the latest authorities on claims for delay disruption and loss expense ....pdf
Post on 04-Jun-2018
229 Views
Preview:
TRANSCRIPT
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
1/150
THE LATEST AUTHORITIES
ON CLAIMS FOR DELAY, DISRUPTION AND
LOSS & EXPENSE
and the Practical Implications for those Preparingand Defending Claims
8 OCTOBER 2013, TUESDAY
PRINCE HOTEL
KUALA LUMPUR
www.charltonmartin.com
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
2/150
About Charlton Martin Group The Regions leading Construction Contracts Consultancy
Consultants who specialise in dispute resolution and dispute
avoidance after many years of industry experience
Serving various market sectors including:
o Engineering
o Oil & Gas / Petrochemical / Process
o Construction
o Power
2www.charltonmartin.com
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
3/150
About Charlton Martin Group
3www.charltonmartin.com
Michael Charlton andRodney Martin have worked together
successfully for the past 16 years, the last 6 of which have been
as Chairman and CEO of the Charlton Martin Group.
The Charlton Martin Group provides services in 4 key areas:
Contract Administration
Claims Preparation / Defense Dispute Resolution
Training
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
4/150
Our Offices Hong Kong
Singapore
Malaysia
Plus Regional and Internat ional Coverage
4www.charltonmartin.com
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
5/150
What Defines Us?
5www.charltonmartin.com
WORK ING HARDER AT WINNING
To pro vid e hig h quali ty consultanc y servic es which arerelevant
to ou r clients needs and circumstances in any par t icu lar
si tuat ion.
In do ing so to be the construct ion con tracts co nsul tant of
cho icew ithin the Asia Pacif ic Regio n.
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
6/150
www.charltonmartin.com
www.char l tonmart in .com
6
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
7/150www.charltonmartin.com
Programme
09:00 09:45 Lecture 1 by Mr Michael Charlton
09:45 10:30 Lecture 2 by Mr Rodney Martin
10:30 11:00 Tea / Coffee Break
11:00 11:45 Lecture 3 by Mr Michael Charlton
11:45 12:30 Lecture 4 by Mr Rodney Martin
12:30 13:00 Questions & Discussion
13:00 14:00 Lunch
14:00 15:30 Workshop 1
15:30 15:45 Tea / Coffee Break
15:45 17:30 Workshop 2
17:30 Close
7
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
8/150www.charltonmartin.com 8
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
9/150www.charltonmartin.com 9
Lecture 1
BY
MR MICHAEL CHARLTON
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
10/150www.charltonmartin.com
Lecture 1: Introduction & Factual Background
Introduction
Factual background toWalter L illy & Co Ltd v Mackay
10
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
11/150www.charltonmartin.com
Introduction
Walter Lil ly & Co L tdvMackay and Ano ther (No 2) [2012]
EWHC 1773 (TCC)
Reported in full 139 pages of judgment and 660 paragraphs!
Also reported in Building Law Reports [2012] BLR 503
provides a commentary and edited report (lengthy factual and fact
specific content removed)
NOTE: Application for leave to appeal against the judgment in
this case was refused in January 2013.
11
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
12/150www.charltonmartin.com
Introduction
Why theWalter Li l lycase?
Addresses the following important topics:
Concurrency in delay
Practical Completion
Conditions Precedent and Notices
Details and Records to Prove Loss and Expense
Global Claims
12
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
13/150
www.charltonmartin.com
Introduction
Why theWalter Li l lycase?
Addresses the following important topics:
Head Office Overheads and Use of Formulae
Recovery by Main Contractor of Reasonable Settlements of
Subcontractors Claims
13
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
14/150
www.charltonmartin.com
Factual Background
Walter Li l lyvMackay
Project from hell!
Recipes:
Difficult and determined employer
Poor and underprovided design
Architect who was undermined and prevented from operating
Consultants to further undermine the architects position
14
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
15/150
www.charltonmartin.com
Factual Background
Walter Li l lyvMackay
Recipes:
Indecision and changes by employer
Complete breakdown between employer and his design team
15
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
16/150
www.charltonmartin.com
Factual Background
Walter Li l lyvMackay
Messrs Daniel Messrs Mackay Messrs West
DMW
Developments
(Employer)
Bought and build on a plot of land at 3, Boltons Place, London SW5
(A house each)
16
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
17/150
www.charltonmartin.com
Factual Background
Walter Li l lyvMackay
Project:
Contractor: Walter Lilly & Company Ltd (WLC)
Contract Sum: 15,372,962.83
QS: Gardiner & Theobald (G&T)
Architect: Barrett Lloyd Davis Associates (BLDA)
17
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
18/150
www.charltonmartin.com
Factual Background
Walter Li l lyvMackay
Project:
Date for Possession: 12 July 2004
Date for Completion: 23 January 2006
Contract Period: 80 weeks (approx. 18.5 months)
Contract: JCT 98, without quantities
WLC only priced Preliminaries, remainder presented as
provisional sums
18
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
19/150
www.charltonmartin.com
Factual Background
Walter Li l lyvMackay
WLC were responsible in respect of design for a list of items.
There was little design or detail available at tender stage.
19
PROJECT
Unit A Unit B Unit C (MrMackays)
split into 3 contracts viadeed of variation
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
20/150
www.charltonmartin.com
Factual Background
Walter Li l lyvMackay
Delays right from the beginning:
Demolition works
Piling works
End of 2004, design information still incomplete due to indecision by
DMW
After original completion date (January 2006), major aspects of
design still not resolved!
None was considered as WLCs fault at that time
20
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
21/150
www.charltonmartin.com
Factual Background
Walter Li l lyvMackay
Cost plan (drawn on the basis for the provisional sum) became
inadequate
High quality and specification demanded by Mr and Mrs Mackay
(e.g. hand stitched leather to bookshelves) made delays worse
Issue arose: Who was responsible for delays in dealing with
provisional sums? Differing views by WLC and DMW
21
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
22/150
www.charltonmartin.com
Factual Background
Walter Li l lyvMackay
November 2005 : WLC applied for19 weeks EOT
January 2006 : WLC reported 27 weeks EOT
April 2006 : WLC requested for33 weeks EOT
June 2006 : WLC anticipated completion in November 2006 i.e.
