulates similar requirements, which are discussed later in more detail. This research will focus on the application of FIDIC EOT provisions under UAE civil law. FIDIC provisions are reviewed in Chapter 2, UAE contract practice is assessed in Chapter 3, while UAE and English law approaches are analysed and compared in Chapter 4.
14
Dood v Churton
[1897] 1QB 562
15
Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd
[1970] 1 BLR 111
16
FIDIC - Fédération Internationale Des Ingénieurs-Conseils (The International Federation of Consulting Engineers), <http://fidic.org/> accessed 01-03-2015
17
Axel-Volkmar Jaeger, Götz-Sebastian Hök,
FIDIC – A Guide for Practitioners
(Springer-Verlag, Germany, 2010), para 1.4.6.7 - Time for Completion, page 43
18
German Civil Code (Bűrgerliches Gesetzbuch), s. 343
19
Roger Knowles,
200 Contractual Problems and their Solutions
(3
rd
edition, Willey-Blackwell, UK, 2012), p 122
20
French Civil Code (Code Civil), art. 1134(3)
21
German Civil Code (Bűrgerliches Gesetzbuch), s. 242
Page 15 of 102
Legal system and construction contracts in UAE
In the UAE and other GCC countries,
22
except in Saudi Arabia, civil law is derived from the
Egyptian Civil Code,
23
which reconciled the principles of Sharia and French laws.
24
Sharia principles are embedded into Civil Codes and apply in the absence of rules of law and custom:
252627
good faith is implied (e.g. time bar provisions for delay notices may not work where the Employer is at fault);
unjust enrichment
(Riba)
is prohibited (e.g. the recovery of financing charges due to delays may be restricted); and
unfair benefit from uncertainty
(Gharar)
is prohibited (e.g. imposing on a Contractor an unquantifiable risk for site physical conditions may be unenforceable).
28
UAE Civil Law is contained in the
UAE Civil Code
.
29
Of particular interest are Articles 1 (role of Sharia), 106 (unlawful exercise of rights), 246 (good faith), 249 (exceptional circumstances), 265-266 (interpretation of contracts), 283-296 (limitation of liability), 318-319 (unjust enrichment), 390 (pre-agreed limits), 892-896 (contracts for works, Muqawala), etc. The
UAE Commercial Code
30
may also apply as parties to a construction claim are 'traders'; Article 6 defines contracting as 'commercial works' and Article 11 defines 'traders'.
22
Gulf Cooperation Council (GCC), founded on 26 May 2081 by Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE
23
Egyptian Civil Code 1948 - Egypt Law No. 131 of 1948 Issuing the Civil Code
24
Adam Balchin, The Middle East, construction and the law, Al Tamimi & Co, February 2013, <http://www.tamimi.com/en/magazine/law-update/section-5/february-4/the-middle-east-construction-and-the-law-1.html> accessed 27-04-2014
25
Saleh Majid,
Application Of Islamic Law In The Middle East
(International Construction Law Review, Volume 20 January 2003), <http://www.mondaq.com/x/52976/international+trade+investment/Application+Of+Islamic+Law+In+The+Middle+East> accessed 23-04-2014
26
UAE Civil Code, Article 1
27
Raid Abu-Manneh,
Contracting in the Middle East
(Construction & Engineering Legal Update, Issue 57 December 2008, published by Mayer Brown), <http://www.mayerbrown.com/publications/Construction-amp-Engineering-Legal-Update-12-18-2008/> accessed 25-04-2014
28
Howard L Stovall,
Arbitration and the Arab Middle East: some thoughts from a commercial lawyer,
2009, <http://www.stovall-law.com/images/Arbitration_in_the_Arab_Middle_East.pdf> accessed 26-04-2014
29
UAE Federal Law No. 5 of 1985 amended by Federal Law No. 1 of 1987 (The Law of Civil Transactions or ‘Civil Code’)
30
UAE Commercial Transactions Law No. 18 of 1993 (‘Commercial Transactions Law’ or 'Commercial Code')
Page 16 of 102
UAE construction contracts are usually based on the employer-modified
FIDIC Red
31
and Yellow Books
32
as surveyed and confirmed in
AECOM's Middle East Handbook (2013),
33
Reuter’s Construction Guide (2014)
34
and
International Legal Guides (2014).
35
Abu Dhabi Municipality uses FIDIC forms modified under special FIDIC license (2007).
36
They contain subtle changes which often seek to impose harsher obligations upon the contractor.
37
However, provisions that appear to have drastic consequences on EOT claims may, in fact, have a different effect due to the UAE Civil Code. NEC3 contract forms have been rarely used, and have not been reinvigorated in Abu Dhabi since the failed test case in 2007 on the Al Raha Beach development.
38
1.2 What to expect
The reader should expect a thorough review of the provisions for EOT claims in FIDIC contract forms (time and cost), including references to FIDIC publications, practice guides and arbitration cases recorded by the ICC International Court of Arbitration. Furthermore, the current contract practice for time management will be critically assessed based on author’s own experience and available publications. Legal issues relevant to EOT under UAE and English laws will be analysed and compared in detail, with some useful illustrations and recommendations for practical work.
31
FIDIC Conditions of Contract for Construction for Building and Engineering Works Designed by the Employer, 1
st
Edition 1999 (The Red Book)
32
FIDIC Conditions of Contract for Plant and Design-Build, 1
st
Edition 1999 (The Yellow Book)
33
AECOM,
Middle East Construction Handbook 2013
(Bahrein, Egypt, KSA, Kuwait, Lebanon, Oman, Qatar, UAE), p 94
34
Michael Kerr, Dean Ryburn, Beau McLaren and Zehra Or Dentons,
Construction and projects in United Arab Emirates: Overview
, Thomson Reuters Multi-Jurisdictional Guide 2013/14 - Construction and projects law, available at <http://uk.practicallaw.com/1-519-3663?service=construction> accessed 29-07-2014
35
International Comparative Legal Guides (ICGL),
United Arab Emirates – Construction & Engineering Law 2014,
by Adam Balchin and Euan Lloyd, Al Tamimi & Company, 2014, available at <http://www.iclg.co.uk/practice-areas/construction-and-engineering-law/construction-and-engineering-law-2014/united-arab-emirates> accessed 09-08-2014
36
Abu Dhabi Conditions of Contract, Decree of the Head of Executive Council, Decision No 1 of 2007 (Based on modified FIDIC Red and Yellow Books under special FIDIC license granted to Abu Dhabi Municipality)
37
Michelle Nelson,
FIDIC 1999 or something else in disguise?
(Construction Week, 30 June 2007), available online at <http://www.arabianbusiness.com/fidic-1999-something-else-in-disguise--58481.html> accessed on 28-07-2014
38
Julio Cesar Bueno (Editor), The project and construction review (Law Business Research, 2011), Chapter 25 – United Arab Emirates by Leonora Riesenburg, Galadari & Associates, Dubai
Page 17 of 102
2 Analysis of the provisions for EOT in FIDIC contract forms
FIDIC 1999 Red Book (RB) and Yellow Book (YB) are the most commonly used conditions of contract for international construction projects,
39
favoured by major development banks.
40
They include the General and Particular Conditions, and majority of the clauses are identical. The main differences are in the allocation of design responsibilities (RB: Employer; YB: Contractor) and measurement of works (RB: re-measurement with BOQ; YB: lump sum with payment schedules). FIDIC EOT provisions are briefly discussed hereunder.
2.1 Relevant definitions and choice of law in the contract
Sub-Clause 1.1 (Definitions) defines the contractual meaning of some plain words and the law of contract. In FIDIC language,
'day'
means a calendar day and
'year'
means 365 days (1.1.3.9);
'Cost'
is all expenditure reasonably incurred on/off the Site, including overheads, but excluding profit (1.1.4.3);
'Site'
means the places where the Permanent Works are executed and to which Plant/Materials are delivered (off-site places are not automatically covered) (1.1.6.7).
'Contractor's Equipment'
means construction machines (1.1.5.1),
'Plant'
is built-in (1.1.5.5).
'Unforeseeable'
means not reasonably foreseeable by an experienced contractor by the Tender submission date (1.1.6.8).
Laws
(1.1.6.5) cover not only national legislation listed in the Appendix to Tender, but also regulations and by-laws of any public authority, which can affect time and Cost. The UAE Constitution permits each of the Emirates to retain its own judicial system, and this is observed by local courts.
4142
The courts apply Federal laws enacted by the Supreme Council (the highest authority, consisting of the Rulers of seven Emirates) as well as local
39
Brian Barr and Leo Grutters (originally by Brian Totterdill),
FIDIC Users’ Guide
(ICE Publishing, UK, 2014), chapter 1.2, p 4
40
Jane Jenkins,
International Construction Arbitration Law
(2
nd
Edition, Kluwer Law International BV, The Netherlands, 2014), para 1.04[A], p 9
41
see Dubai Court of Cassation Judgment 176/96 dated 8 March 1997
42
see Dubai Court of Cassation Judgment 3/2000 dated 29 April 2000
Page 18 of 102
laws enacted by the Ruler of the Emirate concerned.
43
In the event of conflict, Federal laws supersede local laws.
4445
Therefore, a sample definition of FIDIC Laws in Abu Dhabi should include Abu Dhabi laws
and
Federal laws of the UAE as applied in Abu Dhabi. From experience, FIDIC definitions are frequently overlooked in EOT claim submissions.
2.2 Commencement of Works, Time for Completion and Taking Over
Sub-Clauses 8.1 (Commencement of Work) and 8.2 (Time for Completion) describe the start and duration of the Works. Within 42d (or any other period stated in the Appendix to Tender) of the issue of the Letter of Acceptance, the Engineer must give minimum 7-day notice of the Commencement Date. The Contractor should proceed
'with due expedition and without delay'
. The Right of Access to the Site (Sub-Clause 2.1) should be given within the period stated in the Appendix. Since FIDIC defines
day
as a calendar day, all periods include weekends and holidays. Time for Completion covers all the work necessary for Taking-Over of the Works (Sub-Clause 10.1), including the Tests on Completion (Clause 9). This is frequently overlooked by inexperienced UAE contractors as testing/commissioning activities take several months and involve authorities whose regulations are part of
Laws
. The Particular Conditions may include a more detailed list of the work to be completed, in addition to the construction and tests.
46
If Sections of the Works are required to be completed before the overall Time for Completion, they should be described in the Appendix, with the Time for Completion and delay damages for each Section.
2.3 Programme and progress reporting
Sub-Clause 8.3 (Programme) requires the Contractor to submit a detailed programme to the Engineer within 28d from the commencement notice. The programme should be bound to the calendar, including any restrictions (UAE summer periods, Ramadan reduced hours).
43
Essam Al Tamimi,
Practical Guide to Litigation and Arbitration in the United Arab Emirates
(Kluwer Law International, UK, 2003), para 1.2.4 (The Judicial Arrangements), p 4
44
Ibid
45
see Dubai Court of Cassation Judgment 324/2001 dated 25 November 2001
46
Brian Barr and Leo Grutters (originally by Brian Totterdill),
FIDIC Users’ Guide
(ICE Publishing, UK, 2014), chapter 14, p 169
Page 19 of 102
The programme must address work sequencing, design, procurement, manufacture/testing, inspections, Subcontractors, allocated personnel/equipment. The Particular Conditions may further impose specific software and formats, which should be adequately priced. The Engineer is not required to approve the Contractor's programme. He may comment within 21d and request a revised programme that complies with the Contract. The Contractor may periodically update the programme due to adjusted methods of work, but any delays in the updated programme cannot change contractual obligations and non-commenting by the Engineer does not constitute an acceptance of a later completion date.
47
The Contractor is not encouraged to work ahead of the programme. The Employer's Personnel are entitled to rely on the programme when planning their activities, and the Engineer may not be ready to expedite drawings or increase the inspection coverage. The Contractor is required to give
'prompt'
warning notices to the Engineer of any
'events or circumstances which may adversely affect the work'
. Early warnings are additional to claim notices. Sub-Clause 4.21 (Progress Reports) details the requirements for Contractor's monthly progress reporting, which is a sensitive task that generates contemporary records. Sub-Clause 8.6 (Rate of Progress) allows the Engineer to request for a revised programme where Contractor's progress falls behind the programme. UAE-specific issues are further discussed in Chapter 3.
2.4 Extension of Time for Completion, delay events and damages
Sub-Clause 8.4 (EOT for Completion) lists the situations, or events, that may entitle the Contractor to an extension of the Time for Completion. It is not sufficient for the event to cause delay; the Contractor must demonstrate that taking-over
'is or will be delayed'
. In FIDIC-1987
ICC Case 10847
(2003)
,
48
the tribunal confirmed that
‘delay to an activity or sequence of events that are not critical activities or critical sequences do not fairly entitle the Claimant to an EOT.’
