Hong Kong: Global Claims

When a contractor’s works are delayed or disrupted in a major project it is typically the result of numerous interrelated matters. Commonly, contractors avoid preparing a separate claim for each event but simply present the employer with a single claim calculated by subtracting the anticipated total cost of the works from the actual costs and attributing any additional sum generally to the matters relied upon as the causes of delay and disruption. Such claims are described both as global claims, because they roll up all of the alleged causes of delay and disruption, and total cost claims, because they rely on the total cost of the works as the basis for establishing the loss and expense.

In the recent case of John Doyle Construction Limited v Laing Management (Scotland) Limited the Scottish Court of Session provided guidance on the circumstances in which the courts would entertain a global claim and the dangers in pursuing such a claim.

Laing, the management contractor, let the construction of an office block in a number of works packages. Several of these, including WP2010 and WP2011, were let to John Doyle. Both packages were delayed and John Doyle was awarded extensions of time for part but not all of the delays suffered on WP2010. They commenced proceedings to recover loss and expense incurred on WP2011 as a result of delay and disruption. John Doyle alleged that the delay and disruption was caused by:

• The delayed completion of WP2010
• Inclement weather
• Late information

It was agreed between the parties that Laing was responsible for some but not all of the delay to the completion of WP2010.

Ordinarily, in order to prove a claim for loss and expense (or a common law claim for damages), a contractor will need to separately demonstrate the loss and expense incurred as a result of each event. However, because of the complex interaction of causes, it is sometimes impractical or even impossible to identify the loss and expense flowing from each event. In such circumstances, the court may allow a global claim.

Nevertheless, if the employer is able to show that a matter for which he was not responsible caused a material part of the loss and expense claimed from him, the global claim will fail in its entirety, unless there is some rational calculation of the loss and expense for which the employer is not liable. Otherwise, the employer would be at risk of being held liable for a loss that he was not responsible for.

Laing argued that, on John Doyle’s own case, the loss and expense claimed was partly caused by matters for which Laing was not responsible, in particular: part of the delay to WP2010 and inclement weather. As a result the global claim was bound to fail and ought not to be allowed to proceed.

The judge, Lord MacFadyen, found that Laing’s submission came "very close to success". However, he decided that evidence should be heard on how each of the causes of delay ought to be viewed in determining whether the causes for which Laing had no liability played any material part in causing the global loss. Further, he could not exclude the possibility that evidence subsequently adduced would give the court a satisfactory basis for an award of a lesser sum than the full global claim.

Lord MacFadyen therefore allowed the global claim to proceed. However he noted that "the risk that [John Doyle’s] global claim will fail because a material part of the of the causation of the loss and expense was an event for which [Laing] are not liable, if the evidence discloses no rational basis for the award of a lesser sum, remains a live one." If Laing could show that an event for which it was not responsible played a material part in causing the global loss it would "undermine the logic of the global claim".

A global claim should not be advanced unless it is impossible or, at least, impracticable to attribute specific losses to each causative event, identifying the relevant causal links. Even under those circumstances, a global claim will fail if the defendant (typically the employer or superior contractor) is able to demonstrate that matters for which he had no contractual liability were a material cause of the loss and expense, unless there is some rational basis for an award of a lesser sum than the global claim. While the law does allow a contractor to argue a global claim if there is no practicable alternative, doing so is, as the judge put it, a "risky enterprise".

© Herbert Smith 2002

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