Concurrent delay: Time on your side?

In the recent case of Saga Cruises BDF Ltd & Anor vs Fincantieri SPA [2016], the commercial court considered the question of the contractor’s entitlement to an extension of time where there is concurrent delay.

The issue of concurrent delay is a contentious one, the key question being whether the contractor is entitled to an extension of time where there are concurrent causes of delay, one of which is caused by a contractor risk event and the other by an employer risk event.

The starting point must always be the contract. If the contract does not expressly address the point, the position under English law is that the contractor will usually be entitled to an extension of time for employer delay, even if that delay runs concurrently with a contractor delay.

This position is relatively settled but what is more difficult is identifying when two (or more) delay events can be said to be concurrent. The courts have said that each delay must be an “effective cause of delay”, but it can be difficult to apply this in practice.

In brief, the facts of the case were as follows: Saga bought a cruise ship in 2010 which it wanted to transform into its flagship liner. It entered into a contract with Fincantieri (the yard), an Italian shipbuilder, for refurbishment of the vessel.

The work was to be completed by 17 February 2012. The works were delayed and the parties agreed to extend the completion date to 2 March 2012. In fact, the vessel was not re-delivered to Saga until 16 March 2012.

One of the questions for the judge in the commercial court was whether Saga was entitled to liquidated damages for the 14-day delay.

The courts have said that each delay must be an ‘effective cause of delay’, but it can be difficult to apply this in practice

During this period of delay, there were a number of events that delayed the progress of the works. The judge found that due to delays caused by the yard, the works could not have been finished before 16 March 2012.

The judge also found there were items of work that were not completed by 2 March 2012 as a result of risks for which Saga was responsible. The judge found that although these delays would have, on their own, prevented completion of the works until 11 March 2012, they did not “cancel out” the delays caused by the yard. In other words, they were not effective causes of delay.

Therefore, there was no concurrent delay and Saga was entitled to liquidated damages for the full period of delay (subject to a cap).

There are a few points worth noting from this decision. First, the judge seems to have taken a narrow view of when delays can be said to be concurrent. The yard’s own delays were found to be the effective causes of delay and the delays caused by Saga did not cancel them out. However, even without the Yard’s delays, Saga’s delays would have caused delay to completion up to 11 March 2012.

Up to this date, if both delays would have prevented completion, why is one more effective than the other? In terms of causation, the only difference between the yard’s delays and the owner’s delays is that the yard’s delays lasted longer, and it seems that this is the determining factor.

Secondly, the emphasis on the timing of the delay events, and in particular which one lasted the longest, appears to support the draft Delay and Disruption Protocol recently issued by the Society of Construction Law. That protocol suggests that when an employer delay starts after and ends before a contractor delay, the delays would not be concurrent. According to the protocol, the employer delay is said to have no effect because the works were always going to be delayed. This narrow view of when concurrency occurs restricts the benefit that the contractor gains from the position at law, that the contractor is entitled to an extension of time where delay is concurrent.

Practically speaking, a focus on the timing of events may encourage employers to wait to issue instructions or variations, which it may have always intended to instruct, until the contractor is in its own delay. This way, an employer may be able to avoid giving an extension of time for such changes and retain its entitlement to liquidated damages.

Interestingly, in this case the commercial court judge relied heavily on Adyard Abu Dhabi vs SDMarine Services (another commercial court case) rather than Mr Justice Akenhead’s reasoning in Walter Lily vs Mackay [2012], a Technology and Construction Court (TCC) case. We will have to wait to see whether the TCC follows the approach of the commercial court or if there is a divergence between the commercial court and the TCC.

Alexandra Clough is a senior associate in contentious construction at Berwin Leighton Paisner