6 December, 2012

 

Legal News & Analysis – Asia Pacific – Hong Kong – Dispute Resolution

 

Walter Lilly & Co Ltd v Giles Patrick Cyril Mackay & DMW Developments Ltd [2012] EWHC 1773(TCC), Akenhead J, 11 July 2012

 

In the City Inn Ltd v Shepherd Construction Ltd (2010) case on the subject of concurrent delay, the Scottish Court of Session (Scotland’s Court of final appeal) held (amongst other things) that where a situation exists in which two causes are operative, one being a relevant event and the other some event for which the contractor is to be taken to be responsible, and neither of which could be described as the dominant cause, it will be open to the architect approaching the issue in a fair and reasonable way, to apportion the delay in the completion of the works as between the relevant event and the other event.

 

As mentioned in the same article, these findings are not entirely consistent with the conventional approach in previous cases decided by the English Courts and the prevailing view is that it is unlikely to be followed in England. The case of Adyard Abu Dhabi v SD Marine Services (2011) is an example where the English High Court held that in such concurrent delay situation, the contractor is entitled to an extension of time and not an apportionment.

 

Walter Lilly & Company Ltd v Giles Patrick Cyril Mackay v DMW Developments Ltd (2012) is another judgment in which the English Technology and Construction Court expressly refused to follow City Inn. In deciding whether to grant Walter Lilly an extension of time in the concurrent delay situation, the Court held that if the contract provides for a time extension where a Relevant Event is proved to have occurred, the contractor is entitled to the time extension, irrespective of whether the contractor was also partly responsible for the delay. The Court therefore rejected the approach taken in City Inn. It also said that the fact that the architect had to award a “fair and reasonable” extension, did not imply that there should be some apportionment in the case of concurrent delays.

 

The judgment also ruled on whether “global claims” should be allowed. The term “global claims” is commonly used to describe contractors’ claims which identify numerous potential or actual causes of delay and/or disruption, a total cost on the job, a net payment from the employer and a claim for the balance between costs and payment which is attributed without more and by inference to the causes of delay and disruption relied on.

 

The Court said that simply because a contractor claims all the costs on a construction project which it has not yet been paid does not necessarily mean that the claim is a global or total cost claim, although it may be. On the facts of the case, the Court held that Walter Lilly’s claims were not global claims.

 

The Court reviewed the case authorities and gave general guidance in relation to global (or total costs) claims, as follows:

 

1. Ultimately, claims by contractors for delay or disruption related loss and expense must be proved as a matter of fact. Thus, the contractor has to demonstrate, on a balance of probabilities, that:

 

 

  1. events occurred which entitle it to loss and expense;
  2. that those events caused delay and/or disruption; and
  3. that such delay or disruption caused it to incur loss and/or expense (or loss and damage as the case may be).

 

2. As a matter of principle, it does not have to be shown by a claimant contractor that it is impossible to plead and prove cause and effect in the normal way or that such impossibility is not the fault of the party seeking to advance the global claim. One needs to see of course what the contractual clause relied upon says to see if there are contractual restrictions on global cost or loss claims. Absent and subject to such restrictions, the claimant contractor simply has to prove its case on a balance of probabilities.

 

3. The relevant clause in this case, laid down conditions precedent which, if not complied with, would bar to that extent, claims under that clause. If and to the extent that those conditions were satisfied, there was nothing in the clause which stated that the direct loss and/or expense could not be ascertained by appropriate assessments.

 

4. It was open to contractors to prove the above three elements with whatever evidence would satisfy the tribunal and the requisite standard of proof. There was no set way for contractors to prove those three elements. For instance, such a claim may be supported or even established by admission evidence or by detailed factual evidence, which precisely linked reimbursable events with individual days or weeks of delay or with individual instances of disruption and which then demonstrated with precision to the nearest penny what that delay or disruption actually cost.

 

5. There was nothing in principle “wrong” with a “total” or “global” cost claim. However, there were added evidential difficulties in many cases, which a claimant contractor has to overcome. It will generally have to establish (on a balance of probabilities) that the loss which it has incurred (namely the difference between what it has cost the contractor and what it has been paid) would not have been incurred in any event. Thus, it would need to demonstrate that its accepted tender was sufficiently well priced that it would have made some net return. It will need to demonstrate in effect that there are no other matters which actually occurred (other than those relied upon in its pleaded case and which it has proved) that were likely to have caused the loss). The burden of proof does not transfer to the defending party. It is of course open to that defending party to raise issues or adduce evidence that suggests or even shows that the accepted tender was so low that the loss would have always occurred, irrespective of the events relied upon by the claimant contractor or that other events (which are not relied upon by the claimant as causing or contributing to the loss or which are the “fault” or “risk” of the claimant contractor) occurred that may have caused or did cause all or part of the loss.

 

6. The fact that one or a series of events or factors (unpleaded or which are the risk or fault of the claimant contractor) caused or contributed (or cannot be proved not to have caused or contributed) to the total or global loss does not necessarily mean that the claimant contractor can recover nothing. It depends on what the impact of those events or factors is.

 

7. Obviously, there is no need for the Court to go down the global or total cost route if the actual cost attributable to individual loss causing events can be readily or practicably determined.

 

8. DMW’s argument that a global award should not be allowed where the contractor had himself created the impossibility of disentanglement was not, on analysis, supported by authorities and was wrong.

 

In this case, the Court said that even if a global cost claim could not be allowed unless it was impracticable or very difficult for the contractor to relate every penny of loss to each established and pleaded event which entitled it to loss and/expense, it was satisfied that it was impracticable or very difficult for Walter Lilly in this case.

 

 





For further information, please contact:
 
Cheung Kwok Kit, Partner, Deacons
kwokkit.cheung@deacons.com.hk
 
 
 

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