Hong Kong – When Are Two Delays Considered “Concurrent Delays” Such That The Contractor Is Entitled To An Extension Of Time?

14 September, 2017

 

In Saga Cruises BDF Limited v Fincantieri SPA [2016] EWHC 1875, the English High Court held that two delays which occurred within the same time period are not necessarily “concurrent” in the legal sense of the word. One must bear in mind the orthodox rules of causation to determine whether each delay had an actual impact on the completion date. 

 

Background 

 

In 2010, Saga Shipping (Owners) purchased a cruise ship and engaged Fincantieri, an Italian shipbuilding company (Contractor), to refurbish the ship for €14.3 million. 

 

The contract contained a clause imposing liquidated damages on the Contractor for delay in completing the works by the Scheduled Completion Dateas follows:

 

"Amount of liquidated damages. If the completion of the Works is delayed beyond 23.59 GMT on the Scheduled Completion Date (as adjusted pursuant to this Agreement) for any reason whatsoever for which the Contractor is, or its employees, agents or sub-contractors are, responsible, the Contractor shall pay to the Owner liquidated damages …” 

 

Liquidated damages were capped at €770,000. 

 

The works were scheduled to be completed by an extended Scheduled Completion Date of 2 March 2012. The Contractor did not achieve Completion until 16 March 2012. The Owners claimed €770,000 in liquidated damages for the Contractor's delay between the extended Scheduled Completion Date (2 March 2012) and Completion (16 March 2012). 

 

The Court found that: 

 

• the Contractor was responsible for delays between 2 March 2012 and 16 March 2012 for several reasons, including its failure to adequately complete new cabins by the Scheduled Completion Date; and
• the Owners were responsible for delays from around 3 March 2012 to 14 March 2012 arising from weight problems in the ship's lifeboats, and between 2 March 2012 and 10 March 2012 arising from requesting the Contractor to install additional insulation. 

 

Was there concurrent delay? 

 

One of the main issues before the court was whether any or all periods of delay for which the Contractor was found responsible were also the fault of the Owners and therefore concurrently caused. 

 

The Arguments 

 

The Contractor argued that where completion is delayed by two events concurrently, one for which the Contractor was responsible and the other for which the Owners were responsible (as in this case), no liability for liquidated damages arose, as the Contractors were entitled to an extension of time for the period of delay not accountable to them, notwithstanding the concurrent effect of the other event. 

 

The Owners argued that the delays were not concurrent. They argued that if completion was already delayed for reasons for which the Contractor was responsible, then delays for which the Owners were responsible were not examples of concurrent delay and did not give rise to any entitlement to an extension of time by the Contractor because they did not in fact cause any delay to completion. 

 

The Court’s Decision 

 

The Court reviewed a long line of cases on the topic of concurrent delays and  concluded that the most useful synthesis of the issue of concurrent delay in the context of extensions of time is the analysis of Hamblen J (as he then was) in Adyard[1], namely :

 

• concurrent delay is a period of project overrun which is caused by two or more effective causes of delay which are of approximately equal causative potency;
• there is only concurrency if both events in fact cause delay to the progress of the works and the delaying effect of the two effects is felt at the same time;
• the act relied upon must actually prevent the contractor from carrying out the works within the contract period or, in other words, must cause some delay; 

 

The Court concluded that unless there is a concurrency actually affecting the completion date as then scheduled, the contractor cannot claim the benefit of it. Causation must in fact be proved based on the situation at the time as regards delay. 

 

The Contractor was responsible for a number of delays beyond the extended Scheduled Completion Date and was not entitled to rely on the delays for which the Owners were responsible during that period as stopping time running under the liquidated damages clause. Delays caused by the Contractor had effect between 2 March 2012 and 16 March 2012 and delays caused by the Owners had effect up to 14 March 2012. It was clear, the Court said, that the Owner’s delays did not actually impact the completion date, because their effects ended on 14 March i.e. before 16 March. Hence, the Owner’s delays could not be said to be concurrent to the Contractor’s delays and thus the Contractor was not entitled to an extension of time and the Owners were entitled to €770,000 by way of liquidated damages. 

 

Comment 

 

In a construction project, whether the contractor is entitled to an extension of time for completion of the works is determined by the precise wording of the terms of the contract. Where there are two sets of delays, one caused by the employer and one by the contractor, one must carefully examine the actual impact of each set of delays on the project completion date. Two delays are only concurrent when they are of approximately equal causative potency, and when each delay has actually caused delay to the completion date. The conclusion reached by the English Court in this case is consistent with the Guidance published by the English Society of Construction Law Delay and Disruption Protocol (2nd Edition).

 

[1] Adyard Abu Dhabi v SD Marine Services [2011] EWHC 848 (Comm)