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CONCURRENT DELAY IN ENGINEERING AND CONSTRUCTION PROJECTS

WHEN IS WHAT IS FAIR AND REASONABLE AN APPROPRIATE SOLUTION

A paper presented to the Singapore Society of Construction Law on Wednesday 4th March 2008 By Stephen Dennison QC

2009 Stephen Dennison QC. These materials are subject to copyright. No part may be reproduced, adapted or communicated without written consent of the copyright owner except as permitted under applicable copyright law.

Introduction 1. In a relatively recent decision of the English Court of Appeal1 when grappling with issues of causation Lord Justice Glidewell gave judgment in the following terms: The answer in my judgment is supplied by the Australian decisions to which I have referred, which I hold to represent the law of England as well as of Australia, in relation to a breach of duty imposed on a defendant whether by contract or in tort in a situation analogous to breach of contract. The answer in the end is By the application of the courts common sense. A few years later, in 1999, in a lecture to the Chancery Bar entitled Common Sense and Causing Loss Lord Hoffman observed that trying to resolve issues of causation by the application of common sense is not necessarily going to help you very much. The difficulty is that on any given set of facts the application of common sense might permit a range of answers. For those grappling with such problems, to be told the answer is to be found in the application of common sense might be thought to be unhelpful. As Lord Hoffman in his Chancery Bar Lecture put it:

Nor is anyone against common sense.References to common sense often mean that they [the judges] have not really thought [the problem] through. They are looking for the answer in generalities rather than the specifics of the legal problem which raises the question.

2.

For those of us who struggle with issues of causation as they arise in the context of engineering and construction projects Lord Hoffmans words are a reminder that that we must first accurately identify the legal question for which the answer is required and that question may not, indeed I suggest often will not be, did the occurrence of event x cause result y. In 2005 Lord Hoffman in his Blackstone Lecture returned to issues of causation and said this:

There is nothing special or mysterious about the law of causation. One decides, as a matter of law, what causal connection the law requires and one then decides, as a question of fact, whether the claimant has satisfied
1

Galoo v Bright Grahame Murray [1994] 1 WLR 1360 at pages 1374 and 1375

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3 the requirements of the law. There is, in my opinion, nothing more to be said2 For the purposes of this paper I would emphasise the first stage of the exercise, what is the causal connection that the law requires?

3.

In trying to address the problem so identified it is perhaps sensible at of the outset to try to define the subject matter of this paper. It is limited to the law of contract. As the title to the paper might suggest I am concerned with providing an update on the law as it applies to construction projects in circumstances where the completion of the project is delayed by two events. The particular subject matter of the contract is irrelevant: the principles considered below might apply equally to the construction of a retail development, oil rig or ship or the delivery of an IT project. The assumptions that I shall make are that the contract provides a date for completion, a mechanism for extending time and terms providing that liquidated damages can be levied in the event that the completion date is not achieved.

4.

What then is meant by the term concurrent delay? The term is used here in the sense of a period of delay which might sensibly be attributed to two discrete causes, so for example a particular weeks work might be lost because of inclement weather and because of an absence of labour. It is when each party to the contract can be said to be responsible for one of the two causes of delay that tensions arise. The types of dispute that arise are common and I suggest that invariably they require consideration of two related issues: (i) (ii) what was the true cause of the delay? as between the contracting parties who takes the risk of the delay consequent upon any particular occurrence or event?

5.

In answering issue 4 (i) we are inevitably concerned with matters of fact. How adverse was the weather? Did it stop work completely or simply slow progress? Did the adverse weather interfere with work that was critical to achieving the completion date? In many instances the factual enquiry will be determinative: if a typhoon stops all work on site for a week then that may be sufficient the typhoon caused a weeks

Lord Hoffman (2005) 121 LQR 592

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4 delay and there is no need to trouble with the niceties of defining a legal test for causation. If, however, the typhoon occurred during a week when the contractors labour force had refused to work because they had not been paid, the answer to the question what caused the delay? may be more difficult. The answer to the conundrum applying the approach commended to us by Lord Hoffman is that one decides, as a matter of law, what causal connection the law requires .. What though is the causal connection that the law requires and how does one go about defining it? The answer, I suggest, may often be found by answering a question of contractual interpretation, and, practically speaking, may also be influenced by a proper understanding of the facts. Thus the answer to issue 4 (i), will for cases of concurrent delay, frequently be a question of mixed fact and law.

