In the last issue of the Trett Digest, Michael Black, QC explained the general principles which the courts have set down regarding global claims. In this second of three instalments, he looks at some specific examples from case law.
IN ICI PLC v Bovis ConstructionLimited and others (1992) 8 Const. L.J. 293 ICI brought proceedings against Bovis as management contractors and its architects and consulting engineers in connection with the refurbishment and reconstruction of its headquarters at Millbank. The Defendants objected to the lack of particularity in the pleading and the Official Referee ordered a Scott Schedule setting out against whom the complaint was made, the breach and the factual consequences.
However, the Scott Schedule simply set out the total alleged overspend without attributing it to any of the compendious allegations now made. Further, the figures in the Scott Schedule failed to comply with those in the Statement of Claim and were not broken down. The Official Referee held that ICI had failed, where it was able, to make the link between breaches and their financial consequences. He struck out the Scott Schedule.
McAlpine Humberoak Ltd v McDermott International Inc (1992) 58 BLR 1 concerned the construction of the deck structures of an off-shore drilling rig. Part of the Plaintiffs’ claim included indirect costs caused by V0s, revised drawings and late answers to TQs. The Court of Appeal criticised the Plaintiffs for failing to call any witnesses to address the issue of causation. The Plaintiffs employed a consultant, Mr. Waggett, to calculate the indirect costs claim. Mr. Waggett first went through each VO and arrived at a number of days for each based either on the time actually taken or a calculation. He prepared bar charts illustrating the cumulative effect of all causes of delay. He then took the additional time occupied for each activity (as opposed to the actual time taken) and applied the tender rates, making adjustments for the Christmas break, night working and the value of variations. The Court of Appeal said of Mr. Waggett’s method:
"…it suffers from two major defects. So far as the first stage of the calculation is concerned, Mr. Waggett’s approach assumed that if one man was working for one day on a particular VO, the whole contract was held up for that day...
The second, even more serious defect relates to the second stage of the calculation. It assumes that the whole of the workforce planned for a particular activity was engaged continuously on that activity from the day it started until the day it finished...
By reason of these defects, we conclude that the Plaintiffs did not prove, or indeed come near to proving, on the evidence which they called at trial, that the delay in delivery of [the structures] was due to revised drawings, V0s and late response to TQs. Further they never came near to proving that the indirect costs resulting from these matters amounted to £2,020,198. The very fact that the total entitlement claimed by the Plaintiffs on the basis of Mr. Waggett’s evidence came to £1M more than their actual costs should surely have put the judge and his assessors on enquiry." [25-6]
They contrasted Mr. Waggett’s approach with that of the Defendants:
"When the Defendants’ witnesses came to give evidence, they undertook the task which was never undertaken by the Plaintiffs, of tracing the impact of every drawing revision, VO and TQ... [26]
The judge dismissed the Defendants’ approach to the case as being a retrospective and dissectional reconstruction by expert evidence of events almost day by day, drawing by drawing, TQ by TQ and weld procedure by weld procedure, designed to show that the spate of additional drawings which descended on McAlpine virtually from the start of the work really had little retarding or disruptive effect on its progress. In our view the Defendants’ approach is just what the case required." [28]
In John Holland v. Kvaerner (1996) 82 BLR. 8 1, the plaintiff claimed damages as a result of breaches of contract. Losses were calculated in terms of the difference between the tender estimate and actual cost. Argument before Byrne J. focussed on the extent to which it is necessary in the statement of claim to set out the causal link between two groups of fact: the breaches of contract and the alleged extra cost. The plaintiffs form of pleading was described by the judge as implying rather than stating the necessary causal relationship. The claim was accordingly 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 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." [85]
The claim was also a "total cost claim, on which Byrne J. stated the following:
"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 unstated 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. It is the second aspect of the unstated assumption; 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 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 [85-86]
The judge found that in John Holland’s pleading no causal nexus was asserted linking any breach with any item of loss or damage claimed. He approached this flaw in the pleading as follows:
"The fundamental concern of the court is that the dispute between the parties should be determined expeditiously and economically and, above all, fairly. Where the proceeding is being managed in a specialist list, the judge, whose task it is to steer the case through its interlocutory stages, might, and perhaps should, explore the claim to determine whether the form it takes is driven by its nature and complexity, or by a desire to conceal its bogus nature by presenting it in a snowstorm of unrelated and insufficiently particularised allegations, or by a desire to disadvantage the defendant in some way. Relevant to this is an acknowledgement that… a total cost claim puts a burden on the defendant. This burden may involve the defendant in extensive discovery of documents relating to the performance of the project; it may mean that at trial the defendant must cross-examine the plaintiffs witnesses to expose the flaws in a claim which assumes that the defendant is, itself, responsible for every item of the plaintiffs cost overrun; it may mean that the defendant must lead evidence to explain what in fact, was the impact of each of the acts complained of on the project, as was done in McAlpine Humberoak. Litigation inevitably imposes burdens on the parties; the court must exercise its powers to ensure that, as far as possible, these burdens are not unreasonable and are not unnecessarily imposed.
