Global Claims, Large Boulders and Steep Hills

It never cease to amaze me how people underestimate the complexity of construction projects. With so many parties involved mostly motivated by money, conflicting egos, unrealistic programmes, variations, weather, is it really any wonder that so many construction projects have an inbuilt capacity to go very wrong'
 
 

It never cease to amaze me how people underestimate the complexity of construction projects. With so many parties involved mostly motivated by money, conflicting egos, unrealistic programmes, variations, weather, is it really any wonder that so many construction projects have an inbuilt capacity to go very wrong?

 
Except where expressly state otherwise, typical UK construction contracts often require the Contractor to carry all the risks associated with providing a building project. So when the proverbial hits the propeller it is usually the Contractor that is left holding the baby and returning a negative margin, much to the dismay of the shareholders and the Contractor’s bank. 
 
What usually then follows is an autopsy of the project followed by the submission of some form of claim to try and recover the lost time and or money. This is where the fun really starts.
For a claimant to be successful in English law, a Contractor is required to:-
 
  • Particularise its claim (what, where, when and why)
  • Explain why the Employer is responsible for the complaint, (prove the breach of contract)
  • Show that it has incurred costs as a result of the offending action or inaction (prove the loss)
  • Prove that the loss has been caused by the offending action or inaction (cause and effect)
  • Show that but for the offending act the loss would not have been incurred (no contribution by the Contractor)
 
But what happens when the autopsy reveals that the cause of the delay or loss is down to more than one matter and nobody can unravel the mess and show which matter caused what loss? 
 
What usually then follows are claims submitted on a global basis. What do I mean by global basis? Well in the case of claims for time, I literally mean the sort of claim that effectively says…
 
“Dear Mr Architect it has taken 50 week to complete the project. The contract says I only had 40 weeks to complete the projects and as you did vary some of the works and were late in releasing information, it must be your fault I am delayed so please give me an extension of time for 10 weeks”
 
and, in the case of loss and expense….
 
“Dear Mr Architect this project was supposed to make a 10% gross return but has only managed a return of 7%. You did vary part of the works and you where late issuing some of the key information so it must be your fault that we have under recovered, please certify payment of £ xxxxxxx  to cover our unanticipated loss and expense”
 
Hudson’s Building and Engineering Contracts - 11th edition defines global claims in a more legalistic and precise way.
 
“Global claims may be defined as those where a global or composite sum, however, compute, 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”
 
The courts are littered with cases concerning the rights and wrongs of claims that are made on a global basis and it is beyond the scope of this article to consider each of the cases and to debate the merits put forward by the claimants in each of these. However, what can be said in summary is that unless there are very exceptional circumstances, global claims are likely to fail for a number of very fundamental and good reasons.
 
  • A total cost approach less the tender allowance is not in itself evidence that an Employer is in breach of contract or is responsible for causing the Contractor’s loss.
  • It is not unusual for Contractors to lose money on projects for a variety of reasons including for example pricing errors, poor supervision and poor cost control etc. Global claims ignore this reality.
  • Finally and perhaps most importantly, a Contractor has the burden of proving that its claim derives from a breach by the Employer and the Employer has the right to understand the case it has to answer. Global claims invariably fail to discharge this burden
 
So if the starting point is that, other than in exceptional circumstances, global claims are likely to fail, what are exceptional circumstances that may help a Contractor convince a tribunal to consider entitlement under the guise of a global claim?
 
Firstly, it must be impossible or at best impractical to separate out the effects of individual heads of claim. This does not, however, mean that it is only a problem with the benefit of hindsight. If a Contractor knows that it is incurring loss and expense and either chooses or neglects to keep adequate records, this is a failing that the Contractor can not expect to profit from at some point in the future when it then realises that it needs to pursue a claim.
 
Secondly, a detailed summary of all the heads of claim must be provided and I would suggest that either some attempt at apportionment of the loss claimed is made or at the very least a detailed narrative is provided to explain why such apportionment is not possible.  
 
Thirdly, if a Contractor is aware that it is in itself culpable for part of the loss incurred, it should identify and separate this loss from the claim and give the Employer full credit for its own contribution to the loss. This should hopefully improve the credibility of the Contractor in the eyes of the tribunal.
 
Finally, pray – Getting paid out on global claims is not impossible but if you are going to pursue them it might be worth getting in training first by pushing some very large boulders up some very steep hills!
 
Although this article is written from the perspective of a Contractor claiming against an Employer, the above principles would equally apply to a Sub-Contractor claiming against a Contractor.
 
Peter Vinden is a practising adjudicator, mediator, expert and conciliator. He is Joint Managing Director and Chairman of Vinden and he can be contacted by email at pvinden@vinden.co.uk
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