The Effect of Programme Mitigation on a Prolongation Claim

In the case of Cleveland Bridge v Severfield [2012] the English Courts considered the impact of mitigation upon a prolongation claim. The case involved a subcontract for the fabrication and supply of structural steelwork up to the 9th floor of 'The Shard', one of the tallest buildings in Europe. The structure of the Shard comprised a reinforced concrete core with an external steel frame fixed to it and extending up to the 40th floor.

The Subcontractor held to have caused initial delay to the project

Things went awry during the supply of the fabricated steel and by the time the last piece was delivered to site for the 9th floor the works were 56 days late. The Subcontractor duly claimed against the Contractor that it had been delayed by variations, late instructions and information, as well as late issue of free-issue steel. However its claim failed because the necessary link between cause and effect had not been sufficiently proven. It was held that the Subcontractor's reliance on the 'implied impact' of these events was deficient. For example, although the Subcontractor was able to show that certain free-issue steel supplied by the Contractor was late compared to the baseline programme, it had not demonstrated that this had any critical impact on the progress of its works at the time.

In contrast the Contractor's counterclaim proved an altogether different kettle of fish. The Contractor claimed that the 56 day delay to supply of steelwork up to the 9th floor delayed subsequent installation, not only of the first 9 floors, but for the remainder of the building as well.

At the end of the day the Court found that the Subcontractor was indeed culpable. It held that the Subcontractor was responsible for 42 days out of a total actual delay of 56 days to the Subcontract works. Accordingly the Subcontractor was liable to pay the Contractor's prolongation costs equivalent to this period, as the Subcontract works were also critical to completing the steelworks for the whole of the building.

The Contractor's recovery programme and subsequent delay

Now on the face of it this is unremarkable. However, the interesting bit is what happened next. The Contractor, at around the time the Subcontract works were complete, prepared a delay recovery programme. This programme mitigated the full extent of the 56 days delay that had accrued by this time and showed that overall completion of the steelworks up to the 40th floor could be completed 'on-time', i.e. without being delayed.

However, despite implementing additional acceleration measures like working overtime, the steelwork nonetheless finished around 70 days late. Clearly the acceleration measures proved unsuccessful. In addition the Court held that this latter 70 days of delay, as measured against the acceleration programme, did not derive from the Subcontractor's original slow progress or the quality of its fabrication works, and was thus quite separate.

To put all this in context, the basic chronology of events is summarised in the figure below.

The Court's reasoning

When considering this scenario the Court held that the Contractor's implementation of the recovery programme was "...sensible and reasonable...". This reasoning was underpinned by the fact that at the time the Contractor was faced with:- (1) a very substantial liquidated damages liability under its agreement with the Main Contractor; and (2) an additional 42 days worth of site related and overhead costs.

In relation to the principle of mitigation of damage the Court also relied on the dictum of Lord MacMillan in the old case of Banco De Portugal v Waterlow [1932]. His Lordship set out that:-

"Where the sufferer from a breach of contract finds himself in consequence of that breach placed in the position of embarrassment the measures which he may be driven to adopt in order to extricate himself ought not be weighed in nice scales at the instance of the party whose breach of contract has occasioned the difficulty. It is often easy after an emergency has passed to criticise the steps which have been taken to meet it, but such criticism does not come well from those who themselves created the emergency. The law is satisfied if the party placed in a difficult situation by reason of the breach of a duty owed to him has acted reasonably in the adoption of remedial measures merely because the party in breach can suggest that other measures less burdensome to him might have been taken".

Accordingly the Contractor was able to recoup the majority of its actual acceleration costs along with 42 days worth of prolongation costs. This was despite the acceleration measures proving unsuccessful and that, when measured in isolation against the delay recovery programme, the Contractor was itself culpable for the actual overall delay of 70 days.

Conclusion

In light of the Courts approach here, Contractors can perhaps rest a bit easier when struggling with the difficult question of whether to implement often expensive recovery measures to mitigate delays caused by subcontractors and employers alike. This decision suggests that a mitigation programme prepared in similar circumstances, may not have any negative effect on entitlement to prolongation costs for those same delays. Moreover this would apparently hold whether the mitigation measures were successful or not, so long as they were reasonable at the time. This could also mean that the entitlement to prolongation time may be 'banked' as it occurs in much the same way that extension of time is thought to. The only real difference may be that prolongation time is limited to the actual overrun, whereas extension of time can in some situations be more than that.