Extensions Of Time In Building and Construction Disputes

The recent case of Walter Lilly & Company Ltd -v- (1) Mackay and (2) DMW Developments Ltd [2012] EWHC 1773 has provided clarity on:

1. Whether a contractor is entitled to a full extension of time when there is concurrent delay i.e. where the contract works are delayed by reason of both the contractor and the employer, and
2. The principles to be applied when dealing with “global” claims.

Background

The basic facts of the case are straightforward and not unusual in the building and construction industry. A contractor (WL) entered into a contract with DMW Developments (DMW) to build three houses on a plot of land. It was subsequently agreed that the contract would be split into three so that there would be one separate contract for each plot of land.

Unfortunately from that point onwards, the works did not progress as quickly as anticipated, resulting in DMW and Mackay withholding payment from WL on the basis of an alleged entitlement to liquidated damages to compensate them for the delay. Allegations were also made about defective works.

In response, WL brought claims for an extension of time and loss and expense.

Extension of Time

In considering WL’s claim for an extension of time, the Court agreed with WL and granted them a full extension up to the date of practical completion. In reaching this conclusion, the Court took the opportunity to review previous case law on concurrent delay and provide guidance on the approach that should be adopted in future cases.

In 2010, the Scottish Courts heard the case of City Inn Ltd -v- Shepherd Construction Limited. In determining that case, the Court took what is known as the apportionment approach and held that where there is concurrent delay, liability should be apportioned so that the contractor is only awarded an extension of time for the period of delay for which he is not responsible.

Scottish law is not binding in the English Courts, however it can be a persuasive authority and the case of City Inn -v- Shepherd Construction therefore gave employers and contract administrators a way of refusing contractors extensions of time if it could be shown that there was concurrent delay.

When giving judgment in the Walter Lilly -v- Mackay case, the Judge stated that the approach adopted in City Inn -v- Shepherd Construction was “inapplicable in this jurisdiction” and held that the approach adopted in the English cases of Henry Boot Construction (UK) Ltd -v- Malmaison Hotel (Manchester) Ltd [1999] and the more recent 2011 cases of Adyard Aby Dhabi -v- DC Marine and De Beers -v- Atos Origin IT Services UK Ltd was the correct approach.

In these cases, the Court took an ‘all or nothing’ approach to determining whether a contractor was entitled to an extension of time when there was concurrent delay. Accordingly it was determined in these three cases and also in Walter Lilly -v- Mackay that if a contractor can show that there has been a relevant event entitling him to an extension of time i.e. a delay caused by the employer, the fact that the contractor may also have caused a delay will be irrelevant and the contractor will still be entitled to a full extension of time.

Global Claims

Mackay and DMW asserted that WL’s claim for loss and expense constituted a global claim, namely a claim for a total loss which has been caused by a collection of alleged breaches, which should fail in its entirety.

The Court ultimately held that WL’s claim was not a global claim. In reaching this conclusion, the Court considered various cases on this issue from the past 50 years and set out the following principles that should be applied when considering global claims:

1. The contractor must prove its case on a balance of probabilities. To do so, it must prove that a) events have occurred which entitle it to claim loss and expense; b) those events caused delay or disruption; and c) that delay or disruption resulted in the contractor incurring loss and expense.
2. There is no standard process for proving the elements set out at (1) above; it is open to contractors to prove their case with whatever evidence will satisfy the tribunal and requisite standard of proof.
3. There is nothing wrong in principle with global claims, however the contractor will have to overcome additional evidential difficulties and will generally have to establish that the loss which it has incurred would not have been incurred in any event e.g. that its tender was adequate and there are no other matters that would account for the loss.
4. The fact that one or a series of events cannot be shown to have caused or contributed to the global loss does not mean that the contractor’s claim should fail in its entirety. Similarly, the fact that there may be an event (or several) for which the contractor is responsible will not be a complete bar to the contractor’s claim.
5. A global claim will not usually be allowed if the actual costs attributable to each loss causing event can be readily and practicably determined, however this does not necessarily mean that a global claim should be rejected out of hand.
6. There is no basis for arguing that a global award should not be allowed where the contractor himself has created the impossibility of disentangling the loss attributable to each head of claim.

In summary, there is nothing wrong with pleading a global claim, however contractors must remember that such a claim does not in any way diminish or detract from the requirement to prove their claim on the balance of probabilities.

Conclusion

This is nothing particularly unusual about this case, however it is of significance in that it gave the Court an opportunity to consider and give further guidance on issues that often cause conflict at the end of a construction contract.

It remains to be seen what, if any, impact this case will have on future construction related disputes, however given the detailed analysis set out within the Judgment, it will undoubtedly be referred to in future construction related cases and it will be interesting to see whether either of the above areas of law develop further over the course of the next 12 months.

Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.

For any advice on building or construction related disputes, please contact Jonathan Warner Reed a member of our Construction Team today.