Whoever said adjudication killed construction law?

30/07/2012 in Construction, Construction Disputes, Real Estate & Development, Real Estate By James Levy

Looking at the law reports the only thing the TCC ever appears to deal with these days is the enforcement or not of adjudication decisions.  Whatever happened to construction law? Well luckily it still lives and breathes.  In the recent case of Walter Lilly & Company Limited and (1) Giles Patrick Cyril Mackay (2) DMW Developments Limited [2012] EWHC 1773 (TCC) Mr Justice Akenhead delivered a decision which goes to the heart of many of the burning issues that have been causing construction lawyers to scratch their head.

While the case looked at a variety of issues, two important issues decided by the court will be discussed below.  They are:

1. Extension of time - how to deal with concurrency; and
2. Global claims – can you run them?

Concurrency

Concurrency is where two or more events have caused the same delay and one or more of those events are the responsibility of the contractor and one or more have been allocated by the contract to be an employer risk (a Relevant Event). For example if adverse weather and lack of labour both cause one week’s delay, should the contractor be awarded a full one week extension of time for the delay caused by the weather?

Recently in City Inn Limited v Shepherd Construction Limited [2010] BLR 473, the Scottish court looked at this question and decided that if there was concurrent delay, the contractor should only get a reasonable apportioned part of the concurrently caused delay.

However, traditionally the English courts have adopted a different approach and have held that the contractor is entitled to a full extension of time for the delay caused by two or more events, provided that one of them is a Relevant Event.

Mr Justice Akenhead in Walter Lilly endorsed the approach traditionally adopted by the English court and refused to adopt the Scottish approach. As a result, we now are able to fairly confidently state that pursuant to English Law, the contractor is entitled to an extension of time for the whole period of the delay caused by the Relevant Event, notwithstanding that his own shortcoming would have caused the same delay.

Global claims

A global claim is where there had been a number of events which have caused delay and in respect of which the contractor wants to claim loss and expense.  However, for whatever reason, the contractor is unable to say how much delay and how much expense has been caused by each individual delaying event and as a result puts in a single rolled up claim for loss and expense.

The English court normally requires a claimant to prove breach/the Relevant Event and then go on to prove what loss has been caused by that event.  If you are unable to prove causation, your claim fails and you are at risk of having your claim struck out.  This has been the fate of some contractors who have put forward a global claim.  The court is particularly concerned if the delay has not all been caused by Relevant Events and that instead some of the delay is the responsibility of the contractor.

Notwithstanding the misgivings expressed previously by some courts, Mr Justice Akenhead held in Walter Lilly that in certain circumstances, a global claim is permissible.

Mr Justice Akenhead expressed the following views:

1. As a matter of fact, a contractor must prove, on balance of probabilities, its case on delay and expense.
2. If the contractor puts forward a global claim, it is not absolutely necessary for it to also prove that it is impossible to prove cause and effect in the usual way. Nor does the contractor have to prove that it did not cause the impossibility.  A global claim may still be permissible even if the reason why the contractor had to resort to a global claim is that the contractor had itself created the impossibility of disentanglement of the claim into its various individual constituents.
3. While clause 26 of the JCT (loss and expense) contains certain pre-conditions as to the claiming of loss and expense, it should be fairly easy for the contractor to fulfil those conditions.  The claim put forward does not have to be perfectly put together and every last “i” and every “t” crossed.  The contractor must provide sufficient information to show that the loss and expense claim is likely to be or has been incurred.  Again it should be remembered that the English civil court works on the basis of “balance of probabilities” and not on “beyond all reasonable doubt”.  A contract administrator who is on top of the project, probably already has a good idea of costs that will be incurred by the contractor for any period of delay.  They should know who/what is on site at any particular time and for what purpose.
4. There is no set way for a contractor to prove its claim.  The evidence may be incredibly detailed factual evidence which clearly demonstrates every penny of costs that was attributable to each Relevant Event.  That is great, if that is the case but it does not have to be.
5. While there are evidential difficulties with a global claim, there is nothing wrong in principle with it.  However the contractor will still have to establish, on the balance of probabilities, that the cost which it has incurred would not have been incurred in any event.  It will have to prove that there are no other matters which caused the cost claimed.
6. The fact that a series of other factors (which are the risk of the contractor) caused or contributed to the global loss does not necessarily mean that the contractor is entitled to nothing.  The same goes where the contractor cannot prove that the event caused or contributed to the global loss.  The court will try to deduct from the total/global claim, the loss that the contractor cannot prove it is entitled to recover. 
7. It is always advisable for the contractor to try to apportion a particular loss to a particular event.  If the contractor cannot do this, while a court should not dismiss it out of hand, the contractor should expect the court to be sceptical.

In conclusion, as the academic year ends and the Olympics are about to begin, I think we can take two lessons from Walter Lilly:

1. While the united GB team is, we hope, just about to secure a hoard of gold medals, there is still a distinction between the way the Scots do things and how the English do them.  It will always be thus, and
2. those contractors whose records are not in apple pie order, should not necessarily despair.  Although I am sure that the school report will say “they could have done better”.

For more information please contact James Levy or your usual Lewis Silkin contact.