Questions surrounding which party is at fault and which party bears the risk commonly occur in construction projects where there are issues of concurrent delay.
Concurrent delay arises where there are two or more events of equal causative potency, where one event is the fault of the Contractor and the other of the Employer. Last month's TCC decision in North Midland Building Limited v. Cyden Homes Limited [2017] EWHC 2424 further contributed to this ongoing discussion, clarifying the position of English law on concurrent delay.
In this article, we discuss the impact this English law decision could have on the construction market in the UAE and broader region.
The English law position
Generally, English law considers the question of causation in a significant amount of detail. Though there is little guidance in this area by way of statute, over time, different causation-related concepts have emerged from common law, including:
- "but-for" causation: where a loss is deemed to have been caused by an event if, but for the event, the loss would not have occurred; and
- the prevention principle: in the situation where a contractor is prevented from progressing his work as a result of an act by the Employer and therefore unable to complete by the agreed completion date, in the absence of any contractual mechanism, time under the contract becomes "at large" and the contractor is no longer bound by the completion date, but must complete the works within a reasonable time.
Construction contracts will usually provide a set of circumstances under which the Contractor can claim an extension of time (EOT) and compensation for additional costs and expenses, if delays in the progress of construction work are caused by external factors outside his control. However, the waters are muddied where a delay is caused by two or more concurrent factors where one is the fault of the Contractor, and the other the fault of the Employer.
The general position under English law is that the Contractor can claim an EOT where the delay is caused by factors covered in the relevant contractual provisions, even if these factors are not the sole cause of the delay. The common law presumption is that the parties have agreed to grant EOTs as long as the factor relied upon has at least equal causative potency as the other factors, unless there is an agreement to the contrary.
The North Midland case
North Midland Building Limited v. Cyden Homes Limited was a construction case where the Employer, Cyden, appointed North Midland Building Limited as the Contractor for the construction of a stately home. Over the course of the project, works were delayed by two concurrent factors: one was the fault of Cyden and the other was the fault of North Midland. The factors were of equal causative potency and each had caused a significant amount of delay to the works. However, the contract provided as follows:
- any of the events which are stated to be a cause of delay is a Relevant Event; and
- completion of the Works or of any Section has been or is likely to be delayed thereby beyond the relevant Completion Date,
- and provided that
- the Contractor has made reasonable and proper efforts to mitigate such delay; and
- any delay caused by a Relevant Event which is concurrent with another delay for which the Contractor is responsible shall not be taken into account
In other words, where each party was the cause of factors resulting in concurrent delay, the parties were to disregard the factor caused by Cyden. The court upheld the contract and ruled that, because there were contractual provisions to the contrary, North Midland had lost the right to invoke the prevention principle1 to make time at large.
The UAE law position
One place where the North Midlands decision would have application in the UAE is in the DIFC courts, an "offshore" free zone in Dubai, whose legal system is derived from English law. It is possible that the case may guide DIFC court decisions in future cases where concurrent delay arises.
However, what is less clear is how the North Midlands case could affect the interpretation of construction contracts in traditional UAE law. Being a civil law jurisdiction, UAE law bears some marked differences to English law and, furthermore, the law of causation is less developed than in England. There is no "but for" causation and no prevention principle to guide us when deciding who bears the risk in difficult factual matrices involving concurrent delay.
Under UAE law, in the absence of a contractual provision addressing concurrent delay and without a prevention principle, it is difficult to predict how issues of concurrent delay would be resolved. A court would have to look beyond the contract to the intention of the parties deduced from contemporaneous correspondence to give the contract meaning in the facts. In certain cases, it may be easy to identify what the parties intended. However, it may be more difficult to deduce whether the parties planned to apportion the liability for jointly-caused delays, or whether they had another method in mind for allocating risk.
Even if, like in North Midlands, there is a contractual provision addressing concurrent delay, there is a concern about the duty of good faith that exists not only in UAE law, but in other civil law jurisdictions across the Gulf. The duty of good faith means that even where there is an agreement between the parties as to how EOT claims will be handled, the contract could be enforced according to how the court sees fairest (and not necessarily in line with a strict reading of the contract).
It is now accepted practice in the Gulf that where concurrent delays arise, the parties apportion the liability for the delay between them2. This is likely to be most helpful with respect to apportioning damages for delay. However, it is not clear how this would apply with respect to EOT claims. Furthermore, the process of apportionment will necessarily require input from a judge or arbitrator as to how the costs ought to be divided. With no prescribed formula for apportionment of liability, this area of law will be subject to large amounts of judicial and arbitral discretion in future decisions, and we can expect more uncertainty in this area of law for some time to come.
Footnotes
1. For more information on the details of the case and the prevention principle, see Dentons article " Contracting parties can agree up front who will take the risk of concurrent delay"
2. See "Construction Law in the United Arab Emirates and the Gulf" 1st ed., Michael Grose, pp 131-134
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