47
Ibid, p 171
48
ICC Case No. 10847 (2003), published in the ICC Court of Arbitration Bulletin Vol 23/No 2 -2012, page 34
Page 20 of 102
Delay events may arise from: (a) Variations The Engineer may instruct a variation (13.1, Right to Vary), and may request a proposal ahead of instruction (13.3, Variation Procedure). In the absence of instruction/proposal, the Contractor may claim if there is a change in the quantity, quality, dimensions, method, or sequencing of the Works. (b) Other Sub-Clauses Several sub-clauses expressly entitle the Contractor to an extension of time and, in most cases, money (Table 1). (c) Exceptionally adverse climatic conditions Adverse weather must be measured and demonstrated to be 'exceptional' against the 'normal' weather, which may cover a several-year period. Adverse weather may result in additional time, but not money; it is explicitly excluded from Sub-Clause 4.12 (Unforeseeable Physical Conditions). (d) Shortages of personnel or Goods Shortages are difficult to prove, especially in the well-supplied market such as UAE; they must be Unforeseeable. (e) Employer (and Engineer's) actions Employer causes broadly include
'any delay, impediment or prevention caused by or attributable to the Employer, the Employer's Personnel, or the Employer's other contractors'
, in addition to specific causes from Sub-Clauses 17.3 (Employer's Risks) and 17.4 (Consequences of Employer's Risks). The Employer's Personnel includes the Engineer and his assistants (1.1.2.6). Sub-Clause 8.5 (Delays Caused by Authorities) further allows for extension where
'legally constituted public authorities'
interfere with the Works. For clarity, privatized public authorities may be covered by Particular Conditions. The Contractor must always prove that proper procedures were followed and interference was Unforeseeable.
Page 21 of 102 Table 1 - Summary of FIDIC Delay Events and Contractor's Entitlement to EOT, Cost and Profit
Finally, Sub-Clause 20.1 (Contractor's Claims) is sufficiently general to cover other delay events that the Contractor might rely on,
'under any Clause of these Conditions or otherwise in connection with the Contract'
. In the absence of an EOT, Sub-Clause 8.7 (Delay Damages) and Appendix to Tender define the amount to be paid by the Contractor for each day of delay, up to a pre-defined limit (usually 10% of the Contract Price). Delay Damages replace actual losses incurred by the Employer as they
'shall be the only damages due from the Contractor'
. This is further discussed in Chapter 4.
Contractor's Entitlement to EOT, Cost and Profit under Red Book Entitlement under Yellow Book Sub-Clause EOT Cost Profit 1.9 Delayed Drawings or Instructions √ √ √ √ 1.9 Error's in the Employer's Requirements 2.1 Right of Access to the Site √ √ √ √ 4.7 Setting Out √ √ √ √ 4.12 Unforeseeable Physical Conditions √ √ x √ 4.24 Fossils √ √ x √ 7.4 Testing √ √ √ √ 8.4 Extension of Time for Completion √ x x √ 8.5 Delays Caused by Authorities √ x x √ 8.9 Consequences of Suspension √ √ x √ 9.2 Delayed Tests √ √ √ √ 10.3 Interference with Tests on Completion √ √ √ √ 13.1 Right to Vary and 13.3 Variation Procedure √ √ √ √ Includes design variations 13.5 Provisional Sums √ √ √ √ 13.7 Adjustments for Changes in Legislation √ √ x
√
16.1 Contractor's Entitlement to Suspend Work √ √ √
√
17.4 Consequences of Employer's Risks √ √ √ Only in two cases: (1) Unauthorized taking over, and (2) Employer's design errors
√
19.4 Consequences of Force Majeure √ √ Only in some cases x
√
Page 22 of 102
2.5 Contractor’s claims for EOT and associated costs
Sub-Clause 20.1 (Contractor's Claims) requires the Contractor to give notice to the Engineer of any claim
'as soon as practicable, and not later than 28d after the Contractor became aware, or should have become aware, of the event or circumstance'
. Failure to give notice results in loss of entitlement and
'the Employer shall be discharged from all liability in connection with the claim'
. Time bar provisions are discussed in Chapter 4. All notices must comply with Sub-Clause 1.3 (Communications). They should be in writing and use of electronic communications should be pre-agreed in the Particular Conditions. There is no mandatory form of delay notice, but it should describe the delay event, timing, cause, responsibility, estimated duration and adverse effects, without detailed calculations.
49
Notices should be listed in Contractor's monthly reports (4.21, Progress Reports). The Contractor must keep contemporary records to substantiate the claim; the Engineer may (but is not obliged to) inspect them or request copies. The Engineer may also keep his own records, without sharing them with the Contractor. Contemporary records are the key to decision making and the Engineer should clarify them rather sooner than later. Contemporary records are further discussed in Chapter 4. A fully detailed Contractor's claim should be submitted within 42d of the event and this period runs concurrently with the notification time bar. The Engineer must respond (approve/disapprove) on the principles of the claim within another 42d. He may request for further substantiation, but should nevertheless decide in principle.
50
The Engineer may propose and the Contractor may accept even longer periods (not recommended). The Engineer decides on the claim principle and details and cannot delegate this task (Sub-Clause 3.5, Determinations). He should consult with the Parties and agree/determine separately: (i) the EOT and/or (ii) the additional payment. He should review previous determinations and may increase, but not decrease, the total EOT (Sub-Clause 8.4).
49
Keith Pickavance,
Delay and Disruption in Construction Contracts
(3
rd
Edition, LLP Professional Publishing, London-Singapore, 2005), para 5.85 (Notices, Claims and Early Warnings), p 158-159
50
Brian Barr and Leo Grutters (originally by Brian Totterdill),
FIDIC Users’ Guide
(ICE Publishing, UK, 2014), chapter 26, p 265
Page 23 of 102
As a result of Sub-Clauses 8.4 and 20.1, claims for extension of the Time for Completion and associated costs should be notified and submitted separately.
5152
The Engineer's decision on the claim is binding. Approved amounts are included in Payment Certificates and the Employer should pay (14.7, Payment), or face the finance charges (14.8, Delayed Payment). The
ICC Case 10619 (2001)
53
expressly confirmed that binding Engineer’s decisions, even if not final, are enforceable. Either Party may declare dissatisfaction and raise a dispute (20.4, Obtaining DAB's decision). There is no time limit for referring a dispute to the DAB, and this has been criticized.
54
DAB's decision then becomes binding until further revised by agreement (20.5, Amicable Settlement) or arbitration (20.6, Arbitration).
2.6 Employer’s time-related claims
Sub-Clause 2.5 (Employer's Claims) enables the Employer to notify any claim for an extension to the Defects Notification Period or for Contractor's payments. This means that Employer should notify prior to deduction of delay damages as per Sub-Clause 8.7.
55
Employer’s claims should be notified
‘as soon as practicable’
(no time bar) and agreed/determined by the Engineer under Sub-Clause 3.5 (Determinations). There is no requirement for the Contractor to respond to Employer's claim notices. Amounts determined by the Engineer may be deducted from Payment Certificates, subject to certain conditions. The Employer does not have a general right of set-off unless his claim complied with Sub-Clause 2.5 (proper notification and sufficient elaboration of the set-off intention) and Engineer’s determination (fair assessment including consultation with both parties). A different decision, reached in the FIDIC-1999
ICC Case 11813
(2002)
under
51
Christopher Seppala,
Contractor’s claims under the FIDIC civil engineering contract, Fourth (1987) Edition
(International Business Law Journal, 1991), page 19
52
Dr. Götz-Sebastian Hök,
FIDIC Claim Management,
2014,
<http://www.dr-hoek.de/EN/beitrag.asp?t=FIDIC-Claim-Management> accessed 10-09-2014
53
ICC Case No. 10619 (2001)
54
ECV Limited,
The Practical Management of Contract Claims and the Resolution of Disputes under the 1999 FIDIC Contracts and the 2007 Abu Dhabi Government Conditions of Contract
, Proceedings from a two-day specialized FIDIC seminar led by David Heslett and Brian W Totterdill, Abu Dhabi, UAE, 21-22 April 2008
55
ECV Limited,
The Practical Use of the 1999 FIDIC Conditions of Contract under the 1999 FIDIC Contracts and Aide Mémoire on the Multi-lateral Development Banks’ Harmonised Construction Contract 2006 and the 2007 Abu Dhabi Government Conditions of Contract
, Proceedings from a two-day specialized FIDIC seminar led by Brian W Totterdill, Abu Dhabi, UAE, 22-23 March 2010
Page 24 of 102
English law, was heavily criticized by legal commentaries as a mistake and misinterpretation of FIDIC’s intention.
56
While the Tribunal in this case recognized that the Employer might have breached Sub-Clause 2.5, it held that nothing in that Sub-Clause or any of the other Sub-Clauses referred to an exclusion of the Employer’s right of set-off (as strictly defined under English law in the
Housing Grants, Construction and Regeneration Act 1996
). This decision considered FIDIC and English law positions to be equal in regard to set-off, which is not the case. In general, it is viewed by most relevant authors and practitioners, including the author of this publication, that FIDIC views of set-off are more conservative than the English
HGCRA
57
and not fully straightforward. Without a clear notification of Employer's claim and proper Engineer's determination in accordance with the contract, the Employer should not experiment with deductions from the Payment Certificate.
56
ICC Case No. 11813 (2002), criticized in the ICC Court of Arbitration Bulletin Vol 24/No 2 -2013, page 57
57
Housing Grants, Construction and Regeneration Act 1996, s. 111
Page 25 of 102
3 Critique of UAE contract practice for time management
The current contract practice on UAE projects has been reviewed and benchmarked against practice guides and FIDIC requirements and improvements have been suggested.
3.1 Analysis of UAE contract practice
The recent
UAE Study (2010)
58
investigated 42 potential delay factors through a questionnaire sent to 50 UAE companies. Client-related factors (change orders, slow decision making, lack of capability) and poor contract practice (planning/estimating, contract administration) contributed to delays. This aligns with CIOB's findings (Chapter 1). Another
Case Study (2009)
59
researched the causes of delay on 3 projects (late sub-contractor nomination, improper task/resource planning, lack of risk management). The
Dissertation Study (2012)
60
interviewed UAE practitioners, revealing problems with contemporary records. Claims lacked in completeness and clarity due to inefficient document systems. The
Study on Construction Claims (2006)
61
examined 124 UAE claims. Interviewed municipality experts recommended to link constructability with project planning and improve contract administration. The role of 'risk-sharing philosophy' was highlighted in the responses. Own experience from FIDIC-based building projects (2010-2015) has been summarised and tabulated below, covering project planning (Table 2a), progress reporting (Table 2b) and EOT claims (Table 2c). Project configurations (basements, podiums, typical floors) and use (residential, offices, hotels) are indicated in the tables.
58
Omayma Motaleb and Mohammed Kishk,
An investigation into causes and effects of construction delays in UAE
, Egbu, C. (Ed)
Proceedings 26th Annual ARCOM Conference,
6-8 September 2010, Leeds, UK, Association of Researchers in Construction Management, 1149-1157
59
Shaikh Asif Abdus Saeed,
Delay to Projects – Cause, Effect and Measures to Reduce/Eliminate Delay by Mitigation/Acceleration,
Dissertation submitted 2009 at the Institution of Business, The British University of Dubai
60
Nael Maher Zubaida,
Claims Management and Substantiation in the UAE Construction Sector,
Dissertation MSc Project Management, Faculty of Business, The British University of Dubai, May 2012
61
Essam K. Zaneldin,
Construction claims in United Arab Emirates: Types, causes, and frequency,
Elsevier International Journal of Project Management 24 (2006) 453–459
Page 27 of 102 Table 2b - Progress Reporting (UAE Projects)
P
rogress Reporting 1 2 3 4 5 6 7 8 9 10
Actual dates presented, % complete shown Yes; Physical % Yes; Physical % Yes; Physical % Yes; Physical % Yes; Physical % Yes; Physical % Yes; Physical % Yes; Physical % Yes; Physical % Yes; Physical % Logic changes (adjusted construction methods) Yes Yes Yes Yes Yes Nil Yes Yes Yes Yes Float monitored Weekly tracker Weekly tracker Weekly tracker Weekly tracker Weekly tracker Monthly Weekly tracker Weekly tracker Weekly tracker Weekly tracker S-curve provided (cost, effort) Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Detailed cost report, earned value Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Summary dashboard By Engineer By Engineer By Engineer By Engineer By Engineer By Engineer By Engineer Yes By Engineer By Engineer Risk workshops (time) Occasional Occasional Occasional Occasional Occasional Weekly meetings Occasional Occasional Occasional Occasional Submissions and approvals tracked Yes Yes Yes Yes Yes Nil Yes Yes Yes Yes Weekly reports available Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Page 28 of 102 Table 2c - EOT Claims (UAE Projects)
EOT Claims (Time) 1 2 3 4 5 6 7 8 9 10
EOT claims submitted 7 7 3 1 12 3 9 9 2 1 EOT claims notified 31 31 3 3 53 3 89 81 2 1 Delay analysis method used to calculate EOT Windows analysis Windows analysis Windows analysis Simple time impact analysisImpacted as planned Impacted as planned Impacted as planned Impacted as planned Simple time impact analysisSimple time impact analysis EOT claimed (days) 151d 212d 299d 85d 339d 264d 403d 399d 104d 118d EOT approved (days) 151d 212d 215d Under review 339d 264d 222d 217d 82d 91d EOT entitlement -accepted items 3 3 1 1 7 Variations; authority delays 3 3 1 Delay in site possession EOT entitlement - rejected items 28; contractor design, delay events not critical, poor substantiation/records 28; contractor design, delay events not critical, poor substantiation/records 2; delay events not critical, lack of substantiation/records - 21; contractor design, delay events not critical, poor substantiation/records 2; delay events not critical, lack of substantiation/records 12; contractor design, delay events not critical, poor substantiation/records 12; contractor design, delay events not critical, poor substantiation/records 1; works within Contractor’s original scope Nil Quality of submission (basis, cause, effect) Good, as per industry standards Good, as per industry standards Reasonable, as per industry standards Reasonable, as per industry standards Up to industry standards Poor Reasonable; not up to industry standards Reasonable; not up to the industry standards Reasonable, as per industry standards Reasonable, as per industry standards
EOT Claims (Cost) 1 2 3 4 5 6 7 8 9 10
Costs claimed (AED) - - 17m Not yet 5.4m 5m 14m 12m Not yet Not yet Costs approved (AED) - - 0 - 2.7m 0 0; Concurrent delays 0; Concurrent delays - - Entitlement (accepted) - - Nil - Variations, auth. delays Nil Nil Nil - - Quality of submission (details, actual costs) - - Poor, not as per industry standards - Poor; Engineer determined Poor, lack of substantiation Poor, not as per industry standards Poor, not as per industry standards - - Remark Project competed Project completed Project in progress Project in progress Project completed Project completed Delay Damages applicable Delay Damages applicable Project in progress Project in progress
Page 29 of 102
The following key observations are highlighted, based on surveyed projects: -
Programmes
do not capture all contract requirements and methods of work, in spite of the complexity (10,000+ activities per project). Long (>28d) and short (<7d) activities are not optimised, while excessive total floats (>28d) invite for disputes about float utilisation. There is no strategy for time contingencies. -
Progress reporting
satisfies basic FIDIC requirements (charts, photographs, submission logs, safety statistics), but without a view of creating contemporary records for EOT claims. Web-based document management systems are used with non-customised workflows/forms. -
Methods for delay analysis
are not selected with respect to actual circumstances. Delay calculations frequently rely on the original (as-planned) programme, even if such programme may be flawed, increasing claim rejections (Table 2c). -
Methods for calculation of delay costs
vary from the industry standards (Table 2c). -
EOT claim submissions
fall behind the industry standards (Table 2c). -
Risk management techniques
are not applied to the full potential. Each of the above points is briefly addressed below, based on practice guides, case law and FIDIC requirements. Where possible, good practice is explained and generally recommended for all construction projects and not just for those executed within the UAE.
