Global Claims The effect of John Doyle Construction Ltd v Laing - PDF document

Global Claims The effect of John Doyle Construction Ltd v Laing Management (Scotland)/London Underground Limited v Citylink Telecommunications Limited Presented to ICES Date: 15 November 2007 by David Moss, Gregory Buckley and Claire Rawlinson of Hammonds

1 WHAT IS A GLOBAL CLAIM 1.1 What is a global claim Global claims are a modification of the following basic principles of contractual claims, so far as a tribunal will allow such modification. Breach/claims event The claimant has the burden of proving (a) that the breach of contract, breach of duty or other claims event has actually occurred; and (b) that the defendant is factually and legally responsible for it. Causation The claimant has the burden of proving that the breach/claims event caused the loss alleged to have been suffered. Quantum The claimant has the burden of proving loss suffered and amount of that loss. A global claim is one where the claimant cannot or will not adduce evidence to prove these essential elements and offers instead a collection of breaches/events and a total sum of loss incurred and asserts that the former caused the latter. “Global claims may be defined as those where a global or composite sum, however computed, is put forward as the measure of damages or of contractual compensation where there are two or more separate matters of claim or complaint, and where it is said to be impractical or impossible to provide a breakdown or sub-division of the sum claimed between those matters.” (Hudson) In other words claims where the sum put forward as the measure of damages for loss or expense is said to have been caused by two or more events which have interacted with each other in very complex ways, so that it becomes extremely difficult, if not impossible, to identify what loss and expense each event has caused. A global claim is sometimes referred to as a “rolled up”, “total cost” or “actual cost” claim. 1.2 Types of global claim Loss and expense Usually based on an allegation that there were numerous variations in contract and the costs overran. The claimant then alleges the cost overrun is recoverable as a result of the variations. There is, however, no analysis that a particular variation leads to a particular item of cost.

Delay and disruption The claim is usually based upon an allegation that there were numerous variations events interfering with the works and the works were delayed, entitling the contractor to an extension of time and monies. Again there is no link between the alleged events and delay. There are a number of ways in which the global sum may be quantified, but it is usually done on the basis of the total additional cost said to be the result of the matters complained of. 1.3 The problem with global claims – basic principles of contract claims Reversed burden of proof Usually the claimant has the burden of proving breach of contract, that the breach caused the loss alleged to have been suffered and proving the loss suffered and the amount of loss. A global claim is one where the claimant cannot or will not adduce evidence to prove these essential elements and offers instead a collection of breaches/ events and a total sum of loss incurred and asserts that the former caused the latter. Global claims computation by itself is evidence neither of breach or other entitlement, nor of damage or additional cost. Even if accompanied by separate and convincing evidence of breaches of contract or other valid grounds of compensation, and even if strong inference is raised at least some damage or additional costs must have been caused, the method is not even evidence as to what that additional coats must have been caused. The method is not even evidence as to what that additional cost is, since there are many other possible explanations of the cost overrun. Unfair and prejudicial to defendants In addition, global claims, whether or not computed from a basis of total cost, are almost invariably unfair and highly prejudicial to defendants, since they avoid indicating the precise case to be met and enables the claimant to change course during the evidence. No reduction for individual claims The tribunal has no satisfactory material before it to reduce the overall claim in respect of disallowed individual claims. 1.4 Brief History of Global Claims Under English Law early cases provided that a global claim could in principle be made. London Borough of Merton v Stanley Hugh Leach [1985] 32 BLR 31: “If application is made....for reimbursement of direct loss and expense attributable to more than one head of claim and at the time when the loss or expense comes to be ascertained, it is impractical to disentangle or

disintegrate the part directly attributable to each head of claim then, provided of course that the contractor has not unreasonably delayed in making the claim and so has himself created the difficulty, the architect must ascertain the global loss attributable to the two causes ...”. There were then a number of cases which where heralded as sounding the end of global claim. An example of this strict approach was the Privy Council’s decision of the Hong Kong case of Wharf Properties v Eric Cumine Associates (No. 2) [1991] 52 BLR 8, where the clients’ actions against their architects for negligent design and contract administration were struck out as incomplete and therefore disclosing no reasonable course of action. Per Lord Oliver “the pleading is hopelessly embarrassing as it stands....in cases where the full extent of extra costs incurred through delay depend upon a complex interaction between the consequences of various events, so that it may be difficult to make an accurate apportionment of the total extra costs, it may be proper for an arbitrator to make individual financial awards in respect of claims which can conveniently be dealt with in isolation and a supplementary award in respect of the financial consequences of the remainder as a composite whole. This has, however, no bearing upon the obligation of a plaintiff to plead his case with such particularity as is sufficient to alert the opposite party to the case which is going to be made against him at the trial”. But this hard-line position has historically been balanced by exceptions and qualifications: ICI Plc v Bovis Construction Ltd Queen's Bench Division, 17 February 1992 The ICI case arose out of the refurbishment of ICI’s premises where the cost rose from an original estimate of approximately £30m to over £53m. A global claim was made against the main contractor, the architects and the consulting engineers. The global claim for abortive work in respect of hundreds of items amounted to £840,211. It was said that the apportionment was impossible. The defendants asked, if they had a complete defence to all the items save for two minor ones- ’circuits need changing’ and ‘fire bell repositioning’ - what monetary consequences would flow from these two items? The judge held that if any of the events could not be proven at trial, the only consequence is that actual sum paid will fall to be distributed between a lesser number of events, not that the total recoverable will be less. The judge found it palpable nonsense that £840,000 could be the cost of repositioning a fire bell. GMTC Tools v Yuasa Warick Machinery Court of Appeal (Civil Division), 24 November 1994 A manufacturing company sued the firm which had supplied it with an unreliable computer controlled precision lathe. The claim was global to the extent that it did not deal precisely with the costs arising from each and every breakdown. The judge ordered that more detailed information be provided. The Court of Appeal held that the judge was not entitled to require a party to establish causation and loss by a