Monday, April 19, 2010

How to approach delay & concurrency?

In doing a delay analysis, it is important to adopt the most suitable approach to concurrency.

Initially in dealing with concurrent delay and competing delay events, the common law have developed the Doctrine of Concurrent Delay. It is a branch of the contract law theory in which is being used to eliminate the delay damages. In the event where both parties had contributed to the delay of the contract completion, neither party can recover damages for the period of time when both parties were at fault.

For example in the situation where it happens to be that at the same time that the owner is delaying the project and the contractor is also experiencing a delay due the contractor’s own fault, then the two delays are said to be concurrent delays. Therefore, by the general rule of this doctrine, it is determined that a contractor is not entitled to an extension of time or extra compensation due to a delay resulting from the owner caused delay if there is an offsetting concurrent delay that was caused by the contractor.

However, in the current practice in the construction industry, concurrent delays disputes are not as simple as described. Due to the complexity of the industry and the long list of time related dispute resolution, the courts have developed many methods and among it are the famous four principal theories of approach in dealing with concurrent delays of different nature. The approaches are the Devlin approach, Dominant cause, Burden of proof, and Benefit from Ones Own Default[1], with each outline different merits to different situation of concurrency. Crucially, these approaches should also consider the delay effects on the entitlement to EOT and damages.

The first approach is described as the Devlin approach is a reference to a decision made by Mr. Justice Devlin in the case of Heskell v Continental Express Limited[2]. His Honour held that:

“If a breach of contract is one of two causes of a loss, both causes co-operating and both of approximately equal efficacy, the breach is sufficient to carry judgment for the loss.....”

An example to the application of this theory is at the event where two competing causes of delay, such as excessively adverse weather and late issue of instructions by the contract administrator which entitled a contractor to an EOT. In accordance with the Devlin approach, the contractor is entitled to extra time and loss and expense.

Conversely, this approach is obviously unworkable for some construction contract that is complex due to its technical nature. Moreover, the difficulty lies at the point in which it must be applied to both the claim of the contractor for loss and expense or damages and the counterclaim of the principal for liquidated damages. In those circumstances, one could have the absurd position that the contractor’s claim for direct loss and expense succeeded in relation to a period of delay and the principal’s claim for liquidated damages succeeded in respect of exactly the same period of delay.

The second approach in dealing with concurrent delay is by the application of the Dominant cause approach. In the event where there are two causes, one is of the contractual responsibility of the defendant and the other is of the contractual responsibility of the plaintiff, the plaintiff may succeed if he establishes that the cause for which the defendant is responsible is effective. This is the act of identifying the dominant cause. Which cause is the dominant cause is of a question of fact and is solved by mere point of order in time. In other words, this approach applies the common sense in resolving the concurrency dispute.

However, there have been cases where the Dominant cause approach has been rejected by the Courts. For example in the case of H Fairweather and Co Ltd v London Borough of Wandsworth[3], H Fairweather and Co Ltd were the main contractors for the erection of the 478 dwellings for the London Borough of Wandsworth, employing the JCT 1963 standard form of contract. Long delays had occurred and liability for those delays was in question. The matters were firstly referred to arbitration. In regards to the delays, the Architect had granted an extension of eighty-one weeks under conditions 23 (d) of the contract by reason of strikes and combination of workmen. The quantum of EOT was not challenged but Fairweather contended before the arbitrator that eighteen of those eighty-one days should be reallocated under the conditions 23 (e) or (f). For reasoning behind the contention was that only if there was such a reallocation could Fairweather ever recover direct loss and expense under the condition 11 (6) in respect of those weeks reallocated to condition 23 (e) or condition 24 (a) in respect of those weeks reallocated to the condition set out in 23 (f).

The arbitrator had found that there is no mechanism in the conditions for the allocation of an EOT on the different heads of claims, therefore the EOT must be granted in respect of the dominant reason. Therefore, the arbitrator held that the dominant cause of the delay was the strikes and combination of the workmen and accordingly, the Architect was correct in his decision in granting the EOT under the conditions set out in 23 (d). The arbitrator also held that the EOT does not entitled Fairweather to claim for direct loss and/or expense.

