Concurrent Delay: the Latest Guidance From the Courts

Laura Johnson | Bryan Cave Leighton Paisner

Summary

In Thomas Barnes & Sons plc v Blackburn with Darwen Borough Council, the TCC had to consider whether there was a concurrent delay and if so how did that affect the parties’ rights under the contract. The delay to the works in this case entitled the employer to terminate the contract and engage a third party to complete the works. There are debates as to what concurrent delay actually means but the SCL Delay and Disruption Protocol, 2nd edition helpfully explains that it is:

“the occurrence of two or more delay events at the same time (one an Employer Risk Event, the other a Contractor Risk Event) and the effects of which are felt at the same time. For concurrent delay to exist, each of the [events] must be an effective cause of Delay to Completion ([meaning] the delays must both affect the critical path).”

How this works in practice will depend on the facts, and this judgment provides a useful illustration and reminder of the court’s approach to concurrent delay.

What happened?

The claimant contractor, Thomas Barnes & Sons plc (in administration) and the defendant employer, Blackburn with Darwen BC, entered into an amended JCT SBC with Quantities, 2011 Edition for the construction of Blackburn bus station, to include office space and a concourse for access to the buses.

During the project there were delays to the structural steel works (for which the contractor was not contractually responsible), completion of which were necessary for the subsequent works and final interior finishes. However, while the structural steel work delays were ongoing, the contractor suffered delays to its roof works, which were also a prerequisite to the interior finish leading the employer to terminate the contract on this basis and procure a replacement contractor to complete the works.

The contractor sought an extension of time (EOT) due to the structural steel delays and brought a claim seeking:

  • Monies considered due under the contract at the time of termination; and
  • Damages for wrongful termination.

Overall, the court held that issues with both the structural steel and roof covering works were concurrent causes of delay, as both works items were on the critical path (to completion of the internal finishes) and both were causing delay over the same period. The judge agreed with the employer’s delay analyst, that the roof cladding and glazing could not be progressed until the roof coverings were completed and also that the majority of the internal finishes and services could not be progressed until the roof coverings were in place.

The court held that although the contractor had established an entitlement to an EOT, because of the contractor’s delay-related default, the employer was still entitled to exercise both its contractual right to terminate and its common law right to terminate for repudiatory breach.

Consideration of the termination rights and the related sections of the judgment are outside the scope of this blog. In brief, while the employer had failed to comply with the notice requirements of the JCT contract, that did not invalidate the effectiveness of its acceptance of repudiatory breach, nor did it, in itself, amount to a repudiatory breach of contract that could be accepted by the contractor.

Determining concurrent delay

The judgment provides useful commentary on determining concurrent delay based on established case law and industry guidance.

The court considered the decision of Akenhead J in Walter Lilly v Mackay, stating that four observations were helpful in deciding this case:

  • The court is not compelled to choose only between the rival approaches and analyses of the experts. It is a matter of fact for the court to decide what delayed the works and for how long.
  • When considering delays, one should generally have regard to the item of work with the longest sequence.
  • It is not necessarily the last item of work that causes delay.
  • Contemporaneous complaints that were never agreed upon by the parties, established or implemented, are irrelevant to a delay analysis.

The judge referred to Keating on Construction Contracts, 11th edition with regard to the application of the principle of concurrent delay in the context of an EOT contractual claim (counsel agreed that this was an accurate summary and settled law). In brief:

  • It depends on the precise wording of the contract.
  • A contractor is probably entitled to an EOT if there was an effective cause of delay, even if there was another concurrent cause of delay for which the contractor was responsible.
  • A contractor will only be entitled to recover loss and expense if it satisfies the “but for” test. The contractor’s claim will fail if there is another cause of loss for which the contractor was responsible (even if the cause relied on is the dominant cause).

The court held that there was concurrent delay in this case:

“The plain fact is that both of the works items were on the critical path as regards the hub finishes and both were causing delay over the same period.”

The internal finishes could not have started earlier because of the delay to the structural steelwork. The court was satisfied that the converse was also true – it could not have started earlier due to the roof delays.

