A Year in Review: UK Construction and Engineering Adjudication 2022

Coulson LJ could not have encapsulated Adjudication more succinctly:

It is not an alternative to anything; it is the only game in town.[1]

In the UK construction and engineering industry adjudication remains the main forum and means for resolution of disputes, many of which are complex and significant in value. In this blog the author looks at, and summarisers, the salient points arising from an illuminating report arising from a collaboration between The Adjudication Society and the team at Kings College[2], led by Professor Renato Nazzini and Aleksander Kalisz. The collation of data from the questionnaire(s) looks at emerging trends and identification of areas of further refinement in the process.

To read the full text of this post by Vijay Bange and Sam Laycock, please visit the Duane Morris London Blog.

TCC Issues New Decision Addressing the Definition of Concurrent Delay

Concurrent delay occurs whenever two or more separate events – at least one of which is an employer risk event and at least one a contractor risk event – independently delay the critical path of a project.

The substantial majority of standard form construction and engineering contracts are silent as to either the definition of or apportionment of responsibility for concurrent delays, and it is generally rare for parties to seek to include language to that effect by way of bespoke amendment. This reluctance to legislate for concurrent delay in contracts probably reflects the inherent difficulty in formulating language that would adequately address what is always a complex and necessarily heavily fact-dependent issue.

Nevertheless, the consequence of this widespread lack of contractual language is that issues concerning concurrent delays are usually left to be determined by the law of the contract.

Traditionally, the cases raising concurrency in the Courts of England and Wales have concerned concurrent delays by a contractor that is claiming an extension of time against an Owner.  In the seminal case, Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd [1999] 70 Con. L.R. 32, the Court recognized that in such a situation the Contractor would be entitled to an extension of time but not to prolongation costs.

The determination of what is required for two delays to be concurrent under English law, however, has remained unclear.

The preferred approach, the “dominant cause approach”, assigns liability to whichever delay is the “effective, dominant cause” of the critical path impact. If there is such a dominant cause, the delays are not concurrent; concurrency occurs only when both delays are of “approximately equal causative potency.”  North Midland Building Ltd v Cyden Homes Ltd [2018] EWCA Civ 1744; H. Fairweather & Co Ltd v London Borough of Wandsworth [1987] 39 BLR 106 (OR).

A contrary line of cases, however, has resolved apparently concurrent delays based on a first-in-time approach under the reasoning that a subsequent concurrent delay does not actually effect the completion date of the Works: Royal Brompton Hospital NHS Trust v Frederick A Hammond & Ors [2000]. Under this approach, true concurrency would require that “both events in fact cause delay to the progress of the works and the delaying effect of the two events is felt at the same time.”  Id. Note that this approach does not require the events themselves to be concurrent, only the effects of those events.

This view has seemingly been dominant in recent years, having been adopted in Adyard Abu Dhabi v SD Marine Services [2011] EWHC 848 (Comm) (11 April 2011) and Saga Cruises BDF Ltd v Fincantieri SPA [2016] EWHC 1875 (Comm) (29 July 2016).

This approach has also been recommended in the Second Edition of the Society for Construction Law’s Delay and Disruption Protocol, but was condemned by Scotland’s courts as “unnecessarily restrictive and [an approach] which would militate against the achievement of its obvious purpose of enabling the architect, or other tribunal, to make a judgment on the basis of fairness and a common-sense view of causation.”   City Inn Ltd v Shepherd Construction Ltd [2007] CSOH 190 (30 Nov. 2007) – a judgment that was itself criticized in Walter Lilly & Co. Ltd v Mackay [2012] EWHC 1773.

The contrasting approaches adopted by the Courts in this regard undoubtedly reflect the fact that whilst the Courts recognize that this is an area that requires judicial guidance, it is also heavily fact-dependent, such that an approach adopted in one case may not be appropriate with a different set of facts.

Insofar as it is possible to establish overarching principles, they are likely to be those summarized in Saga Cruises v Fincantieri and drawn from Henry Boot v Malmaison:

  • Where an employer risk event actually causes a delay to completion, the contractor will always be entitled to an extension of time notwithstanding any concurrent contractor risk events. This is based in part on the principle that an employer cannot hold a contractor to an obligation that the employer himself has prevented the contractor achieving (the “prevention principle”).
  • The delay caused by an employer risk event must be actual, not notional or theoretical.
  • Where a contractor risk event has caused concurrent delay, the contractor’s claim for prolongation costs arising from the employer risk event is likely to fail for want of causation.
  • In cases of concurrency, the Courts (and therefore contract administrators) should be very cautious to attempt to apportion critical delay between two or more concurrent events.

Notwithstanding these principles, the treatment of concurrency remains uncertain, especially under international contracts where the law of England and Wales is being applied by an external tribunal or arbitrator.