6.

Issue 4 (ii) is potentially more straightforward the contract may provide the answer, so it might expressly allocate the risk to one party or the other. In the example given above the contract might expressly provide that, in the event of a typhoon, irrespective of any other cause of delay, the risk is to be borne by the employer such that the contractor is to be entitled to an extension of time. At this point I make two preliminary observations. Firstly, despite the fact that disputes over the causes of delay are common, the extension of time clauses that seek to allocate risk often fail to address expressly issues of concurrency; and, secondly, it is rare to find such a clause drafted in terms that identify, clearly, the legal test of causation that is to be applied. From the point of view of the draftsman responsible for drafting extension of time clauses this can be an important consideration it is not simply a question of allocating risks but in defining by whom and how the process of the assessment of the effects of that allocation is to be undertaken.

7.

The most recent decision from the courts in the United Kingdom on the subject of concurrent delays is the Scottish case decided by the Court of Session Outer House in City Inn Ltd v Shepherd Construction Ltd [2008] BLR 269. For the purposes of this update I shall endeavour to review how, if at all, the decision in City Inn is consistent with the more recent English decisions on the subject and in so doing hopefully provide a helpful summary of the current state of the law and of the uncertainties that remain.

2009 Stephen Dennison QC. These materials are subject to copyright. No part may be reproduced, adapted or communicated without written consent of the copyright owner except as permitted under applicable copyright law.

8.

City Inn is a decision that turns on the proper construction of the JCT Standard Form of Building Contract, 1980 Edition, and given that two of the reported English decisions are decisions on (substantially) the same form of contract I shall use the language of this form of contract as a vehicle for reviewing the underlying principles. Though there are differences between the language used here and the forms commonly used in Singapore, readers of this paper will be very familiar with the underlying concepts. Interestingly some of the language used by Lord Drummond Young (the judge in City Inn) echoes that used by Warren LH Khoo J in Lian Soon Construction Pte Ltd v Guan Qian Realty Pte Ltd [2000] 1 SLR 495; see paragraphs 10 and 17 below. The basic contractual framework in the JCT Standard Form can be summarised as follows: a. The responsibility for deciding whether or not the contractor is entitled to an extension of time is given to the architect. b. The contractors rights to an extension of time are set out in clause 25. The events entitling the contractor an extension of time are listed in clause 25.4 and include events such as adverse weather and compliance with architects instructions. c. During the course of the performance of the contract the contractor is required to notify the architect of events that either have caused or are likely to cause delay and in response to such a notice if the architect is satisfied that the event is a Relevant Event and that completion is likely to be delayed then he is to grant an appropriate extension of time. d. Following Practical Completion the architect is to review the position and to fix a later completion date if in his opinion the fixing of such a later completion date is fair and reasonable.

The particular clauses are set out in the judgment and are in the following terms: During Performance If, in the opinion of the architect, upon receipt of any notice, particulars and estimate under clauses 25.2.1.1 and 25.2.2 .1 any of the events which are stated by the Contractor to be a cause of the delay is a Relevant Event and
2009 Stephen Dennison QC. These materials are subject to copyright. No part may be reproduced, adapted or communicated without written consent of the copyright owner except as permitted under applicable copyright law.