The court also considered the SCL Protocol when considering the differing delay analysis methods selected by each expert. The Protocol aims to provide “useful guidance on some of the common delay and disruption issues” and that “irrespective of which method…deployed, there is an overriding objective of ensuring that the conclusions derived from [the delay] analysis are sound from a common sense perspective”, highlighting that a practical approach depending on the facts of the case was important in this case.

Conclusion

In this case, the court seems to have taken a very practical approach in determining that both events were causes of delay and therefore there was concurrent delay entitling the contractor to an EOT but not recovery of losses (in line with the approach in Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd. This was the case on the facts here and this is a useful addition to the guidance from the courts in other cases such as Adyard Abu Dhabi v SD Marine Services and De Beers UK Ltd (formerly Diamond Trading Co Ltd) v Atos Origin IT Services UK Ltd.

Concurrent delay is an area that is not expressly covered in the JCT form of contract, although the North Midland decision (as upheld by the Court of Appeal in North Midland Building Ltd v Cyden Homes Ltd has shown that parties can agree in advance how to deal with concurrency. This is what the FIDIC 2017 suite of contracts has sought to do in clause 8.5 (Red Book 2017) and if compensation events are assessed chronologically and prospectively as intended, concurrency should be less of an issue under the NEC form of contract. What is certain is that this will continue to be a common issue when looking at delay and one for the courts to decide based on the specific circumstances, and contract, in each case.


When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Party Cannot Skirt Out of the Very Fraud it Perpetrates

Edward Garber | Florida Construction Legal Updates

An interesting case came out of Florida’s Fourth District Court of Appeal that touches upon two important points.

First, the independent tort doctrine does not apply when there is not a contract between the parties.

Second, an officer cannot escape fraud simply by claiming his or her actions were done as an officer of the company when he or she actively participated in the fraud.

Both of these points are best explained by initially going into the facts of this case. As you will see, the Court’s rationale relates to the premise that a party should not be able to skirt out of the very fraud it perpetrates.

Factual Background

Costa Investors, LLC v. Liberty Grande, LLC, 48 Fla.L.Weekly D7b (Fla. 4th DCA 2022) involved the ultimate development and construction of four adjacent properties into the Costa Hollywood Hotel.  The properties were purchased by a company called Liberty Grande.  Its president / manager was also the president of Liberty Grande’s wholly owned subsidiary called Costa Hollywood Property. Liberty Grande transferred the properties to Costa Hollywood Property and the deed was signed by the president / manager.

Shortly after the properties were transferred to Costa Hollywood Property, a group of investors (EB-5 investors) entered into a loan agreement with Liberty Grande for the development of the Costa Hollywood Hotel. The investors were granted a security interest and mortgage in consideration for the loan.  However, the real properties at-issue subject to the loan and security interest were the properties Liberty Grande previously transferred to its wholly owned subsidiary, Costa Hollywood Property.  The loan agreement was signed by the president / manager.

Liberty Grande defaulted under its loan agreement with its investors. The investors learned that Liberty Grande’s president / manager’s representation that Liberty Grande owned the properties at the time of the loan agreement was untrue.  The investors filed an affidavit in the official records with a copy of the loan agreement stating they entered into the loan agreement for the development of the properties.

Costa Hollywood Property sued the investors for slander of title due to the recording of the affidavit. The investors filed a third-party complaint against Liberty Grande and its president / manager.  The investors claimed the president / manager committed fraud.

The president / manager moved for summary judgment arguing the fraud claim should be barred by the independent tort doctrine and because the president / manager was not a party to the loan agreement in his individual capacity. The trial court granted summary judgment for the president / manager.  This was reversed on appeal.

Fourth District Court of Appeal’s Opinion on Two Important Points

First, the Fourth District Court of Appeal held that the independent tort doctrine did NOT apply in this context.

The independent tort doctrine is a general principle of law that provides “a plaintiff may not recover in tort for a contract dispute unless the tort is independent of any breach of contract.”  “This principle only applies, however, to the parties to the contract.” 

