Construction projects are complex. There are multiple players involved, each with tasks that run on independent but overlapping timelines. However, a delay of one player’s work progress can delay a second unrelated party from proceeding on their timeline. That’s what is called a “concurrent delay.” This can result in costs to both the second party and the overall project. An unresolved dispute over who-pays-who can end up in court.
That’s what happened during the construction of a hospital in downtown Toronto. Elevator subcontractor, Schindler Elevator Corporation, sued the contractor partnership of Walsh Construction Company of Canada and Bondfield Construction Company Limited (“WBP”) for $1 million for unpaid services and materials. In response, the two contractors countersued Schindler for about $2.2 million, claiming delays to the project could be attributed to the elevator subcontractor.
These types of concurrent claims are challenging to prove in court. In this case, the situation was further complicated by the contractors’ claim that concurrent delays caused by other subcontractors also contributed to project delays and costs, but that nevertheless Schindler was responsible for its share of damages.
Sahil Shoor, partner with Gowling WLG, writes, “To recover from Schindler, WBP had to establish that Schindler was responsible for a delay that caused WBP’s losses. In cases of concurrent delay, this is a complicated exercise in determining the delay, breaking the delay down into its various parts, assessing each part’s particulars in terms of time and costs, and assigning responsibility for each part to a project participant.”
The Ontario Superior Court’s ruling in this case provides guidance going forward.
The court concluded that Schindler did, in fact, breach its subcontract by delayed performance of the elevator installation, explain Laura Brazil and Donia Hashem of McMillan LLP. Furthermore, these delays did affect project activities that followed. Therefore, the contractors were entitled to set aside some of the damage it incurred from their payments due to Schindler.
At the same time however, the court did not accept WBP’s claim that Schindler was responsible for delaying the entire project, thereby leaving many of the contractors’ claims unsupported and therefore denied.
Brazil and Hashem agree with Shoor regarding the challenges of unravelling the delay components and assigning responsibility.
“This is a highly complex and speculative assessment process.”
Assigning liability entirely to one party through a claim of concurrent delay is hard to establish in today’s complex projects, they write.
“This decision affirms that it is often unrealistic to expect a precise quantification of responsibility for delay. Overlapping events on construction projects often make any such measure virtually impossible. Courts may also prefer to split the responsibility for the overall delay to prevent one party from shouldering a disproportionate share of the cost.”
U.S. law firm Smith, Currie & Hancock LLP likens the situation to a sports game.
“Concurrent delay is the construction equivalent of offsetting penalties in football. If both parties to a dispute involving delay damages are partially responsible for the delay, neither recovers damages.”
The lessons to be gained from this case can be broken down into two parts.
First, as Shoor explains, “the court’s decision provides direction on the definition of ‘concurrent delay’ and indicates that a practical approach, acknowledging the complexity of construction projects, must be taken when assessing concurrent delay and apportioning responsibility for the losses arising from same.”
Second, given that the court acknowledges the difficulty of evaluating the effects of concurrent delay, Brazil and Hashem suggest a proactive approach should be considered.
“Construction industry members can minimize the risks arising from concurrent delay by regularly updating project schedules, diligently following notice provisions in contracts, and keeping careful records of construction activities. In a complex concurrent delay case, these documents can be critical in establishing responsibility for a delay.”
“Without these records,” they conclude, “it will be even more difficult to ‘unscramble’ the causes of delay and ascertain who bears true responsibility.”
John Bleasby is a Coldwater, Ont.-based freelance writer. Send comments and Legal Notes column ideas to firstname.lastname@example.org.