DELAY AND DESTRUCTION: CURRENT PRACTICE, PROCEDURE AND THE RELEVANCE OF EXPERT EVIDENCE
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1 DELAY AND DESTRUCTION: CURRENT PRACTICE, PROCEDURE AND THE RELEVANCE OF EXPERT EVIDENCE Andrew Burr MA(Cantab), ACIArb, FFAVE(Master) ArbDB Chambers Silver Shemmings LLP London
2 1. Delay and disruption: some attempted definitions Comparative terms Completion dates No intrinsic qualities Causes and effects of each other 2
3 2. Introduction Walter Lilly and Company Limited v Mackay, [2012] EWHC 1773 (TCC), per Akenhead J Vivergo Fuels Limited v Redhall Engineering Solutions Limited [2013] EWHC 4030 (TRC), per Ramsey J 3
4 3. Apportionment concurrency and progress against the contract programme 3.1 The English and Welsh way: Walter Lilly and Company Limited v MacKay [2012] EWHC 1773 (TCC) JCT standard form of BC 1998 edition: almost 30 months delay; 234 EoTs requested with 196 EoTs going unanswered; evaluation in judgment depended upon Lilly s design responsibilities and of the defects Who has the responsibility to pay up? Defects claim almost totally unsuccessful Further payment of 2.3 million (plus costs) and EoTs awarded to the date of practical completion (PC) Unclear contractual allocation of design responsibility 4
5 Apportionment, concurrency and progress against the contract programme EoT: 1. Look at what the contract stipulates 2. Look at relevant evidence; actual facts and expert advice (minus any theoretical possibilities) 3. If delay results from two or more effective causes, one entitling the contractor to an EoT as a relevant event, EoT should be granted (an all or nothing approach) 4. The central question = CAUSATION 5
6 Apportionment, concurrency and progress against the contract programme Based upon: Principle that these are relevant events that would otherwise amount to an act of prevention; unfair not to award an EoT in such circumstances The straight contractual approach ; clause 25 of JCT stated nothing about apportionment if the contractor is partially responsible for delay 6
7 Apportionment, concurrency and progress against the contract programme How to assess causation in relation to delay? 1. Criticality 1. Generally, not the last item of work but what delays this 2. Snagging? Only if excessive 2. Prospective and retrospective analysis 1. Should come to the same conclusions 2. Prospective: requires a critical path programme (CPP) (absent in this case from 2007) 3. Cross-checking (in absence of a CPP): 1. Month-month review of probable delays 2. Cross check with facts (factual analysis) 7
8 Apportionment, concurrency and progress against the contract programme 3.2 The Scottish way: City Inn v Shepherd [2010] CSIH 68 Amended JCT 80 contract (construction of a hotel in Bristol) employer, (City Inn) dismissed design team and contractor, Shepherd claimed 11 week EoT to the completion date. Is there an entitlement to EoT, if the architect's instructions which caused delays were concurrent with delays arising from matters which were the contractor' s responsibility? 8
9 Apportionment, concurrency and progress against the contract programme Elements of relevance for the decision: Principles of calculation of EoTs Critical path analysis Causation in law when there are concurrent events 9
10 Apportionment, concurrency and progress against the contract programme Lord Drummond Young: Thorough examination of the construction process supported by expert witnesses Mere critical path analysis approach not possible in the case at hand (eg because of lack of full electronic records from the contractor) Where there is a true concurrency between a relevant event and a contractor default, in the sense that both existed simultaneously, regardless of which started first, it may be appropriate to apportion responsibility for the delay between the two causes. 10
11 Apportionment, concurrency and progress against the contract programme Inner House of the Court of Session, Scotland (majority) held Where two concurrent causes are operative, one being a relevant event and the other being an event for which the contractor is responsible, the certifier should approach the matter in a fair and reasonable manner and apportion the delay between the causes unless one is dominant. 11
12 Apportionment, concurrency and progress against the contract programme Five Hudson principles for the evaluation of a delay claim 1. Is there a relevant event which is likely to cause / has caused delay as a result of which completion of the work is likely to be / has been delayed? 2. Application of common sense 3. Discretion of the decision maker as to the choice and use of evidence 4. Is the cause dominant? 5. In case of concurrent events, neither of which is dominant Discretion of the decision maker to apportion the delay by applying the principles of fairness and reasonableness 12
13 4. Assessment of causation Mirant City Inn Allocation of responsibility by expert witnesses of opinion DDCCS 13
14 5. Time at large and the prevention principle Multiplex v Honeywell [2007] EWHC 447 (TCC) Honeywell = sub-contractor, responsible for the security and communication installations at Wembley Multiplex = main contractor Did Multiplex mismanage the project? Did this mismanagement release Honeywell from its obligations to complete the project within the period foreseen in the sub-contract? 14
