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General provisions
Clause 4.23 of the Joint Contracts Tribunal (JCT) Standard Building Contract With Quantities 2011 (JCT 2011 - available from RICS Books ) provides that, in certain circumstances, where the contractor:

'incurs or is likely to incur direct loss and/or expense for which he would not be reimbursed by a payment under any other provision in these conditions ... the Architect/Contract Administrator shall ascertain, or instruct the Quantity Surveyor to ascertain, the amount of the loss and/or expense which has been or is being incurred ... '

(Reproduced with kind permission of JCT. ? JCT)

This restricts the application of the rules associated with reimbursement of reasonable costs to situations where the contract does not allow those costs to be 'valued' under any other provision.

Valuation of variations
Clause 5 of the Joint Contracts Tribunal (JCT) Standard Building Contract With Quantities 2011 (JCT 2011) sets out provisions relating to variations and provisional sums generally, while clause 5.6 deals with the valuation rules. At clause 5.6.3.3 this includes allowances, where appropriate, for any addition to or reduction of preliminary items. This may include allowances for delay and disruption. All additional preliminaries associated with variations should be valued using rates set out in the contract bills where appropriate.

If the rates in the contract bills are not appropriate (see clause 5.6 and Henry Boot v Alstom Combined Cycles [2000]) and fair rates and prices are to be used, then these may be based on actual cost adjusted to bills of quantities pricing levels.

In Henry Boot v Alstom the relevant bill rates were in fact unrealistically high, and Henry Boot accepted that it had made an error in its calculation. Henry Boot nevertheless insisted that it was entitled to be paid for the extra work on the basis of those artificially high bill rates. The arbitrator disagreed with Henry Boot, applying fair rates and prices instead. Henry Boot appealed against the arbitrator's award to the Technology and Construction Court (TCC), on a matter of law. The judges found in favour of Henry Boot, stating that bill rates, even though they contain an error, should be applied to additional work where the provisions of the contract so provide.

The Institution of Civil Engineers (ICE) Conditions of Contract Measurement Version (7th edition) adopts a similar procedure, by referring to the 'price' of ordered variations in clause 52. This price is to be based, where appropriate, on the rates set out in the bills of quantities. Clause 53 makes provision for the contractor to claim a higher rate or price or any additional payment pursuant to any clause of these conditions other than sub-clauses 3 and 4 of clause 52 (valuing variations) or clause 56(2) (increase or decrease in rate due to actual quantities being greater or less then the measured quantities). The ICE 7th edition therefore restricts the reimbursement of reasonable additional costs to situations where these costs cannot be 'valued' under the contract.

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Arguably clause 4.23 of JCT 2011 allows the reimbursement of reasonable costs associated with general disruption caused by a number of variations that would not have been incurred by reason of any one of the variations in isolation. The ICE 7th edition does not provide for such reimbursement other than by adjustment of the bill rates for the individual variations.

The difference of approach between valuing variations and valuing claims for loss and expense is highlighted in the case of Weldon Plant Ltd v The Commission for New Towns [2000].

See also WW Gear Construction Ltd v McGee Group Ltd [2010] which adds further support for the decision in Merton v Leach.

Duties of parties involved

Duties of the architect or engineer
Under clause 4.23 of Joint Contracts Tribunal (JCT) Standard Building Contract With Quantities 2005 (JCT 2011), and having received a notice from the contractor, the architect/contract administrator should from time to time ascertain the amount of loss or expense. This provision allows the architect/contract administrator to ascertain the amount of loss or expense on more than one occasion - when the notice is first given, and thereafter, when more information becomes available.

Under the Institution of Civil Engineers (ICE) Conditions of Contract Measurement Version (7th edition), and having received a notice from the contractor, the engineer should determine the amount of any costs to be paid in the monthly statements. See clause 60(2) (a), which allows the engineer to determine the additional cost on the occasion of each monthly statement.

Under clauses 53(1) and 53(2) of the ICE 7th edition, the contractor must keep such contemporary records as may reasonably be necessary to support any claim it may subsequently wish to make. In addition, under clause 53(3), the engineer may instruct the contractor to keep such contemporary records as are reasonable, and to allow the engineer to inspect these.

