13 October, 2016
There are few areas of construction law that have caused as many headaches as the issue of concurrent delay.
Two recent developments have provided guidance towards a more settled approach in this area:
- the publication of the Consultation Draft for the 2nd edition of the Society of Construction Law Delay and Disruption Protocol (the Protocol); and
- the English decision of Saga Cruises BDF Ltd & Anor v Fincantieri SPA.1
Background
Often during the life of a project several overlapping events occur that are said to cause delay, for which different parties are said to be responsible. Correct analysis of concurrent delays is significant because it often determines whether the Principal is entitled to liquidated damages on the one hand, and whether the Contractor is entitled to an extension of time (EOT), and thereby avoid the application of liquidated damages, on the other. These outcomes depend on the allocation of responsibility under the contract for the delay. The recent developments
outlined above go some way to solving this problem.
‘Concurrent delay’ is a term that may have a number of different meanings when used in the construction context, and this has plagued the area with a cloud of obscurity. As noted judicially, 'One of the problems in using such expressions as "concurrent delay" or "concurrent delaying events" is that they refer to a number of different situations.'2 In order to understand the developments, it is important to distinguish between two concepts:
- True Concurrent Delay describes two or more delay events occurring at the same time, one a Principal-Risk Event, the other a Contractor-Risk Event, and the effects of which are felt at the same time. This can occur, for example, at the commencement date when the Principal fails to give access to the site, but the Contractor does not have sufficient resources to carry out any work.
- Sequential Delays describes the situation where two or more delay events arise at different times, but the effects of them are felt at the same time. In our experience, the majority of delay events that are said to be ’concurrent’ on projects can be categorised as Sequential Delays.
True Concurrent Delay
With respect to True Concurrent Delay, whether the Contractor is entitled to an EOT is fairly well settled: in the absence of an express provision in the contract, the Contractor will be entitled to an EOT for a delay caused by a Principal-Risk Event, even if that delay runs concurrently with a delay caused by a Contractor-Risk Event3, provided that each event has at least equal 'causative potency'.4
This approach is reflected in Core Principle 9 of the Protocol (also in the first edition): 'Where Contractor Delay to Completion occurs concurrently with Employer Delay to Completion, the Contractor’s concurrent delay should not reduce any EOT due.'
It should be noted that an alternative, and somewhat novel, approach has been adopted in Scotland, which involves 'apportioning' the delay between the two events.4 This approach, however, has been expressly rejected in England.5 The New South Wales Court of Appeal has also recently rejected an arguably analogous apportionment approach when considering global claims.6
Sequential Delays – towards a narrow approach?
The Protocol illustrates the different approaches to Sequential Delays by describing the following situation:
A Contractor Risk Event will result in five weeks Delay to Completion, delaying the contract completion date from 21 January to 25 February. Independently and a few weeks later, a variation is instructed on behalf of the Employer which, in the absence of the preceding Contractor Risk Event, would result in Delay to Completion from 6 February to 20 February.7
On one view, the correct approach would be to simply ask whether the variation issued by the Employer would have delayed completion in the absence of the Contractor-Risk Event. Adoption of this approach would entitle the Contractor to an EOT for the period between 6 February and 20 February.
The Protocol does not adopt this approach. Instead it reasons that the variation issued by the Employer does not in fact result in the works being delayed because the works were already going to be delayed by a greater period as a result of the Contractor-Risk Event. Therefore there is no entitlement to an EOT.
Such an approach was recently adopted in the English case of Saga Cruises BDF Ltd & Anor v Fincantieri SPA.8 In Saga, the owner of a cruise ship contracted with a shipyard to refurbish the ship, such works to be completed by 2 March 2012. Completion was not achieved until 16 March 2012 and the owner sought to recover liquidated damages for the delay.
The shipyard argued that it had been delayed by various events for which the owner was responsible. In reliance on previous cases,9 the Court rejected this argument, reasoning that any of the events for which the owner was responsible did not cause delay because they occurred during a period when completion was already going to be delayed as a result of a delay for which the yard was responsible:
If completion of the project was already delayed for reasons for which the Yard was responsible, then delays to completion of particular activities by the Owners are not examples of concurrent delay and do not give rise to any entitlement to an extension of time by the Yard. That is because they do not in fact cause any delay to completion.10
There may be a certain attraction in the simplicity of this approach for the courts. By limiting the characterisation of concurrent delay to True Concurrent Delay, depending on the facts, it opens the door to simply disregarding the second event in a situation of Sequential Delay.
