UK: Recovering Prolongation Costs: A Cautionary Tale

Last Updated: 7 October 2009
Article by Caroline Cummins

The recent TCC case of Costain v Haswell highlights the difficulties that may be faced when a party attempts to recover prolongation costs.

Costain's case, in a nutshell, was that, due to negligence on the part of consulting engineer Haswell, the foundation designs for two new structures at a Water Treatment Works had to be changed at a late stage, causing Costain additional direct cost and also delay to those works, which were being undertaken by Costain on a design and build basis for United Utilities Water Ltd, along with numerous other structures on the same site.

Costain's allegations of negligence against Haswell were accepted by the judge after hearing the expert evidence, but in its claim for damages, in particular the recovery of the costs of prolongation of the works due to delay resulting from the need to redesign, failed for want of proof. Instead, Costain had to adopt its opponent's case on the effect of the delay, leading to a much diminished recovery.

Proof of Delay

Costain claimed that delays caused by the foundations redesign led to an overall delay of some 12 weeks and 4 days. The associated claim for prolongation costs was for the recovery of the site overheads (for the whole of the site) for 12 weeks and 4 days. The claim failed on two bases: one, because it doesn't follow that an early critical delay necessarily leads to a delay to the completion date and two, because the loss does not necessarily extend to the whole of the site overheads, and you cannot assume that it does.

The programming experts appointed by the parties agreed that "time impact analysis" was the appropriate methodology to assess the effect of the delay on the completion date caused by the need to redesign the foundations. This method of analysis considers the effect of delay events on the planned programme at the time the delay event occurs. As such it is a useful tool when considering entitlement to extensions of time when the contract requires an assessment of whether the completion of the works is likely to be delayed. It is surprising that this analysis was used to establish actual (as opposed to likely) delay as a basis for claiming prolongation costs.

Both programming experts agreed that some delay had occurred to the foundation works of the two structures due to the need to redesign. They also agreed that at the time of the delay, the foundation works were on the critical path of the project "so that, all other things being equal, and if no later mitigation measures were taken, those delays would ultimately delay the completion of the project as a whole". Crucially however, no investigation was undertaken to establish whether this early delay, albeit on the critical path at the time, was the actual cause of delay to the completion of the works. Costain seems to have argued that it was inevitable that a critical delay in the early stages of a project would lead to a delay to completion, and based its claim for recovery of general site overheads for the whole of the delay period on that assertion. Not surprisingly, it didn't wash with the judge.

Successfully Claiming Prolongation Costs

In a damages claim you must establish that the breach of contract caused actual loss. A claim for prolongation costs is a claim for the costs of the additional period the contractor is required to spend on site to complete the works over and above the contract period. An early delay may disrupt the works, but it does not follow automatically that it will extend the time required for completion, even if it is on the critical path. All sorts of things happen on construction sites which can radically change the expected outcome of events. In order to make a claim good, it is necessary to analyse what actually happened after the delaying event to trace through that delay and demonstrate its effect on the completion date. Costain's expert failed to do this and this omission was fatal to the claim.

It is also necessary to analyse in detail the actual costs that have been increased as a result of the prolongation. Particularly on a site such as the one in this case, with multiple structures being constructed, not all site overheads will necessarily be required if one part of the works is delayed, even if that delay leads to a delay in completion overall. The judge found that Costain had failed to establish that the costs of maintaining the site as a whole (or head office overheads) were extended as a result of delays to the foundations.

A hollow victory?

Although it appears that Costain was justified in its claim for negligence against Haswell, its quantum claim didn't justify the costs it expended to bring the case to trial. When proceedings were commenced, Costain claimed £3.5m against Haswell for breach of duty, but this sum was reduced to £1.5m shortly before trial commenced. In fact, Costain recovered only £163,478.51. Was it worth it?

Reference: Costain Ltd v Charles Haswell & Partners Ltd (TCC, 24 September 2009, DHCJ Richard Fernyhough QC).

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 06/10/2009.

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