Dhabi v Sd Marine Services

In a shipbuilding contract, the builder bears responsibility for design development needed to satisfy existing contractual, classification and regulatory requirements. An indication that a regulatory authority may grant an exemption does not itself alter the applicable requirement. Where the contract provides an extension-of-time mechanism, the prevention principle does not operate. Any extension or prevention claim requires proof that the relevant event caused actual delay to the progress of the works. Where concurrent causes are alleged, both must have caused actual delay. A builder that misses contractual sea-trials milestones without qualifying delay cannot resist rescission or repayment of instalments.

Adyard contracted with SDMS for the construction of two vessels. SDMS rescinded after the vessels were not ready for sea trials by the contractual dates. Adyard alleged that the MCA had changed the applicable regulatory requirements and that resulting design items, including watertight sliding doors and valves, caused delay. It relied on contractual variation and extension provisions and the prevention principle. SDMS denied any regulatory change, disputed causation, and counterclaimed for repayment of instalments. The central issues were whether the applicable requirements had changed, whether the alleged events caused actual delay, and whether SDMS was entitled to rescind.

1. Disposition. The claims were dismissed. SDMS obtained judgment on its counterclaims for repayment of instalments, with interest under the contracts.
2. Regulatory requirements. The builder was responsible for developing the design so far as necessary to meet existing contractual, classification and regulatory requirements. The MCA had not approved an exemption from the IMO Code of Safety for Special Purpose Ships. It had indicated only that an exemption could be applied for and considered. Until properly applied for and approved, the SPS Code remained applicable. An indication that a discretion might be exercised favourably was not an alteration or change in a regulatory requirement. The alleged variation case therefore failed.
3. Prevention principle. The principle identified in Multiplex v Honeywell [2007] Bus LR Digest D109 and Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board [1973] 1 WLR 601 could not assist where the contract provided an applicable extension-of-time mechanism. Articles V, VIII and II.3.3 operated coherently. The broad definition of permissible delay included contractual postponements of the delivery date.
4. Causation. Adyard had to prove actual delay to the progress of the works. Notional delay measured only against the original sea-trials dates was insufficient. The approach in Balfour Beatty v Chestermount Properties (1993) 62 BLR 1, Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999) 70 Con LR 33 and Royal Brompton Hospital NHS Trust v Hammond (No 7) (2001) 76 Con LR 148 required the effect on actual progress and completion to be assessed. The contrary approach of Lord Carloway in City Inn Ltd v Shepherd Construction Ltd [2010] BLR 473 did not reflect English law. No actual delay was proved.
5. Extension and rescission. Any permissible-delay claim also failed for want of the contractual notice required by Article VIII.2.1. Since the vessels were not ready for sea trials by the specified dates, and the failure was not caused by permissible delay or buyer default, SDMS was entitled to rescind under Article II.3.3 and recover the instalments under Article X.