Delay is, of course, a common problem on construction projects worldwide. Claims based on delay are often very complex, and this is especially true of claims involving situations of concurrent delay. As parties in Asia often select English law to govern their construction contracts (particularly for larger projects and international projects), it is relevant to consider recent English‑law developments in relation to this issue.
In 2010, the decision of the Scottish Inner House in City Inn v Shepherd Construction attracted considerable attention for the approach it adopted in “apportioning” responsibility for concurrent delay. This decision was discussed in an earlier newsletter. In this newsletter, we consider the implications of the recent English case of Adyard Abu Dhabi v SD Marine Services, which suggests that the Courts of England & Wales (and possibly other jurisdictions) are unlikely to follow the approach adopted in City Inn.
Before considering the relevant law, it is worth revisiting what is meant by the term “concurrent delay”.
Construction contracts will usually entitle a contractor to extension of time for certain employer-risk events (perhaps, unforeseeable ground conditions, variations, delayed site access, etc). However, no extension will be available where the event is a contractor risk (for example, repairs to defective works, or inefficient programming of activities); in such cases the employer will usually be entitled to liquidated damages if the contractor fails to complete the works by the date stipulated in the contract.
To further complicate that basic position, claims for extensions of time on construction projects will often turn upon a number of events. This may be because there are a number of events which have contributed to the delay, or because a claiming party has failed to establish what event has caused what delay. Frequently, these multiple events are lumped together as “concurrent”, and this has given rise to considerable confusion about the meaning of the term. For the purposes of this newsletter, we will be adopting the definition used by Hamblen J. in Adyard, which is that concurrent delay means the situation where two or more events “in fact cause delay to the progress of the works and the delaying effect of the two events is felt at the same time.”
If at least one of the causes of delay is an employer risk, and another is not, how will the contract administrator determine whether and how much extension of time is due?
Some relevant considerations
While the issue of concurrent delay has been considered at length by courts in various jurisdictions, it is important to bear in mind that the first step in addressing the issue is to consider the terms of the contract between the parties. For example, some Australian standard-forms of contract (such as AS-4902) expressly provide for apportionment where delays overlap. Similarly, if the parties agree to adopt the Society of Construction Law Protocol as the contractual allocation of risk, then concurrent delay will entitle the contractor to an extension of time but not to loss and expense.
It is also important to consider any relevant provisions under the system of law chosen by the parties. Different jurisdictions have developed different approaches to dealing with this question, and of course these differences should also be kept in mind.
The City Inn and Adyard cases
Against that background, we can turn to consider the Adyard decision and how it effects the question of whether a contractor is entitled to an extension of time in the event of concurrent delay caused by an employer-risk event and a contractor-risk event.
The City Inn case in Scotland concerned the JCT form of contract, which does not address situations of concurrency but requires a contract administrator to fix a “fair and reasonable” extension of time. The approach adopted by Lord Osborne, on appeal, was to decide that “where two causes, neither of which is dominant, are under consideration, a relevant event and a non-relevant event, it may be appropriate for the architect or decision-maker to apportion responsibility for the delay between the two causes”.
This apportionment approach has attracted considerable criticism. In particular, many commentators consider it to be contrary to the English law approach as laid down previously in the Henry Boot v Malmaison case: that is, if there are two concurrent causes of delay, one of which is an employer-risk event and the other is not, then the contractor is entitled to an extension of time for the full period of delay which is attributable to the employer-risk event (despite the concurrent effect of the other event).
Unfortunately (at least from the point of view of construction lawyers) City Inn will not be appealed to the Supreme Court following settlement between the parties. It therefore remains as an important and controversial analysis of the law in this area, although as a Scottish court decision it is not formally binding on the English Courts. Indeed, it was recently the subject of comment and criticism from an English court when Hamblen J issued his decision in Adyard. This was a case concerning a contract for construction of two ships which the buyer had rescinded because of delay by the shipyard. The shipyard claimed that – notwithstanding its own delay – (i) the buyer had ordered variations, (ii) the contract did not provide for an extension of time for delay caused by variations, and (iii) the variations had in fact caused delay. Therefore, the shipyard said, time was “at large” and there was no right to rescind.
Hamblen J rejected all of these contentions. Of particular note, however, are his comments concerning the City Inn apportionment approach. Consistent with the Malmaison approach described above, he said that in situations of concurrent delay: “…the English law approach would be to recognize that the builder is entitled to an extension of time, not an apportionment.”
Throughout Asia, parties often select English law as the governing law of their construction contracts. For these parties, the Adyard decision is significant because it clearly supports the view of many commentators that the City Inn apportionment approach does not reflect English law.
However, the apportionment approach may still find favour amongst Tribunals and Courts applying systems of civil law, which often contain obligations of “good faith” and “fairness”. In such situations, where the views of English courts may be seen as less persuasive, we expect to see some contract administrators applying an apportionment approach and – in any ensuing disputes – parties running claims based on apportionment.
In such situations, it will be important for contractors in particular to bear in mind that, if the contract administrator is expected to make an apportionment which appears fair in all the circumstances, it is clearly in the contractor’s interests to try to demonstrate that the greatest part of the delay was due to employer-risk events. Therefore, contractors seeking extensions in any jurisdiction ignore the need for proper and thorough delay analysis at their own peril.