36 weeks delay
Cost ballooned 5.5 mil to approx. 9.375 mil by May 2006
22
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
23/150
www.charltonmartin.com
Factual Background
Walter Li l lyvMackay
Up to 29 June 2006, BLDA considered the main causes of delay
are:
Late instructions and design information
Splitting of packages into smaller packages
Poor coordination of services, the lifts and substation
Problems from only one staircase compared to two in original
specification
WLC not taking enough design responsibility (not accepted by WLC)
23
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
24/150
www.charltonmartin.com
Factual Background
Walter Li l lyvMackay
July 2006: Only 20 weeks EOT granted. WLC applied for another
EOT, identifying 46 weeks delay due to late instructions by BLDAarising from changes to doors and wall specification
October 2006: More and more delays!
Continuous strained ties between Mr Mackay and BLDA and G&T
prompted him to employ Knowles for contractual and adjudication
advice.
24
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
25/150
www.charltonmartin.com
Factual Background
Walter Li l lyvMackay
Strategy with Knowles on board:
Pursue WLC, make them responsible for LD
and restrain BLDAs actions
BLDA was accused of masking its own delay by issuing EOTs to
WLC. Under pressure, BLDA wrote numerous letters to WLC
omitting sections of work to shorten the contract period.
25
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
26/150
www.charltonmartin.com
Factual Background
Walter Li l lyvMackay
Final EOT extended completion date to 16 February 2007.
Practical Completion for Unit A certified on 2 February 2007,
while MrMackays unit was still in delay due to various problems.
Mr Mackay indicated intention to hold LDs from 16 February 2007
had client walk around meetings without WLCs presence
Knowles became influential and advised withholding of 550k for
defective and outstanding works Knowles involvement raised
temperature
26
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
27/150
www.charltonmartin.com
Factual Background
Walter Li l lyvMackay
March 2007: DMW withheld payment BLDA suspend service
April 2007: WLC requested 71 weeks of EOT as most major
delays were still ongoing
Mr Mackay blamed BLDA and continued interfering BLDA
cannot issue instructions without Knowles agreement
WLC commenced adjudication with DMW succeed amounts
withheld for various defects were inappropriate
27
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
28/150
www.charltonmartin.com
Factual Background
Walter Li l lyvMackay
Knowles aggressive policy:
Wewould like to create a situation whereby direct work is not
delaying [Practical Completion] i.e. Practical Completion is
solely delayed byWLCsworks. WLCsworks can be omitted to
achieve this if possible
Recommended BLDA be dismissed
G&T instructed not to issue any further interim valuations
28
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
29/150
www.charltonmartin.com
Factual Background
Walter Li l lyvMackay
January 2008 : Delay due to specialist ceiling works
February 2008 : Mr Mackay fall out with Knowles unpaid bills
Engaged in highly derogatory dialogues
Objected Knowles suggestion that DMW were responsible for
part of the delays
29
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
30/150
www.charltonmartin.com
Factual Background
Walter Li l lyvMackay
March 2008 : DMW terminated BLDA. Navigant appointed
January to August 2008 : Many artists and tradesmen worked on
the site damaged WLCs work WLC spent time rectifying
but Navigant were not dealing with their EOT applications
Navigant: Practical Completion 7 July 2008 (original: 23 Jan 2006)
G&T: Valuation No. 40 9.1 mil (original: 5.3 mil)
Dispute continues into 2009 and 2010
30
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
31/150
www.charltonmartin.com
Factual Background
A Brief Look into the Judgment
On the witnesses generally favourable to WLC while Mr
Mackay was found to be an unsatisfactory witness
On the experts approach
WLCs expert preferred objective identified critical delay by
referring to logical sequence of events on the longest path
MrMackays expert focused on WLC not proving their case
not expertsjob based on conversation not in evidence
31
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
32/150
www.charltonmartin.com 32
Lecture 2
BY
MR RODNEY MARTIN
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
33/150
www.charltonmartin.com
Lecture 2: Concurrency, Practical Completion &
Conditions Precedent and Notice
Concurrency in Delay
Practical Completion
Conditions Precedent and Notices
33
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
34/150
www.charltonmartin.com
Concurrent Delay
34
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
35/150
www.charltonmartin.com
Concurrency in Delay
35
Concurrent Delay(work delayed due to two or more competing causes of delay)
Contractor /
Subcontractors
responsibility
OR Neutral event
delays occur at the same time
Architect /
Engineer /
Employers
responsibility
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
36/150
www.charltonmartin.com 36
Concurrency in Delay
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
37/150
www.charltonmartin.com 37
Concurrency in Delay
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
38/150
www.charltonmartin.com 38
Concurrency in Delay
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
39/150
www.charltonmartin.com 39
Concurrency in Delay
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
40/150
www.charltonmartin.com 40
Concurrency in Delay
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
41/150
www.charltonmartin.com 41
Concurrency in Delay
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
42/150
www.charltonmartin.com
Concurrency in Delay
Keating on Construction Contracts:
Dominant Cause Approach
Leyland Ship ping v Norw ich[1918]which cause is dominant is a question of fact which is not solved
by mere point of order in time, but is to be decided applying
common sense standards
H Fairweather v Lo nd on Boro ug h of Wand sw orth[1987]
To assume that it is possible to analyse two causes of delay and
assess which event is the dominant or predominant cause of
delay was considered by the court to be inappropriate
42
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
43/150
www.charltonmartin.com
Concurrency in Delay
Keating on Construction Contracts:
Apportionment
Jo hn Doyle v Laing Management[2004]
City Inn v Shepherd Constru ctio n[2010]
Favoured in these cases - requires a compromise between the
parties by allocating total delay among matters causing delay.
