This column was originally published on the Real Estate News Exchange (renx.ca).
When it comes to complex, large-scale construction and development projects, delays will always happen. With developers, construction companies, and contractors working collaboratively on the same schedule, it is unrealistic to expect that the project will get completed on time.
These situations often arise when certain components take more time than expected, which in turn impact other aspects and the project stalls as a result. When this happens, different parties will often blame each other for the delay and courts become tasked with the difficult exercise of determining how the resulting damages should be allocated. This is known as “concurrent delay”, and it is notoriously challenging to deal with.
Such was the case in Schindler Elevator Corporation v. Walsh Construction Company of Canada, where the Ontario Superior Court ruled on a matter concerning the redevelopment of Women’s College Hospital in downtown Toronto. The project was commenced in 2010 through a partnership comprised of Walsh Construction Company of Canada and Bondfield Construction Company Limited (“WBP”). It involved the construction of a new hospital to replace the former Women’s College Hospital as a phased demolition and building process.
WBP retained Schindler Elevator Corporation (“Schindler”) as a subcontractor for the construction, installation and delivery of all elevator operations in the new hospital facilities. Schindler completed the elevator installation in accordance with its contract and ended up commencing a claim against WBP for nearly $1 million in unpaid invoices.
WBP counterclaimed against Schindler for nearly $3.5 million (which was reduced to about $2.2 million at trial), alleging that Schindler did not complete its work in a timely manner. WBP claimed that the delays caused by Schindler impacted the schedule for the project, which resulted in mitigation costs and contractual penalties for the late completion of the first phase. WBP also argued that Schindler was liable for part of a concurrent delay on the project, alleging that additional delays were simultaneously caused by other subcontractors and that Schindler was on the hook for its share of the resulting damages.
Schindler denied that it was responsible for any delay on the project and argued that if phase one was not delivered on schedule, it was the fault of WBP and the other subcontractors. WBP therefore had to prove that part of its loss was caused by Schindler’s failure to complete its work on time.
In cases of concurrent delay, a party must establish that the actions of a certain subcontractor delayed the project and consequently caused the party to suffer losses. This is typically a complex and multifaceted exercise when numerous subcontractors are involved, as it requires a detailed breakdown of the specific delay and a determination of how certain subcontractors caused it. To do this, the court must examine project times and the cost of completing tasks to determine which party caused which share of the delay and assign damages appropriately.
In this case, Schindler called an expert who argued that, for there to be concurrent delay, all of the independent causes of the delay have to occur simultaneously and be of the same duration. The court did not accept this approach, as requiring different causes of delay to occur at the exact same time and for the same duration is not practical.
Instead, the court held that “[i]t is not necessary for the independent causes of delay to occur exactly at the same time for them to be considered concurrent. Indeed, it is rare that concurrent delays start and end at the same time. Concurrent delays are more commonly experienced as overlapping events.” It was noted that this was a more practical and realistic approach to reach a fair result. The method proposed by Schindler, the court held, would be overly rigid and could result in a single party being held entirely responsible for a large-scale delay on a project.
In the end, the court agreed that Schindler did fail in its obligation to deliver the elevator installation in a timely manner, which constituted a breach of its subcontract. WBP was therefore entitled to some damages and was permitted to set off part of this amount against Schindler’s unpaid invoices. However, despite the breach of contract, WBP could not prove that Schindler was responsible for materially delaying the project as a whole and this aspect of WBP’s counterclaim therefore failed.
This case provides valuable insight on the nature of “concurrent delays” and how they are identified and dealt with in large-scale developments. In its 102-page decision, the court was tasked with reviewing and analyzing every nuance of the project in painstaking detail to determine the nature of the delay and how damages were to be identified and apportioned.
In large-scale construction projects such as the Women’s College Hospital, it is only natural to expect delays and complications. However, as this case demonstrates, determining how various delays impact the overall project is no easy task.
To mitigate risk, participants in large, complicated projects should take a forward-thinking approach and keep records as the project progresses. It is also important to ensure that everyone involved is kept in the loop and given notice as per the provisions in the contract documents. Exercising this sort of diligence could be of great help in identifying and apportioning liability when concurrent delay situations arise.
Author: Daniel Waldman, Lawyer