Retrospective delay analysis

Where a claim or certain claims for money are made under the contract, the starting point must be to consider the terms of the clauses relied upon under the contract. The meaning of the clauses may be determinative of the approach to apply to causation, without any sophisticated analysis of the principles of causation, even if there is more than one competing cause of delay. However (more usually), the meaning of the relevant clauses may not answer the question as to which approach should be applied.

In law, a number of approaches to causation have been suggested. In the context of apportioning loss arising out of competing causes, Keating on Building Contracts (see Further information for full details of this publication) has suggested 4 possible approaches:

• Devlin approach: If a breach of contract is one of 2 causes of a loss, with both causes cooperating and both of approximately equal efficacy, the breach is sufficient to carry judgment for the loss (Heskell v Continental Express Ltd [1950], 1 All ER 1033 per Devlin J).
• Dominant cause: If there are 2 causes, one the contractual responsibility of the defendant and the other the contractual responsibility of the claimant, the claimant succeeds if they establish that the cause for which the defendant is responsible is the effective, dominant cause. The question as to which cause is dominant is a question of fact, to be decided by applying common sense standards (City Inn Ltd v Shepherd Construction).
• Burden of proof: The claimant must effectively prove that 'but for' the defendant's breach of contract, they would have suffered no loss.
• Tortious approach: The claimant recovers if the cause upon which they relied caused or materially contributed to the delay.

The 'burden of proof', or the 'but for' approach to causation has been generally rejected as the correct approach (see Galoo Ltd v Bright Grahame Murray).

It is possible to argue that the correct approach to apply in instances of concurrency in construction contracts is the dominant cause approach. The other approaches are problematic primarily because they fail to answer what has been referred to by the authors of Keating as the 'obverse problem'.

The obverse problem arises because of reciprocal claims made for the same delay. It is considered a nonsense for both the contractor and employer (or, for that matter, the main contractor and subcontractor) to have valid cross-claims against each other for the same period of delay, each relying on a competing cause for delay. It is considered that the dominant cause approach avoids such a result. An analogy can be drawn with insurance cases, which require the identification of the dominant cause by applying common sense standards. The leading insurance case of this type is the decision of the House of Lords in Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society Ltd [1918] A.C. 350.

The dominant cause approach has also found favour in the opinions of Lords MacLean, Johnston and Drummond Young in the Scottish case of John Doyle Construction Ltd v Laing Management (Scotland) Ltd. In this case the court's opinion was that the question of causation must be treated by 'the application of common sense to the logical principles of causation': John Holland Construction & Engineering Pty Ltd v Kvaerner RJ Brown Pty Ltd, BLR 84I per Byrne J.; Alexander v Cambridge Credit Corporation Ltd, (1987) 9 NSWLR 310; Leyland Shipping Company Ltd v Norwich Union Fire Insurance Society Ltd, [1918] AC 350, at 362 per Lord Dunedin.

In this connection, it is frequently possible to say that an item of loss has been caused by a particular event notwithstanding that other events played a part in its occurrence. In such cases, if an event or events for which the employer is responsible can be described as the dominant cause of an item of loss that will be sufficient to establish liability, notwithstanding the existence of other causes that are to some degree at least concurrent. That test is similar to that adopted by the House of Lords in Leyland Shipping Company Ltd v Norwich Union Fire Insurance Society Ltd [1918] A.C. 350.

The dominant cause approach found favour in the Court of Appeal in Midland Mainline Ltd and Others v Eagle Star Insurance Company Ltd [2004] EWCA Civ 1042, which involved compensation for losses following the Hatfield train crash and also most recently in City Inn Ltd v Shepherd Construction Ltd.

It is recognised that the dominant cause approach is very much an 'all or nothing approach' to causation. In other words, if Party A proves that Party B was the dominant cause of delay, its claim will succeed even though Party B might have proven that Party A was also culpable to an extent. Conversely, if Party A proves that Party B acted in breach of contract and was a cause of delay, or even that Party B was an equally effective but not dominant cause of delay, Party A may be left without a remedy and Party B will escape liability for its breach.

