The Latest Authorities On Claims For Delay Disruption and Loss Expense PDF

THE LATEST AUTHORITIES ON CLAIMS FOR DELAY, DISRUPTION AND LOSS & EXPENSE
and the Practical Implications for those Preparing and Defending Claims
8 OCTOBER 2013, TUESDAY PRINCE HOTEL KUALA LUMPUR

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Programme
09:00 09:45
09:45 10:30 10:30 11:00
Lecture 1 by Mr Michael Charlton

Lecture 2 by Mr Rodney Martin Tea / Coffee Break
11:00 11:45
11:45 12:30 12:30 13:00
Lecture 3 by Mr Michael Charlton

Lecture 4 by Mr Rodney Martin Questions & Discussion
13:00 14:00
14:00 15:30 15:30 15:45 15:45 17:30 17:30
Lunch
Workshop 1 Tea / Coffee Break Workshop 2 Close
Lecture 1
BY MR MICHAEL CHARLTON
Lecture 1: Introduction & Factual Background

Introduction Factual background to Walter Lilly & Co Ltd v Mackay
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Introduction
Walter Lilly & Co Ltd v Mackay and Another (No 2) [2012] EWHC 1773 (TCC)
Reported in full 139 pages of judgment and 660 paragraphs!

Also reported in Building Law Reports [2012] BLR 503 provides a commentary and edited report (lengthy factual and fact specific content removed)
NOTE: Application for leave to appeal against the judgment in

this case was refused in January 2013.
Introduction
Why the Walter Lilly case? Addresses the following important topics: Concurrency in delay Practical Completion Conditions Precedent and Notices Details and Records to Prove Loss and Expense
Global Claims
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Introduction
Why the Walter Lilly case? Addresses the following important topics: Head Office Overheads and Use of Formulae Recovery by Main Contractor of Reasonable Settlements of
Subcontractors Claims
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Factual Background
Walter Lilly v Mackay Project from hell! Recipes: Difficult and determined employer Poor and underprovided design Architect who was undermined and prevented from operating
Consultants to further undermine the architects position
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Factual Background
Walter Lilly v Mackay Recipes: Indecision and changes by employer Complete breakdown between employer and his design team
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Factual Background
Walter Lilly v Mackay Messrs Daniel Messrs Mackay Messrs West
DMW Developments (Employer)
Bought and build on a plot of land at 3, Boltons Place, London SW5 (A house each)
Factual Background
Walter Lilly v Mackay Project: Contractor: Walter Lilly & Company Ltd (WLC) Contract Sum: 15,372,962.83 QS: Gardiner & Theobald (G&T) Architect: Barrett Lloyd Davis Associates (BLDA)
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Factual Background
Walter Lilly v Mackay Project: Date for Possession: 12 July 2004 Date for Completion: 23 January 2006 Contract Period: 80 weeks (approx. 18.5 months) Contract: JCT 98, without quantities
WLC only priced Preliminaries, remainder presented as

provisional sums
Factual Background
Walter Lilly v Mackay WLC were responsible in respect of design for a list of items. There was little design or detail available at tender stage.
PROJECT
split into 3 contracts via deed of variation
Unit A
Unit B
Unit C (Mr Mackays)

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Factual Background
Walter Lilly v Mackay Delays right from the beginning:
Demolition works Piling works End of 2004, design information still incomplete due to indecision by DMW After original completion date (January 2006), major aspects of design still not resolved!
None was considered as WLCs fault at that time

Factual Background
Walter Lilly v Mackay Cost plan (drawn on the basis for the provisional sum) became
inadequate
High quality and specification demanded by Mr and Mrs Mackay (e.g. hand stitched leather to bookshelves) made delays worse Issue arose: Who was responsible for delays in dealing with provisional sums? Differing views by WLC and DMW
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Factual Background
Walter Lilly v Mackay November 2005 : WLC applied for 19 weeks EOT January 2006 : WLC reported 27 weeks EOT April 2006 : WLC requested for 33 weeks EOT June 2006 : WLC anticipated completion in November 2006 i.e. 36 weeks delay
Cost ballooned 5.5 mil to approx. 9.375 mil by May 2006
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Factual Background
Walter Lilly v Mackay Up to 29 June 2006, BLDA considered the main causes of delay
are:
Late instructions and design information Splitting of packages into smaller packages Poor coordination of services, the lifts and substation Problems from only one staircase compared to two in original
specification
WLC not taking enough design responsibility (not accepted by WLC)
Factual Background
Walter Lilly v Mackay July 2006: Only 20 weeks EOT granted. WLC applied for another
EOT, identifying 46 weeks delay due to late instructions by BLDA