Page 30 of 102
3.2 Programming methodology and quality of the programme
Good practice guides (SCL,
62
PMI
63
) and experience suggest the following approach: - Programme should be developed using the network scheduling methodology, the
Precedence
method (works are modelled by activity nodes and logical relationships); this suits the most popular scheduling software (
Oracle Primavera)
. - Programme should contain enough detail to communicate the intended methodology for each trade in each area of the work, supported with:
o
Narrative and sketches explaining the method of project execution: logistics plans, method statements, cycle analysis, workflows, etc;
o
Narrative outlining the scheduling approach: contractual requirements (Provisional Sums, milestones, review/approval periods), progress measurement (physical, financial);
o
Activity ID structure: (ProjectCode)-(Phase)-(Discipline)-(Floor/Location)-(ActivityNo);
o
Calendars with holidays and reduced working hours (summer, Ramadan);
o
Productivity rates used to calculate durations;
o
Manpower histograms;
o
S-curves (effort, costs, Earned Value);
o
Work Breakdown Structure, up to 6 levels,
64
such as: (1) Phase, (2) Building/Location, (3) Discipline/Trade, (4) Activity Groups, (5) Detailed Activities, (6) Micro Activities; level 5 is appropriate for FIDIC contracts;
62
Society of Construction Law (SCL),
Delay and Disruption Protocol,
October 2002, reprinted October 2004, available at <http://www.scl.org.uk/resources> accessed 26-07-2014
63
Project Management Institute,
Practice Standard for Scheduling,
2
nd
Edition, PMI, USA, 2011
Page 31 of 102
o
Derived reports, e.g. Line of Balance, to explain movement of crews; - Baseline Gantt Chart, showing: Activity ID/Description, Original Duration, Early/Late Start/Finish, Total Float, while updates should add: Current Duration, Actual Start/Finish, %Complete. The longest (critical) path must be highlighted.
65
Programme presentations may further benefit from 3D BIM standards,
66
which became mandatory on UK public projects starting from 2016.
67
- Quality checks: activities (no missing tasks), logic (meaningful), calendars (resources, activities), leads/lags (no unreasonable waiting times), constraints (based on contract requirements), floats (no excessive floats, no negative floats), long durations (>28d to be justified), resource loading (resources, costs), near critical path (float≈0). - Contractor's time contingencies should be included as separate activities, as opposed to relying on activity floats. Examples of the above documents are shown in
Appendix 6.1
, for illustration and guidance. Some influential authors, like Pickavance,
68
recommend to price the programme development separately in the Tender Documents due to its complexity and significance.
3.3 Progress reporting and maintenance of contemporary records
The
CIOB Study (2008)
69
revealed that 49% of respondents attempt to perform delay analysis on a Programme that is not updated! This is against the practice guides; according to the SCL Protocol,
'the programme should be updated to record actual progress and any
64
CIOB and Hill International,
Masterclass – Manage, Analyse and Avoid Construction Delay & Disruption in a Changing Economic Climate
, Proceedings from a two-day seminar led by Keith Pickavance, Abu Dhabi, UAE, 2-3 June 2009
65
Royal Institution of British Architects (RIBA),
Good Practice Guide: Extensions of Time
(RIBA Publishing, UK, 2008), page 66
66
Royal Institution of Chartered Surveyors (RICS),
Extensions of Time
(1
st
Edition (Draft), RICS Professional Guidance Note, UK, 2014), page 15
67
Andrew Baldwin, David Bordoli,
A Handbook for Construction Planning and Scheduling
(Wiley Blackwell, UK, 2014), page 6 - New information and communication technologies
68
Keith Pickavance,
Delay and Disruption in Construction Contracts
(3
rd
Edition, LLP Professional Publishing, London-Singapore, 2005), at 7.130, page 229
69
CIOB,
Managing the Risk of Delayed Completion in the 21
st
Century
, Research published in 2009, available at <http://www.ciob.org/sites/default/files/CIOB%20research%20-%20Managing%20the%20Risk%20of%20Delayed%20Completion%20in%20the%2021st%20century.pdf> accessed 25-07-2014
Page 32 of 102
EOT granted...then...used as a tool for determining EOTs'.
70
Practice guides offer comprehensive advice on how to maintain the programme so that it remains suitable for EOT calculations.
7172
The critical path (the longest path that drives project completion) may change in the updated programme, and English courts have acknowledged the dynamic nature of the programme.
73
In
Balfour Beatty v Chestermount Properties (1993),
74
Colman J said that power to grant an EOT should give due regard to the incidence of the developer's time risk events, measured by the standard of what is fair/reasonable. In
Henry Boot Construction v Malmaison Hotel (1999),
75
assessment of delay was based on a revised programme where the work affected by the developer was not on the critical path. In line with good practice, FIDIC Sub-Clause 4.21 (Progress Reports) requires the following monthly report submissions: - charts/descriptions of progress for each stage (design, construction, procurement, manufacture, delivery, erection, testing); - photographs; - status of manufacture and progress on site for key equipment/materials; - details of Contractor's Personnel and Equipment; - QA/QC records; - list of claim notifications; - safety statistics; - comparisons of actual and planned progress.
70
Society of Construction Law (SCL),
Delay and Disruption Protocol,
October 2002, reprinted October 2004, available at <http://www.scl.org.uk/resources> accessed 26-07-2014
71
Project Management Institute,
Practice Standard for Scheduling,
2
nd
Edition, PMI, USA, 2011
72
Andrew Baldwin, David Bordoli,
A Handbook for Construction Planning and Scheduling
(Wiley Blackwell, UK, 2014)
73
Keith Pickavance,
Delay and Disruption in Construction Contracts
(3
rd
Edition, LLP Professional Publishing, London-Singapore, 2005), at 9.26, page 288
74
Balfour Beatty Building Ltd v Chestermount Properties Ltd
[1993] 62 BLR
75
Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd
[1999] 70 Con LR 32
Page 33 of 102
If actual progress is too slow, Sub-Clause 8.6 (Rate of Progress) allows the Contractor to revise the Programme. If slow progress is caused by the Employer, this should be documented. As FIDIC does not prescribe reporting variables and formats, some recommendations are provided in
Appendix 6.2
. Advanced reporting techniques (Earned Value, online dashboards) are helpful, but not essential for delay analysis. Visuals generated by site Web cameras (photos/videos, weather trackers) could be useful. Web-based document management systems may facilitate claim research and increase availability of progress reports and other contemporary records, such as: correspondence, meeting minutes, inspection records, requests for information, instructions, drawings, material submissions, delivery documents, etc.
3.4 Methods for analysis of delay time
There are a number of methods for analysing delays, with varying complexity. These are not fully standardized and there are differences between practice guides. FIDIC (and other) forms are silent about preferred delay analysis methods.
Simple methods
The purpose of delay analysis should be to determine the cause of delay and its effects, not to complicate.
76
In
P&O Developments v The Guy's and St Thomas' NHS Trust (1982)
,
77
the judge asked
'what an informed person in the building industry (not the man on the street) would take to be the cause without too much microscopic analysis but on a broad view'
. Simple ways of assessing delays include
overview of the facts
and
comparison of actual and planned progress (as-planned v as-built)
.
78
These simple methods rely on contemporary records to provide 'proof by inference',
79
but such approach works
'only if all
76
Keith Pickavance,
Delay and Disruption in Construction Contracts
(3
rd
Edition, LLP Professional Publishing, London-Singapore, 2005), page 490
77
P&O Developments Ltd v The Guy's and St Thomas' NHS Trust
[1999] BLR 3
78
Royal Institution of Chartered Surveyors (RICS),
Extensions of Time
(1
st
Edition, RICS Professional Guidance Note, UK, 2014), page 13
79
Keith Pickavance,
Delay and Disruption in Construction Contracts
(3
rd
Edition, LLP Professional Publishing, London-Singapore, 2005), page 490
Page 34 of 102
other activities proceeded according to programme,'
as stated by Judge Hicks QC in
Ascon Contracting v McAlpine Construction (1999).
80
In reality, a more detailed analysis of the critical path is usually required in addition to simple inference.
Prospective time impact analysis
Delays should preferably be analysed as they occur ('prospectively',
81
'contemporaneously'),
82
taking account of the actual critical path(s) in the updated programme. The SCL Protocol and English courts have adopted the view that this is the desired method.
83
In
Balfour Beatty v Lambeth LBC (2002),
84
Judge Lloyd QC mentioned the importance of
'the original programme'
and
'soundness of its revisions on the occurrence of every event'
when analysing causes and effects
;
'a valid critical path (or paths) has to be established both initially and at every later material point since it (or they) will almost certainly change.'
Such prospective real-time approach is known as
time impact analysis
85
and includes chronological 'impacting' of each delay event onto the updated programme in order to assess the effect. The programme is impacted by using the contemporary records. The principal problem is extreme complexity if there are multiple causes of delay each of which needs to be analysed independently.
86
In fact, as noted in
Adyard Abu Dhabi v SD Marine Services
(2011),
87
this method has not been fully applied in any reported case.
88
The
80
Ascon Contracting Ltd v Alfred McAlpine Construction Isle of Man Ltd
[1999] 66 Con LR 119 at p. 146
81
Roger Gibson,
Construction Delays – Extensions of Time and Prolongation Claims
(Taylor & Francis, UK, 2008), page 175, para C. Prospective analysis
82
Keith Pickavance,
Delay and Disruption in Construction Contracts
(3
rd
Edition, LLP Professional Publishing, London-Singapore, 2005), page 495, paragraph 14.28
83
Ibid
84
Balfour Beatty Construction Ltd v The Mayor And Burgesses of the London Borough of Lambeth
[2002] 1 BLR 288 at p. 302
85
Roger Gibson,
Construction Delays – Extensions of Time and Prolongation Claims
(Taylor & Francis, UK, 2008), page 175
86
Jane Jenkins,
International Construction Arbitration Law
(2
nd
Edition, Kluwer Law International BV, The Netherlands, 2014), page 225
87
Adyard Abu Dhabi v SD Marine Services
[2011] EWHC 848, paras 289-290
88
Jane Jenkins,
International Construction Arbitration Law
(2
nd
Edition, Kluwer Law International BV, The Netherlands, 2014), page 226
Page 35 of 102
UK Survey (2013)
89
confirmed that prospective approach is hardly adhered to in practice, and the top contributory reason is lack of adequate project records.
Retrospective methods
Where the prospective time impact analysis is not feasible, some form of retrospective delay analysis can be applied.
The windows (time slice, snapshot) analysis method
evolves from prospective time impact analysis. The total project duration is divided into a number of consecutive time periods, or windows, which can match the reporting periods. The smallest window possible is one that contains only one delaying event and that equates to time impact analysis without windows.
90
The programme is updated at the end of each window, and delays are investigated and apportioned between the employer and the contractor.
91
This is viewed as systematic and objective method, which uses the contemporary critical path within each window.
92
The as-planned expanded (impacted) method
takes the original as-planned programme and adds to it the effects of delay events. These events and their durations are assessed by the expert from the material available, which may become subjective. Furthermore, the results are flawed if the original programme was poor and/or the methods of work have changed.
93
It may work if the original programme and its critical path remain steady, which is rarely the case.
