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Extension of Time Claims - Delay Analysis Based On Theoretical Critical Path

The court considered whether a builder's claim for an extension of time and delay costs based on a computerized delay analysis showing theoretical critical path delays was valid. The court found that the contract required claims to be based on actual delays, not hypothetical delays, and that the rejection of the delay analysis was fatal to most of the builder's claims. The court also upheld the arbitrator's interpretation of notice provisions for variations in the contract.

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0% found this document useful (0 votes)
247 views2 pages

Extension of Time Claims - Delay Analysis Based On Theoretical Critical Path

The court considered whether a builder's claim for an extension of time and delay costs based on a computerized delay analysis showing theoretical critical path delays was valid. The court found that the contract required claims to be based on actual delays, not hypothetical delays, and that the rejection of the delay analysis was fatal to most of the builder's claims. The court also upheld the arbitrator's interpretation of notice provisions for variations in the contract.

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William Tong
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ACLN - Issue #47 50

Extension of Time Claims - Delay Analysis Based on Theoretical Critical


Path - Arbitrators' Awards - Final and Unappealable?

Leighton Contractors Pty Ltd v South Australian Superannuation Fund Investment Trust,
unreported, Full Court of the Supreme Court of South Australia,
King CJ, Matheson and Millhouse JJ, 24 April 1995.

In Leighton Contractors Ply Ltd v South Australian 9.01 ofthe contract authorised a claim by the builder for an
Superannuation Fund Investment Trust, the Full Court of extension of time "if the progress of the works is delayed
the Supreme Court of South Australia considered the by reason of any event specified in Clause 15.09 but not
practice, commonly adopted by contractors, ofsupporting otherwise". Clause 15.09 specified those events and
claims for extensions of time and delay costs with a provided further that in respect of variations the builder
computerised delay analysis based on the theoretical or was not entitled to an extension oftime "unless the variation
hypothetical effect of delays to the contract programme. directly affects one or more activities which can be shown
The Court was considering an appeal from ajudgement to be critical to the maintenance ofprogress in the execution
by Debelle J in which His Honour refused the appellant of the works so as to achieve practical completion by the
builder leave to appeal against an arbitrator's award. relevant date for same as adjusted from time to time".
The arbitrator found that the process of sequential
FACTS modelling on which the delay analysis was based
The builder entered into a contract with the respondent disregarded the actual delay and took no account ofactual
for the construction ofa $35.8m, 17 storey office building. events on site such as the fact that actual progress did not
Disputes arose between owner and builder which were keep pace with the programme, nor of losses of time
taken to arbitration. The arbitrator sat for 116 days. through non-claimable delays.
The parties adopted a Standard Form JCC contract with
substantial modifications and additions, particularly in THE FULL COURT'S DECISION
respect ofClauses 9 and 15 dealing with extensions oftime The Full Court held that, for an entitlement to an
and costs and associated notice provisions. The contract extension of time, there must be actual delay caused by a
set down 6 Febmary 1989 as the Date for Practical specified event. Referring to the contract provisions in
Completion and extensions of time were granted which question, King C J said:
extended this to 22 February 1989. Practical Completion "These are plainly concerned with actual delays, that
was certified by the architect as having been achieved on is to say the extent to which the works are actually
13 April 1989. Under the contract the builder was entitled delayed by the causes for which the builder is entitled
to receive a bonus for completing before the Date for to claim. If the delay which could be expected to be
Practical Completion. caused is offset by other factors so that no, or only,
At arbitration the builder submitted a computerised reduced, delay is caused, only the actual delay can be
delay analysis based on the contract programme and into the subject ofan extension oftime and damages. ...
which the various variations and other causes of delay for
which the builder was entitled to an allowance were There is no warrant in the contractfor the production
introduced. The Court described this as a process of of a delay analysis after practical completion of the
"computerised sequential modelling" by which the kind produced by the appellant. "
"theoretical delaying effect of each cause of delay was
estimated" and which "purported to demonstrate that the The Court held that the rejection of the delay analysis
Practical Completion date should be regarded as delayed approach used by the appellant, disposed of the claim for
to 1 December 1989". Based on this model the builder an early completion bonus and was "fatal to much, although
claimed to be entitled to costs for the (theoretical) delay to perhaps not all, of the appellant's claim for delay costs".
that date and, as the work had been completed in April The application for leave to appeal was dismissed.
1989, the builder also claimed entitlement to the early
completion bonus. OTHER ISSUES THE SUBJECT OF APPEAL
The appellant put forward various grounds of appeal,
in particular with respect to the arbitrator's interpretation Notice Provisions
ofthe contract as to measurement oftime and his rejection The Court also considered the notice provisions in
of the delay analysis put forward by the builder. Clause Clauses 6.09.02,15.11.01 and 15.11.02:
ACLN - Issue #47 51