Rejected in other cases and not considered applicable under
English law where standard form construction contracts are used
43
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
44/150
www.charltonmartin.com
Concurrency in Delay
Keating on Construction Contracts:
But For
Turner Page Musi c v To rres[1997]but for the delay caused by the Architect the delay should not have
occurred but rejected in this case as being inconsistent with the
more popular Dominant Cause approach
44
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
45/150
www.charltonmartin.com
Concurrency in Delay
Keating on Construction Contracts:
Devlin Approach
If a Delay is the result of two causes one of which constitutes a breach
of contract (e.g. late instruction) then the EOT will be calculated using
the delay caused by the breach
But this is not a helpful approach where delay caused by both parties
would result in both parties claims (prolongation cost by contractor and
LAD by employer) being successful which makes little sense for samedelay period
45
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
46/150
www.charltonmartin.com
Concurrency in Delay
Keating on Construction Contracts:
Burden of Proof Approach
Applies where one of the delays clearly caused by the Contractor
Contractor must demonstrate that delay to completion was caused by
matters which entitle him to EOT in isolation of his own delay
No entitlement where concurrent delays since Contractor could notshow separate liability for delay
Resulting in same outcome as but for test
46
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
47/150
www.charltonmartin.com
Concurrency in Delay
Keating on Construction Contracts:
First Past the Post
One of the delays occurs first in time (thus first past the post)
Used for dealing with questions of EOT
All other delaying matters are then ignored until the first cause has
ceased to have effect
47
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
48/150
www.charltonmartin.com
Concurrency in Delay
Keating on Construction Contracts:
Loss Lies Where It Falls
Where parallel Contractor and Employer delays occur, Employer
required to acknowledge the right to EOT and thus will be prevented
from levying LDs
Contractor will have no entitlement to loss & expense because this
would arguably have been incurred in any event due to his own
culpable delay
48
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
49/150
www.charltonmartin.com
Concurrency in Delay
Leading Cases
Wells v Arm y and Navy Co-operati ve Soc iety[1902]
Where an Employer delays the Contractor, he or she will not be entitledto deduct liquidated damages even though the Contractor is causing
delay
49
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
50/150
www.charltonmartin.com
Concurrency in Delay
Leading Cases
City Inn Ltd v Sheph erd Constru ctio n Ltd[2008]
Delay that had been caused by matters for which Contractor wasresponsible would not deprive the Contractor of an Extension of Time for
the delay caused by a Relevant Event
Architect should apportion responsibility for delay only way for architect
to give fair result. Similar to contributory negligence.
But for test rejected.
50
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
51/150
www.charltonmartin.com
Concurrency in Delay
Leading Cases
City Inn Ltd v Shepherd Con stru ctio n Ltd[2010]
Identified concurrency as a delay caused by the Contractor (culpable delay)occurring at the same time as a delay caused by the Employer where both
cause delay to completion. The appeal decision of the 2008 judgment still
supported apportionment.
De Beers UK Lim ited v A tos Orig in IT Serv ices UK Lim ited[2010]
In considering the principles of concurrency, City Inn and apportionment was
ignored. Failure by Atos to give notice fatally undermined arguments that
non payment by De Beers was a repudiatory breach.
51
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
52/150
www.charltonmartin.com
Concurrency in Delay
Leading Cases
Ady ard Abu Dhabi v SD Marin e Servi ces[2011]
Contractors pre-existing delay is relevant to the question of determininga contractors entitlement to an extension of time.
Thus concurrency in this case was defined as two or more effective
causes of delay of approximately equal causative potency
Thus a pre-existing delay might have more causative potency
52
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
53/150
www.charltonmartin.com
Concurrency in Delay
Leading Cases
Henry Bo ot Constru ctio n (UK) Ltd v Malmaison Hotel (Manchest er)
L td[2000]
If there are two concurrent causes of delay, one which is a Relevant
Event and other is not, the Contractor is entitled to Extension of Time for
the period of delays caused by the Relevant Event
One of the most important cases on how to deal with concurrency and now
favoured by the courts See Walter Lilly
53
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
54/150
www.charltonmartin.com
Concurrency in Delay
Leading Cases
The Royal Brompto n Hosp ital NHS Trust v Frederick Alexander Hammond
and others[2001]
Extension of Time can be granted when:
(1) the Relevant Event has occurred; and
(2) the Relevant Event is likely to cause the completion of works as a whole
to be delayed beyond the completion date then fixed under the contract
The need to show that the relevant event caused actual delay to the completion of
the project is always necessary notwithstanding any consideration of delay events
which are pre-existing and ongoing events or those which are truly concurrent
54
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
55/150
www.charltonmartin.com
Concurrency in Delay
Leading Cases
Motherw ell Brid ge Cons truc t ion Ltd v Micafi l Vakuum techn ik[2001]
A full Extension of Time should be awarded where there is concurrent Contractor-caused and Employer-caused delay, if it is fair and reasonable to do so
55
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
56/150
www.charltonmartin.com
Concurrency in Delay
Standard Forms of Contract References
Where standard forms are silent on the issue of concurrency, the
common law position applies.
In Malaysia, only the IEM 2011 deals with concurrency at Clause 44.3(6):
the Engineer must not consider in his certification of any extension of
the Date for Completion the effect of the events due to the Contractors
fault which operate concurrently with any of the events listed in Clause
44.1(1).
56
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
57/150
www.charltonmartin.com
Concurrency in Delay
Decision in Walter Lilly
Where delay is caused by two or more effective causes, one entitles
contractor to EOT as Relevant Event, Contractor is entitled to full EOT.
Logic Many Relevant Events would be acts of prevention and it would
be wrong in principle to construe Clause 25 to deny contractor full EOT
in those circumstances
Relevant Event provides for EOT, nothing suggests there is any sort of
proviso that EOT be reduced if causation criterion established.
57
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
58/150
www.charltonmartin.com
Concurrency in Delay
Decision in Walter Lilly
Architect to award fair and reasonable EOT, does not permit
apportionment test is causation
City Inn is persuasive but not applicable in English law
In the event, by analysis it was found by the experts that there was
actually no concurrency at all a very common situation
The Malmaisoncase is now considered good authority in concurrency
cases
58
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
59/150
www.charltonmartin.com
Concurrency in Delay
Decision in Walter Lilly
It is considered that the Walter Lilly decision will be valid in Malaysia
although this remains to be tested.
