Practical Law

I’ve not long returned from the Windy City where I attended the 8th International Society of Construction Law Conference.  I chaired a session titled “Bringing Order To The Delay Melee: Understanding the SCL Delay & Disruption Protocol and AACE RP 29R-03”.

Most of you will be aware of the SCL Protocol, which is now in its second edition, but I would hazard a guess that many of you haven’t come across the catchily titled AACE RP 29R-03 before. It is the Advancement of Cost Engineering’s (AACE) International Recommended Practice No. 29R-03 on Forensic Schedule Analysis.

While AACE RP 29R-03 is very different to the Protocol and focuses on the recommended steps for forensic programme delay analysis, the speakers did an excellent job of summarising how the two documents deal with some of the common issues relating to delay, one of which is concurrency. That got me thinking about the Court of Appeal’s recent judgment in North Midland Building Ltd v Cyden Homes Ltd, and the implications it will have on claims for extension of time.  Will it really have the impact that some commentators are suggesting?

A brief history of North Midland Building v Cyden Homes

I’m not going to go into the case in any detail because so much has been written about it already (including Alexandra Clough’s excellent piece), but a brief summary is as follows.

Cyden Homes employed North Midland to build a substantial private home in Lincolnshire under a JCT Design and Build Contract, 2005 Edition. The works were delayed and a dispute arose as to the extension of time that North Midland was entitled to. There were allegations of concurrent delay and Cyden Homes relied on an amendment to the JCT form which stated at clause 2.25.1.3(b) that:

“… any delay caused by a Relevant Event which is concurrent with another delay for which the Contractor is responsible shall not be taken into account.”

In the TCC

North Midland applied to the TCC for a declaration that the effect of clause 2.25.1.3(b) was to make time at large where North Midland had a claim for an extension of time for a delay caused by a Relevant Event that was concurrent with another delay for which North Midland was responsible.

In 2017, Fraser J refused to grant that declaration, finding that there was no point of construction as clause 2.25.1.3(b) was crystal clear, meaning that the prevention principle did not arise.

In the Court of Appeal

In the Court of Appeal, North Midland argued that the prevention principle was a matter of legal policy that would operate to rescue it from the effect of clause 2.25.1.3(b), but this proposition was rejected by Coulson LJ (who gave the leading judgment) for five reasons, namely:

• Unlike the rule that strikes down liquidated damages, the prevention principle is not an overriding rule of public or legal policy.
• In accordance with the second principle set out by Jackson J (as he was then) in Multiplex Construction (UK) Ltd v Honeywell Control Systems Ltd (at paragraph 56), the prevention principle was not engaged because the contract provided for an extension of time to be granted for Cyden’s acts of prevention.
• The “prevention principle has no obvious connection with separate issues that may arise from concurrent delay” as the authorities concerning this principle do not mention concurrent delay.
• The purpose of clause 2.25.1.3(b) was to reverse the result of cases such as Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd and Walter Lilly and Co Ltd v Giles Mackay and another. Coulson LJ said that Akenhead J’s analysis in Walter Lilly was unconnected with the prevention principle, as is clause 2.25.1.3(b).
• Even if clause 2.25.1.3(b) was connected to the prevention principle, the parties are free to contract out of it.

I agree with those commentators who have suggested that we will see a rise in employer’s seeking to insert clauses similar to clause 2.25.1.3(b) into building contracts.

However, the question is, how often will these clauses actually need to be relied upon to deprive a contractor of an extension of time? The answer to this question really depends on two issues, firstly whether concurrency is found to have arisen in any particular case, and, secondly, how it should be dealt with when it is found to have arisen.

Concurrency, rarer than a hen’s tooth?

The courts generally adopt John Marrin QC’s definition of concurrency :

“… a period of project overrun which is caused by two or more effective causes of delay which are of approximately equal causative potency.”

This definition was adopted by the Court of Appeal and I will adopt it for the purposes of this blog.

