Global claims and Walter Lilly

Posted: 16/05/2013


In simple terms a global claim is one which arises when the contractor has suffered loss caused by a number of different events, but is unable or unwilling to identify the quantifiable amount of loss caused by each different event. The contractor therefore ‘rolls up’ his claims into one global claim. In extreme scenarios the contractor may take the approach, “I planned for the works to cost me £X, they actually cost me £X+Y, therefore the employer owes me the sum £Y”.

The traditional view had been that global claims were bound to fail. However, the recent High Court case of Walter Lilly v Mackay (2012) reassess this. Here, the redevelopment of three luxury London houses was delayed significantly and the contractor sought various sums together with an extension of time. Interestingly, on the facts, the judge actually held the claim in question was not a global one, however he did helpfully provide a useful summary of the law relating to global claims. In January 2013 the Court of Appeal refused the employer permission to appeal.

One of the main objections to allowing global claims had been the view that they effectively reverse the burden of proof, requiring the employer to disprove a causal link between the event and the loss, rather than requiring the contractor to prove it. It was felt this shift in burden of proof, as well as offending the key cause and effect principle, made it more likely the employer would be pressured to settle a claim, possibly at a higher level than otherwise.

However, Akenhead J held this was not the case. He made clear the contractor still has to prove a number of elements in order to succeed in a global claim and in doing so, he dispelled other myths about such claims. He stated that the contractor must:

  • Prove he has complied with the requirements of the contract regarding dispute resolution – for example, complied with notification provisions, notifying the dispute to the relevant persons;
  • Prove the claim as a matter of fact – that is, prove that the events entitling the contractor to loss and expense occurred and that they caused the losses in question (an overall causal link). Prior to Walter Lilly there were a number of myths around this requirement which Akenhead J dispelled:
    1. Failure to separate out any claim which could be separated into quantifiable losses for each event, but which was not, will not cause the claim to fail. Instead, the failure will go to credibility;
    2. The claim will not fail simply because one of the events pleaded by the contractor was not an employer risk event. Loss will instead be apportioned; and
    3. The claim will not fail simply because the contractor has caused the inability to separate out the claim;
  • Plead causal links where possible;
  • Show the loss would not have incurred in any event – for example, show that the contractor had not priced the tender so low such as to make profit unlikely or impossible;
  • Have sufficient evidence to support the claim through witness statements, records etc.

Whilst Akenhead J has at first glance seemingly made it easier for global claims to succeed, advice must still be to approach them with caution. Walter Lilly has made clear there is a place for global claims should the circumstances dictate, but proving them in the absence of the usual cause and effect may be difficult and global claims are more likely to be subject to greater suspicion from the courts than the traditional fully formulated claim. Therefore, if the traditional cause and effect route is available, this should be favoured.

It is often said that “good construction management starts the day the contract is signed” and that the key to good construction management is having good contemporaneous documentation. As always, the advice to any construction professional is to keep full and detailed records in order to avoid having to make a global claim in the first place.
 


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