It is possible to derive from the authorities 2 approaches alleviating the potential harshness of the dominant cause approach. The first is really a restatement of the Devlin approach set out above. The second (and the approach adopted in Scotland) is based on a willingness to apportion damages between the claimant and defendant in cases of concurrent causation where the claimant and defendant are both culpable.

Restatement of the Devlin approach

If a breach of contract is one of 2 causes, both cooperating and both of equal efficacy in causing loss to the claimant or referring party, the party responsible for the breach is liable to the claimant or referring party for that loss. The contract-breaker is liable so long as their breach was 'an' effective cause of the loss: the court need not choose which cause was the most effective. This proposition restates the dicta of Devlin J in Heskell v Continental Express Ltd, an approach approved by the Court of Appeal in the more recent cases of Banque Keyser SA v Skandia (UK) Insurance [1990] 1 QB 665, County Ltd and another v Girozentrale Securities [1996] 3 All ER 834 and Flanagan v Greenbanks Ltd (t/a Lazenby Insulation) [2013] EWCA Civ 1702.

If the above approach is applied, it only requires Party A to prove that Party B was an effective cause of the delay. Party A does not need to prove that Party B was more effective than itself in causing delay. Accordingly, the claim assessor does not need to identify the dominant cause of delay, so long as they are satisfied that Party B was an effective cause of the delay.

Apportionment of damages in cases of concurrent causation

This approach requires the claim assessor to consider the respective potency of both parties' conduct to the overall delay and allocate the financial consequences depending on the respective potency.

It is correct to state that the courts have historically tended to apply the principles of causation in an 'all or nothing' way. In the absence of statutory authority, the courts have declined to apportion damages as between 2 or more competing causes. The Law Reform (Contributory Negligence) Act 1945 permits apportionment of loss by the reduction of the claimant's damages where they 'suffer damage as the result partly of their own fault and partly of the fault of any other person'. The Act only applies to claims in contract in certain exceptional cases.

However, in recent cases determined by English courts, the court has apportioned damages in cases involving competing causes, even though in each case the Law Reform (Contributory Negligence) Act 1945 was held to have no application. (See Tennant Radiant Heat Ltd v Warrington Development Corporation.)

The case of Tennant was considered briefly by the Court of Appeal in Bank of Nova Scotia v Hellenic Mutual War Risks Association (Bermuda) Ltd [1990] 1 QB 818 at 904. The Court of Appeal did not disapprove of the decision, although May LJ said, obiter:

'Similarly, we think that the facts and circumstances of the present case are such that it can and should be easily distinguished from those in Tennant Radiant Heat Ltd v. Warrington Development Corporation [1988] 1 E.G.L.R. 41, decided in this court on 16 December 1987. We merely add respectfully our view that the scope and extent of this last mentioned case would have to be a matter of substantial argument if the principle there applied were to arise for consideration in another case.'

However, the case of Tennant was applied by HHJ Hicks QC in W Lamb Ltd (t/a The Premier Pump & Tank Co) v J Jarvis & Sons Plc. In fact, the judge considered that the decision in Tennant was binding upon him.

There is also the dicta of Brandon J in the case of The Calliope, Carlsholm (owners) v Calliope (owners) [1970] 1 All ER 624 at 638, supporting the view that in principle, concurrent causation should be capable of being reflected in the apportionment of damage. 

More recently, in the Scottish case of John Doyle Construction Ltd v Laing Management (Scotland) Ltd the court's opinion was that even if it cannot be said that events for which the employer is responsible are the dominant cause of the loss, it may be possible to apportion the loss between the causes for which the employer is responsible and other causes. In such a case it is obviously necessary that the event or events for which the employer is responsible should be a material cause of the loss. Provided that condition is met, however, the judges were of opinion that apportionment of loss between the different causes is possible in an appropriate case. This approach was followed again by the Scottish courts in City Inn v Shepherd Construction Ltd.

