In light of the recent woes brought on in part by delays in high risk construction projects, Harper Macleod’s head of construction, Michael Conroy, compares the Scots and English law positions in relation to ‘concurrent delays’ and suggests practical steps to be taken by parties to contracts which may reduce or mitigate their exposure from disputes.
The recent collapse of Carillion has again brought into focus the low margins and high risks faced by contractors involved in complex high value construction projects.
Where contractors on such projects can be working to extremely low margins, the impact of a failure to recover losses incurred due to extended delays on problem jobs may be fatal to their business.
For any delayed project there may be a myriad of circumstances which have occurred to cause delay and disruption to the regular progress of works, some being the fault of the contractor and others not. Unravelling which of these should determine any extension of time or entitlement to loss and expense for a contractor and thereafter quantifying such time, loss and expense is not straightforward nor is it an exact science with much scope for divergence of expert opinion.
The position is not assisted by the failure of the most commonly used standard form contracts (JCT in England and their Scottish SBCC equivalents) to specify methodologies for determination of fair and reasonable extensions of time.
In particular the standard forms do not provide a determination mechanism for those circumstances where there is a concurrency of delays (broadly where there are two or more causes of a particular delay one of which is the fault of the contractor and the other(s) is/are “Relevant Events” entitling the Contractor to an extension of time or “Relevant Matters” entitling the Contractor to loss and expense).
Where the standard forms are silent as to dealing with concurrency the position is further exacerbated by the law being less than clear. Further confusion arises where there is a divergence as to the treatment of these circumstances under English law and Scottish law.
Scots law versus English law
The following table sets out the differing principles formulated by the Scottish and English courts:
English law (“the Malmaison Approach”)
|Leading Case: City Inn v Shepherd||Leading Cases: Henry Boot v Malmaison
Walter Lilley v McKay
|There is true concurrency between a relevant event and a contractor default where they both existed simultaneously regardless of which started first.
Note: Focus on the occurrence of the delay events.
|Concurrent delay denotes a period of project overrun which is caused by two or more effective causes of delay which are of approximately equal causative potency.
Note: Focus on the period of project overrun.
|Where there are two or more effective causes of delay with unequal causative potency the dominant cause will be treated as the cause of delay
|Where there are two or more effective causes of delay with unequal causative potency the dominant cause may be treated as the cause of delay
|Where there are two or more effective causes of delay with equal causative potency then it may be appropriate that delays are apportioned between the parties
|Where there are two or more effective causes of delay with equal causative potency then the contractor will be awarded an extension of time
|Where there are two or more effective causes of delay with equal causative potency then it may be appropriate that losses are apportioned between the parties
|Where there are two or more effective causes of delay with equal causative potency the contractor will not be entitled to loss and expense.
Many construction companies will operate UK wide. It is important that their understanding of exposure for contract default takes account of the differences between English and Scottish law.
Whereas in England contractors may be entitled to a full extension of time but no loss and expense, in Scotland for the same circumstances they may get some of the time and some of their loss and expense. Those responsible within the contractor’s organisation for the entering into of contracts should be educated as to these differences so that an acceptable/desired risk profile can be achieved.
For employers it is common to amend the standard forms to achieve more favourable terms. Amendments which we commonly include for employer clients are statements that no extension of time or loss and expense will be awarded or loss where there exists at the time of a Relevant Event or Relevant Matter any concurrent delay which is the fault of the contractor.
Other possible amendments could include: a clear statement of what constitutes concurrency; guidance as to identification of the dominant cause; and a statement that the dominant cause will prevail over another effective cause
For both parties it may be preferable that detailed provisions are included to deal with programme issues to identify clearly methodologies and principles to be applied by the Contract Administrator to the analysis of delay events and his/her formulation of a fair and reasonable opinion on these matters.
The topic of this brief note is the subject of extensive commentary and ongoing debate. The purpose is simply to raise some awareness and should not be regarded as an authoritative exposition on this area of construction law.
If you wish any further guidance or advice around these issues please do not hesitate to contact Michael Conroy, partner and head of Harper Macleod’s Construction Law Practice.
t: 0141 227 9316
This blog originally appeared on the Harper Macleod website.