There is no reason to suppose that the City Inn apportionment ruling
would be applicable in Malaysia.
The PAM conditions of contract in use in Malaysia in this regard are
similar to JCT 98 on which the Walter Lilly decision was made.
59
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
60/150
www.charltonmartin.com
Concurrency in Delay
Society of Construction Law Protocol
Where Contractor delays to completion occur concurrently with Employer
delays, the Contractors concurrent delay should not reduce any EOT
due, even where Employer delays are only overlapping (i.e. ofconcurrent effect rather than truly concurrent) SOCL page 16
Accords with Walter Lilly judgment
60
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
61/150
www.charltonmartin.com
Practical Completion
61
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
62/150
www.charltonmartin.com
Practical Completion
What is practical completion?
An important issue in the Walter Lilly case.
PAM 2006 Clause 15.1 states:
When in the opinion of the Architect, the Employer can have full use of the Works
for their intended purposes, notwithstanding that there may be works and defects
of a minor nature still to be executed and the Contractor has given to the Architect
a written undertaking to make good and to complete such works and defects
within a reasonable time specified by the Architect; and other requirements
expressly stated in the Contract Documents as pre-requisite for the issuance of
the Certificate of Practical Completion have been complied with.
62
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
63/150
www.charltonmartin.com
Practical Completion
What is practical completion?
CIDB 2000 Clause 1.1 states:
Practical completion: completion of the works including tests on
completion under the contract and where the works include equipment
which requires a licence for its operation, then completion so as to
render such equipment eligible for issuance of a licence in respect of its
operation. Provided however the existence of minor outstanding works
and defects, which do not affect the functional use of the works shall not
affect Practical Completion.
63
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
64/150
www.charltonmartin.com
Practical Completion
What is practical completion?
PWD 203A (Rev. 2010) has similar definition to that of PAM 2006
IEM 2011 does not provide helpful definition of completion thus
common law applies
Note that under PAM 2006, de minimis rule applies to minor works and
defects in determining practical completion
64
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
65/150
www.charltonmartin.com
Practical Completion
The Common Law
J Jarvis v Westm ins ter Corp oratio n[1978]
I take the words [practical completion] to mean completion for all practical
purposes
J Nevil le v Wil liam Press and Sons[1981]
Ithink the word practically gave the Architect the discretion to certify
that William Press had fulfilled its obligation, where very minor de minimis
work had not been carried out, but that if there were any patent defects
the Architect could not have given a certificate of practicalcompletion
65
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
66/150
www.charltonmartin.com
Practical Completion
Substantial Completion
Max Abrahamson on Engineering Law and the ICE Contracts, 4th Ed.
The Concise Oxford Dictionary equates substantial with virtual which is
defined as thatis such for practical purposes though not in name or according
to strictdefinition. It is at least clear on the one hand that the fact that the works
are or are capable of being used by the Employer does not automatically mean
that they are substantially complete (anysubstantial part of the Works which
has both been completedand occupied orused)and on the other hand that
the Engineer may not postpone his certificate under this Clause until the works
are absolutely completed and free of alldefects
66
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
67/150
www.charltonmartin.com
Practical Completion
Decision in Walter Lilly
When has Practical Completion been achieved?
What effect does snagging have on PC?
Judge considered that PC meant completion for all practical purposes
and that what completion entails must depend upon the nature, scope
and contractual definitions of the works, as they may have developed by
way of variations or architects instructions
67
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
68/150
www.charltonmartin.com
Practical Completion
Decision in Walter Lilly
De minimis snagging should not be a bar to PC unless there is so much
of it that the building cannot be used for its intended purpose
In the Walter Lilly case, work was often omitted and awarded to others
outside the contract because due to the extensive use of Provisional
Sums there was no issue in doing so
In this case once the work was omitted it no longer formed part of the
contract and did not need to be done or completed in order to obtain PC
Although it is unusual for all work to be the subject of provisional sums, if
it were to be the case then none of the Malaysian forms restrict the
omission of work by definition as a variation
68
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
69/150
www.charltonmartin.com
Conditions Precedent and Notices
69
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
70/150
www.charltonmartin.com
Conditions Precedent and Notices
Notice
Hudsons, 11th Edition
Sincethe purpose of such provisions is to enable the owner to considerthe position and its financial consequences, (by cancelling an instruction
or authorising a variation, for example, he may be in a position to reduce
his financial liability if the claim is justified), there is no doubt that in
many if not most cases the courts will be ready to interpret these notice
requirements as conditions precedent to a claim, so that failure to give
notice within the required period may deprive the contractor of allremedy.
70
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
71/150
www.charltonmartin.com
Conditions Precedent and Notices
Notice
PAM 2006 Cl. 24.1(a) Notice within 28 days from start of the
occurrence of the matter giving rise to claim
with estimate & relevant info substantiatingthe claim
IEM 1989 / PWD 203A Notice within 30 days with estimate
IEM 2011 Cl. 53.1 Notice within 28 days after event. However,
Cl.53.5 allows the Engineer to makedetermination irrespective of whether the
Contractor complied with Cl. 53.1 Defeats
purpose of condition precedent
71
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
72/150
www.charltonmartin.com
Conditions Precedent and Notices
Notice
CIDB 2000 Cl. 32.1 Notice within 30 days after the event and
must specify Such notice is a condition
precedent
FIDIC 1999 Cl. 20.1 Notice within 28 days after Contractor
became aware of the event or should
have become aware of the event
72
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
73/150
www.charltonmartin.com
Conditions Precedent and Notices
Notice
WW Gear Cons tru ct ion Ltd v Mc Gee Group Ltd[2010]
Timely application in writing was a precondition to the recovery ofloss and/or expense claim
73
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
74/150
www.charltonmartin.com
Conditions Precedent and Notices
Nature and Form of Notice
Check contract requirements and comply
Case law on nature of applications -London Bo rough of Mertonv Stan ley Hugh Leach[1985]
74
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
75/150
www.charltonmartin.com
Conditions Precedent and Notices
Lack of Notice
Gaymark Investments Pty Ltd v Walter Construct ion Group
[1999]
Lack of notice could not deny entitlement to EOT where cause of
delay was employer act of prevention
However, the lack of notice did deny the Contractor costs of delay
75
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
76/150
www.charltonmartin.com
Conditions Precedent and Notices
Qualifications in Loss and Expense Clauses
Usual in standard form construction contracts that only additional
cost not reimbursed by payment under any other clause of the
contract will be recoverable.