arising from changes to doors and wall specification October 2006: More and more delays! Continuous strained ties between Mr Mackay and BLDA and G&T prompted him to employ Knowles for contractual and adjudication
advice.
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Factual Background
Walter Lilly v Mackay Strategy with Knowles on board: Pursue WLC, make them responsible for LD and restrain BLDAs actions BLDA was accused of masking its own delay by issuing EOTs to WLC. Under pressure, BLDA wrote numerous letters to WLC omitting sections of work to shorten the contract period.
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Factual Background
Walter Lilly v Mackay Final EOT extended completion date to 16 February 2007. Practical Completion for Unit A certified on 2 February 2007, while Mr Mackays unit was still in delay due to various problems.
Mr Mackay indicated intention to hold LDs from 16 February 2007

had client walk around meetings without WLCs presence Knowles became influential and advised withholding of 550k for
defective and outstanding works Knowles involvement raised

temperature
Factual Background
Walter Lilly v Mackay March 2007: DMW withheld payment BLDA suspend service April 2007: WLC requested 71 weeks of EOT as most major delays were still ongoing
Mr Mackay blamed BLDA and continued interfering BLDA

cannot issue instructions without Knowles agreement WLC commenced adjudication with DMW succeed amounts withheld for various defects were inappropriate
Factual Background
Walter Lilly v Mackay Knowles aggressive policy: We would like to create a situation whereby direct work is not delaying [Practical Completion] i.e. Practical Completion is solely delayed by WLCs works. WLCs works can be omitted to achieve this if possible Recommended BLDA be dismissed G&T instructed not to issue any further interim valuations
Factual Background
Walter Lilly v Mackay January 2008 : Delay due to specialist ceiling works February 2008 : Mr Mackay fall out with Knowles unpaid bills Engaged in highly derogatory dialogues Objected Knowles suggestion that DMW were responsible for part of the delays
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Factual Background
Walter Lilly v Mackay March 2008 : DMW terminated BLDA. Navigant appointed January to August 2008 : Many artists and tradesmen worked on the site damaged WLCs work WLC spent time rectifying but Navigant were not dealing with their EOT applications Navigant: Practical Completion 7 July 2008 (original: 23 Jan 2006) G&T: Valuation No. 40 9.1 mil (original: 5.3 mil) Dispute continues into 2009 and 2010
Factual Background
A Brief Look into the Judgment On the witnesses generally favourable to WLC while Mr
Mackay was found to be an unsatisfactory witness

On the experts approach
WLCs expert preferred objective identified critical delay by

referring to logical sequence of events on the longest path Mr Mackays expert focused on WLC not proving their case not experts job based on conversation not in evidence
Lecture 2
BY MR RODNEY MARTIN
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Lecture 2: Concurrency, Practical Completion & Conditions Precedent and Notice

Concurrency in Delay Practical Completion Conditions Precedent and Notices
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Concurrent Delay
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Concurrency in Delay
Concurrent Delay
(work delayed due to two or more competing causes of delay)
delays occur at the same time
Contractor / Subcontractors responsibility
OR Neutral event
Architect / Engineer / Employers responsibility