The architect or engineer need not make an ascertainment or determination during the currency of the contract works unless a notice has been provided by the contractor. However, if the architect or engineer is aware that the contractor is incurring additional loss, expense or additional costs, it is good practice to ascertain or determine the level of those losses, expenses or costs. If such a notice is provided, and if the other requirements are met and the architect or engineer does not ascertain or determine the amount of loss, expense or additional costs, this will probably result in a referral to adjudication. It may also entitle the contractor to interest or finance charges (see London Borough of Merton v Stanley Hugh Leach [1985] ). Such action could also amount to a breach of contract, entitling the contractor to other damages, such as statutory interest for late payment at a much higher rate.

Clause 4.3.3.4 of JCT 2011 and clauses 7(4), 12(6), 13(3), 14(8), 31(2), 40(1) and 42(3) of the ICE 7th edition provide that the architect or engineer shall include any such amounts so ascertained or determined within the interim certificates or monthly statements.

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Retention is not deducted from loss and expense under JCT 2011, although it is deducted from additional cost under the ICE 7th edition.

Clause 4.5.2.1 of JCT 2011 and clause 60(4) of the ICE 7th edition provide that the architect or engineer shall ascertain or determine any loss, expense or additional cost as part of the final account.

In London Borough of Merton v Stanley Hugh Leach Ltd [1985], the court indicated that under the JCT 63 conditions, a notice by the contractor was necessary before the architect was obliged to ascertain loss and expense. However, if the contractor had made a claim for damages, rather than for loss and expense, then a notice would not have been necessary to assess the damages incurred (this reasoning may also be applied to other forms of contract). In this case, therefore, failure by the contractor to provide a notice did not prevent it from recovering damages for breach of contract, but it did prevent it from recovering loss or expense under the terms of the contract.

Duties of the contractor

Clauses 4.23 of JCT Standard Building Contract With Quantities 2011 (JCT 2011) and 53 of the ICE Conditions of Contract Measurement Version (7th edition) require the contractor to make written application to the architect/contract administrator or engineer stating that it has incurred, or is likely to incur, direct loss and expense.

In Walter Lilly & Company Ltd v Mackay & Anor [2012] EWHC 1773 (TCC) the court held that such written applications under the JCT contracts are a condition precedent to recovery by the contractor. In terms of the timing of such notices the court held that:

'for time related preliminary costs, the Contractor can wait until it is clear that the loss or expense has been incurred [before making the application]; thus, if the delay has not actually happened, the extended preliminary costs will (often) not have been incurred and the Contractor can therefore wait before serving its application until it has actually been incurred.'

In relation to the costs associated with such application the court held that:

'Clause 26.1 [of JCT ?98] expressly says that the application under Clause 26.1 does not have to be given with a money quantification, because the bracketed wording suggests only that the Contractor "may give his quantification"'.

Arguably clause 4.23 of JCT 2011 is even clearer in this respect.

Clause 4.23.2 of JCT 2011 requires the contractor to submit upon request such information as will enable the architect/contract administrator to form an opinion as to whether such loss and expense has been, or is likely to be, incurred. Similar provisions are contained within the ICE 7th edition (for example, clause 53).

In the Walter Lilly case, the court held that:

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'all that is required is that the architect must be reasonably put into a position in which it can form an opinion that "direct loss and/or expense has been incurred or is likely to be incurred ... because the regular progress of the Works ... has been materially affected" by the given events.'

Clause 53 of the ICE 7th edition requires the contractor, after submitting notice of a claim, to keep such contemporary records as may reasonably be necessary to support any claim it may subsequently wish to make. A similar provision could be implied within JCT 2011. On the balance of probabilities, failure to keep records will, in any event, have an adverse impact on the contractor's ability to prove a loss.

Clauses 4.23.3 of JCT 2011 and 53 of the ICE 7th edition require the contractor to submit upon request such details of loss, expense and additional costs as are reasonably necessary for the ascertainment or determination of these as aforesaid.

