Professional Documents
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and the Practical Implications for those Preparing and Defending Claims
o Construction
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Lecture 1
BY MR MICHAEL CHARLTON
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Introduction
Walter Lilly & Co Ltd v Mackay and Another (No 2) [2012] EWHC 1773 (TCC)
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
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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
Bought and build on a plot of land at 3, Boltons Place, London SW5 (A house each)
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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
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
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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!
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
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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)
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Factual Background
Walter Lilly v Mackay July 2006: Only 20 weeks EOT granted. WLC applied for another
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.
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
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
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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
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Factual Background
A Brief Look into the Judgment On the witnesses generally favourable to WLC while Mr
Lecture 2
BY MR RODNEY MARTIN
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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)
OR Neutral event
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Concurrency in Delay
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Concurrency in Delay
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Concurrency in Delay
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Concurrency in Delay
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Concurrency in Delay
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Concurrency in Delay
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Concurrency in Delay
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
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Concurrency in Delay
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
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Concurrency in Delay
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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Concurrency in Delay
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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Concurrency in Delay
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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Concurrency in Delay
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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Concurrency in Delay
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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Concurrency in Delay
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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Concurrency in Delay
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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Concurrency in Delay
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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Concurrency in Delay
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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Concurrency in Delay
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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Concurrency in Delay
Leading Cases
The Royal Brompton Hospital NHS Trust v Frederick Alexander Hammond
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Concurrency in Delay
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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Concurrency in Delay
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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Concurrency in Delay
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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Concurrency in Delay
Decision in Walter Lilly
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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Concurrency in Delay
Decision in Walter Lilly
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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Concurrency in Delay
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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Practical Completion
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.
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Practical Completion
What is practical completion?
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.
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Practical Completion
What is 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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Practical Completion
The Common Law
J Jarvis v Westminster Corporation [1978]
I take the words [practical completion] to mean completion for all practical purposes
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
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Practical Completion
Decision in Walter Lilly
When has Practical Completion been achieved?
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Practical Completion
Decision in Walter Lilly
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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Notice within 28 days after Contractor became aware of the event or should have become aware of the event
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[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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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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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);
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supporting descriptions, the duration of new or delayed activities and their logical interface with the remaining works.
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Quotations
Order forms
Delivery notes
Evidence of incorporation into works
Invoices
Receipts
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applications
Architect only needs to be put in position to form an opinion that
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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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(1967)
It is therefore impracticable, if not impossible, to assess the
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(1967)
I can see no reason why he (the arbitrator) should not recognize
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Others (1991)
The Court of Appeal in Hong Kong decided that the pleadings were hopelessly embarrassing, as they stood (some seven years after the
Ltd (2004)
A total cost claim
the contractor might reasonably have expected to perform the work for a particular sum, usually the contract price;
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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.
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concurrent.
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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.
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defined terms
Claiming all costs incurred on a project does not make the claim
global
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EOT applied
Costs mostly for staff for extended period Actual costs used Evidence submitted on thickening
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Must show that tender sufficiently well priced to make some net
return, no other matters which actually caused loss
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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
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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
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Administrative expenses
Travelling expenses
Directors salaries
Head office staff salaries
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HO/Profit Percentage* x Contract Sum x Period of Delay 100 Contract Period (weeks) (in weeks)
*Percentage in Contract
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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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Head Office Overheads Allocated x Period of Delay Allocated to the Contract Contract Period = Amount Claimed
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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
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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
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Reasonable
For Employer to be liable to contractor, contractor must show breach by employer has caused the loss incurred as for causation of damages
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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
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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
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Reasonable
Benefits of settling rather than expenses of litigation Question of whether settlement reasonable it to be assessed at date of settlement
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Conclusion
Walter Lilly Judgment
Offers very helpful practical comments and decisions particularly on: Concurrency Notices and provision of information as condition precedent
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LUNCH BREAK
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WORKSHOP
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CLOSE
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