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Keating on Construction Contracts: Dominant Cause Approach
Leyland Shipping v Norwich [1918]
which cause is dominant is a question of fact which is not solved by mere point of order in time, but is to be decided applying common sense standards
H Fairweather v London Borough of Wandsworth [1987] To assume that it is possible to analyse two causes of delay and assess which event is the dominant or predominant cause of delay was considered by the court to be inappropriate
Keating on Construction Contracts: Apportionment
John Doyle v Laing Management [2004]
City Inn v Shepherd Construction [2010] Favoured in these cases - requires a compromise between the parties by allocating total delay among matters causing delay. Rejected in other cases and not considered applicable under English law where standard form construction contracts are used
43
Keating on Construction Contracts: But For
Turner Page Music v Torres [1997]
but for the delay caused by the Architect the delay should not have occurred but rejected in this case as being inconsistent with the more popular Dominant Cause approach
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Keating on Construction Contracts: Devlin Approach
If a Delay is the result of two causes one of which constitutes a breach of contract (e.g. late instruction) then the EOT will be calculated using the delay caused by the breach But this is not a helpful approach where delay caused by both parties would result in both parties claims (prolongation cost by contractor and LAD by employer) being successful which makes little sense for same delay period
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Keating on Construction Contracts: Burden of Proof Approach
Applies where one of the delays clearly caused by the Contractor
Contractor must demonstrate that delay to completion was caused by matters which entitle him to EOT in isolation of his own delay No entitlement where concurrent delays since Contractor could not show separate liability for delay Resulting in same outcome as but for test
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Keating on Construction Contracts: First Past the Post
One of the delays occurs first in time (thus first past the post)
Used for dealing with questions of EOT All other delaying matters are then ignored until the first cause has ceased to have effect
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Keating on Construction Contracts: Loss Lies Where It Falls
Where parallel Contractor and Employer delays occur, Employer required to acknowledge the right to EOT and thus will be prevented from levying LDs Contractor will have no entitlement to loss & expense because this would arguably have been incurred in any event due to his own culpable delay
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Leading Cases
Wells v Army and Navy Co-operative Society [1902] Where an Employer delays the Contractor, he or she will not be entitled to deduct liquidated damages even though the Contractor is causing delay
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Leading Cases
City Inn Ltd v Shepherd Construction Ltd [2008] Delay that had been caused by matters for which Contractor was responsible would not deprive the Contractor of an Extension of Time for the delay caused by a Relevant Event
Architect should apportion responsibility for delay only way for architect to give fair result. Similar to contributory negligence.
But for test rejected.
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Leading Cases
City Inn Ltd v Shepherd Construction Ltd [2010] Identified concurrency as a delay caused by the Contractor (culpable delay) occurring at the same time as a delay caused by the Employer where both cause delay to completion. The appeal decision of the 2008 judgment still supported apportionment. De Beers UK Limited v Atos Origin IT Services UK Limited [2010] In considering the principles of concurrency, City Inn and apportionment was ignored. Failure by Atos to give notice fatally undermined arguments that non payment by De Beers was a repudiatory breach.
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Leading Cases
Adyard Abu Dhabi v SD Marine Services [2011] Contractors pre-existing delay is relevant to the question of determining a contractors entitlement to an extension of time. Thus concurrency in this case was defined as two or more effective causes of delay of approximately equal causative potency Thus a pre-existing delay might have more causative potency
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Leading Cases
Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester)
Ltd [2000]
If there are two concurrent causes of delay, one which is a Relevant Event and other is not, the Contractor is entitled to Extension of Time for the period of delays caused by the Relevant Event
One of the most important cases on how to deal with concurrency and now favoured by the courts See Walter Lilly
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Leading Cases
The Royal Brompton Hospital NHS Trust v Frederick Alexander Hammond
and others [2001]

Extension of Time can be granted when: (1) the Relevant Event has occurred; and (2) the Relevant Event is likely to cause the completion of works as a whole to be delayed beyond the completion date then fixed under the contract The need to show that the relevant event caused actual delay to the completion of the project is always necessary notwithstanding any consideration of delay events which are pre-existing and ongoing events or those which are truly concurrent
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Leading Cases
Motherwell Bridge Construction Ltd v Micafil Vakuumtechnik [2001] A full Extension of Time should be awarded where there is concurrent Contractorcaused and Employer-caused delay, if it is fair and reasonable to do so
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Standard Forms of Contract References
Where standard forms are silent on the issue of concurrency, the common law position applies. In Malaysia, only the IEM 2011 deals with concurrency at Clause 44.3(6): the Engineer must not consider in his certification of any extension of the Date for Completion the effect of the events due to the Contractors fault which operate concurrently with any of the events listed in Clause 44.1(1).
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Decision in Walter Lilly
Where delay is caused by two or more effective causes, one entitles contractor to EOT as Relevant Event, Contractor is entitled to full EOT. Logic Many Relevant Events would be acts of prevention and it would be wrong in principle to construe Clause 25 to deny contractor full EOT in those circumstances Relevant Event provides for EOT, nothing suggests there is any sort of proviso that EOT be reduced if causation criterion established.
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Architect to award fair and reasonable EOT, does not permit apportionment test is causation City Inn is persuasive but not applicable in English law In the event, by analysis it was found by the experts that there was actually no concurrency at all a very common situation The Malmaison case is now considered good authority in concurrency cases
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It is considered that the Walter Lilly decision will be valid in Malaysia although this remains to be tested. There is no reason to suppose that the City Inn apportionment ruling would be applicable in Malaysia. The PAM conditions of contract in use in Malaysia in this regard are similar to JCT 98 on which the Walter Lilly decision was made.
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Society of Construction Law Protocol
Where Contractor delays to completion occur concurrently with Employer delays, the Contractors concurrent delay should not reduce any EOT due, even where Employer delays are only overlapping (i.e. of concurrent effect rather than truly concurrent) SOCL page 16 Accords with Walter Lilly judgment
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Practical Completion
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What is practical completion?
An important issue in the Walter Lilly case. PAM 2006 Clause 15.1 states:
When in the opinion of the Architect, the Employer can have full use of the Works
for their intended purposes, notwithstanding that there may be works and defects
of a minor nature still to be executed and the Contractor has given to the Architect a written undertaking to make good and to complete such works and defects within a reasonable time specified by the Architect; and other requirements expressly stated in the Contract Documents as pre-requisite for the issuance of the Certificate of Practical Completion have been complied with.
CIDB 2000 Clause 1.1 states: Practical completion: completion of the works including tests on completion under the contract and where the works include equipment which requires a licence for its operation, then completion so as to render such equipment eligible for issuance of a licence in respect of its operation. Provided however the existence of minor outstanding works and defects, which do not affect the functional use of the works shall not affect Practical Completion.
PWD 203A (Rev. 2010) has similar definition to that of PAM 2006
IEM 2011 does not provide helpful definition of completion thus common law applies
Note that under PAM 2006, de minimis rule applies to minor works and defects in determining practical completion
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The Common Law
J Jarvis v Westminster Corporation [1978]
I take the words [practical completion] to mean completion for all practical purposes
J Neville v William Press and Sons [1981]

