Contractors should take note of the recent judgment in Walter Lilly vs Mackay with regards to loss and expense claims
A judgment by Mr Justice Akenhead handed down last week in Walter Lilly and Company Ltd v (1) Giles Patrick Cyril Mackay (2) DMW Developments Ltd provides useful clarity in relation to a number of issues of interest to the construction industry.
Not only did the court scotch any suggestion that City Inn Ltd vs Shepherd Construction Ltd  might be good law in England and Wales in relation to concurrent delay, but it also outlined a commercial approach to loss and expense and global claims that is based on the ultimate civil burden of proof.
Walter Lilly had been appointed as the main contractor on a substantial residential project under a JCT standard form contract with bespoke amendments. The project suffered considerable delay and Walter Lilly sought an extension of time and the recovery of loss and expense.
Extension of time and concurrency
Mr Justice Akenhead looked in some detail at the approach to be taken by the court when considering questions of extensions of time. He found that the court should use the advantage it has of knowing what actually happened and should decide on the balance of probabilities what delay was actually caused by relevant events, based upon both actual and expert evidence.
In considering how concurrent causes of delay should be dealt with the court endorsed the comments of Mr Justice Dyson in Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999), holding that where there is an extension of time clause such as the one in question, and delay is caused by two or more effective causes, one of which entitles the contractor to an extension of time as being a relevant event, the contractor is entitled to a full extension of time. In doing so, Mr Justice Akenhead rejected the Scottish school of thought set out in City Inn Ltd v Shepherd Construction Ltd  stating that it is “inapplicable within this jurisdiction”.
Loss and expense
The court also looked at the correct application of a standard form loss and expense clause. The relevant clause in this case required the contractor to submit details which are “reasonably necessary” for the ascertainment of loss and expense - yet it did not set out either the extent of such details nor the form in which such details should be provided. Contractors will be heartened by the court’s pragmatic and commercial approach:
- An entitlement to loss and expense will not be lost if some of the loss details are not provided. It was recognised as unattractive if, say, £10 out of a £1 million claim is not adequately detailed with the consequence that the whole claim fails.
- A requirement to provide “reasonably necessary” detail, in line with the JCT standard form wording, does not necessarily give rise to an obligation to submit all of the backup accounting information. An offer to the architect or quantity surveyor to inspect records at the contractor’s office could suffice.
- A loss and expense clause should be construed in a “sensible and commercial way that would resonate with commercial parties in the real world”. The contractor will need to provide such detail so that the architect or quantity surveyor is “satisfied”, but not necessarily “certain”, that some or all of the loss and expense claimed is likely to be or has been incurred.
- The context in which loss and expense claims are made is typically due to the fault and risk of the employer. As such the court recognised that there was no need to construe the loss and expense provisions in a way which was penal against the contractor.
The defendants argued that the loss and expense claims were so-called “global” or “total” cost claims and therefore, in the circumstances of the case, should fail in their entirety. In the light of this, the court conducted a comprehensive review of the existing authorities relating to global claims, concluding that there is nothing “wrong” in principle with a global cost claim.
The court found that, ultimately, claims for loss and expense must be proved as a matter of fact. The contractor will have to establish that, on a balance of probabilities, (1) events have occurred which give rise to an entitlement to loss and expense; (2) those events caused delay and/or disruption; and (3) those events caused the contractor to incur loss and expense. Contractors do not, however, have to show that it would be impossible to plead and prove cause and effect in the usual way, in order to bring a global claim.
Most importantly, a global claim will not necessarily fail by reason of factors for which the claimant contractor is responsible or which cannot be proved not to have contributed to the global loss. The consequence would simply be that the claim would be reduced by the value of the event or series of events in question.
This case was hard-fought litigation. However, as the dust settles, the detail can be put to one side. The judgment is helpful to contractors bringing loss and expense claims based on employer breaches and also in bringing greater clarity to an important area of construction law.
Kit Harvey is a senior associate and Samantha Perry is an associate in the construction team at RPC, who acted for the claimant