Here, as [the president / manager] stated below in his statement of undisputed facts and as is apparent from the loan agreement, he was only the signatory for Liberty [Grande]; he was not a party to the Agreement. Accordingly, the trial court’s reliance on the independent tort doctrine to determine that [the president / manager] was not liable was error. 

Instead, the court should have analyzed the complaint to determine whether the evidence was sufficient to show that fraud occurred and whether [the president / manager] could be liable for fraud or negligent conduct when he actively participated in the fraud, even when he signed as a corporate officer.

Costa Investors, LLC, supra (internal citations omitted).

Second, the Fourth District Court of Appeal held that the president / manager was NOT excused from fraud simply because he signed the loan agreement in an officer (versus personal) capacity.

“As a general rule, ‘a false statement of fact, to be a ground for fraud, must be of a past or existing fact, not a promise to do something in the future.’ ”  “[F]raudulent (‘knowingly false’) representations . . . of a present fact . . . constitute[ ] fraud in the inducement.” 

The agreement and Borrower’s Certificate, both signed by [the president / manager] on behalf of Liberty [Grande], made false statements of “existing fact.” Prior to [the president / manager] signing those documents on behalf of Liberty [Grande], he had previously transferred title to the [properties] from Liberty [Grande] to another one of his entities, Costa Hollywood Property. The agreement represented Liberty [Grande] as the owner of [the properties] which was an existing false statement of fact, and the agreement falsely purported to give [the investors] a security interest and mortgage on the [properties]. The Borrower’s Certificate, which [the president / manager] also signed on behalf of Liberty [Grande], made additional false statements of existing fact, including that “all ‘representations and warranties’ made by Liberty [Grande] in the loan agreement were “true and correct in all material respects.” Thus, [the president / manager] was not entitled to summary judgment based upon the court’s conclusion that [he] had not made any false statements of material fact.

The central question is whether [the president / manager] can be held individually liable for this fraud evidenced by the agreement and certificate when he signed as the corporate officer of Liberty [Grande]. We hold that he can.

***

Generally, courts have applied an “active participation theory” in holding officers and directors individually liable when they actively participated in the torts of the corporation.  “Under the participation theory, the court imposes liability on the individual as an actor rather than as an owner . . . not predicated on a finding that the corporation is a sham and a mere alter ego of the individual corporate officer.”  “Instead, liability attaches where the record establishes the individual’s participation in the tortious activity.” 

***

[The president / manager] actively participated in the wrong, i.e., fraud and misrepresentation, by signing the agreement and Borrower’s Certificate purporting to show Liberty [Grande] as the owner of [the properties] when [he] had, on behalf of Liberty [Grande], previously transferred the title from Liberty [Grande] to another one of his entities. [The president / manager] actively participated in offering to [the investors] in the agreement a “security interest, Lien and mortgage” in the “assets that comprise the Project” including “the Land and Improvements thereon” in order to obtain loans from [the investors]. Under the active participation theory, [the president / manager] can be personally liable for his fraudulent statements even though he signed on behalf of Liberty [Grande].  Otherwise, [the president / manager] would be able to perpetrate this flagrant fraud and escape liability behind the shield of his representative character.

Costa Investors, LLC, supra (internal citations omitted).


When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Harrell v. Deluca: Fraud, Construction, Litigation, And The Intention To Perform

Ryan Kennedy | Dunlap Bennett & Ludwig

On November 7, 2022, the United States District Court for the District of Virginia decided the case of Harrell v. Deluca, 1:20-cv-00087, which centered around a home builder and contractor who failed to successfully deliver on a major home renovation. The facts recited by the Court’s opinion bear an uncanny resemblance to the story told by numerous potential plaintiffs who feel they were taken advantage of and are exploring suing their contractor: an optimistic beginning, followed by delays and apparent construction defects, failure of the builder to communicate effectively, and attempts by the consumer to push for a solution. Then whether because the expectations of one party may be unreasonable, or other factors not apparent until later, the relationship completely deteriorates to the point that work stops and lawyers are hired.