The as-built collapsed (subtracted, as built but for) method
takes what factually happened, the as-built programme, and deducts actual delay events in order to assess the earliest date at which the work could have been completed without their effects. This method demands considerable time and effort to develop the as-built model and sometimes involves
89
Nuhu Braimah,
Approaches to Delay Claims Assessment Employed in the UK Construction Industry
, Civil Engineering Department, School of Engineering and Design, Brunel University, UK, Article in Buildings 2013, 3, 598-620, 11 September 2013
90
Andrew Baldwin, David Bordoli,
A Handbook for Construction Planning and Scheduling
(Wiley Blackwell, UK, 2014), page 325
91
Roger Gibson,
Construction Delays – Extensions of Time and Prolongation Claims
(Taylor & Francis, UK, 2008), page 180
92
James R Knowles (Middle East),
Proceedings from the Training Course for Delay Analysis
, Presented by Coling Smith, Dubai, UAE, 23 September 2002
93
Jane Jenkins,
International Construction Arbitration Law
(2
nd
Edition, Kluwer Law International BV, The Netherlands, 2014), page 223
Page 36 of 102
the subjective expert reasoning in regard to the as-built critical path(s) and relationships.
94
The acceptability increases with the more accurate site records. Practical comparison of above methods is provided in
Appendix 6.3
. Windows analysis should be used wherever possible as it became the most accepted method in practice,
95
even though there is still no precise definition amongst experts, see
Costain v Charles Haswell
(2009)
.
96
In FIDIC contracts, the windows analysis method can (and should) be applied progressively on a monthly basis using the updated programme and contemporary records.
3.5 Breakdown of delay costs
It is a common mistake to link time and money in delay situations. The SCL Protocol states that
‘entitlement to an EOT does not automatically lead to entitlement to compensation (and vice versa)
’.
97
Additional monies may be recovered even without prolongation, and, conversely, a contractor may receive an EOT and still not be entitled to additional financial recovery.
98
In FIDIC contracts, time and money claims should be notified and submitted separately, and Contractor's entitlement to Cost (
‘all expenditure reasonably incurred, including overheads’
) and/or profit varies (Chapter 2).
Delay costs
are time-related costs associated with delays. There could also be additional
disruption costs
to cover the 'thickening'
99
of resources on non-critical activities. In the FIDIC-based
ICC Case 12654 (2005)
,
100
the tribunal explained that
‘pure delay costs'
arise due to the prolonged use of resources, while
'disruption costs'
are linked to
'unproductive manner'
of work or
'out of sequence'
work.
94
Roger Gibson,
Construction Delays – Extensions of Time and Prolongation Claims
(Taylor & Francis, UK, 2008), page 179
95
Andrew Baldwin, David Bordoli,
A Handbook for Construction Planning and Scheduling
(Wiley Blackwell, UK, 2014), page 325
96
Costain Ltd v Charles Haswell & Partners Ltd
[2009] EWHC 3140 (TCC)
97
Society of Construction Law (SCL),
Delay and Disruption Protocol,
October 2002, reprinted October 2004, available at <http://www.scl.org.uk/resources> accessed 26-07-2014, para 1.6.2
98
Ali Haidar and Peter Barnes,
Delay and Disruption Claims in Construction
(2nd Edition, ICE Publishing, UK, 2014), page 53
99
Ibid, page 51
100
ICC Case No. 12654 (2005), published in the ICC Court of Arbitration Bulletin Vol 23/No 2 -2012, page 38
Page 37 of 102
Practice guides and experience suggest the following heads of claim for delay and disruption costs (sometimes called loss and expense).
101102
Site overheads (preliminaries)
On-site mobilization, running and demobilization costs may be identifiable within the 'Preliminaries' section of the Bills of Quantities (BOQ). Delay costs reflect the additional
running costs
during the EOT period; mobilization/demobilization costs are usually unaffected. Where the BOQ is not straightforward or there is no specified rate for running (delay) costs, which is usually the case, the actual delay costs should be calculated, having in mind the following items: - site personnel (management, specialists, labour) and related expenses (e.g. travel) that are project-specific; - site accommodation and/or offices, including any associated furniture and equipment (e.g. IT equipment); - site temporary facilities (e.g. covered stores, workshops, maintained yards, truck washing facilities, and similar); - site safety and security facilities (e.g. fences, gates, safety barriers, safety scaffolding, security and access equipment, site cameras, etc); - contractor's equipment (e.g. tower cranes, mobile cranes, hoists, concrete plant, major scaffolding, dedicated formwork, etc); - site temporary services (e.g. water supply, electricity supply, telecommunication systems, site sewage, site storm water drainage, etc), inclusive of mandatory maintenance and service charges; - temporary protection of works and required environmental measures (e.g. mandatory sampling and testing);
101
Ali Haidar and Peter Barnes,
Delay and Disruption Claims in Construction
(2nd Edition, ICE Publishing, UK, 2014), page 53
102
Royal Institution of British Architects (RIBA),
Good Practice Guide: Assessing Loss and Expense
(RIBA Publishing, UK, 2013), page 40
Page 38 of 102
- site administration and expenses (e.g. cleaning and removal of debris, payment of government fees and other services not mentioned above); - maintenance of extended insurances and bonds in accordance with the contract; - expenses for extended storage facilities, repeated testing and commissioning and extended warrantees for the works and built-in equipment. In most cases, therefore, the actual costs incurred by the contractor should be claimed and not the prices of the preliminaries from the BOQ,
103
provided that resources were actually required on site (just presence of resources does not mean they are additional to the tendered ones!) and that contractor mitigated losses.
104
From the
British Westinghouse v Underground Electric Railways
(1912)
,
105
the injured party must take all reasonable steps to mitigate losses, and cannot recover any loss which could have been avoided (e.g. inefficiency of resources, failure to apply simple mitigation measures, poor site management and similar are non-recoverable). Mitigation is further discussed in Chapter 4. Actual costs should rely on the contemporary records; no unnecessary operating charges (repairs, parts, fuel) should be applicable and rental costs should reflect the stand-by or non-operational (idle) status. The costs should relate to the periods in which delay has occurred and only to the sequence of activities that were actually delayed (if some other activities progressed). The onus is on the contractor to prove that the costs claimed have been actually incurred and that every effort has been taken to minimise these costs.
106
Head office overheads
These are administrative and management costs of running the head office, such as: rents, running/administration costs, transportation, salaries, depreciation, legal/professional fees. Entitlement to such general overheads is an arguable point.
107
103
Roger Knowles,
200 Contractual Problems and their Solutions
(3
rd
edition, Willey-Blackwell, UK, 2012), page 215
104
Ali Haidar and Peter Barnes,
Delay and Disruption Claims in Construction
(2nd Edition, ICE Publishing, UK, 2014), page 55
105
British Westinghouse Electrical Manufacturing Co Ltd v Underground Electric Railways
[1912] AC 673
106
Ali Haidar and Peter Barnes,
Delay and Disruption Claims in Construction
(2nd Edition, ICE Publishing, UK, 2014), pages 56-57
107
Ibid, page 59
Page 39 of 102
Following
JF Finnegan v Sheffield City Council
(1988),
108
contractor's off-site overheads claim should show that
'the workforce, but for the delay, might have had the opportunity of being employed on another contract which would have had the effect of funding the overheads during the overrun period.'
The onus is on the contractor to prove that actual loss has been suffered.
109
In
Peak Construction v McKinney Foundations
(1970)
110
the contractor was asked to prove that there was other work available which, but for the delay, the contractor would have secured. Such loss of an opportunity is often very difficult to prove.
111
The actual overhead costs must be reasonable.
112
In
Tate & Lyle v Greater London Council
(1981)
,
113
damages for head office expenses were justified, but could not be recovered because of the failure to keep proper records; the court wanted to know who at head office was involved and what was the record of their time spent on the overrunning project.
Babcock Energy v Lodge Sturtevant
(1994)
114
reinforced the contractor’s entitlement to recover head office overheads based upon accurately recorded costs. Head office overheads are sometimes calculated by use of a formulae (Hudson's, Emden's in UK, Eichleay in US), which have found limited judicial and arbitral approval.
115
The SCL Protocol is sceptical about the use of formulae due to double-counting of overhead costs, especially where there are variations in works.
116
Variations usually include an element of overhead/profit, which causes the overlapping and double-counting of these costs.
108
J F Finnegan v Sheffield City Council
[1988] 43 BLR 124
109
John Murdoch, Will Hughes,
Construction Contracts – Law and Management
(4
th
edition, Taylor & Francis, UK, 2008), page 231
110
Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd
[1970] 1 BLR 111
111
Roger Knowles,
200 Contractual Problems and their Solutions
(3
rd
edition, Willey-Blackwell, UK, 2012), page 214
112
Royal Institution of British Architects (RIBA),
Good Practice Guide: Assessing Lass and Expense
(RIBA Publishing, UK, 2013), page 43
113
Tate & Lyle Food and Distribution Ltd v Greater London Council
[1981] 3 All ER 716
114
Babcock Energy Ltd v Lodge Sturtevant Ltd (Formerly Peabody Sturtevant Ltd)
[1994] 41 ConLR 45
115
Royal Institution of British Architects (RIBA),
Good Practice Guide: Assessing Loss and Expense
(RIBA Publishing, UK, 2013), page 44
116
Society of Construction Law (SCL),
Delay and Disruption Protocol,
October 2002, reprinted October 2004, available at <http://www.scl.org.uk/resources> accessed 26-07-2014, para 1.16.6 – 1.16.10
Page 40 of 102
Loss of profit
In English law, economic loss must follow naturally from the breach or be within the reasonable contemplation of the parties at the time of contracting to be recoverable,
117
as per the second lag in
Hadley v Baxendale
(1854);
118
loss of profit, being economic loss, can be treated as 'special damages' and included in the claim. Similarly to head office overheads, the contractor would need to show that he was prevented from earning profit elsewhere, see
Peak Construction v McKinney Foundations
(1970)
,
119
and demonstrate the actual loss of profit that he would have earned on other contracts had there been no delay and disruption.
120
Rough estimates of profit margins based on the tender price are unlikely to be sufficient.
121
In
Inserco v Honeywell Control Systems
(1996),
122
the judge referred to Spon's industry norms and actual expectation in profit in Inserco’s business. Following
Wraight v PH&T (Holdings)
(1968)
,
123
where the contractor's employment has been determined as a result of employer's default, the contractor is entitled to be reimbursed the amount of profit that he can prove that he would have made on that particular contract had he been allowed to complete the works, less the amount saved because of the removal of his contractual obligation. Loss of profit is very difficult to prove and recovery may depend on the applicable law (Chapter 4). In FIDIC forms, loss of profit is expressly excluded for some delay events (Chapter 2).
Increased resource costs due to delay (inflation)
This head of claim usually arises on a fixed price contract, or where a fluctuation recovery has been agreed.
124
The claim should cover the excess necessarily incurred as a direct
117
Ewan McKendrick,
Contract Law – Text, Cases and Materials
(5
th
edition, Oxford University Press, 2012)
118
Hadley v Baxendale
[1854] 156 ER 145
119
Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd
[1970] 1 BLR 111
120
Ali Haidar and Peter Barnes,
Delay and Disruption Claims in Construction
(2nd Edition, ICE Publishing, UK, 2014), page 60
121
Jane Jenkins,
International Construction Arbitration Law
(2
nd
Edition, Kluwer Law International BV, The Netherlands, 2014), page 193
122
Inserco Ltd v Honeywell Control Systems Ltd
[1996] 21 BLISS 3
123
Wraight Ltd v PH & T (Holdings) Ltd
[1968] 8 BLR 22
124
Ali Haidar and Peter Barnes,
Delay and Disruption Claims in Construction
(2nd Edition, ICE Publishing, UK, 2014), page 61
Page 41 of 102
result of the prolongation; records must be kept to show the difference in labour/material prices between the actual and planned periods of work.
125
FIDIC Sub-Clause 13.8 (Adjustments for Changes in Cost) allows for such price adjustments, provided that cost indices are specified in the Appendix to Tender. This clause is frequently disallowed in UAE contracts, with some exceptions (e.g. copper rates on power projects).
Increased costs for work under different climatic conditions due to delay
Loss/expense due to work in less favourable climatic conditions are recoverable in English law, as per
Bush v Whitehaven
(1888)
.
126
The contractor needs to demonstrate that productivity was actually affected, not just that the work was undertaken during a period of less favourable climatic conditions.
127
This is a special case of disruption. In FIDIC contracts, financial compensation for climatic Unforeseeable Physical Conditions is explicitly excluded (Sub-Clause 4.12). However, Sub-Clause 20.1 (Contractor's Claims) covers claims
'otherwise in connection with the Contract'
and could be called upon in reasonable disruption cases due to Employer’s delay events.
Finance and interest charges
When a contractor incurs loss/expense, this has to be financed by him either from his own capital resources of by increased borrowing.
128
This is pure economic loss, similar to loss of profit, and may be claimed as 'special damages', subject to the remoteness test. The case of
FG Minter v Welsh Health Technical Services Organisation
(1980)
129
confirmed that interest on borrowed money to cover contractor's loss/expense is recoverable under JCT contracts. In
Rees & Kirby Ltd v
Swansea CC
(1985)
,
130
the court assessed a
125
Royal Institution of British Architects (RIBA),
Good Practice Guide: Assessing Loss and Expense
(RIBA Publishing, UK, 2013), page 46
126
Bush v Whitehaven
[1888] 52 JP 392
127
Ali Haidar and Peter Barnes,
Delay and Disruption Claims in Construction
(2nd Edition, ICE Publishing, UK, 2014), page 61
128
Ibid, page 57
129
F G Minter Ltd v Welsh Health Technical Services Organisation
[1980] 13 BLR 1, CA
130
Rees & Kirby Ltd v
Swansea City Council
[1985] 30 BLR 1
Page 42 of 102
similar claim on the basis of compound rather than simple interest. This was followed in Scotland in
Ogilvie Builders v
Glasgow City DC
(1994)
.
