Who is responsible for delays in multi-party projects? What happens when there are multiple independent causes of delay in the same time period? How do courts determine if a delay impacts the critical path of the project schedule?

The Ontario Superior Court of Justice was faced with these issues in the recent case Schindler Elevator Corporation v Walsh Construction Company of Canada[1] where several subcontractors, including Schindler Elevator Corporation (“Schindler”), had delayed the performance of their respective contracts. These delays allegedly impacted the critical path of the Women’s College Hospital Capital Redevelopment Project (the “WCH Project”) led by Walsh Construction/Bondfield Partnership (Walsh Construction Company of Canada and Bondfield Constructed Company Limited, collectively “WBP”).

This case provided a thorough analysis on apportioning liability to one of multiple parties in a complex commercial construction project and a lengthy review of documented evidence and expert testimony on calculated impacts. The case also defined the meaning of “concurrent delays” to be used in future construction disputes to ensure a fair and just assessment of responsibility for delays.

Background

In 2010, Women’s College Partnership (“ProjectCo”) entered into a construction contract with WBP for the design, construction and maintenance of a new 624,000 square foot hospital replacing the old Women’s College Hospital in downtown Toronto for a price of $272 million.[2] The contract followed the same deadlines of ProjectCo’s project agreement with Women’s College Hospital (“WCH”), which was to contractually achieve Interim Completion by April 29, 2013, and achieve Substantial Completion by September 9, 2015.[3]

WBP subcontracted Schindler to fabricate, deliver, and install all ten elevators for the new hospital facilities at an agreed base subcontract price of $2.1 million.[4] It also engaged a substantial number of other subcontractors for the project including trades for curtain wall and glazing work, mechanical and electrical work, supply and installation of precast panels, painting services and various interior civil works.[5]

The Critical Path Delay

Before Schindler commenced work and throughout the installation, there were a number of project delays occurring around the same time.[6] Upon Schindler’s delay in its own work, WBP had issued numerous written notices of default and withheld all further payments.[7] The Court found that there were some events that were out of Schindler’s control and extended the time accordingly.[8] However, Schindler was ultimately found to be liable for breach of its subcontract due to the delayed completion of the elevator work.[9]

Schindler registered a claim for lien for almost $1 million in unpaid services and materials.[10] WBP counterclaimed for $2.2 million in damages and contractual penalties for Schindler’s delayed performance.[11] However, in order to determine liability for overall project losses, it was necessary to find that Schindler caused critical path delay to the WCH Project. The “critical path” was defined as “the longest chain of logically connected activities in a project schedule that, if delayed, will delay the end date of a project”.[12] WBP had the evidentiary onus of proving a causal connection between each of Schindler’s delays and WBP’s delay and impact losses, on a balance of probabilities, in order to indemnify WBP’s costs for mitigation and delay penalties.[13]

Defining Concurrent Delay

WBP acknowledged that other subcontractors also contributed to the project delay through the same period.[14] In describing the concept of simultaneity of delays from two or more sources in large-scale construction projects, the Court turned to Glenn Grenier’s article: “Evaluating Concurrent Delay: Unscrambling the Egg”.[15] Grenier illustrated that evaluating a concurrent delay is a “much more involved and speculative process compared to an isolated or singular cause of delay” and the parties and the Court must break down the overall project delay into its component parts to apportion the time, responsibility and costs.[16]

The Court rejected Schindler’s expert testimony that concurrent delay meant there were two co-critical, co-controlling activities that had the same timing and duration.[17] Instead, it relied on the observation that delays starting and ending at the same time were rarely the reality and concurrent delays were more commonly experienced as overlapping events.[18] At least in more complex cases of concurrency, a more flexible definition would avoid one party being held solely responsible for a project delay and would more likely lead to a fair and just result where it is supported that multiple parties delayed the project.[19]

The Court ultimately found that there was no clear evidence that Schindler materially contributed to the overall critical path delay. While there was a delayed turnover of the Freight Elevators which directly impacted the immediate subsequent activity, the manner in which the subsequent activity caused delay to the overall project was not shown.[20] Therefore, the Court concluded that Schindler did not cause or materially contribute to the failure to achieve the Interim Completion deadline.[21]

However, in light of the extent of Schindler’s performance delay, the Court concluded it would be inequitable to absolve Schindler entirely of causally connected losses and damages.[22] The Court reviewed each of Schindler’s disputed activities which allegedly caused the delay and assessed the evidence for each claim. The finding was that Schindler owed a total of $51,653.79 to WBP for its delay and the Court dismissed WBP’s remaining claims for damages.[23] The net result was WBP owing a sum of $650,786.20 for unpaid amounts to Schindler.

Key Takeaways

Following the Schindler decision, future dispute resolutions for delays in large, multi-party projects may see a flexible approach in defining concurrent delays to fairly distribute the responsibility of events where responsibility is due. Determining causation of the critical path delay will require clear evidence of the subcontractor’s specific performance delay and how it materially contributed to the overall project delay.

It is important to maintain a distinction between liability for breach of a subcontract and liability for overall project delay and associated losses. To claim unpaid amounts in the subcontract, Schindler had the evidentiary onus of proving any delays, impacts, and its right to an extension of time in accordance with the subcontract. To counterclaim losses for the overall project delay, WBP had the evidentiary onus of proving a material causal connection between Schindler’s delays and the critical path delay. Thus, a breach of a subcontract does not necessarily mean liability for overall project delay losses.

Accordingly, unanticipated delays should not hinder compliance with the contractual terms which govern project delays. In Schindler, the Court made evident that both WBP and Schindler were sophisticated parties who agreed to detailed terms dealing with payment, delay, notice of default, and default remedies.[24] Significant weight was given to the contractual interpretation of the subcontract which governed the time period and remedies used in the Court’s analysis.

The decision in Schindler underlines the need for assertions of overall project delay to be supported by evidence that connects the contractor’s delays or defaults with the project’s critical path. Claims of overall project delay, in the absence of such evidence, are unlikely to succeed.

Finally, cooperation, collegiality, and organization were recognized as key throughout the course of the lengthy and complex trial. The professionalism and the preparation of all the parties involved were “a model example” of how to present these cases to the Court.[25] It is good practice to keep records of all work done for projects, including items such as work tickets, emails, incidents, shop drawings, shutdowns due to safety concerns, monthly reports and schedules, game plans, letters, invoices, cheques, and timesheets that clearly support their relation to the operation, the dates the work was performed, and when the work was undertaken. Detailed and diligent documentation by the parties involved will be important to support any future claims when projects get delayed.