It is thus noteworthy that last week the TCC rendered a decision addressing concurrent delays: Thomas Barnes & Sons PLC v Blackburn with Darwen Borough Council [2022] EWCH 2598 (TCC) (17 Oct. 2022).  The Borough Council for the borough of Blackburn with Darwen (“Blackburn”) contracted with Thomas Barnes to construct a bus terminal under the terms of a Joint Contracts Tribunal agreement.  The subsequent litigation stemmed from Blackburn’s denial of Barnes’ extension of time claims and termination of the Contract based on delays to the Works.

Barnes’ extension of time claim was based on structural steel defects (deflection under load) for which Barnes was not contractually responsible. Completion of the structural steel work was necessary to allow pouring of the concrete topping, which in turn was required for exterior wall construction and interior finishing thereafter.  While the structural steel delays were ongoing, Barnes independently suffered delays to its roof works, which were also a required prerequisite to interior finishing.  The roof delays, however, arose after the structural steel delays, and were resolved prior to the construction of the exterior walls, and therefore did not independently cause delay to the critical path.

The Court found that these roof delays, although subsumed entirely within the critical path impact of the structural steel delays, were concurrent, writing:

“In my judgment this is a case where these causes were concurrent over the period of delay caused by the roof coverings. That is because completion of the remedial works to the hub structural steelwork was essential to allow the concrete topping to be poured and the hub SFS to be installed, without which the hub finishes could not be meaningfully started, but completion of the roof coverings was also essential for the hub finishes to be meaningfully started as well. It is not enough for the claimant to say that the works to the roof coverings were irrelevant from a delay perspective because the specification and execution of the remedial works to the hub structural steelwork were continuing both before and after that period of delay.  Conversely, it is not enough for the defendant to say that the remedial works to the hub structural steelwork were irrelevant from a delay perspective because the roof coverings were on the critical path. The plain fact is that both of the work items were on the critical path as regards the hub finishes and both were causing delay over the same period.”

The Court held that Barnes was entitled to an extension of time based on the delay caused by the steel frame deflection, but was only entitled to prolongation damages for the periods of delay that were not concurrent with Barnes’ own delays to the roof works.

Even given the diversity of approaches taken by the Courts on concurrency this is a curious decision. On the facts as given in the judgment, it appears that the dominant cause of delay was the completion of remedial works to the hub structural steelwork, and that this is therefore not an instance of true concurrency. However, the Court does not discuss the dominance of these works, and it is possible that this issue was not raised in submissions before it. The Court also appears to have ascribed at least some significance to the parties’ contemporaneous evaluation of the critical path impacts of the two delays, a consideration that has not played a prevalent role in prior decisions addressing concurrent delays.

It is not currently known whether this decision will be appealed. Nevertheless, in the meantime this case only increases the uncertainty surrounding the definition of “concurrent delay” under the law of England and Wales.

For More Information

If you have any questions about this blog, the final guidance or its potential implication, please contact Vijay Bange, Chris Chasin, Owen Newman or Steve Nichol.

CHANGES TO MANDATORY INSURANCE-RELATED DISCLOSURE IN NEW YORK CIVIL LITIGATION

New York law requires that defendants to a lawsuit disclose insurance-related information. On December 31, 2021, New York Governor Kathy Hochul signed the Comprehensive Insurance Disclosure Act (the “Act”) into law, amending New York Civil Practice Law and Rules (“CPLR”) §3101(f) to expand the scope of insurance-related disclosure requirements in pending civil lawsuits. The aim of the Act is to ensure full disclosure of insurance information during litigation, including the existence and contents of any insurance agreement, including coverage amounts, under which any person or entity may be liable to satisfy part or all of a judgment.

From day one, however, the new law faced backlash from the insurance industry, which considered the new disclosure requirements to be unduly burdensome on both insurers and insureds. Governor Hochul appeared to agree, such that she identified several possible changes before signing the legislation into law. Within two months, on February 24, 2022, Governor Hochul signed into law amendments to modify the most onerous requirements in the Act.

Under CPLR 3101(f)(1), as amended, the production of a copy of the insurance policy in place at the time of the loss that may satisfy all or part of a judgment is required, unless a party agrees, in writing, to accept a declarations page. A party that agrees to accept a declarations page in lieu of a policy may revoke such agreement at any time, and demand the production of the full copy of the insurance policy in place at the time of the loss. The copy of the insurance policy or the declarations page produced must include:

      • All primary, excess and umbrella policies that relate to the claim being litigated. CPLR §3101(f)(1)(i).
      • Full and complete insurance agreements, “including, but not limited to, declarations, insuring agreements, conditions, exclusions, endorsements, and similar provisions.” CPLR §3101(f)(1)(iii).
      • “[T]he contact information, including the name and e-mail address, of an assigned individual responsible for adjusting the claim at issue.” CPLR §3101(f)(1)(iii).
      • The total limits available to satisfy a judgment or to reimburse for payments made to satisfy the judgment. CPLR §3101(f)(1)(iv).

