Ascertainment of loss and expense

Global claims arise where a contractor argues that it cannot allocate cost individually to each of the heads of claim, but that the combined effects of the heads of claim have caused the loss in question.

The general rule of thumb is that such claims may experience difficulty with adequately addressing the issue of cause and effect and therefore may not satisfy the requirement to prove causation.

In certain circumstances, however, such claims may be valid, provided that the following conditions are met:

• it must be impracticable to make an accurate apportionment between the various heads of claim;
• there must be no duplication in the costs awarded; and
• there must be no profit element in the costs (see Crosby Ltd v Portland UDC [1967]).

It must also be established that the costs incurred are wholly the responsibility of the employer. There must be no neutral causes or causes that are the responsibility of the contractor wrapped up within the claim. Moreover, all of the above requirements must be met - failure on one invalidates the entire claim.

In some instances, a global claim may be a perfectly valid way of calculating loss. See, for example, British Airways Pension Trustees Ltd v Sir Robert McAlpine & Sons Ltd and Others [1994]. Similar principles applied in GMTC Tools and Equipment Ltd v Yuasa Warwick Machinery Ltd [1994]. In both of these cases, the court refused to strike out claims made on a global basis and affirmed that the claimants were entitled to plead their claim in that way if they chose to do so. (See also London Borough of Merton v Stanley Hugh Leach Ltd [1985] and Section 4.2.4.10 of the old Surveyors' Construction Handbook.)

However, there is a large risk for the contractor in relying on global claims. If one factor founded on as playing a material part in the causation of the global loss can be seen to be the responsibility of the contractor, or otherwise not the responsibility of the employer and that factor cannot be adequately separated out or isolated then there will be no rational basis for maintaining any part of the claim (see John Doyle Construction Ltd v Laing Management (Scotland) Ltd [2002] CILL 1870).

A claim should not be dismissed solely on the basis that there are elements of the costs which have been calculated on a 'global basis'. The case of John Doyle Construction Ltd v Laing Management confirmed that a global claim should not be dismissed if there was a possibility of the claiming party being able to demonstrate chains of causation between individual causes and heads of loss, or of the claiming party being able to demonstrate that the dominant cause of the loss was the employer's responsibility, or of the claiming party being able to use the process of apportionment to divide the costs between the various causes.

The case of John Doyle Construction Ltd v Laing Management has since received some limited judicial support in City Inn Ltd v Shepherd Construction Ltd [2010] and London Underground Ltd v Citylink Telecommunications Ltd Rev 1 [2007].

In Walter Lilly & Company Ltd v Mackay & Anor [2012] EWHC 1773 (TCC) the court provided the following very useful summary at paragraph 486 of the judgment:

'(a) Ultimately, claims by contractors for delay or disruption related loss and expense must be proved as a matter of fact. Thus, the Contractor has to demonstrate on a balance of probabilities that, first, events occurred which entitle it to loss and expense, secondly, that those events caused delay and/or disruption and thirdly that such delay or disruption caused it to incur loss and/or expense (or loss and damage as the case may be). I do not accept that, as a matter of principle, it has to be shown by a claimant contractor that it is impossible to plead and prove cause and effect in the normal way or that such impossibility is not the fault of the party seeking to advance the global claim. One needs to see of course what the contractual clause relied upon says to see if there are contractual restrictions on global cost or loss claims. Absent and subject to such restrictions, the claimant contractor simply has to prove its case on a balance of probabilities.

(b) Clause 26 [of JCT ‘98] in this case lays down conditions precedent which, if not complied with, will bar to that extent claims under that clause. If and to the extent that those conditions are satisfied, there is nothing in Clause 26 which states that the direct loss and/or expense cannot be ascertained by appropriate assessments.

(c) It is open to contractors to prove these three elements with whatever evidence will satisfy the tribunal and the requisite standard of proof. There is no set way for contractors to prove these three elements. For instance, such a claim may be supported or even established by admission evidence or by detailed factual evidence which precisely links reimbursable events with individual days or weeks of delay or with individual instances of disruption and which then demonstrates with precision to the nearest penny what that delay or disruption actually cost.

