Concurrent Delay Under Construction Contracts

CONSTRUCTION:

Richard Silver, Senior Partner at Silver Shemmings LLP, examines in detail the judgment in the Saga Cruises case in which the court adopted a narrow approach to issues of concurrent delay under construction contracts but ultimately supported the position taken in the Society of Construction Law’s Delay and Disruption Protocol.

 How did the issue of concurrent delay arise in Saga v Fincantieri?

Saga Cruises (‘Saga’) employed Fincantieri SPA (‘Fincantieri’) under a contract to refurbish a cruise ship. The works encompassed both engineering and outfitting works with a completion date set of 2 March 2012. Completion, however, was not achieved by Fincantieri until 16 March 2012 and Saga sought to recover liquidated damages for delay.

 Fincantieri disputed Saga’s right to liquidated damages for delay and argued that Saga itself was culpable for concurrent delays which prevented Fincantieri from completing its works by the completion date set. Delays cited by Fincantieri included that it had been discovered, following a class inspection of the vessel, that due to defective flooring carried out by others employed by Saga, new insulation was required to be installed and which was the subject of a Change Order issued by Saga to Fincantieri. The defective flooring, however, had to be first repaired which was undertaken in the period from 2–10 March 2012, and hence Fincantieri argued that this was a concurrent delay entitling it to an extension of time.

 What did the court decide?

The court decided that Fincantieri was obliged to pay liquidated damages for the whole period of delay from the completion date of 2 March 2012 to when completion actually occurred on 16 March 2012 and that it wasn’t entitled to an extension of time. The court held that the alleged concurrent delay of Saga had been subsumed by Fincantieir’s own culpable delays which had continued until completion had been achieved on 16 March 2012. The court held that the alleged concurrent delay, therefore, had not contributed to the delay for completion which had in fact been caused by Fincantieri’s delays.

 In so deciding the court placed emphasis on when each delay impacted upon the progress of the works and the effect it had upon completion. In this regard the court noted the importance in concurrency arguments of distinguishing between a delay which, had the contractor not been delayed would have caused delay, but because of an existing delay made no difference and those where further delay is actually caused by the event relied on’.

 How does this fit with previous case law?

In Scotland, following the Inner House decision in City Inn Ltd v Shepherd Construction Ltd [2010] ScotCS CSIH 68, responsibility for concurrent delay may be apportioned between the parties. The English courts have, however, rejected apportionment; rather as stated in Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999) 70 Con LR 32 the contractor is considered to be entitled to an extension of time but not to loss and/or expense and/or damages.

Debate remains, however, as to what constitutes concurrent delay for the purpose of the Malmaison principle.

One approach, sometimes referred to as the ‘consensus view’, requires for the delay events to be considered as concurrent that they are of ‘equal causative potency’. Where this approach is adopted, critical path analysis will often be used with an application of common sense to all the circumstances in analysing what is to be considered the critical delay.

An alternative approach, is the ‘reverse “but for” test’. This approach, unsurprisingly favored by contractors, excludes consideration of delay event(s) for which the contractor is culpable, but rather simply considers those events for which the contractor has claimed an extension of time and asks but for these delay events would the contractor have completed on time.

Yet a further alternative approach, the ‘dominant cause approach’, places emphasis on the date the delay event impacts upon the progress of the works. In circumstances where a delay has impacted upon progress, a subsequent delay will only become dominant when its effect causes completion to be further delayed beyond the effects of the earlier delay. This form of delay analysis is often referred to as snapshot, window or time slice analysis. Indeed this is the approach expressly provided for, for the assessment of delay associated with compensation events under the NEC Engineering and Construction Contract.

 Is it consistent with the approach taken in the Society of Construction Law’s Delay and Disruption Protocol?

This approach taken by the courts in Saga is consistent with the approach taken in the current (first) and draft second edition of the Society of Construction Law’s Delay and Disruption Protocol and which advocates the use of the snapshot (or time slice) form of analysis in determining the dominant delay. Within both editions, the Protocol distinguishes between what it refers to as ‘concurrent delay’, where the events initially impact upon the programme at the same time, with ‘the situation where two or more delay events arise at different times, but the effects of them are felt at the same time referred to as the “concurrent effect” of sequential delay events’. The Protocol recognises that what it refers to as true concurrent delay rarely occurs.

 What are the practical implications for construction lawyers in relation to concurrent delay?

It is the writer’s experience, that it is a very rare occurrence on a project when delay occurs where one party accepts that they are completely responsible for the prolongation of the project and that the other party is completely blameless. Indeed when claims for liquidated damages for delay and/or claims for loss and/or expense and/or damages arise, both parties all too often deny any culpability and instead seek to blame the other. Under such circumstances each party seeks to advance its best case forward based upon the available records, which are often anything but perfect. Issues of concurrency undoubtedly will therefore arise, and continue to provoke considerable debate as to the correct approach to be adopted. The reliance, in Saga, on the importance placed on the starting date (the date the delay impacted upon the programme) and the finish date (the impact the delay has on the completion date) will be criticised by those it does not favour on the facts, as being far too simplistic.

Ultimately, until definitive guidance is provided by the Court of Appeal the issue of concurrency will remain a hot topic of dispute.

Interviewed by Susan Ghaiwal.


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