I think the word practically gave the Architect the discretion to certify that William Press had fulfilled its obligation, where very minor de minimis work had not been carried out, but that if there were any patent defects the Architect could not have given a certificate of practical completion
Substantial Completion
Max Abrahamson on Engineering Law and the ICE Contracts, 4th Ed.
The Concise Oxford Dictionary equates substantial with virtual which is defined as that is such for practical purposes though not in name or according to strict definition. It is at least clear on the one hand that the fact that the works are or are capable of being used by the Employer does not automatically mean that they are substantially complete (any substantial part of the Works which has both been completed and occupied or used) and on the other hand that
the Engineer may not postpone his certificate under this Clause until the works
are absolutely completed and free of all defects
When has Practical Completion been achieved?
What effect does snagging have on PC?

Judge considered that PC meant completion for all practical purposes and that what completion entails must depend upon the nature, scope and contractual definitions of the works, as they may have developed by way of variations or architects instructions
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De minimis snagging should not be a bar to PC unless there is so much of it that the building cannot be used for its intended purpose In the Walter Lilly case, work was often omitted and awarded to others outside the contract because due to the extensive use of Provisional Sums there was no issue in doing so In this case once the work was omitted it no longer formed part of the contract and did not need to be done or completed in order to obtain PC Although it is unusual for all work to be the subject of provisional sums, if it were to be the case then none of the Malaysian forms restrict the omission of work by definition as a variation
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Conditions Precedent and Notices
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Notice
Hudsons, 11th Edition Since the purpose of such provisions is to enable the owner to consider the position and its financial consequences, (by cancelling an instruction or authorising a variation, for example, he may be in a position to reduce his financial liability if the claim is justified), there is no doubt that in many if not most cases the courts will be ready to interpret these notice requirements as conditions precedent to a claim, so that failure to give notice within the required period may deprive the contractor of all remedy.
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Notice
PAM 2006 Cl. 24.1(a) Notice within 28 days from start of the occurrence of the matter giving rise to claim with estimate & relevant info substantiating the claim Notice within 30 days with estimate Notice within 28 days after event. However, Cl.53.5 allows the Engineer to make determination irrespective of whether the Contractor complied with Cl. 53.1 Defeats purpose of condition precedent
IEM 1989 / PWD 203A IEM 2011 Cl. 53.1
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Notice
CIDB 2000 Cl. 32.1 Notice within 30 days after the event and must specify Such notice is a condition precedent
FIDIC 1999 Cl. 20.1
Notice within 28 days after Contractor became aware of the event or should have become aware of the event
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Notice WW Gear Construction Ltd v Mc Gee Group Ltd [2010] Timely application in writing was a precondition to the recovery of loss and/or expense claim
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Nature and Form of Notice Check contract requirements and comply Case law on nature of applications - London Borough of Merton v Stanley Hugh Leach [1985]
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Lack of Notice Gaymark Investments Pty Ltd v Walter Construction Group
[1999]
Lack of notice could not deny entitlement to EOT where cause of delay was employer act of prevention However, the lack of notice did deny the Contractor costs of delay
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Qualifications in Loss and Expense Clauses Usual in standard form construction contracts that only additional cost not reimbursed by payment under any other clause of the contract will be recoverable. Obvious example: variations clauses
PAM, IEM, PWD & CIDB Forms of Contract
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Notice was not really an issue regarding EOT, the issue was more related to loss and expense Counsel for the parties agreed that timely written application with supporting information and details was a condition precedent under JCT 98 Clause 26
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Judge said it was necessary to bear in mind that most of the matters which entitle contractor to loss and expense are the fault or risk of employer, e.g. variations, late provision of information or instructions Notice needed to be interpreted with care and without construing them against contractor Notice to be served when contractor has incurred loss and expense or is likely to incur loss and expense
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For time related preliminaries contractor can wait until cost has been incurred which will not be until the delay has in fact happened Architect may not have to ascertain loss until it has happened This may be relevant where loss is head office overheads or profit which will not occur until the extended period
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There are two notices to be considered, one relating to application for costs and the other relating to the provision of details of loss and expense to enable ascertainment to be carried out What is to be provided in each case depends on the circumstances of each case
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CHARLTON MARTIN ONE DAY SEMINAR
TEA / COFFEE BREAK
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Lecture 3 BY
MR MICHAEL CHARLTON
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Lecture 3:
Details and Records to Prove Loss and Expense & Global Claims
Details and Records to Prove Loss and Expense Global or Rolled up Claims
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Details and Records to Prove Loss and Expense