• Clause 6.09.02 entitled the builder, ifit considered "A manifest error oflaw on theface ofthe award may
an instruction by the architect to be a variation, to be an error which would be apparent to thejudge upon
refer the matter to arbitration "provided that prior a mereperusal ofthe reasoned award itselfwithout the
to carrying out the instruction he shall have given benefit ofadversarial argument. "
to the architect written notice ofhis intention so to
do, ..." (This closely reflects the English test as explained in
• Clause 15.11.02 required the builder to give written Pioneer Shipping Ltd v BTP Tioxide Ltd (The Nema)
notice to the architect within 14 days of becoming [1982] AC 724 at 742.)
aware of any act matter or thing including any During the appeal and after some two hours of
instruction by the architect which, in the builder's explanation by counsel for the appellant, His Honour
opinion, constituted a variation. However Clause Millhouse J asked:
15.11.01 provided that in the event that such notice "/fit needs such a long explanation, or an explanation
was not given prior to commencing the work "the at all, is it manifest on its face? "
builder shall be precluded from claiming at any
time thereafter that the works ... so commenced Clearly His Honour thought it was not and in refusing
included or constituted a variation." leave to appeal His Honour said that if the arbitrator had
made errors there were certainly not "manifest errors" in
The Court held that with respect to Clauses 6.09.02 and the sense of"staring me in theface, looming large". (The
15.11.01 that: latter being synonyms for "manifest" found in Roge!' s
"The giving ofnotice prior to commencing the work is Thesaurus and referred to elsewhere in His Honour's
a condition precedent to claiming for the work as a reasons.)
variation. No question oftime arises. The stipulation In a dissenting view Matheson J found that the arbitrator
is mandatory and the right to claim for variation is had erred in not valuing rectification work unnecessarily
contingent upon compliance. " performed by the appellant pursuant to a direction by the
architect. Matheson J would have held this to be a manifest
Leave to Appeal Arbitrator's Award - Manifest error on the face of the award. However, because of the
Error of Law appellant's omission to comply with the necessary notice
Section 38 of the Commercial Arbitration Act 1986 provisions in respect ofthat work the application for leave
(SA) deals with leave to appeal against an arbitrator's to appeal must fail.
award, s38(5) providing that the Supreme Court shall not
grant leave unless it considers that (amongst other things) CONCLUSIONS
there is "a manifest error oflaw on theface ofthe award". Builders and contractors, architects and superintendents
King C J concluded that the appellant had not should note that unless the terms of the contract allow
demonstrated any errors oflaw on the face ofthe award and otherwise, extensions of time should not be quantified
therefore found it unnecessary to make a qualitative according to the hypothetical delay produced by modelling
assessment as to whether an error was "manifest". the theoretical effect of allowable delays on the contract
Millhouse J explored s38 of the Act in some detail, programme. Only the actual delay, being the extent to
noting that s38(5) was a relatively recent amendment which the works are actually delayed, can be the subject of
uniform or at least common to several states. His Honour an extension of time. The critical path will often change
noted that "the policy behind the amendment is to cut down during the course of a contr~ct and the theoretical delay
the number ofappeals from arbitrators so that with some may also be reducedby other factors, such as re-deployment
qualifications, their awards are final; unappealable". of the workforce on other work under the contract, or by
His Honour referred to an explanation ofthe policy by delay events for which the builder or contractor is not
Rogers C J Comm D in Promenade Investments Ply Ltd v entitled to an extension of time.
State ofNSW(1991) 26 NSWLR 184 in which Rogers C J Builders and contractors should therefore ensure that
states that: programmes used for delay analyses are updated regularly
"... it adopts the philosophy ofthe English Courts that so as to accurately reflect the actual sequence and status of
an applicationfor leave shouldnot involve a major and the work.
lengthy examination of the award but rather that the With respect to the circumstances under which leave to
argumentfor grant ofleave should be so strong and so appeal against an arbitrator's award will be granted, this
apparently compelling that afairly rapid examination case further reinforces the policy objective behind s3'8(5)
should disclose that the requirements ofthe Act have of the Commercial Arbitration Act, namely that, with few
been satisfied. " exceptions, an arbitrator's award is final and unappealable.
The hurdles a would-be appellant must surmount are very
In examining the meaning of "manifest error" in considerable.
s3 8(5)(b)(i), His Honour referred with apparent approval, Peter Willis, Senior Consultant,
to the explanation ofSheller JAin Promenade Investments Hinds Blunden Australia Pty Limited,
the most pertinent sentence ofwhich was, in His Honour's Engineers and Analysts.
view:

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