ppt - walter lilly v mackay - summary

7/17/2019 PPT - Walter Lilly v MacKay - Summary

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www.charlesrussell.co.uk

Issues relating to Contractor Claims:

Walter Lilly v. DMW Developments Ltd

David Savage



2

The big case of 2012…….

• Walter Lilly & Company Limited v (1) Giles Patrick Cyril

Mackay (2) DMW Developments Limited

• Technology and Construction Court; before Mr Justice

Akenhead - judgment delivered 11 July 2012

• Permission to appeal refused to DMW last week (on Thursday

24th January 2013)

• 28 days in which to appeal that decision to the Supreme

Court.



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Background and context:

• This is the second most expensive street in the UK:

• 1: Kensington Pal Gdns, London W8 (£19.2m)

• 2: The Boltons, London SW10 (£13.3m)

• 3: Frognal Way, London NW3 (£10.5m)

• 4: Compton Avenue, London N6 (£8m)

• 5: Park Place Villas, London W2 (7.2m)

• 6: Courtenay Avenue, London N6 (£7.1m)

• 7: Manresa Road, London SW3 (£6.6m)

• 8: Victoria Road, London W8 (£6.4m)

• 9: Ilchester Place, London W14 (£6.3m)

• 10: Cottesmore Gardens, London W8 (£6.3m)



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Places with the most £1m streets…….

• London (2,290 million pound streets)



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Places with the most £1m streets…….• London (2,290 million pound streets)

• 2: Guildford (89)

• 3: Cobham (78)

• 4: Leatherhead (77)

• 5: Sevenoaks (77)

• 6: Beaconsfield (73)

• 7: Esher (68)

• 8: Richmond (64)

• 9: Altrincham (61)

• 10: Henley-on-Thames (61)



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• Trial last 16 days in the TCC in front of Mr Justice Akenhead

• Evidence from 8 experts and 9 witness of fact

• Each side incurred costs of £9m - £10m

• 160 page judgment



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Judge commentated:

• ‘very old-fashioned’

litigation that had involved a

• ‘… full-blooded conflict between the parties in which there seems to

have been little, no or belated room for compromise … ’ .



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The Facts:

• 2001 Mr Mackay and two associates acquired a site at The

Boltons in Central London

• 2004 Mr Mackay and his associates established DMW

Developments Limited

• 28 May 2004 Walter Lilly and Company Limited (‘WLC’) was

engaged by DMW to build three large residential houses on

for £15.4m.

• JCT Standard Form of Building Contract 1998 Edition Private

w/o quantities with CDP Supplement w/o Quantities 1998



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The Facts:

• Date for completion was 23 January 2006

• When WLC commenced work (July 2004) only a small proportion ofthe design work for the project had been completed

• Certificates of Practical Completion were issued on 2 February 2007

for Plot A, on 28 September 2007 for Plot B and on 13 August 2008for Mr Mackay’s Plot C.

• 31 March 2010: WLC issued proceedings for a full EOT to the date of

Practical Completion, loss and expense incurred in connection withthe delay, the return of deducted liquidated damages, the return ofsums said to have been wrongly deducted for alleged defects and theoutstanding unpaid value of the works.



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The Facts:

• September 2010 DMW served its Defence and Counterclaim

contending that:

◦ there had been an overpayment in terms of the value of

work;

◦ that no further extension of time was due;

◦

that substantial liquidated damages were due; and

◦ that a sum of circa £2 million was due for defects.



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Main areas of interest in the 160 page judgment:

• Recoverability of “Global Claims”

• Recovery of Loss and Expense

• Approach towards EOT in periods of Concurrent Delay –would the English & Wales High Court follow the 2010

Scottish decision of City Inn Ltd v. Shepherd Construction?



12

Global Claims:

• Is a global claim automatically irrecoverable?

• What must you prove?

• Can you contractually exclude global claims?



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What is a “global claim”?

“What is commonly referred to as a global claim is a

contractor’s claim which identifies numerous potential or

actual causes of delay and/or disruption, a total cost on the

job, a net payment from the employer and a claim for the

balance between costs and payment which is attributed

without more and by inference to the causes of delay anddisruption relied on.”



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Is a global claim automatically irrecoverable?

• No.

• There is no one set way to prove a money claim.



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What must you prove?

• A contractor will be required to establish on the balance of

probabilities that:

◦ (i) the events occurred which entitled the contractor to loss

and/or expense,

◦ (ii) that those events caused the contractor delay and/or

disruption, and

◦ (iii) that such events caused the loss and expense.



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What must you prove?

“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 thendemonstrates with precision to the nearest penny what that delay

or disruption actually cost.”



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But:

“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 theloss 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).”



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What about if the detailed evidence is available but not used?

“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.”



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The final word on global claims in this case:

“Even if a global cost claim cannot be allowed unless it was

impracticable or very difficult for the Contractor to relate every penny

of loss to each established and pleaded event which entitled it to loss

and/expense, I am satisfied that it was impracticable or very

difficult for WLC in this case.”