Text Book References Delay and Disruption in Construction Contracts (3rd Ed, 2005)
by Keith Pickavance
[the Contractor] should be required to produce the factual evidence underpinning its opinion of the expected effects, together with: (1) a network programme accurately illustrating how it intended to complete the works if the event had not occurred (i.e. a workable master programme);

Text Book References
(2) an updated network programme showing what had actually
been achieved in relation to the proposed programme before

the event occurred; and (3) an impacted network programme demonstrating with
supporting descriptions, the duration of new or delayed activities and their logical interface with the remaining works.
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Cost records required Audit Trail
Quotations
Order forms
Delivery notes
Evidence of incorporation into works
Invoices
Receipts
Evidence of actual payment
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Standard Forms of Contract References PWD 203A (Rev. 2010) Clause 44.2: the Contractor shall submit full particulars of all claims for direct loss or expense ... supporting documents, vouchers,
explanations and calculations which may be necessary to be

ascertained by the S.O. Only IEM 2011 defines Costs
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Decision in Walter Lilly Useful practical comments offered by the judge which have not
been addressed in earlier cases

It should be borne in mind that the architect already has
knowledge of project and delays and costs from attendance at

meetings and receipt of applications for EOT Has much information at his fingertips
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Decision in Walter Lilly Less information needs to be provided by contractor in
applications
Architect only needs to be put in position to form an opinion that
direct loss and expense has been incurred or is likely to be

incurred due to disturbance in regular progress of works Reference made to Merton
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Decision in Walter Lilly Failure to provide notice on minor item of loss will not invalidate
major amount claimed

JCT only requires contractor to submit details which are
reasonably necessary for ascertainment of loss and expense
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Decision in Walter Lilly Offer to architect or QS to inspect records at contractors office
may be considered as submission of details of L&E

Details of L&E do not include backup accounting information
which may support same

No need to construe Clause 26 in a strict way or as penalty against contractor
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Decision in Walter Lilly Worth noting this, employers and consultants often consider
notices requirements which are conditions precedent to be a

penalty, failure to comply bars all
Grounds under Clause 26 arise due to fault and risk of employer

DMW had requested comprehensive list of information which was not necessary under contract
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Decision in Walter Lilly QS and architect are aware of and familiar with items which will
incur additional costs in event of delay

CP would be fulfilled by reference to BQ preliminary items Architect and QS not strangers to contract
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Decision in Walter Lilly The judge posed an unusual and interesting view: Arguable that loss and expense could be valued by reference to contract rates or prices for such preliminaries on basis that those
rates or prices represent the loss (if not the expense) to the
contractor of having such staff or other preliminary activities on the project for longer than anticipated
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Decision in Walter Lilly Ascertainment means determine or discover definitely Mass of back up detail not necessary
In my judgment it is necessary to construe the words in a sensible and commercial way that would resonate with commercial parties in the real world. The architect or QS must be put in the position in which they can be satisfied that all or some of the loss and expense claims are likely to be or have been incurred

They do not have to be certain. One has to bear in mind that
the resolution will be on a balance of probabilities. Tribunal only

has to be satisfied that contractor probably incurred loss and expense as a result of the events listed.
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Global or Rolled up Claims

Traditionally, it has been considered that notwithstanding the extreme difficulty on occasion of isolating the specific cause and relating it to a specific event, if it can be shown that any part of the cause arises from the contractors own default, his claim will fail entirely. The usual response from employers and indeed the courts has been that a contractor must take and maintain records.
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Leading cases J Crosby & Sons Ltd v Portland Urban & District Council
(1967)
It is therefore impracticable, if not impossible, to assess the
additional expense caused by delay and disorganization due to

any one of these matters in isolation from the other matters.
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Leading cases J Crosby & Sons Ltd v Portland Urban & District Council
(1967)
I can see no reason why he (the arbitrator) should not recognize
the realities of the situation and make individual awards in

respect of those parts of individual items of claim which can be dealt with in isolation and a supplementary award in respect of
the remainder of these claims as a composite whole. (J

