Walter Lilly & Company Ltd v Mackay and DMW Developments [2012] EWHC 1773 (TCC)

Walter Lilly was engaged by DMW in 2004 as a main contractor under a JCT Standard form of Building Contract with bespoke amendments to build three houses at 1, 2 and 3 Boltons Place, Earls Court. Mr and Mrs Mackay were to occupy number 3 on completion. Mr Mackay (together with Mr Daniel and Mr West, who were to occupy numbers 2 and 3) formed DMW as the corporate vehicle through which the development would be carried out. Little, if any of the design had been completed prior to the involvement of WLC, as a result of which the project suff ered from considerable delay.  

Upon commencement of the project, DMW and WLC agreed to split the building contract in three so that there would be a separate contract for each plot. A deed of variation dated 23 December 2004 was signed to this eff ect. Throughout the project period WLC had sought, and was granted, extensions of time on numerous occasions by the fi rst architect under the building contract. DMW eventually changed architect and at the date of practical completion (deemed by the court to have occurred on 7 July 2008) DMW withheld liquidated damages for late completion.  

WLC argued that it was entitled to an extension of time for the whole period of delay. DMW said that WLC was responsible for the delays. Akenhead J notably distinguished between a prospective assessment of delay by the architect before practical completion occurs and a retrospective analysis by a court, arbitrator or the architect after practical completion. Following this approach, the judge found that the court must use its knowledge of events as provided by witness and expert evidence, and on the balance of probabilities should determine what delay was actually caused by relevant events. Mr Justice Akenhead considered a number of English authorities on concurrent delay including Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd [1999] and the more recent decision in Adyard Abu Dhabi v SD Marine [2011]. He determined that:  

“where there is an extension of time clause such as that agreed upon in this case, and delay is caused by two or more eff ective causes, one of which entitles the contractor to an extension of time as being a relevant event, the contractor is entitled to a full extension of time”.

In reaching his conclusion, while recognising the judgment as “persuasive”, the Judge notably rejected the approach taken by the Scottish court in City Inn Ltd v Shepherd Construction Ltd [2010] as “being inapplicable in this jurisdiction”.  

The Judge therefore held that WLC was entitled to the full extension of time claimed.  

WLC and DMW had agreed that in order to claim loss and expense under the building contract, WLC had to make a timely application and provide details of the loss and expense claimed. In relation to loss and expense generally, following the guidance in London Borough of Merton v Stanley Hugh Leach [1985], the court found that the requirement to provide “reasonably necessary” detail in accordance with JCT wording does not in eff ect give rise to an obligation on part of a contractor to provide details that prove its claim beyond all reasonable doubt. Information provided in support of a loss and expense claim needs to be suffi cient to satisfy a court or arbitrator that the contractor has on the balance of probabilities incurred such loss as a result of a relevant event.  

DMW argued that WLC’s claims amounted to a global claim which should, on the facts, fail in its entirety. Upon a thorough review of the relevant authorities, Mr Justice Akenhead observed that when claiming costs a contractor has to prove its claim as a matter of fact and has to demonstrate on the balance of probabilities that (1) events have happened which entitle it to loss and expense; (2) that those delays caused delay and/or disruption and (3) that such delay or disruption caused it to incur loss and/or expense/damage. The judge further stated that “there is nothing in principle “wrong” with a “total” or “global” cost claim”, however, “there are added evidential difficulties… 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 diff erence between what it has cost the contractor and what it has been paid) would not have been incurred in any event…”

Signifi cantly, the court held that a global claim will not automatically fail on the basis of a single issue not properly pleaded or proved, or which is shown to be the fault of the contractor. In such circumstances, following the approach in John Doyle Construction Ltd v Laing Management (Scotland) Ltd [2004], the Judge clarifi ed that the claim would simply be reduced by the value of the event or series of events in question.  

The court, however, concluded that WLC’s claim was not a “global” claim and added that even if WLC had in fact made a global claim, the latter had demonstrated that its original preliminaries prices were realistic and set at a level which, if the events referred to had not arisen, would not have led to the losses it ultimately suffered.