Morrison Ross Limited Services - Recent Case
Law re - Delay|
– v – Petroleo Brasiliero SA
Inn – v – Shepherd Construction
over 15 years, since Wharf Properties Ltd v Eric Cumine Associates
(1991), the view of the Courts has been that if a party wishes to claim for
losses which arises from several breaches of contract, then the claimant must
demonstrate a connection between each individual breach of contract and the
losses attributable to that breach. It is not sufficient for a claimant
to present its entire loss and to claim that all of that loss was caused by
the compounded effects of a number of breaches of contract, known as a 'global
clients and commentators thought the position had changed following the
Scottish case: John Laing v Doyle  BLR 295, before the Inner
House of the Court of Sessions (broadly the Scottish equivalent of the Court of
Appeal) . The Court allowed the claimant to bring a global claim and it
succeeded in recovering its additional costs. The Court nonetheless warned that
if the claimant failed to prove that the defendant was responsible for all
of the losses claimed, then his claim is likely to fail in full,
because the claimant would be unable to prove the precise loss attributable
to each of the breaches in dispute.
opened the door for global claims in Scotland. In England and Wales, where the
decision is not binding but heavily persuasive, parties to construction
contracts have been tentatively making global claims.
English Courts have reconsidered this issue. In July 2007, the Commercial Court
handed down its judgment in Petromec Inc v Petroleo Brasiliero SA.
In that case, Petromec claimed additional monies due to it as a consequence
of numerous variations to the specification of an oil platform. Petromec
advanced its case on the basis that it was entitled to the difference between
(1) its actual costs; and (2) its anticipated costs had the variations not taken
place. Petromec was attempting to pursue a global claim as it did not try to
attribute its additional costs to each separate variation.
The defendant, (known to the Court as Petrobras) objected to this approach at an
early stage and asked the Court to order that Petromec set out its full case in
respect of each and every variation.
briefly considered the authorities, referring specifically to Wharf
Properties, and decided that the existing authorities 'disapproved' of
global claims. If there was any consideration of John Laing v Doyle, this
was not reflected in the judgment. Instead, Petromec appear to have
concentrated their efforts on attempting to establish that the variation
provisions of the contract did not require it to specify and prove the extra
expense attributable to each variation.
did not accept Petromec's interpretation of the contract and ordered them
to break down the effects of each and every variation, thus preventing Petromec
from pursuing a global claim.
appealed to the Court of Appeal whose decision, handed down on 21 December 2007,
upheld the Judgment of the
Commercial Court in all material respects.
Again, the argument between the parties appeared to centre upon the
interpretation of the variation provisions, rather than the law on this point.
Again, the Court neither discussed the earlier cases generally nor Laing v
Doyle in particular.
The Court of
Appeal decision leaves the legitimacy of global claims in doubt. As it appears
that there has been little or no debate about the law in either of the Petromec
decisions it may still be open for a claimant to attempt to rely upon Laing v
Doyle in the future. However, one view is that the Court of Appeal has
placed its seal of approval on the Wharf Properties approach spelling the
end for global claims.
wide practical implication for parties involved in the construction industries
where the cause and responsibility for loss, expense and delay can be very
complex. If there are multiple causes of losses then a claimant will be
expected to make a good attempt to value the loss attributable to each
cause. So it is critical to establish good procedures during the carrying out
of any works for properly recording instructions given, costs arising and
management time spent. On the other hand, the Petromec decision may be
good news for employers, traditionally on the receiving end of loss and expense
type claims, who may be able to achieve an easy victories if it appears that
a contractor is unable to apportion his losses.
CITY INN - v -
Concurrent delay - contractors can sometimes get extensions of time and
loss & expense.
The latest decision in the Scottish case of City Inn v Shepherd Construction
sees Lord Drummond Young finding in favour of the contractor
on three counts. Firstly, he states that where there is concurrent delay
caused by employer related events and contractor related events, and
there is no dominant cause, it is not correct to apply
a "but for" test and conclude that the works would
have been delayed by the contractor in any event and
he should not therefore be awarded an extension of time.
Lord Drummond Young states that the wording of Clause 25 of the JCT 1998
contract makes it clear the contract administrator should make an
assessment which is fair and reasonable; to be fair and reasonable, that
assessment must make an apportionment between the concurrent delay
That apportionment, he says should be approached in a way similar to
that of contributory negligence - the degree of
culpability and the significance of the factors being
taken into consideration.
also rejected City Inn's argument that where prolongation costs
are caused by concurrent employer and contractor delay, the contractor is
not entitled to costs if he would have incurred them as a result of his
own delay. Instead, the court says the costs should be
apportioned between the events for which the employer
is responsible and the events for which the contractor
In considering whether the pursuers had waived their right to insist on a
condition precedent to either an extension of time or loss and expense
claim, the court stated that it is possible for a contract administrator
waive procedural requirements in the contract and bind the employer by
City Inn Limited vs Shepherd Construction Limited