Donaldson)

Leading cases London Borough of Merton v Stanley Hugh Leach (1985) The loss or expense attributable to each head of claim cannot in reality be separated.
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Leading cases
Wharf Properties Ltd and Another v Eric Cumine Associates and
Others (1991)
The Court of Appeal in Hong Kong decided that the pleadings were hopelessly embarrassing, as they stood (some seven years after the
action began) and an unparticularised pleading in such a form should not

be allowed to stand. (HK C of A) The failure even to attempt to specify any discernible nexus between the wrong alleged and the consequent delay provides, to use [counsels] phrase no agenda for the trial (Privy Council)

Leading cases John Doyle Construction Ltd v Laing Management (Scotland)
Ltd (2004)
A total cost claim
the contractor might reasonably have expected to perform the work for a particular sum, usually the contract price;
the proprietor committed breaches of contract;
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Leading cases John Doyle Construction Ltd v Laing Management (Scotland)
Ltd (2004)
the actual reasonable cost of the work was a sum greater than the expected cost. This involves an assertion that, given that the breaches of contract caused some extra cost, they must have caused the whole of the extra cost because no other relevant cause was responsible for any part of it.

Leading cases John Holland Construction & Engineering Pty Ltd v Kvaerner
RJ Brown Pty Ltd [1996]

In such a case, if an event or events for which the employer is
responsible can be described as the dominant cause of an item

of loss, that will be sufficient to establish liability, notwithstanding the existence of other causes that are to some degree at least
concurrent.

Leading cases Leyland Shipping Company Ltd v Norwich Union Fire
Insurance Society Ltd [1918] AC 350

If an item of loss results from concurrent causes, and one of
those causes can be identified as the proximate or dominant

cause of the loss, it will be treated as the operative cause, and the person responsible for it will be responsible for the loss
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It may be said that such an approach (of apportionment)
produces a somewhat rough and ready result. This procedure

does not, however, seem to us to be fundamentally different in nature from that used in relation to contributory negligence or
contribution among joint wrongdoers



It seems to us that in such cases the contractor should be
able to recover for part of his loss and expense, and we are
not persuaded that the practical difficulties of carrying out the exercise (of apportionment) should prevent him from doing so.
107


It may be possible to use a process of apportionment to
divide the pursuers increased costs between the two sets of

causes The straight denial simply because a claim is global no longer appears to be appropriate

Decision in Walter Lilly Many of the above cases considered WLC had claimed L&E across three residential units using a notional split this was considered reasonable and there was no
purpose in trying to analyse precisely.

Claims were made for thickening of preliminaries due to additional input cause by delay etc.
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Decision in Walter Lilly Global or total cost claims are not terms of art or statutorily
defined terms
Claiming all costs incurred on a project does not make the claim
global
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Decision in Walter Lilly A global claim identifies 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 attributed without more and by inference to the causes of delay and disruption relied on Judge not convinced WLCs claims were global
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Decision in Walter Lilly Prolongation costs related solely to delays asserted for which
EOT applied
Costs mostly for staff for extended period Actual costs used Evidence submitted on thickening
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Decision in Walter Lilly To prove global claims, evidence must be proved as fact On balance of probabilities First; events occurred giving entitlement Second; those events caused delay Third; those events incurred loss and expense
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Decision in Walter Lilly JCT do not lay down that direct loss and expense cannot be
ascertained by appropriate assessments

No set way to prove the three elements of claim
Nothing in principle wrong with global claim

Added evidential difficulties in proving on balance of probabilities
Must show that tender sufficiently well priced to make some net
return, no other matters which actually caused loss

Concurrent events which cause loss which contractor responsible for do
not preclude some recovery

Necessary to make adjustment to allow for loss caused by contractor
1m claim does not fail because contractor responsible for 50k loss, it
is simply deducted from entitlement
Claim simply adjusted for losses caused by contractor Particulars in prose form relating to thickening costs were acceptable
Lecture 4 BY
MR RODNEY MARTIN
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Lecture 4:
Head Office Overheads and Use of Formulae & Recovery of Main Contractor of Reasonable Settlement of SubContractors Claims
Head Office Overheads and the Use of Formulae

Recovery by Main Contractor of Reasonable Settlement of SubContractors Claims
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Head Office Overheads and the Use of

Formulae
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Head Office Overheads
Offices, plant and yards

