Out-Law Guide 10 min. read
10 Jan 2023, 11:34 am
Covid-19 delayed and disrupted construction projects worldwide. The war in Ukraine has to a lesser extent caused similar challenges and continues to do so. Materials shortages add to these complexities.
In many cases, contractors have found time and delay relief in force majeure clauses or similar provisions. But the reality is that other causes of delay are often in play - some of which will be attributable to the contractor, while others may be the responsibility of the employer and supply chain, or a combination of all three.
All of this is generating debate on a familiar but still important – and sometimes misunderstood – area of law: concurrent delay.
The term "concurrent delay" is generally used in circumstances where a period of delay to the completion of a project is caused by two or more factors, one of which is the contractor's responsibility and one of which is the employer's responsibility. In practice, the phrase is more often used to describe the situation where the competing events occur at different times but their delaying effects on the work are felt at the same time.
In English law, the generally accepted definition was coined by John Marrin QC in a paper produced for the Society of Construction Law (SCL) in 2002, and requires "two or more effective causes of delay which are of approximately equal causative potency". While "true" concurrency in this sense is very rare, the issue of concurrent delay repeatedly raises its head project after project and has been the subject of much comment by both judges and construction law commentators.
It will often be the case that, through a factual analysis of the day-to-day progression of a project, events which were originally thought to be concurrent actually are not and, where they are, frequently one is shown to be of more significant "causative potency" then the other. In these cases, arguments about concurrency will often fall away because when the facts are examined, it will be shown that there is actually only one true cause of delay.
Regardless, however, it is important to understand how the courts have approached concurrency in the past.
The leading English law cases on concurrency date back to the late 1990s and early 2000s. The approach adopted in them has been departed from in Scotland, following which it was unclear for a short time whether a similar approach would be followed south of the border.
Most of the leading cases related to contracts using Joint Contracts Tribunal (JCT) standard form contracts or similar provisions relating to completion and extensions of time.
The current challenges being faced by the industry are likely to see the debate over concurrency brought into further sharp focus before long.
A 1999 case involving Henry Boot Construction and the Malmaison hotel in Manchester was the leading case under English law for many years, and is the case that was effectively challenged in the Scottish courts. In the case Mr Justice Dyson ruled that a contractor was entitled to an extension of time for the period of delay caused by a "relevant" event "notwithstanding the concurrent effect of the other event".
As an example, the judge referred to a hypothetical scenario in which no work was possible on the site for a week because of "exceptionally inclement weather" (a "relevant event"), but also because the contractor had a labour shortage (not a "relevant event"). Assuming the failure to work during that week was likely to delay the works beyond the contractual completion date by one week, an extension of time should be granted regardless of the fact that the delay would have occurred in any event due to the labour shortage.
The effect of this case was that providing one of the concurrent causes of the delay was at the employer's risk, the contractor received a full extension of time for the whole period of delay - even though that delay was caused in part by matters for which the contractor was itself responsible.
In a 2000 case involving Royal Brompton Hospital NHS Trust and Frederick Hammond and others, Judge Seymour commented that the rule in the Malmaison case should not apply to "a situation in which, work already being delayed ... an event occurs which is a relevant event and which, had the contractor not been delayed would have caused him to be delayed, but which in fact by reason of the existing delay made no difference".
Judge Seymour's analysis has come in for criticism from commentators, and was rejected by the Scottish courts in a case involving City Inn. He favoured a very narrow definition of concurrency - essentially, "true" concurrency where the two competing events start and finish at the same time. Judge Seymour's analysis is generally considered to be too narrow and has now largely been left behind. According to the second edition of the SCL Delay and Disruption Protocol (84-page / 869KB PDF), the term is more commonly used to describe “the situation where two or more delay events arise at different times, but the effects of them are felt at the same time”.
In a 2010 case involving City Inn and Shepherd Construction the Scottish courts found that apportionment between the competing causes might be appropriate in cases of concurrent delay. The case concerned claims for extension of time under the 1980 JCT standard form building contract by Shepherd, the contractor.
At first instance, Lord Drummond Young concluded that the task of the decision maker under clause 25 of the JCT contract was to make a "judgement" and, ultimately, arrive at a "fair and reasonable" decision on an extension of time. The court decided that where there was concurrency, irrespective of when the events began or ended, in the absence of one event being "dominant" a fair and reasonable outcome may involve an apportionment exercise.
City Inn appealed, and the appeal court rejected the appeal. Having reviewed the authorities and the first instance court's analysis, the court said:
“Where a situation exists in which two causes are operative, one being a relevant event and the other some other event for which the contractor is to be taken to be responsible, and neither of which could be described as the dominant cause, the claim for extension of time will not necessarily fail. In such a situation, which could, as a matter of language, be described as one of concurrent causes, in a broad sense, it will be open to the decision-maker, whether the architect, or other tribunal, approaching the issue in a fair and reasonable way, to apportion the delay in the completion of the works occasioned thereby as between the relevant event and the other event.”
The idea that an architect, as decision maker, could apportion responsibility for delay between competing causes was widely seen as a departure from what had previously been considered an established principle: that the contractor is entitled to an extension of time for the whole of the concurrent delay period, regardless of its own responsibility for any of the delay. However, the decision affirmed the approach taken previously by the Scottish courts in the 2004 Laing Management (Scotland) Ltd v John Doyle Construction Ltd case, although that case dealt with financial loss arising from different causes.
The apportionment approach has also found support in the courts of Hong Kong and Singapore, and may also have some footing in the law of other jurisdictions including the UAE and France.
Following the City Inn case, there was a lot of interest as to whether the English courts would follow their Scottish counterparts and adopt the principle of apportionment in cases of concurrent delay.
