Title: Shawton Engineering Ltd v DGP International Ltd (t/a Design Group Partnership) [2005] ABC.L.R. 11/18

Shawton Engineering Ltd v DGP International Ltd [2005] ABC.L.R. 11/18

Key Words - Delay claim,Reasonable time, Repudiatory breach

Prepared by - Gayani Huruggamuwa (LL.B. , LL.M, Attorney-at-Law )

Facts

Project Context

British Nuclear Fuels Ltd engaged Kvaerner Construction for nuclear waste handling infrastructure at Sellafield. Kvaerner subcontracted to KAT Nuclear, who then subcontracted Shawton Engineering Ltd for manufacturing equipment. Shawton, in turn, subcontracted the design work for five equipment packages to DGP International Ltd.

Contract Structure

Lump sum, fixed-price contracts. DGP agreed to deliver detailed, "fit-for-purpose" manufacturing drawings derived from Design Proposal Drawings (DPDs) provided by KAT.

Delays and Variations

 Significant design work delays and scope changes occurred. Although original delivery dates were fixed, variations were issued without a formal extension of time clause, causing time to become “at large,” i.e., DGP had to complete the works within a reasonable time.

Parties’ Arguments

Q: DGP International Ltd
A: Argued delays were due to scope underestimation and valid variation orders.

Contended time was not of the essence, and they were not in breach.

Asserted Shawton had waived deadlines by continuing to engage DGP and negotiating payments

Q: Shawton Engineering Ltd
A: Terminated DGP's contracts on 26 March 2001 for delays.

Claimed £856,607 for re-procurement and £933,927 for disruption.

Argued DGP was in repudiatory breach and failed to meet agreed timelines or revised programmes.

Dispute

The key legal issues:

Had time been made of the essence in the contract?

Could Shawton lawfully terminate the contract based on delays?

Was DGP in repudiatory breach for failing to deliver within a reasonable time?

Judgment

Trial Court (TCC, Salford)

- Held that DGP was not in repudiatory breach.
- Shawton failed to prove what constituted a "reasonable time" for performance considering the extent of variations and scope development.
- By issuing variations and continuing negotiations, Shawton waived time obligations.
- Shawton’s termination was unjustified, amounting to a repudiatory breach by Shawton

Court of Appeal

- Dismissed Shawton's appeal.
- Found Shawton had never made time of the essence.
- Upheld that a party must provide clear notice before terminating due to delay, which Shawton failed to do.
- Confirmed DGP was entitled to reasonable time, especially given project complexity, lack of clear deadlines, and variations.

Significance for Construction Professionals

This case is essential reading for construction engineers, contract administrators, and project managers due to the following key takeaways

Repudiation is Hard to Prove
Only extreme or persistent delays depriving the other party of “substantially the whole benefit” justify termination.

Time Must Be Made of the Essence
You cannot terminate for delay unless time is explicitly made “of the essence” via a clear notice

Importance of Variations and EOT
Where contracts lack EOT clauses, variations trigger an implied right to reasonable time. Proper document control and variation logs are essential.

Delay ≠ Breach Automatically
Delays, especially when there are variations, don’t automatically amount to breach. Parties are expected to adjust to evolving circumstances.

Waiver by Conduct
Continued cooperation, payments, and collaboration on variations can waive rights to enforce deadlines strictly

🧠 Summary

The case shows that in construction disputes, especially those involving delays and termination, courts will examine conduct, communication, variation handling, and evidence of “reasonable expectations”. For professionals, it reinforces the need for clear contractual mechanisms, realistic time assessments, and diligent documentation of delays and scope changes.

Q: Which of the following best describes the time obligation in the DGP contracts after variations were issued?
- Time remained fixed as per original contract dates
- Time became of the essence
- Time became "at large", requiring completion within a reasonable time (correct)
- DGP could complete whenever they wanted

Q: The court ruled that DGP had to complete the design work within a reasonable time because variations made the original timeframes inoperable.
A: true

Q: You are a contractor and your subcontractor is delayed due to late design instructions and variations. You’re frustrated, but the client isn’t demanding immediate delivery.
You want to terminate. What do you do?
- Immediately terminate for breach.
- Issue a clear notice making time of the essence. (correct)
- Ignore the delay and hope for the best.
- Refuse to pay for any work until complete.

References

Shawton Engineering Ltd v DGP International Ltd (t/a Design Group Partnership) [2005] ABC.L.R. 11/18

Roger Gibson, Construction Delays: Extension of Time and Prolongation Claims (Taylor & Francis 2008)