This month, in the fourth of the series, Chris Binnington enlightens us on the topic of Claims, and in particular Global Claims. Read on.
It is more than 15 years since I presented a seminar dealing with Contractors Claims. At the time we had been on the receiving end of a number of large claims by Contractors and one of the common threads was the failure to understand the basic logic of a claim.
The common approach then was that the Contractor wanted to recover from the loss situation he found himself in and accordingly formulated his claim on the basis of quantifying the difference between what he thought the job would cost and what it had actually cost. Alternatively, the approach was to try and recover the difference between the cost of constructing the Works and what was actually paid.
What the Contractors were trying to do was to create a global approach to the claim ignoring the basic principles, which always apply to claim situations, namely, that a claim must have a foundation either in a clause of the contract or, alternatively, in the common law.
Since that time, the use of the global claim approach has continued to find favour with Contractors, notwithstanding the repeated approach taken by courts internationally to resist claims on this basis. Even in the United States, a jurisdiction that is commonly held out to be more liberal than its European counterparts, the global approach, or ‘total cost approach” as it is more commonly known there, has often failed.
What then is a global claim and are there circumstances under which this approach might succeed? Firstly, global claims are usually related to loss and expense claims (damages) arising out of delay and disruption situations. Generally there will be a substantial number of individual causes of delay and disruption and hence loss and expense. In order to succeed with this approach it is necessary to draw from the experience of courts that have allowed this approach and to take careful note of the types of situations, within the framework of such loss and expense, which have caused claims to fail.
Fortunately there are a number of cases from which guidance may be obtained. One of the more recent is the decision by the Scottish Court of Sessions in John Doyle Construction Ltd v Laing Management (Scotland) Ltd. In this appeal court case the court had the opportunity to review the approach taken by other jurisdictions. The court started its analysis by observing that the principle of global claims had been established in a number of prior cases. For example: Merton v Leach (1985); Wharf Properties v Eric Cumine Associates (1991): John Holland Construction and Engineering v Kvaemer RJ Brown (Pty) Ltd. (1996). In these cases the claimants had averred that, despite their best efforts, they had been unable to identify causal links between each cause of delay and disruption and the cost consequences thereof. The court then went on to analyse what, in its opinion, would be required for this approach to succeed and started the analysis by setting out what ordinarily would require to be proved for a loss and expense claim as follows:
- the occurrence of an event for which the Employer bears responsibility;
- that the Contractor has suffered loss or incurred expense;
- that the loss or expense was caused by the event.
The Court also recognised that the events may interact with each other in complex ways such that it becomes very difficult if not impossible, to identify what loss and expense each event has caused.
The Court then went on to state the underlying principle necessary to be established for such an approach to succeed. As can be seen from this principle it will inevitably be an up hill struggle for the Contractor/Claimant.
The principle is that ALL events for which the Claimant relies, must be events for which the Employer is liable. If there are contributing causes of delay and disruption for which the Contractor is liable or if there are circumstances causing delay and disruption, hence loss and expense for which neither party is liable, then the claim, on a global basis, will fail. Therein lies the rub!
Two Possibilities for success
However, the Court left open two possibilities. The first is that whilst the global claim will fail under the above considerations, it does not necessarily follow that no claim will succeed. The fact that the claimant has been driven (or chosen) to advance a global claim, it does not follow that after evidence has been led it will remain impossible to attribute individual causes of loss and expense to individual causative events. In the South African Courts, or in arbitration, it would be necessary to ensure that the claimant’s pleadings are wide enough to cover this situation.
The second consideration is that the Court suggested that “causation” must be treated as a common sense matter.
A further possibility exists which has recently found favour in an arbitration in which we were involved, It must however be stated that arbitration a legal precedent.
Keep good records
The case involved the usual complex facts and interrelated causes of delay and disruption. By analysing each week of the contract during the disrupted period, it was possible to allocate portions of the hours expended — for which good records existed — to: work for which payment was received; inefficiency occasioned by the claimant itself; hours lost for which neither party was responsible, weather etc.; unproductive hours caused by the Employer and for which overwhelming evidence of the existence thereof was available but for which the individual linkage of cause and effect could not be established.
The necessity for such an approach was occasioned by virtue of the Contractor’s lack of detailed records of events on a daily, or in this case, more appropriately, an hourly basis.
The outcome of the arbitration was consistent with the Scottish Court’s approach, which highlighted the fact that had the Employer’s causes not been the dominant cause of delay and disruption then the global claim approach would fail.
The conclusion is that whilst global claims continue to be some of the most difficult claims to succeed with, the Courts have not rejected them out of hand but have rather set out guidelines which open the door to success if the claimant can remain within those guide lines, [John Doyle Construction Ltd. V Laing Management (Scotland) LTD  ScottS 141 (11 June 2004)
THE CIVIL ENGINEERING CONTRACTOR MAY 2005