Obvious example: variations clauses
PAM, IEM, PWD & CIDB Forms of Contract
76
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
77/150
www.charltonmartin.com
Conditions Precedent and Notices
Decision in Walter Lilly
Notice was not really an issue regarding EOT, the issue was more
related to loss and expense
Counsel for the parties agreed that timely written application with
supporting information and details was a condition precedent under JCT
98 Clause 26
77
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
78/150
www.charltonmartin.com
Conditions Precedent and Notices
Decision in Walter Lilly
Judge said it was necessary to bear in mind that most of the matters
which entitle contractor to loss and expense are the fault or risk of
employer, e.g. variations, late provision of information or instructions
Notice needed to be interpreted with care and without construing them
against contractor
Notice to be served when contractor has incurred loss and expense or is
likely to incur loss and expense
78
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
79/150
www.charltonmartin.com
Conditions Precedent and Notices
Decision in Walter Lilly
For time related preliminaries contractor can wait until cost has been
incurred which will not be until the delay has in fact happened
Architect may not have to ascertain loss until it has happened
This may be relevant where loss is head office overheads or profit which
will not occur until the extended period
79
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
80/150
www.charltonmartin.com
Conditions Precedent and Notices
Decision in Walter Lilly
There are two notices to be considered, one relating to application for
costs and the other relating to the provision of details of loss and
expense to enable ascertainment to be carried out
What is to be provided in each case depends on the circumstances of
each case
80
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
81/150
www.charltonmartin.com
CHARLTON MARTIN ONE DAY SEMINAR
TEA / COFFEE BREAK
81
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
82/150
www.charltonmartin.com 82
Lecture 3
BY
MR MICHAEL CHARLTON
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
83/150
www.charltonmartin.com
Lecture 3: Details and Records to Prove Loss and
Expense & Global Claims
Details and Records to Prove Loss and Expense
Global orRolled up Claims
83
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
84/150
www.charltonmartin.com
Details and Records to Prove Loss and Expense
Text Book References
Delay and Disruption in Construction Contracts (3rd Ed, 2005)
by Keith Pickavance
[the Contractor] should be required to produce the factual
evidence underpinning its opinion of the expected effects, together
with:
(1) a network programme accurately illustrating how it intended to
complete the works if the event had not occurred (i.e. a
workable master programme);
84
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
85/150
www.charltonmartin.com
Details and Records to Prove Loss and Expense
Text Book References
(2) an updated network programme showing what had actually
been achieved in relation to the proposed programme before
the event occurred; and
(3) an impacted network programme demonstrating with
supporting descriptions, the duration of new or delayed
activities and their logical interface with the remaining works.
85
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
86/150
www.charltonmartin.com
Details and Records to Prove Loss and Expense
Quotations
Order forms
Invoices
Receipts
86
Delivery notes
Evidence of incorporation into works
Evidence of actual payment
Cost records required Audit Trail
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
87/150
www.charltonmartin.com
Details and Records to Prove Loss and Expense
Standard Forms of Contract References
PWD 203A (Rev. 2010) Clause 44.2:
the Contractor shall submit full particulars of all claims for
direct loss or expense ... supporting documents, vouchers,
explanations and calculations which may be necessary to be
ascertained by the S.O.
Only IEM 2011 defines Costs
87
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
88/150
www.charltonmartin.com
Details and Records to Prove Loss and Expense
Decision in Walter Lilly
Useful practical comments offered by the judge which have not
been addressed in earlier cases
It should be borne in mind that the architect already has
knowledge of project and delays and costs from attendance at
meetings and receipt of applications for EOT
Has much information at his fingertips
88
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
89/150
www.charltonmartin.com
Details and Records to Prove Loss and Expense
Decision in Walter Lilly
Less information needs to be provided by contractor in
applications
Architect only needs to be put in position to form an opinion that
direct loss and expense has been incurred or is likely to be
incurred due to disturbance in regular progress of works
Reference made toMerton
89
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
90/150
www.charltonmartin.com
Details and Records to Prove Loss and Expense
Decision in Walter Lilly
Failure to provide notice on minor item of loss will not invalidate
major amount claimed
JCT only requires contractor to submit details which are
reasonably necessary for ascertainment of loss and expense
90
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
91/150
www.charltonmartin.com
Details and Records to Prove Loss and Expense
Decision in Walter Lilly
Offer to architect or QS to inspect records at contractors office
may be considered as submission of details of L&E
Details of L&E do not include backup accounting information
which may support same
No need to construe Clause 26 in a strict way or as penalty
against contractor
91
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
92/150
www.charltonmartin.com
Details and Records to Prove Loss and Expense
Decision in Walter Lilly
Worth noting this, employers and consultants often consider
notices requirements which are conditions precedent to be apenalty, failure to comply bars all
Grounds under Clause 26 arise due to fault and risk of employer
DMW had requested comprehensive list of information which was
not necessary under contract
92
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
93/150
www.charltonmartin.com
Details and Records to Prove Loss and Expense
Decision in Walter Lilly
QS and architect are aware of and familiar with items which will
incur additional costs in event of delay
CP would be fulfilled by reference to BQ preliminary items
Architect and QS not strangers to contract
93
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
94/150
www.charltonmartin.com
Details and Records to Prove Loss and Expense
Decision in Walter Lilly
The judge posed an unusual and interesting view:
Arguablethat loss and expense could be valued by reference to
contract rates or prices for such preliminaries on basis that those
rates or prices represent the loss (if not the expense) to the
contractor of having such staff or other preliminary activities onthe project for longer than anticipated
94
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
95/150
www.charltonmartin.com
Details and Records to Prove Loss and Expense
Decision in Walter Lilly
Ascertainment means determine or discover definitely
Mass of back up detail not necessary
Inmy judgment it is necessary to construe the words in a sensible
and commercial way that would resonate with commercial parties in
the real world. The architect or QS must be put in the position in
which they can be satisfied that all or some of the loss and expense
claims are likely to be or have been incurred
95
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
96/150
www.charltonmartin.com
Details and Records to Prove Loss and Expense
Decision in Walter Lilly
They do not have to be certain. One has to bear in mind that
the resolution will be on a balance of probabilities. Tribunal onlyhas to be satisfied that contractor probably incurred loss and
expense as a result of the events listed.