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Can you contractually exclude global claims?

• Yes



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Loss and expense under the JCT 1998 – Clause 26

• Clause 26.1.1 of JCT SFBC 1998: (JCT 2011 equivalent is Clause 4.23).

• 26.1.1 the Contractor's application shall be made as soon as it has

become, or should reasonably have become, apparent to him that the

regular progress of the works or of any part thereof has been or was likely

to be affected as aforesaid; and

• 26.1.2 the Contractor shall in support of his application submit to the

Architect upon request such information as should reasonably enable

the Architect to form an opinion as aforesaid; and

• 26.1.3 the Contractor shall submit to the Architect or to the Quantity

Surveyor upon request such details of such loss and/or expense as are

reasonably necessary for such ascertainment as aforesaid.



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Recovery of Loss and Expense

• Will a claim for loss and expense necessarily fail i f the claim

is found to be insufficiently detailed?

• No.

• Under the JCT Contract there was a condition precedent for WLCto submit details that were “realistically necessary” for

ascertaining loss and expense.

• The judge found that this was not the same as providing

complete accounting information. The CA was to be put in aposition that they could be satisfied that some or all of the loss

and expense claimed was likely to have been incurred. There

was no requirement for absolute certainty.



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Recovery of Loss and Expense

• The architect must be satisfied that the loss and expense claimed

is likely to be or has been incurred but he does not have to be“certain”.

• The obligation is to submit details which are “reasonably

necessary” for the ascertainment of loss and expense.

• “Ascertain” means to determine or discover with certainty, and:

“In my judgment, it is necessary to construe the words in asensible and commercial way that would resonate with

commercial parties in the real world.”



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Concurrent delay

• Was WLC entitled to a full extension of time for a delaying

event (caused by DMW’s as Employer) where they toowere responsible for delay in respect of the same period?

• Yes.

• Where there is concurrent delay, WLC was entitled to an EOT

for any period of delay which was also DMW’s responsibility,

thereby giving rise to a Relevant Event.

• City Inn Ltd v. Shepherd Construction not followed.



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Concurrent delay

“Of course, the debate will depend upon the contractual terms

in question but most of the debate in cases in this country andelsewhere has revolved around extension of time clausessimilar to those contained in Clause 25 where the Architecthas to grant an extension which is “fair and reasonable”.

The two schools of thought, which currently might bedescribed as the English and the Scottish schools, are theEnglish approach that the Contractor is entitled to a fullextension of time for the delay caused by the two or more

events (provided that one of them is a Relevant Event) andthe Scottish approach which is that the Contractor only gets areasonably apportioned part of the concurrently causeddelay.”



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Concurrent delay

“I am clearly of the view that, where there is an extension of

time clause such as that agreed upon in this case and wheredelay is caused by two or more effective causes, one of which

entitles the Contractor to an extension of time as being a

Relevant Event, the Contractor is entitled to a full extension of

time. … The test is primarily a causation one. It thereforefollows that, although of persuasive weight, the City Inn case

is inapplicable within this jurisdiction.”



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Conclusions – the Law (see Keating, 9th Edition 2012)In respect of claims under the contract:

• Depending upon the precise wording of the contract a contractor is probably entitledto an extension of time if the event relied upon was an effective cause of delay evenif there was another concurrent cause of the same delay in respect of which thecontractor was contractually responsible. [This has now been confirmed byWalter Li lly]

• Depending upon the precise wording of the contract a contractor is only entitled torecover loss and expense where it satisfied the "but for " test. Thus, even if theevent relied upon was the dominant cause of the loss, the contractor will fail if therewas another cause of that loss for which the contractor was contractuallyresponsible.

In respect of claims for breach of contract:

• In general a claimant will have to show that "but for" the matter relied upon it wouldnot have suffered the loss, and the matter relied upon was an effective cause of theloss.



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Conclusions – what next:

• Contractors are going to like this case and will cite it regularly

• Employers will fight back by seeking to exclude global claims

via express drafting to that effect.

• As ever, the devil is in to the detail. The judge clearly felt the

contractor had been poorly treated by DMW.

• Global claims will continue to be controversial, and test the

reasoning powers of tribunals (and lawyers!).



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Q & A



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This information has been prepared as a general guide only and does not constitute advice on any specific matter. We recommend thatyou seek professional advice before taking action. No liability can be accepted by us for any action taken or not taken as a result of this

information.

Charles Russell LLP is a limited liabil ity partnership registered in England and Wales, registered number OC311850, and is authorised andregulated by the Solicitors Regulation Authority. Any reference to a partner in relation to Charles Russell LLP is to a member of CharlesRussell LLP or an employee with equivalent standing and qualifications. A list of members and of non-members who are described as

partners, is available for inspection at the registered office, 5 Fleet Place, London EC4M 7RD.

www.charlesrussell.co.uk

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