This approach gives priority to whichever of the Contractor-Risk Event or Principal-Risk Event occurs first. Provided each event is of at least 'causative potency', the principles can be summarised as follows:
- Contractor-Risk Events occurring during a delay caused by a Principal-Risk Event will not reduce the Contractor’s entitlement to an EOT for the delay;
- Principal-Risk Events occurring during a delay caused by a Contractor-Risk Event will not reduce the Principal’s entitlement to liquidated damages; and
- if the second event extends the delay caused by the first event, the additional delay is subject to either an EOT or liquidated damages (depending on which scenario above applies).
On the other hand, the approach can be viewed as overly simplistic as it does not take into account the combined effect of multiple overlapping events. It is fair to say that its application may be limited to the very narrow circumstances where each event is of at least equal 'causative potency', and would have occurred for the same duration in the absence of other event.
Application to Australian Standard Form AS-2124
Parties contracting under Australian standard forms should be aware that publishers have attempted to prescribe procedures for the assessment of concurrent delays through drafting. Of particular concern to clients is the fifth paragraph of Clause 35.5 of form AS 2124-1992 which provides:
Where more than one event causes concurrent delays and the cause of at least one of those events, but not all of them, is not a cause referred to in the preceding paragraph, then to the extent that the delays are concurrent, the Contractor shall not be entitled to an extension of time for Practical Completion.
Unhelpfully, AS 2124-1992 does not define ‘concurrent delays’. The intention of this clause appears to be to deprive the Contractor of an entitlement to an EOT in the case of True Concurrent Delay, by reversing the common law position (whether it achieves this intention is arguable).12
What impact does it have on Sequential Delays?
If one were to adopt the approach suggested in the Protocol and Saga, this paragraph should not affect the common law position for Sequential Delays outlined above. This is because when one carries out the factual analysis required, and determines that the second event did not actually (as opposed to hypothetically) cause a delay, then the situation is not one where “more than one event causes concurrent delays”. Having said that, it is not difficult to foresee circumstances in which a court would find the approach insufficient to properly determine the contractual entitlements in more complex scenarios.
KEY TAKEAWAYS
When analysing delays to a project and the issue of concurrency is raised, carefully consider whether the situation is one of True Concurrent Delay or Sequential Delay.
Always check the contract to see if terms such as 'concurrent delays' are defined.
Consider whether the circumstances permit an argument to be made that a standard concurrent delay clause (such as in AS 2124-1992) does not apply to the situation, but is limited only to True Concurrent Delays
1. [2016] EWHC 1875 (Comm).
2. City Inn Ltd v Shepherd Construction Ltd [2010] CSIH 68.
3. Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd 70 Con. L.R, 32.
4. Keating on Construction Contracts (10th edition, 2016), 8-026.
5. City Inn Ltd v Shepherd Construction Ltd [2010] CSIH 68.
6. Walter Lilly & Co Ltd v Giles Mackay and DMW Developments Ltd [2012] EWHC 1773.
7. Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184, [197] – [206].
8. Guidance Note 3.10.7.
9. [2016] EWHC 1875 (Comm).
10. Adyard Abu Dhabi v SD Marine Services [2011] EWHC 848 (Comm), Royal Brompton Hospital NHS Trust v Hammond (No 7) (2001) 76 Con LR 148.
11. SagaCruisesBDFLtd&AnorvFincantieriSPA[2016] EWHC 1875 (Comm), [244].
12. Turner Corp Ltd v Coordinated Industries Pty Ltd 19( 1995) 11 BCL 202.
13. See Paul Tobin, ‘Concurrent and Sequential Causes ofDelay’,(2008)24BuildingandConstructionLaw Journal 10,
For further information, please contact:
Clare Smethurst, Special Counsel, Herbert Smith Freehills
clare.smethurst@hsf.com