96
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
97/150
www.charltonmartin.com
Global or Rolled up Claims
Traditionally, it has been considered that notwithstanding the
extreme difficulty on occasion of isolating the specific cause and
relating it to a specific event, if it can be shown that any part of
the cause arises from the contractors own default, his claim will
fail entirely.
The usual response from employers and indeed the courts has
been that a contractor must take and maintain records.
97
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
98/150
www.charltonmartin.com
Global or Rolled up Claims
Leading cases
J Crosby & Sons Ltd v Portland Urban & Distr ict Counc il
(1967)
It is therefore impracticable, if not impossible, to assess the
additional expense caused by delay and disorganization due to
any one of these matters in isolation from the other matters.
98
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
99/150
www.charltonmartin.com
Global or Rolled up Claims
Leading cases
J Crosby & Sons Ltd v Portland Urban & Distr ict Counc il
(1967)
Ican see no reason why he (the arbitrator) should not recognize
the realities of the situation and make individual awards in
respect of those parts of individual items of claim which can bedealt with in isolation and a supplementary award in respect of
the remainder of these claims as a composite whole. (J
Donaldson)
99
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
100/150
www.charltonmartin.com
Global or Rolled up Claims
Leading cases
London Borough of Merton v Stanley Hug h Leach(1985)
The loss or expense attributable to each head of claim cannot in
reality be separated.
100
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
101/150
www.charltonmartin.com
Global or Rolled up Claims
Leading cases
Wharf Prop ert ies Ltd and Ano ther v Eric Cum ine As so ciates and
Others(1991)
The Court of Appeal in Hong Kong decided that the pleadings were
hopelessly embarrassing, as they stood (some seven years after the
action began) and an unparticularised pleading in such a form should not
be allowed to stand. (HK C of A)
The failure even to attempt to specify any discernible nexus between the
wrong alleged and the consequent delay provides, to use [counsels]
phrase no agenda for the trial (Privy Council)
101
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
102/150
www.charltonmartin.com
Global or Rolled up Claims
Leading cases
John Doy le Constr uc tion Ltd v Laing Management (Sco tland)
Ltd(2004)
A total cost claim
the contractor might reasonably have expected to perform the work
for a particular sum, usually the contract price;
the proprietor committed breaches of contract;
102
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
103/150
www.charltonmartin.com
Global or Rolled up Claims
Leading cases
John Doy le Constr uc tion Ltd v Laing Management (Sco tland)
Ltd(2004)
the actual reasonable cost of the work was a sum greater than the
expected cost.
This involves an assertion that, given that the breaches of contract
caused some extra cost, they must have caused the whole of the
extra cost because no other relevant cause was responsible for any
part ofit.
103
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
104/150
www.charltonmartin.com
Global or Rolled up Claims
Leading cases
John Ho lland Cons tru ctio n & Eng ineering Pty Ltd v Kvaerner
RJ Brown Pty Ltd[1996]
In such a case, if an event or events for which the employer is
responsible can be described as the dominant cause of an item
of loss, that will be sufficient to establish liability, notwithstandingthe existence of other causes that are to some degree at least
concurrent.
104
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
105/150
www.charltonmartin.com
Global or Rolled up Claims
Leading cases
Ley land Sh ipp ing Company L td v Norwich Un ion Fi re
Ins uranc e Soc iety Ltd[1918] AC 350
Ifan item of loss results from concurrent causes, and one of
those causes can be identified as the proximate or dominant
cause of the loss, it will be treated as the operative cause, andthe person responsible for it will be responsible for the loss
105
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
106/150
www.charltonmartin.com
Global or Rolled up Claims
Leading cases
Ley land Sh ipp ing Company L td v Norwich Un ion Fi re
Ins uranc e Soc iety Ltd[1918] AC 350
Itmay be said that such an approach (of apportionment)
produces a somewhat rough and ready result. This procedure
does not, however, seem to us to be fundamentally different innature from that used in relation to contributory negligence or
contribution among jointwrongdoers
106
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
107/150
www.charltonmartin.com
Global or Rolled up Claims
Leading cases
Ley land Sh ipp ing Company L td v Norwich Un ion Fi re
Ins uranc e Soc iety Ltd[1918] AC 350
Itseems to us that in such cases the contractor should be
able to recover for part of his loss and expense, and we are
not persuaded that the practical difficulties of carrying out theexercise (of apportionment) should prevent him from doing so.
107
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
108/150
www.charltonmartin.com
Global or Rolled up Claims
Leading cases
Ley land Sh ipp ing Company L td v Norwich Un ion Fi re
Ins uranc e Soc iety Ltd[1918] AC 350
Itmay be possible to use a process of apportionment to
divide the pursuers increased costs between the two sets of
causes
The straight denial simply because a claim is global no longer
appears to be appropriate
108
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
109/150
www.charltonmartin.com
Global or Rolled up Claims
Decision in Walter Lilly
Many of the above cases considered
WLC had claimed L&E across three residential units using a
notional splitthis was considered reasonable and there was no
purpose in trying to analyse precisely.
Claims were made for thickening of preliminaries due to
additional input cause by delay etc.