In the Walter Lilly case, the court held that:

'it is necessary to construe the words in a sensible and commercial way that would resonate with commercial parties in the real world. The architect or the quantity surveyor must be put in the position in which they can be satisfied that all or some of the loss and expense claimed is likely to be or has been incurred. They do not have to be "certain". One has to bear in mind that the ultimate dispute resolution tribunal will decide any litigation or arbitration on a balance of probabilities and at that stage that tribunal will (only) have to be satisfied that the contractor probably incurred loss or expense as a result of one or more of the events listed in Clause 26.2 [of JCT 98]. Bearing in mind that one of the exercises which the architect or quantity surveyor may do is allow loss and expense, which has not yet been incurred but which is merely "likely to be incurred"; in the absence of crystal ball gazing, they cannot be certain precisely what will happen in the future but they need only to be satisfied that the loss or expense will probably be incurred.'

Establishing the claim

Heads of claim
Under both the JCT and the ICE provisions, the contractor is given an entitlement to recover reasonable costs associated with a number of identified issues. In JCT Standard Building Contract With Quantities 2011 (JCT 2011), these are referred to as 'matters' and are listed in clause 4.24. In the ICE Conditions of Contract Measurement Version (7th edition), these issues are identified within the individual clauses.

When calculating the reasonable costs of the contractor, it is essential to start with each of these issues (causes), tracing their effects through the contractor's accounts. The information provided by the contractor needs to be presented in sufficient detail to allow this to be effected. However, strict proof is not required. So long as the claim assessor is satisfied that there is an entitlement, they should assess the quantum on that basis. (See Ascon Contracting Ltd v Alfred McAlpine Construction Isle of Man Ltd [1999] and Section 4.2.1.9 of the old Surveyors' Construction Handbook .)

Important issues to be considered are those of causation and remoteness, which are discussed below.

Causation
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When tracing the effects of the heads of claim through the contractor's costs, it is necessary to consider each of the claimed costs, identifying whether it has been caused by the head of claim currently under consideration.

The first test to apply is the 'but for' test. That is, 'but for the occurrence represented by this head of claim, would this cost still have been incurred?' If the answer is 'yes', apply the second test. If the answer is 'no', the cost has been caused by the occurrence.

If the first test has not been satisfied, the second test is to identify the 'dominant' cause. That is, if there are two or more potential causes of the loss at any given point, what is the dominant cause of the loss? In such circumstances it is the dominant cause which is deemed to have caused the loss. If there is no dominant cause such that the competing causes are equally effective in delaying the works, the causes of loss are considered concurrent.

In determining the dominant cause of the delay it will usually be the event that causes the longest delay that is dominant.

The correct approach will usually be to step through the programme month by month to determine when there were delays occurring, what effect they were having on the planned completion of the works and therefore which delays were dominant.

Where there are genuine concurrent causes of delay the approach adopted by the courts in Scotland differs from the approach adopted by the courts in England.

In Scotland the loss should be apportioned between the causes. See John Doyle Construction Ltd v Laing Management (Scotland) Ltd [2004] and London Underground Ltd v Citylink Telecommunications Ltd Rev 1 [2007] .

In England the contractor should be granted a full extension of time but they cannot recover in respect of the loss caused by the delay.

If the loss is deemed to have been caused in fact by the occurrence under consideration. The question of whether the loss has been caused in law by the occurrence is referred to as 'remoteness of damage' and is discussed in the next section.

Remoteness
Having satisfied the tests of causation in fact, the third test is to establish whether or not the loss has been caused by an occurrence in law. That is, whether or not a loss is 'too remote'.

In F. G. Minter v Welsh Health Technical Services Organisation [1980] , the court decided that the first rule in Hadley v Baxendale [1854] was synonymous with 'direct loss and/or expense' under the Joint Contracts Tribunal (JCT) 63 standard form of contract. We can apply this reasoning to the JCT 2005 forms and to 'additional costs' under the Institution of Civil Engineers (ICE) forms.

The test to be applied is whether or not the loss arose naturally from the ordinary course of things. That is, whether at the time a contract was entered into, a reasonable person would

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have concluded that the loss of the type in question was a serious possibility, or a real danger as a result of the event in question.

This issue has been reconsidered and approved by the House of Lords in the case of Jackson v Royal Bank of Scotland (HL; 2005) .

