A significant decision has recently been given by the High Court, dealing with a spectrum of issues at the heart of construction disputes. In particular, it provides clarification on the law of concurrency and global claims under the JCT form of Contract.
Walter Lilly & Company Ltd v Giles Patrick Cyril Mackay and another (“the Walter Lilly case”)1 concerned the development of three high value residential houses in London under a JCT Standard form of Building Contract (1998 Edition Private Without Quantities). The relationship between the employer Mr Mackay, his professional team and the contractor Walter Lilly, deteriorated considerably. The project suffered substantial delays and Walter Lilly eventually commenced proceedings against Mr Mackay claiming an extension of time and loss and expense. The Court held that Walter Lilly was entitled to an extension of time until the date of practical completion and that it was entitled to loss and expense in the sum of £2.3 M.
Concurrency is where overlapping contractor and employer delay events both cause a delay to the completion date.
Recently, there has been some uncertainty as to how concurrency should be treated in the context of an extension of time application.
Prior to the Walter Lilly case, the most significant English case was Henry Boot Construction v Malmaison (“Malmaison”)2 where the Court considered concurrency under a JCT form of contract. There the Court held:
"If there are two concurrent causes of delay, one of which is a Relevant Event, and the other is not, then the contractor is entitled to an extension of time for the period of delay caused by the Relevant Event notwithstanding the concurrent effect of the other event".
The waters were muddied somewhat ten years later with the case of City Inn v Shepherd 3 , which took a different interpretation of the extension of time provision in a JCT form of Contract. There the Scottish Courts decided that if there are concurrent causes of delay, the issue should be approached in a fair and reasonable way and responsibility for the delay should be apportioned as between the Relevant Event and the contractor risk event. The case hinged on the Court's interpretation on the words “fair and reasonable” in the context of the extension of time provision.
Although City Inn v Shepherd was a Scottish case and not strictly applicable in England, it opened the door for arguments that where there was concurrency, delay should be apportioned.
In the Walter Lilly case, the Court clarified the position holding that the correct approach was the English position, as advanced in Malmaison ie:
- Where there are two or more effective causes of delay one of which entitles the contractor to an extension of time for a Relevant Event, then the contractor is entitled to the full extension of time;
- The Contract should be applied strictly. The relevant clause did not state that an extension of time should in any way be reduced or apportioned.
To prove a claim for loss stemming from delay, a contractor must prove cause and effect, ie that he was delayed, by an event for which the Employer bears the risk, and as a result of that delay he suffered loss. This is easier said than done. Sometimes, especially where there has not been proper programming on a project, causal links are impractical or impossible to demonstrate. Also, to carry out the sort of analysis necessary to prove a claim is often very complex and disproportionately costly.
A global claim is where the contractor is unable to prove the necessary ingredients of cause and effect to prove a claim, ie establish that a delay caused him loss. Instead, the contractor will present the events that he asserts caused him loss and the total amount of loss incurred.
There are three significant developments to the law on global claims which arise from the Walter Lilly case:
1. It is no longer a requirement for a contractor to prove that it is impossible or impractical to separate out the consequences of each event.
Prior to the Walter Lilly case, it was believed that the contractor needed to prove that it was impossible or impractical to separate out the consequences of each event in order to succeed with a global claim.
The Court has now made clear that it is necessary for the contractor to prove its claim on the balance of probabilities. However, the Court also emphasised that a global claim is not necessarily wrong and did not accept that it is necessary for a contractor to prove 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.”
2. Global claims are no longer likely to fail in the event that they include matters for which the employer is not responsible.
It was commonly thought that if an employer could demonstrate that at least part of the contractor’s loss had been caused by a “not merely trivial” event that was not the employer’s responsibility, then the contractor’s global claim would fail in its entirety.
However, in the Walter Lilly case the Court held that if a global claim contains elements relating to events for which the employer is not responsible, this does not mean the claim will fail. Any contractor events should simply be omitted from the global claim and apportioned accordingly.
3. The contractor will need to provide proof that it would not have incurred the loss in any event.
The Court confirmed that the contractor has the burden of establishing that the loss which it has incurred would not have been incurred in any event. In particular, the judge said that a contractor:
“…will need to demonstrate that its accepted tender was sufficiently well priced that it would have made some net return… and that there are no other matters which actually occurred.”
In the event, the Court determined that Walter Lilly’s claim was not a “global” claim.
Even if it had been a global claim, the claim would have likely succeeded because Walter Lilly had been able to demonstrate 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.
Steve Carey, Partner in Speechly Bircham’s Construction and Engineering team commented, “The Walter Lilly case has provided a much needed clarification on the correct approach to concurrency, the effect of which potentially restricts the defences open to an employer to challenge an extension of time claim. I also fully expect contractors to rely upon this case to support global claims, the occurrence of which will undoubtedly increase following this decision. “