131
In FIDIC contracts, finance and interest charges may be claimed
'otherwise in connection with the Contract'
under Sub-Clause 20.1 (Contractor's Claims), but
Laws
may interfere (Chapter 4).
Disruption and acceleration
Disruption arises from the unproductive use of contractor's labour and equipment due to disturbance or hindrance to the normal working methods, even without any delay. Forced or so-called 'constructive' acceleration (when contractor does not get the deserved EOT and is forced to accelerate) may invoke disruption. There are several methods to quantify loss of productivity in a disruption claim.
The industry standard approach
(actual and standard/published productivity rates are compared) and
the measured mile approach
(actual and non-disrupted productivity rates are compared, within the same project) are frequently used. In
Whittal Builders Company v Chester-Le-Street District Council
(1985),
132
the court favoured the measured mile method, which is also recommended by SCL.
133
In
John Doyle Construction v Laing Management (Scotland)
(2004),
134
it was similarly acceptable to compare labour productivity actually achieved on site when work was largely free from disruption with disrupted productivity. The principal problem is not so much in identifying the actual cost incurred, but in showing that, but for the disruptive event, the cost would have been less than actually turned out to be.
135
This is often extremely difficult to prove as contractor's own record of performance on a project is rarely perfect. Reasonable mitigation measures should also be considered. FIDIC (and other) contract forms do not elaborate on disruption. The Contractor should warn about
'adverse circumstances'
(8.3, Programme), and may claim for loss
'otherwise in connection with the Contract'
(20.1, Contractor's Claims).
131
Ogilvie Builders Ltd v
Glasgow City District Council
[1994] 68 BLR 122
132
Whittal Builders Company Ltd v Chester-Le-Street District Council
[1985] 11 CLR 40
133
Society of Construction Law (SCL),
Delay and Disruption Protocol,
October 2002, reprinted October 2004, available at <http://www.scl.org.uk/resources> accessed 26-07-2014, para 1.19.7, page 32
134
John Doyle Construction Ltd v Laing Management (Scotland) Ltd
[2004] Scots CS 141
135
Jane Jenkins,
International Construction Arbitration Law
(2
nd
Edition, Kluwer Law International BV, The Netherlands, 2014), page 194
Page 43 of 102
Sub-contractor EOT claims
Sub-contractor's EOT claims may be relevant, provided that they can be attributed to delays caused by the employer only. Contractors are often reluctant to provide a break-up of sub-contractor's delay costs due to the actions of the contractor and the employer, and endeavour to recoup all of a sub-contractor's delay costs from the employer.
136
Passing sub-contractor claims directly to the employer may be extremely difficult if the sub-contractor was required to carry out his work 'back-to-back' with the main contract. Such a claim would trigger analysis of sub-contract provisions, proof of payments to the sub-contractor and justification in the same manner required for the contractor's own claims.
137
Relevance of sub-contractor's claims also depends on the applicable law (Chapter 4).
Claim preparation costs
Claim preparation is normally considered as part of project administration. Fees of external consultants are generally not recoverable under English law, except where the issue proceeds to arbitration/litigation, see
James Longley v South West Thames
(1984)
.
138
Compensation might be sought where the request for further evidence involves unusually heavy amount of managerial time,
139
see
Tate & Lyle v GLC
(1981)
.
140
FIDIC forms similarly convey that normal contract administration is part of Contractor's obligations.
3.6 Claim submissions
EOT claims frequently suffer from poor presentation and substantiation. The time-part of EOT claims should contain these essential elements: - Project and contract details;
136
Ali Haidar and Peter Barnes,
Delay and Disruption Claims in Construction
(2nd Edition, ICE Publishing, UK, 2014), page 57
137
Ibid
138
James Longley v South West Thames
[1984] 25 BLR 56
139
John Murdoch, Will Hughes,
Construction Contracts – Law and Management
(4
th
edition, Taylor & Francis, UK, 2008), page 234
140
Tate & Lyle Food and Distribution Co Ltd v GLC
[1981] 3 All ER 716
Page 44 of 102
- Delay event(s) and responsibility allocation; - Contractual entitlement (contract clauses, law); - Contractual procedures (warnings, notices, submissions); - Cause and effect analysis (narrative of planned and actual events); - Delay analysis (using appropriate method(s)); - Statement of claim (conclusion, days claimed); - Substantiation (contemporary records). The cost-part of EOT claims should be notified and submitted separately (Chapter 2). Similarly to time claims, the contractor must show that cause of the delay is one that entitles the contractor, under the contract, to payment for the extra costs incurred. The factual evidence and the breakdown of costs must be clearly presented (Chapter 3).
3.7 Use of risk management for avoidance of EOT claims
Risk management may contribute to prevention of EOT claims. Practice guides, in general, recommend the following procedural steps:
141
1) Risk Management Planning 2) Risk Identification 3) Qualitative Risk Analysis 4) Quantitative Risk Analysis (not always required) 5) Risk Response Planning 6) Risk Monitoring and Control Elaboration of risk management steps is outside of this research, but a sample risk register is provided in
Appendix 6.4
; it may be adjusted to suit a particular project and included in monthly progress reports.
141
Project Management Institute,
Practice Standard for Project Risk Management
, PMI, USA, 2009; and similar
Page 45 of 102
4 Comparative analysis of legal issues relevant to EOT in FIDIC contracts under English and UAE laws
UAE civil law may influence the way courts and arbitrators interpret FIDIC EOT provisions. Relevant issues are discussed below by comparing the English law approach with the provisions from UAE legislation. Supporting court decisions and recommendations of professional organizations and legal practitioners are highlighted.
4.1 Construction and interpretation of contract terms
When the parties disagree about the particular clause, courts try to construe ('construct') the clause in order to give effect to it. English courts would try to assess
objectively what the parties must be taken to have intended.
142
If the wording is ambiguous, the court may seek other evidence of intentions; in
Robertson v Jackson
(1845),
143
the phrase
'turn to deliver' the goods was constructed by referring to port procedures. Custom of the trade may be used to fill out the unclear contract provisions; in
Hutton v Warren
(1836)
,
144
allowances for seeds and labour in the last year of the tenancy were incorporated into a lease agreement. Oral or other extrinsic evidence, if accepted, may be used to 'fill the gap' or 'rectify' the written document;
145
in
Allen v Pink
(1838)
,
146
the court allowed evidence of an oral promise regarding the horse's behaviour in harness. However, such extrinsic (oral) evidence is admissible only to clarify, not to vary the contract ('parol evidence rule', parol stands for 'oral').
147
English courts favour the 'purposive' or 'commercial' approach (contract wording is placed in context to be properly understood) as opposed to the 'literal' approach (wording has literal meaning subject only to the
contra proferentem
rule that any ambiguity would be interpreted
142
Richard Stone,
The Modern Law of Contract
(9th Edition, Routledge, UK, 2011), page 192, para 6.5.2 Construction
143
Robertson v Jackson
[1845] 2 CB 412
144
Hutton v Warren
[1836] 150 ER 517
145
Richard Stone,
The Modern Law of Contract
(9th Edition, Routledge, UK, 2911), page 316, para 9.7.2 Rectification
146
Allen v Pink
[1838] 4 M & W 140
147
Parol Evidence Rule
, see <http://legal-dictionary.thefreedictionary.com/document> accessed 02-01-2015
Page 46 of 102
against its creator).
148
In
Reardon Smith Line v Hansen-Tangen
(1976)
,
149
Lord Wilberforce referred to the need for the court to place itself in the same
'factual matrix'
to that of the parties when they made the contract. In
Investors Compensation Scheme v West Bromwich Building Society
(1998),
150
Lord Hoffmann favoured
'the common sense principles'
because '
the meaning which a document...would convey to a reasonable man is not the same thing as the meaning of its words.'
UAE construction contracts must comply with the UAE Civil Code (Article 19(2)):
'The lex situs of the place in which real property is situated shall apply to contract made over such property.'
Furthermore,
'a mandatory provision (of law) shall take precedence over a contractual stipulation'
(Article 31)
,
and
'ignorance of the law is no excuse'
(Article 29). If the contract is clear, it will be interpreted under UAE law in accordance with its provisions;
'There shall be no scope for implications in the face of clear words.'
(Article 259). It the wording is not clear, the UAE Civil Code provides guidance in Section 4, The Construction of Contracts (Articles 257-266). 'Construction' and 'interpretation' are used interchangeably. Generally, UAE law looks into 'the common intention of the parties', which is a more subjective test than that of a 'reasonable' or 'ordinary' man under English law. While interpreting, a difference can be made between plain and ambiguous expressions in the contract.
151
Plain expressions
, if clearly stated and not in conflict with the law, are interpreted literally, unless
'it is impossible to give them their direct meaning'
(Article 258(2)). The
Dubai Court of Cassation Case 280/2008
152
confirmed that
'where the wording of the contract is clear and obvious, there shall be no deviation from that clear wording to another.'
If the expression
148
Ibid, page 194, para 6.5.3 'Purposive' or 'Commercial' Interpretation
149
Reardon Smith Line v Hansen-Tangen
[1976] 1 WLR 989
150
Investors Compensation Scheme Ltd v West Bromwich Building Society
[1998] 1 All ER 98
151
Al Tamimi & Co, UAE,
Law Updates
, <http://www.tamimi.com>:
The interpretation of contracts under the UAE Civil Code
, by by Abobakr Dafalla
,
January 2014, <http://www.tamimi.com/en/magazine/law-update/section-8/december-january-1/the-interpretation-of-contracts-under-the-uae-civil-code.html> accessed 05-08-2014
152
Dubai Court of Cassation Case 280/2008
Page 47 of 102
is plain but still does not reflect real intentions of the parties, the judge may search for its true meaning; the
Dubai Court of Cassation Case 280/2008
153
clarified that what matters are
'intentions and meanings and not words and form'
(Article 258(1)).
Ambiguous expressions
may have more than one meaning and are interpreted by looking at the
'mutual intentions of the parties...in accordance with the custom'
(Article 265(2)). The
Dubai Court of Cassation Case 125/2007
154
confirmed that
'the contract's aim is defined by the true intentions and meanings of the parties'.
It is important to distinguish between evidence of context (allowed for interpreting an ambiguous contract) and extrinsic evidence (disallowed as an aid for changing a written contract,
155
see the
UAE Evidence Act (1992)
,
156
Article 36). This is similar to the 'parole evidence rule' in English law. The UAE law approach is qualified by Article 266(1) stating that
'a doubt shall be interpreted in favour of the obligor'
, which allows uncertain obligations to be resolved in favour of the person required to perform the relevant obligation (especially if his bargaining power is inferior).
157
This is different than English 'contra proferentem' rule, where the ambiguous clause is interpreted against the party who put forward the wording.
158
4.2 Good faith, ethical issues and role of the Engineer when assessing claims
In English contract law, there is no legal principle of good faith, for two reasons.
159
Firstly, parties are free to pursue their own goals in negotiating and performing contracts provided they are not in breach of contract. Secondly, there is concern that concept of good faith is too
153
Dubai Court of Cassation Case 294/2008
154
Dubai Court of Cassation Case 125/2007
155
Al Tamimi & Co, UAE,
Law Updates
, <http://www.tamimi.com>:
The interpretation of contracts under the UAE Civil Code
, by by Abobakr Dafalla
,
January 2014, <http://www.tamimi.com/en/magazine/law-update/section-8/december-january-1/the-interpretation-of-contracts-under-the-uae-civil-code.html> accessed 05-08-2014
156
UAE Federal Law of Evidence No. 10 of 1992 ('UAE Evidence Act'), amended by Law No. 36 of 2006 (Electronic Transactions)
157
International Comparative Legal Guides (ICGL),
United Arab Emirates – Construction & Engineering Law 2014
, by Adam Balchin and Euan Lloyd, Al Tamimi & Company, 2014, available at <http://www.iclg.co.uk/practice-areas/construction-and-engineering-law/construction-and-engineering-law-2014/united-arab-emirates> accessed 09-08-2014, para 3.16
158
Al Tamimi & Co, UAE,
Law Updates
, <http://www.tamimi.com>:
The interpretation of contracts under the UAE Civil Code
, by by Abobakr Dafalla
,
January 2014, <http://www.tamimi.com/en/magazine/law-update/section-8/december-january-1/the-interpretation-of-contracts-under-the-uae-civil-code.html> accessed 05-08-2014
159
Fenwick Elliott LLP, London,
Contract Papers
<http://www.fenwickelliott.com>:
Can you imply good faith into agreements made under English Law,
by Jeremy Glover, Issue 05, March 2013, <http://www.fenwickelliott.com/files/jeremy_glover_-_issue_05_-_iq_2013_-_good_faith.indd_.pdf> accessed 15-08-2014
Page 48 of 102
vague and subjective and therefore uncertain. Nevertheless, recently in
Yam Seng v International Trade Corporation
(2013),
160
the judge supported 'fair dealing' and 'reasonable standard of conduct' in a distributorship agreement and implied duty of honesty in the provision of information and approval of fair retail prices. The judge stressed, however, that such approach depends on the context; in the construction context, he mentioned an example of consents and decisions that should not be withheld unreasonably. In contrast, the UAE Civil Code implies that Sharia principles of 'good faith' and 'fairness' must be followed in exercising rights and powers (Article 246(1)):
‘The contract must be performed in accordance with its contents, and in a manner consistent with the requirements of good faith’.
