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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> John Doyle Construction Ltd v. Laing Management (Scotland) LTD [2004] ScotCS 141 (11 June 2004) URL: https://www.bailii.org/scot/cases/ScotCS/2004/141.html Cite as: 2004 SC 713, [2004] BLR 295, 2004 GWD 20-434, [2004] ScotCS 141, 2004 SCLR 872 |
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EXTRA DIVISION, INNER HOUSE, COURT OF SESSION |
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Lord MacLean Lord ![]() Lord Drummond Young
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A806/01 OPINION OF THE COURT delivered by LORD DRUMMOND YOUNG in RECLAIMING MOTION in the cause
Pursuer and Respondents; against
Defenders and Reclaimers: _______ |
Act: McNeill, Q.C., Smith; MacRoberts (Pursuers and Respondents)
Alt: Howie, Q.C., Borland; Masons, Glasgow (Defenders and Reclaimers)
11 June 2004
[1] The defenders were the[2] The pursuers aver that they began work on WP2011 on 25 September 1995. According to the
The decision at first instance
[3] After sundry procedure, the action proceeded to debate in the Commercial Court. The debate dealt with two main issues. First, the defenders contended that certain averments made by the pursuers about the effect of WP2010 on the completion of WP2011 were inconsistent and irrelevant, and should accordingly be excluded from probation. Those averments were to the effect that
" ... due to the foregoing late
information, and to restricted access to the work area owing to delay in Work Package 2010, the Pursuers were prevented from making a meaningful start until 12 February 1996, some ten weeks
later
than planned".
On that basis, the pursuers claimed an extension of time in respect of WP2011. The Lord Ordinary held that it was critical to the pursuers' case on this matter that none of the causes of delay to WP2011 was attributable to their fault. The pursuers had been granted an extension of time in respect of WP2010, but the delay in completion of WP2010 that had an impact on the start of WP2011 included a period after that extension. Consequently the pursuers' averments on this matter were irrelevant. In addition, the Lord Ordinary held that an agreement that the parties had concluded itself prevented any reliance by the pursuers on delay in the completion of WP 2010 beyond the extension of time that had been granted. Nevertheless, the Lord Ordinary did not exclude the averments in question from probation, on the basis that it was artificial to withhold from the knowledge of the court one aspect of the actual circumstances that might have contributed to the occurrence of delay in WP2011 simply because that aspect did not support the pursuers' claim for an extension of time. That finding was not challenged by either party.
[4] The second issue debated before the Lord Ordinary was the relevancy of the averments in support of the pursuers' claim for loss and expense. The contention for the defenders was that these amounted to a global claim, that is to say, a claim in which the individual causal connections between the events giving rise to the claim and the items of loss and expense making up the claim are not specified, but the totality of the loss and expense is said to be a consequence of the totality of the events giving rise to the claim. The defenders submitted that the success of a global claim was perilled on the proposition that all of the causal factors were matters for which the defenders were legally responsible. If, therefore, one factor founded on as playing a material part in the causation of the global loss could be seen to be the responsibility of the pursuers, or at least not the responsibility of the defenders, a global claim could not be maintained. The Lord Ordinary held that the pursuers' averments of loss and expense were relevant, and the present reclaiming motion is against that part of his decision.[5] The Lord Ordinary began his discussion by pointing out that the case was not concerned with whether a global claim for loss and expense may relevantly be advanced by a contractor under a
[6] The pursuers had attributed their global loss to a number of causal factors. One of these was the delaying and disruptive effect on WP2011 of delay in the completion of WP2010 during a period after the extension of time granted in respect of the
[7] The Lord Ordinary then went on to analyse the nature of a global claim.
