In a major judgment published on 11 July 2012, Walter Lilly v. Mackay, Mr Justice Akenhead, the judge in charge of the Technology and Construction Court in London ("TCC") has given guidance on a number of important issues in construction law. These include design liability, causation, head office overhead calculations, third party settlements and the duty to warn. However, some of the most important findings concern the proper treatment of concurrent delay events, global claims and the extent of the obligation on Contractors to provide information when notifying claims. We concentrate on these issues in this newsletter.
The case concerns a luxury development in London where relations between Employer and Contractor and between the Employer and his professional team became very strained. There were substantial delays and the Contractor eventually instituted proceedings claiming an extension of time to the Completion Date achieved and substantial sums for loss and expense. The project was entered into on a JCT Standard form of Building Contract 1998 Edition Private Without Quantities with a Contractor's Designed Portion supplement. Design work was far from complete by the date the Contract was let. Many of the individual work packages were only briefly described and were subject to provisional sums. The Court eventually found that most of the key areas where delay had occurred related to elements of the works for which the Contractor had no design responsibility and it determined that an extension of time should be awarded to the date of practical completion. It also awarded a substantial sum (£2.3m) for loss and expense.
- Concurrent delay
Perhaps the most significant part of the judgment was the discussion of how concurrent causes of delay should be addressed, where one of the causes of delay is the responsibility of the Employer and the other is not. The relevant extension of time clause contained in this standard form required the Architect to grant an extension of time which was "fair and reasonable having regard to any of the Relevant Events", i.e. events which were the responsibility of the Employer. Where the delay was caused by more than one event, at least one of which was the responsibility of the Employer, the Court decided that the following applied:
- Where there are two or more effective causes, one of which entitles the Contractor to an extension of time as being a Relevant Event, the Contractor is entitled to the full extension of time for that event.
- The logic behind this conclusion is that many of the Relevant Events would otherwise amount to acts of preventioni1 and that it would be wrong to deny the Contractor a full extension of time in these circumstances.
- As to the interpretation of the relevant clause of the Contract, where the Relevant Event can be shown to have delayed the works, the Contractor is entitled to an extension of time for the whole period of delay caused by the Relevant Event. Nothing in the clause suggested that the extension should be reduced if the Contractor can be shown to be partly responsible for the delay.
- The "apportionment" approach adopted by the Scottish Court in the City Inn case in 2010 is not part of English law. Instead, the Court stated that the "test is primarily a causation one" and "although of persuasive weight, the City Inn case is inapplicable within the jurisdiction".
However, the Court did not comment on the position where the parties have drafted their extension of time clause with the aim of reaching a different outcome and it seems it still remains open to the parties to do so.
- Global claims
The Court gave general guidance on the approach to be taken in relation to "global" claims, defining these as, broadly speaking, claims where causes of delay are identified and the total of the Contractor's cost is computed; from this figure the Employer's net payment is deducted and a claim for the balance is made, without attributing actual costs to individual events.
The Court identified the following propositions:
- Contractors must prove their claims as a matter of fact and on the balance of probabilities. They must show the occurrence of a Relevant Event and that it caused delay leading to loss and expense. In principle, when putting forward a global claim a Contractor does not need to show that it is impossible to plead and prove cause and effect in the normal way. However, any contractual restrictions on global claims may have an impact. Otherwise, the Contractor must prove his case on the balance of probabilities.
- Whilst there is nothing in principle "wrong" with a global claim, it may raise evidential difficulties since the Contractor will have to show that the loss he has incurred would not have been incurred in any event. He will need to demonstrate that his tender was sufficiently well priced that he would have made some net return and that no other matters are likely to have caused the loss. A global claim does not transfer the burden of proof to the party defending it; the defending party may adduce evidence that the accepted tender was so low that the loss would always have occurred, irrespective of the events relied on by the Contractor.
- Even if an event which is not the fault of the Employer caused or contributed to the global loss, that does not mean that the Contractor will recover nothing. It depends on the impact of such an event. It may be that the claim will not be rejected but a deduction will be made for the individual event which is not the Employer's responsibility.
- If it is practicable to attribute actual costs to individual events, the Court may be sceptical about a global claim. However, a global award may be made even if the Contractor himself made it impossible to disentangle the various causes. The measure of the claim's success will depend on the facts and will be subject to proof.
- Notification of claims
The relevant clause of the Contract required the Contractor to submit to the Architect such details as should reasonably enable him to ascertain the extent of loss and expense. The Court considered what information must be provided pursuant to this clause:
- The extent of information already available to the Architect (for example through Site meetings) must be taken into account in considering the Contractor's obligations for provision of information
- The contractual obligation was to submit details which are "reasonably necessary" for the ascertainment of loss and expense. This requirement may be met by an offer to the Architect (or Engineer) to inspect records at the Contractor's office, as actually occurred in this case. Whilst it would be possible for a clause to require that the Contractor should provide details and all necessary supporting documentation, that is not what the clause said in this case.
- The Architect must be satisfied that the loss and expense claimed is likely to be or has been incurred but he does not have to be "certain"; he only needs to review all the detail that is reasonably required by the wording of the clause.
This case provides valuable guidance as to the meaning of broadly similar provisions to those in the JCT standard form that may also be found in many standard forms currently in use. However, different and/or bespoke provisions in parties' contracts may lead to a different interpretation being adopted.