Each party is required to discharge its contractual obligations with
'all such care as the reasonable man would exercise'
(Article 383). A failure to act in good faith would therefore be a breach of contract.
161
The Civil Code further clarifies (Article 106):
‘A person shall be held liable for an unlawful exercise of his rights,...(a) intentional infringement (of another's rights);....(b) contrary to Islamic Sharia, the law, public order, or morals;....(c) if the interests desired are disproportionate to the harm that will be suffered by others;....(d) if it exceeds the bounds of usage and custom'.
These provisions in UAE law are sometimes relied upon by Contractors when making allegations of unlawful acts (or inaction) by Engineers/Employers.
162
The FIDIC Engineer must follow a fair approach when evaluating claims. In FIDIC-1987, the Engineer was expressly impartial (Sub-Clause 3.1). In FIDIC-1999, he works for the
160
Yam Seng Pte Ltd (a company registered in Singapore) v International Trade Corporation Ltd
[2013] EWHC 111 (QB)
161
Raid Abu-Manneh,
Contracting in the Middle East
(Construction & Engineering Legal Update, Issue 57 December 2008, published by Mayer Brown), <http://www.mayerbrown.com/publications/Construction-amp-Engineering-Legal-Update-12-18-2008/> accessed 25-04-2014
162
Al Tamimi & Co, UAE,
Law Updates
, <http://www.tamimi.com>:
Dealing with concurrency in construction delay claims,
by Dean O’Leary, April 2014,
<
http://www.tamimi.com/en/magazine/law-update/section-8/april-7/dealing-with-concurrency-in-construction-delay-claims.html> accessed 05-08-2014
Page 49 of 102
Employer (1.1.2.4, 3.1), but
'shall consult with each Party in an endeavour to reach agreement'
and, if agreement is not achieved,
'shall make a fair determination...taking due regard of all relevant circumstances'
(Sub-Clause 3.5). The
FIDIC Contracts Guide
163164
suggests an amendment that ‘
the Engineer shall act impartially when making these determinations
’. Even if the Engineer is a Government employee, he should still be impartial.
165
FIDIC does not allow the Engineer to delegate his authority to determine any matter, unless specifically agreed by the Parties (Sub-Clause 3.2). The Engineer's decision is binding, subject to the notice of dissatisfaction (Sub-Clause 20.4), and this is enforced in arbitrations. In the
ICC Case 7910 (1996)
,
166
the Contractor obtained Engineer’s decision; in the absence of dissatisfaction notice, the tribunal lacked jurisdiction. In the
ICC Case 3790 (1983)
,
167
the tribunal confirmed the final/binding Engineer's decision.
168
Regardless of jurisdiction, the Engineer may be liable for his wrong decisions. In
John Mowlem v Eagle Star Insurance
(1992),
169
the architect was liable in tort under English law for wrongful interference with the contract. In Dubai’s
Pacific Associates v Baxter
(1988),
170
Engineer’s unfair claim assessments under a FIDIC dredging contract could be challenged by the Contractor, but only by claiming against the Employer.
163
FIDIC,
The FIDIC Contracts Guide – 1999 Conditions for Construction, Plant & DB and EPC/T
(1
st
Edition, 2000; Amended 2006)
164
Michael D Robinson,
An Employer's and Engineer's Guide to the FIDIC Conditions of Contract
(Wiley-Blackwell, UK, 2013), page 79
165
Christopher Seppala,
Contractor’s claims under the FIDIC civil engineering contract, Fourth (1987) Edition
(International Business Law Journal, 1991), page 20 referring to J. B. Wikeley,
Municipal Engineering Law and Administration
(C.R. Books Ltd, London 1964, at 29)
166
ICC Case No. 7910 (1996)
167
ICC Case No. 3790 (1983)
168
Christopher Seppala,
International construction contract disputes: commentary on ICC awards dealing with the FIDIC International Conditions of Contract
(The International Court of Arbitration, Bulletin Vol. 9 No 2, November 1998), pages 36-37, topic D
169
John Mowlem & Co plc v Eagle Star Insurance Co Ltd
[1992] 62 BLR 126
170
Pacific Associates Inc and Another v Baxter and Other
[1988] 44 BLR 33
Page 50 of 102
4.3 Delay notices and warnings as condition precedent
English courts generally view that timescales in construction contracts are directory rather than mandatory. The contractor should not lose his right to claim if such claim is not brought within the stipulated timescale,
171
see
Temloc v Errill Properties (1987).
172
The case of
Bremer Handelgesellschaft
v
Vanden Avenne Izegem (1978)
173
defined that a notice provision should be construed as a condition precedent if: (1) it states the precise time for serving the notice, and (2) it makes plain by express language that unless the notice is served within that time the claimant will lose his rights. FIDIC Sub-Clause 20.1 (Contractor's Claims) fulfils both these conditions, and was clearly drafted as a condition precedent:
174
“The notice shall be given as soon as practicable, and not later than 28d after the Contractor became aware, or should have become aware, of the event or circumstance. If the Contractor fails to give notice...the Time for Completion shall not be extended, the Contractor shall not be entitled to additional payment.'
Sub-Clause 8.3 (Programme) further requires the Contractor to issue 'prompt' warnings to the Engineer of
'probable future events or circumstances which may adversely affect the work.'
These are not regarded as condition precedent as they cover virtually anything.
175
The 'prevention principle' (one should not benefit from his own wrongs) may interfere, if the employer has prevented the contractor. In the Australian
Gaymark Investments v
Walter Construction Group
(1999)
,
176
the prevention principle took precedence over the notification provisions; the contractor was not deprived of his right to claim in spite of a failure
171
Fenwick Elliott LLP, London, Contract Papers <http://www.fenwickelliott.com>:
FIDIC: An overview of the latest developments, comparisons, claims and force majeure,
by Jeremy Glover, 2007, <http://www.fenwickelliott.com/files/Arbitration%207%20-%20FIDIC%20an%20overview.pdf> accessed 15-08-2014, page 17
172
Temloc Ltd
v
Errill Properties Ltd
[1987] 39 BLR 34
173
Bremer Handelgesellschaft mbH
v
Vanden Avenne Izegem nv
[1978] 2 Lloyd’s Rep. 113, per Lord Salmon
174
Fenwick Elliott LLP, London, Contract Papers <http://www.fenwickelliott.com>:
FIDIC: An overview of the latest developments, comparisons, claims and force majeure,
by Jeremy Glover, 2007, <http://www.fenwickelliott.com/files/Arbitration%207%20-%20FIDIC%20an%20overview.pdf> accessed 15-08-2014, page 17
175
Brian Barr and Leo Grutters (originally by Brian Totterdill),
FIDIC Users’ Guide
(ICE Publishing, UK, 2014), page 171
176
Gaymark Investments Pty Ltd
v
Walter Construction Group Ltd
[1999] 18 BCL 449
Page 51 of 102
to notify. This judgment provoked a debate, and
Gaymark
was finally rejected in England in
Multiplex Construction v
Honeywell Control Systems (2007
),
177
where Mr Justice Jackson explained that notice of delay serves a useful purpose:
"Such notice enables matters to be investigated while they are still current.'
It
'gives the employer the opportunity to withdraw instructions when the financial consequences become apparent."
This judgment was confirmed in
Steria v Sigma Wireless Communications
(2008)
,
178
with further clarification that
'minutes of meeting prepared by third parties...did not constitute adequate notice'
. In Scotland,
John Haley v Dumfries & Galloway RC
(1988)
179
also held that minutes will not constitute good notice unless the parties specifically amend the contract. FIDIC time-bar provisions are therefore valid under English law, but their operation under UAE law might be different.
The
UAE Commercial Code
180
states that contract provisions prevail over the commercial/civil codes (Article 2), but subject to mandatory law provisions (Civil Code, Article 31). Mandatory law provisions do not allow contractual rights to expire easily; for commercial claims such time bar is 10 years (Commercial Code, Article 95):
'The obligations of traders towards each other and concerning their commercial activities, shall not be hard...on the lapse of ten years from the date on which the performance of the obligation falls due, unless the law stipulates a shorter period'.
This precedes any contractual time bars (Civil Code, Article 486(1)):
'It shall not be permissible to waive a time-bar defence prior to the establishment of the right to raise such defence, nor shall it be permissible to agree that a claim may not be brought after a period differing from the period laid down by law'.
Provisions of 'good faith' and 'unlawful exercise of a right' (Articles 246, 106) may also apply. Rejection of a valid claim by the Engineer/Employer due to a late notice or improper format of
177
Multiplex Construction
v
Honeywell Control Systems
[2007] EWHC 447 (TCC)
178
Steria Ltd v Sigma Wireless Communications Ltd
[2008] 118 Con LR 177
179
John L Haley Ltd v Dumfries & Galloway Regional Council
[1988] 39 GWD 1599
180
UAE Commercial Transactions Law No. 18 of 1993 (‘Commercial Transactions Law’, 'Commercial Code')
Page 52 of 102
notice (e.g. minutes of meeting) may be seen as an act of bad faith, causing disproportionate harm to the Contractor. A straightforward rejection of a large financial claim on the grounds of procedural technicalities may also be an 'unjust enrichment'
181
(Articles 318-319). From the other perspective, FIDIC expressions are clearly drafted and contracts should be interpreted in accordance with their terms (Chapter 4.1), so the Contractor should comply with mandatory time bars. Contractor's failure to notify could equally be seen as an act of bad faith, depriving the Employer of any chance to apply corrective measures. The actual circumstances should be examined and may play an important role. Abu Dhabi Municipality decided to keep the original Sub-Clause 20.1 in their modified FIDIC contract,
182
but there are no published experiences about its enforcement in practice. Claim notices provoke polarising opinions. In the FIDIC-based
ICC Case 15282 (2010)
,
183
the Contractor failed to comply with the notification time limit. Rather than dismissing the claim outright, which should have been done according to commentators,
184
the tribunal took a pragmatic approach and examined the Contractor's documentary evidence to determine whether this was sufficient, and rejected the claim on that basis and not on notice provisions. Claim notice as a condition precedent might not always be enforceable under UAE law as per the views published by the
UAE Society of Engineers
.
185
As time bars are a regular contentious issue in the UAE,
186
it seems reasonable to recommend that EOT claim should be initially reviewed based on its merits and actual circumstances, rather than immediately rejected for non-compliance with the notice provisions alone. It might even be prudent and reasonable to consider relaxing time bar provisions, where appropriate. In any case,
181
Claire King,
English Law v the UAE Civil Code,
Fenwick Elliott, International Quarterly, Issue 12, 2014, <http://www.fenwickelliott.com/files/issue_12_-_iq_2014.pdf> accessed 14-02-2015
182
Abu Dhabi Conditions of Contract, Decree of the Head of Executive Council, Decision No 1 of 2007 (Based on modified FIDIC Red and Yellow Books under special FIDIC license issued to Abu Dhabi Municipality)
183
ICC Case No. 15282 (2010), published in the ICC Court of Arbitration Bulletin Vol 24/No 2 -2013, pp 53-54
184
Christopher Seppala,
International construction contract disputes: Fourth commentary on ICC awards dealing with the FIDIC International Conditions of Contract
, The International Court of Arbitration, Bulletin Vol. 24 No 2, 2013, page 54
185
UAE Society of Engineers,
The legal effect of condition precedent described in Clause 20(1) of FIDIC 1999 in the context of England and UAE Courts
, by Mahmoud Bader, <http://www.uaesocietyofengineers.com/magazineCurrentIssuemore.aspx?id=112> accessed 30-07-2014
186
International Comparative Legal Guides (ICGL),
United Arab Emirates – Construction & Engineering Law 2014
, by Adam Balchin and Euan Lloyd, Al Tamimi & Company, 2014, available at <http://www.iclg.co.uk/practice-areas/construction-and-engineering-law/construction-and-engineering-law-2014/united-arab-emirates> accessed 09-08-2014, para 3.6
Page 53 of 102
Contractor's non-compliances with the contract provisions should be taken into account in claim assessments.
4.4 Significance of contemporary records
Under English law, claim records were defined by Judge Sanders in the FIDIC-1987 case,
Attorney General for the Falklands Islands
v
Gordon Forbes Construction (Falklands)
(2003)
as:
187
"original or primary documents, or copies thereof, produced or prepared at or about the time giving rise to a claim, whether by or for the contractor or the employer."
Contemporary records arise at (or very close to) the time of the claim.
188
Judge Sanders held that it was not possible to avoid the contractual requirement of contemporary records by simply producing witness statements after the event, and rejected the claim. In the FIDIC-1987
ICC Case 15282 (2010),
189
in spite of the improper claim notification, the tribunal examined the claim and referred to the definition of ‘contemporary records’ in the
Falklands
case. The Claimant failed to present ‘contemporary records’ to support its claim and the tribunal rejected the claim on that basis.
190
However, FIDIC-1999 Sub-Clause 20.1 is somehow different: The Contractor
'shall keep such contemporary records as may be necessary to substantiate any claim'
and the Engineer may
'monitor the record-keeping and/or instruct the Contractor to keep further contemporary records'
.