In Harrell, the plaintiffs purchased their home from the builder and signed a contract for the builder to extensively renovate the property. The parties signed a construction agreement that detailed the work to be done by the builder and set a deadline for completion. However, the plaintiffs noticed apparent shortcomings in the builder’s work and began to look deeper into the builder and its subcontractors. The relationship soured and work was not completed by the contract deadline. At this point, the plaintiffs terminated the contract and told the builder to stop all work.

The Harrell plaintiffs filed suit for fraud, constructive fraud, violation of the Virginia Consumer Protection Act, and breach of contract. These are common counts included in many suits where fraud is alleged in connection with a real estate deal. However, as the Harrell case demonstrates, there is a significant difference between alleging fraud at the outset of litigation and proving it at trial.

Key to the plaintiff’s case in Harrell was the idea that the builder had committed fraud because it never intended to perform in accordance with the contract. Many potential plaintiffs want to make this allegation after the fact, especially when significant errors in the construction process come to light. The plaintiffs in Harrell appear to be no different. The Court’s analysis points out that, while fraud can be shown by circumstantial evidence, a plaintiff must still show that the builder had absolutely no intent on performing. Furthermore, this intent must be present as of the date the contract was signed. The burden of proof for this allegation is high, and these claims are extraordinarily difficult to prove.

Just as in other cases this law firm has encountered, the plaintiff’s position in Harrell was difficult for the Court to reconcile against evidence that the builder had actually tried to perform. The builder in Harrell made an effort to apply for permits, worked with the county to correct the permits, obtained materials and supplied labor, and had actually completed some portion of its work. In these circumstances, most courts view the evidence as only showing frustration with the result (or, “disappointed economic expectations”), which is understandable, but Virginia law does not allow these frustrations to become fraud. The Harrell Court reached this same conclusion and dismissed the fraud-related claims in the plaintiff’s complaint, stating that the builder did not appear to have the requisite intent to commit fraud.

The opinion also indicates that the plaintiffs had made false accusations that one of the builder’s subcontractors was a sex offender. It is difficult to know whether this incident colored the Court’s decision, but it certainly didn’t appear to help. Salacious and shocking allegations are risky in litigation If unproven, such allegations risk undermining your credibility, especially if another, simpler explanation exists.

Nevertheless, there did appear to be a breach by the builder in Harrell as several items were either incomplete or improperly built at the construction deadline. Both parties presented expert testimony as to the value of that work. After carefully examining the testimony and written reports of each expert the Court awarded the plaintiffs damages.

Notably, the Court declined to award the plaintiffs damages relating to the delay in completing construction. In reaching this conclusion the Court relied on a legal principle known as the prevention doctrine. The prevention doctrine prevents the recovery of damages by a party who interferes with the completion of a contract. In Harrell, the plaintiffs had directed the builder to cease all work, and thus the prevention doctrine applied.

The lesson here is not that a potential plaintiff must allow their contractor to continue to perform work despite the contractor’s breach of contract. There are ways to kick a contractor off a job, but the answer is dependent on the facts of each case and consulting an attorney first is a smart course of action.

One last point to make about the Harrell case; the Court did not award the plaintiffs any attorneys’ fees. Typically, each party has to pay their own way unless a statute or contract provision states otherwise. Neither appears to have been available here. Instead, the parties have each likely incurred significant fees which have now become sunk costs. This is another important consideration that should be discussed with your attorney early on.

The Harrell case will be an easy and informative read for anyone contemplating a similar lawsuit. The opinion gives a good outline of the legal issues involved, and the types of factual considerations the parties will have to confront. This law firm is also very familiar with construction litigation and can assist you in evaluating your own claim.