"[35] Ordinarily, in order to make a relevant claim for contractual loss and expense under a construction
contract (or a common
law
claim for damages) the pursuer must aver (1) the occurrence of an event for which the defender bears legal responsibility, (2) that he has suffered loss or incurred expense, and (3) that the loss or expense was caused by the event. In some circumstances, relatively commonly in the context of
construction
contracts, a whole series of events occur which individually would form the basis of a claim for loss and expense. These events may inter-react with each other in
very
complex ways, so that it becomes
very
difficult, if not impossible, to identify what loss and expense each event has caused. The emergence of such a difficulty does not, however, absolve the pursuer from the need to aver and prove the causal connections between the events and the loss and expense. However, if all the events are events for which the defender is legally responsible, it is unnecessary to insist on proof of which loss has been caused by each event. In such circumstances, it will suffice for the pursuer to aver and prove that he has suffered a global loss to the causation of which each of the events for which the defenders is responsible has contributed. Thus far, provided the pursuer is able to give adequate specification of the events, of the basis of the defender's responsibility for each of them, of the fact of the defender's involvement in causing his global loss, and of the method of computation of that loss, there is no difficulty in principle in permitting a claim to be advanced in that way.
[37] Advancing a claim for loss and expense in global form is therefore a risky enterprise. Failure to prove that a particular event for which the defender was liable played a part in causing the global loss will not have any adverse effect on the claim, provided the remaining events for which the defender was liable are proved to have caused the global loss. On the other hand, proof that an event played a material part in causing the global loss, combined with failure to prove that that event was one for which the defender was responsible, will undermine the logic of the global claim. Moreover, the defender may set out to prove that, in addition to the factors for which he is liable founded on by the pursuer, a material contribution to the causation of the global loss has been made by another factor or other factors for which he has no liability. If he succeeds in proving that, again the global claim will be undermined.
[38] The rigour of that analysis is in my
[39] The second factor mitigating the rigour of the logic of global claims is that causation must be treated as a common sense matter ... That is particularly important, in my
[9] In our opinion the Lord Ordinary is correct both in allowing a proof before answer and in the legal analysis that led to that result. We were, however, addressed at considerable length on the
Causation of loss and global claims
[10] For a loss and expense claim under a[11] The expression "global claim" has normally been used in
[12] Perhaps the most detailed description of total cost claims is found in
"The claim as pleaded ... is a global claim, that is, the claimant does not seek to attribute any specific loss to a specific breach of contract, but is content to allege a composite loss as a result of all of the breaches alleged, or presumably as a result of such breaches as are ultimately proved. Such claim has been held to be permissible in the case where it is impractical to disentangle that part of the loss which is attributable to each head of claim, and this situation has not been brought about by delay or other conduct of the claimant ...
Further, this global claim is in fact a total cost claim. In its simplest manifestation a contractor, as the maker of such claim, alleges against a proprietor a number of breaches of contract and quantifies its global loss as the actual cost of the work less the expected cost. The logic of such a claim is this:
(a) the contractor might reasonably have expected to perform the work for
a particular sum, usually the contract price;
(b) the proprietor committed breaches of contract;
(c) the actual reasonable cost of the work was a sum greater than the
expected cost.
The logical consequence implicit in this is that the proprietor's breaches caused that extra cost or cost overrun. This implication is valid
only so long as, and to the extent that, the three propositions are proved and a further unstated one is accepted: the proprietor's breaches represent the only causally significant factor responsible for the difference between the expected cost and the actual cost. In such a case the causal nexus is inferred rather than demonstrated ... The understated assumption underlying the inference may be further analysed. What is involved here is two things: first, the breaches of contract caused some extra cost; secondly, the contractor's cost overrun is this extra cost. The first aspect will often cause little difficulty but it should not, for this reason, be ignored ... It is the second aspect of the understated assumption, however, which is likely to cause the more obvious problem because it involves an allegation that the breaches of contract were the material cause of all of the contractor's cost overrun. This involves an assertion that, given that the breaches of contract caused some extra cost, they must have caused the whole of the extra cost because no other relevant cause was responsible for any part of it".
Byrne J. went on to consider the claim made by the plaintiffs in the case before him, and pointed out that , because it was a total cost claim, it was necessary to eliminate any causes of inadequacy in the tender price other than matters for which the employer was responsible. It was also necessary to eliminate any causes of overrun in the construction
cost other than matters for which the employer was responsible.