Nonetheless, the arbitrator’s award was the subject to an appeal. The judge in this case disagreed with the arbitrator’s award that the EOT should be treated by using the approach of the dominant cause of delay. His Honour said in his judgement:

“Dominant has a number of meanings: ‘Ruling, prevailing, most influential’. On the assumption that the conditions 23 is not solely concerned with the liquidated or ascertained damages but also triggers and conditions a right for a contractor to recover direct loss and expense where applicable under the condition 23 then an Architect and in his turn an Arbitrator has the task of allocating, when the facts require it, the extension of time to various heads. I do not consider that the dominant test is correct. But I have held earlier in this judgement that the assumption is false. I think the proper course here is to order that this part of the interim award should be remitted to Mr Alexander for his reconsideration and that Mr Alexander should within six months or such further period as the court may direct his interim award on this part.”

The decision in this case may had places doubts upon the Dominant cause theory, but it still holds its own merits. If this approach is being applied in a simplistic approach, it may be acceptable to adjust the contract period by ignoring the less dominant cause and to only consider the delay event that is relevant to the date of completion as stated in the contract. Accordingly, even though the Dominant cause is not a favourable approach to adopt, yet it may still be applied to time related disputes sensibly.

The third method in dealing with concurrent delay is through the Burden of Proof approach. The term burden of proof is often related with the Latin maxim “semper necessitas probandi incumbit ei qui agit”, in which is best translated to English as "the necessity of proof always lies with the person who lays charges." For any construction claim, this approach is the best to fairly and reasonably substantiate ones’ claim. The burden of proof tends to lie with party who is arguing against received wisdom, but does not always, as sometimes the consequences of accepting a statement or the ease of gathering evidence in its defence might alter the burden of proof its proponents shoulder.

In the event of when part of the damages is shown to be due to breach of contract by the Claimant, the claimant must demonstrate how much damages is caused by his breach of contract, failing which he may recover nominal damages only. So, if the delays were caused by the activities in making good of defects to the works which happens along the same time when the principal had contributed to another delay event. The methodology here would be to most suitable to be dealing with the time allowance more than the allocation of cost recovered from the EOT given.

In this present time, most standard form of contract for construction works have learned to incorporate this element into their delay and extension of time provisions. Commonly, it may be found that the contractor is to submit a delay notice to the contract administrator of the probability for late completion to the works. Along with that, the contractor must satisfy the standard requirement set-out in the contract along with the evidence which had caused the delay. With this, the contract administrator may do a delay analysis, decide on the concurrency and the usage of float, and finally grant an EOT for any excusable delay.

The last method is through the approach of Benefit from Ones Own Default. According to the United Kingdom (“UK”) methods, if a neutral and the principal’s caused delay had overlapped, the delay shall be treated as the responsibility of the principal. Consequentially, the contractor is then entitled to EOT and reimbursement of additional cost. In the event where there is a neutral cause, the principal’s cause and the contractor’s cause, the contractor is entitled for EOT for any excusable delays only and no cost should be awarded. Applying common sense, fairness and reasonableness may be the objective firstly intended for this approach. Such approach is also being enhanced through the “Peak Principle” from the case of Peak Construction (Liverpool) v McKinney Foundations[4] . On the general principle, if the construction contract complies with its procedural obligations and allows for the principal to benefit from its own breach, it would mean that time was put at large. With the contractor unable to obtain an EOT, it is also sensible for the principal to be denied the possibility of claiming liquidated damages.

Nonetheless, not all standard form of contracts adopts this method that one should not benefit from its own default. The Courts in the United States of America (“US”) have addressed this problem and applied the legal maxim that a party cannot benefit from its own errors. A principal who deducts liquidated damages during an overrun period when the delay is being caused by both late issue of information and making good of defective works activity may concurrently fall into this category. Therefore, in these events the US Courts had made a rule that a principal is not entitled to deduct liquidated damages and for the same reason, the contractor is also not allowed to claim for additional cost due to the delay.

In concluding this section of the paper, it is fairly understood that there are no firm and fast rule that governs situation in dealing with concurrent delays. Through the modern delay analysis techniques and the application of the earlier discussed methods of approach that is suitable for any such situation, disputes in relevance to EOT and cost may be dealt with reasonableness and common sense.

[1] Keating on Building, 6th ed.

[2] (1950) 1 All England 1033

[3] (1987) 39 BLR 106.

[4] (1971) 1 BLR 111 CA