15 Time at large and the prevention principle Honeywell s line of argument: Prevention principle Failure by Multiplex to provide adequate programming data deprived Honeywell of the possibility to give proper notices or particulars of delay ( condition of the right to an EoT) Gaymark Investments v Walter Construction (no liquidated damages for delay, even though no EoT could be given) 15
16 Time at large and the prevention principle Jackson J (as he then was): Prevention principle not applicable, since the contract allowed Multiplex to grant EoTs for acts of prevention Sub-contractor is only expected to give notices when practicable and if there is requisite knowledge Contractual terms requiring the contractor to give prompt notice of delay should be preserved, regardless of the other party complicating matters 16
17 6. Notice as a condition precedent Education 4 Ayrshire v South Ayrshire Council [2009] CSOH 146 Contractor had to work towards certain phases of the project to achieve target service availability dates (TSAD) Contractor had to give notice if it could not achieve a TSAD within 20 business days of the delay event Contractor served a TSAD notice of delay due to asbestos (containing a claim for EoT and damages) Contract provided for an obligation of the contractor to comply with a 20 day deadline for notice of works compensation event (WCE) such notice was not served 17
18 Notice as a condition precedent Cautionary tale for contractors entering into contracts requiring a strict formal process in order to obtain time and money Determination of the meaning and effect of a condition precedent clause by a Scottish Court (= clause regularly used in FIDIC and NEC contracts to prevent contractors claiming an EoT, or additional payment unless they provide written notice of the delay event, within a prescribed time limit): 18
19 Notice as a condition precedent Decision: Strict and clear contractual requirements for relief (including WCE notice) Non compliance with these requirements leads to loss of right to extra time and payment Decision is in line with previous cases (eg Steria Limited v Sigma Wireless Communications Limited): no interference by the courts in cases of clear and unambiguous contractual requirements 19
20 7. The valuation of damages for prolongation Costain v Haswell [2010] TCLR 1 Claim for damages for breach of contract /negligence Is a recovery of prolongation costs for the period during which it was alleged that the project encountered delays from the abandonment of the surcharged scheme and the later design and construction of piled foundations possible? What is the critical delay to the completion of a project in the case of a negligent foundation design? 20
21 The valuation of damages for prolongation Experts from both parties agreed on delays to foundations causing critical delays due to one of the affected structures being on the critical path at the time Unanimity between experts as to a common methodology to assess delay (using time impact analysis), the baseline programme as well as as-built data Differences between the experts on how the agreed methodology should apply 21
22 The valuation of damages for prolongation Deputy High Court Judge Richard Fernyhough QC in the TCC: Design had failed to produce the intended result Negligence Criticism of both experts: - Failure to undertake an analysis of a specific period - Failure to consider what effect the foundation delays actually had on follow-on activities and other structures - Failure to investigate whether Costain could have mitigated or negated the initial delays by later events. 22
23 The valuation of damages for prolongation Held: Recovery of prolongation costs for the whole project requires the demonstration that the delay relied upon in fact led to an overall delay to the completion of the project as a whole, not due to other reasons Since there were other delays caused by United Utilities as well as Costain, there was no justification for Costain recovering all its costs in maintaining the site The extent of critical delay can only be determined retrospectively once the works are completed 23
24 The valuation of damages for prolongation Clause 26 JCT: Walter Lilly and Co Limited v Mackay [2012] EWHC 1773 (TCC) Contractor informs architect of losses/expenses incurred or likely to be incurred which, under the contract terms, will not be reimbursed which, will materially affect the progress of Works Architect agrees that works will be materially affected Architect shall instruct a quantity surveyor to quantify the loss/expense AS LONG AS... 24
25 The valuation of damages for prolongation Conditions: Provisions of ff. of the JCT contract are followed Timely application Provision of factual supporting details and evidence -> But what does this entail? Common sense fact-fact approach Consider knowledge available to Architect and their involvement in the project Put architect in reasonable position This can be retrospective, or prospective 25
26 The valuation of damages for prolongation Global and/or total loss claims: These are not terms of art or statutorily defined terms...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 and disruption relied upon Akenhead J 26
27 The valuation of damages for prolongation Principles: Contractor must prove delays occurred and caused it to incur loss on the balance of probabilities No need to show that it is impossible to prove cause and effect in the normal way Any condition precedent clauses re notification are complied with No established method of proof for such claims Evidentiary difficulties: Contractor must show that loss has been incurred would not have been incurred in any event They had a sufficiently well-priced tender which would have made a net return 27
