A Sad, But Salutary Lesson

The case of Walter Lilly & Co Ltd v Mackay in the Technology and Construction Court represents a sad, but salutary lesson in how not to organise and progress an expensive, substantial and complicated construction project.

Background

The dispute had already raised issues of interest to the legal profession.

In Walter Lilly & Co Ltd v Mackay [2012] EWHC 649 TCC the court had to consider whether in response to an application for disclosure, correspondence with Knowles Ltd, a claims consultancy that employed personnel with legal qualifications and which had been retained by the defendants to provide 'contractual and adjudication advice' was covered by legal professional or legal advice privilege.

The principal judgment on liability also contains interesting findings on substantive matters such as extension of time and head office overheads, and such procedural matters as the weight to be given to matters not put in cross-examination and to the recovery of sums paid in a settlement.

The separate judgment on costs also considers the granting of indemnity costs on the basis of the defendants' behaviour and the rejection of a Part 36 offer.

However, this article focusses on what Akenhead J. referred to as "a number of issues which may be of interest to the construction industry and specialist legal practitioners ... those include global claims and concurrent delays".

The action

The claimant contractors Walter Lilly (WLC) had entered into a contract under the JCT 98 (Without Quantities) edition with a development company (DMW) the site owners, for the construction of three luxury houses in London. There were significant delays and the owners, notably Mr. Mackay, became involved in bitter disputes with their consultants, at one stage appointing Knowles to maintain vigilance over them.

WLC issued proceedings against Mr Mackay and DMW regarding extension of time which it claimed and money that it alleged it was owed.

Concurrent delay

Unlike the Architect, who prior to Practical Completion must make the best assessment possible of likely future delay resulting from the Relevant Events in question, a court or arbitrator has the advantage, when reviewing the question of what extensions were due, of knowing what actually happened.

The court or arbitrator would then have to decide on a balance of probabilities what delay had actually been caused by the relevant events.

However, the judge emphasised that "The Court should be very cautious about taking into account, in the exercise of determining what delays were caused by what events, theoretical possibilities as to what one party or the other might have done (but did in fact not do)".

After referring to Balfour Beatty Building v Chestermount Properties (1993) 32 Con LR 137, the judge warned that in the context of a contractual approach to extension of time, one could not simply carry out a purely retrospective exercise, identifying the last of a number of events delaying completion and saying that this caused the overall delay to the Works.

What had to be considered was what critically delayed the Works as they went along.

The greatest interest lies in what the judge contributed to the "substantial debate...as to how what is called concurrent...causes of delay should be dealt with" since "most of the debate in cases in this country and elsewhere has revolved around extension of time clauses similar to those contained in Clause 25 where the Architect has to grant an extension of time which is fair and reasonable'".

The judge extracted from the case law two lines of thought which he described as "The English and Scottish schools".

The former derived from Henry Boot Construction v Malmaison Hotel (1999) 70 Con LR 32, to the effect that the contractor is entitled to a full extension of time for the delay caused by two or more events, provided that one of them is a relevant event.

The latter derived from City Inn v Shepherd Construction [2010] 136 Con LR 51, to the...