"This theory has never been favoured by the court and has been tolerated only when no other mode was available and when the reliability of the supporting evidence was fully substantiated ... The acceptability of the method hinges on proof that (1) the nature of the particular losses make it impossible or highly impracticable to determine them with a reasonable degree of accuracy; (2) the plaintiff's bid or estimate was realistic; (3) its actual costs were reasonable; and (4) it was not responsible for the added expenses".
In that case it was held that any suggestion that there was a presumption that the contractor's expenditure was reasonable must be rejected.
[14] We agree with the foregoing statements of the
"In situations where the court has rejected the 'total cost' method of proving damages, but where the record nevertheless contained reasonably satisfactory evidence of what the damages are, computed on an acceptable basis, the court has adopted such other evidence ...; or where such other evidence, although not satisfactory in and of itself upon which to base a judgment, has nevertheless been considered at least sufficient upon which to predicate a 'jury verdict'
award, it has rendered a judgment based on such a
verdict....
However, where the record is blank with respect to any such other alternative evidence, the court has been obliged to dismiss the claim for failure of damage proof, regardless of the merits".
[16] In the third place, even if it cannot be said that events for which the employer is responsible are the dominant cause of the loss, it may be possible to apportion the loss between the causes for which the employer is responsible and other causes. In such a case it is obviously necessary that the event or events for which the employer is responsible should be a material cause of the loss. Provided that condition is met, however, we are of opinion that apportionment of loss between the different causes is possible in an appropriate case. Such a procedure may be appropriate in a case where the causes of the loss are truly concurrent, in the sense that both operate together at the same time to produce a single consequence. For example, work on a
[17] Apportionment in this way, on a time basis, is relatively straightforward in cases that involve only delay. Where disruption to the contractor's work is involved, matters become more complex. Nevertheless, we are of opinion that apportionment will frequently be possible in such cases, according to the relative importance of the
[18] An apportionment procedure of this nature has been used with apparent success in the United States in cases before the Court of Claims. Thus in Lichter
"Once it had thus been established that only part of the ... claim represented extra cost chargeable to Mellon, the one question remaining was whether a reasonable allocation of part of the total sum was possible. The court undertook such an allocation, guided by evidence concerning the extra time required for the performance of the stone contract as the result of the improper shelf angles. We cannot say that this was an arbitrary method of allocation. Indeed, [the plaintiff] is not in position to complain that the allocation was imprecise since it bore the burden of proving how much of the extra cost resulted from Mellon's improper conduct. [The plaintiff] risked the loss of its entire claim, as occurred with reference to the masonry contract, if the court should not have been able to make a reasonable allocation".
The important points that emerge from this decision are, first, that the Federal courts in the United States are willing to undertake an apportionment exercise and, secondly, that any such apportionment must be based on the evidence and carried out on a basis that is reasonable in all the circumstances. In our opinion a similar procedure should be available in Scots law.
We stress, however, that the allocation must be based on the evidence, and that under Scottish procedure the evidence must be based on a foundation in the pleadings.
[20] The present case is concerned with the relevancy of the pursuers' pleadings, and the argument for the defenders in
The pursuers' pleadings
[21] It is now necessary to examine the pursuers' pleadings against the foregoing background. The pursuers aver that the completion of WP2011 took 50 weeks, involving a delay of 22 weeks. That delay, it is said, was caused by Relevant Events within the meaning of clause 2.10 of the Works Contract Conditions. Clause 2.10 defines Relevant Events, so far as they are material, as follows:
"(5) compliance by the Management
Contractor with Instructions (which shall be deemed to include compliance by the Works Contractor with Instructions) ...
(6) the Management
Contractor, or the Works Contractor through the
Management
Contractor, not having received in due time necessary Instructions, drawings, details or levels from the Professional Team ...
(7.1) delay on the part of other Works Contractors in respect of the Project which the Works Contractor has taken all practicable steps to avoid or reduce".