6 .2 the completion of the Works is likely to be delayed thereby beyond the Completion Date the architect shall in writing to the Contractor give an extension of time by fixing such later date as he then estimates to be fair and reasonable

Following Practical Completion After the Completion Date, if this occurs before the date of Practical Completion, the architect may, and not later than the expiry of 12 weeks after the date of Practical Completion shall, in writing to the Contractor .1 fix a Completion Date later than that previously fixed if in his opinion the fixing of such later Completion Date is fair and reasonable having regard to any of the Relevant Events, whether upon reviewing a previous decision or otherwise and whether or not the Relevant Event has been specifically notified by the Contractor under clause 25.2.1.1

The Underlying Objective 9. The operation of the extension of time clause mechanism was the subject of a detailed judgment from Colman J in Balfour Beatty Building Ltd v Chestermount Properties Ltd (1993) 62 BLR 1. Colman J described the underlying objective of the relevant contractual provisions as follows: The underlying objective is to arrive at the aggregate period of time within which the contract works as ultimately defined ought to have been completed having regard to the incidence of non-contractors risk events and to calculate the excess time if any, over that period, which the contractor took to complete the works. In essence, the architect is concerned to arrive at an aggregate period for completion of the contractual works, having regard to the occurrence of non-contractors risk events and to calculate the extent to which the completion of the works has exceeded that period.3 I suggest that this summary is likely to be applicable to many such clauses time is to be extended to take into account the effect of the occurrence of events for which the employer is responsible non-contractor risk events. What is required is to make an

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7 assessment of the actual delay caused by the events for which the employer is responsible.

10.

The point was emphasised later in the judgment in the following words: In order to test this point one again returns to the purpose of the architects powers under clause 25. He looks back after the most recently-fixed completion date and, under clause 25.3.3, perhaps after practical completion, and assesses the extent to which the period of contract time available for completion ought to be extended or reduced having regard to the incidence of the relevant events. His yardstick is what is fair and reasonable. For this purpose he will take into account amongst other factors the effect that the relevant event had on the progress of the works. Did it bring the progress of the works to a standstill? Or did it merely slow down the progress of the works? The function which he performs under clause 25.3.3 must as a matter of construction be in substance exactly analogous to that which he performs under clause 25.3.1. The difference is that under the former clause he does it after the completion date and not before it. But in both cases his objective must be the same: to assess whether any of the relevant events has caused delay to the progress of the works and, if so, how much. He must then apply the result of his assessment of the amount of delay caused by the relevant event by extending the contract period for completion of the works by a like amount and this he does by means of postponing the completion date.4 The emphasis is mine the objective is described as one where the architect is to assess whether any of the relevant events caused delay and if so how much. How though is the architect (or any tribunal) to undertake the assessment whether or not a particular relevant event caused delay? Though the judgment in Chestermount provides a valuable review of the operation of extension of time clauses it is necessary to recognise that the court was not being asked to decide how those clauses were to be operated so as to resolve issues of concurrency. With this qualification in mind it is helpful to compare the description given by Colman J with that given by Warren LH Khoo J in Lian Soon Construction. At paragraph 29 of his Judgment Justice Khoo stated as follows: What is involved in a time extension exercise is, basically, to assess how much more time the contractor should fairly and reasonably be entitled to have beyond the time initially allowed by the contract to complete the works as a result of the delay events which have occurred

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As in Chestermount it is necessary to recognise that the judge is describing the operation of the extension of time clause; Justice Warren LH Khoo is, similarly, not trying to deal with how the clause is to be applied in the context of concurrent delay.

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9 The Tests for Causation 11. The formulation of the legal test for causation has been variously expressed. The language used is familiar: e.g. use common sense, the but for test, the effective cause, the dominant cause, a material and significant cause. Perhaps the common thread between all of these tests, however expressed, is that they produce an all or nothing result: if the relevant causal connection is made out the claimant succeeds, if not he fails. In contract, there has been limited judicial consideration of

