Concurrency and the prevention principle
Zoi Polyzou, Senior Director, FTI Consulting
TIME is of great importance in construction and infrastructure projects. Construction delays can lead to uncertainty and highly complex situations, especially when there’s an aggregate of causes, some of which are the employer’s risk and some of which are the contractor’s risk. Concurrent delay is, therefore, one of the most controversial and perplexing aspects of dispute resolution, and difficulties can arise in the assessment of time and money when it occurs.
This article considers the influence of the decision in North Midland Building v Cyden Homes (2017) EWHC 2414 (TCC); (2018) EWCA Civ 1744 on concurrent delay and the prevention principle. It also explores whether express contract provisions dealing with issues of concurrency and prevention can achieve a better balance between the interests of employer and contractor when those circumstances arise.
Construction delays can lead to uncertainty and highly complex situations, especially when there’s an aggregate of causes, some of which are the employer’s risk and some of which are the contractor’s risk. The construction industry demands certainty and continuity in the application of the law to essential elements of construction contracts. The principles that have assisted in providing such certainty and continuity in respect of delay are the prevention principle and the Malmaison approach to concurrent delay1.
Defining concurrent delay: The conventional ambiguous position
Concurrent delay is a muchdebated concept in the construction industry. Its meaning and effects appear to have different interpretations, while judicial definitions are scarce. Even in circumstances where it is claimed that there is concurrent delay, it often becomes obvious over the course of the factual enquiry that only one of the competing causes is actually the effective cause.
Establishing whether there is true concurrency is important as it defines the approach that the courts should adopt when assessing parties’ claims.
In 2002, Marrin described concurrent delay as ‘a period of project overrun which is caused by two or more effective causes of delay which are of approximately equal causative potency’2.
The construction industry demands certainty and continuity in the application of the law to essential elements of construction contracts.While Marrin’s definition focuses on the effects of the critical delays, the SCL Protocol suggests that for true concurrency to exist both delay events must occur at the same time and their effects must be felt at the same time, thereby providing a narrower definition3.
As recently confirmed in Thomas Barnes & Sons v Blackburn with Darwen Borough Council (2022) EWHC 2598, the general position under English law is that causation will be established where it can be shown that the events in question are of approximately equal causative potency and that they are actually effective causes of delay. Given the details of this specific case, it remains to be seen how things will develop in subsequent cases.
Nevertheless, the distinction between concurrency of delay causes versus concurrency of delay effects still causes some difficulty for the courts, as recognised by Lord Drummond Young in City Inn v Shepherd Construction (2007) CSOH 190.
Unravelling the Malmaison approach
Concurrent delay is a much-debated concept in the construction industry. Its meaning and effects appear to have different interpretations, while judicial definitions are scarce.
The English court’s preferred approach to concurrency is the Malmaison approach. In his decision, Justice Dyson held that, in cases of true concurrency, the contractor is granted a full extension of time but without the associated costs.
Accordingly, based on this approach, the employer is not entitled to any liquidated damages even if the contractor could not have completed the works before the completion date because of his own default. There is, therefore, an all-or-nothing feel to the courts’ treatment of concurrent delay issues.
A question arises as to whether a better balance between the parties’ interests can be achieved when concurrency arises.
Despite this approach being based on an agreement between the parties in Malmaison, rather than a reasoned decision of the court, the English courts appear to have adopted and applied it without providing any further reasoning on its application. The judicial and academic justification for this wider application appears to be based on the proposition that, within their contract, the parties must have contemplated that there could be more than one effective cause of delay. Nevertheless, they expressly agreed that even in such circumstances the contractor is due an extension of time.
Another justification lies in the fact that, by providing a full extension of time to the contractor for acts of prevention by the employer, the Malmaison approach does not invoke the prevention principle (stipulating that a party cannot benefit from its own wrong). The prevention principle is therefore at the heart of the reasoning in the Malmaison principle, justifying the English courts’ preference for it.
Applicability of the prevention principle to concurrency
The prevention principle’s origins can be traced back to Sir Henry Rolle’s ‘abridgment’ in 1668 and Sir John Comyns’ ‘digest’ of common law principles in 1760.
The prevention principle’s origins can be traced back to Sir Henry Rolle’s ‘abridgment’ in 1668 and Sir John Comyns’ ‘digest’ of common law principles in 1760. However, it was not until the often-quoted case of Peak Construction v McKinney Foundations (1976) 1 BLR 111 that this principle was cemented in English law in the context of liquidated damages.
