The dark arts of delay analysis turn ultra violet – or ‘don’t ignore the facts’

20 September 2019
Daniel Middleton, Partner, Melbourne Andrew Archer, Special Counsel, Melbourne

White Constructions Pty Ltd v PBS Holdings Pty Ltd [2019] NSWSC 1166 (6 September 2019) (Hammerschlag J)

 

Delay and, separately, disruption claims are common sources of dispute in construction projects.  Compounding what are usually factually complicated scenarios are issues of terminology and experts’ competing views about the correct analysis and approach to assessing the parties’ opposing claims.  Programming experts rarely agree on the correct methodology.

A recent NSW Supreme Court decision by respected building judge and head of the NSW Supreme Court Commercial List Justice David Hammerschlag has reminded the industry that a programming expert’s opinion in this area, as in any other, is no more than that – that is, an opinion.  The initial and primary focus remains a detailed analysis of the proven facts and the cause and effect outcomes those facts demonstrate.

This dispute concerned White Constructions Pty Ltd’s development of a 100 lot subdivision in Kiama, NSW.  The development required the design of sewerage works.  White Constructions engaged related entities SWC (a water servicing coordinator) and IWS (a sewer designer) to undertake the design of the sewerage works.  The initial sewerage design was rejected by Sydney Water.  Until Sydney Water approved the sewerage design (by the issuing of what is known as a section 73 Certificate) the plan of subdivision could not be registered.  A subsequent design was approved and the section 73 Certificate issued.

Completion of the project was delayed.  White Constructions commenced proceedings against SWC and IWS alleging that the failure to produce a compliant sewerage design within a reasonable time resulted in a 7.5 month delay to the project.  White Constructions’ claim was a common law claim for damages of about $1.93 million for breach of the design retainer.  In essence, it required White Constructions to demonstrate that SWC/IWS breached their design obligations and those breaches caused the delay claimed.

The parties engaged respective programming experts.  The experts could not agree on, at least, the correct delay methodology to be adopted and how they each applied the method selected (by the other), with the result that wildly different conclusions were reached.

White Constructions’ expert (Mr Jonathan Shahady) concluded that the critical delay due to SWC/IWS’s alleged breaches totalled 240 days.

Conversely, SWC/IWS’s expert (Mr James Senogles) contended that only 19 days could be laid at SWC/IWS’s door.  Justice Hammerschlag noted this conclusion was based upon a number of assumptions ‘the correctness of which he [Mr Senogles] did not embrace’.

Hammerschlag J also noted, at [19], that:

‘Plainly both experts are adept at their art.  But both cannot be right.  It is not inevitable that one of them is right.’

and, at [22]:

‘The expert reports are complex. To the unschooled, they are impenetrable. It was apparent to me that I would need significant assistance to be put in a position to critically evaluate their opinions and conclusions’.

Hammerschlag J called in aid the Court’s power to appoint an expert to assist/advise the Court.  The Court, with the parties’ agreement, appointed its own programming expert, Mr Ian McIntyre.  Mr McIntyre’s assistance was invaluable – so much so that, at [26], Hammerschlag J concluded that Mr McIntyre’s advice ‘demonstrated that the complexity that has been introduced is a distraction.’

 

The parties’ competing approaches to delay analysis

White Constructions relied on an ‘as-planned versus as-built windows analysis’, summarised by the Court at [20]: ‘under which the duration of the works is broken down into windows which are framed by revised contemporaneous programmes, contemporaneously updated programmes, milestones or significant events. Key measuring points are identified on the path taken by the analyst to be critical. Changes to the critical path, critical path delays and the causes of those delays within and between each of the windows are examined to determine slippages and causes of delays.’

That approach is one identified in the second edition of the UK Society of Construction Law Delay and Disruption Protocol.  The delay impact is determined retrospectively.  The analysis is ‘effect and cause’.  It requires a baseline programme and as built data.

SWC/IWS adopted the ‘collapsed as built’ approach, summarised by the Court at [19]: ‘which involves extracting delay events from the as-built programme to provide a hypothesis of what might have happened had the delay events not occurred. This method requires the selection of “logic links” which link various components of the works to assume relationships of dependency to determine a critical path.’

This too is a retrospective determination but based on a ’cause and effect’ analysis.  It requires a logic linked programme and a selection of delay events to be modelled.

Notably, neither party used the SCL’s preferred Time Impact Analysis ’cause and effect’ prospective approach.

At [191] to [197] Hammerschlag J said:

‘Mr McIntyre’s opinion [ie the court appointed expert], upon which I propose to act, is that for the purpose of any particular case, the fact that a method appears in the Protocol does not give it any standing, and the fact that a method, which is otherwise logical or rational, but does not appear in the Protocol, does not deny its standing.

‘Mr McIntyre’s opinion, upon which I propose to act, is that neither method is appropriate to be adopted in this case. This view is consistent with me accepting Shahady’s view of Senogles and Senogles’ view of Shahady.

‘Mr McIntyre’s opinion, upon which I propose to act, is that close consideration and examination of the actual evidence of what was happening on the ground will reveal if the delay in approving the sewerage design actually played a role in delaying the project and, if so, how and by how much. In effect, he advised that the Court should apply the common law common sense approach to causation referred to by the High Court in March v E & MH Stramare Pty Ltd (1991) 171 CLR 506.

‘The Court is concerned with common law notions of causation. The only appropriate method is to determine the matter by paying close attention to the facts, and assessing whether White has proved, on the probabilities, that delay in the underboring solution delayed the project as a whole and, if so, by how much.’

Against that foreshadowed approach, the Hammerschlag J held that White Constructions failed at the first hurdle – it had not proven a breach of the contract with SWC/IWS.  In so finding, Hammerschlag J noted, at [185], that:

‘This is not the type of subject upon which precise evidence cannot be adduced.  It is not a subject which involves the Court having to make an estimation or engage in some degree of guesswork.  It is not the kind of case where it is necessary for the Court to do its best, in the absence of evidence which White was capable of adducing – see Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 77 ALJR 768.’

After this conclusion, Hammerschlag J commented, at [200] and [201]:

‘Shahady aptly commented that his report does not purport to prove facts. It does not.  

‘This case demonstrates the importance of paying close attention to the actual facts rather than opinions about what the evidence establishes.’

The case is slightly unusual in that it involved delay to a project for asserted breaches of a design retainer assessed on the basis of common law principles and not a breach or breaches of the style of delay clauses found in sophisticated bespoke construction contracts.  Nevertheless, the two scenarios share common ground.  Comprehensive contemporaneous evidence of the events alleged to cause delay or disruption and their consequences is vital.  Such evidence will at least serve to help prove the underlying factual assumptions upon which any expert opinion is based.

Further, it is not inconceivable, as this case demonstrates, that if the contemporaneous and other factual evidence is sufficiently detailed then a claim for delay or disruption (or discrete components of a larger claim) may be proven ‘on the facts’ and without the need for opinion evidence.  With increasing use of technology, for example, the use of drones (particularly in offshore projects) and Building Information Modelling (BIM) practices the degree of contemporaneous evidence capturing how a project unfolds in real time is likely to increase significantly.

Despite these technological advances, perhaps little has really changed since Charles Dickens wrote in Hard Times ‘Now, what I want is facts … facts alone are wanted in life … nothing else will ever be of any service …’.

 

Authored by:

Andrew Archer, Special Counsel

This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content.

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