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Whoever said adjudication killed construction law?

Looking at the law reports, some may think that the only thing the TCC ever deals with these days is the enforcement (or not) of adjudication decisions. Whatever happened to construction law? Well, luckily it still lives and breathes. In Walter Lilly & Co Ltd v Mackay and DMW Developments Ltd, Akenhead J delivered a judgment that goes to the heart of many of the burning issues that have been causing construction lawyers to scratch their heads.

While the case looked at a variety of issues, two of the important issues were:

  • Extensions of time and how you deal with concurrency.
  • Whether you can run a global claim.

Concurrency

Concurrency is where two or more events have caused the same delay and:

  • one or more of those events is the contractor’s responsibility; and
  • one or more has been allocated by the contract to be an employer risk event (a relevant event).

For example, if adverse weather and lack of labour both cause one week’s delay, should the contractor be awarded a full one week extension of time for the delay caused by the weather?

Recently, in City Inn Ltd v Shepherd Construction Ltd, the Scottish court looked at this question and decided that if there was concurrent delay, the contractor should only get a reasonable apportioned part of the concurrently caused delay. However, traditionally the English courts have adopted a different approach and have held that the contractor is entitled to a full extension of time for the delay caused by two or more events, provided that one of them is a relevant event.

In Walter Lilly, Akenhead J endorsed the English courts’ traditional approach and refused to adopt the Scottish courts’ approach. As a result, we are able to fairly confidently state that under English law, the contractor is entitled to an extension of time for the whole period of the delay caused by the relevant event, despite the fact that its own shortcoming (in our earlier example, a lack of labour) would have caused the same delay.

Global claims

A global claim is where a number of events have caused delay, for which the contractor wants to claim loss and expense. However, for whatever reason, the contractor is unable to say how much delay and how much expense has been caused by each individual delaying event and, as a result, puts in a single rolled up claim for loss and expense.

The English courts normally require a claimant to prove breach (or the relevant event) and then go on to prove what loss has been caused by that event. If a claimant is unable to prove causation, its claim fails and it is at risk of having its claim struck out. This has been the fate of some contractors who have put forward a global claim. The court is particularly concerned if the delay has not all been caused by relevant events and that, instead, some of the delay is the contractor’s responsibility.

Akenhead J’s views on global claims

Notwithstanding the misgivings expressed previously by some courts, in Walter Lilly, Akenhead J held that in certain circumstances, a global claim is permissible. He expressed the following views:

  • As a matter of fact, a contractor must prove, on the balance of probabilities, its case on delay and expense.
  • If the contractor puts forward a global claim, it is not absolutely necessary for it to also prove that it is impossible to prove cause and effect in the usual way. Nor does the contractor have to prove that it did not cause the impossibility. A global claim may still be permissible even if the reason why the contractor had to resort to a global claim is that the contractor had itself created the impossibility of disentanglement of the claim into its various individual constituents.
  • While clause 26 of the JCT standard form contract (on loss and expense) contains certain pre-conditions as to the claiming of loss and expense, it should be fairly easy for the contractor to fulfil those conditions. The claim put forward does not have to be perfectly put together and every “i” dotted and every “t” crossed. The contractor must provide sufficient information to show that the loss and expense claim is likely to be or has been incurred. Again it should be remembered that the English courts works on the basis of “balance of probabilities” and not “beyond all reasonable doubt” (that is left to the criminal courts). A contract administrator who is on top of the project, probably already has a good idea of costs that the contractor will incur for any period of delay. He should know who and/or what is on site at any particular time and for what purpose.
  • There is no set way for a contractor to prove its claim. The evidence may be incredibly detailed factual evidence that clearly demonstrates every penny of costs that was attributable to each relevant event. That is great, if that is the case, but it does not have to be.
  • While there are evidential difficulties with a global claim, there is nothing wrong in principle with it. However, the contractor will still have to establish, on the balance of probabilities, that the cost which it has incurred would not have been incurred in any event. It will have to prove that there are no other matters that caused the cost claimed.
  • The fact that a series of other factors (which are the contractor’s risk) caused or contributed to the global loss does not necessarily mean that the contractor is entitled to nothing. The same goes where the contractor cannot prove that the event caused or contributed to the global loss. The court will try to deduct from the total or global claim the loss that the contractor cannot prove it is entitled to recover.
  • It is always advisable for the contractor to try to apportion a particular loss to a particular event. If the contractor cannot do this, while a court should not dismiss it out of hand, the contractor should expect the court to be sceptical.

What can we learn from Walter Lilly?

In conclusion, as the academic year ends and the Olympics continue, I think we can take two lessons from Walter Lilly:

  • While the GB team is securing a hoard of gold medals, there is still a distinction between the way the Scots do things and how the English do them. It will always be thus.
  • Those contractors whose records are not in apple pie order should not necessarily despair. Although I am sure that the school report will say that “they could have done better”.

This piece is based on an article that first appeared on the Lewis Silkin LLP website in July 2012.

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