apportionment; contributory negligence is generally unavailable. The decision in Tennant Radiant Heating Ltd v Warrington Development Corporation [1998] 1 EGLR 41 is something of an exception in that the Court of Appeal in a dispute between landlord and tenant as to damage caused by an accumulation of rainwater (each in part being responsible for the damage caused) felt able to approach the problem as one of apportionment: The problem which this court faces, on the claim and counterclaim alike, is in my judgment a problem of causation of damage. On the claim, the question is how far the damage to its goods which the lessee has suffered was caused by the corporations negligence notwithstanding the lessees own breach of covenant. On the counterclaim, the question is how far the damage to the corporations building which the corporation has suffered was caused by the lessees breach of covenant, notwithstanding the corporations own negligence. The effect is that on each question, apportionment is permissible. However, in Bank of Nova Scotia v Hellenic Mutual War Risks Association (Bermuda) Ltd [1990] 1 QB 818, Lord Justice May giving the judgment of the court said of the decision in Tennant: We merely add respectfully our view that the scope and extent of this last mentioned case would have to be a matter of substantial argument if the principle there applied were to arise for consideration in another case.5 12. In terms of the application of any particular test for causation, specifically in the context of concurrent delays, there remains surprisingly little judicial guidance. As matters currently stand the but for test receives little support; see City Inn at paragraphs 15 and 17 and the cases there cited. This might suggest that the approach
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10 to be adopted lies in approaching the issue as one of effective or dominant cause. There is little considered authority on the point.

13.

The most direct observations on the point are those of Mr Justice Dyson (as he then was) in Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999) 70 Con LR 32 at paragraph 13: Secondly, it is agreed that if there are two concurrent causes of delay, one of which is a Relevant Event, and the other is not, then the contractor is entitled to an extension of time for the period of delay caused by the Relevant Event notwithstanding the concurrent effect of the other event. Thus, to take a simple example, if no work is possible on a site for a week not only because of exceptionally inclement weather (a Relevant Event), but also because the contractor has a shortage of labour (not a Relevant Event), and if the failure to work during that week is likely to delay the Works beyond the Completion Date by one week, then if he considers it fair and reasonable to do so, the Architect is required to grant an extension of time of one week. He cannot refuse to do so on the grounds that the delay would have occurred in any event by reason of the shortage of labour. Applying this approach the answer in respect of cases where there is concurrent delay is that the contractor is entitled to an extension of time. There are I suggest three points that merit comment:

(i) (ii) (iii)

as the judge records, the conclusion is one that is based on the agreement of counsel; the judgment does not formulate or express any legal test for causation; and it would appear that because of the agreement between counsel there was no (or little) discrete analysis of the law or of the contract.

14.

The approach adopted in Henry Boot has recently been applied by HH Judge Stephen Davies in Steria Ltd v Sigma Wireless Communications Ltd [2008] BLR 79. The extension of time clause that Judge Davies had to consider was a bespoke clause for the IT contract that had given rise to the dispute but the Judge clearly regarded the judgment in Henry Boot as a statement of general principle; see paragraphs 130 and 131 of the judgment. The judge in adopting the approach taken by Dyson J cited with

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11 approval a passage from Keating on Construction Contracts (8th edition) at paragraph 8-021 where the editors suggest that in the light of the decision in Henry Boot: It now appears to be accepted that a contractor is entitled to an extension of time notwithstanding the matter relied on by the contractor is not the dominant cause of delay, provided that it has equal causative potency The conclusion expressed in Steria was one where the Judge records (at paragraph 130) that: The parties have not directed submissions to me specifically on this point. 15. In between the decisions of Henry Boot and Steria there had been the judgment of HHJ Seymour QC in Royal Brompton Hospital NHS Trust v Hammond (No.7) [2000] EWHC 39 (TCC), (2000) 76 Con LR 148. Having referred to the decisions in Chestermount and Henry Boot, he continued as follows (at paragraph 31): However, it is, I think, necessary to be clear what one means by events operating concurrently. It does not mean, in my judgment, a situation in which, work already being delayed, let it be supposed, because the contractor has had difficulty in obtaining sufficient labour, 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 an existing delay, made no difference. In such a situation, although there is a Relevant Event, the completion of the Works is [not] likely to be delayed thereby beyond the Completion Date. The Relevant Event simply has no effect upon the completion date. This situation obviously needs to be distinguished from a situation in which, as it were, the works are proceeding in a regular fashion and on programme, when two things happen, either of which, had it happened on its own, would have caused delay, and one is a Relevant Event, while the other is not. In such circumstances there is a real concurrency of causes of the delay.6 This case was not mentioned in the judgment in Steria. 16. The position in English law, certainly as it can be derived from the decisions in Boot and Steria can be contrasted with the approach adopted in the United States. Chow Kok Fong in his book Law and Practice of Construction Contracts (Third Edition)
6

