Ascertainment of loss and expense

Where a contractor is claiming loss and expense for its own plant, notional plant hire rates are not an acceptable method of calculating loss (see Alfred McAlpine Homes Ltd v Property and Land Contractors Ltd [1995]). In such circumstances, actual loss must be calculated, taking into account the substantiated costs of capital and depreciation. The calculation may not include other elements included in hire rates, such as periods of non-hire.

If the contractor can prove that, because of the delay, it has been deprived of the use of that plant elsewhere and has therefore had to hire plant for another project, the associated extra and substantiated costs will be recoverable if they pass the 'remoteness' test outlined above. The hire charges of plant from non-associated plant hire companies will be recoverable in accordance with the usual principles.

Where plant is hired from a sister company, the hire rates should be allowed if the contractor can demonstrate that they are genuine market rates. In instances where a sister plant hire company has been set up as a vehicle to protect assets, but does not operate in the open market, particular care is needed. In such instances, hire rates are notional and bear no relevance to market hire rates. It should be remembered that the contractor has a duty to mitigate its loss. If plant could have been obtained more cheaply elsewhere, then the contractor's compensation should be restricted to that lower rate.