For example a situation in which an architect issues late information, which delays a brickwork subcontractor by 4 weeks. One week after the subcontractor would otherwise have completed the works, they become insolvent. The main contractor is put to considerable additional cost and delay in appointing another subcontractor to complete the works. Is the employer liable for this additional time and cost? The additional cost has been caused in fact by the late information, as without this, the additional costs arising out of the insolvency would not have been incurred. However, it may not be recoverable by the contractor. It may be considered too remote, on the grounds that it is a type of loss that the parties could not reasonably have considered (at the time that the contract was entered into) as being a serious possibility as a result of late issue of information.

However, if both causation in fact and in law have been satisfied, then the loss is recoverable under the head of claim under consideration (see Section 4.2.2.2 of the Surveyors' Construction Handbook).

Mitigation
'Mitigation' is the phrase used in law to refer to the obligation on the claimant to temper the costs that it intends to claim as damages.

This principle denies the claimant the opportunity to recover any part of the damage that has been caused unnecessarily or that could readily have been avoided by the claimant. (See British Westinghouse Company v Underground Electric Railways [1912] .)

The principle does not impose on the claimant an obligation to take any step that a reasonable and prudent person would not ordinarily take in the course of their business. Nor does it impose on the claimant an obligation to spend significant sums of money to mitigate a loss.

Similarly, the express obligation in clause 2.28.6.1 of JCT Standard Building Contract With Quantities 2005 (JCT 2005) is not thought to impose on the contractor an obligation to spend substantial sums of money to reduce delays.

Extensions of time
There is a link between loss and expense (or additional cost for delay) and disruption and extensions of time, although the link is not so close as many believe. See City Inn Ltd v Shepherd Construction Ltd [2010] .

If an architect or engineer grants an extension of time on grounds that also attract loss and expense or additional cost, then that loss and expense or additional cost will usually be ascertained or determined for that period. However, it must be recognised that loss and expense or additional cost may go beyond just the costs of keeping the site open. Disruption may also feature under the same head of claim.

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Under JCT Standard Building Contract With Quantities 2011 (JCT 2011), when valuing loss or expense associated with a delay to works, these amounts must be proven as actual losses or expenses. For this purpose, bill rates should not be used. When valuing additional preliminaries that can be attributed to specific instructions, these may be valued at bill rates. Under the Institution of Civil Engineers (ICE) Conditions of Contract Measurement Version (7th edition), such additional preliminaries arising out of the engineer's instructions should be valued according to bill rates adjusted as appropriate (see clause 52(3)).

Under both the JCT 2011 and ICE 7th edition contracts, the matters facilitating reimbursement of additional cost are different from the events facilitating an extension of time.

Under either set of conditions, a contractor may have been delayed by an employer, but need not be entitled to an extension of time (if, for example, the contractor would otherwise have finished early). Under these circumstances, the contractor would, however, still be entitled to loss and expense or additional cost.

When ascertaining or determining the costs of increased preliminaries for prolongation, it is common practice to use the amounts in the contract bills proportioned to the length of the delay. Depending on the circumstances, this may be correct under the ICE 7th edition and under the provisions of clause 5.6.3 of the JCT conditions. Where the bill rates are not to be used, the actual cost to the contractor of the additional preliminary items is the correct basis of ascertainment or determination, and full details of such costs must therefore be provided by the contractor.

From the principles discussed above, it will be apparent that the actual cost incurred by the contractor because of the delay is more likely to be incurred at the time of the delay than at the end of the contract (see Sections 4.2.3.2 and 4.5.3 of the old Surveyors' Construction Handbook).

For a full discussion of this aspect, see Extensions of time .

Loss of overheads and profit

Fixed overheads are sometimes referred to as 'head office' overheads. These are costs that are not project-specific, and may include surveying and senior management time.

Where the cost or value (as appropriate) of additional resources specifically and reasonably devoted to the project as a result of delay or disruption can be separately identified, such as the time spent by surveyors and managers, then these should be separated out and priced accordingly. These need not be subjected to the 'but for' test set out below.