The Peak principle holds that if the owner delays the contractor, and there is no extension of time provision in respect of the delays in question, then the contractor’s obligation to complete the works by a certain date will be substituted by an obligation to complete within reasonable time and the liquidated damages provisions will fall away.
A potential scenario where the prevention principle is relevant in a case of concurrency is where the contractor does not receive a full extension of time for an act of prevention and, as a result, the extension of time mechanism fails. Consideration would need to be given to the timing of the delays in terms of the applicability of prevention if prior delays have impacted progress.
In such circumstances, it would be necessary to consider whether the contract expressly excludes the application of the prevention principle. However, such expressions of contrary intent are rare in standard forms of construction contracts.
Consequently, there is still a debate within the courts on whether the prevention principle applies to concurrent delay where the contract does not expressly exclude the prevention principle. In both Adyard Abu Dhabi v SD Marine Services (2011) EWHC 848 and Jerram Falkus Construction v Fenice (2011) EWHC 1935, the courts held that the prevention principle would not be triggered when concurrency occurs as, in any case, it would be impossible for the contractor to complete the works by the stipulated contract time due to its own delays.
In contrast, in Walter Lilly v Mackay (2012) EWHC 1773, Justice Akenhead acknowledged that if he did not apply the Malmaison approach, then the prevention principle would be invoked on the basis that the contractor would be denied a full extension of time despite being delayed by relevant events. The editors of Hudson have also supported the consistent application of the prevention principle across concurrent delay events4.
The impact of North Midland on allocating concurrent delay risk
There is still a debate within the courts on whether the prevention principle applies to concurrent delay where the contract does not expressly exclude the prevention principle. Considering the perception of inequality arising out of the Malmaison approach, the inconsistent application of the prevention principle by the courts and the risks to an employer caused by prevention, it is unsurprising that employers attempt to resolve these issues using concurrency clauses.
One of those clauses was considered by the English courts in North Midland. In this case, an amended JCT 2005 contract contained an extension of time mechanism that restricted its operation in specific instances of delay caused by the employer.
As a result, when concurrency occurred, the time for completion could not be extended and the contractor was held to the original completion date and to payment of liquidated damages. In his judgment, Justice Dyson held that the parties are free to include express provisions for concurrent delay and that the prevention principle would not cut through the parties’ agreement in such a case.
The decision in North Midland suggests that the employer may include an extension of time provision but with a stipulation that under certain circumstances it will be inoperative. This stipulation is likely to be viewed by the courts as amounting to an agreement by the parties, being of equal bargaining power, to contract out of the prevention principle and allocate the risk of concurrent delay to the contractor.
While this option would be unattractive for contractors, it could potentially be viable if it was balanced by the appropriate rewards for them.
The starting point for assessing which party is responsible for concurrent delays is the contract. However, most standard forms stay silent on the approach to concurrency. The case also highlights that contractors often overlook the risk of concurrency clauses preventing them from gaining an extension of time or additional recompense for employer-caused delays. Despite this perceived inequality for contractors, North Midland is likely to encourage parties to agree provisions on this clearly and unambiguously allocate the risk of concurrent delay.
Concurrency clauses in standard form contracts
The starting point for assessing which party is responsible for concurrent delays is the contract. However, most standard forms stay silent on the approach to concurrency. This lack of guidance creates more uncertainty in the already nebulous divergent approaches on concurrent delay followed in different jurisdictions.
Under the 2017 FIDIC contracts, the parties are invited to agree their own arrangements in respect of the rules governing the allocation of contractual risk in the event of concurrent delay. Sub-clause 8.5 suggests that if there is no express provision, the contractor’s entitlement to an extension of time is determined by having regard to the relevant circumstances5.
FIDIC’s explanation for not including an explicit regime for concurrent delay can be found in the guidance for the preparation of particular conditions, noting that ‘there is no one standard set of rules/procedures in use internationally’ and that ‘different rules/ procedures may apply in different jurisdictions’. The JCT Design and Build Contract 2016 provides that upon notice by the contractor of the delay caused by the relevant events, the decision-maker is to grant an extension of time ‘as he then estimates to be fair and reasonable’6.
The lack of clarity in the approach to concurrency of delay events between the standard forms has led to the type of bespoke amendments that were discussed in North Midland. Bearing in mind the complexity of the legal principles involved, it is not surprising that this has also given rise to difficulties.
The Australian perspective: For better or for worse?
