Cases - Shawton Engineering v DGP International Ltd

Record details

Name

Shawton Engineering v DGP International Ltd

Date

[2005]; [2006]

Citation

AII ER (D) 241, CA; CILL 2306 CA

Keywords

Construction claim - time for completion - reasonable time - judged at the time when the question arises - reasonable time in all the circumstances - repudiation - termination - time of the essence

Summary

This decision of the Court of Appeal concerned the provision of design drawings by the defendant for the engineering and manufacture of box encapsulation plant for the storage of nuclear waste at Sellafield.

So far as the quality of DGP's drawings was concerned, the Court was satisfied that many of the drawings contained errors, including a number of errors which a reasonably competent engineer would not have put forward.

However, on the basis that the errors were in general corrected by DGP, the Court considered that the existence of errors went essentially to the question of delay rather than breach of contract of itself. They were insufficient to give the claimant the right to terminate the contract.

Variations were ordered both before and after the contractual completion date for the works. The contract did not contain any provision for extending time in the event that variations were ordered.

The Court of Appeal held that in such circumstances, the effect of the variations was to oblige the contractor to complete the works within a reasonable time, with such reasonableness being judged 'at the time when the question arises in the light of all relevant circumstances'.

The Court of Appeal confirmed that an employer could legitimately terminate a contractor's employment on the grounds of delay on two bases:

1. if a completion date fixed in a reasonable notice making time of the essence was not complied with; and/or
2. if the failure to complete works within a reasonable time was so flagrant that It effectively deprived the innocent party substantially of the whole benefit of the contract.

In respect of point 1, the Court of Appeal further ruled that a party seeking to make time of the essence is required to demonstrate that the other party was in breach of its time obligations under the contract at the time of the notice purporting to make time of the essence.

While not deciding the matter, the Court of Appeal did however cast doubt on the trial judge's conclusions that a 'reasonable time in all the circumstances' would be influenced by the defaulting parties' misapprehension as to the extent of the workscope, and that the effect of instructing a variation was to allow the contractor a reasonable time from the moment for the whole of the remaining work.