Running costs
Administrative expenses
Travelling expenses
Directors salaries
Head office staff salaries
Legal and professional fees

Depreciation
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Head Office Overheads Two approaches: Actual increased overhead expended, or The opportunity cost or loss of opportunity method formula
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The Actual Cost Approach Identify actual head office costs affected by delay May be difficult identifying which costs arise directly or indirectly from delay Should be possible for key head office staff to generate a timesheet for delay period and compare with normal time sheet
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The Actual Cost Approach Support services such as accounts, secretarial, clerical, rent, stationery etc. can be included a proportion of costs to be allocated to key staff Alternatively compare actual costs with amount included in tender
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The Lost Opportunity Approach Hudsons Formula
HO/Profit Percentage* x Contract Sum x Period of Delay 100 Contract Period (weeks) (in weeks)
*Percentage in Contract
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The Lost Opportunity Approach Emdens Formula
Head Office Overhead %** x Contract Sum x Period of Delay 100 Contract Period
**The HO/Profit percentage is arrived at by dividing the total overhead cost and profit of the Contractors organization as a whole by the total turnover
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The Lost Opportunity Approach Eichleay Formula
i.e. Value of work during contract period Total value of work for the company as a whole during contract period = x Total Head Office Overhead During Contract Period
Head office Overheads Allocated to the Contract
Head Office Overheads Allocated x Period of Delay Allocated to the Contract Contract Period = Amount Claimed

The Lost Opportunity Approach J F Finnegan Ltd v Sheffield City Council (1988) It is generally accepted that, on principle, a contractor who is delayed in completing a contract due to the default of his employer, may properly have a claim for head office or off-site overheads during the period of delay, on the basis that the workforce, but for the delay, might have had the opportunity of being employed on another contract which would have had the effect of funding the overheads during the overrun period.
126

The Lost Opportunity Approach Ellis Don Ltd v The Parking Authority of Toronto (1978) The court accepted the use of the Hudsons formula Whittall Builders v Chester Le Street Distict Council (1985) The court accepted the use of the Emdens formula which improved on the Hudsons formula by using the actual head office / profit percentage and not that used at tender
127

The Lost Opportunity Approach Tate & Lyle v Greater London Council [1983] After many years of success, the opportunity cost approach and the formula in general fell out of favour when in this case the court would not accept a calculation of head office overheads based upon a simple percentage requiring actual additional cost to be proved
128

The Lost Opportunity Approach Alfred McAlpine Homes North v Property and Land Contractors (1995) Emdens formula was rejected not because the opportunity cost method was not appropriate but because they were not appropriate in this particular case because of the companys method of working and the prevailing economic climate The arbitrator accepted the additional costs
129

The Lost Opportunity Approach The difficulty in proving and assessing the actual additional costs incurred in respect of head office overheads have recently led to the courts taking a more relaxed view of the degree of proof necessary. Claims using loss of opportunity approach and formulae are reappearing no better alternative has yet to be devised For example: Norwest Holst Construction Ltd v Co-operative Wholesale Society (1989) Emden formula used with a significantly reduced percentage

The Lost Opportunity Approach Opportunity cost method using formula relies upon:1. Overhead percentage capable of being earned at time of delay 2. Overhead percentage reasonable 3. Work at same level of overhead recovery available during period of delay
131

The Lost Opportunity Approach Opportunity cost method using formula relies upon:4. Method of working suitable to formula approach, i.e. contractor seeking further work on on-going basis 5. Contractor denied opportunity of earning overheads elsewhere as result of being detained on site during period of delay
Contractor must prove above criteria
132

The Lost Opportunity Approach Following usually required: Audited accounts for appropriate period Showing that level of overheads claimed is reasonable Company trading and actively seeking work other than during alleged delay period
133

The Lost Opportunity Approach Following usually required: Evidence of tender activity, invitation to tender, declined during period of delay Increased margins applied to tenders which were consequently unsuccessful Company prevented from obtaining work during alleged delay
134

Loss of Profit Principles similar to overheads Some contracts exclude claims for loss of profit Unless contract excludes both under contract and at common law then loss of profit a legitimate claim Problems in showing that a profit may have been made but for the delay
135

Loss of Profit Evidence of opportunities to tender on other contracts
Show all tenders submitted and awarded to demonstrate profit level

Demonstration on balance of probability
136

Decision in Walter Lilly Judge considered many of above cases Contractor can recover overheads and profit lost as result of delay on project caused by factors which entitle it to loss and expense
Necessary to show on balance of probability criteria as listed previously
137

Decision in Walter Lilly Architect and QS do not need to be certain that loss has occurred. Needs to be confident that loss and expense being allowed had actually been incurred as a result of the delay and disruption
138
Recovery by Main Contractor of Reasonable

