The recent case of Walter Lilly & Company Limited v Mackay and DMW Developments Limited is an extremely important judgment which clarifies the legal position on some of the most frequently disputed issues in the construction industry, namely:

• concurrent delay;
• the correct approach to analysing a contractor’s entitlement to an extension of time;
• a contractor’s entitlement to loss and/or expense under a JCT contract;
• global claims; and
• loss of profit/overheads claims.

In this article, we consider the delay-related aspects of the case. The loss and expense-related issues will be considered in our next article.

Background

In early 2004, Walter Lilly & Company Limited (“WCL”) were engaged by Mr Mackay via his company DMW Developments Limited (“DMW”) to build a luxury 5 storey home for Mr Mackay and his family in London. The £15m project was expected to take 18 months to complete.

WLC was engaged pursuant to a JCT Standard Form of Building Contract 1998 Edition Private Without Quantities, incorporating the Contractor’s Designed Portion Supplement. WLC had limited design responsibility, with most of the design work being carried out by DMW’s Architect, Barrett Lloyd Davies Associates (“BLDA”) or specialist contractors. However, very little design work had been completed when construction began. The judge commented that for this reason alone the project was “a disaster waiting to happen”.

Perhaps inevitably, the project quickly fell behind schedule, with substantial delays being caused as a result of ongoing design decisions and the rectification of alleged defects. The relationship between Mr Mackay and both BLDA and WLC deteriorated significantly, with Mr Mackay making it clear that he considered both parties to be in serious breach of their contractual obligations. Practical completion was not achieved until July 2008.

WLC took action against Mr Mackay and DMW to recover over £2m of costs arising from delay to the project. In order to determine WLC’s entitlement to costs, the court was first of all required to consider complex issues relating to extensions of time.

Concurrent Delay

WLC asked the court to award it an extension of time up to the date of practical completion of the project. WLC’s entitlement to an extension of time was set out in clause 25 of its contract, which was written in essentially the same terms as clauses 2.27 and 2.28 of the JCT Standard Building Contract 2011. The clause provided for an extension of time to be awarded by the Architect if a Relevant Event has delayed the works.

The court was required to consider the issue of concurrent delay, which has long been a source of confusion in the UK construction industry.

The issue of concurrent delay arises when there are two (or more) delays to a project at the same time, one delay being the responsibility of, or at the risk of, the contractor and the other being the responsibility of, or at the risk of, the employer. In such cases, the question arises as to whether the contractor is entitled to a full extension of time for the delay event which is the employer’s responsibility/risk.

The English law approach to assessing concurrent delay is that the contractor is entitled to a full extension of time for the period of delay caused by the event which is at the employer’s responsibility/risk. In contrast, the Scottish law approach is that the contractor is only entitled to an extension of time for a reasonably apportioned part of the concurrently caused delay (this was the approach taken by the Scottish courts in the well-known case of City Inn v Shepherd Construction).

The court firmly rejected the Scottish approach to assessing concurrent delay. The court stated that the primary rationale behind the English approach is that if the contract provides for an extension of time where a Relevant Event is proven to have occurred, the contractor is prima facie entitled to that extension of time, regardless of whether the contractor also has responsibility for delay. The court also stressed that even though the contract in question allowed the Architect to award a “fair and reasonable” extension of time, this did not mean the Architect was entitled to make an apportionment in cases of concurrent delay.

Correct Approach to Delay Analysis

Both parties had obtained expert reports on delay. The court heavily criticised DMW’s expert evidence, finding that their expert had analysed the situation in an overly subjective way and attributed too much weight to theoretical possibilities about what the parties might have done.

The court stated that the proper approach to take when analysing delay is as follows:

• It is necessary to carry out a factual analysis which involves considering what critically delayed the works as they progressed. It is proportionate and sensible to carry out this task by looking at delay on a monthly basis.
• In order to determine what is delaying the works, it is necessary to identify the longest sequence of the outstanding work.
• It is not necessarily the case that the last item of work causes delay, so simply identifying the last delaying event prior to completion and concluding that it must have delayed the project is not correct. For example, snagging work is usually the last item to complete, but this is rarely going to be what delays the project as a whole.

Having analysed the facts, the court found that WLC was entitled to a full extension of time up to the date of practical completion of the works. WLC did not have any responsibility for the delay to the project, which was all attributable to late decisions and instructions on the part of DMW and/or BLDA.

Summary

• This is an extremely useful case for anyone involved in a dispute relating to delay.
• The case confirms that the apportionment method of analysing concurrent delay which has been adopted by the Scottish courts does not apply under English law, putting aside once and for all any doubt about the correct approach to assessing concurrent delay.
• It is also helpful to receive confirmation from the court of the correct approach to take when analysing delays to a project.