BuildLaw Issue 31 March 2018 | Page 26

Prospective vs retrospective delay analysis: New TCC Commentary
Protocol had stated a preference for a prospective methodology in all cases, even where an analysis was to be carried out after the event by a judge, arbitrator or adjudicator. This had been criticised and the 2nd Edition of the Protocol now states that where an extension of time claim is being assessed at a time distant from the events in question, a “prospective analysis of delay … may no longer be appropriate”.
The contractual provisions dealing with extensions of time are important in this regard. Under the JCT form of contract, in addition to assessing extensions of time applied for during the course of the Works (which would by necessity be carried out on a prospective basis), the Architect / Employer is required to carry out a final extension of time exercise after Practical Completion, although at that time cannot reduce any previously awarded extension. This is often said to support a retrospective approach.
Other contracts, such as the NEC, contain language which at first glance would appear to require a prospective approach to extensions of time. However, an attempt to require a prospective approach to be taken under the NEC has recently failed in a Northern Ireland High Court decision (NIHE v Healthly Buildings (Ireland) Limited – for our LawNow on the case click here http://www.cms-lawnow.com/ealerts/2017/05/nec3-compensation-events-forecasting-versus-actual-cost).
The Healthy Buildings decision relied in part on established case law in relation to the assessment of damages to the effect that assessments should be made with the benefit of full information. The colourful statement of the position given by Lord Macnaghten in the Bwllfa case in 1903 is often quoted in this respect: “Why should [the arbitrator] guess when he can calculate? With the light before him, why should he shut his eyes and grope in the dark?”. Or as Lord Robertson put it, “estimate and conjecture are superseded by facts”. This case law usually requires a retrospective approach to be taken where claims for breach of contract rather than extension of time are concerned.
Fluor v Shanghai Zhenhua Heavy Industry Co
The present case concerned the construction of the Greater Gabbard wind farm 26 kilometres off the coast of Suffolk. Fluor entered into an EPC contract for the construction of the foundations and infrastructure to support the 140 wind turbine generators planned for the wind farm. Fluor subcontracted the fabrication of the steel foundation structures to Shanghai Zhenhua Heavy Industry Co (“SZHI”).
Defects emerged in the welding carried out by SZHI, leading to large delays in Fluor’s works under the EPC contract. Fluor sued SZHI for damages and was successful in a judgment on liability delivered last year. The present decision concerned quantum.
Part of Fluor’s claim involved delay analysis and an issue arose over whether there had been a change in the critical path after the defects had been discovered. This involved consideration of whether a prospective or retrospective approach to delay analysis should be adopted. The court summarised the position as follows:
“There has been an extensive debate about the correct approach to delay analysis. Mr Morgan said, and I would accept, that a prospective analysis in other words considering the critical path at any particular point in time as viewed by those on the ground at that time does not necessarily produce the same answer as an analysis carried out retrospectively. The former is the correct approach when considering matters such as the award of an extension of time, but that is not the exercise with which the court is concerned in this case. I agree that some form of retrospective analysis is required.”