Mr Justice Edwards-Stuart did not refer to the City Inn case, or to apportionment, in his judgment in an English dispute between De Beers and Atos Origin IT Services, notwithstanding the fact that it was delivered a few months after the Scottish appeal court's decision in City Inn. In this case, both the contractor delay and the employer delay were critical and operated concurrently, in the sense that either delay was sufficient on its own to delay completion.
The general rule in these cases, according to the judge, was that the contractor was entitled to an extension of time but could not recover in respect of the loss caused by the delay. This was because "not only must the contractor complete within a reasonable time but also the contractor must have a reasonable time within which to complete", he said.
It therefore did not matter if the contractor would have been unable to complete by the contractual completion date if there had been no breaches of contract by the employer, because he is entitled to have the time within which to complete which the contract allows or which the employer’s conduct has made reasonably necessary.
In a 2011 case between Adyard Abu Dhabi and SD Marine Services, Mr Justice Hamblen expressly rejected the idea of apportionment. Following the Malmaison case, the English law approach was "to recognise that the builder is entitled to an extension of time, not an apportionment".
The court once again rejected the idea of apportionment the following year, in a dispute involving Walter Lilly and Giles Mackay. Mr Justice Akenhead actually described how there were two schools of thought on the point: the English and the Scottish schools, exemplified by Malmaison and City Inn respectively. However, he found that this was not a case in which concurrent delay applied, meaning that nothing that he said on the subject can strictly speaking be relied upon in future cases.
More recently, in a 2022 case between Thomas Barnes & Sons plc and Blackburn with Darwen Borough Council, the court endorsed the approach taken in the De Beers and Atos Origin IT Services, Adyard Abu Dhabi and SD Marine Services and Walter Lilly and Giles Mackay cases - namely that, where there is concurrent delay, the contractor is usually entitled to an extension of time but is not entitled to any loss it incurs as a result of the prolongation.
John Marrin QC returned to considering concurrency in 2012 in a follow-up paper delivered to the SCL. In his paper, he analysed the English courts' rejection of apportionment - and their continued following of the Malmaison approach - by reference to three principles.
First, if the employer prevents the contractor from completing on time, then, unless the contract expresses a contrary intention, the employer cannot claim liquidated damages. The extension of time machinery in construction contracts is designed to overcome this 'prevention principle', by permitting the employer to extend the time for completion in respect of delays caused by its "acts of prevention".
According to Marrin, the Malmaison approach does not offend the prevention principle, because the contractor gets a full extension of time. Apportionment, on the other hand, does offend the prevention principle, because if the contractor only gets an extension of time for part of the delay, the employer should get to recover liquidated damages for the other part - an effective cause of which must be the employer's act of prevention.
Second, in delay claims, there will be directly opposing financial claims. If the delay is caused by the contractor, the employer is entitled to liquidated damages. If it is the employer's fault, the contractor is entitled to its loss and/or expense. Logic dictates that only one of these competing claims can succeed. This is sometimes referred to as the 'obverse problem'.
The approach in the Malmaison case avoids this problem in cases of concurrent delay in the sense that the contractor is entitled to time, but not money. Apportionment, by its nature, defies the 'logic' of the obverse problem by allowing both claims to succeed, at least in part.
Third, Marrin accepts that the Malmaison approach requires a relaxation of the 'but for' test of causation, which requires a party to show that it is more likely than not that the harm suffered was caused by a breach of duty by the other party. However, that test is not a hard and fast one, and the courts have historically recognised that it may be appropriate to relax it in appropriate circumstances.
The justification for doing so in concurrency cases it that it is necessary in order to avoid a result that runs contrary to the parties' express intentions - that is, that in JCT cases at least, the contractor is entitled to a "fair and reasonable" extension of time. Marrin also suggests that Malmaison adopts a fair approach, as the 'but for' test is relaxed in relation to time but not money.
As things stand, Malmaison remains the leading case law authority in England, and its approach to concurrency – full extension of time, but no entitlement to loss and/or expense – remains the general approach in England and Wales, at least for the time being.
To date apportionment has only been formally adopted – in a UK context - in the Scottish courts. Marrin's definition of concurrency from back in 2002 also remains the generally accepted definition under English law.
More recently, the Court of Appeal confirmed, in North Midland Building Ltd v Cyden Homes Ltd, that a clause in a construction contract which allocated the risk of concurrent delays to the contractor is valid and enforceable. Therefore, in England at least, the general approach to concurrency is subject to the express terms which the parties have agreed.
However, the law on concurrent delay is not necessarily set in stone. Some commentators have doubted the application of the prevention principle where there is concurrent delay and take the view that the ‘but for’ causation test should not in fact be relaxed on the basis of the prevention principle. Such an analysis would – on one view – disentitle a contractor to both time and money relief in the event of concurrent delay.
The issue was discussed in the North Midland Building Ltd case, albeit ‘obiter’, and so not forming part of the judgment. The Court of Appeal said a contractor’s entitlement to an extension of time in circumstances of concurrent delay (under unamended JCT standard forms) was “not entirely free from doubt”, noting that the relevant case law was all at first instance and there was no Court of Appeal authority on the issue. This case was, however, concerned with contractual principles and allocation of risk only, and no decision of more general application or principle was made.
It has even been suggested by some commentators that the law in England may soon swing towards some form of apportionment approach, if the Malmaison approach is eventually rejected at Court of Appeal level or above, giving the contractor at least relief for the delay period attributable to the employer.
The current challenges being faced by the industry are likely to see these issues brought into further sharp focus before long.
15 Sep 2022