The issue of additional recovery for these items, which cannot be separately identified as specifically relating to the project in question, usually occurs where a contractor has been delayed by additional work, the late issue of information or the suspension of work. The contractor may argue that its non-job-specific fixed overheads have been employed for longer than anticipated and that a full recovery has not been made in respect of them. This potential to recover for loss of profit was expressly approved by the Court of Appeal in Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd [1970] .

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As explained above, under the rules of the Joint Contracts Tribunal (JCT) Standard Building Contract With Quantities 2011 (JCT 2011) and the Institution of Civil Engineers (ICE) Conditions of Contract Measurement Version (7th edition), the site and head office preliminaries may be valued at bill rates depending on the head of claim (typically, delay caused by an architect's or engineer's instruction). When ascertaining loss and expense under JCT 2011 or determining additional cost under ICE 7th edition, it will be necessary to apply the principles set out above.

In practice, the hardest of the tests to satisfy when valuing head office overheads is the 'but for' test (that is, 'but for this delay, would the contractor have been able to recover additional monies in respect of these overhead costs by taking on other work?', or, put another way, has the contractor been deprived of the opportunity to mitigate these costs by, say, making staff redundant sooner? - see Causation ). Proof that the contractor was turning work away because of the delay to a particular project may be found by reference to the contractor's order books, invitations to tender and general market conditions.

If the 'but for' test is satisfied, together with the other tests described in this chapter (see Establishing the head of claim ), then reimbursement of the costs of the fixed overheads should be made.

If the 'but for' test has been satisfied, a formula may be appropriate in order to calculate the loss (see Section 4.2.5.11 of the old Surveyors' Construction Handbook). The 3 formulae in common use - Hudson, Emden and Eichleay - have all been used by the courts, but perhaps the Eichleay formula is a better estimate of true loss than the other two.

The Hudson formula is as follows:

head office percentage

contract sum contract period

delay period

(where the head office percentage is the percentage for head office costs illustrated in the bills of quantities.)

The Emden formula is similar to the Hudson formula, except that the head office percentage is calculated from the contractor's accounts, rather than the bills of quantities.

The Eichleay formula is as follows:

total overhead costs during contract period total turnover during the same period

total project cost to the contractor contract period

delay period

In practice, if the 'but for' test is satisfied, then either the Emden or the Eichleay formulae will suffice. Unless deliberately using bill rates for overheads and profit, the Hudson formula should be avoided.

All the formulae are an estimate of the loss and should only be used where no better method of calculation is possible.

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When calculating the loss for additional overheads in this way, account needs to be taken of the additional contribution towards overheads earned through the performance of additional works. Arguably, it is only the additional works undertaken during the delay period that should be taken into account, as additional works undertaken outside of this period would not have contributed to the overheads in question.

If the 'but for' test is not satisfied, and the contractor cannot demonstrate that the delay has caused it any loss or expense, then the mere fact of management resources having been deployed on the project during the delay period may not be enough to trigger an entitlement. (See Phee Farrar Jones Ltd v Connaught Mason Ltd [30 April 2003] CILL (2003) 2005.)

However, in Euro Pools v Clydesdale Steel Fabrications Ltd 2003 SC (D) 18/1 the court held that it was not necessary to demonstrate an actual loss in order to recover for the time of employees and directors.

In Robertson Group (Construction) Ltd v Amey-Miller (Edinburgh) Joint Venture & Others [2005] ScotCS the court held that the phrase 'all direct costs and directly incurred losses' in a letter of intent was sufficiently broad to enable the contractor to recover for overheads and profit. The court concluded that it cannot have been the intention of the parties to limit the recovery of the contractor to reimbursement of its outlays only.

See also the judgment in Walter Lilly & Company Ltd v Mackay & Anor [2012] EWHC 1773 (TCC) at paragraphs 540 to 554 for an example of a case in which head office overheads and profit were recovered by the contractor in full, together with a detailed explanation of the principles to be applied.

Costs of preparing the claim

An argument often put forward by contractors is that they have incurred reasonable expenses in preparing a claim, and that these expenses should be recoverable as part of the claim. This argument has never been fully accepted by the courts, and as such should usually be rejected. The preferred view is that the costs for preparing a claim are only recoverable as extra-contractual damages in three circumstances: 1. Under the Joint Contracts Tribunal (JCT) conditions, where the employer is in breach of contract by failing to prepare the final account and the contractor mitigates the damage by preparing it for the employer. This is not applicable under the Institution of Civil Engineers (ICE) Conditions of Contract Measurement Version (7th edition) (see clause 60(4)); the contractor has been instructed to collate or analyse information in a manner beyond that which could reasonably have been expected; and costs in the course of arbitration or litigation, such as the appointment of an expert witness, where the contractor is successful.

