Construction contracts usually contain provisions to deal with delays and the consequences of those delays e.g. is the contractor entitled to an extension of time and/or costs associated with the delay, or will the employer be entitled to claim liquidated damages etc? Such consequences will usually depend upon the cause of the delay and who takes responsibility for the same under the terms of the relevant construction contract. But what happens where there are two competing causes of delay which occur at the same time, one being an event for which the contractor takes responsibility, one being an event for which the employer takes responsibility, both of which would have delayed the project on their own?
This scenario was considered by the Technology and Construction Court (TCC) in the recent case of Thomas Barnes & Sons plc (in administration) v Blackburn with Darwen Borough Council [2022] EWHC 2598 (TCC). While the outcome in this case was necessarily fact specific, this case sets out useful guidance for parties to consider should this situation arise. The case also noted the court’s approach to a number of other related issues which are common across construction disputes, including contractual termination and repudiatory breach.
Background
- Blackburn with Darwent Borough Council (BDBC) engaged Thomas Barnes & Sons plc (Barnes) during 2014 by a JCT standard form of building contract with quantities 2011 (with amendments) for the construction of a new transport hub, with a contract sum of c.£4.5m. The contract contained very limited design obligations.
- Barnes applied for a number of extensions of time (EOTs) during the project. Some EOTs were awarded by the Contract Administrator, but not to the full extent claimed by Barnes.
- In particular, a disagreement arose over delays to the works caused by steel deflection due to a design issue (for which BDBC’s design team were responsible) which had an impact on the critical path.
- On 4 June 2015 BDBC sought to terminate the contract due to Barnes’ alleged breach(es) of contract, including its failure to proceed regularly and diligently with the works. The termination notice also contained an acceptance of Barnes’ alleged repudiatory breach of contract.
- BDBC engaged others to complete the works, at a net cost of c.£1.8m (although BDBC did not pursue this as a claim against Barnes, due to Barnes’ subsequent insolvency).
The claim
Barnes claimed losses of c.£1.7m allegedly suffered as a result of delays caused by others during the works. Barnes also claimed that BDBC would have no right to bring a claim against Barnes for the cost of having the works completed by others, as its purported termination of the contract was invalid.
Extension of time
Barnes claimed that it was entitled to an EOT of 172 days due to issues with the steelwork which were the responsibility of the BDBC design team and for associated loss and expenses suffered as a result of that delay. BDBC defended this and argued that the delays were actually caused by an issue in relation to the roof coverings, which was the responsibility of Barnes.
The court first considered whether, on the expert evidence provided by both parties, the causes of delay were concurrent. Having found that they were, the court explored the approach to be taken when looking at cases of concurrent delay, and referred to Keating on Construction Contracts 11th edition, which, in summary, states that, subject to precise contract terms, a contractor is probably entitled to an EOT if the event relied upon was an effective cause of delay, even if there was another concurrent cause of delay for which the contractor was responsible, but a contractor will fail to recover loss and expenses if there was another cause of that loss for which the contractor was responsible.
In this case, the court found that the causes of delay were concurrent for the period of delay caused by the roof coverings. Therefore, Barnes was entitled to an EOT for the length of the concurrent delay period. However, as Barnes’ were responsible for one of the concurrent causes of delay, they were not entitled to recover loss and expense suffered due to the concurrent period of delay. Ultimately, the court found that Barnes’ was only entitled to loss and expenses suffered in relation to 27 days beyond that already allowed by BDBC under the contract (rather than for the 172 days claimed).
Termination
Barnes also claimed that BDBC’s purported termination of the contract was invalid and that it had committed repudiatory breach by such invalid termination of the contract.
BDBC’s termination notice included a number of reasons for the termination, including Barnes’ failure to proceed regularly and diligently with the works (partly due to its failure to pay its sub-contractors on time, which resulted in one sub-contractor suspending works for non-payment). Alternatively, BDBC contended that if it was ineffective as a termination notice, it was to take effect as acceptance of repudiatory breach by Barnes.
The court found that it was clear that Barnes was in such serious and significant breach of contract that BDBC was entitled to terminate the contract or to accept that breach as repudiatory. The court commented that in the circumstances BDBC had "no realistic option other than to bring [Barnes’] contract to an end and engage replacement contractors".
But was the termination notice valid? Here, the court found that BDBC had not strictly complied with the contractual requirements for service. Therefore, BDBC had failed to terminate the contract in accordance with the contractual termination provisions (although practically, this only meant that Barnes’ had been removed from site two days earlier than would have been allowed under the contractual procedure). However, this failure by BDBC did not amount to a repudiatory breach of contract by BDBC and in any event, the termination notice was alternatively valid acceptance of Barnes’ repudiatory breach of contract, so the termination was still effective.
Because of the court’s findings on the EOT and termination, the court found that Barnes’ had no prospect of recovering anything in this litigation, as any final account analysis would be more than extinguished by BDBC’s right to recover and set-off the net cost of having the works completed by others.
Other points of interest in the judgement
Witnesses
The court levelled some criticism at witnesses for the claimant whose witness statements were "replete with commentary and opinion" and included "flagrant contraventions" of PD 57AC. The court found that this went to the credibility of the witnesses. The court also stressed the infallibility of human memory and the importance of contemporary documents as a means of getting at the truth. Finally, the court set out a helpful summary of the inferences a court may make where a witness of fact is not called by a party.
Delay expert analysis
The court levelled criticisms at the claimant’s delay expert for "overly-simplified analysis…which failed to investigate and engage with all of the potential causes of delay to the critical path of the works". However, the court felt that he had a good practical knowledge of planning and delay and considered the expert evidence on its merits. The claimant complained that the defendant’s delay expert was unduly reliant on computer modelling. However, the court found that the expert had impressive expertise in delay analysis and his analysis was overall significantly more convincing than that of the claimant’s expert.
Contract formation and terms
The court conducted a useful brief analysis of when the contract between the parties came into force and on what terms, in the absence of a formal countersigned contract. This was in the context of JCT contract terms having been included in the tender documentation and the parties initially progressing under letters of intent. Further essential terms were also agreed at a pre-contract meeting. This will be a matter of fact in each case, but it is interesting to note that in this case, the court found that an informal contract on the agreed JCT terms came into existence once the claimant started on site, incorporating all of the matters which had been agreed and would be inserted into a formal JCT contract.
Key takeaways
While this case was fact specific, the court set out a number of helpful comments which are of general application to construction disputes on delays and termination. In particular:
- The importance of being able to show clear and robust evidence of the delay, the cause of the delay and the impact on the critical path
- The need to closely follow contractual provisions for termination, or risk such termination being found to be invalid
- A useful example of where a failure to perform works regularly and diligently was held to be a repudiatory breach of contract and
- The importance of putting a formal contract in place, to avoid subsequent arguments over applicable terms and conditions.
Concurrent delay is a complicated issue which will always need to be carefully analysed in order to determine the subsequent consequences to the parties to the construction contract. This case also highlights that a party attempting to terminate a contract should be aware of, and strictly follow, any contractual provisions for termination, to avoid any such termination being held to be invalid. In this particular case, the employer was saved by the contractor’s repudiatory breach, but others may not be so lucky. Finally, a reminder that it is in the best interests for all parties to agree contract terms and conditions before starting work - and to get that contract properly executed - to avoid unnecessary (and potentially costly) arguments in the future.
Claire Perry