The Act sets time limits to effect the mandatory disclosures. The automatic insurance-related disclosure applies to lawsuits filed on or after December 31, 2021. The first disclosure must be made within 90 days of filing an answer and continue throughout the litigation. CPLR §3101(f)(1). At certain specific points throughout the litigation, the disclosing party must update information disclosed. Additionally, the parties are required to maintain the accurate and complete insurance information for 60 days after any settlement or entry of final judgment, inclusive of all appeals. CPLR §3101(f)(2).

The Act, as amended, also adds a certification requirement for insurance-related disclosure. CPLR §3122-b mandates that the parties and counsel certify the accuracy and completeness of the documents and information disclosed, and that reasonable efforts have been taken and will be taken to assure that the information remains accurate and complete.

Jose A. Aquino (@JoseAquinoEsq on Twitter) is a special counsel in the New York office of Duane Morris LLP, where he is a member of the Construction Group and of the Duane Morris Cuba Business Group.  Mr. Aquino focuses his practice on commercial litigation with a concentration in construction law, mechanics’ lien law and government procurement law. This blog is prepared and published for informational purposes only and should not be construed as legal advice. The views expressed in this blog are those of the author and do not necessarily reflect the views of the author’s law firm or its individual attorneys.

UK Construction – Cybercrime is the Invisible Enemy

Cyber fraud is a real and present danger across almost all industry sectors, and the construction sector is not immune as our recent article demonstrated. According to the FCA there has been a jump of 52% in incident reports and recent global conflict may possibly increase this threat.

One of the primary types of fraud affecting the construction industry is the prevalence of payment diversion fraud. It is estimated that contractors pay out around £100m per year in fake invoices. In some cases, a single instance of payment diversion fraud can amount to millions of pounds. In such cases it is easy to see how the fraud would place intolerable pressure on the cash flow of a business and in extreme instances even lead to insolvency. In an industry already under pressure through factors such as super-inflation and rising energy costs, fraud is yet another unwelcome factor which can be detrimental to cash flow on a project.

To read the full text of this post by Matthew FriedlanderChris Recker and Sam Laycock, please visit the Duane Morris London Blog.

UK: Construction Supply Chains Struggle Under Pressure

In the construction sector solid cash flow throughout the supply chain is the lifeblood of most projects, no matter what size, and is arguably the single most important factor in ensuring that a project reaches its conclusion. However, the cumulative effect of various other factors such as Brexit, escalating global energy prices, the outlawing from 1 April 2022 of the use of the red diesel usage for construction plant, super inflation, higher material and labour costs and the end of government COVID-19 support schemes has led to increased lending costs and smaller profit margins.  As such, the construction supply chain is likely to come under ever increasing pressure in 2022.

To read the full text of this post by Duane Morris attorneys Matthew Friedlander and Tanya Chadha, please visit the Duane Morris London Blog.

Limitations on the Use of Red Diesel for the Construction and Engineering Sectors in the UK

Glasgow and COP26 resulted in various commitments from global economies to work towards targets in the reduction of greenhouse gas emissions. The UK is to target the reduction of greenhouse emissions to net zero by 2050.

However, even prior to COP26 there were already legislative changes afoot to have cleaner air. The Finance Bill 2021, and the associated secondary legislation, as part of the government’s plans to reduce carbon emissions, has the effect of restricting the usage of red diesel after April 2022.

To read the full text of this post by Duane Morris partner Vijay Bange, please visit the Duane Morris London Blog.

The Ongoing Fallout from the Achmea Decision

In the Achmea case the Court of Justice of the European Union (ECJ) held that Article 8 of the Netherlands – Slovakia bilateral investment treaty, which allowed for the resolution of disputes by way of arbitration, was incompatible with EU law. The rationale for the decision was that a tribunal may have to interpret or apply EU law and where a question of law arose, unlike a Member State court, that question of law could not be referred to the ECJ. In other words, intra-EU bilateral investment treaty arbitration provisions, as reasoned by the ECJ, deprived the EU courts of jurisdiction in respect of the interpretation of EU law.

We raised the prospect that the ramifications from the decision were potentially far reaching and were not, it seemed, confined to the BIT between Netherlands and Slovakia.

To read the full text of this post by Duane Morris attorneys Vijay Bange and Matthew Friedlander, please visit the Duane Morris London Blog.

Is It Necessity or Choice to Use Technology in Arbitration?

The global pandemic continues to challenge us, with various measures ranging from further lockdowns to restrictions on in-person meetings. The judicial machinery, including that in the arbitration world, has continued to function throughout the pandemic notwithstanding the difficulties of embracing innovative processes and new technology.

To read the full text of this post by Duane Morris attorneys Vijay Bange and Tanya Chadha, please visit the Duane Morris London Blog.

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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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