Settlement of Sub-Contractors Claims
139
Recovery by Main Contractor of Settlement of Sub-Contractors Claims

Settlement with Sub-Contractor
Reasonable
WLC had reached a full and final settlement with their subcontractor Norstead at 1,750,000 26k above amount claimed as entitlement Issue as to whether the settlement was reasonable
140

Reasonable
Judge referred to Supershield Ltd v Siemens Building Technologies FE Ltd [2010] BLR145 Employer liable to contractor for contractors liability to his subcontractor Not necessary for contractor to prove on balance of probability that contractor was liable to sub-contractor or that he would have been liable for that amount
141

Reasonable
For Employer to be liable to contractor, contractor must show breach by employer has caused the loss incurred as for causation of damages
Damages not too remote

Claim and settlement sufficiently strong to be considered reasonable
142

Reasonable
Unless claim so weak that reasonable person would not take it sufficiently seriously to offer settlement, cannot be said that settlement was not caused by breach
Loss must be within contemplation of parties
143

Test for Settlement

Reasonable
Is amount within range of amounts reasonable people in position of settling party might have made Following relevant:-
Strength of claim Whether settlement made as result of legal advice Uncertainties and expenses of litigation
144

Test for Settlement
Following relevant:-
Reasonable
Benefits of settling rather than expenses of litigation Question of whether settlement reasonable it to be assessed at date of settlement
145
Conclusion
Walter Lilly Judgment
Offers very helpful practical comments and decisions particularly on: Concurrency Notices and provision of information as condition precedent
Amount of information which is contemplated by typical conditions

Global claims Other topics including Practical Completion, Head Office Overheads, Recovery of Settlement amounts
146
QUESTIONS AND DISCUSSION
147
LUNCH BREAK
148
WORKSHOP
149
CLOSE
150

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THE LATEST AUTHORITIES ON CLAIMS FOR DELAY, DISRUPTION AND LOSS & EXPENSE

8 OCTOBER 2013, TUESDAY PRINCE HOTEL KUALA LUMPUR

About Charlton Martin Group

avoidance after many years of industry experience

About Charlton Martin Group

Contract Administration Claims Preparation / Defense Dispute Resolution Training

What Defines Us?

Lecture 1 by Mr Michael Charlton

Lecture 3 by Mr Michael Charlton

Lecture 1: Introduction & Factual Background

Reported in full 139 pages of judgment and 660 paragraphs!

NOTE: Application for leave to appeal against the judgment in

Consultants to further undermine the architects position

DMW Developments (Employer)

WLC only priced Preliminaries, remainder presented as

Unit C (Mr Mackays)

None was considered as WLCs fault at that time

Cost ballooned 5.5 mil to approx. 9.375 mil by May 2006

EOT, identifying 46 weeks delay due to late instructions by BLDA

Mr Mackay indicated intention to hold LDs from 16 February 2007

defective and outstanding works Knowles involvement raised

Mr Mackay blamed BLDA and continued interfering BLDA

Mackay was found to be an unsatisfactory witness

WLCs expert preferred objective identified critical delay by

Lecture 2: Concurrency, Practical Completion & Conditions Precedent and Notice

delays occur at the same time

Contractor / Subcontractors responsibility

Architect / Engineer / Employers responsibility

and others [2001]

J Neville v William Press and Sons [1981]

What effect does snagging have on PC?

Conditions Precedent and Notices

Conditions Precedent and Notices

Conditions Precedent and Notices

IEM 1989 / PWD 203A IEM 2011 Cl. 53.1

Conditions Precedent and Notices

FIDIC 1999 Cl. 20.1

Conditions Precedent and Notices

Conditions Precedent and Notices

Conditions Precedent and Notices

Conditions Precedent and Notices

PAM, IEM, PWD & CIDB Forms of Contract

Conditions Precedent and Notices

Conditions Precedent and Notices

Conditions Precedent and Notices

Conditions Precedent and Notices

CHARLTON MARTIN ONE DAY SEMINAR

TEA / COFFEE BREAK

Details and Records to Prove Loss and Expense

Details and Records to Prove Loss and Expense

been achieved in relation to the proposed programme before

Details and Records to Prove Loss and Expense

Evidence of actual payment

Details and Records to Prove Loss and Expense

explanations and calculations which may be necessary to be

Details and Records to Prove Loss and Expense

been addressed in earlier cases

knowledge of project and delays and costs from attendance at

Details and Records to Prove Loss and Expense

direct loss and expense has been incurred or is likely to be

Details and Records to Prove Loss and Expense

major amount claimed

reasonably necessary for ascertainment of loss and expense