(d) There is nothing in principle "wrong" with a "total" or "global" cost claim. However, there are added evidential difficulties (in many but not necessarily all cases) which a claimant contractor has to overcome. It will generally have to establish (on a balance of probabilities) that the loss which it has incurred (namely the difference between what it has cost the contractor and what it has been paid) would not have been incurred in any event. Thus, it will need to demonstrate that its accepted tender was sufficiently well priced that it would have made some net return. It will need to demonstrate in effect that there are no other matters which actually occurred (other than those relied upon in its pleaded case and which it has proved are likely to have caused the loss). It is wrong, as Counsel suggested, that the burden of proof in some way transfers to the defending party. It is of course open to that defending party to raise issues or adduce evidence that suggest or even show that the accepted tender was so low that the loss would have always occurred irrespective of the events relied upon by the claimant contractor or that other events (which are not relied upon by the claimant as causing or contributing to the loss or which are the "fault" or "risk" of the claimant contractor) occurred may have caused or did cause all or part of the loss.

(e) The fact that one or a series of events or factors (which are the risk or fault of the claimant contractor) caused or contributed (or cannot be proved not to have caused or contributed) to the total or global loss does not necessarily mean that the claimant contractor can recover nothing. It depends on what the impact of those events or factors is. An example would be where, say, a contractor's global loss is £1 million and it can prove that but for one overlooked and unpriced £50,000 item in its accepted tender it would probably have made a net return; the global loss claim does not fail simply because the tender was underpriced by £50,000; the consequence would simply be that the global loss is reduced by £50,000 because the claimant contractor has not been able to prove that £50,000 of the global loss would not have been incurred in any event. Similarly, taking the same example but there being events during the course of the contract which are the fault or risk of the claimant contractor which caused or cannot be demonstrated not to cause some loss, the overall claim will not be rejected save to the extent that those events caused some loss. An example might be (as in this case) time spent by WLC's management in dealing with some of the lift problems (in particular the over-cladding); assuming that this time can be quantified either precisely or at least by way of assessment, that amount would be deducted from the global loss. This is not inconsistent with the judge's reasoning in the Merton case that "a rolled up award can only be made in the case where the loss or expense attributable to each head of claim cannot in reality be separated", because, where the tribunal can take out of the "rolled up award" or "total" or "global" loss elements for which the contractor cannot recover loss in the proceedings, it will generally be left with the loss attributable to the events which the contractor is entitled to recover loss.

(f) Obviously, there is no need for the Court to go down the global or total cost route if the actual cost attributable to individual loss causing events can be readily or practicably determined. I do not consider that Vinelott J was saying in the Merton case (at page 102 last paragraph) that a contractor should be debarred from pursuing what he called a "rolled up award" if it could otherwise seek to prove its loss in another way. It may be that the tribunal will be more sceptical about the global cost claim if the direct linkage approach is readily available but is not deployed. That does not mean that the global cost claim should be rejected out of hand.

(g) DMW's Counsel's argument that a global award should not be allowed where the contractor has himself created the impossibility of disentanglement (relying on Merton per Vinelott J at 102, penultimate paragraph and John Holland per Byrne J at page 85) is not on analysis supported by those authorities and is wrong. Vinelott J was referring to unreasonable delay by the contractor in making its loss and/or expense claim; that delay would have led to their being non-compliance with the condition precedent but all that he was saying otherwise was that, if such delay created difficulty, the claim may not be allowed. He certainly was not saying that a global cost claim would be barred necessarily or at all if there was such delay. Byrne J relied on Vinelott J's observations and he was not saying that a global cost claim would be barred but simply that such a claim "has been held to be permissible in the case where it is impractical to disentangle that part of the loss which is attributable to each head of claim, and this situation has not been brought about by delay or other conduct of the claimant". In principle, unless the contract dictates that a global cost claim is not permissible if certain hurdles are not overcome, such a claim may be permissible on the facts and subject to proof.'

John Sisk & Son Ltd v Carmel Building Services Ltd [2016]:

'A party endeavouring to prove a global or total costs claim will carry a greater burden than a party endeavouring to prove the same claim on an itemised basis. This was not to introduce some flawed legal principle, but rather to reflect the comments of Akenhead J at paragraph 486 (d) in Walter Lilly (supra). There are added evidential difficulties in proving a global or total costs claim.'