See also Max Abrahamson, Engineering Law and ICE Contracts (4th Edition 1979) at page 139.

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12 cites7 the decision of the US Court of Claims in Raymond Constructors of Africa Ltd v United States (1969) as an illustration of a case where the court apportioned the loss consequent upon concurrent delays according to the degree of culpability of each of the parties. In comparing the approach adopted in the US with that applied in England the author comments that Ostensibly, the decision in the United States case appears to offer a more balanced result.

City Inn v Shepherd 17. The judgment in Steria was handed down some two weeks before the decision of the Court of Session in City Inn. The judgment of Lord Drummond Young is one that considered both the judgment of Colman J in Chestermount and Dyson J in Henry Boot. The Judge expressly addressed, in respect of the JCT form, the issue of concurrency. He said (at paragraph 16) that he had some difficulty with the distinction drawn by HHJ Seymour QC in Royal Brompton in the passage quoted above; that he considered it to be based on an arbitrary criterion. The judgment at paragraph 13 contains the following analysis: Thirdly, this process involves certain inherent uncertainties. For example, a contractors risk event and a non-contractors risk event may operate concurrently in such a way that delay can be said to result from both, or indeed either. Another possibility is that a non-contractors risk event merely slows the progress of the Works, rather than bringing them to a halt. Because of these uncertainties, the architect is given power to adjust the Completion Date retrospectively, because it is clearly only with hindsight that the causative potency of each of the sources of delay can be properly assessed. Fourthly, the inherent uncertainties in the process are recognised in the scheme of clause 25. The architect is not expected to use a coldly logical approach in assessing the relative significance of contractors risk events and non-contractors risk events; instead, as the wording of both clause 25.3.1 and clause 25.3.3.1 makes clear, the architect is to fix such new Completion Date as he considers to be fair and reasonable. That wording indicates that the architect must look at the various events that have contributed to the delay and determine the relative significance of the contractors and non-contractors risk events, using a fairly broad approach. Judgment is involved. It is probably fair to state that the architect exercises discretion, provided that it is recognised that the architects decision must be based on the evidence that is available and must be reasonable in all the circumstances of the case. The decision must, in addition, recognise that the critical question is

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13 to determine the delay caused by non-contractors risk events, and to extend the Completion Date accordingly. Lord Drummond Young recognises, and I suggest with some force, the fact that, as part of the post contract review, the architect, under the JCT Form, is to fix a later date for completion if in his opinion the fixing of such later date is fair and reasonable. What Lord Drummond Young does is to construe the contract and by construing the contract he arguably defines the legal test for causation the legal test being that which is fair and reasonable. It is important to recognise that what Lord Drummond Young does is to take the analysis one stage further than in Chestermount and to consider clause 25 in terms that were not addressed at all by Dyson J in Henry Boot. Based on this analysis the judgment proceeds to the conclusion that in cases of concurrent delay, applying the test of what is fair and reasonable, it may be appropriate to apportion responsibility for the delay; see the Judgment at paragraph 18. The conclusion reached by Lord Drummond Young contemplates a result that might be quite different from that given in Henry Boot and Steria, i.e. the winner takes all result does not necessarily follow. Recognising that Justice Warren LH Khoo was not in Lian Soon Construction addressing a problem that had arisen from events said to be concurrently causative of delay it is nonetheless interesting to note the similarity of the language used; compare the extract from City Inn set out above with the quotation from Lian Soon Construction in paragraph 10 above. 18. Thus in applying the approach commended to us by Lord Hoffmann, one decides as a matter of law what causal connection the law requires, and in order to answer that question one first turns to the terms of the contract. Under the JCT Form, and one sees many similar provisions which call for a discretion to be exercised, there is a persuasive argument for saying that the contract does not just allocate risk but that it describes how the assessment of the effects of that allocation of risk is to be undertaken. 19. The decision in City Inn has not been without its critics; it may be subject to appeal and it remains to be seen if City Inn will be followed in England8. However,
8

