Ascertainment of loss and expense

An argument often put forward by contractors is that they have incurred reasonable expenses in preparing a claim, and that these expenses should be recoverable as part of the claim. This argument has never been fully accepted by the courts, and as such should usually be rejected. The preferred view is that the costs for preparing a claim are only recoverable as extra-contractual damages in three circumstances:

1. Under the Joint Contracts Tribunal (JCT) conditions, where the employer is in breach of contract by failing to prepare the final account and the contractor mitigates the damage by preparing it for the employer. This is not applicable under the Institution of Civil Engineers (ICE) Conditions of Contract Measurement Version (7th edition) (see clause 60(4));
2. the contractor has been instructed to collate or analyse information in a manner beyond that which could reasonably have been expected; and
3. costs in the course of arbitration or litigation, such as the appointment of an expert witness, where the contractor is successful.

In all of the above circumstances, only reasonable costs are recoverable. Invariably, when a claim proceeds to arbitration or litigation, the original claim presented by the contractor is redrafted and represented. In these circumstances, the costs associated with the original preparation of the claim are not recoverable (see James Longley v South West Regional Health Authority [1983]).

In Walter Lilly & Company Ltd v Mackay & Anor [2012] EWHC 1773 (TCC) the court concluded that claim preparation costs could be a valid head of claim but found it very difficult to unravel exactly what the claims consultant had been doing in that case. The court therefore made a conservative allowance for such costs as an additional preliminary resource needed to help manage the delay that was occurring.