187
Attorney General for the Falklands Islands
v
Gordon Forbes Construction (Falklands) Limited
[2003] 6 BLR 280
188
Nicholas Gould,
United Kingdom: Making a claim under the FIDIC form of contract. What Is Clause 20 all about?
, sponsored by Fenwick Elliott, 2007, <http://www.mondaq.com/x/54934/Building+Construction/Making+A+Claim+Under+The+FIDIC+Form+Of +Contract+What+Is+Clause+20+All+About> accessed 01-08-2014
189
ICC Case No. 15282 (2010), published in the ICC Court of Arbitration Bulletin Vol 24/No 2 -2013, pp 53-54
190
Christopher Seppala,
International construction contract disputes: Fourth commentary on ICC awards dealing with the FIDIC International Conditions of Contract
, The International Court of Arbitration, Bulletin Vol. 24 No 2, 2013, page 54
Page 54 of 102
This wording was discussed in the Trinidad/Tobago case of
National Insurance Property Development v NH International (Caribbean)
(2009).
191
It was held that FIDIC-1999 (unlike the
Falklands
case) does not specifically require a verification of the claim by contemporary records; it only requires the Contractor to keep and have available these records. A failure to keep records does not prevent recovery on the claim but is to be taken into account in its assessment insofar as it may have prejudiced or prevented a proper investigation of the claim. The claim without contemporary records does not automatically fail under English law
.
In the UAE, where 'good faith' is enforceable, immediate claim rejections for procedural technicalities alone are not generally recommended (Chapters 4.2-4.3). Furthermore, witness evidence is important and may be more compelling than in common law jurisdictions.
192
However, these differences do not negate the importance of maintaining contemporary records; proper site diaries and progress reports remain essential for documenting delay and disruption claims.
193
FIDIC requirements in regard to contemporary records are clear and should be followed by contractors. Failure to keep proper records should be taken into account in claim assessments; in
the
Dubai Court of Cassation Case (213/2008),
194
the EOT was approved by the court, but without costs due to the contractor's failure to demonstrate clear causation and provide valid evidence of actual idle resources and administrative costs associated with delays (see also the discussion on 'global claims' below). The
UAE Evidence Act
195
further explains the evidence procedures and admissible types of evidence. The
Law No. 36 (2006)
amends the Act to allow electronic documents and
191
National Insurance Property Development Co Ltd v NH International (Caribbean) Ltd,
High Court of Trinidad and Tobago, 21 October 2009 (Claim No CV2008-04881)
192
Essam Al Tamimi,
Practical Guide to Litigation and Arbitration in the United Arab Emirates
(Kluwer Law International, UK, 2003)
193
Sachin Kerur, Pinsent Masons Gulf Region,
Record what happened, when it happened – the importance of ‘contemporary records’,
and related response from Roger Gibson, see
<http://kluwerconstructionblog.com/2010/06/08/record-what-happened-when-it-happened-%E2%80%93-the-importance-of-contemporary-records/>
accessed 07-01-2015
194
Dubai Court of Cassation (213/2008) Commercial Appeal (19 January 2009)
195
UAE Federal Law of Evidence No. 10 of 1992 ('UAE Evidence Act'), amended by Law No. 36 of 2006 ('Electronic Transactions')
Page 55 of 102
signatures to serve as court evidence.
Abu Dhabi Court of Cassation (2010)
196
held that electronic communications, including offer-acceptance, must be given the same evidentiary weight as physical communications. Emails are valid evidence once it is proven that the email has been received from the sender. This broadens the contemporary records and stresses on the importance of electronic document management systems (Chapter 3.2).
4.5 Approach to resolving concurrent delays
The
SCL Protocol
offers the following definition:
197
'True concurrent delay is the occurrence of two or more delay events at the same time, one an Employer Risk Event, the other a Contractor Risk Event, and the effects of which are felt at the same time. True concurrent delay will be a rare occurrence.'
However, in
Adyard Abu Dhabi v SD Marine Services
(2011),
198
Hamblen J did not follow the SCL Protocol and accepted the definition of concurrent delay as:
‘a period of project overrun which is caused by two or more effective causes of delay which are of approximately equal causative potency.’
This definition assumes that events: 1) occur simultaneously; 2) are effective causes of delay; 3) are of equal contributory strength. If the events are not equal in effect, one will be treated as the effective and the other will be ignored.
199
Cases where delay effects occurred concurrently, but from the sequential events, are also classed as 'concurrent'.
200
Court decisions on concurrent delays under English law are inconsistent and several approaches have been considered.
201202
196
Abu Dhabi Court of Cassation Case (2010), Decision on Using Electronic Communications as Evidence, see Tamimi Law Update at < http://www.tamimi.com/en/magazine/law-update/section-6/october-2/electronic-evidence-in-the-uae-courts.html> and
<http://www.ehow.com/about_6663794_uae-federal-law-evidence.html> both accessed 16-03-2015
197
Society of Construction Law (SCL),
Delay and Disruption Protocol,
October 2002, reprinted October 2004, available at <http://www.scl.org.uk/resources> accessed 26-07-2014, para 1.4.4, page 16
198
Adyard Abu Dhabi v SD Marine Service
s [2011] EWHC 848
199
John Marrin QC,
Concurrent Delay Revised'
(179 SCL, February 2013)
,
a paper presented to the Society of Construction Law at a meeting in London on 4 December 2012
200
Kennedys,
Concurrency in delay claims, <
http://www.cila.co.uk/files/Construction/Kennedys/Concurrency%20Talk.pdf> accessed 09-01-2015
Page 56 of 102
The Malmaison approach
203
was originated by Judge Dyson in
Henry Boot Construction v Malmaison Hotel (Manchester)
(1999)
204
, and was accepted by both parties:
'If there are two concurrent causes of delay, one of which is a relevant event, and the other is not, then the contractor is entitled to an EOT...notwithstanding the concurrent effect of the other event'.
Under this approach, widely accepted in the industry, the contractor is given an EOT caused by the employer's event even if the contractor himself was responsible for another parallel delay event. The SCL Protocol similarly recommends that
'Contractor's concurrent delay should not reduce any EOT due.
205
This applies equally to '
true concurrent delays'
206
and where events
‘occur sequentially but have concurrent effects
.’
207
The dominant cause approach
was introduced by Keating (1995)
208
in the absence of relevant law:
209
'If there are two causes, one the contractual responsibility of the defendant and the other...of the plaintiff, the plaintiff succeeds if he establishes that the cause for which the defendant is responsible is the effective, dominant cause.'
Which cause is dominant is not resolved by the mere point of order in time, but it is to be decided by applying common sense standards and logical principles of causation. It is sometimes referred to as the
'common sense approach'
.
210
201
Roger Knowles,
200 Contractual Problems and their Solutions
(3
rd
edition, Willey-Blackwell, UK, 2012), pp 93-100
202
Ali Haidar and Peter Barnes,
Delay and Disruption Claims in Construction
(2nd Edition, ICE Publishing, UK, 2014), page 42
203
Ibid, page 39
204
Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd
[1999] 70 Con LR 32
205
Society of Construction Law (SCL),
Delay and Disruption Protocol,
October 2002, reprinted October 2004, available at <http://www.scl.org.uk/resources> accessed 26-07-2014, para 1.4.1, page 15
206
Ibid, para 1.4.5, page 16
207
Ibid, para 1.4.7, page 16
208
Donald Keating, Anthony May,
Keating on Building Contracts
(6th edition, Sweet & Maxwell, 1995), para 8.015-8.018
209
Roger Knowles,
200 Contractual Problems and their Solutions
(3
rd
edition, Willey-Blackwell, UK, 2012), p 95
210
Ali Haidar and Peter Barnes,
Delay and Disruption Claims in Construction
(2nd Edition, ICE Publishing, UK, 2014), page 43
Page 57 of 102
However, common sense was not sufficient in
H Fairweather v London Borough of Wandsworth
(1987).
211
The judge disagreed with the arbitrator's decision that the EOT should relate to the dominant cause and requested that each separate cause of delay should be assessed individually. The common sense approach may not suffice on projects that have sustained multiple overlapping changes or delays of long duration.
212
The apportionment approach
might apply in the absence of an identifiable dominant cause. The competing concurrent causes were considered in the Scottish case of
City Inn v
Shepherd’s Construction
(2010),
213
with the following
conclusions: - if a dominant cause can be identified,
'effect will be given to that, but by leaving out of account any cause or causes which are not material'
; - where there are two causes, neither of which is dominant, and only one is the employer's delay event,
'the claim for EOT will not necessarily fail...it will be open to the decision maker...to apportion the delay.'
The apportionment was appropriate in
John Doyle v Laing Management (Scotland)
(2004)
,
214
where the dominant cause could not be applied. The apportionment approach has been criticized as being '
contrary to the principles within the SCL Protocol'
215
. In
Walter Lilly
v MacKay
(2012)
216
the judge decided that ‘apportionment approach’ was not applicable in England and the
Malmaison
case was followed; if there are two concurrent delay events, the contractor is entitled to an EOT and there is no legal basis in England to apportion delay. Furthermore, there is no difference in approach between simultaneous and sequential delays (similar to SCL).
217218
211
H Fairweather and Co Ltd v London Borough of Wandsworth
[1987] 39 BLR 106
212
Ali Haidar and Peter Barnes,
Delay and Disruption Claims in Construction
(2nd Edition, ICE Publishing, UK, 2014), page 43
213
City Inn Ltd
v
Shepherd’s Construction
[2007] CSIH 68
214
John Doyle Ltd v Laing Management (Scotland) Ltd
[2004] BLR 295
215
see Galadari Advocates & Legal Consultants, Dubai, available at <www.galadarilaw.com/userfiles/files/EOTsandLADs-April%202012.pdf> accessed 10-01-2015
216
Walter Lilly and Company
v MacKay
[2012] BLR 503
217
Winter J., ‘
How Should Delay be Analysed – Dominant Cause and its Relevance to Concurrent Delay’,
SCL Paper 153, January 2009, p.16
218
Society of Construction Law (SCL),
Delay and Disruption Protocol,
October 2002, reprinted October 2004, available at <http://www.scl.org.uk/resources> accessed 26-07-2014, para 1.4.5 and 1.4.7, page 16
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There are other simplistic approaches, such as the
'first past the post' approach
,
219
where the cause of delay which occurs first will be used for EOT, and
'but for' approach
,
220221
where one party seeks to lay responsibility for delay on the other party by arguing that the delay would not have occurred 'but for' certain actions. These are less relevant.
As for the
monetary aspect of concurrent delay
, Pickavance
222
and Knowles
223
recommend that an EOT should be awarded to the contractor where the employer's and contractor's delay events are concurrent, but
without monetary compensation
. The SCL Protocol similarly states:
224
'Contractor may not recover compensation...unless it can separate the loss/expense that flows from the Employer Risk Event from that which flows from the Contractor Risk Event. 'Contractor will be entitled to compensation only for any period by which the Employer Delay exceeds the duration of the Contractor Delay.'
FIDIC contracts are silent on concurrent delays and disputes are decided on a case-by-case basis. The FIDIC-based
ICC Case 10847 (2003)
225
denied a time extension due to delayed drawings, given the Contractor's concurrent delay in excavation, because drawings were not on a critical path. Opinions are divided on this decision as it differs from SCL recommendations.
226
219
Roger Knowles,
200 Contractual Problems and their Solutions
(3
rd
edition, Willey-Blackwell, UK, 2012), p 97
220
Ibid, p 99
221
Ali Haidar and Peter Barnes,
Delay and Disruption Claims in Construction
(2nd Edition, ICE Publishing, UK, 2014), page 43
222
Keith Pickavance,
Delay and Disruption in Construction Contracts
(3
rd
Edition, LLP Professional Publishing, London-Singapore, 2005), p 352
223
Roger Knowles,
200 Contractual Problems and their Solutions
(3
rd
edition, Willey-Blackwell, UK, 2012), p 97
224
Society of Construction Law (SCL),
Delay and Disruption Protocol,
October 2002, reprinted October 2004, available at <http://www.scl.org.uk/resources> accessed 26-07-2014, para 1.10.4, page 23
225
ICC Case No. 10847 (2003), published in the ICC Court of Arbitration Bulletin Vol 23/No 2 -2012, page 35
226
Christopher Seppala,
International construction contract disputes: Fourth commentary on ICC awards dealing with the FIDIC International Conditions of Contract
, The International Court of Arbitration, Bulletin Vol. 23 No 2, 2012, page 35
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Page 59 of 102
In another FIDIC-based
ICC Case 12654 (2005)
,
227
the tribunal concluded that part of the delay in giving possession of the site was due to the Employer and awarded the Contractor part of its claimed costs; the Contractor was able to demonstrate entitlement to some compensation. The UAE Civil Code
provisions of 'good faith' (Article 246(1)) and 'unlawful exercise of right' (Article 106) impose an obligation on the Engineer to take a fair account of Employer's concurrent delays. Furthermore, a judge (or tribunal) may consider responsibility of each party when assessing compensation for delay (Article 290):
'It shall be permissible for the judge to reduce the level by which an act has to be made good or to order that it need not be made good if the person suffering harm participated by his own act in bringing about or aggravating the damage',
or may even ‘apportion’ liability for concurrent delay (Article 291):
'If a number of persons are responsible for a harmful act, each of them shall be liable in proportion to his share in it, and the judge may make an order against them in equal shares or by way of joint or several liability.'