109
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
110/150
www.charltonmartin.com
Global or Rolled up Claims
Decision in Walter Lilly
Global or total cost claims are not terms of art or statutorily
defined terms
Claiming all costs incurred on a project does not make the claim
global
110
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
111/150
www.charltonmartin.com
Global or Rolled up Claims
Decision in Walter Lilly
A global claim identifies numerous potential or actual causes of
delay and/or disruption, a total cost on the job, a net paymentfrom the employer and a claim for the balance between costs and
payment attributed without more and by inference to the causes
of delay and disruption relied on
Judge not convinced WLCs claims were global
111
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
112/150
www.charltonmartin.com
Global or Rolled up Claims
Decision in Walter Lilly
Prolongation costs related solely to delays asserted for which
EOT applied
Costs mostly for staff for extended period
Actual costs used
Evidence submitted on thickening
112
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
113/150
www.charltonmartin.com
Global or Rolled up Claims
Decision in Walter Lilly
To prove global claims, evidence must be proved as fact
On balance of probabilities
First; events occurred giving entitlement
Second; those events caused delay
Third; those events incurred loss and expense
113
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
114/150
www.charltonmartin.com
Global or Rolled up Claims
Decision in Walter Lilly
JCT do not lay down that direct loss and expense cannot be
ascertained by appropriate assessments
No set way to prove the three elements of claim
Nothing in principle wrong with global claim
Added evidential difficulties in proving on balance of probabilities
Must show that tender sufficiently well priced to make some net
return, no other matters which actually caused loss
114
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
115/150
www.charltonmartin.com
Global or Rolled up Claims
Decision in Walter Lilly
Concurrent events which cause loss which contractor responsible for do
not preclude some recovery
Necessary to make adjustment to allow for loss caused by contractor
1m claim does not fail because contractor responsible for 50k loss, it
is simply deducted from entitlement
Claim simply adjusted for losses caused by contractor
Particulars in prose form relating to thickening costs were acceptable
115
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
116/150
www.charltonmartin.com 116116
Lecture 4
BY
MR RODNEY MARTIN
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
117/150
www.charltonmartin.com 117
Lecture 4: Head Office Overheads and Use of
Formulae & Recovery of Main Contractor
of Reasonable Settlement of Sub-
Contractors Claims
Head Office Overheads and the Use of Formulae
Recovery by Main Contractor of Reasonable Settlement of Sub-
Contractors Claims
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
118/150
www.charltonmartin.com 118
Head Office Overheads and the Use ofFormulae
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
119/150
www.charltonmartin.com 119
Head Office Overheads and the Use of Formulae
Offices, plant and yards
Running costs
Directors salaries
Head office staff salaries
Administrative expenses
Travelling expenses
Legal and professional fees
Depreciation
Head Office Overheads
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
120/150
www.charltonmartin.com 120
Head Office Overheads and the Use of Formulae
Head Office Overheads
Two approaches:
Actual increased overhead expended, or
The opportunity cost orloss ofopportunity method formula
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
121/150
www.charltonmartin.com 121
Head Office Overheads and the Use of Formulae
The Actual Cost Approach
Identify actual head office costs affected by delay
May be difficult identifying which costs arise directly or indirectly
from delay
Should be possible for key head office staff to generate a
timesheet for delay period and compare with normal time sheet
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
122/150
www.charltonmartin.com 122
Head Office Overheads and the Use of Formulae
The Actual Cost Approach
Support services such as accounts, secretarial, clerical, rent,
stationery etc. can be included a proportion of costs to be
allocated to key staff
Alternatively compare actual costs with amount included in tender
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
123/150
www.charltonmartin.com 123
Head Office Overheads and the Use of Formulae
The Lost Opportunity Approach
Hudsons Formula
HO/Profit Percentage* x Contract Sum x Period of Delay
100 Contract Period (weeks)
(in weeks)
*Percentage in Contract
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
124/150
www.charltonmartin.com 124
Head Office Overheads and the Use of Formulae
The Lost Opportunity Approach
Emdens Formula
Head Office Overhead %** x Contract Sum x Period of Delay
100 Contract Period
**The HO/Profit percentage is arrived at by dividing the total overhead cost and
profit of the Contractors organization as a whole by the total turnover
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
125/150
www.charltonmartin.com 125
Head Office Overheads and the Use of Formulae
The Lost Opportunity Approach
Eichleay Formula
i.e. Value of work during contract period x Total Head Office OverheadTotal value of work for the company During Contract Period
as a whole during contract period
= Head office Overheads Allocated to the Contract
Head Office Overheads Allocated x Period of Delay Allocated to the Contract
Contract Period
= Amount Claimed
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
126/150
www.charltonmartin.com 126
Head Office Overheads and the Use of Formulae
The Lost Opportunity Approach
J F Finnegan L td v Sheffi eld City Counc il(1988)
It is generally accepted that, on principle, a contractor who isdelayed in completing a contract due to the default of his employer,
may properly have a claim for head office or off-site overheads
during the period of delay, on the basis that the workforce, but for the
delay, might have had the opportunity of being employed on another
contract which would have had the effect of funding the overheads
during the overrun period.
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
127/150
www.charltonmartin.com 127
Head Office Overheads and the Use of Formulae
The Lost Opportunity Approach
Ellis Don Ltd v The Parkin g Autho rity of Toro nto(1978)
The court accepted the use of the Hudsons formula
Wh ittall Buil ders v Ches ter Le Street Dis tic t Cou nc il(1985)
The court accepted the use of the Emdens formula which improved
on the Hudsons formula by using the actual head office / profitpercentage and not that used at tender
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
128/150
www.charltonmartin.com 128
Head Office Overheads and the Use of Formulae
The Lost Opportunity Approach
Tate & Ly le v Greater Lo ndon Coun ci l[1983]
After many years of success, the opportunity cost approach and theformula in general fell out of favour when in this case the court would
not accept a calculation of head office overheads based upon a
simple percentage requiring actual additional cost to be proved
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
129/150
www.charltonmartin.com 129
Head Office Overheads and the Use of Formulae
The Lost Opportunity Approach
Alfred McA lp ine Homes North v Proper ty and Land Contractors
(1995)
Emdens formula was rejected not because the opportunity costmethod was not appropriate but because they were not appropriate
in this particular case because of the companys method of working
and the prevailing economic climate
The arbitrator accepted the additional costs
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
130/150
www.charltonmartin.com 130
Head Office Overheads and the Use of Formulae
The Lost Opportunity Approach
The difficulty in proving and assessing the actual additional costs
incurred in respect of head office overheads have recently led to the
courts taking a more relaxed view of the degree of proof necessary.
