Global Claims in Construction

Claims are unavoidable in the construction industry. They can arise due to several reasons including, but not limited to, changes, delays, unforeseen circumstances, etc. What constitute a claim and how to deal with the same is commonly set out under the different forms of contract.

Under a typical FIDIC contract, contractor is required to submit a claim notification followed by interim/detailed particulars for each claim within a specific period of time. Whilst this is easily said, in reality, strict compliance with these requirements might be technically difficult or impossible.

In a typical project where there are multiple causes for delay and/or there are many events that give rise to claims, it might be (and indeed it is) very difficult to accurately ascertain the net effect of each claim in isolation of other claims/claimable event. For this very simple reason, some may believe that a Global Claim could be a last resort.

What is a global claim?

Ian Duncan Wallace in Hudson’s Building and Engineering Contracts [London, Sweet and Maxwell, 1995] defines global claims as:

“. …those where a global or composite sum, however computed, is put forward as the measure of damage or of contractual compensation where there are two or more separate matters of claim or complaint, and where it is said to be impractical or impossible to provide a breakdown or sub-division of the sum between those matters.”

The “matters of claim or complaint” referred to by Duncan Wallace QC are most likely to be a combination of events that the contractor alleges caused both delay and disruption to the works. Events can include variations, late provision of design information, denial of access to parts of the site, interference by other contractors, etc.

It is argued, if an employer has caused such events to occur, a global claim may be the only way of compensating a contractor for its losses and of preventing the employer from benefiting from the complex situation it has created.

In a global claim a contractor cannot or will not adduce evidence to prove a causal link between its losses and the actions of the employer complained about. The fact that the causal links are impractical or impossible to demonstrate should not prevent a contractor’s claim succeeding.

In making a global claim the contractor does not identify each and every event complained of or attribute a loss to each event. Generally, the requirements of a successful global claim can be summarized as follows:

1) The claim must be pleaded with sufficient particularity to enable the defendant to know the case against it; In Bernhard’s Rugby Landscapes Ltd v Stockley Park Consortium Limited [1997] 82 BLR 39 HHJ Humphrey LLoyd QC ordered the contractor to provide a list in relation to all of the alleged causes of delay other than variations that set out the relevant contract condition relied on or any other special circumstance, in which case the nature of the cause or breach also had to be particularised.

2) All other contractual requirements for a valid claim must have been complied with; The most important contractual pre-condition that needs to be satisfied is the giving of notice by a contractor that an event has occurred which may delay the project and/or result in the contractor incurring loss.

3) It must be impossible or impractical to separate out the consequences of each of the events; In Petromec Inc v Petroleo Brasileiro S.A. Petrobras & ors [2007] EWCA Civ 1371 the Court of Appeal re-emphasized that a global claim will not succeed if it is possible to apportion the total extra costs between the various events.

4) Where there are matters that the employer is not responsible for that are significant to the delay or disruption claimed, these must be accounted for in the claim

Objections to Global Claims:

The main objection to global claims is that Global claims offend the generally accepted legal position on what a contractor must prove in order to succeed with a claim, namely the causal link between the sums claimed and each individual event. As a result, a global claim can have the effect of reversing the burden of proof so that it is the employer, rather than the contractor, who has to undertake a detailed analysis of the events and quantum to show why the global approach is not justified.

An employer can obviously raise defences in an attempt to defeat a contractor’s global claim. One of the most effective defences an employer can deploy is to demonstrate that it was not responsible for a significant cause of the loss, and that this was the dominant cause of the delay or loss[1].

Interesting case law:

Having said that, it is very interesting to note the judgement that resulted in the case of Walter Lilly and Co Ltd v Mackay[2].

The Judge in this case, Mr Justice Akenhead, set out his analysis at para 486 where he stated at point (e) that:he fact that one or a series of events or factors (unpleaded or which are the risk or fault of the claimant contractor) caused or contributed (or cannot be proved not to have caused or contributed) to the total or global loss does not necessarily mean that the claimant contractor can recover nothing. Similarly, taking the same example but there being events during the course of the contract which are the fault or risk of the claimant contractor which caused or cannot be demonstrated not to cause some loss, the overall claim will not be rejected save to the extent that those events caused some loss”

The Jude further added at para 487 that “Even if a global cost claim cannot be allowed unless it was impracticable or very difficult for the Contractor to relate every penny of loss to each established and pleaded event which entitled it to loss and/expense, I am satisfied that it was impracticable or very difficult for WLC in this case. This project was, essentially, a complete mess from the administrative side on the part of DMW and its professional team.

The Protocol

In its second edition of February 2017, the Society of Construction Law Delay and Disruption Protocol discourages the making of composite or global claims by contractors, despite the apparent trend for the courts to take a more lenient approach when considering global claims.

It further states that if accurate and complete records are maintained, the contractor should be able to establish the causal link between an Employer Risk event and the resultant loss and/or expense suffered without the need to make a global claim. The Protocol goes on to state that the failure to maintain such records does not justify the contractor in making a global claim

Conclusion:

Whilst Global Claims may, in principle, be permissible, they are best used as a negotiation leverage being less objective in defining and/or establishing a causal link and quantum.

Contractors are advised to keep proper contemporarily records and be able to establish the causal link between an Employer Risk event and the resultant loss and/or expense suffered without the need to make a global claim.


[1] John Doyle Construction Ltd v Laing Management (Scotland) Ltd [2004] ScotCS 141

[2] Walter Lilly & Company Ltd v Mackay & Anor [2012] EWHC 1773 (TCC) (11 July 2012)

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