Morrison Ross Limited Services -  Recent Case Law re - Delay

 Recent Case Law re-Delay

         Petromec Inc – v – Petroleo Brasiliero SA

         City Inn – v – Shepherd Construction


Petromec Article


For 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 claim'. 


Lawyers, clients and commentators thought the position had changed following  the Scottish case:  John Laing v Doyle [2004] 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.


This case 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.   


Recently the 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. 


The Court 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.  


The Court 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.


Petromec 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.


There are 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.





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.


Instead, 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 events.

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.


The court 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 is responsible.

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 to
waive procedural requirements in the contract and bind the employer by doing so.

City Inn Limited vs Shepherd Construction Limited