In the first of a three part series, Michael Black, QC reviews the general principles behind this old chestnut.
In J Crosby & Sons Ltd v Portland Urban District Council (1967) 5 BLR 121 the Contractor made a "General Claim for Delay and Disorganisation". Donaldson J held:
"Since, however, the extent of the extra cost incurred depends upon an extremely complex interaction between the consequences of the various denials, suspensions and variations, it may well be difficult or even impossible to make an accurate apportionment of the total cost between the several causative events.... I can see no reason why [the Arbitrator] should not recognise the realities of the situation and make individual awards in respect of those parts of individual items of the claim which can be dealt with in isolation and a supplementary award in respect of the remainder of these claims as a composite whole [136]."
It is important to note the limitations of this approach:
(1) the global approach is only justified in cases where it is difficult or impossible to make an accurate apportionment;
(2) where elements of the claim can practicably be isolated the Arbitrator must make individual awards;
(3) the approach is one of last resort and cannot be used to lump all delaying events together to justify a total overrun or financial shortfall.
In London Borough of Merton v Stanley Hugh Leach Ltd (1985) 32 BLR 51 the Judge was asked to answer a number of questions, one of which was:
Do the terms of the contract [JCT 63] permit the Contractor to recover direct loss and/or expense under Clause 11 (6) or 24(1) in respect of any alleged event when it is not possible for the Contractor to state in respect of any such alleged event the amount of loss and/or expense attributable thereto?
The Judge followed the decision in Crosby and expressed himself in the following terms:
"If application is made ... for reimbursement of direct loss or expense attributable to more than one head of claim and at the time when the loss or expense comes to be ascertained it is impracticable to disentangle or disintegrate the part directly attributable to each head of claim, then, provided of course that the Contractor has not unreasonably delayed in making the claim and so has himself created the difficulty the Architect must ascertain the global loss directly attributable to the two causes, disregarding, as in Crosby, any loss or expense which would have been recoverable if the claim had been made under one head in isolation and which would not have been recoverable under the other head in isolation.
... a rolled up award can only be made in a case where the loss and expense attributable to each head of claim cannot in reality be separated and secondly ... a rolled up award can only be made where apart from practicable impossibility the conditions which have to be satisfied before an award can be made have been satisfied in relation to each head of claim. [102-3]"
Thus, additional guidelines were added to those set out above, namely:
(1) that the Contractor must not have delayed in making his claim and thereby created the difficulty in apportioning the loss and/or expense between causes;
(2) even if the consequences of the individual heads of claim cannot be disentangled from each other, nonetheless the Contractor must still establish that each head of claim qualifies him for the benefit sought;
(3) thus, the actual basis of each claim must be identified separately;
(4) the Judge emphasised that loss and/or expense consequent on a cause that could have been considered in isolation must be disregarded in assessing the global loss.
If elements are included in a rolled up claim which clearly cannot be the responsibility of the Employer, or in respect of which the Contractor has failed to comply with the contract, since the claim is global in nature, the Court will hold that it is impossible to sever the good from the bad and therefore the Contractor has not proved his case.
In the case of Wharf Properties Limited v Epic Cumine Associates (No. 2) (1991) 52 BLR 1. The Plaintiff Developers retained the Defendant Architects for a project on the waterfront, Kowloon, Hong Kong. The Plaintiffs became liable to pay HK$317,712,799 to the contractors for delay and lost rent amounting to HK$199,910,544. They commenced proceedings against the Architects alleging negligence in the administration of the contract. In their pleading they alleged that due to the complexity of the project it was not possible to isolate individual periods of delay and attribute them to specific acts or omissions of the Architects. The Privy Council considered Crosby and Merton and made comments of general importance to the presentation of claims. Lord Oliver said that:
"Those cases establish no more than this, that in cases where the full extent of extra costs incurred through delay depend upon a complex interaction between the consequences of various events, so that it may be difficult to make an accurate apportionment of the total extra costs, it may be proper for an arbitrator to make individual financial awards in respect of claims which can conveniently be dealt with in isolation and a supplementary award in respect of the financial consequences of the remainder as a composite whole. This has, however, no bearing upon the obligation of a plaintiff to plead his case with such particularity as is sufficient to alert the opposite party to the case which is going to be made against him at the trial. [The Architects] are concerned at this stage not so much with the quantification of financial consequences ... but with the specification of the factual consequences of the breaches pleaded in terms of periods of delay. The failure even to attempt to specify any discernible nexus between the wrong alleged and the consequent delay provides... 'no agenda' for the trial. [20-1]"
The significance of the above is to add a further and extremely important qualification to the use of rolled-up claims: the concept is limited solely to the quantification of claims, it cannot be applied to the proof of claims. A Claimant must prove, on a balance of probabilities, a link between specific events and the delay or disruption relied on. This can only be achieved with admissible and persuasive evidence.
In Mid Glamorgan County Council v J Devonald Williams and Partner (1992) 8 Const. L.J. 61 Mr. Recorder Tackaberry QC, sitting as a deputy Official Referee held
"A proper cause of action must be pleaded.
Where specific events are relied upon as giving rise to a claim for moneys under the contract then any pre-conditions which are made applicable to such claims by the terms of the relevant contract will have to be satisfied, and satisfied in respect of each of the causative events relied upon.
When it comes to quantum, whether time based or not, and whether claimed under the contract or by way of damages, then a proper nexus should be pleaded which relates each event relied upon to the money claimed.
Where however a claim is made for extra costs incurred through delay as a result of various events whose consequences have a complex interaction that renders specific relation between event and time/money consequence impossible or impracticable, it is permissible to maintain a composite claim." [69-70]
In the next issue, Michael Black reviews some specific examples of how the courts have applied these general principles.
Michael Black, QC practices from Chambers in Manchester and London, telephone number Manchester (0161) 829 2100, London (0207) 822 1252.