Walter Lilly & Co v (1) Giles Patrick Cyril Mackay (2) DMW Developments
Technology and Construction Court, 11 July 2012
In 2004, DMW appointed Walter Lilly & Co (WLC) as main contractor to build three luxury houses in south-west London with a combined contract value of £15.4m. Separate traditional JCT contracts were ultimately placed for each of the three dwellings, the third of which was being carried out for Mr Mackay with a contract value of £5.3m.
Justice Akenhead described the project as “a disaster waiting to happen”, primarily because of the fact that little or no design work had been completed by contract stage. The design, led by Mr Mackay’s consultant design team, effectively took place during the construction phase, resulting in many severe delays to WLC’s progress.
Contract completion, scheduled for January 2006, was not achieved until August 2008. In the intervening period, numerous issues of late design information, late specification decisions, defective works, payment, extensions of time, liquidated damages and loss and expense arose and several adjudications were instigated. In addition, relationships between all involved parties become extremely difficult, resulting in the replacement by Mr Mackay of his architects, his appointment of a full-time claims consultancy, and an ensuing war of both extensive correspondence and heated verbal exchanges.
By the time of practical completion, the parties were in serious dispute in relation to matters of defects, extensions of time, payment (including loss and expense) due to WLC, and delay damages deducted by DMW. A substantial claim was issued by WLC, which was met by a counterclaim from DMW.
Significantly, Justice Akenhead held in favour of almost all of WLC’s arguments on legal and valuation matters, as well as preferring the evidence of its experts and witnesses. WLC was awarded payment of a further £2.3m, a fraction of the sum expended by the parties in fighting their corners.
Richard Hildrick’s analysis
Concurrent delay concerns the question of a contractor’s entitlement to an extension of time, in a situation where there are two (or more) causes of delay, one of which is an event for which the employer is contractually responsible (a “relevant event”), and the other is not. This has been the subject of many often conflicting decisions of the courts. However, in City Inn v Shepherd [2010] the Scottish Appeal Court suggested that an apportionment of the delay between the two causes might be appropriate.
In this case, it was held that this “Scottish school” of thought was not applicable in England, the judge clarifying that a full extension of time must be awarded where one of the causes of delay was a relevant event. This conclusion flows naturally from the potential scenario in which an employer would otherwise be entitled to deduct delay damages despite having acted to prevent a timely completion.
Global claims arise when a contractor seeks to recover its total additional cost. In a preceding decision concerning global claims John Doyle v Laing Management [2004], the judge said that “advancing a claim for loss and expense in global form is a risky enterprise”.
The complexity of the events giving rise to loss and expense, and the inter-relationship between those, often numerous, events, however, often dictates that a global approach is necessary, or in reality is the only approach available given the difficulty of separating the effect of each individual cause of the loss and expense.
The judge recognised this difficulty facing a contractor who has incurred considerable additional cost, largely through the actions/inactions of the employer. He therefore concluded that there is nothing in principle wrong with a global cost claim, and that it would be wrong to deny a contractor any recovery of loss and expense because it was unable to produce a detailed cause and effect analysis.
Richard Hildrick MRICS MCIOB FCIArb is a quantity surveyor, contracts consultant and adjudicator. Email: [email protected]