Claims using loss of opportunity approach and formulae are re-
appearing no better alternative has yet to be devised
For example:
Norwest Hols t Const ruct ion Ltd v Co-opera t ive Wholesa leSociety(1989)
Emden formula used with a significantly reduced percentage
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
131/150
www.charltonmartin.com 131
Head Office Overheads and the Use of Formulae
The Lost Opportunity Approach
Opportunity cost method using formula relies upon:-
1. Overhead percentage capable of being earned at time of
delay
2. Overhead percentage reasonable
3. Work at same level of overhead recovery available during
period of delay
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
132/150
www.charltonmartin.com 132
Head Office Overheads and the Use of Formulae
The Lost Opportunity Approach
Opportunity cost method using formula relies upon:-
4. Method of working suitable to formula approach, i.e.
contractor seeking further work on on-going basis
5. Contractor denied opportunity of earning overheads
elsewhere as result of being detained on site during period
of delay
Contractor must prove above criteria
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
133/150
www.charltonmartin.com 133
Head Office Overheads and the Use of Formulae
The Lost Opportunity Approach
Following usually required:-
Audited accounts for appropriate period
Showing that level of overheads claimed is reasonable
Company trading and actively seeking work other than during
alleged delay period
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
134/150
www.charltonmartin.com 134
Head Office Overheads and the Use of Formulae
The Lost Opportunity Approach
Following usually required:-
Evidence of tender activity, invitation to tender, declinedduring period of delay
Increased margins applied to tenders which were
consequently unsuccessful
Company prevented from obtaining work during alleged delay
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
135/150
www.charltonmartin.com 135
Head Office Overheads and the Use of Formulae
Loss of Profit
Principles similar to overheads
Some contracts exclude claims for loss of profit
Unless contract excludes both under contract and at common law
then loss of profit a legitimate claim
Problems in showing that a profit may have been made but for
the delay
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
136/150
www.charltonmartin.com 136
Head Office Overheads and the Use of Formulae
Loss of Profit
Evidence of opportunities to tender on other contracts
Show all tenders submitted and awarded to demonstrate profit
level
Demonstration on balance of probability
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
137/150
www.charltonmartin.com 137
Head Office Overheads and the Use of Formulae
Decision in Walter Lilly
Judge considered many of above cases
Contractor can recover overheads and profit lost as result of
delay on project caused by factors which entitle it to loss andexpense
Necessary to show on balance of probability criteria as listed
previously
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
138/150
www.charltonmartin.com 138
Head Office Overheads and the Use of Formulae
Decision in Walter Lilly
Architect and QS do not need to be certain that loss has occurred.
Needs to be confident that loss and expense being allowed had
actually been incurred as a result of the delay and disruption
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
139/150
www.charltonmartin.com 139
Recovery by Main Contractor of ReasonableSettlement of
Sub-Contractors Claims
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
140/150
www.charltonmartin.com 140
Recovery by Main Contractor of Reasonable
Settlement of Sub-Contractors Claims
Settlement with Sub-Contractor
WLC had reached a full and final settlement with their sub-
contractor Norstead at 1,750,000
26k above amount claimed as entitlement
Issue as to whether the settlement was reasonable
R b M i C f R bl
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
141/150
www.charltonmartin.com 141
Recovery by Main Contractor of Reasonable
Settlement of Sub-Contractors Claims
Decision in Walter Lilly
Judge referred to Supershield Ltd v Siemens Bui ld in g
Technolo gies FE Ltd [2010] BLR145
Employer liable to contractor for contractors liability to his sub-
contractor
Not necessary for contractor to prove on balance of probability
that contractor was liable to sub-contractor or that he would have
been liable for that amount
R b M i C t t f R bl
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
142/150
www.charltonmartin.com 142
Recovery by Main Contractor of Reasonable
Settlement of Sub-Contractors Claims
Decision in Walter Lilly
For Employer to be liable to contractor, contractor must show
breach by employer has caused the loss incurred as for causation
of damages
Damages not too remote
Claim and settlement sufficiently strong to be considered
reasonable
R b M i C t t f R bl
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
143/150
www.charltonmartin.com 143
Recovery by Main Contractor of Reasonable
Settlement of Sub-Contractors Claims
Decision in Walter Lilly
Unless claim so weak that reasonable person would not take itsufficiently seriously to offer settlement, cannot be said that
settlement was not caused by breach
Loss must be within contemplation of parties
R b M i C t t f R bl
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
144/150
www.charltonmartin.com 144
Recovery by Main Contractor of Reasonable
Settlement of Sub-Contractors Claims
Test for Settlement
Is amount within range of amounts reasonable people in position of
settling party might have made
Following relevant:-
Strength of claim
Whether settlement made as result of legal advice
Uncertainties and expenses of litigation
R b M i C t t f R bl
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
145/150
www.charltonmartin.com 145
Recovery by Main Contractor of Reasonable
Settlement of Sub-Contractors Claims
Test for Settlement
Following relevant:-
Benefits of settling rather than expenses of litigation
Question of whether settlement reasonable it to be assessed
at date of settlement
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
146/150
www.charltonmartin.com 146
Conclusion
Walter Lilly Judgment
Offers very helpful practical comments and decisions particularly on:-
Concurrency
Notices and provision of information as condition precedent
Amount of information which is contemplated by typical conditions
Global claims
Other topics including Practical Completion, Head Office Overheads,
Recovery of Settlement amounts
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
147/150
www.charltonmartin.com 147
CHARLTON MARTIN ONE DAY SEMINAR
QUESTIONS AND DISCUSSION
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
148/150
www.charltonmartin.com 148
CHARLTON MARTIN ONE DAY SEMINAR
LUNCH BREAK
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
149/150
www.charltonmartin.com
CHARLTON MARTIN ONE DAY SEMINAR
WORKSHOP
149
-
8/14/2019 The Latest Authorities on Claims for Delay Disruption and Loss Expense ....pdf
150/150
CHARLTON MARTIN ONE DAY SEMINAR
CLOSE
top related