UK: The Saga Decision: Concurrent Delay And Causation

The English High Court decision in Saga Cruises BDF Ltd & Anor v Fincantieri SpA1 emphasises that unless there is concurrent delay affecting a contractor's completion date, the contractor will not be entitled to an extension of time.

What is concurrent delay?

"Concurrent delay" is a period of project overrun caused by two or more delay events. At least one delay is caused by an event usually defined in the construction contract as a "Relevant Event" or an "Excusable Delay" entitling the contractor to an extension of time eg delayed access to site. The other delay is caused by an event for which the contractor accepted the time and cost consequences eg a labour shortage. To be concurrent, the delays must be of approximately "equal causative potency"2 and be felt at the same time. The Malmaison3 decision stands as authority for the proposition that concurrent delay will entitle a contractor to an extension of time to the completion date, but not to its time-related costs.

Facts

The facts of Saga Cruises, as they relate to concurrent delay, are as follows:

  • In 2010, Saga Shipping ("Owners") purchased a cruise ship built in 1981. The Owners contracted with Fincantieri, an Italian shipbuilding company ("Contractor"), to refurbish the ship for €14.3 million. The refurbishment was for engineering and fit out works to transform the vessel into the Owners' premier cruise ship.
  • The contract contained a clause imposing liquidated damages on the Contractor for delay in reaching completion ("Scheduled Completion Date"), for any reason for which the Contractor was responsible. Liquidated damages were capped at €770,000.
  • The works were scheduled to start on 9 November 2011 and conclude by an extended Scheduled Completion Date of 2 March 2012. The Contractor did not achieve Completion until 16 March 2012.
  • The Owners claimed €770,000 in liquidated damages for the Contractor's delay between the extended Scheduled Completion Date (2 March 2012) and Completion (16 March 2012).
  • The Owners and the Contractor evidenced competing reasons for the delay in reaching Completion. The Court accepted that:
    • the Contractor was responsible for delays between 2 March 2012 and 16 March 2012 for several reasons, including its failure to adequately complete new cabins by the Scheduled Completion Date; and
    • the Owners were responsible for delays from around 3 March 2012 to 14 March 2012 arising from weight problems in the ship's lifeboats, and between 2 March 2012 and 10 March 2012 arising from requesting the Contractor to install additional insulation.

Issue for the Court

Ms Sara Cockerill QC, sitting as a Deputy High Court Judge, considered whether the Contractor's delays and the delays for which the Owner was responsible were concurrent delays. If the delays were not concurrent, the Owners would succeed in their liquidated damages claim.

Owners' argument

The Owners submitted that the delays were not concurrent delays. They argued that if the Scheduled Completion Date had already been delayed by earlier events for which the Contractor was responsible, the delays for which the Owners were responsible were not to be treated as occurring concurrently. The Owners submitted that because the Contractor's work was already delayed by the Contractor's own delays, any delays for which the Owner bore the responsibility could not have occurred concurrently.

Contractor's argument

The Contractor submitted that the Court should approach the question having regard to the prevention principle. The prevention principle is the established English law doctrine that an owner cannot insist upon the performance of an obligation which the owner prevented the contractor from performing. The principle is invoked to relieve a contractor of liability for liquidated damages and to set a reasonable timeframe for completion where an owner delays a contractor's performance.

The Contractor relied on the fact that the contract did not contain a general extension of time provision for acts of prevention by the Owners. It argued that other provisions in the contract providing that the Owners would only have a claim for liquidated damages where delay to the Scheduled Completion Date was due to a matter for which Contractor was responsible, respected the prevention principle. On that basis, the Contractor submitted that where there are two concurrent causes of delay, one being a delay event entitling the Contractor to an extension of time, and one that would not, the Contractor is entitled to an extension of time. The Contractor argued that in those circumstances it was entitled to an extension of time notwithstanding the concurrent effect of its own delays.

Decision

The Court rejected the Contractor's approach awarding liquidated damages to the Owners. The Court held that when the Owners' delays occurred, there were already delays occurring for which the Contractor was responsible. Accordingly, the Contractor could not rely on concurrency to defeat the Owners' claim for liquidated damages.

Referring to the analysis in Adyard Abu Dhabi4 and Balfour Beatty Building Ltd5, the Court concluded that unless there is concurrency affecting the completion date, a contractor cannot claim the benefit of it. The Court found that causation must in fact be proved based on the situation as it was known at the time.

Saga Cruises emphasises that causation should always be considered when assessing concurrent delay. A contractor should not be entitled to the benefit of an owner's delay event if it was already in delay, with effect that the owner's event had no actual impact on the completion date. A contractor must prove that an owner's delay event actually caused delay to the completion date.

Footnotes

1 [2016] EWHC 1875 (Comm).

2 John Marrin QC, Society of Construction Law UK paper "Concurrent Delay" (February 2002), p 2.

3 Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd [1999] 70 Con LR 32.

4 Adyard Abu Dhabi and SD Marine Services [2011] EWHC 848 (Comm).

5 Balfour Beatty v Chestermount Properties (1993) 62 BLR 1.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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