28 The valuation of damages for prolongation Not all, or nothing: If the claim includes an event, not caused by the employer, this does not wipe out the claim It all depends upon the impact of such events A deduction can be made from the global claim total for such individual events (ie in a claim for 1M with an underpriced 50K item, that 50K item is deducted) However: No need for such a claim, if it is possible to find the actual cost attributable to individual events Possible, even if contractor is responsible for the inability to disentangle individual events 28
29 The valuation of damages for prolongation The facts: Contract was a complete mess on the administrative side Insufficient design from the outset and no sufficient allocation of this responsibility to WLC Multiple variations Hopelessly late provision of instructions and information Lack of unity and certainty between owner and designers Allowed for certain losses/expenses to be claimed as a global claim 29
30 The valuation of damages for prolongation Head office overheads and profit: 1. Contractor can recover the above as a result of ownercaused delay 2. Contractor must prove, on balance of probabilities, that if there had not been delay, it would have won tenders for other projects which would produce a profitable return or contributed to head office overheads 3. Emden/Hudson formula are useful methodologies for calculating number 2 above 4. There need be certainty that the loss or expense has been incurred because of a clause 26 delay. 30
31 8. Global and/or total costs claims Impossibility of proving cause and effect Lilly 31
32 9. Head office overheads and profit Proof that the contractor would otherwise have successfully won other contracts Clause 26 relevant event 32
33 10. Material breach: programming Vivergo Fuels Limited v Redhall Engineering Solutions Limited [2013] EWHC 4030 (TCC) Material breach for the purpose of termination: failure to provide a rev 4 programme? Hudson on Building and Engineering Contracts (8-056 to 8-058): Facts of the case Consequences of termination Importance attached to the type of breach Actual circumstance of the breach Commercial consequences of the breach Here: time of completion = important aspect of the project 33
34 Material breach: programming Contractor s inability to provide a rev 4 programme Five principles derived from Hudson 34
35 11. Obligation to proceed regularly and diligently Vivergo Fuels Limited v Redhall Engineering Solutions Limited [2013] EWHC 4030 (TCC) West Faulkner Associates v London Borough of Newham [1992] 71 BLR 1 Contractor obliged to do both Regularly: With sufficient way of men, materials and plant to have physical capacity to progress works substantially in accordance with contractual obligations Diligently: Physical capacity must be applied industriously an efficiently with successful progress towards contractual obligations 35
36 Obligation to proceed regularly and diligently West Faulkner Associates definitions Vivergo v Redhall 36
37 Obligation to proceed regularly and diligently Facts: Vivergo claims Redhall breached this obligation by: Inadequate resourcing of critical path works to DET Lack of productivity Lack of programming Poor labour management and supervision Poor material controls and site management Ruled: in breach of productivity and programming obligations because of a lack of a proper programme. This gave rise to a notice under 43.2(b) of the Contract. 37
38 12. Notices Vivergo Fuels Limited v Redhall Engineering Solutions Limited [2013] EWHC 4030 (TCC) Unilateral notices: Construe against the relevant objective contextual scene Meaning as understood by the reasonable recipient Purpose of notice is relevant to its construction Sufficiently clear and unambiguous In addition, default and termination notices: Must be reasonably connected in content and time Notify the default Indicate seriousness, or link to clause
39 Notices Facts: No explicit clause 43.2 reference > valid in the background context, or improperly construed? Not specific and unambiguous enough in the three notices The reasonable recipient of the letter would...not know that it had to take steps to remedy a default within 14 days to avoid termination Fourth notice: contained a sufficient link to a clause 43.2 notice BUT only with regard to one aspect of the claim Not consider that it can be construed as giving clear and unambiguous notice that Redhall had to take other steps 39
40 13. Opinion evidence Walter Lilly v DMW [2012] EWHC 1773 (TCC) Expert witnesses Persons of this description though in English law confounded with witnesses and not without advantage treated as such, are in fact a sort of assistant to the Judge and treated as such by Roman law. The expert witness is in quite a special position. He is an assistant in the determination of truth. He is a purveyor of information on which decisions are arrived at, and to the truth and validity on that information his professional credit and reputation are pledged Attributed to Jeremy Bentham 40
41 Opinion evidence Vivergo Fuels Limited v Redhall Engineering Solutions Limited [2013] EWHC 4030 (TCC) How an expert s approach can help assess delay and disruption, which leads to breach? Use common programme and factual information Aware of each other s approach Problems: Lack of coherent reasoning and analysis 41
42 Thank you for your attention! 42
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