The pursuers then aver that the delay was caused by their compliance with instructions, by their not receiving in due time necessary instructions, drawings, details and levels duly requested from the Professional Team, and by delay on the part of the Works Contractors responsible for WP2010 (the latter
being the pursuers).
[23] The completion of Block A was further delayed beyond the initial 10 weeks. The pursuers' claim in respect of such delay relates to a period of 154 days (22 weeks). That delay is identified as delay a5 in an application for an extension of time dated 12 September 1996, which is No 7/13 of process. It is clear from the
[24] The pursuers' pleadings incorporate two other documents in addition to number 7/13 of process. These are appended at Schedules B and C to the summons, and purport to summarize the delays that led to an extension of time claim of 22 weeks and affected contract completion. In these documents, in particular Schedule B, the delay in completion of WP2011 seems to be attributed to a number of factors that do not form part of the case summarized in paragraphs [22] and [23] above. In particular, Schedule B appears to attribute parts of the delay on WP2011 to delay in completing WP2010, and also to the effects of bad weather, in particular a heavy snowfall that made it impossible to work for seven days following 5 February 1996. In their submissions counsel for the defenders made much of these schedules; they submitted, in particular, that it must be concluded from these schedules that the delay and disruption for which the pursuers claim to recover their loss and expense did not result solely from the defenders' activities, but also resulted from matters for which the pursuers were responsible (as works contractors for WP2010) or for which neither party was responsible. Counsel for the pursuers, however, indicated that the pursuers no longer sought to rely on those schedules. We accept that that is the proper interpretation of the pursuers' pleadings. It is noticeable that the matters summarized in paragraphs [22] and [23] above are set out at some length in the pleadings, and also in number 7/13 of process. Schedules B and C, by contrast, are in summary form, and are simply incorporated into the pleadings. In these circumstances it is appropriate to treat the averments contained in the pleadings themselves at the pursuers' primary case, and the schedules as merely secondary; in the event of a conflict the primary case should prevail. We should comment, however, that it is unfortunate that Schedules B and C were ever relied on by the pursuers; at best, they would have added nothing to a case that is otherwise adequately pled, and in the event they added unnecessary confusion into the case.
[25] The pursuers go on to make averments about the causation of loss and expense. They aver, first, that it is not possible to identify causative links between each cause of delay and disruption and the cost consequence thereof. Such an averment is normally essential to enable a pursuer to present its claim on a global basis. The pursuers go on to aver that the effect of the
[26] The pursuers go on to aver that the quantification and evaluation of recoverable costs arising from uneconomic working comprises the following elements:
(A) Establishment of "normal" levels of productivity for each core type, composite
slabs, in-situ slabs, walls and other works by a analysis of selected representative areas where disruption was at a relatively low level, and extrapolation to the whole works. This was derived from an analysis of the daily labour
allocation sheets for the works in a manner that is then specified in detail by reference to cores, composite slabs, in-situ slabs, walls and drainage. The conclusion of this analysis is that the total Contract Work Content reasonably required to complete the whole works as detailed at the time of the contract was 188,792 man hours.
(B) Comparison of the Contract Work Content with the total labour
actually
expended (in man hours). The total labour
actually expended by the pursuers in WP2011 as disclosed by the
labour
sheets amounted to 373,283 man hours. The additional productive effort by the pursuers was therefore 184,491 man hours.
(C) Analysis of the difference, identification of the additional man hours the cost
of which is admissible for recovery, and evaluation.
[28] Apart from the matters discussed in the
[29] We are of opinion that, on a proper analysis, the foregoing method of calculation of the pursuers' claim is relevantly pled. The claim for uneconomic
[30] The pursuers must nevertheless establish that their actual
[31] We are accordingly of opinion that the pursuers' averments should proceed to a proof before answer. In the course of such proof, it may emerge that the causation of the pursuers' additional
Conclusion
[32] For the foregoing reasons we are of opinion that the Lord Ordinary's decision was correct. We will accordingly refuse the reclaiming motion.