When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

3-D Printing, Construction and the Next Frontier

Stephanie U. Eaton and Alexander L. Turner | Spilman Thomas & Battle

The Site Report has extensively discussed the developments of 3-D printing building construction and its impact on the construction industry. 3-D printing structures is becoming more commonplace. Last month, Iowa State University began designing 3-D printed housing for rural Iowa. ICON Technology, Inc., an Austin, Texas company, is currently planning to build an entire subdivision in Texas using its 3-D printing technology. Expanding on its 3-D construction experience, ICON recently entered into a contractual partnership with NASA that will see its 3-D construction technology used extraterritorially.    
 
NASA launched the Artemis I on November 16, 2022 as its first step toward a return of astronauts to the Moon. NASA plans to have humans walking on the Moon by 2025. Once humans are back on the Moon, the challenge is how do they build a permanent base on the Moon. It costs roughly $10,000 per pound to launch a payload into space, so launching all the required building materials from Earth to build a Moon base is cost prohibitive. NASA’s answer to this problem is 3-D printing using robots and materials found on the Moon. NASA recently entered into a contract with ICON to 3-D print a Moon base on the surface of the Moon. The contract was awarded following ICON’s participation in NASA’s 3-D Printed Habitat Challenge along with its partner, the Colorado School of Mines. The competition included the construction of a sample structure that was tested for its ability to hold a seal, the strength of the structure, and the structure’s ability to endure extreme temperatures. 3-D printing is not just for pre-production models for consumer goods and home hobbyists anymore. It is a viable option for advancing humans’ exploration of space.
 
While 3-D printing a Moon base with robots seems completely revolutionary, the use of 3-D printing methods in construction is not a new process. In 1941, William E. Urchel developed the Wall Building Machine, a semi-automated machine that used a radial arm to lay layers of concrete to build circular structures. The machine used spinning disks on the side of the printing head to smooth the extruded concrete. The building process also featured tongue and groove fittings between the layers to increase adhesion. The Wall Building Machine’s is similar in design to the modern Apis Cor’s 3-D printing system. While the Wall Building Machine was developed in an attempt to help the military build bomb shelters and other structures on the battlefields of WWII, it was ahead of its time and did not see commercial success or widespread adoption. Ironically, the use of 3-D printing in construction has now come full circle with the U.S. Department of Defense contracting with ICON to construct concrete housing facilities at Fort Bliss in Texas utilizing ICON’s 3-D printing technology.     
 
Even though the building of Moon bases and learning about the Wall Building Machine is interesting, the use of 3-D printing in construction does have widespread practical applications for the entire construction industry. While concrete 3-D printers used in the construction of structures are expensive at this time, costing between $180,000 to $1,000,000, as technology improves and the use of these machines becomes more mainstream, this manner of construction can revolutionize the industry. It will be revolutionary because not only is concrete a naturally sustainable and inexpensive building material, but also because these 3-D printers generate little waste. Moreover, 3-D printed construction greatly reduces the time it takes to construct a building compared to manual construction, reduces labor required to construct buildings, minimizes supply chain disruptions using alternative building materials, and allows contractors to build even complex structures that are aesthetically pleasing and resilient. 3-D concrete printed buildings can have a positive impact on the environment, and supply affordable housing where it is most needed.
 
Businesses throughout the economy are experiencing a labor crunch, including in the construction industry. The use of 3-D construction and robotic automation will alleviate the pressure on construction companies to hire sufficient salaried and hourly construction labor. That is because much of the tedious and time-consuming foundation and wall construction can be performed by large 3-D printers and other automated processes. In an effort to find cost effective ways to meet the current demands of the housing market in this tight labor market, ICON created a gantry-styled 3-D printer, operated from a smart device, to build architecturally innovative homes. Additional labor-saving construction automation is also being developed at Cornell’s College of Engineering. Cornell is conducting robotic research and testing to evaluate ways in which robots can be used to lay brick, print large scale metals, and print using recycled plastics. Over time, larger sized components, such as those used for bridge construction, may be printed with use of a robot. These technologies should help automate many tedious construction jobs, thereby eliminating the need for a large construction crew on-site, and help all eliminate the labor supply crisis.
 