Under the Civil Code, a contractor is liable for the consequences of his
'wrongful act or default'
, but he is not liable for the occurrence of events that he is not responsible for (Article 878). In the
Dubai Court of Cassation Case 266/2008
,
228
the employer claimed for delay in construction and defects and the contractor made a counter claim for prolongation costs. The court expert found that a nominated sub-contractor, not under the main contractor's control, was a dominant cause, and awarded an EOT. In another
Dubai Court of Cassation Case 1/2006
,
229
the contractor was not expeditious, but the employer also delayed the commencement, instructed additional works and changed
227
ICC Case No. 12654 (2005), published in the ICC Court of Arbitration Bulletin Vol 23/No 2 -2012, page 38
228
Dubai Court of Cassation Case 266/2008 (17 March 2009)
229
Dubai Court of Cassation Case 1/2006 (16 April 2006)
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the use from residential to serviced apartments. The court granted an EOT because employer delays were dominant. UAE court judgments suggest that contractor is entitled to an EOT for a relevant cause of delay in which he played no part, despite the contractor himself being in concurrent delay; the prospective time analysis method and the dominant cause approach seem acceptable.
230
If the Contractor was in concurrent delay, then UAE law will likely protect an employer from contractor’s claims for prolongation costs, reflecting the English position.
231
The background of a court expert (or arbitrator) and the wording of a contract may contribute to a concurrency scenario. If the contract provides that contractor is not entitled to relief for concurrent delay, a court may give effect to this drafting;
232
contracts should be interpreted in accordance with their terms (Chapter 4.1). As a matter of clarification, a FIDIC contract may be amended to state that contractor will receive an EOT for true concurrent delay, but without costs; no party should benefit from its own mistakes.
4.6 Ownership of float in the programme
The
SCL Protocol
suggests that float is available to both the employer and the contractor (actually, to the project), and EOT should be granted only if there is no remaining float:
233
'where there is remaining float in the programme...an EOT should only be granted to the extent that the Employer Delay is predicted to reduce to below zero the total float.'
The SCL approach was followed in
Ascon Contracting v McAlpine Construction
(1999)
.
234
McAlpine was the main contractor and Ascon was the structural works sub-
230
Abdurrahman Yousef Rahhal,
Entitlement to Extension of Time in cases of Concurrent Delays under the UAE Law
, MSc Dissertation, Faculty of Construction Law and Dispute Resolution, The British University of Dubai, UAE, June 2013, see the summary of court cases and conclusions on pages 47-49
231
Al Tamimi & Co, UAE,
Law Updates
, <http://www.tamimi.com>:
Dealing with concurrency in construction delay claims,
by Dean O’Leary, April 2014,
<
http://www.tamimi.com/en/magazine/law-update/section-8/april-7/dealing-with-concurrency-in-construction-delay-claims.html> accessed 05-08-2014
232
International Comparative Legal Guides (ICGL),
United Arab Emirates – Construction & Engineering Law 2014
, by Adam Balchin and Euan Lloyd, Al Tamimi & Company, 2014, available at <http://www.iclg.co.uk/practice-areas/construction-and-engineering-law/construction-and-engineering-law-2014/united-arab-emirates> accessed 09-08-2014, para 3.4
233
Society of Construction Law (SCL),
Delay and Disruption Protocol,
October 2002, reprinted October 2004, available at <http://www.scl.org.uk/resources> accessed 26-07-2014, para 1.3.1, page 13
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Page 61 of 102
contractor. The project was delayed by 9w, and McAlpine argued that 5w float was for their own delays. The judge rejected this and favoured the 'first come, first served' approach. In
Royal Brompton Hospital v Hammond
(2002)
,
235
Judge Lloyd similarly held that the project owns the float, but recognised the potential unfairness to contractors in the event of a delay caused by the employer taking place before one caused by the contractor. The 'first come, first served' approach is not universally accepted. Thomas
236
believes that
'any float in the contractor's programme is for the benefit of the contractor.'
Pickavance
237
discusses the American approach from
Natken v George Fuller
(1972)
,
238
where neither total nor free floats should be used for employer's changes. Knowles
239
also suggests that float is for correcting contractor's own mistakes, although he acknowledges this is in contrast with SCL recommendations and English court decisions. FIDIC does not expressly define the ownership of float. Corbett and Richards
240
suggest that wording of the FIDIC suite shifts the float ownership towards the Contractor, but this is not widely accepted or evidenced in arbitral awards. In the UAE, there is no particular guidance on float ownership and legal authors refrain from taking positions.
241
The contractor, the employer, or the project may own the float.
242
Realistically, the float should be for the benefit of the contractor. However, in standard EOT calculations (Chapter 3.4) floats are usually consumed by delay events as they occur. To prevent this, the contractor may extract floats into 'contingency activities', which is a
234
Ascon Contracting Ltd v McAlpine Construction
[1999] 43 BLISS 5
235
Royal Brompton Hospital National Health Trust v Hammond etc
[2002] BLR 255, [2002] All ER 801
236
Reg Thomas,
Construction Contract Claims
(2
nd
Edition, Palgrave, UK, 2001), page 101
237
Keith Pickavance,
Delay and Disruption in Construction Contracts
(3
rd
Edition, LLP Professional Publishing, London-Singapore, 2005), page 335
238
Natken & Co v George A Fuller & Co
347 F. Supp. 17 (W.D. Mo. 1972)
239
Roger Knowles,
200 Contractual Problems and their Solutions
(3
rd
edition, Willey-Blackwell, UK, 2012), para 5.3 Who owns float time in the contractor's programme, page 88 Summary
240
Cornerstone Seminars,
FIDIC Claims - Managing, Defending and Making Claims under FIDIC Contracts
, Proceedings from a two-day specialized FIDIC workshop led by Edward Corbett and David Richards, Abu Dhabi, UAE, 24-25 May 2011, commented by David Richards during the seminar workshops
241
Al Tamimi & Co, UAE,
Law Updates
, <http://www.tamimi.com>:
Dealing with concurrency in construction delay claims,
by Dean O’Leary, April 2014,
<
http://www.tamimi.com/en/magazine/law-update/section-8/april-7/dealing-with-concurrency-in-construction-delay-claims.html> accessed 05-08-2014, see footnote No. 2
242
International Comparative Legal Guides (ICGL),
United Arab Emirates – Construction & Engineering Law 2014
, by Adam Balchin and Euan Lloyd, Al Tamimi & Company, 2014, available at <http://www.iclg.co.uk/practice-areas/construction-and-engineering-law/construction-and-engineering-law-2014/united-arab-emirates> accessed 09-08-2014, para 3.5
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Page 62 of 102
preferred approach, or preventively extend contractor's activities to avoid excessive floats that invite for disputes.
4.7 Sub-contractor EOT claims
A sub-contractor would generally submit EOT claims to a main contractor, but an employer may get involved. Contract forms (including FIDIC) require the contractor to produce a programme, but there is no express obligation to follow it strictly (Chapter 2.3). Similarly, a sub-contractor is generally not required to strictly follow a main contractor's programme. In
Pigott Foundations v Shepherd Construction
(1994)
,
243
it was decided that piling sub-contractor should complete the JCT sub-contract reasonably in accordance with the progress of works, and not strictly in accordance with the main contractor's programme. An express obligation for a sub-contractor to follow a main contractor's programme can be a 'two-edged sword'.
244
In
Kitson Sheet Metal v Matthew Hall M&E Engineers
(1989),
245
the sub-contractors (Kitsons) were unable to recover EOT claims due to main programme delays, because the main contractor (Matthew Hall) made areas available for work and were not in breach of contract, even if Kitsons were brought to a complete stop. Similarly, in
Martin Grant v Sir Lindsay Parkinson
(1984)
,
246
there was no entitlement for the sub-contractor to claim extra due to delays to the main contract programme. Linking a sub-contract with a main contract programme does not necessarily help in passing sub-contractor claims directly to the employer
247
(Chapter 3.5). Consequently, FIDIC
proposed the
Sub-Contract Form (2011),
248
which regulates back-to-back provisions with FIDIC-1999. EOT claims between a main contractor and a sub-contractor can become complex, and English courts may encourage multi-tier settlement. Where a sub-contractor claims against a
243
Pigott Foundations v Shepherd Construction
[1994] 67 BLR 48
244
Roger Knowles,
200 Contractual Problems and their Solutions
(3
rd
edition, Willey-Blackwell, UK, 2012), p 85
245
Kitson Sheet Metal Ltd v Matthew Hall Mechanical & Electrical Engineers Ltd
[1989] BLR 82
246
Martin Grant & Co Ltd v Sir Lindsay Parkinson & Co Ltd
[1984] 3 ConLR 116
247
Ali Haidar and Peter Barnes,
Delay and Disruption Claims in Construction
(2nd Edition, ICE Publishing, UK, 2014), page 57
248
FIDIC Conditions of Subcontract for Construction for Building and Engineering Works Designed by the Employer, 2011
Page 63 of 102
main contractor for employer's delays, the sub-contractor can be forced to accept a settlement made between the employer and main contractor, provided that such settlement is reasonable.
249250
In
John Hunt Demolition v ASME Engineering
(2007)
,
251
Hunt was a sub-contractor to Kier for demolishing works, and ASME was their sub-sub-contractor for temporary supports. Hunt and Kier settled the claims, and Hunt sought to recover them from ASME. Judge Coulson decided that the main contract settlement was unreasonable and the lesser sum could only be recoverable from ASME. EOT claims in main contracts and sub-contracts are technically similar.
252
EOT notice provisions (Chapter 4.3), contemporary records (4.4), concurrent delays (4.5), float ownership (4.6), methods of delay analysis (3.4) and delay costs (3.5) are all applicable. The sub-contractor should not claim for EOT directly against the employer as there is no contractual relationship between them; sub-letting risks are born by the main contractor.
253
FIDIC-1999 stipulates that Contractor
'shall be responsible for the acts or defaults of any Sub-Contractor'
(4.4, Subcontractors), including 'nominated sub-contractors', although the Contractor may raise a reasonable objection to nomination (5.2, Objection to Nomination). Nomination may disturb the line of responsibility and this provoked contradictory court decisions in England. In
Bickerton v North West Hospital Board (1970)
254
, the employer was liable to re-appoint a replacement nominated sub-contractor upon the termination of the original one. In contrast, in
Percy Bilton v Greater London Council (1982)
255
, prompt re-nomination by the employer was acceptable and the contractor was liable for delay of the new sub-contractor.
249
Roger Knowles,
200 Contractual Problems and their Solutions
(3
rd
edition, Willey-Blackwell, UK, 2012), discussion about multi-tier settlements on pages 299-300
250
Discussion about the case
of Hunt v ASME
(2007) by Daniel Atkinson, barrister and engineer at <http://www.supplymanagement.com/law/court-reports/john-f-hunt-demolition-ltd-v-asme-engineering-ltd> accessed on 23-1-2015
251
John F Hunt Demolition v ASME Engineering
[2007] EWHC 1507 (TCC)
252
Roger Knowles,
200 Contractual Problems and their Solutions
(3
rd
edition, Willey-Blackwell, UK, 2012), p 122, p 187
253
John Murdoch, Will Hughes,
Construction Contracts – Law and Management
(4
th
edition, Taylor & Francis, UK, 2008), p 274, para 19.5.2 Position of the main contractor
254
Bickerton v North West Metropolitan Regional Hospital Board
[1970] 1 WLR 607
255
Percy Bilton v Greater London Council
[1982] 1 WLR 794
Page 64 of 102
Generally, compromises about main contractor’s responsibilities and control over his sub-contractors have been criticised.
256
The concept of post-contract nomination has been dropped from JCT (2005) and NEC3 forms, but 'listed' (named) sub-contractors have been retained, and the main contractor is liable for them. This was confirmed in
FB McKee v North West Regional College (2010),
257
where the windows sub-contractor was named/approved, together with details that amended the windows system, which did not integrate with the cladding system; the court decided that the main contractor was responsible for named sub-contractor’s work. The UAE Civil Code allows a contractor to sub-let the works (part or the whole), unless prohibited by the contract or the nature of the works (Article 890):
'A contractor may entrust the performance of the whole or part of the work to another contractor unless he is prevented from so doing by a condition of the contract, or unless the nature of the work requires that he do it in person.'
A sub-contractor has no right against an employer, unless the main contractor has assigned his entitlement to payment for the relevant sub-contract works to the sub-contractor and the employer has agreed to the assignment (Article 891):
'A sub-contractor shall have no claim against the employer for anything due to him from the first contractor unless he has made an assignment to him against the employer.'
All rights and liabilities for the sub-let works are therefore a matter between the contractor and his subcontractor. Even where the sub-contractor provided warranties (collateral, direct) to the employer, this does not give any right to a sub-contractor to claim against an employer, unless there are special circumstances where a legal relationship can be established between the employer and the sub-contractor.
258
256
Ian Duncan Wallace,
Hudson’s Building and Engineering Contracts
(Sweet & Maxwell, 1994, 11th Edition) para 13.010-13.011
257
FB McKee & Company Ltd v North West Regional College
[2010] NIQB 59
258
Al Tamimi & Co, UAE,
Law Updates
, <http://www.tamimi.com>:
UAE & Chinese Construction Law (Part II),
by Eric Teo, August-September 2011, <http://www.tamimi.com/en/magazine/law-update/section-7/august-september-1/highlights-of-the-laws-of-the-united-arab-emirates-the-peoples-republic-of-china-and-the-common-law.html> accessed 05-08-2014