Malmaison approach

John Marrin QC, in an article on concurrent delay ((2002) 18 Const LJ at 436), submits that the correct approach is what has been described as the Malmaison approach, derived from the case of Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd [2001] Q.B. 388. It is important to note that this case did not directly consider the correct approach to apply to causation in claims for money under the contract or for damages for breach of contract in cases where the causes of delay were concurrent. This approach was validated in the case of Walter Lilly and Co Ltd v Mackay [2012] EWHC 1972 (TCC). 

In the Malmaison case, Dyson J determined an appeal relating to a dispute on the pleadings in an arbitration as to the extent of the inquiry that the arbitrator was entitled to undertake to resolve one of the contractor's extension of time claims. The judge recorded that it was common ground between the parties that if there were 2 concurrent causes of delay, one a 'relevant event' (as defined in a standard form contract) and the other not, the contractor would be entitled to an extension of time for the period of delay caused by the relevant event, notwithstanding the concurrent effect of the other event. A simple example was given (at 37, para. 13):

'If no work is possible on site for a week not only because of exceptionally inclement weather (a relevant event), but also because the contractor has a shortage of labour (not a relevant event), and if the failure to work during that week is likely to delay the works beyond the completion date by one week, then if he considers it fair and reasonable to do so, the architect is required to grant an extension of time of one week. He cannot refuse to do so on grounds that the delay would have occurred in any event by reason of the shortage of labour.'

The suggested rationale for this approach is that it does no more than reflect the allocation of risk agreed upon by the parties when they entered into their contract. The suggestion is that, in allocating risks as between themselves, the parties may be taken, first, to have recognised that any one delay or period of delay might well be attributable to more than one cause and, secondly, to have agreed, nevertheless, that provided that one of those causes affords grounds for relief under the contract, then the contractor should have his relief. (See also the case of Royal Brompton Hospital NHS Trust v Hammond (No. 7) [2001] 76 Con LR 148, QBD (TCC) per HHJ Seymour.)

The following points might be made in relation to the article by John Marrinand on the Malmaison approach.

Although doubts are expressed about the dominant cause approach, it is thought that this is in the context of a contractor's rights to extensions of time, rather than causation generally.

Even if the Malmaison approach is applied and the subcontractor is entitled to an extension of time, notwithstanding concurrent causes of delay, it does not follow that the sub-contractor should be entitled to any compensation for the period of the extension. This is recognised in the Delay and Disruption Protocol: Hunting Snarks Const. L.J .2003, 19(3), 135-143 published by the Society of Construction Law.

The Protocol suggests that the contractor should not be entitled to any compensation unless it can separate out additional costs caused by the employer's delay from those caused by its own delay. This gives rise to the question of what approach should be taken to causation in determining a subcontractor's money claim for prolongation under the contract.

The Protocol does not expressly deal with this issue, but from its formulation of the contractor's entitlement, it appears to advocate the 'but for' test. In other words, unless the subcontractor can prove that but for the delay caused by the contractor it would not have incurred additional costs, its claim for compensation will fail.

The suggested rationale for the Malmaison approach is that the parties have agreed to allocate the risk, in the knowledge that any one period of delay might be attributable to more than one cause. It is submitted that this rationale is highly questionable. It is difficult to see why (or how) the parties should be taken to have allocated the risk, in circumstances where it is conceivable that both the contractor's claim for prolongation and the passing down of liquidated damages might fail because of the subcontractor's entitlement to an extension of time. A subcontractor's claim for compensation will also fail, unless it can prove that its loss and damage was caused exclusively by the contractor's delay, as opposed to its own. In addition, this scenario potentially gives rise once again to the obverse problem.

This text is derived from an opinion prepared by Jonathan Lewis, a barrister at 9 Stone Buildings. It has been subsequently edited and is included here with his kind permission.