3-D printing may also relieve the ubiquitous supply chain issues the construction industry is currently experiencing. While ICON uses its own cement building material, Lavacrete, in its construction, there are other building materials that can be used in conjunction with 3-D printing technology. These materials are more readily available, and 3-D printed buildings require fewer materials overall in their construction. By using fewer and materials that are easier to source, 3-D printing construction will lessen the impact of the supply chain issues that the construction industry is currently experiencing. Additionally, the lower labor and material costs associated with 3-D printing will permit for more affordable and faster construction.       
 
Increased use of 3-D printing will also positively impact the environment by reducing the carbon footprint for the construction industry, generally. As of 2021, the construction industry is responsible for more than 34 percent of energy demand and approximately 37 percent of energy and process-related carbon dioxide emissions according to the 2022 Global Status Report for Buildings and Construction. This is significant because the construction industry will be forced to alter how construction projects are completed in order to meet global climate change goals. Moreover, in the United States, the push by the federal government, through Executive Order 14057 (the “Federal Sustainability Plan”), and some state governments to reach net zero carbon emissions by 2050 does not overlook the impacts the construction industry has on climate change. As a result, 3-D printing construction will assist the construction industry as a whole, particularly on public projects, meet governmental environmental mandates by reducing carbon emissions and material usage, and incorporating more “green” and recycled materials into construction projects.
 
Building codes will need to be changed to include 3-D printing. This is important because changes to the code will legitimize the use of 3-D printing in construction, set standards for manufacturers to follow, and establish code that other state regulators can adopt to further expand the use of 3-D printing nationally. Montana was the first state to update its building codes to include 3-D printing construction. It is anticipated that as 3-D printing construction matures that more states will follow Montana’s lead. 
 
Construction of homes using 3-D printing has the potential to provide low cost housing to first-time buyers, homeless populations, and to those displaced following natural disasters. The use of the 3-D technology has expanded to the extent that the global market for construction using 3-D printing methods is expected to reach $114.4 million in 2023. As the use of 3-D printing in construction expands, we expect more states to adopt codes regulating the materials and processes in an effort to set standards that will likely exceed traditional construction methods, and the acceptance of 3-D printing will become more widespread.


When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Five Ways to Protect Bidding Opportunities and Bid Formulations

Evan Blaker | Cohen Seglias Pallas Greenhall & Furman

The bidding process for a construction project includes a vast array of folks: estimators, owners, project managers, design professionals and many others. Security, especially cybersecurity, can prove a challenge, and those receiving, drafting or issuing bids would be wise to consider potential problems before they become a reality. This can be accomplished by establishing and maintaining standards and protocols to protect your work product. These protocols can cover elements including accessibility, document protections, review processes and fundamental security protections such as passwords. Here are five essential steps parties should enact to guard their proprietary bidding information:

  1. Limit accessibility to services that provide portals where new projects are presented for bid and require log-on criteria to access the portal. These limitations are the building blocks for good security. Safeguarding access to the portals—and minimizing the number of people who have access—is a simple and practical approach that can and should be used from the initiation of the services.
  2. Require any employee with access to bid requests to sign an NDA. NDAs are imperative to protecting data and can be valuable tools for doing so, assuming they are well-written and address the particulars of what employees and former employees cannot disclose.
  3. Require any and all employees to work full-time and prohibit “moonlighting” for other contractors. One potential area for leaks comes from employees working for competitors. Policies prohibiting such overlap head off such issues before they occur.
  4. Review incoming and sent emails/items from those employees that issue bids. Regular examinations of such communications can help the reviewers proactively spot and address possible issues.
  5. Keep access to bidding pro-forma documents limited and password protected. Similar to the first point, limiting access, especially to important documents, and using strong passwords, are sensible methods for strengthening security.

While there may not be any one way to protect bid formulations and processes fully, taking the above steps will significantly mitigate risk. Consistent, well-implemented and written requirements may also be useful if controversy arises, so parties should consult with their counsel to ensure their procedures are up-to-date and clearly documented.


When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.