Cost benefit analysis approach to global claims

• Author: Wayne Edward Lord
• Position: Department of Civil and Building Engineering, Loughborough University, Loughborough, UK

Introduction

This paper uses traditional doctrinal legal methodology to evaluate judicial statements on global claims, drawing on key authorities from a number of jurisdictions and from the realms of health and safety law and professional negligence. The purpose of this paper is to examine relevant case law governing the failure and/or success of global or rolled-up claims. It proposes a theoretical framework to improve a claimant's prospect of success in advancing a global claim, not only in circumstances where it may be impractical or impossible to provide a breakdown but also where a cost benefit analysis concludes it is logical and reasonable to do so. Global claims, if advanced correctly, could significantly reduce the costs of litigating complex construction disputes.

The starting point

The general rule as regards a claimant being compensated in damages for breach of contract was set out by Lord Blackburn in these terms:

[…] in settling the sum of money to be given for reparation of damages you should as nearly as possible get at that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in if he has not sustained the wrong¹.

In other words, the wronged party, so far as money can do it, should be placed in the same position as if the contract had been performed.

Contractors may find themselves in the position of having suffered a loss on a particular project and consider the whole of that loss is attributable to breaches of contract by the client. Contractors may then proceed, in a seemingly generalised and simplistic way, to present a claim for the total “loss” as a measure of damage which should compensate them for the harm suffered.

The claimant's right to be compensated for harm done should also be balanced up with the rights of the defendant as set out by Lord Justice Saville:

The basic purpose of pleadings is to enable the opposing party to know what case is being made in sufficient detail to enable that party properly to prepare to answer it².

The global claim authorities

Global or “rolled-up claims” occur when the claimant presents a claim with no breakdown in the sense that, rather than showing how each individual event has caused delay together with the monetary loss attached to each delay, the claimant provides a single claim lumping each alleged cause together without itemisation. Such an approach under normal circumstances:

[…] is the antithesis of a claim where the causal nexus between the wrongful act or omission of the defendant and the loss of the plaintiff has been clearly and intelligibly pleaded³.

Lord Humphrey LLoyd QC also went on to say:

However, that nexus need not always be expressed since it may be inferred. As Lord Oliver emphasised in Wharf Properties there must be a discernable nexus between the wrong alleged and the consequent delay (or money) for otherwise there will be no “agenda” for the trial³.

Awards given on a global basis have been supported in the context of:

[…] an extremely complex interaction […] [where] it may be difficult or even impossible to make an accurate apportionment of the total extra cost between the several causative events⁴ (emphasis added).

The arbitrator in Crosby v. Portland also used the word “impractical”. Similar words were used by Vinelott J., where he indicated:

[…] a rolled up award can only be made in a case where the loss or expense attributable to each head of claim cannot in reality be separated and […] where apart from that practical impossibility the conditions which have to be satisfied before an award can be made have been satisfied in relation to each head of claim⁵ (emphasis added).

Awards made by both arbitrators and adjudicators on a global basis have been supported by the courts⁴,⁶. There have, however, been notable failures. An argument commonly cited against the global approach is that it amounts to an abuse of process, such an argument usually being presented at an interlocutory stage in the form of an application to strike out the claim. The abuse can be categorised as where the claimant provides no particularisation to a claim such that the defendant does not know what he is defending himself against. In Wharf v. Cumine Associates⁷, the claimant had submitted a 400 page document without stating their exact position and without identifying the key cause of delay. In responding to an application to strike out, the claimant then stated that:

It will be necessary at trial to consider all variations instructed in order to establish which of them are unnecessary⁷.

The court then concluded:

The failure even to attempt to specify any discernable nexus between the wrong alleged and the consequent delay provides, to use Mr Thomas's phrase [counsel for the defendants] “no agenda for the trial”⁷.

While Wharf could be argued to be the low point for global claims, in Mid Glamorgan v. Devonald Williams⁸, the court reiterated the view that global claims were permissible in situations where there were issues of impossibility or impracticability:

Where however a claim is made for extra costs incurred through a 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 claim⁸ (emphasis added).

From Wharf onwards, we can see the courts reluctance to strike out global claims purely because they were presented as global claims.

The District Court of Western Australia (2007) defines the nature of a Scott schedule as being a form of pleading which allows the court to have before it a single document. That document conveniently providing a full description of each element of claim together with the adopted positions of each party (in terms of admission or denial and quantum/evidence) to each element. In ICI v. Bovis, the claimant produced four volumes to present its case in the form of a Scott schedule:

The objectives sought to be achieved by the Court in orders made relating to Scott Schedules are to ensure that when the action is entered for trial: each individual item claimed is particularised […] the amount asserted by both parties […] the contentions of each parties […] areas of agreement relating to the description of the item and quantum […] the aggregate of the claims and areas of admissions of each party are known⁹.

The claim in ICI v. Bovis was still found to be deficient in many respects but permitted to proceed without further and better particulars being required. The claimant's claim in British Airways Pensions Trustees v. Sir Robert McAlpine² (on appeal from a successful strikeout application) was acknowledged by the court as seriously defective in failing to particularise the basis of the claim, yet was allowed to proceed with further and better particulars being required. To the other extreme was the Australian case of John Holland v. Kvaerner¹⁰ where the pleadings showed no nexus between the events claimed of and the loss and damage alleged but still allowed to proceed provided further and better particulars were produced.

Consideration was given as to how far the claimant must go in particularising his claim in the case of Bernhard's Rugby Landscapes v. Stockley Park³. Judge Humphrey LLoyd, having reviewed the authorities, restated the principles of a global claim and, while maintaining the proposition that the claimant is entitled to present its case as it thinks fit, the court must ensure a party spells out its case in sufficient particularity in order to ensure fairness and observance of the rules of natural justice. Judge Humphrey LLoyd went on to say:

What is sufficient particularity is a matter of fact and degree in each case, with a balance being struck between excessive particularity and basic information. The approach must also be cost effective¹¹ (emphasis added).

The Court of Appeal concluded that the core dispute, over pleadings and case management, in Petromec Inc v. Peroleo Brasileiro SA¹² concerned the degree of particularity with which Petromec must plead its case. The dispute raised questions of fairness, practicality and the appropriate means of enabling the court to define and decide issues between the parties. The court concluded that “it would not be fair to Petrobras, nor a practical way of the court proceeding, if Petromec were not required to give adequate particulars of their claim”¹³ (emphasis added).

Lord Woolf and Lord Justice Otton heard an appeal against the refusal of a late strikeout application of a poorly pleaded global claim in the case of GAB Robins v. Specialist Computer Centres¹⁴. The appeal was refused. Lord Woolf acknowledged that the case should have taken a different direction. He also expressed some sympathy for the trial judge and expressed hope that the judge would take into account the contribution the poor pleadings may have had on whether, to use the earlier words of Lord Justice Otton (citing with approval Judge LLoyd in Bernhard's Rugby Landscapes v. Stockley Park), the court's fundamental concern that the dispute should be determined “expeditiously and economically”¹⁴ had been addressed.

There are warnings against the danger of a global claim failing completely if any significant part of the delay is not established and the court finds no basis for awarding less than the whole ( Keating, 2006 ).

In John Doyle v. Laing, Lord McFadden indicated that “advancing a claim for loss and expense in global form is therefore a risky enterprise”¹⁵. The risk being the global claim is undermined if either the claimant fails to prove that a material...