Lessons for GCC on concurrent delay

By David Johnston

DELAYS on engineering and construction projects are almost inevitable; the more complex the project, the more likely the prospect of delay, and the more chance of two or more delays occurring at or around the same time.

Where the contractor is culpable for the delay, for example, rectifying its own defective workmanship, it is usually not entitled to an extension of time. However, where an employer-caused delay occurs concurrently with the contractor’s culpable delay – for example, where the employer has instructed a variation, and assuming that each of these events is of approximately equal significance – is the contractor now entitled to an extension of time?

Various legal jurisdictions have struggled with this question and come to different positions. Some of these positions are set out in this article, as are some suggestions as to how this debate should inform approaches taken by employers to concurrent delay on construction projects in the GCC.

The position under English law was set out in the case of Henry Boot Construction (UK) versus Malmaison Hotel (Manchester). Where a delay is caused by more than one event, but one of which entitles the contractor to time relief, the contractor is entitled to a full extension of time, and the contractor’s culpable delay is disregarded for the purposes of calculating that entitlement.

This approach has been justified on the basis that, where the parties have provided for certain events to lead to an entitlement to an extension of time, they are assumed to have understood that delays may be caused by more than one cause, and that one of those causes may not entitle the contractor to time relief. Nevertheless, they have agreed that the contractor is entitled to an extension of time for the relevant cause. However, this position has been criticised as too “contractor-friendly”, in that it can give contractors an escape route by which they can avoid the consequences of their own culpable delay.

Other jurisdictions take a less absolutist approach than the English system. In Scotland, the position is set out in the case of City Inn versus Shepherd Construction. Under Scots law, where there are two or more concurrent causes of delay, and where none of them can be described as the dominant cause, then the delay may be apportioned between the causes. This must be done in a fair and reasonable manner.

City Inn is praised by some as more nuanced than the “everything or nothing” position in England, while others criticise its lack of certainty and contrast the requirement that the court engage in a potentially complex apportionment exercise with the more straight-forward English approach. City Inn sceptics further argue that the Scottish method ignores the fact that a “fair and reasonable” approach need not imply the need for apportionment and may justify other approaches.

Further afield, Australian courts appear willing to follow the English position. Courts in the US, however, while previously hostile to apportionment, will now allow it where a clear apportionment of the delay is possible among each of the parties. Hong Kong has also shown a similar move towards apportionment in recent times. Finally, Canadian courts have adopted apportionment, in part justified with reference to laws on contributory negligence. While there is no international consensus, there appears to be a clear movement towards apportionment. But what can this movement tell us about the appropriate approach employers should take to concurrent delay in the GCC?

The legal systems of the GCC are strongly influenced by Shariah principles, and many Shariah concepts are relevant to contract and commercial law in the region. A fundamental feature which distinguishes the legal systems in the region from many western jurisdictions is the principle of good faith. Article 129 of the Bahrain Civil Code provides that “(a) contract must be performed in accordance with its contents and in compliance with the requirements of good faith and honesty”.

Article 246(1) of the UAE Civil Code contains a similar provision, as do other GCC civil codes. The use of concepts such as “good faith and honesty” appears to mirror the reference in City Inn to a “fair and reasonable manner”, and would suggest that courts in the GCC will have the discretion to follow the Scottish courts, rather than the stricter English method. Employers could argue that apportionment of responsibility is therefore the appropriate method for dealing with concurrent delay in the GCC, and may be able to justify a refusal to grant a full extension of time under local law.

However, it is unclear whether the courts would determine the relevant provisions to be applicable in cases of concurrent delay. Furthermore, in disputes under international arbitration where English law is the governing law of the underlying contract, employers could still be required to grant a full extension of time, notwithstanding the provisions of the local law.

Concurrent delay remains a contentious and complex area of law which challenges even more mature legal systems such as those of England and the US. Therefore, it is vital that employers maintain complete and comprehensive records and agree accurate and up-to-date programmes with contractors. This is best practice in any event, but will be crucial in the event that analysis of delay events is subsequently required in order to identify, or rule out concurrency. Furthermore, the correct approach to be adopted will greatly depend on the provisions of the contract. Parties must ensure their contracts reflect the preferred method of dealing with concurrency, and in all cases seek appropriate legal advice. Notwithstanding these points, however, employers can take comfort from the apparent scope for a more pragmatic approach to concurrent delay in the GCC.

Gulf Construction