A Commercial Court decision published last week has considered the correct approach to issues of concurrent delay under construction contracts. The decision adopts a narrow approach and appears to provide support for the position taken in the recently published Consultation Draft for the 2nd edition of the SCL Delay and Disruption Protocol. The decision is likely to provoke further debate in this unresolved area of the law.
Concurrent delay: an overview
The position with regard to concurrent delay in Scotland has largely been settled by the Inner House decision in City Inn Ltd v Shepherd Construction Ltd in 2010, which permits responsibility for concurrent delay to be apportioned between the parties. Apportionment has, however, been rejected by the English courts. The position in England is thought to be as stated in Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd, the contractor being entitled to an extension of time but not additional cost.
The primary area of debate in England concerns the definition of concurrent delay for the purpose of theMalmaison principle. Broadly speaking, three schools of thought can be identified as to the causative connection required to establish concurrent causes of delay for the purpose of the Malmaison principle:
- The most commonly used test, sometimes referred to as the “consensus view”, requires two delaying events to be of “equal causative potency”. A critical path analysis will typically be used to eliminate delaying events which have not impacted the critical path, but even events which do impact the critical path may not, on analysis, be shown to be of “equal causative potency”. The question is one of common sense in all the circumstances.
- A broader test has recently been advocated by some commentators, described as a “reverse ‘but for’ test”. This approach asks simply whether the delaying event for which an extension of time is claimed would have delayed completion in the absence of the delay event(s) that the contractor is responsible for. In such circumstances, the delaying event claimed for is an effective cause of delay and there is no need to ask whether it is of “equal causative potency” with any contractor culpable delay events.
- A narrower test to the consensus view is sometimes advanced which focuses on the point in time at which delaying events occur. Where an existing event has caused delay to completion, subsequent delay events are treated as not being a cause of delay to completion at all unless they increase the delay already caused by the existing event.
Support may be found to varying degrees for each of the above approaches in the recent cases. The Commercial Court’s decision in the present case appears to adopt the narrower, third approach.
Saga Cruises BDF Ltd v Fincantieri SPA
Saga Cruises (the “Owners”) contracted with Fincantieri (the “Yard”) for the refurbishment of a cruise ship originally constructed in 1981. The refurbishment included both engineering and outfitting works and was to be completed by 2 March 2012. Completion was ultimately achieved by the Yard on 16 March 2012 and the Owners sought to recover liquidated damages for delay (among other claims).
The Yard argued, among other things, that it had been prevented from completing the works by 2 March 2012 due to various delays on the part of the Owners. For example, following a Class inspection of the vessel, it was discovered that new insulation was required to be installed due to defective flooring carried out by others on behalf of the Owners. A Change Order was issued by the Owners, but the new insulation could not be installed until the defective flooring had been repaired, which occurred between 2 and 10 March 2012. Completion could not therefore have been achieved by the Yard before 11 March 2012.
The court rejected the Yard’s arguments in relation to the Owners’ delays and found the Yard liable for the whole delay from 2 to 16 March 2012. The Owners’ delays had been subsumed by the Yard’s own delays which had persisted up until 16 March 2012. The Owners’ delays had not therefore caused any additional delay to completion which was not already accounted for by the Yard’s delays.
The court’s reasoning appears to emphasise the starting and finishing dates for individual delay events. In particular, 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”.
Conclusions and implications
The court’s decision is likely to provoke further debate as to the correct approach to concurrent delay claims under English law. The court’s reliance, in particular, on the starting and finish dates for individual delay events has been criticised elsewhere as being too simplistic an approach to determining whether an event second-in-time may nonetheless still be an effective cause of delay to completion. Proponents of the broader approach to the assessment of concurrent delay noted above will also find little support for their views in this judgment.
The decision appears to lend support to the position adopted in the recently published Consultation Draft for the 2nd edition of the SCL Delay and Disruption Protocol. By reference to an example similar to those considered by the court in the present case, the draft 2nd edition notes that “the Employer Delay will not result in the works being completed later than would otherwise have been the case because the works were already going to be delayed by a greater period because of the Contractor Delay to Completion. Thus, the only effective cause of the Delay to Completion is the Contractor Risk Event. ”
It remains to be seen to what extent the present decision will be followed by the Technology and Construction Court, which some commentators consider to be leaning towards a less restrictive approach to concurrent delay. Needless to say, this area of law is likely to remain uncertain until definitive guidance is provided by the Court of Appeal.