Both the SCL Protocol and Keating on Construction Contracts accept that true concurrency, requiring the timing of the events and their effect to coincide, will very rarely occur. Keating goes on to state (at paragraph 8-025):

“It is probably sufficient that each event relied upon would, in the absence of any competing event, have caused delay, but they both must be on the critical path and the delay caused by the events coincide or overlap.”

Although the SCL Protocol makes a similar statement, it also provides a worked example that, arguably, suggests a more restrictive view of when concurrent delay will arise in circumstances where an employer delay occurs after the commencement of a contractor delay. The following scenario is provided at paragraph 10.7:

“… a Contractor Risk Event will result in five weeks Contractor Delay to Completion, delaying the contract completion date from 21 January to 25 February. Independently and a few weeks later, a variation is instructed on behalf of the Employer which, in the absence of the preceding Contractor Delay to Completion, would result in Employer Delay to Completion from 1 February to 14 February.”

The SCL Protocol recommends that the employer risk event should be seen as not causing delay to completion and, as the only effective cause of the delay to completion is therefore the contractor risk event, there is no concurrency. As such there would be no need for the employer to rely on a type 2.25.1.3(b) clause.

What if the above scenario is reversed, so that it is the employer risk event causing the delay from 21 January to 25 February and the contractor risk event causing delay from 1 February to 14 February? Would the position be the same, such that there would be no concurrency because the contractor risk event would not be causing delay to completion? If so then the employer would be unable to rely on a type 2.25.1.3(b) clause, once again rendering it valueless.

This approach as to when concurrency arises is consistent with the approach taken by Hamblen J (as he was then) in Adyard Abu Dhabi v SD Marine Services who stated that:

“There is only concurrency if both 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… the act relied on must actually prevent the contractor from carrying out the works within the contract period or, in other words, must cause some actual delay.”

This statement was approved by Coulson J (as he was then) in Jerram Falkus Construction Ltd v Fenice Investments. It is also consistent with the judgment of Sara Cockerill QC (now Cockerill J) in Saga Cruises BDF Ltd v Fincantieri SpA.

Dealing with concurrency when it does arise

It is arguable that in cases such as Adyard and Saga the court didn’t find that there was no concurrent delay, but rather that the contractors were not entitled to an extension of time because, despite the existence of concurrent delay, the employer’s risk events had not caused any actual further delay. Either way though, the ultimate effect is the same and the employers would still not have needed to rely on a type 2.25.1.3(b) clause.

The approach in Adyard, Fenice and Saga to deciding a contractor’s entitlement to an extension of time in cases of concurrency differs from that found in cases such as Walter Lilly and Henry Boot.  For example, in the former case Akenhead J stated that:

“I am clearly of the view that, where there is an extension of time clause such as that agreed upon in this case and where delay is caused by two or more effective causes, one of which entitles the Contractor to an extension of time as being a Relevant Event, the Contractor is entitled to a full extension of time.”

This is also consistent with the position set out in Keating as to a contractor’s entitlement to an extensions of time once concurrency has been established (see paragraph 8-026). If a contractor would be entitled to an extension of time in such situations then a type 2.25.1.3(b) clause will clearly be of benefit to an employer who should be able to deploy it in order to avoid granting an extension of time.

Only time will tell

The impact of North Midland Building v Cyden Homes will have to be judged over years, rather than months, as it will take time for such clauses to be more regularly included in contracts and then come before tribunals.

However, the case may well have put another spanner in the works for contractors seeking to rely on concurrency arguments because, if they are not caught by restrictive approaches as to when concurrency arises and/or is dealt with, they may well now be caught by type 2.25.1.3(b) clauses.

Finally, the SCL International Conference was a roaring success, and Chicago was my kind of town. The next SCL International Conference, which will be in Auckland in 2020, has a tough act to follow, but I have no doubt they are up to the task.