In Australia, some standard form contracts have evolved to include express provisions for concurrency. For instance, the Australian AS 4902-2000 and AS-4000 standard forms provide for the apportionment of delay ‘according to the respective causes contribution’ in the event of concurrent delay. Furthermore, clause 35.3 of AS 2124-1992 provides that the contractor has no entitlement to an extension of time for periods of concurrent delay.
As a result of these express concurrency clauses, there appears to be limited case law on the topic as the contractual position prevails over the position at law7.
However, these forms have attracted some criticism. For instance, the AS-4000 and AS 4902-2000 standard forms do not provide a definition of apportionment of delay while AS 2124-1992 does not define concurrent delay8. It is, therefore, important that concurrency clauses prescribe a clear and comprehensive approach as to how concurrent delay is to be defined, assessed and dealt with.
In Australia, some standard form contracts have evolved to include express provisions for concurrency. For instance, the Australian AS 4902-2000 and AS-4000 standard forms provide for the apportionment of delay ‘according to the respective causes contribution’ in the event of concurrent delay.An analysis of the most commonly used standard form construction contracts in Australia indicates that employers have gone further toward avoiding the operation of the prevention principle by introducing unilateral extension of time provisions into construction contracts9.
These provisions, such as clause 35.5 of AS4300-1995, provide power for the contract administrator to unilaterally extend the time for completion of the works, irrespective of whether the contractor has claimed for or is actually entitled to an extension of time.
These provisions not only benefit employers but also contractors by extending the time for completion, thereby reducing their liability for late completion of the works.
A unilateral discretion to extend the date for completion can also be useful in circumstances where there is no provision dealing with concurrent delay causes, one of which is an act of prevention by the employer. Under those circumstances, both the employer and the contractor would benefit from the contract administrator extending the completion date. This is because the employer would not lose its right to liquidated damages and the contractor would be given the appropriate time to complete his works.
However, there are two issues arising from these types of provisions: firstly, they appear to be the subject of significant litigation in Australia and secondly, they raise questions as to the extent to which a contract administrator is required to be fair and impartial in performing his functions10 . These criticisms would need to be addressed by contract draftsmen before injecting such provisions into their contracts.
Are express provisions the way forward?
With the Malmaison approach leaving an all-or-nothing feel to contractual parties, the decision in North Midland highlights that a better balance may be achieved between their interests if an express provision is made in their contract dealing with issues arising out of concurrency and prevention. However, clarity in such clauses is essential to avoid disputes as to their meaning and effect.
With the most commonly used standard forms of contract being silent in the context of concurrent delays, Australian standard form concurrency clauses and unilateral extension of time provisions provide a potential area for consideration for contract draftsmen. However, criticisms of the Australian forms indicate that such guidance should be considered both in respect of how these clauses should be drafted and what to avoid. Otherwise, lack of clarity of the definition of key concepts as well as the effects of these clauses may lead to more confusion and increased litigation.
Throughout the project, both the employer and contractor are required to undertake extensive analysis to establish whether there is concurrency or dominance of delay causes. This is naturally a factual and contract-dependent exercise. Maintaining accurate and detailed contemporaneous records is important for a delay analysis, especially in cases of concurrency.
Furthermore, issues of alleged concurrency can be avoided if all parties agree on the contemporaneous critical sequence and causes of delay. Clarity of the planned sequences and execution by the contractor and communication of this to the employer are therefore crucial in avoiding concurrency arguments later in the project. Parties should also be aware of who owns the risk for concurrency based on their contract.
Zoi Polyzou, Senior Director, FTI Consulting
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1 Henry Boot Construction v Malmaison Hotel (1999) 70 ConLR 32
2 Marrin, J. Concurrent delay (2002) 18(6) CLJ 436,448
3 Society of Construction Law. The Society of Construction Law Delay and Disruption Protocol (2002)
4 Atkin Chambers, Hudson on Building and Engineering Contracts (Sweet & Maxwell 2010) note 3, para 6-060
5 FIDIC 2017 Red, Yellow and Silver Books
6 At clause 2.25.1
7 Rosenberg, K. Concurrent delay: what is all the fuss about? (2018) 34(1) CLJ 3,18
8 Tobin, P. Concurrent and Sequential Causes of Delay (2007) 24 ICLR 142, 151
9 AS4300-1995, AS4000-1997, AS2124-1992, AS4902-2000
10 Mae, K. Preventing Improper Liability for Delay but not Preventing Disputes (2019) ICLR 24,49