Though in many respects similar, English and Scottish law are not the same.

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14 whatever view one might take as to the correctness of the result in City Inn, it is respectfully suggested that the underlying approach taken by the court has some attractions. In principle, I suggest that there is no impediment to a contract providing that where competing causes of delay occur then the problems arising from such an occurrence are to be resolved through the application of principles analogous to those applied in cases of contributory negligence.

Conclusion 20. In answering the question posed by Lord Hoffmann (as to what causal connection the law requires), ones starting point is likely to be the wording of the contract. Where the contract is silent as to what is to happen in the event of concurrency, and where there is no discretion conferred on the relevant decision-maker, then one has regard to more general legal principles. The effect of these would appear to be that, where an extension of time clause confers on the contractor an entitlement to an extension of time for a particular event or events, then the contractor will be entitled to an extension even where there is a concurrent delay for which he is responsible; the contractor will not thereby be deprived of the extension of time. 21. City Inn opens up a different approach where discretion is given to the relevant decision-maker. The scope of the discretion is, of course, critical. Depending on the wording of the contract, the judgment that has to be made need not be constrained to the application of any particular (or traditional) legal test for causation.

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15

CONCURRENT DELAY IN ENGINEERING AND CONSTRUCTION PROJECTS

WHEN IS WHAT IS FAIR AND REASONABLE AN APPROPRIATE SOLUTION

ANNEX to LECTURE

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16

1.

A dispute had arisen between Owner and Charterer as to the delay in loading. The Charter provided that the vessel would arrive at the port of Sikka in India to take on a cargo of gasoil between 17th and 22nd November 2000. The Charterer, who was a dealer in gasoil, duly contracted with the refinery (located at the port) to supply and load the gasoil during the stipulated window. There were further provisions of the Charter as follows: (i) for demurrage at a rate of $100,000 per day; (ii) that the vessel would be presented, by the Owner, for loading, in a clean condition; (iii) that the Owner would indemnify the Charterer for the direct costs incurred as a consequence of the vessel not being presented clean; (iv) that the Owners obligation to arrange for the vessel to arrive at the port of loading was subject to qualifications - to allow for example for adverse weather conditions. The vessel did not in fact arrive at Sikka until 30th November. The late arrival of the vessel was not due to any breach of contract on the part of then Owner, i.e. the Owner was entitled to rely on the contractual qualifications referred to at 2(iv) above. After the cleaning of its tanks the vessel was presented as ready to load on 2nd December. The vessels tanks were inspected for cleanliness on 2nd December. The inspectors determined that the vessel was dirty and that the tanks required to be re-cleaned. The refinery would have been unable to load the cargo of gasoil on 2nd December because it had undertaken commitments to other suppliers. The vessel was re-cleaned between 2nd and 9th December. After re-cleaning a further a further inspection was undertaken. It was not until 9th December that the tanks had been cleaned so as to permit loading to commence. As at 9th December the refinery was, by reason of its commitments to other customers, unable to supply gasoil and it was not until 2nd January that the vessel could be loaded. What is the causal connection required by law to entitle recovery of demurrage/damages; and has the Owner or the Charterer (or both) satisfied that test in respect of the period between 2nd and 9th December?

2.

3.

4.

5.

6.

7.

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