2. 3.

In all of the above circumstances, only reasonable costs are recoverable. Invariably, when a claim proceeds to arbitration or litigation, the original claim presented by the contractor is redrafted and represented. In these circumstances, the costs associated with the original preparation of the claim are not recoverable (see James Longley v South West Regional Health Authority [1983] ).

In Walter Lilly & Company Ltd v Mackay & Anor [2012] EWHC 1773 (TCC) the court concluded that claim preparation costs could be a valid head of claim but found it very difficult

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to unravel exactly what the claims consultant had been doing in that case. The court therefore made a conservative allowance for such costs as an additional preliminary resource needed to help manage the delay that was occurring.

Wholly owned plant and plant hired from a sister company

Where a contractor is claiming loss and expense for its own plant, notional plant hire rates are not an acceptable method of calculating loss (see Alfred McAlpine Homes Ltd v Property and Land Contractors Ltd [1995] ). In such circumstances, actual loss must be calculated, taking into account the substantiated costs of capital and depreciation. The calculation may not include other elements included in hire rates, such as periods of non-hire.

If the contractor can prove that, because of the delay, it has been deprived of the use of that plant elsewhere and has therefore had to hire plant for another project, the associated extra and substantiated costs will be recoverable if they pass the 'remoteness' test outlined above. The hire charges of plant from non-associated plant hire companies will be recoverable in accordance with the usual principles.

Where plant is hired from a sister company, the hire rates should be allowed if the contractor can demonstrate that they are genuine market rates. In instances where a sister plant hire company has been set up as a vehicle to protect assets, but does not operate in the open market, particular care is needed. In such instances, hire rates are notional and bear no relevance to market hire rates. It should be remembered that the contractor has a duty to mitigate its loss. If plant could have been obtained more cheaply elsewhere, then the contractor's compensation should be restricted to that lower rate.

Interest and finance charges

Interest or finance charges may be reimbursable if: 1. 2. 3. 4. 5. the contract provides so; they are claimed as direct loss and or expense and form part of the loss incurred; they are claimed as damages for breach of contract and form part of the loss incurred; the Late Payment of Commercial Debts (Interest) Act 1998 applies; or interest is awarded by the court.

Neither the conditions contained in the Joint Contracts Tribunal (JCT) Standard Building Contract With Quantities 2011 (JCT 2011) nor the Institution of Civil Engineers (ICE) Conditions of Contract Measurement Version (7th edition) make specific provision for the recovery of financing charges as part of the loss incurred, although both sets of conditions provide for the payment of interest in the event of late payment. In this context, finance charges are payable in respect of the amounts certified, whereas interest is payable if the amount certified is not paid in full by the final date for payment.

Items (3), (4) and (5) above are extra-contractual and therefore outside the scope of the responsibilities of the claim assessor. However, the claim assessor must be aware of potential recoverability when advising the client. The award of interest by a court or arbitrator is at the discretion of the court or arbitrator, but is often awarded as simple interest at a rate of 8% from the date the sum was due until the date of judgment.

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In F. G. Minter v Welsh Health Technical Services Organisation [1980] , the court was willing to accept that finance charges could form part of the loss incurred by the contractor. This was achieved by interpreting JCT 63 (which contained similar provisions to JCT 80, JCT 98, JCT 2005 and JCT 2011) as including a contractual right to interest as direct loss and expense. It is felt that the ICE conditions should be interpreted in a similar way when determining cost.

As with other items of loss, expense and additional cost, only the contractor's reasonable costs are reimbursable.

In order to recover compound interest as part of the loss, it is not necessary for the contractor to issue repeated notices for the interest costs being incurred (see Rees and Kirby v Swansea City Council [1985]). The contractor is entitled to reasonable financing charges from the occurrence of the loss until the date of payment on a compound basis. In Rees and Kirby it was held that quarterly rests were appropriate. If the contractor delays reimbursement by failing to provide details of its loss within a reasonable time, then this should be taken into account when calculating the financing charges due.