In my opinion, the court should approach a total cost claim with a great deal of caution, even distrust. 1 would not, however, elevate this suspicion to the level of concluding that such a claim should be treated as prima facie bad: British Airways Pension Trustees. Nevertheless, the point of logical weakness inherent in such claims, the causal nexus between the wrongful acts or omissions of the defendant and the loss of the plaintiff, must be addressed. I put to one side the straightforward case where each aspect of the nexus is apparent from the nature of the breach and loss as alleged. In such a case the objectives of the pleading may be achieved by a short statement of the facts giving rise to the causal nexus. If it is necessary for the given case for this to be supported by particulars, this should be done. But, in other cases, each aspect of the nexus must be fully set out in the pleading unless its probable existence is demonstrated by evidence or argument and further, it is demonstrated that it is impossible or impractical for it to be spelt out further in the pleading. Moreover, the court should be assiduous in pressing the plaintiff to set out this nexus with sufficient particularity to enable the defendant to know exactly what is the case it is required to meet and to enable the defendant to direct its discovery and its attention generally to that case." And it should not be overlooked that an important means of achieving the result that, once it starts, the trial should be conducted without undue prejudice, embarrassment and delay, is by ensuring that, when it begins, the issues between the parties including this nexus are defined with sufficient particularity to enable the trial judge to address the issues, to rule on relevance and generally to contain the parties to those issues. And if, in such a case, the plaintiff fails to demonstrate this causal nexus in sufficient detail because it is unable or unwilling to do so, then this may provide the occasion for the court to relieve the defendant of the unreasonable burden which the plaintiff would impose on it: Wharf [90-91]
The John Holland analysis and restatement of principle was accepted and adopted by H H Judge Lloyd, QC in Bernhard’s Rugby Landscapes Ltd v. Stockley Park Consortium Ltd (1997) 82 BLR. 39:
The statement of claim left the reader to ferret in the enormous supporting schedules to find the heart and real nature of the plaintiffs case. The terms of the contract were not set out in the statement of claim; the nature of the breaches of these terms which were relied upon as founding claims for damages were not set out in the statement of claim; the basis upon which claims were advanced under express terms of the contract for the recovery of additional costs were not pleaded in the statement of claim. The pleading was therefore of the type customarily known as a "forest" pleading since the statement of claim was virtually no more than a vehicle for the relaunch of the plaintiffs original contractual claims submissions. No attempt has apparently been made to consider the contractual claims submissions and to extract from them the material which ought properly to have appeared in a statement of claim, leaving to the schedules, as is customary and proper, the finer details of the specific allegations in the statement of claim. Although the statement of claim superficially looked as if it complied with the Rules of the Supreme Court, in reality its structure was fundamentally wrong in that one had to delve in the accompanying schedules in search of the factual and the legal bases for the claimant’s case. Whilst it is clearly desirable to make the best use possible of material that has already been prepared so as to avoid unnecessary costs being incurred and to maintain a continuity of approach, it must not be forgotten that there may be a marked difference between the form and content of a claim presented under the terms of a contract for consideration by an architect, engineer or other person appointed to issue certificates and/or reach decisions and the presentation of a claim in legal and arbitral proceedings.
On the global claim part of the case, the judge stated as follows:
Official referees are expected to control the cases in their list and do so, either on application or, where permitted and appropriate, of their own motion, with a view to ensuring, within the rules of court, that the presentation of a case is such that it ensures that the issues raised by it are or will be clearly defined, as a matter of procedure, both with a view to trial and also to see that the parties should be aware of the strengths and weaknesses in their respective cases so that only those disputes which require to be tried should come to the court for decision. If Lord Woolf ’s proposals are to be adopted the time is fast approaching when a claimant party will be required from the outset to present its case in considerably more detail than is at present customary. For present purposes the position may be restated as follows:
(1) Whilst a party is entitled to present its case as it thinks fit and it is not to be directed as to the method by which it is to plead or prove its claim whether on liability or quantum, a defendant on the other hand is entitled to know the case that it has to meet.
(2)With this in mind a court may - indeed must - in order to ensure fairness and observance of the principles of natural justice - require a party to spell out with sufficient particularity its case, and where its case depends upon the causal effect of an interaction of events, to spell out the nexus in an intelligible form. A party will not be entitled to prove at trial a case which it is unable to plead having been given a reasonable opportunity to do so, since the other party would be faced at the trial with a case which it also did not have a reasonable and sufficient opportunity to meet.
(3) What is sufficient particularity is a matter of fact and degree in each case. A balance has to be struck between excessive particularity and basic information. The approach must also be cost effective. The information may already be in the possession of a party or readily available to it so it may not be necessary to go into great detail.
In the next issue Michael Black will summarise the principles and the application of global claims.
Michael Black QC is the Head of the Construction Group at 2 Temple Gardens, London EC4Y 9AY
telephone number: +44 20 7822 1200
e-mail: mblack@2templegardens.co.uk