Increased costs caused by delay

The contractor may claim that, as a consequence of delay, it has suffered price rises that would otherwise have been avoided.

In principle, such claims are valid, provided that the additional costs can be proven, any costs have been mitigated (for example by pre-ordering with the consent of the architect or engineer) and the costs do not duplicate that which has already been allowed for under fluctuations clauses.

Global claims
Global claims arise where a contractor argues that it cannot allocate cost individually to each of the heads of claim, but that the combined effects of the heads of claim have caused the loss in question.

The general rule of thumb is that such claims may experience difficulty with adequately addressing the issue of cause and effect and therefore may not satisfy the requirement to prove causation.

In certain circumstances, however, such claims may be valid, provided that the following conditions are met:

it must be impracticable to make an accurate apportionment between the various heads of claim; there must be no duplication in the costs awarded; and there must be no profit element in the costs (see Crosby Ltd v Portland UDC [1967] ).

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It must also be established that the costs incurred are wholly the responsibility of the employer. There must be no neutral causes or causes that are the responsibility of the contractor wrapped up within the claim. Moreover, all of the above requirements must be met - failure on one invalidates the entire claim.

In some instances, a global claim may be a perfectly valid way of calculating loss. See, for example, British Airways Pension Trustees Ltd v Sir Robert McAlpine & Sons Ltd and Others [1994] . Similar principles applied in GMTC Tools and Equipment Ltd v Yuasa Warwick Machinery Ltd [1994] . In both of these cases, the court refused to strike out claims made on a global basis and affirmed that the claimants were entitled to plead their claim in that way if they chose to do so. (See also London Borough of Merton v Stanley Hugh Leach Ltd [1985] and Section 4.2.4.10 of the old Surveyors' Construction Handbook.)

However, there is a large risk for the contractor in relying on global claims. If one factor founded on as playing a material part in the causation of the global loss can be seen to be the responsibility of the contractor, or otherwise not the responsibility of the employer and that factor cannot be adequately separated out or isolated then there will be no rational basis for maintaining any part of the claim (see John Doyle Construction Ltd v Laing Management (Scotland) Ltd [2002] CILL 1870 ).

A claim should not be dismissed solely on the basis that there are elements of the costs which have been calculated on a 'global basis'. The case of John Doyle Construction Ltd v Laing Management confirmed that a global claim should not be dismissed if there was a possibility of the claiming party being able to demonstrate chains of causation between individual causes and heads of loss, or of the claiming party being able to demonstrate that the dominant cause of the loss was the employer's responsibility, or of the claiming party being able to use the process of apportionment to divide the costs between the various causes.

The case of John Doyle Construction Ltd v Laing Management has since received some limited judicial support in City Inn Ltd v Shepherd Construction Ltd [2010] and London Underground Ltd v Citylink Telecommunications Ltd Rev 1 [2007] .

In Walter Lilly & Company Ltd v Mackay & Anor [2012] EWHC 1773 (TCC) the court provided the following very useful summary at paragraph 486 of the judgment:

'(a) Ultimately, claims by contractors for delay or disruption related loss and expense must be proved as a matter of fact. Thus, the Contractor has to demonstrate on a balance of probabilities that, first, events occurred which entitle it to loss and expense, secondly, that those events caused delay and/or disruption and thirdly that such delay or disruption caused it to incur loss and/or expense (or loss and damage as the case may be). I do not accept that, as a matter of principle, it has to be shown by a claimant contractor that it is impossible to plead and prove cause and effect in the normal way or that such impossibility is not the fault of the party seeking to advance the global claim. One needs to see of course what the contractual clause relied upon says to see if there are contractual restrictions on global cost or loss claims. Absent and subject to such restrictions, the claimant contractor simply has to prove its case on a balance of probabilities.

(b) Clause 26 [of JCT ?98] in this case lays down conditions precedent which, if not complied with, will bar to that extent claims under that clause. If and to the extent that those conditions are satisfied, there is nothing in Clause 26 which states that the direct loss and/or expense cannot be ascertained by appropriate assessments.

(c) It is open to contractors to prove these three elements with whatever evidence will satisfy the tribunal and the requisite standard of proof. There is no set way for contractors to prove

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these three elements. For instance, such a claim may be supported or even established by admission evidence or by detailed factual evidence which precisely links reimbursable events with individual days or weeks of delay or with individual instances of disruption and which then demonstrates with precision to the nearest penny what that delay or disruption actually cost.

(d) There is nothing in principle "wrong" with a "total" or "global" cost claim. However, there are added evidential difficulties (in many but not necessarily all cases) which a claimant contractor has to overcome. It will generally have to establish (on a balance of probabilities) that the loss which it has incurred (namely the difference between what it has cost the contractor and what it has been paid) would not have been incurred in any event. Thus, it will need to demonstrate that its accepted tender was sufficiently well priced that it would have made some net return. It will need to demonstrate in effect that there are no other matters which actually occurred (other than those relied upon in its pleaded case and which it has proved are likely to have caused the loss). It is wrong, as Counsel suggested, that the burden of proof in some way transfers to the defending party. It is of course open to that defending party to raise issues or adduce evidence that suggest or even show that the accepted tender was so low that the loss would have always occurred irrespective of the events relied upon by the claimant contractor or that other events (which are not relied upon by the claimant as causing or contributing to the loss or which are the "fault" or "risk" of the claimant contractor) occurred may have caused or did cause all or part of the loss.

(e) The fact that one or a series of events or factors (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. It depends on what the impact of those events or factors is. An example would be where, say, a contractor's global loss is ?1 million and it can pro e that but for one overlooked and unpriced ?50,000 item in its accepted tender it w uld probably have made a net return; the global loss claim does not fail simply because the tender was underpriced by ?50,000; the consequence would simply be that the global l ss is reduced by ?50,000 because the claimant contractor has not been able to pr ve that ?50,000 of the global loss would not have been incurred in any event. Similarly, aking 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 no to cause some loss, the overall claim will not be rejected save to the extent that those eve ts caused some loss. An example might be (as in this case) time spent by WLC's man gement in dealing with some of the lift problems (in particular the over-cladding); assuming that this time can be quantified either precisely or at least by way of assessment, that am unt would be deducted from the global loss. This is not inconsistent with the judge's reason ng in the Merton case that "a rolled up award can only be made in the case where t e loss or expense attributable to each head of claim cannot in reality be separated", beca se, where the tribunal can take out of the "rolled up award" or "total" or "global" loss elements for which the contractor cannot recover loss in the proceedings, it will generally be left wit the loss attributable to the events which the contractor is entitled to recover loss.

(f) Obviously, there is no need for the Court to go down the global or total cost route if the actual cost attributable to individual loss causing events can be readily or practicably determined. I do not consider that Vinelott J was saying in the Merton case (at page 102 last paragraph) that a contractor should be debarred from pursuing what he called a "rolled up award" if it could otherwise seek to prove its loss in another way. It may be that the tribunal will be more sceptical about the global cost claim if the direct linkage approach is readily available but is not deployed. That does not mean that the global cost claim should be rejected out of hand.

(g) DMW's Counsel's argument that a global award should not be allowed where the contractor has himself created the impossibility of disentanglement (relying on Merton per Vinelott J at 102, penultimate paragraph and John Holland per Byrne J at page 85) is not on analysis supported by those authorities and is wrong. Vinelott J was referring to unreasonable delay by the contractor in making its loss and/or expense claim; that delay

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would have led to their being non-compliance with the condition precedent but all that he was saying otherwise was that, if such delay created difficulty, the claim may not be allowed. He certainly was not saying that a global cost claim would be barred necessarily or at all if there was such delay. Byrne J relied on Vinelott J's observations and he was not saying that a global cost claim would be barred but simply that such a claim "has been held to be permissible in the case where it is impractical to disentangle that part of the loss which is attributable to each head of claim, and this situation has not been brought about by delay or other conduct of the claimant". In principle, unless the contract dictates that a global cost claim is not permissible if certain hurdles are not overcome, such a claim may be permissible on the facts and subject to proof.'

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